Foundations of Business 3e Pride, Hughes, & Kapoor

Creating a Flexible Organization Chapter 7

Learning Objectives Understand what an organization is and identify its characteristics. Explain why job specialization is important. Identify the various bases for departmentalization. Explain how decentralization follows from delegation. Understand how the span of management describes an organization. Describe the four basic forms of organizational structure. Describe the effects of corporate culture. Understand how committees and task forces are used. Explain the functions of the informal organization and the grapevine in a business.

So, What Is an Organization? A group of two or more people working together to achieve a common set of goals Developing organization charts Organization chart A diagram that represents the positions and relationships within an organization Chain of command The line of authority that extends from the highest to the lowest levels of the organization Staff (advisory) positions Jobs that are not part of the direct chain of command in the organization

Example: A Typical Corporate Organization Chart

Objective: Organize your Shop Class Excercise The Gift Wrapping Store You have an idea to open up a gift wrapping store in a high-end mall in Omaha. You anticipate a non-stop work flow. Your employees (4) are…your brother (who is strong) your sister (who is “gifted” at gift decoration) your 16 yr old niece (who is good at wrapping) your 15 yr old nephew (who is a hard worker) Jobs at the shop: Box the gift Wrap the gift perfectly Decorate the gift creatively Order supplies Answer the phones Work the cash register Answer phones Handle customer service issues (complaints) Objective: Organize your Shop Who will do what jobs? Who will be in charge, second, third…?

Gift Wrap Store Organizational Chart You Phones /customer service / finances Lead Manager Brother Boxing/supplies Sister Wrapping/shop displays Decorations Dept Boxing Dept Nephew Niece Assistant Boxer Assistant Gift Decorator

Major Management Considerations for Organizing a Business Job design Departmentalization Delegation Span of management Chain of command

Organizing Consideration #1 - Job Design Job specialization The separation of activities into distinct tasks and the assignment of different tasks to different people Rationale for specialization The “job” of the organization is too large for one person to accomplish. A worker learning only a specific, highly specialized task should be able to learn to do it efficiently. Workers do not lose time switching from one operation to another. Specialization makes it easier to design machinery to assist those who do the job. Specialization makes it easier to train new workers.

Class Exercise Can become very efficient at a task Job specialization is the separation of all organizational activities into distinct tasks and the assignment of different tasks to different people. What are the advantages of job specialization? What are the disadvantages of job specialization? What types of jobs lend themselves to specialization? What types of jobs do not lend themselves to specialization? Can become very efficient at a task The task can become boring…less production. Highly specialized tasks using special equipment Low skilled, nonmotivating work

Alternatives to job specialization Job Design (cont.) Alternatives to job specialization Job Rotation - systematically shifts employees from one job to another Job Enlargement - Expanding a workers job to include additional but similar tasks Job Enrichment – motivation technique that provides employees more variety and responsibility in their jobs Needs photo credit

Types of Firms Using Job Rotation by Industry

Organization Consideration #2 - Departmentalization Grouping jobs into manageable units Common bases for departmentalization By function By product By location By customer Combinations

An Evolving Organization Chart

Departmentalization by Function CEO Finance Marketing Operations

Departmentalization by Product CEO Computers Printers Software Hewlett Packard?

Departmentalization by Location CEO U.S. Region European Region Asian Region Coca Cola?

Departmentalization by Customer CEO Home Users Business Users Educational Users Dell Computers?

Multibase Departmentalization for New-Wave Fashions, Inc.

Using the Internet Accenture is a consulting company that firms turn to for advice about reorganization of current structures and processes. http://www.accenture.com

Organization Consideration #3 - Delegation, Decentralization, and Centralization Delegation—assigning part of a manager’s work and power to other workers Steps in delegation Responsibility—the duty to do a job or perform a task Authority—the power, within an organization, to accomplish an assigned task Accountability—the obligation to accomplish an assigned job or task Barriers to delegation Fear the work will not get done Fear the work will be done too well Inability to plan and assign work effectively

Steps in the Delegation Process The manager assigns responsibility. The subordinate is empowered to do the task. Ultimate accountability remains with the manager.

Authority: Should it be Centralized or Decentralized? Decentralized organization Management consciously attempts to spread authority widely in the lower levels of the organization Nordstrom Department Store Centralized organization Authority is concentrated at the upper levels of the organization Factors favoring decentralization A complex and unpredictable business environment Decisions that carry low risk or that are unimportant Highly capable lower-level managers with strong decision- making skills Past practices of the firm in decentralizing its structure and decision-making processes

Organization Consideration #4 – The Span of Management The number of workers who report directly to one manager Wide span Large number of subordinates to one manager Narrow span Only a few subordinates to one manager

The Span of Management – Narrow or Wide?

The Span of Management – Some definitions Organizational height—number of layers, or levels, of management in a firm Flat organizations – Verizon Store Have wider spans of management and fewer levels Require managers to perform more administrative tasks and to spend more time supervising subordinates Tall organizations - UNL Have narrow spans of management and many levels Have higher administrative costs (more managers) May distort internal communications during passage of the communications through the multiple levels of organization

Organization Consideration #5 –The Chain of Command Line structure The chain of command goes directly from person to person throughout the organization Simplicity allows for quick decision making and direct accountability Most suitable for small organizations with lower volume of activities than medium or large organizations

Forms of Organizational Structure (cont.) Line-and-staff structure Utilizes the chain of command from a line structure in combination with the assistance of staff managers

Line and Staff Managers

Forms of Organizational Structure (cont.) Line-and-staff structure (cont.) Line managers make decisions and give orders to subordinates. Line authority—line managers can make decisions and issue directives related to organizational goals Staff managers provide support, advice, and expertise. Advisory authority—the expectation that line managers will consult with staff managers before making decisions Functional authority—staff managers’ authority to make decisions and issue directives within their area of expertise

Forms of Organizational Structure (cont.) Line-and-staff structure (cont.) Reasons for conflict between line and staff managers Staff managers often have more formal education. Staff managers are sometimes younger and more ambitious. Line managers may perceive staff managers as a threat. Staff managers may become angry if their recommendations are not adopted. Minimizing conflict between line and staff managers Integrate line and staff managers into one team. Ensure that responsibilities are clearly defined. Hold both line and staff managers accountable for results.

Forms of Organizational Structure (cont.) Matrix structure A structure that combines vertical and horizontal lines of authority, usually by superimposing product departmentalization on functional departmentalization Authority flows both down and across Employees on cross-functional teams report to both the project manager in charge of the team and to their superiors in their home-base functional department

A Matrix Structure

Finally, Corporate Culture, Comittees and Task Forces What is Corporate Culture? The inner rites, rituals, heroes, and values of a firm Indicators of corporate culture The physical setting (e.g., building and office layout) Corporate statements about itself How the company greets its guests How employees spend their time at work (alone or in groups)

Corporate Culture (cont.) Source: Accenture survey of 1,000 full-time female workers 22 to 35 years old. USA Today, Monday March 1, 2010, B1

Types of Corporate Cultures Networked culture Trust and friendship among employees Strong commitment to the organization Informal environment Mercenary culture Passion, energy, sense of purpose, excitement for work Intense, focused, determined to win Fragmented culture Employees not friends; work “at” (not “for”) organization Employees have autonomy, flexibility, equality Communal culture Friendship, commitment, focus on performance, high energy Lives revolve around the product; success is celebrated by all

Corporate Culture (cont.) Cultural change is needed when A company’s environment changes The industry becomes more competitive Company performance is mediocre The company is growing or becomes a large firm

Use of Committees and Task Forces Types Ad hoc—created for a specific short-term purpose Standing—relatively permanent; charged with performing some recurring task Task force—established to investigate a major problem or pending decision Committees vs. Individual Action Advantages Members bring more information and knowledge; more accurate decisions; results communicated more effectively Disadvantages Decision making takes longer; may reach unnecessary compromises; one person may dominate

The Informal Organization Pattern of behavior and interaction that stems from personal rather than official relationships Informal groups Formed by the members themselves to accomplish goals that may or may not be relevant to the organization Can be powerful forces in organizations, exerting positive as well as negative influences York College “Green Team” The grapevine Informal communication network within an organization that is completely separate from—and sometimes faster than—the organization’s formal communication channels May be accurate or distorted; managers should be aware and use appropriately

II.-Do you Know What Your Strengths Are? Videos “Trombone Player Wanted” - Parts 1 & 2 I.-What’s Stopping You? Are you in the 2 out of 10? As you grow, your personality changes? Will you grow most in your area of weakness? Do your daily energies lie with strengths or weaknesses? What really makes a great team member? II.-Do you Know What Your Strengths Are? Strengths are not just what you are good at. Who is the best judge of my strengths? Are your strengths at the center of your week?

Chapter Quiz Solid vertical lines on an organization chart indicate relationships among staff positions. employees. delegated positions. the chain of command. line and staff positions.

Chapter Quiz The systematic shifting of employees from one job to another is called job specialization. rotation. sharing. enlargement. enrichment.

Chapter Quiz Grouping all activities according to the geographic area in which they are located is departmentalization by function. employee. product. customer. location.

Chapter Quiz In a ______ organization, administrative costs are higher because more managers are needed. long flat tall short broad

Chapter Quiz The power to accomplish an assigned job is called authority. accountability. responsibility. delegation. obligation.