© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1

Chapter Objectives Identify and describe four characteristics common to all organizations and distinguish between line and staff positions. Describe a business organization in terms of the open- system model and explain the term learning organization. Describe the time dimension of organizational effectiveness. Explain the concept of contingency organization design and distinguish between mechanistic and organic organizations. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2

Chapter Objectives (cont’d) Identify and briefly describe the five basic departmentalization formats. Describe how a highly centralized organization differs from a highly decentralized one. Define the term delegation and list at least five common barriers to delegation. Explain how the traditional pyramid organization is being reshaped. Describe at least three characteristics of organizational cultures and explain the cultural significance of stories. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3

Organization Structure and Effectiveness An organization is a cooperative social system of two or more people with a common purpose Common Characteristics of Organizations Coordination of effort: Multiplying individual contributions to achieve results greater than those possible by individuals working alone Common goal or purpose: Having a focus to strive for something of mutual interest Division of labor: Dividing tasks into specialized jobs that use human resources efficiently Hierarchy of authority: Using a chain of command to control and direct the actions of others © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4

Organization Charts Organization Chart (Table) A visual display of an organization’s positions and lines of authority that is useful as a blueprint for deploying human resources Vertical and Horizontal Dimensions Vertical hierarchy establishes the chain of command. Horizontal specialization denotes the division of labor. Line and Staff Positions Line managers make decisions and staff personnel provide advice and support. Personal staff are assigned to a specific manager in supporting roles. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5

Figure 9.1: A Simplified Sample Organization Chart © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 6

Organizations as Open Systems Characteristics of Open Systems Interaction with the external environment through permeable boundaries An open-system model encourages managers to think about the organization’s life-support system Interacting organizational subsystems: Technical (production function) subsystems define the organization’s transformation process. Boundary-spanning subsystems provide the organization’s interface with the external environment. Managerial subsystems bridge (control and direct) the technical and boundary-spanning subsystems. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7

Figure 9.2: Open-System Model of a Business © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8

Organizational Learning Learning Organization One that can create, acquire, and transfer knowledge, and can then adapt its behavior accordingly Necessary Skills for a Learning Organization Solving problems Experimenting Learning from organizational experience and history Learning from others Transferring and implementing © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9

Figure 9.3: Garvin’s Model of the Learning Organization © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10

Organizational Effectiveness Effectiveness A measure of whether or not organizational objectives are accomplished Efficiency A measure of the relationship between inputs and outputs for the organization No Silver Bullet No single approach to the evaluation of effectiveness is appropriate in all circumstances or for all organizational types. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11

Organizational Effectiveness (cont’d) A Time Dimension Organizational Effectiveness: Meeting organizational objectives and prevailing societal expectations in the near future Adapting to environmental demands Maturing and learning in the immediate future © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12

Figure 9.4: The Time Dimension of Organizational Effectiveness © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13

Contingency Design The process of determining the degree of environmental uncertainty and adapting the organization and its subunits to the situation How much environmental uncertainty is there? What combination of structural characteristics is most appropriate? © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14

Table 9.1: Determining Degree of Environmental Uncertainty © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15

The Burns and Stalker Model Mechanistic Organizations Are rigid in design, rely on formal communications, and have strong bureaucratic qualities best suited to operating in relatively stable and certain environments Organic Organizations Have flexible structures, have participative communication patterns, and are successful in adapting to change in unstable and uncertain environments © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16

Table 9.2: Mechanistic versus Organic Organizations © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17

Basic Departmentalization Formats Departmentalization Grouping of related jobs or processes into major organizational units Overcomes some of the effect of fragmentation caused by differentiation (job specialization) Permits coordination (integration) to be handled in the least costly manner Sometimes refers to divisions, groups, or units in large organizations © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18

Basic Departmentalization Formats (cont’d) Functional Departments Categorize jobs according to the activity performed Product-Service Departments Group jobs around a specific product or service Geographic Location Departments Based on the physical dispersion of assets, resources, and customers Customer Classification Departments Centered on various customer categories Work Flow Process Departments in Reengineered Organizations Emphasis on smooth and speedy work flow between two points: Identifying customer needs Satisfying the customer © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19

Figure 9.5A: Alternative Departmentalization Formats © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20

Figure 9.5B: Alternative Departmentalization Formats (cont’d) © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21

Figure 9.5 C, D, E: Alternative Departmentalization Formats (cont’d) © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22

Span of Control Span of Control (Management) The number of people who report to a manager. Narrow spans of control foster tall organizations with many organizational/managerial layers. Flat organizations have wider spans of control. Is There an Ideal Span of Control? The right span of control efficiently balances too little and too much supervision. Situational factors dictate the width of spans of control. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 23

Figure 9.6: Narrow and Wide Spans of Control © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24

Figure 9.7: Situational Determinants of Span of Control © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25

Centralization and Decentralization Centralization The retention of decision-making authority by top management Decentralization The sharing of decision-making authority by management with lower-level employees The Need for Balance The challenge to balance the need for responsiveness to changing conditions (decentralization) with the need to create low-cost shared resources (centralization) © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 26

Figure 9.8: Factors in Relative Centralization/Decentralization © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 27

Effective Delegation Delegation Assigning various degrees of decision-making authority to lower-level employees Advantages of Delegation Frees up managerial time for other important tasks Serves as a training and development tool for lower- level managers Increases subordinates’ commitment by giving them challenging assignments © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 28

Figure 9.9: The Delegation Continuum © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 29

Effective Delegation (cont’d) Barriers to Delegation Belief that only you can do the job right Lack of confidence and trust in lower-level employees Low self-confidence Fear of being called lazy Vague job definition Fear of competition from those below Reluctance to take risks that depend on others Lack of early warning controls Poor example of bosses who do not delegate © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 30

The Changing Shape of Organizations Characteristics of New Organizations Fewer organizational layers More teams Smallness within bigness New Organizational Configurations Hourglass organization: Three-layer structure with constricted middle (management) layer Cluster organization: Collaborative structure in which teams are the primary unit Virtual organizations: Internet-linked networks of value- adding subcontractors © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 31

Figure 9.10: Reshaping the Traditional Pyramid Organization © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 32

Organizational Cultures Organizational Culture The collection of shared beliefs, values, rituals, stories, myths, and specialized language that creates a common identity and sense of community The “social glue” that binds an organization’s members together © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 33

Characteristics of Organizational Cultures Collective: Organizations are social entities. Emotionally charged: The organization’s culture serves as a security blanket to its members. Historically based: Trust and loyalty result from long-term organizational associations. Inherently symbolic: Actions often speak louder than words. Dynamic: Culture promotes stability and control. Inherently fuzzy: Ambiguity, contradictions, and multiple meanings are part of culture. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 34

Forms and Consequences of Organizational Cultures Organizational values are shared beliefs about what the organization stands for. The degree of sharing and the degree of intensity determine whether an organization’s culture is strong or weak. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 35

Figure 9.11: Forms and Consequences of Organizational Culture © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 36

The Organizational Socialization Process Organizational socialization: The process of transforming outsiders into accepted insiders Orientations Orientation programs familiarize new employees with the organization’s history, culture, competitive realities, and compensation and benefits. Storytelling Recitations of heroic or inspiring deeds provide “social road maps” for new employees. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 37

Strengthening Organizational Cultures Symptoms of a weak organizational culture Inward focus Morale problems Fragmentation/inconsistency Ingrown subcultures Warfare among subcultures Subculture elitism © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 38

Summary All organizations exhibit four characteristics: (1) coordination of effort, (2) common goal or purpose, (3) division of labor, and (4) hierarchy of authority. In open-system terms, business organizations are made up of interdependent technical, boundary-spanning, and managerial subsystems. Organizations need to satisfy different effectiveness criteria in the near, intermediate, and distant future. Contingency advocates contend that there is no one best organizational setup for all situations. There are five basic departmentalization formats: functional, product-service, geographic location, customer classification, and work flow process departmentalization. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 39

Summary (cont’d) Situational factors dictate degree of centralization and how many people a manager can directly supervise Effective delegation permits managers to tackle higher- priority duties while helping train and develop lower-level managers. Management is reshaping the traditional pyramid bureaucracy. Three emerging configurations are the hourglass, cluster, and virtual organization. Organizational culture is the “social glue” binding people together through shared symbols, language, stories, and practices. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 40

Terms to Understand Organization Authority Organization chart Line and staff organization Learning organization Organizational effectiveness Contingency design Mechanistic organizations Organic organizations Departmentalization Span of control Centralization Decentralization Delegation Hourglass organization Cluster organization Virtual organization Organizational culture Organizational values Organizational socialization © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 41