Structure and Fundamentals of Organizing Chapter 7 Structure and Fundamentals of Organizing Copyright © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Learning Objectives Discuss the fundamental characteristics of organizing, including such concepts as work specialization, chain of command, span of management, and centralization versus decentralization. Describe functional and divisional approaches to structure. Explain the matrix approach to structure and its application to domestic and international organizations. Describe the contemporary team and virtual network structures and why they are being adopted by organizations. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Learning Objectives (contd.) Learning Objectives (contd.) Explain why organizations need coordination across departments and hierarchical levels, and describe mechanisms for achieving coordination. Identify how structure can be used to achieve an organization’s strategic goals. Illustrate how organization structure can be designed to fit environmental uncertainty. Define production technology (manufacturing, service, and digital) and explain how it influences organization structure. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Organizing The deployment of organizational resources to achieve strategic goals. The deployment of resources is reflected in the division of labor into specific departments and jobs, formal lines of authority and mechanisms for coordinating diverse organization tasks. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Organization Structure Organization Structure Defined as: 1. The set of formal tasks assigned to individuals and departments. 2. Formal reporting relationships. 3. The design of systems to ensure effective coordination of employees across departments. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Work Specialization Tasks are subdivided into individual jobs. Tasks are subdivided into individual jobs. Employees perform only the tasks relevant to their specialized function. Jobs tend to be small, but they can be performed efficiently. There is a concern that employees may become isolated, and do only a single boring job. Many organizations are moving away from this principle. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Chain of Command Unbroken line of authority that links all persons in an organization and shows who reports to whom. Associated with two underlying principles. Unity of Command. Scalar Principle. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Authority Formal and legitimate right of a manager to make decisions, issue orders, and to allocate resources to achieve organizationally desired outcomes. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Characteristics of Authority Characteristics of Authority Authority is vested in organizational positions, not people. Authority is accepted by subordinates. Authority flows down the vertical hierarchy. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

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. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Delegation Process managers use to transfer authority and responsibility. Organizations encourage managers to delegate authority to lowest possible level. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Line and Staff Authority Line and Staff Authority Line authority means that people in management positions have formal authority to direct and control immediate subordinates. Staff authority includes the right to advise, recommend, and counsel in the staff specialist’s area of expertise. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Span of Management The number of employees reporting to a supervisor. Span of Management The number of employees reporting to a supervisor. Traditional view, seven or so per manager. Many organizations today, 30 or more per manager. Generally if supervisors must be closely involved with employees span should be small. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Large Spans of Control Factors Large Spans of Control Factors Work is stable or routine. Similar task is performed by everyone. A single location. Employees are highly trained. Rules and procedures are available. Support systems and personnel are available for supervisor. Little time is required in nonsupervisory activities. Personal preferences and styles of management favor a large span. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Tall versus Flat Structure 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. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Ex. 7.2 Reorganization to Increase Span of Management for President of an International Metals Company © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Centralization versus Decentralization Centralization – decision authority is located near the top of the organization. Decentralization – authority is pushed downward to lower organizational levels. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Figure 7.3 Five Approaches to Structural Design © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Figure 7.3 (contd.) © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Figure 7.3 (contd.) © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Team Approach Cross-functional teams consist of employees from various functional departments. Permanent teams solve ongoing problems. Employees come from all functional areas. © 2006 by South-Western, a division of Thomson Learning. All rights reserved. 34

Virtual Network Structure Virtual Network Structure The firm subcontracts most of its major functions to separate companies and coordinates their activities from a small headquarters organization. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Figure 7.6 Evolution of Organizational Structures © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Structural Design Task Force . . . A temporary team or committee formed to solve a specific short-term problem. Team . . . Participants from several departments who meet to solve ongoing problems. Project Manager . . . A person responsible for coordinating the activities of several departments. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Traditional Vertical Structure New Horizontal Structure Ex. 7.9 Contingency Factors that Influence Organization Structure Strategy Traditional Vertical Structure or New Horizontal Structure Environment Company Performance Technology Interdependence © 2006 by South-Western, a division of Thomson Learning. All rights reserved.

Consequences of an Uncertain Environment Consequences of an Uncertain Environment Increased differences occur among departments. Organizations that need increased coordination. Organizations must adapt to change. © 2006 by South-Western, a division of Thomson Learning. All rights reserved.