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INTRODUCTION TO BUSINESS
Citation preview
Organizing the Business Enterprise
Chapter 6
Sr.Chapter Chapter HeadingNo.No.
1. 3 Understanding the Global context of business (031012)2. 4 Conducting Business Ethically and Responsibly (250212)3. 6 Organizing the Business Enterprise (030312)4. 7 Understanding Entrepreneurship and Small Business
(0312)5. 8 Managing Human Resources6. 9 Understanding Employee Motivating, Satisfying and
Leadership7. 11 Understanding Marketing Processes and Consumer
Behavior8. 16 Managing Quality and Productivity9. 17 Managing Information Systems and Communication
Technology10. 19 Understanding Money and Banking11. 20 Intermediate Term and Lease Financing
Course Outline
3
Marks Distribution
50 Terminal Examination20 Mid Term Examination15 Quizzes15 Final Assignment
WHAT IS ORGANIZATIONAL STRUCTURE Determinants of Organization Chain of Command
THE BUILDING BLOCKS OF ORGANIZATIONAL STRUCTURE
Specialization Departmentalization
Customer Departmentalization Product Departmentalization Process Departmentalization Geographic departmentalization Functional Departmentalization
TOC
ESTABLISHING THE DECISION-MAKING HIERARCHY Assigning Tasks: Responsibility and Authority Performing Tasks: Delegation and Accountability
Fear of Delegating
Distributing Authority: Centralization and Decentralization Tall and Flat organizations Span of Control Three forms of authority
Line Authority Staff Authority Committee and Team Authority
BASIC FORMS OF ORGANIZATIONAL STRUCTURE Functional Organization Divisional Organization Matrix Organization International Organization
Organizational Design for 21st century Boundary-less organization The team organization The virtual organization The learning organization
TOC
7-6
Organizational Structure
The specification of the jobs to be done within a business and how those jobs are related to one another
Each organization must develop a structure that meets its specific needs
7
Definitions
Determinants of Organization Purpose, Mission & Strategy Size, technology and changes in
environment Organizational Chart:
Diagram depicting a company’s structure and showing employees where they fit into its operations
Chain of Command: Reporting relationships within a
company
THE BUILDING BLOCKS OF ORGANIZATIONAL STRUCTURE Job Specialization
The process of identifying the specific jobs that need to be done and designing the people who will perform them
Departmentalization The process to determine how jobs
should be grouped together in logical units to make the workplace more efficient
9
BASIS OF DEPARTMENTALIZATION
1. Customer: according to types of customers likely to buy a given product. E.g. women and men departments; wholesale and retail department.
2. Product: Departmentalization according to specific products being created. Example: When a computer store has a department for printers, for hardware, for software, etc. often used in manufacturers.
3. Process: Departmentalization according to production processes used to create a good or service. Sewing Department, Cutting department etc in a garment factory
4. Geographic: Departmentalization according to areas served by a business.
5. Functional: Departmentalization according to the function or activities of similar groups. Example: When a company has a different department for marketing, accounting, etc.
Customer Departmentalization
Industrial vs. Consumer
Youth vs. Adult Family vs.
Singles
President & CEOTravel Ways Inc.
Vice PresidentMarket
Seniors Travel
Managers
Staff
Vice PresidentMarket
Couples Travel
Managers
Staff
Vice PresidentMarket
Family Travel
Managers
Staff
7-11
Product Departmentalization
Consumer office supplies vs. business office supplies
Photocopiers vs. computers
Tax return preparation vs. company financial statements
President & CEOBusiness
TechnologyInc.
Vice PresidentDivision
Photocopier
Managers
Staff
Vice PresidentDivision
Computer
Managers
Staff
Vice PresidentEquipment DivisionTelecommunications
Managers
Staff
7-12
Process Departmentalization
Groups based on the manufacturing process
assembly painting drying inspection
President & CEOHi-Tech Systems
Ltd.
Vice PresidentDivision
Parts Fabrication
Managers
Staff
Vice PresidentDivision
Assembly
Managers
Staff
Vice PresidentPainting Division
Managers
Staff
7-13
Geographic Departmentalization
Western vs. Eastern region
Canadian vs. American
North America vs. Europe
President & CEOCollege
Publishers Ltd.
Vice PresidentWestern Region
Managers
Staff
Vice PresidentCentral Region
Managers
Staff
Vice PresidentEastern Region
Managers
Staff
Functional Departmentalization
Based on activities performed
accounting & finance
marketing human resource production
President & CEOCrystal Retailers
Ltd.
Vice PresidentFinance
Accounting &
Managers
Staff
Vice PresidentMarketing
Managers
Staff
Vice PresidentResources
Human
Managers
Staff
The Combination of Various Organizational Structures
16
ESTABLISHING THE DECISION-MAKING HIERARCHY
1. Assign tasks2. Perform tasks3. Distribute Authority
17
Assign Tasks
Responsibility:Duty to perform an assigned task
Authority:Power to make the decisions necessary to complete a task
18
Perform Tasks
Delegation:assignment of a task, responsibility, or authority by a manager to a subordinate
Accountability:Liability of subordinates for accomplishing tasks assigned by managers
Centralized organizations
Decentralized organizationsLower level managers hold significant decision-making
authority
Top managers hold most decision-making authority
Distributing Authority
20
Distributing AuthoritySpan of Control: The number of subordinates that a manager is responsible for supervising
Wide span- many subordinates- Flat OrganizationNarrow span- very few subordinates- Tall Organization
Flat organizations: Characteristic of decentralized companies with relatively few layers of management and relatively wide spans of control.
Tall organizations: Characteristic of centralized companies with multiple layers of management and relatively narrow spans of control.
Relatively narrow span of control
Relatively wide span of control
Organizational Structure and Span of Control
Forms of Authority
Line Authority Line Departments
Staff Authority Staff Members
Committee and Team Authority
Forms of Authority Several different forms of authority develop in most
organizations, regardless of the organizational structure. Line authority: When authority flows up and down the chain of
command. Classic example: the military. Line departments: Departments with a direct link to the
production and sales of a specific product. Examples include: manufacturing, assembly, sales, and distribution. Each line department is essential to an organization’s success. Line employees are the producers in the company.
Staff authority: When authority is based on expertise that usually involves advising line managers. Examples include: legal, accounting, human resources. They help line departments in making decisions. E.g. marketing department seeks attorney advice for signing new contract.
Staff members: Assist line departments in making decisions, but do not have the authority to make final decisions.
Team and committee authority: Authority granted to teams or committees that play central roles in the firm’s daily operations. This form of authority has recently emerged across a wide spectrum of companies.
Basic Forms ofOrganizational Structure
Divisional Organization
International Organization
Functional Organization
Matrix Organization
Basic Forms ofOrganizational Structure Functional organization: Structured around basic
business functions such as marketing, operations, and finance. Examples can be found in most small to medium businesses.
Divisional organization: Corporate divisions operate as autonomous businesses under the larger corporate umbrella. This structure relies on product departmentalization. Examples include General Electric, and The Walt Disney Company. The create product based divisions. Each may be managed as a separate enterprise.
Matrix organization: Teams are formed, and team members report to two or more managers. In some firms the matrix structure is temporary, while in other firms it is permanent. Examples include: Martha Stewart Living, Omnimedia, and many large consulting firms. It was created by NASA. It relies on committee and team authority.
International organization: Approach developed in response to the need to manufacture, purchase, and sell in global markets. Typically an international structure evolves as international operations escalate.
A Matrix OrganizationMARTHA STEWART
Media Group
Magazines Books Internet Radio/Newspaper
Network/Cable TV
Merchandising Group
Kmart line
Catalog line
Sears Paint
Specialty retailing
Area Specialists
Cooking
Entertainment
Weddings
Crafts
Gardening
Home
Holidays
Children
An International Organization
CEO
Retail Division A
Retail Division B
International Division
Latin America
Europe Asia
An International Organization
Many organizations initiate international expansion with a small team of specialists, evolve into a separate division as shown in the slide, and ultimately (if they experience success in foreign markets) integrate international operations into their standard business units.
The Future of Organizational Structure
Boundary-less Organizations
Team Organizations
Virtual Organizations
Learning Organizations
The Future of Organizational Structure Organizational structure continues to change as organizations
seek new ways to compete effectively within a rapidly changing business environment. Emerging forms include (these characteristics):
1. Boundary-less: Organizations in which traditional boundaries and structures are minimized or eliminated. Example: Wal-Mart has tied its key suppliers into its information system for seamless\faultless inventory management.
2. Team: Organizations that rely almost exclusively on project-type teams. Examples: Xerox and Apple are moving in this direction.
3. Virtual: Organizations that have little or no formal structure, relying heavily on temporary workers, leased facilities, and outsourced services. Examples: Global Research Consortium operates this way, and University of Phoenix is moving in this direction.
4. Learning: Organizations that strive to integrate continuous improvement with continuous employee learning and development. Example: Shell Oil Company.
5. Learning org. works to facilitate the lifelong learning and personal development to all employees and continuous respond to change.
Informal Groups The grapevine\
gossip Intrapreneuring
The Informal OrganizationA Powerful Dynamic
The Informal OrganizationA Powerful Dynamic
The informal organization is the network of everyday social interactions among employees, which do not follow formal lines of communication. The informal organization can be as powerful—if not more so—than the formal organization.
Informal groups: Groups of people who decide to interact among themselves. Their impact on the organization can be positive, negative, or neutral.
The grapevine\gossip: Informal communication network that runs through the organization. You need to have open channels of communication and responding vigorously in order to eliminate its level.
The Informal OrganizationA Powerful Dynamic
Intrapreneuring: Harnessing\tie together the energy of the informal organization to improve productivity by creating the innovation and flexibility of a small-business environment within the confines of a large organization. Compaq, Rubbermaid, 3M, and Xerox are examples of companies that support intrapreneuring.