Copyright © 2002 by Harcourt, Inc. All rights reserved. Topic 15 : Business organization and organizational structure Lecturer: Zhu Wenzhong

Copyright © 2002 by Harcourt, Inc. All rights reserved.

Topic 15 : Topic 15 :

Business organization and organizational Business organization and organizational structure structure

Lecturer: Zhu Wenzhong Lecturer: Zhu Wenzhong


• Explain what is organization chart and why Explain what is organization chart and why it is drawn by a businessit is drawn by a business

• Define chains of command and span of Define chains of command and span of control control

• Explain the difference between Explain the difference between centralization and decentralization in an centralization and decentralization in an organizationorganization

• Explain the four major forms of business Explain the four major forms of business structure structure

LEARNING GOALSLEARNING GOALSLEARNING GOALSLEARNING GOALS


Organization chart Organization chart Organization chart Organization chart • A picture of the reporting structure and A picture of the reporting structure and

the division of labor in an organization the division of labor in an organization • Most organizations will have an Most organizations will have an

organization chart to provide people organization chart to provide people with this information with this information

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• Help managers to spot communication Help managers to spot communication problems problems

• Help individuals to see their position and Help individuals to see their position and responsibilityresponsibility

• Help people to understand their Help people to understand their relationships with other parts of the relationships with other parts of the businessbusiness

• Help to find who has authority to make Help to find who has authority to make decisionsdecisions

Why do businesses draw an Why do businesses draw an organization chart?organization chart?Why do businesses draw an Why do businesses draw an organization chart?organization chart?


Chain of command and span of Chain of command and span of control control Chain of command and span of Chain of command and span of control control

The way in which authority is The way in which authority is organized within an organizationorganized within an organization or a set of relationships that or a set of relationships that indicates who directs which activities indicates who directs which activities and who reports to whomand who reports to whom

• Short chain of commandShort chain of command• Long chain of commandLong chain of command

Chain of command Chain of command


Chain of command and span of Chain of command and span of controlcontrolChain of command and span of Chain of command and span of controlcontrol

The number of people The number of people working under a working under a manager or the manager or the number of number of subordinates subordinates reporting directly to reporting directly to a managera manager

• A narrow span of A narrow span of controlcontrol

• A wide span of controlA wide span of control

Chain of command Chain of command

Span of controlSpan of control


Trend of Flatter organization Trend of Flatter organization structure structure Trend of Flatter organization Trend of Flatter organization structure structure

• Since 1990s, many Since 1990s, many businesses have begun to businesses have begun to adopt the flatter adopt the flatter structuresstructures

• There are fewer layers of There are fewer layers of middle management middle management


Question for critical thinking Question for critical thinking Question for critical thinking Question for critical thinking

• What does a tight span or wide span What does a tight span or wide span of control mean? Explain the of control mean? Explain the advantages of disadvantages of advantages of disadvantages of them. them.

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Centralization and decentralization Centralization and decentralization Centralization and decentralization Centralization and decentralization

• Centralization and Centralization and decentralization refer to the decentralization refer to the degree to which authority is degree to which authority is delegated in a business.delegated in a business.

• Complete centralization means Complete centralization means that employees have no that employees have no

authority to make decisionsauthority to make decisions. . • Complete decentralization Complete decentralization

(delegation) means employees (delegation) means employees have all the authority to make have all the authority to make decisions. decisions.

CentralizationCentralization CentralizationCentralization

DecentralizationDecentralization DecentralizationDecentralization


Advantages and disadvantages of Advantages and disadvantages of centralization and decentralization centralization and decentralization Advantages and disadvantages of Advantages and disadvantages of centralization and decentralization centralization and decentralization

Centralization DecentralizationCentralization Decentralization

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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


Different forms of business Different forms of business structurestructureDifferent forms of business Different forms of business structurestructure

• The entrepreneurship structure: The entrepreneurship structure: A A structure in which decisions are made centrally by one or two people structure in which decisions are made centrally by one or two people

• The bureaucratic or pyramid The bureaucratic or pyramid structure: structure: A structure where decisions are shared throughout A structure where decisions are shared throughout the organization and employees are each given a role.the organization and employees are each given a role.

• The matrix structure: The matrix structure: A structure combining A structure combining people with different skills into project groups or task groups. people with different skills into project groups or task groups.

• The independence structure:The independence structure:A structure A structure

emphasizing the individuals in decisions, also called ‘non-organization’emphasizing the individuals in decisions, also called ‘non-organization’

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Question for critical thinking Question for critical thinking Question for critical thinking Question for critical thinking

• Look at your handout Page 5. Look at your handout Page 5. Could you tell which type of Could you tell which type of business structure does A, B, business structure does A, B, C, and D each belong to? C, and D each belong to? Please explain the advantages Please explain the advantages and disadvantages of each and disadvantages of each briefly. briefly.

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DepartmentalizationDepartmentalizationDepartmentalizationDepartmentalization

• Departmentalization: : process of process of dividing work activities into units dividing work activities into units within the organizationwithin the organization

• Major forms of departmentalization Major forms of departmentalization subdivide work by:subdivide work by:• ProductProduct• Geographic AreaGeographic Area• CustomerCustomer• FunctionFunction• ProcessProcess

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

ProductProduct



• Geographic Geographic departmentalization:departmentalization: units organized by units organized by geographic region within geographic region within a countrya country

• For a multinational firm, For a multinational firm, units organized by units organized by regions throughout the regions throughout the worldworld

ProductProduct


GeographicGeographic


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

ProductProduct



CustomerCustomer


• Functional Functional departmentalization: departmentalization: work units organized work units organized according to business according to business functions such as functions such as finance, marketing, finance, marketing, human resources, and human resources, and productionproduction

ProductProduct



CustomerCustomer

FunctionalFunctional


• Process Process departmentalization:departmentalization: units organized by work units organized by work processes required to processes required to complete production of complete production of goodsgoods

ProductProduct



CustomerCustomer

FunctionalFunctional

ProcessProcess


Delegating Work AssignmentsDelegating Work AssignmentsDelegating Work AssignmentsDelegating Work Assignments

• Delegation:Delegation: act of assigning act of assigning activities to subordinatesactivities to subordinates

• Span of management (span of Span of management (span of control): control): number of subordinates a number of subordinates a manager can supervise effectivelymanager can supervise effectively

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Delegating Work AssignmentsDelegating Work AssignmentsDelegating Work AssignmentsDelegating Work Assignments

• Centralization:Centralization: retains retains decision-making at the top of decision-making at the top of the management hierarchythe management hierarchy

• Decentralization: Decentralization: locates locates decision-making at lower levelsdecision-making at lower levels

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Types of Organization StructuresTypes of Organization StructuresTypes of Organization StructuresTypes of Organization Structures

• Line organization:Line organization: establishes a establishes a direct flow of authority from the direct flow of authority from the chief executive to subordinateschief executive to subordinates

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• Line-and-staff organization:Line-and-staff organization: combines the direct flow of combines the direct flow of authority of a line organization with authority of a line organization with staff departments that serve, advise, staff departments that serve, advise, and support the line departmentsand support the line departments


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• Line manager:Line manager: interacts directly with the interacts directly with the functions of production, finance, or functions of production, finance, or marketing – the functions needed to produce marketing – the functions needed to produce and market goods and servicesand market goods and services

• Staff manager: Staff manager: provides information, provides information, advice, or technical assistance to aid line advice, or technical assistance to aid line managersmanagers


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• Committee organization:Committee organization: structure structure that places authority and that places authority and responsibility jointly in the hands of responsibility jointly in the hands of a group of individuals rather than a a group of individuals rather than a single managersingle manager

• Matrix, or project management, Matrix, or project management, structure: structure: links employees from links employees from different parts of the organization to different parts of the organization to work together on specific projectswork together on specific projects

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Figure 8.13 The Matrix OrganizationFigure 8.13 The Matrix Organization

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Copyright © 2002 by Harcourt, Inc. All rights reserved. Topic 15 : Business organization and organizational structure Lecturer: Zhu Wenzhong