1. Chapter Eight Creating a Flexible Organization

2. Copyright © Houghton Mifflin Company. All rights reserved.8 - 2 What Is an Organization? A group of two or more people working together to achieve a common set of goals Developing organization charts –Organization chart A representation of the positions and relationships in an organization –Chain of command The line of authority that extends from the highest to the lowest levels of the organization –Staff (advisory) positions Jobs that are not part of the direct chain of command in the organization

3. Copyright © Houghton Mifflin Company. All rights reserved.8 - 3 Five Steps to Organizing a Business 1.Job Design Divide the work into separate parts and assign those parts to positions 2.Departmentalization Group the positions into manageable units 3.Delegation Distribute responsibility and authority 4.Span of Management Determine the number of subordinates who will report to each manager 5.Chain of Command Designate the positions with direct authority and those that are support positions

4. Copyright © Houghton Mifflin Company. All rights reserved.8 - 4 2) Departmentalization Grouping jobs into manageable units Common bases for departmentalization –By function –By product –By location –By customer

5. Copyright © Houghton Mifflin Company. All rights reserved.8 | 5 Departmentalization by Function

6. Copyright © Houghton Mifflin Company. All rights reserved.8 | 6 Departmentalization by Product

7. Copyright © Houghton Mifflin Company. All rights reserved.8 | 7 Departmentalization by Location

8. Copyright © Houghton Mifflin Company. All rights reserved.8 | 8 Departmentalization by Customer

9. Copyright © Houghton Mifflin Company. All rights reserved.8 - 9 Departmentalization: Combinations of Bases Multibase Departmentalization for New-Wave Fashions, Inc. –Most firms use more than one basis for departmentalization to improve efficiency and to avoid overlapping positions.

10. Copyright © Houghton Mifflin Company. All rights reserved.8 - 10 3) Delegation Delegation –Assigning part of a manager’s work and power to other workers –Responsibility The duty to do a job or perform a task –Authority The power within the organization to accomplish an assigned task. –Accountability The obligation to accomplish an assigned job or task

11. Copyright © Houghton Mifflin Company. All rights reserved.8 - 11 Steps in the Delegation Process The manager assigns responsibility The subordinate is empowered to do the task Ultimate accountability remains with the manager

12. Copyright © Houghton Mifflin Company. All rights reserved.8 | 12 Debate Issue: Should Firms Use Downsizing When Employees Are No Longer Needed? YES Downsizing can lead to quicker decision making, precise accountability, and harder-working employees. Downsizing can reduce a firm’s salary expense. NO Employees are needed to perform their jobs or they wouldn’t have been hired in the first place. Downsizing is expensive because most companies must make severance payments and fund retirement plans.

13. Copyright © Houghton Mifflin Company. All rights reserved.8 - 13 5) Chain of Command: Line and Staff Management Line Management Position –A position that is part of the chain of command; includes direct responsibility for achieving the goals of the organization Line authority—the authority line managers have to make decisions and issue directives related to organizational goals Staff Management Position –A position created to provide support, advice, and expertise within an organization Advisory authority—the expectation that line managers will consult with staff managers before making decisions Functional authority—staff managers’ authority to make decisions and issues directives within their area of expertise

14. Copyright © Houghton Mifflin Company. All rights reserved.8 - 14 Line and Staff Management

15. Copyright © Houghton Mifflin Company. All rights reserved.8 - 15 Forms of Organizational Structure The Bureaucratic Structure –A management system based on a formal framework of authority that is carefully outlined and precisely followed –Characteristics 1.A high level of job specialization 2.Departmentalization by function 3.Formal patterns of delegation 4.A high degree of centralization 5.Narrow spans of management, resulting in a tall organization 6.Clearly defined line and staff positions –Advantages Inflexibility helps ensure fair and equitable treatment –Disadvantages Inflexibility creates problems in adapting to dynamic business environments

16. Copyright © Houghton Mifflin Company. All rights reserved.8 - 16 Additional Factors That Influence an Organization Corporate Culture –The inner rites, rituals, heroes, and values of a firm –Indicators of corporate culture The physical setting (e.g., building and office layout) Corporate statements about itself How the company greets its guests How employees spend their time at work (alone or in groups) –Cultural change is needed when The business environment changes Company performance is mediocre The company is growing or becomes a large firm

17. Copyright © Houghton Mifflin Company. All rights reserved.8 - 17 Additional Factors That Influence an Organization (cont’d) Intrapreneurship –Intrapreneur—an employee who pushes an innovative idea, product, or process through the organization while using the organization’s resources for idea development

18. Copyright © Houghton Mifflin Company. All rights reserved.8 - 18 Additional Factors That Influence an Organization (cont’d) Committees –Types Ad hoc—created for a specific short-term purpose Standing—relatively permanent; charged with performing some recurring task Task force—established to investigate a major problem or pending decision –Positive aspects Members bring more information and knowledge; more accurate decisions; results communicated more effectively –Negative aspects Decisions making takes longer; may reach unnecessary compromises; one person may dominate

19. Copyright © Houghton Mifflin Company. All rights reserved.8 - 19 Additional Factors That Influence an Organization (cont’d) The Informal Organization –Patterns of behavior and interactions that stem from personal, rather than official, relationships in the organization –Informal Groups Formed by the members themselves to accomplish goals that may or may not be relevant to the organization Reasons for joining: the need for affiliation; agreement with the goals of the group; desire to be accepted –The Grapevine Informal communication network within an organization that is completely separate from—and sometimes faster than—the organization’s formal communication channels –May be accurate or distorted; managers should be aware and use appropriately