Basic Elements of Organizing CHAPTER 11 Basic Elements of Organizing PowerPoint Presentation by Charlie Cook Copyright © by Houghton Mifflin Company. All rights reserved.

Learning Objectives After studying this chapter, you should be able to: Identify the basic elements of organizations. Describe alternative approaches to designing jobs. Discuss the rational and the most common basis for grouping jobs into departments. Describe the basic elements involved in establishing reporting relationships. Discuss how authority is distributed in organizations. Discuss the basic coordinating activities undertaken by organizations. Describe basic ways in which positions within the organization can be differentiated. Copyright © by Houghton Mifflin Company. All rights reserved.

Chapter Outline The Elements of Organizing Designing Jobs Job Specialization Benefits and Limitations of Specialization Alternatives to Specialization Grouping Jobs: Departmentalization Rationale for Departmentalization Common Bases for Departmentalization Chain of Command Narrow Versus Wide Spans Tall Versus Flat Organizations Establishing Reporting Relationships Determining the Appropriate Span Distributing Authority The Delegation Process Decentralization and Centralization Coordinating Activities The Need for Coordination Structural Coordination Techniques Differentiating Between Positions Differences Between Line and Staff Administrative Intensity Copyright © by Houghton Mifflin Company. All rights reserved.

The Elements Organizing Deciding how to best group organizational activities and resources. Organization Structure The set of building blocks that can be used to configure an organization. Copyright © by Houghton Mifflin Company. All rights reserved.

Designing Jobs Job Design Job Specialization (Division of Labor) The determination of an individual’s work-related responsibilities. Job Specialization (Division of Labor) The degree to which the overall task of the organization is broken down and divided into smaller component parts. Benefits of Specialization Workers can become proficient at a task. Transfer time between tasks is decreased. Specialized equipment can be more easily developed. Employee replacement becomes easier. Limitations of Specialization Employee boredom and dissatisfaction with mundane tasks. Anticipated benefits do not always occur. Copyright © by Houghton Mifflin Company. All rights reserved.

Adam Smith’s Example of Job Specialization Making a pin (nail) requires 18 tasks 1 worker doing all 18 tasks might make 20 pins (nails) a day. 20 workers = (20 x 20) = 400 pins ______________________________ With specialization: 20 workers make 100,000 pins a day. 1 worker = 5,000 pins 20 pins vs. 5,000 pins per worker Copyright © by Houghton Mifflin Company. All rights reserved. 10

Alternatives to Specialization Job Rotation Systematically moving employees from one job to another in an attempt to reduce employee boredom. Most frequent use today is as a training device for skills and flexibility. Job Enlargement An increase in the total number of tasks workers perform. Increases training costs, unions contend that workers deserve more pay for doing more tasks, and the work may still be dull and routine. Job Enrichment Increasing both the number of tasks the worker does and the control the worker has over the job. Copyright © by Houghton Mifflin Company. All rights reserved.

Alternatives to Specialization (cont’d) Job Characteristics Approach: Core Dimensions Skill variety—the number of tasks a person does in a job. Task identity—the extent to which the worker does a complete or identifiable portion of the total job. Task significance—the perceived importance of the task. Autonomy—the degree of control the worker has over how the work is performed. Feedback— the extent to which the worker knows how well the job is being performed. Growth-Need Strength The desire for some people to grow, develop, and expand their capabilities that is their response to the core dimensions. Copyright © by Houghton Mifflin Company. All rights reserved.

Job Characteristics Approach Core job dimensions Personal and work outcomes Critical psychological states Experienced responsibility for outcomes of the work • Skill variety Task identity Task significance Autonomy Feedback Knowledge of the actual results of work activities Employee growth-need strength High internal work motivation High-quality work performance High satisfaction with the work Low absenteeism and turnover meaningfulness Job Characteristics Approach Source: J. R. Hackman and G. R. Oldham, “Motivation Through the Design of Work: A Test of a Theory,“ Organizational Behavior and Human Performance, Vol. 6 (1976), pp. 250–279. Copyright © Academic Press, Inc. Reprinted by permission of Academic Press and the authors. Figure 11.1 Copyright © by Houghton Mifflin Company. All rights reserved.

Alternatives to Specialization (cont’d) Work Teams An alternative to job specialization that allows the entire group to design the work system it will use to perform an interrelated set of tasks. Copyright © by Houghton Mifflin Company. All rights reserved.

Grouping Jobs: Departmentalization The process of grouping jobs according to some logical arrangement. Rationale for Departmentalization Organizational growth exceeds the owner-manager’s capacity to personally supervise all of the organization. Additional managers are employed and assigned specific employees to supervise. Copyright © by Houghton Mifflin Company. All rights reserved.

Grouping Jobs: Departmentalization (cont’d) Functional Departmentalization Is the grouping of jobs involving the same or similar activities. Advantages Each department can be staffed by functional-area experts. Supervision is facilitated in that managers only need be familiar with a narrow set of skills. Coordination inside each department is easier. Disadvantages Decision making becomes slow and bureaucratic. Employees narrow their focus to the department and lose sight of organizational goals/ issues. Accountability and performance are difficult to monitor. Copyright © by Houghton Mifflin Company. All rights reserved.

Bases for Departmentalization: Apex Computers Design Marketing Computers President Software Manufacturing Finance Phoenix Dallas Consumer sales Industrial sales St. Louis Chicago Southwest U.S. Southeast U.S. Northeast U.S. Northwest U.S. Central U.S. Figure 11.2 Copyright © by Houghton Mifflin Company. All rights reserved.

Product Departmentalization Form The grouping of activities around products or product groups. Advantages All activities associated with one product can be integrated and coordinated. Speed and effectiveness of decision making are enhanced. Performance of individual products or product groups can be assessed. Disadvantages Managers may focus on their product to the exclusion of the rest of the organization. Administrative costs may increase due to each department having its own functional-area experts. Copyright © by Houghton Mifflin Company. All rights reserved.

Customer Departmentalization Grouping activities to respond to and interact with specific customers and customer groups. Advantage Skilled specialists can deal with unique customers or customer groups. Disadvantage A large administrative staff is needed to integrate activities of various departments. Copyright © by Houghton Mifflin Company. All rights reserved.

Location Departmentalization The grouping of jobs on the basis of defined geographic sites or areas. Advantage Enables the organization to respond easily to unique customer and environmental characteristics. Disadvantage Large administrative staff may be needed to keep track of units in scattered locations. Copyright © by Houghton Mifflin Company. All rights reserved.

Departmentalization Other Forms of Departmentalization Grouping activities by time Dividing daily activities into specific units of time (e.g., day, evening, and night shifts). Grouping activities by sequence. Assigning responsibilities by a characteristic of the customer, product, or service (e.g., telemarketing calls from business listings). Other Considerations Departments are often called by other names (e.g., divisions, units, sections, and bureaus). Organizations are likely to employ multiple bases of departmentalization, depending on level. Copyright © by Houghton Mifflin Company. All rights reserved.

Establishing Reporting Relationships Chain of Command A clear and distinct line of authority among the positions in an organization. Unity of Command Each person within an organization must have a clear reporting relationship to one and only one boss. Scalar Principle A clear and unbroken line of authority must extend from the bottom to the top of the organization. Copyright © by Houghton Mifflin Company. All rights reserved.

Establishing Reporting Relationships (cont’d) Narrow Versus Wide Spans Span of Management The number of people who report to a particular manager. Sometimes called the span of control. A. V. Graicunas Subordinate interactions Direct—the manager’s relationship with each subordinate. Cross—among the subordinates themselves. Group—between groups of subordinates. Formula for the number of interactions of all types: I = N(2N/2 + N - 1), where I is the total number of interactions and N is number of subordinates. Ralph Davis Operative span for lower-level managers up to 30 workers. Executive span for middle and top managers at 3 to 9. Copyright © by Houghton Mifflin Company. All rights reserved.

Establishing Reporting Relationships: Tall versus Flat Organizations Tall Organizations Are more expensive because of the number of managers involved. Foster more communication problems because of the number of people through whom information must pass. Flat Organizations Lead to higher levels of employee morale and productivity. Create more administrative responsibility for the relatively few managers. Create more supervisory responsibility for managers due to wider spans of control. Copyright © by Houghton Mifflin Company. All rights reserved.

Tall Versus Flat Organizations President Tall Organization Flat Organization Figure 11.3 Copyright © by Houghton Mifflin Company. All rights reserved.

Determining the Appropriate Span: Factors Influencing the Span of Management Table 11.1 Copyright © by Houghton Mifflin Company. All rights reserved.

Distributing Authority Power that has been legitimized by the organization. Delegation The process by which managers assign a portion of their total workload to others. Reasons for Delegation To enable the manager to get more work done by utilizing the skills and talents of subordinates. To foster the development of subordinates by having them participate in decision making and problem solving that allows them to learn about overall operations and improve their managerial skills. Copyright © by Houghton Mifflin Company. All rights reserved.

Steps in the Delegation Process Manager Step 1 Assigning responsibility Step 3 Creating accountability Step 2 Granting authority Subordinate Figure 11.4 Copyright © by Houghton Mifflin Company. All rights reserved.

Problems in Delegation Manager Reluctant to delegate. Disorganization prevents planning work in advance. Subordinate’s success threatens superior’s advancement. Lack of trust in the subordinate to do well. Subordinate Reluctant to accept delegation for fear of failure. Perceives no rewards for accepting additional responsibility. Prefers to avoid any risk and responsibility. Copyright © by Houghton Mifflin Company. All rights reserved.

Decentralization and Centralization The process of systematically delegating power and authority throughout the organization to middle- and lower-level managers. Centralization The process of systematically retaining power and authority in the hands of higher-level managers. Factors Determining the Choice of Centralization The complexity and uncertainty of the external environment. The history of the organization. The nature (cost and risk) of the decisions to be made. Copyright © by Houghton Mifflin Company. All rights reserved.

Coordinating Activities Coordination The process of linking the activities of the various departments of the organization. The Need for Coordination Departments and work groups are interdependent; the greater the interdependence, the greater the need for coordination. Copyright © by Houghton Mifflin Company. All rights reserved.

Coordinating Activities: Three Major Forms of Interdependence Pooled interdependence When units operate with little interaction; their output is simply pooled at the organizational level. Sequential interdependence When the output of one unit becomes the input of another unit in sequential fashion. Reciprocal interdependence When activities flow both ways between units. Copyright © by Houghton Mifflin Company. All rights reserved.

Three Major Forms of Interdependence Sequential Reciprocal Input Output Input Output Input Output Pooled Input Input Output Input Input Output Copyright © by Houghton Mifflin Company. All rights reserved.

Structural Coordination Techniques The Managerial Hierarchy Placing one manager in charge of interdependent departments or units. Rules and Procedures Routine coordination activities can be handled via rules and procedures that set priorities and guidelines for actions. Liaison Roles A manager coordinates interdependent units by acting as a common point of contact, facilitating the flow of information. Copyright © by Houghton Mifflin Company. All rights reserved.

Structural Coordination Techniques (cont’d) Task Forces Used with multiple units when coordination is complex requiring more than one individual and the need for coordination is acute. Disbanded when the need for coordination has been met. Integrating Departments Permanent organizational units that maintain internal integration and coordination on an ongoing basis. May have authority and budgetary controls. Copyright © by Houghton Mifflin Company. All rights reserved.

Differentiating Between Positions Line Positions Positions in the direct chain of command that are responsible for the achievement of an organization’s goals. Have formal (legitimate) authority to direct the workforce. Staff Positions Positions intended to provide expertise, advice, and support to line positions. Have advisory authority; can give compulsory advice. Have functional authority to enforce compliance with organizational policies and procedures. Administrative Intensity The degree to which managerial positions are concentrated in staff positions. Copyright © by Houghton Mifflin Company. All rights reserved.