1. Managing for Quality and Competitiveness
Part 3
Managing for Quality and Competitiveness
We continue part 3 of your textbook, Managing for Quality and Competitiveness.
© 2015 McGraw-Hill Education.

2. CHAPTER 6 CHAPTER 7 CHAPTER 8 The Nature of Management
Organization, Teamwork, and Communication
CHAPTER 8
Managing Service and Manufacturing Operations
Chapter 7 addresses a very important area of business management. We will discuss the organization, teamwork, and communication aspects of business and other types of organizations. We will examine the different ways in which organizations can be structured, differentiate between teams and groups, and describe how communication occurs in organizations.

3. Learning Objectives
LO 7-1 Define organizational structure and relate how organizational structures develop.
LO Describe how specialization and departmentalization help an organization achieve its goals.
LO Determine how organizations assign responsibility for tasks and delegate authority.
LO Compare and contrast some common forms of organizational structure.
LO Distinguish between groups and teams and identify the types of groups that exist in organizations.
LO Describe how communication occurs in organizations.
After reading this chapter, you will be able to:
Define organizational structure, and relate how organizational structures develop
Describe how specialization and departmentalization help an organization achieve its goals
Determine how organizations assign responsibility for tasks and delegate authority
Compare and contrast some common forms of organizational structure
Distinguish between groups and teams, and identify the types of groups that exist in organizations
Describe how communication occurs in organizations

4. Organizational Culture
Organizational Culture (Corporate Culture)
A firm’s shared values, beliefs, traditions, philosophies, rules, and role models for behavior
Ensures that organizational members:
Share values
Observe common rules
Share problem solving approaches
Perhaps one of the most important aspects of organizing a business is determining its culture. We define organizational culture as the firm’s shared values, believes, traditions, philosophies, rules, and role models for behavior. In a sense, the organization’s culture provides a detailed map for employees and outsiders as to how the organization functions.
Organizational culture helps to ensure that all members of a company behave appropriately, treat customers well, and deal effectively with problems in the organization. Organizational culture exists in every type of organization regardless of its size or its mission.

5. Organizational Structure
The arrangement or relationship of positions within an organization
An organization’s structure develops when:
Managers assign work tasks to specific individuals or work groups
Coordinate the diverse activities required to reach the firm’s objectives
Organizational structure is critical in achieving the firm’s goals and objectives. Structure determines the arrangement and relationship of positions within the organization in a way that facilitates the attainment of the firm’s mission, strategic plan, and objectives. Developing the organization’s structure is a very important aspect in determining a firm’s long-term success. The organization’s structure develops as managers begin to assign tasks and activities to individuals or groups and specify how these groups and individuals will work with each other to reach the firms objective. The organizational structure allows managers to coordinate activities throughout the firm to achieve success.

6. The organizational structure at TOMS Shoes consists of two parts
The for-profit component of the company manages overall operations
Its nonprofit component, Friends of TOMS, is responsible for volunteer activities and shoe donations
TOMS Shoes’ organizational culture is determined by the founder’s desire to provide as many shoes as possible to children in developing countries (where
shoeless children walk for miles to get water, food, and medical care). His company operates with a program that for every shoe purchased, a shoe will be donated to children in need. The organizational structure at TOMS Shoes consists of two parts. The for-profit component of the company manages overall operations. Its nonprofit component, Friends of TOMS, is responsible for volunteer activities and shoe donations.

7. Organizational Charts
A visual display of the organizational structure, lines of authority (chain of command), staff relationships, permanent committee arrangements, and lines of communication
The organizational chart provides a detailed and graphical presentation of the structure of an organization. Some organizations are rather small and have simple structures whereas others, such as large corporations with several divisions, have complex structures. The organizational chart details the chain of command or the authority relationships that exist among positions in the firm. It also helps identify the lines of communication as well as showing who reports to whom in the company.
The organizational chart shows:
Organizational structure
Chain of command (lines of authority)
Other relationships (staff, committees, etc.)
Lines of communication

8. The Evolution of a Clothing Store, Phases 1, 2, and 3
The best way to begin to understand how organizational structure develops is to consider the evolution of a new business such as a clothing store. At first, the business is a sole proprietorship in which the owner does everything—buys, prices, and displays the merchandise; does the accounting and tax records; and assists customers. As the business grows, the owner hires a salesperson and perhaps a merchandise buyer to help run the store. As the business continues to grow, the owner hires more salespeople. The growth and success of the business now require the owner to be away from the store frequently, meeting with suppliers, engaging in public relations, and attending trade shows. Thus, the owner must designate someone to manage the salespeople and maintain the accounting, payroll, and tax functions. If the owner decides to expand by opening more stores, still more managers will be needed. The figure above (figure 7.1 in text), shows these stages of growth with three organizational charts.

9. Assigning Tasks Specialization Why specialize:
The division of labor into small, specific tasks and the assignment of employees to do a single task
Why specialize:
Efficiency
Ease of training
Activities too numerous for one person
As companies grow and become more complex, managers may determine that more specialized tasks be performed. Specialization is where managers divide the labor into small, specific tasks and assign employees to accomplish these tasks. The organization can gain efficiencies and more effective training of employees. Specialization is crucial when the activities in an organization become too numerous and complex to be handled by a less formal structure.

10. Learning Organization
A learning organization is one that opens communication between departments in order to increase the level of learning among employees within the organization
The manager creating and sustaining this kind of organization invests in employees through extensive training and minimal restrictions so that creativity is emphasized
Through the knowledge that is created and captured, employees are encouraged to experiment with the ideas that have the most value for customers
Managers encourage a healthy level of risk taking and learning from mistakes
Failure is valued as a learning experience and success, while celebrated, is seen as a fleeting experience that should not be the focus of the future because there is not much to learn from success
Learning Organization
A learning organization is one that opens communication between departments in order to increase the level of learning among employees within the organization. The manager creating and sustaining this kind of organization invests in employees through extensive training and minimal restrictions so that creativity is emphasized. Through the knowledge that is created and captured, employees are encouraged to experiment with the ideas that have the most value for customers. Managers encourage a healthy level of risk taking and learning from mistakes. Failure is valued as a learning experience and success, while celebrated, is seen as a fleeting experience that should not be the focus of the future because there is not much to learn from success.

11. Overspecialization can have negative consequences
Departmentalization
Employees become bored
Job dissatisfaction
Poor quality work
Increased injuries
Increased employee turnover
Overspecialization can have negative consequences
Departmentalization
The grouping of jobs into working units usually called departments, units, groups, or divisions
Functional departmentalization
Product departmentalization
Geographical departmentalization
Customer departmentalization
While specialization can be very important for an organization to achieve its objectives, overspecialization can create dysfunctional consequences for the organization. If tasks are too repetitive or mundane, employees may become bored, dissatisfied with their jobs and not pay careful attention to what they are doing. This can create problems with the quality of the product or service, it can result in injuries to employees, and people may quit the company to find more rewarding work.
Once specialized tasks have been assigned to employees, it becomes necessary for managers to organize workers doing similar jobs into groups. This makes it easier to coordinate and manage. This organization of similar jobs into groups is called departmentalization. Departmentalization can result in the creation of departments, units, groups, or even divisions. There are different ways that managers can departmentalize the grouping of jobs. They include, functional departmentalization, product departmentalization, geographical departmentalization, and customer departmentalization.

12. Functional Departmentalization
The grouping of jobs that perform similar functional activities, such as finance, manufacturing, marketing, and human resources
Functional departmentalization groups jobs that perform similar functional activities, such as finance, manufacturing, marketing, and human resources. This approach is common in small organizations. A weakness of functional departmentalization is that, because it tends to emphasize departmental units rather than the organization as a whole, decision making that involves more than one department may be slow, and it requires greater coordination.

13. Product Departmentalization
The organization of jobs in relation to the products of the firm
Product departmentalization , as you might guess, organizes jobs around the products of the firm. Functional activities—production, finance, marketing, and others—are located within each product division. Consequently, organizing by products duplicates functions and resources and emphasizes the product rather than achievement of the organization’s overall objectives. However, it simplifies decision making and helps coordinate all activities related to a product or product group.

14. The Campbell Soup Company uses product departmentalization to organize its company
However, the firm also engages in a type of geographic departmentalization for various regions
The Campbell Soup Company uses product departmentalization to organize its company. However, the firm also engages in a type of
geographic departmentalization for various regions.

15. Geographical Departmentalization
The grouping of jobs according to geographic location, such as state, region, country, or continent
Geographical departmentalization groups jobs according to geographic location, such as a state, region, country, or continent. Multinational corporations often use a geographical approach because of vast differences between different regions. However, organizing by region requires a large administrative staff and control system to coordinate operations, and tasks are duplicated among the different regions.

16. Customer Departmentalization
The arrangement of jobs around the needs of various types of customers
Customer departmentalization arranges jobs around the needs of various types of customers. Customer departmentalization, like geographical departmentalization, does not focus on the organization as a whole and therefore requires a large administrative staff to coordinate the operations of the various groups.

17. An Organizational Chart for the City of Corpus Christi
Many city governments also have departments for specific services (e.g., police, fire, waste disposal) as well as departments for legal, human
resources, and other business functions. The figure above (figure 7.3 in the text) depicts the organizational chart for the city of Corpus Christi, Texas, showing these departments.

18. Delegation of Authority
Giving employees not only tasks, but also the power to make commitments, use resources, and take whatever actions are necessary to carry out those tasks
As a business grows, so do the number and complexity of decisions that must be made; no one manager can handle them all
Delegation of authority frees a manager to concentrate on larger issues such as planning or dealing with problems and opportunities
Once groups have been assigned tasks and organized into departments or divisions, they must be given responsibility to carry out their assignments. Management determines the level of responsibility that it will delegate to employees and specifies how the manager will hold her employees accountable for results. We define delegation of authority as the process of giving employees tasks and empowering them to make commitments, use resources and take action to carry out tasks.

19. Responsibility and Accountability
The obligation, placed on employees through delegation, to perform assigned tasks satisfactorily and be held accountable for the proper execution of work
Accountability
The principle that employees who accept an assignment and the authority to carry it out are answerable to a superior for the outcome
While delegation establishes the authority that employees and groups of employees have in carrying out tasks, it also determines the level of responsibility that they have to perform the tasks appropriately, with quality, and efficiency. When employees are responsible for their work, managers hold them accountable for proper execution and adherence to appropriate standards.

20. Degree of Centralization
Centralized Organizations
A structure in which authority is concentrated at the top, and very little decision-making authority is delegated to lower levels
Overcentralization can cause serious problems for a company, in part because it may take longer for the organization as a whole to implement decisions and to respond to changes and problems on a regional scale
Decentralized Organizations
An organization in which decision-making authority is delegated as far down the chain of command as possible
Delegating authority to lower levels of managers may increase the organization’s productivity
How much authority is delegated and to whom determines the degree of centralization of authority that exists in an organization. Organizations can be either centralized or decentralized. In centralized organizations, authority is typically not delegated and is concentrated in upper levels of management. In decentralized organizations, decision-making authority is delegated as far down the chain of command as is possible. When the decisions are risky, organizations tend to be more centralized. Decentralized organizations are those that are in complex environments that face a great deal of competition. In order for a firm to be able to respond quickly, decentralized authority provides that flexibility to make rapid decisions at lower levels of the organization.

21. Span of Management Span of Management
The number of subordinates who report to a particular manager
A wide span of management exists when a manager directly supervises a very large number of employees
A narrow span of management exists when a manager directly supervises only a few subordinates
When managers structure organizations, they must determine the number of subordinates that should report to a given manager. There is no simple way to make this determination. Experts generally agree that top managers should not directly supervise more than eight people. Lower-level managers who supervise fairly routine tasks are able to manage a much larger number of employees. The span of management is determined by the number of employees reporting to a single manager. In a wide span of management, the manager is supervising a relatively large number of employees. In a narrow span of management, a manager directly supervises only a few employees.

22. Organizational Layers
The levels of management in an organization
Complements the concept of span of management
A company with many layers of managers is considered tall; in a tall organization, the span of management is narrow
Organizations with few layers are flat and have wide spans of management
Complementing the concept of span of management is organizational layers, the levels of management in an organization. A company with many layers of managers is considered tall; in a tall organization, the span of management is narrow. Because each manager supervises only a few subordinates, many layers of management are necessary to carry out the operations of the business. Organizations with few layers are flat and have wide spans of management. When managers supervise a large number of employees, fewer management layers are needed to conduct the organization’s activities. Many of the companies that have decentralized also flattened their structures and widened their spans of management, often by eliminating layers of middle management.

23. Forms of Organizational Structures
Line structure
Line-and-staff structure
Multidivisional structure
Matrix structure
We have discussed the assignment of tasks and the responsibility for carrying them out. Managers must also consider how to structure authority relationships within the organization. In other words, managers must determine what structure the organization itself will have and how it will appear on the organizational chart. The common forms of organization are listed on this slide: line structure, line-and-staff structure, multidivisional structure, and the matrix structure.

24. Line Structure Line Structure
The simplest organizational structure in which direct lines of authority extend from the top manager to the lowest level of the organization
The line structure results in a very flat organization. Of all the common forms of organization, the line structure is the simplest. Line structure has direct lines of authority that extend from the top manager to employees at the lowest level of the organization. In the illustration on this slide, in the convenience store, there is only one line of authority with a very clear chain of command that enables managers to make decisions quickly. For example, an assistant manager can make a decision quickly as she only has to consult one person, her immediate supervisor. Line structures are most common in small businesses.

25. Line-and-Staff Structure
A structure having a traditional line relationship between superiors and subordinates and also specialized managers – called staff managers – who are available to assist line managers
The line and staff structure has traditional line relationships between superiors and subordinates but it also has specialized managers called staff managers who are available to assist the line managers.

26. Line-and-Staff Structure
A line and staff structure is considerably more complex, and taller than a simple line structure. Line managers focus on their area of expertise and staff managers provide assistance, support, and advise in specialized areas such as finance, human resources, and legal issues. In the illustration on this slide you will notice the dotted line connecting the production manager with engineering and human resources. While there is not a reporting relationship per se here, the specialized departments of engineering and human resources provide support to the production manager as he or she supervises his or her group of supervisors.

27. Multidivisional Structure
A structure that organizes departments into larger groups called divisions
Occurs as organizations grow larger and more diversified
Divisions can be formed on the same bases as departments (customer, product, and/or geography)
Delegation of authority and divisionalized work
A multidivisional structure organizes departments into larger groups called divisions. Divisions can be formed based on geography, customer, product, or a combination of these, so can departments within each of these divisions. Multidivisional structures permit delegation of decision making authority, allowing divisional and department managers to specialize. Delegation of authority and divisionalized work also mean that better decisions are made faster, and they tend to be more innovative.

28. Matrix Structure Matrix Structure
A structure that sets up teams from different departments, thereby creating two or more intersecting lines of authority; also called a project-management structure
A matrix structure is a structure that sets up teams from different departments, thereby creating two or more intersecting lines of authority; also called a project-management structure.

29. Matrix Structure
A matrix structure is a form of organization that attempts to address issues that arise with growth, diversification, productivity, and competitiveness. It is also called a project management structure that sets up teams from different departments creating two or more intersecting lines of authority. Project teams bring together specialists from a variety of areas to work together on a project. Here, employees are responsible to two managers, functional managers and project mangers. Matrix structures are usually temporary and exist only to facilitate a particular project.

30. Groups and Teams
Group
Two or more individuals who communicate with one another, share a common identity, and have a common goal
Team
A small group whose members have complementary skills; have a common purpose, goals, and approach; and hold themselves mutually accountable
Today, most work in organizations is done through work groups and teams. Some experts don’t distinguish between groups and teams, while others do. There has been a gradual shift toward teams to enhance organizational effectiveness. We will look at this in more detail in the next slides. First, we must define what we mean by a group. A group is two or more individuals who communicate with one another, share a common identity, and have a common goal. While groups have common identities and goals, teams are a special type of group whose members have complementary skills, common purposes, goals, and approach. However, unlike groups, team members hold themselves mutually accountable for achieving the team’s objectives and goals.

31. Differences Between Groups and Teams
All teams are groups, but not all groups are teams. The table above (table 7.2 in text) points out some important differences between them. Work groups emphasize individual work products, individual accountability, and even individual leadership. Salespeople working independently for the same company could be a work group. In contrast, work teams share leadership roles, have both individual and mutual accountability, and create collective work products. In other words, a work group’s performance depends on what its members do as individuals, while a team’s performance is based on creating a knowledge center and a competency to work together to accomplish a goal.

32. Committees and Task Forces
A permanent, formal group that performs a specific task
Task Force
A temporary group of employees responsible for bringing about a particular change
Typically come from across all departments and levels of an organization
Membership is usually based on expertise rather than organizational position
Occasionally, a task force may be formed from individuals outside a company
Organizations make use of specialized groups two of which are presented on this slide: committees and the task force. A committee is usually a permanent and formal group that is responsible for some specific task. A compensation committee may exist in a company to ensure that its wages and benefits are competitive. A task force is a temporary group of employees who are responsible for bringing about a particular change. Members of task forces usually come form different functions and departments within the organization.

33. Teams
Project Teams
Groups similar to task forces which normally run their operation and have total control of a specific work project
Product-Development Teams
A specific type of project team formed to devise, design, and implement a new product
Quality-Assurance Teams (or Quality Circles)
Small groups of workers brought together from throughout the organization to solve specific quality, productivity, or service problems
Self-Directed Work Teams (SDWT)
A group of employees responsible for an entire work process or segment that delivers a product to an internal or external customer
In the United States, the use of teams in organizations has become fairly widespread. Teams are typically formed because they have been found to increase productivity, quality, and competitiveness. Teams are beneficial because they pool members’ knowledge and skills and make greater use of them than individuals working alone. It is important to point out that effective teams are usually small in number, no more than five members. Organizations employ different types of teams depending upon what they wish to accomplish. The more common types of teams are listed on this slide and the following slide: project teams, product development teams, quality assurance teams that are often called quality circles, and the highest form of team functioning called the self-directed work teams referred to as SDWT.
Project teams are groups similar to task forces which normally run their operation and have total control of a specific work project.
Product-development teams are a specific type of project team formed to devise, design, and implement a new product.
Quality-assurance teams (or quality circles) are small groups of workers brought together from throughout the organization to solve specific quality, productivity, or service problems.
Self-directed work teams (SDWT) are a group of employees responsible for an entire work process or segment that delivers a product to an internal or external customer.

34. The Flow of Communication in an Organizational Hierarchy
Of critical importance to organizations is the relative effectiveness of communication. Communication can flow in a variety of directions and from various sources. Communications can be oral and written. The importance of effective communication for an organization cannot be forgotten. It is clear that the more successful the communication system is within an organization, the more successful the firm is. This slide presents a graphical illustration of formal communication within a firm. As you can see, the type of communication differs relative to the level in the organizational hierarchy. Communication can flow upward and downward as well as horizontally and diagonally in an organization. Organizational communications can move in all directions, with horizontal communication between first-line managers, and upward, downward, and diagonal communications between CEOs, Presidents, Vice Presidents, and Managers.

35. Downward Communication
Formal Communication
Flow of communication within the formal organizational structure as depicted on organizational charts
Upward Communication
Flows from lower to higher levels of the organization
Includes information such as progress reports, suggestions for improvement, inquiries, and grievances
Downward Communication
Refers to the traditional flow of information from upper organizational levels to lower levels
Typically involves directions, the assignment of tasks and responsibilities, performance feedback, and certain details about the organization’s strategies and goals
Formal communication within an organization refers to the flow of communication as it is specified by the organizational structure usually depicted by the organizational chart. Upward communication flows from lower levels of the firm to higher levels and takes the form of progress reports or suggestions for improvement. Downward communication typically involves directions, policies, and assignments and flows from upper levels of management down through the organization.

36. Formal Communication Horizontal Communication Diagonal Communication
Involves the exchange of information among colleagues and peers on the same organizational level, such as across or within departments
Information informs, supports, and coordinates activities both within the department and with other departments
Diagonal Communication
When individuals from different units and organizational levels communicate
With firms downsizing and increasing the use of work teams, workers are being required to communicate with others in different departments and on different levels to solve problems and coordinate work
Horizontal communication involves the exchange of information among peers on the same level and can support and coordinate activities within and across departments. Finally, diagonal communication occurs with self managed work teams as members are required to communicate with individuals in different department and levels to solve problems and coordinate work.

37. Informal Communication
Grapevine
An informal channel of communication, separate from management’s formal, official communication channels
Managers can utilize informal communications as a sounding device
Can obtain valuable information from the grapevine that could improve decision making
Some organizations use the grapevine to their advantage by floating ideas, soliciting feedback, and reacting accordingly
While formal communications are important for organizational efficiency, informal communication has a profound impact on the effectiveness of the organization. Communication occurs between friends who may be in different departments and on different levels in the organization. The most significant information communication occurs through the grapevine that is separate form management's formal, official communication channels. Information passed along the grapevine may relate to the job or it may be gossip and rumor. The accuracy of grapevine information can be of great concern to managers.

38. Non-Verbal Communication
Non verbal communication is embedded in most forms of communication and send messages out through hand movements, head nodding, and tone of voice or written word
These indirect forms of communication can be more informative than the direct message being transmitted
It is important to be aware of one’s own non verbal communication style in order to ensure sending the intended message
Non-verbal communication
Non verbal communication is embedded in most forms of communication and send messages out through hand movements, head nodding, and tone of voice or written word. These indirect forms of communication can be more informative than the direct message being transmitted. It is important to be aware of one’s own non verbal communication style in order to ensure sending the intended message.

39. Improving Communication Effectiveness
Encourage employees to provide feedback
Helps identify strengths and weaknesses
Avoid interruptions
Develop strong and effective communication channels through training
Important for companies to communicate their policies throughout the organization
Without effective communication, the activities and overall productivity of projects, groups, teams, and individuals will be diminished. Communication is an important area for a firm to address at all levels of management. One of the major issues of effective communication is in obtaining feedback. If feedback is not provided, then communication will be ineffective and can drag down overall performance.
Interruptions can be a serious threat to effective communication. Various activities can interrupt the message. For example, interjecting a remark can create discontinuance in the communication process or disrupt the uniformity of the message. One suggestion is to give the communicator space or time to make another statement rather than quickly responding or making your own comment.
Strong and effective communication channels are a requirement for companies to distribute information to different levels of the company. Businesses have several channels for communication, including face-to-face, , phone, and written communication (for example, memos). It is important for companies to communicate their policies throughout the organization.

40. Discussion
Indentify four types of departmentalization and give an example of each type.
Discuss the different forms of organizational structure. What are the primary advantages and disadvantages of each form?
Identify four types of departmentalization and give an example of each type.
Departmentalization is grouping jobs into working units usually called departments, units, groups, or divisions. Functional departmentalization is the grouping of jobs that perform similar functional activities, such as finance, manufacturing, marketing, and human resources. Product departmentalization is grouping jobs around the products of a firm. Geographical departmentalization is grouping jobs by geographic location, such as country, region, or an even smaller area. Customer departmentalization is grouping jobs around the needs of various types of customers, which allows an organization to respond to the needs of each group of customers. (Examples of these departmentalization types will vary according to the examples given by students).
Discuss the different forms of organizational structure. What are the primary advantages and disadvantages of each form?
The process of delegation establishes a pattern of authority and accountability, often called bureaucracy, within the organization. Various forms of bureaucracy include line structure, line-and-staff structure, and matrix structure, as well as committees.
A line structure is based on direct lines of authority that extend from the top executive to employees at the lowest level of an organization. This structure provides a clear chain of command, but it also requires managers to possess a wide range of knowledge.
In the line-and-staff structure there is a line relationship between superiors and subordinates, and line departments are directly involved in the operation of the organization. Specialized managers, called staff managers, are available to assist line managers.
The matrix structure involves setting up teams from different departments and creating two or more intersecting lines of authority. The matrix structure improves cross-pollination of ideas but is generally temporary.