Welcome to AB140

Unit 4 - Organizing

Michael B. McKenna

Organizing for Action

A firm’s structure may well be the most important factor in determining whether its strategy can be carried out – whether employees can meet customer expectations, communicate effectively with each other and their bosses, and respond to change in the competitive environment.

Their profitability and survival depend on effective structures.

Bateman Snell p120.

Unit 4 Objectives

•Identify characteristics of vertical and horizontal organizational structures•Identify levels of authority in an organization•Discuss delegation•Centralized versus Decentralized Organizations•Functional and Divisional and Matrix Organizations •General Questions and Answers

Fundamentals of Organizing

• Differentiation -the organization is composed of many different units that work on different kinds of tasks, using different skills and work methods.

• Integration -these differentiated units are put back together so that work is coordinated into an overall product

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Differentiation

• Division of labor-The assignment of different tasks to different people or groups

• Specialization -A process in which different individuals and units perform different tasks

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Integration

• Coordination

-The procedures that link the various parts of an organization for the purpose of achieving the organization’s overall mission

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Conventional Organization Chart

6-7Figure 6.1

Organizing for ActionA firm’s structure may well be the most important factor in

determining whether its strategy can be carried out – whether employees can meet customer expectations, communicate effectively with each other and their bosses, and respond to change in the competitive environment.

Their profitability and survival depend on effective structures.

Bateman Snell p120.

Modern OrganizingOrganic Structure:

An organizational form that emphasizes flexibility characterized by:

•Broader responsibilities that change as the need arises•Communication through advice and information•Decentralized decision making and influence•Expertise is highly valued•Reliance on judgment rather than rules•Obedience to authority is less important than

commitment to the organization’s goals.•Employees depend more on one another

and relate more informally and personally.

Authority in Organizations

• Authority-The legitimate right to make decisions and to tell other people what to do.

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Authority in Organizations

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Delegation

• Responsibility-The assignment of a task that an employee is supposed to carry out

• Accountability-The expectation that employees will perform a job, take corrective action when necessary, and report upward on the status and quality of their performance

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Delegation

• Delegation-The assignment of new or additional responsibilities to a subordinate

• Responsibility,• Authority, and • Accountability

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Span of Control

•The number of subordinates who report directly to an executive or supervisor•The optimal span of control maximizes effectiveness by balancing two considerations:

•Must be narrow enough to permit managers to maintain control over subordinates•Must not be so narrow that it leads to over control and an excessive number of managers overseeing a few subordinates

When should span be wide?

1. The work is clearly defined and unambiguous2. Subordinates are highly trained and have access to

information3. The manager is highly capable and supportive4. Jobs are similar and performance measures are

comparable5. Subordinates prefer autonomy to close supervisory

control

Is this delegation?

Call Tom Burton at Nittany Office Equipment. Ask him togive you the price list on an upgrade for our personalcomputers. I want to move up to a Core 2 Duo processorwith 4 gigs of RAM and at least a 500-gigabyte hard drive.Ask them to give you a demonstration, and let them try itout. Have them write up a summary of their needs and thepotential applications they see for the new systems. Thenprepare me a report with the costs and specifications of theupgrade for the entire department. Oh, yes, be sure to askfor information on service costs.

Advantages of Delegation

•Leverages the manager’s energy and talent and those of his or her subordinates•Conserves a manager’s time•Develops effective subordinates•Gives the subordinate a more important job•Subordinate gains an opportunity to develop new skills and demonstrate potential for additional responsibilities and perhaps promotion•Promotes a sense of being an important, contributing member of the organization leading to stronger commitment, perform their tasks better, and engage in more innovation.

Steps in Effective Delegation

6-18Figure 6.2

Decentralization

• Centralized organization

-An organization in which high-level executives make most decisions and pass them down to lower levels for implementation

• Decentralized organization

-An organization in which lower-level managers make important decisions

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• Differentiation: an aspect of the

organization’s internal environment

created by job specialization and

the division of labor.

• Integration: The degree to which

differentiated work units work together

and coordinate their efforts.

Bottom line: Achieve the organization’s overall mission!

Organizational Structures

The Functional Organization

• Functional organization

-Departmentalization around specialized activities such as production, marketing, and human resources.

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The Functional Organization

6-22Figure 6.3

The Divisional Organization

• Divisional organization-Departmentalization that groups units around products, customers, or geographic regions.

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The Divisional Organization

6-24Figure 6.4

The Matrix Organization

• Matrix organization-An organization composed of dual reporting relationships in which some managers report to two superiors—a functional manager and a divisional manager

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Matrix Organizational Structure

6-26Figure 6.5

Matrix Survival Skills

•Top executives must learn to balance power and emphasis between the product and functional orientations.

•Middle managers must learn how to be responsible to two superiors, prioritizing multiple demands and reconciling conflicting orders.

Vertical Structure

• Defines the authority within an organization• Reporting relationships• Management team

- Board of Directors- Chief Executive Officer- Upper Management Team- Middle Management- First Line Management

The Vertical Structure

• Authority – legitimate right to make decisions and to tell other people what to do.

• Formal authority• Based on formal position• e.g., Board of directors, Chief executive officer,

• Top management team• Informal authority

• Based on expertise, experience, • or personal qualities

• e.g., scientists, computer-savvy employees

Vertical Differentiation

• Span of control• Delegation

• Authority• Responsibility• Accountability

• Decentralization

Horizontal DifferentiationDeals with issues of departmentalization that create functional, divisional, and matrix organizations.

• Studying the organizations structure• Departmentalization

• Line Departments• Staff Departments

Hierarchy

•Three broad levels of the organizational pyramid•Top management•Middle management•Operational management

Coordination by Standardization

• Standardization-Establishing common routines and procedures that apply uniformly to everyone.

• Formalization-The presence of rules and regulations governing how people in the organization interact.

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Coordination by Plan

• Coordination by plan

-Interdependent units are required to meet deadlines and objectives that contribute to a common goal

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Coordination by Mutual Adjustment

• Coordination by mutual adjustment

-Units interact with one another to make accommodations to achieve flexible coordination

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Managing High Information-Processing Demands

6-36Figure 6.7

Organizing around Core Competencies

• Identify existing core competencies.• Acquire or build core competencies that will be

important for the future.• Keep investing in competencies so that the firm

remains world class and better than competitors.• Extend competencies to find new applications and

opportunities for the markets of tomorrow

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Strategic Alliances

• Strategic alliance-A formal relationship created among independent organizations with the purpose of joint pursuit of mutual goals.

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The Learning Organization

• Learning organization-An organization skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights.

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The High-Involvement Organization

• High-involvement organization -A type of organization in which top management ensures that there is consensus about the direction in which the business is heading

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Total Quality Management

• Total quality management (TQM)

-An integrative approach to management that supports the attainment of customer satisfaction through a wide variety of tools and techniques that result in high-quality goods and services.

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Organizing for Flexible Manufacturing

• Mass customization-The production of varied, individually customized products at the low cost of standardized, mass-produced products.

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Key Features in MassCustomization

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Table 6.1

Lean Manufacturing

• Lean manufacturing-An operation that strives to achieve the highest possible productivity and total quality, cost effectively, by eliminating unnecessary steps in the production process and continually striving for improvement.

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Time-Based Competition

• Just-in-time (JIT) -A system that calls for subassemblies and components to be manufactured in very small lots and delivered to the next stage of the production process just as they are needed.

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Assignments• Discussion Question:

-Pick a paid or unpaid job that you have held where you delegated responsibility to others or had responsibilities delegated to you. If you have not had a paid or unpaid job previously, use your experience in this course, where your instructor has delegated assignments to you, as your reference for this discussion.Describe your experience with delegation in terms of what went well and why, or what did not go as expected. What could have improved the chances of a successful outcome in that particular situation?

• Dropbox Assignment

- This week's Assignment consists of reading a scenario about Sandwich Blitz, Inc., and responding to four questions.

• Review