Organizing Process a course of action, a route, a progression Structure an arrangement, a configuration, a construction

Organizing The process of deploying resources to achieve strategic goals

The process of organizing takes place within a structure reflected by the way in which the organization Divides its labor into departments and jobs Establishes formal lines of authority Establishes mechanisms for coordinating diverse tasks

Organizing process leads to creation of an Organizational Structure Formal tasks assigned Formal reporting relationships Systems design for coordination across departments

Features of Organizational Structure President Vice President

Work Specialization Also called division of Labor Specialists get good at a specific task Efficiency increases Employees are selected based on specific skills Training is geared toward increased efficiency. Based on a mechanistic organization

Chain of Command An unbroken line of authority Unity of Command-Everyone has only one supervisor Scalar Principle-Everyone has at least one boss. Everyone is included

Authority The formal rights of a manager to manage Vested in the organizational position, not the person. Provides the manager with positional power Authority is accepted by the subordinates Authority flow from the top, down.

Responsibility The duty to perform the task the employee has been assigned. Responsibility and Authority are delegated together and make the employee accountable to superiors

Span of Management (Control) The number of employees reporting to a supervisor. Size varies with the type of organization, skill of the subordinates, Geographic dispersion Managerial skill and preference

Factors Affecting Span of Control Job Complexity  More complex jobs = more manager Job Similarity  Similar jobs = more employees per manager Geographic Proximity of Employees  Dispersed locations = more supervision Amount of Coordination to Complete Task  High coordination = more supervision

Factors Affecting Span of Control Employee Abilities  Knowledgeable, trained staff = less supervision Employee Empowerment  Employees who are trusted and empowered to make decisions need less supervision Ability of Management  Dispersed locations = more supervision Hierarchy  Tall hierarchy = low span of control

Centralization Decision making is done high in the organization Tendency toward decentralization Greater use of employee skills Less mechanistic Relieve burden on manager to do everything Decisions made closer to the action Decisions are make quicker

Factors influencing Decentralization Amount of change and uncertainty in the environment Corporate strategy and culture Size and dispersion of the organization The risk of failure The greater the risk, the higher up the decisions are made.

Advantages and disadvantages of centralization and decentralization Centralization Decentralization Centralization Decentralization © PhotoDisc Adv.: Tight control Strong leadership Improved communication Disadv.: Less participation incomplete decisions Adv.: Better motivate Reducin senior managers’ burden Benefiting the middle managers Disadv.: Risk of losing control Hard to make decisions as a whole

Matrix Organization Two sets of bosses-functional and divisional. Violates the chain of command, e.g. two bosses, not clear line of authority. Attempts to lower the risks of functional and divisional structures Requires employee to manage two sets of bosses.

Network or Value Chain Management Do what you do well, sub-contract everything else to those who do better than you. Look for the best industry practices Management the value chain rather than the organization Advantages Increased competitiveness Flexibility Reduced costs Disadvantages Requires a different kind of management Need to sell the concept Less control

Different forms of business structure The entrepreneurship structure: A structure in which decisions are made centrally by one or two people The entrepreneurship structure: A structure in which decisions are made centrally by one or two people The bureaucratic or pyramid structure: A structure where decisions are shared throughout the organization and employees are each given a role. The bureaucratic or pyramid structure: A structure where decisions are shared throughout the organization and employees are each given a role. The matrix structure: A structure combining people with different skills into project groups or task groups. The matrix structure: A structure combining people with different skills into project groups or task groups. The independence structure: A structure emphasizing the individuals in decisions, also called ‘non- organization’ The independence structure: A structure emphasizing the individuals in decisions, also called ‘non- organization’ © PhotoDisc

Departmentalization : process of dividing work activities into units within the organization Departmentalization: process of dividing work activities into units within the organization Major forms of departmentalization subdivide work by: Major forms of departmentalization subdivide work by: Product Product Geographic Area Geographic Area Customer Customer Function Function Process Process © PhotoDisc

Product departmentalization: Organizes work units based on the goods and services offered Product departmentalization: Organizes work units based on the goods and services offered Product Departmentalization

Geographic departmentalization: units organized by geographic region within a country Geographic departmentalization: units organized by geographic region within a country For a multinational firm, units organized by regions throughout the world For a multinational firm, units organized by regions throughout the worldProduct Departmentalization Geographic

Customer departmentalization: organization that offers a variety of goods and services targeted to different types of customers might structure itself based on customers served Customer departmentalization: organization that offers a variety of goods and services targeted to different types of customers might structure itself based on customers servedProduct Departmentalization Geographic Customer

Functional departmentalization: work units organized according to business functions such as finance, marketing, human resources, and production Functional departmentalization: work units organized according to business functions such as finance, marketing, human resources, and productionProduct Departmentalization Geographic Customer Functional

Process departmentalization: units organized by work processes required to complete production of goods Process departmentalization: units organized by work processes required to complete production of goodsProduct Departmentalization Geographic Customer Functional Process

Delegating Work Assignments Delegation: act of assigning activities to subordinates Delegation: act of assigning activities to subordinates Span of management (span of control): number of subordinates a manager can supervise effectively Span of management (span of control): number of subordinates a manager can supervise effectively © PhotoDisc

Delegating Work Assignments Centralization: retains decision- making at the top of the management hierarchy Centralization: retains decision- making at the top of the management hierarchy Decentralization: locates decision-making at lower levels Decentralization: locates decision-making at lower levels © PhotoDisc

Types of Organization Structures Line organization: establishes a direct flow of authority from the chief executive to subordinates Line organization: establishes a direct flow of authority from the chief executive to subordinates © PhotoDisc

Line-and-staff organization: combines the direct flow of authority of a line organization with staff departments that serve, advise, and support the line departments Line-and-staff organization: combines the direct flow of authority of a line organization with staff departments that serve, advise, and support the line departments Types of Organization Structures © PhotoDisc

Line manager: interacts directly with the functions of production, finance, or marketing – the functions needed to produce and market goods and services Line manager: interacts directly with the functions of production, finance, or marketing – the functions needed to produce and market goods and services Staff manager: provides information, advice, or technical assistance to aid line managers Staff manager: provides information, advice, or technical assistance to aid line managers Types of Organization Structures © PhotoDisc

Types of Organization Structures Committee organization: structure that places authority and responsibility jointly in the hands of a group of individuals rather than a single manager Committee organization: structure that places authority and responsibility jointly in the hands of a group of individuals rather than a single manager Matrix, or project management, structure: links employees from different parts of the organization to work together on specific projects Matrix, or project management, structure: links employees from different parts of the organization to work together on specific projects © PhotoDisc

Figure 8.13 The Matrix Organization