Developed by Stephen M.PetersCopyright © 2000 by Harcourt, Inc. All rights reserved. Ten hapter Fundamentals of Organizing © 2000 by Harcourt, Inc. All

Developed by Stephen M.Peters Copyright © 2000 by Harcourt, Inc. All rights reserved.

Tenhapter

Fundamentals of Organizing

© 2000 by Harcourt, Inc.

All rights reserved. Requests for permission to make copies of any part of the work should be mailed to the following address: Permissions Department, Harcourt, Inc., 6277 Sea Harbor Drive, Orlando, Florida 32887-6777.


Organizing

• The deployment of organizational resources to achieve strategic goals

• The deployment of resources is reflected in the organization

• Division of labor• Formal lines of authority and mechanisms

• The deployment of organizational resources to achieve strategic goals

• The deployment of resources is reflected in the organization

• Division of labor• Formal lines of authority and mechanisms


Organization Structure

• Defines how tasks are divided, resources are deployed, and departments are coordinated

• The set of formal tasks• Formal reporting relationships• The design of systems to ensure effective

coordination of employees across departments• Organizing process leads to the creation of

organization structure

• Defines how tasks are divided, resources are deployed, and departments are coordinated

• The set of formal tasks• Formal reporting relationships• The design of systems to ensure effective

coordination of employees across departments• Organizing process leads to the creation of

organization structure


Four Points About The Organization Chart

Visual representationVisual representation

Set of formal tasksSet of formal tasks

Formal reporting relationships

Formal reporting relationships

Framework for vertical control

Framework for vertical control

The Home Depot


Work Specialization

• Tasks are subdivided into individual jobs• Division of labor concept• Employees perform only the tasks relevant to their

specialized function• Jobs tend to be small, but they can be performed

efficiently


Chain of Command

• Unbroken line of authority that links all persons in an organization

• Shows who reports to whom• Associated with two underlying principlesUnity of CommandScalar Principle

• Unbroken line of authority that links all persons in an organization

• Shows who reports to whom• Associated with two underlying principlesUnity of CommandScalar Principle


Authority

• Formal and legitimate right of a manager to make decisions and issue orders

• Allocate resources to achieve organizationally desired outcomes

• Authority is distinguished by three characteristicsAuthority is vested in organizational positions, not

peopleAuthority is accepted by subordinates Authority flows down the vertical hierarchy

• Formal and legitimate right of a manager to make decisions and issue orders

• Allocate resources to achieve organizationally desired outcomes

• Authority is distinguished by three characteristicsAuthority is vested in organizational positions, not

peopleAuthority is accepted by subordinates Authority flows down the vertical hierarchy


Responsibility

• The duty to perform the task or activity an employee has been assigned

• Managers are assigned authority commensurate with responsibility


Accountability

Mechanism through which authority and responsibility are brought into alignment

People are subject to reporting and justifying task outcomes to those above them in the chain of command

Can be built into the organization structure


Delegation

Process managers use to transfer authority and responsibility

Organization encourage managers to delegate authority to lowest possible level

1

2


Techniques for Delegation

Give thorough instructions

Maintain feedback Evaluate and reward performance

Delegate the whole task Select the right person

Delegation

Ensure that authority equals responsibility


Centralization versus Decentralization

• Greater change and uncertainty in the environment are usually associated with decentralization

• The amount of centralization or decentralization should fit the firm’s strategy

• In times of crisis or risk of company failure, authority may be centralized at the top


Span of Management/Span of Control

• Number of employees who report to a supervisor• Traditional view, about seven subordinates per manager• Many lean organizations today have 30, 40, or even

higher subordinates• When supervisors must be closely involved with

subordinates, the span should be small• Supervisors need little involvement with subordinates, it

can be large

• Number of employees who report to a supervisor• Traditional view, about seven subordinates per manager• Many lean organizations today have 30, 40, or even

higher subordinates• When supervisors must be closely involved with

subordinates, the span should be small• Supervisors need little involvement with subordinates, it

can be large


Factors Associated With Less Supervisor Involvement

• Work is stable and routine• Subordinates perform similar work tasks• Subordinates are concentrated in a single location• Subordinates are highly trained• Rules and procedure defining task activities are

available• Support systems and personnel are available for the

manager• Little time is required in nonsupervisory activities• Managers’ preferences and styles favor a large span

• Work is stable and routine• Subordinates perform similar work tasks• Subordinates are concentrated in a single location• Subordinates are highly trained• Rules and procedure defining task activities are

available• Support systems and personnel are available for the

manager• Little time is required in nonsupervisory activities• Managers’ preferences and styles favor a large span


Tall versus Flat Structure

• Span of Control used in an organization determines whether the structure is tall or flat

• Tall structure has a narrow span and more hierarchical levels

• Flat structure has a wide span, is horizontally dispersed and fewer hierarchical levels

• The trend has been toward wider spans of control


Centralization and Decentralization

• The hierarchical level at which decisions are made

NASA


Centralization

• All facilities at one location• Decision authority is located near the top of the

organization

• All facilities at one location• Decision authority is located near the top of the

organization


Decentralization

• Facilities at different locations• Decision authority is pushed down the chain of

command to lower levels


Decentralization Tends To---

• Make greater use of human resources• Reduce burdens of top managers• Cause decisions to be made close to the action• Permit rapid response to changes

• Make greater use of human resources• Reduce burdens of top managers• Cause decisions to be made close to the action• Permit rapid response to changes


Factors that Influence Centralization/Decentralization

• Amount of change and uncertainty• Corporate culture• Size of organization• Cost and risk of failure• Efficiency of communication and control systems


DepartmentalizationThe basis on which individuals are grouped into departments

• Five structural alternatives Vertical functional approach. People are grouped together in

departments by common skills. Divisional approach. Grouped together based on a common

product, program, or geographical region. Horizontal matrix approach. Functional and divisional chains

of command. Some employees report to two bosses Team-based approach. Created to accomplish specific tasks Network approach. Small, central hub electronically

connected to their other organizations that perform vital functions. Departments are independent, and can be located anywhere.


Advantages ofFunctional Approach

• Efficient use of resources• In-depth skill specialization• Career progress within the department• Top manager has direction and control• Excellent coordination• High-quality problem solving• Simplifies training

• Efficient use of resources• In-depth skill specialization• Career progress within the department• Top manager has direction and control• Excellent coordination• High-quality problem solving• Simplifies training


Disadvantages ofFunctional Approach

• Poor communication among functional departments• Slow response to external changes• Centralized decision making• Responsibility for problems difficult to identify• Employees have limited view• Limited general management training

• Poor communication among functional departments• Slow response to external changes• Centralized decision making• Responsibility for problems difficult to identify• Employees have limited view• Limited general management training


Divisional Approach

• Departments are grouped together based on organizational outputs

• Diverse departments are brought together to produce a single organizational output

• Encourages decentralization

• Departments are grouped together based on organizational outputs

• Diverse departments are brought together to produce a single organizational output

• Encourages decentralization


Advantages ofGeographic Divisions

• Responsive in an unstable environment• Shows concern for customer• Coordinates across functional departments• Identifies responsibility for product • Emphasizes overall product and division goals• Develops general management skills• Minimizes travel costs

• Responsive in an unstable environment• Shows concern for customer• Coordinates across functional departments• Identifies responsibility for product • Emphasizes overall product and division goals• Develops general management skills• Minimizes travel costs


Disadvantages ofGeographic Divisions

• Duplication of resources across divisions• Less specialization in divisions• Poor coordination across divisions• Less top management control• Competition for resources among divisions• More managers needed


Matrix Approach

• Functional and divisional chains of command simultaneously

• Dual lines of authority• Functional hierarchy of authority runs vertically• Divisional hierarchy runs laterally• Violates the unity of command concept

General Electric


Advantages of Matrix

• More efficient use of resources than single hierarchy• Adaptable to changing environment• Development of both general and specialists

management skills• Expertise available to all divisions• Enlarged tasks for employees


Disadvantages of Matrix

• Dual chain of command• High conflict between two sides of matrix• Many meetings to coordinate activities• Need for human relations training• Power domination by one side of matrix

• Dual chain of command• High conflict between two sides of matrix• Many meetings to coordinate activities• Need for human relations training• Power domination by one side of matrix


Team Approach

• Cross-functional teams consist of employees from various functional departments

• Interdisciplinary approach to management• Permanent team solve ongoing problems• Reengineering radical redesign for improvements

in cost, quality, service and speed


Advantages of Teams

• Same advantages as functional structure• Reduced barriers among departments• Quicker response time• Better morale• Reduced administrative overhead


Disadvantages of Teams

• Dual loyalties and conflict• Time and resources spent on meetings• Unplanned decentralization


Network Approach

• Organization divides major functions into separate companies brokered by a small headquarters organization

• "Where is the organization?"• Especially appropriate for international operations• Held together with phones, faxes, and other

electronic technology

• Organization divides major functions into separate companies brokered by a small headquarters organization

• "Where is the organization?"• Especially appropriate for international operations• Held together with phones, faxes, and other

electronic technology


Advantages of Network Approach

• Global competitiveness• Work force flexibility• Reduced administrative overhead


Disadvantages ofNetwork Approach

• No hands-on control• Loss of part of the organization severely impacts

remainder of organization• Employee loyalty weakened

• No hands-on control• Loss of part of the organization severely impacts

remainder of organization• Employee loyalty weakened

Documents

Developed by Stephen M.PetersCopyright © 2000 by Harcourt, Inc. All rights reserved. Ten hapter Fundamentals of Organizing © 2000 by Harcourt, Inc. All