1. Creating a Flexible Organization
Chapter Seven
Creating a Flexible Organization

2. Learning Objectives
Understand what an organization is and identify its characteristics
Explain why job specialization is important
Identify the various bases for departmentalization
Explain how decentralization follows from delegation
Understand how the span of management describes the organization
Understand how the chain of command is established by using line and staff management
Describe the four basic forms of organizational structure: bureaucratic, matrix, cluster, and network team
Summarize the use of corporate culture, intrapreneurship, committees, coordination techniques, informal groups, and the grapevine

3. 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

4. A Typical Corporate Organization Chart

5. Five Steps to Organizing a Business
Job design
Divide the work into separate parts and assign those parts to positions
Departmentalization
Group the positions into manageable units
Delegation
Distribute responsibility and authority
Span of management
Determine the number of subordinates who will report to each manager
Chain of command
Designate the positions with direct authority and those that are support positions

6. Job Design Job specialization Rationale for specialization
The separation of activities into distinct tasks and the assignment of different tasks to different people
Rationale for specialization
The “job” of the organization is too large for one person to accomplish
A worker learning only a specific, highly specialized task should be able to learn to do it efficiently
Workers do not lose time switching from one operation to another
Specialization makes it easier to design machinery to assist those who do the job
Specialization makes it easier to train new workers

7. Class Exercise
Job specialization is the separation of all organizational activities into distinct tasks and the assignment of different tasks to different people.
What are the advantages of job specialization?
What are the disadvantages of job specialization?
What types of jobs lend themselves to specialization?
What types of jobs do not lend themselves to specialization?

8. Job Design Alternatives to job specialization Job rotation
The systematic shifting of employees from one job to another to reduce boredom and dissatisfaction
Job enlargement
Adding tasks to a job to increase the variety of a worker’s activities
Job enrichment
Increasing the autonomy (self-governing) workers have in deciding how to do their jobs

9. Departmentalization Grouping jobs into manageable units
Common bases for departmentalization
By function
By product
By location
By customer
Combinations

10. Departmentalization by Function

11. Departmentalization by Product

12. Departmentalization by Location

13. Departmentalization by Customer

14. Delegation, Decentralization, and Centralization
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

15. Steps in the Delegation Process
The manager assigns responsibility
The subordinate is empowered to do the task
Ultimate accountability remains with the manager

16. Decentralization of Authority
Decentralized organization
Management consciously attempts to spread authority widely in the lower levels of the organization
Centralized organization
Authority is concentrated at the upper levels of the organization
Factors favoring decentralization
A complex and unpredictable business environment
Decisions that carry low risk or that are unimportant
Highly capable lower-level managers with strong decision-making skills
Past practices of the firm in decentralizing its structure and decision-making processes

17. The Span of Management
Wide and narrow spans of control

18. The Span of Management Organizational height Flat organizations
Have wider spans of management and fewer levels
Require managers to perform more administrative tasks and to spend more time supervising subordinates
Tall organizations
Have narrow spans of management and many levels
Have higher administrative costs (more managers)
May distort internal communications during passage of the communications through the multiple levels of organization

19. 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 significantly reduce a firm’s salary expense when unneeded employees are terminated. 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.

20. 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

21. Line and Staff Management

22. Line-Staff Conflict Reasons for conflict Minimizing conflict
Staff managers often have more formal education
Staff managers are sometimes younger and more ambitious
Line managers may perceive staff managers as a threat
Staff managers may become angry if their recommendations are not adopted
Minimizing conflict
Integrate line and staff managers into one team
Ensure that responsibilities are clearly defined
Hold both line and staff managers accountable for results

23. Forms of Organizational Structure
Bureaucratic structure
A management system based on a formal framework of authority that is carefully outlined and precisely followed
Characteristics
A high level of job specialization
Departmentalization by function
Formal patterns of delegation
A high degree of centralization
Narrow spans of management, resulting in a tall organization
Clearly defined line and staff positions
Advantages
Inflexibility helps ensure fair and equitable treatment
Disadvantages
Inflexibility creates problems in adapting to dynamic business environments

24. Forms of Organizational Structure
Matrix structure
A structure that combines vertical and horizontal lines of authority, usually by superimposing product departmentalization on functional departmentalization
Authority flows both down and across
Employees on cross-functional teams report to both the project manager in charge of the team and to their superiors in their home-base functional department

25. A Matrix Structure
Source: Ricky W. Griffin, Management, 9th ed. Copyright © 2008 by Houghton Mifflin Company. Adapted with permission.

26. The Matrix Structure Disadvantages Advantages
Added flexibility
Increased productivity
Higher morale
Increases in creativity and innovation
Personal development of team members
Disadvantages
Chain of command conflicts
May take longer to resolve problems and reach solutions
Personality clashes
Poor communications
Undefined individual roles
Unclear responsibilities
Difficulty in determining how to reward individual and team performance

27. Forms of Organizational Structure
Cluster structure
An organization that consists primarily of teams with no or very few underlying departments
Also called “team” or “collaborative” structures
Teams may move on to other projects or individual members may be reassigned to different teams and projects
Strengths
Small teams allows for flexibility to change direction quickly and try new things
Weaknesses
Employees may be concerned about job security
Increased stress due to rapid changes

28. Forms of Organizational Structure
Network structure (virtual organization)
An organization in which administration is the primary function performed and most other functions such as engineering, production, and marketing are contracted out to other firms
Strength
Flexibility allows the organization to adjust quickly to changes
Weaknesses
Difficulty controlling the quality of work by other organizations
Low morale and high turnover of hourly workers
Vulnerability of relying on outside contractors

29. 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

30. Additional Factors That Influence an Organization
Intrapreneurship
Intrapreneur—an employee who pushes an innovative idea, product, or process through the organization while using the organization’s resources for idea development

31. Elements Needed to Develop Successful Intrapreneurs
Encouragement by management and organization
Individual motivation
Transparency, openness and communality
Individual competence
Enabling working environment
Encouragement to innovations
Development
Source: J. Heinonen and K. Korvela, “How About Measuring Intrapreneurship,” Turku School of Economics and Business Administration, 2003,

32. Additional Factors That Influence an Organization
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

33. Additional Factors That Influence an Organization
Coordination techniques
Managerial hierarchy
The arrangement that provides for increasing authority at higher levels of management
Rules and procedures
Liaison to coordinate the activities of groups
Committee to integrate complex coordination

34. Additional Factors That Influence an Organization
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

35. Chapter Quiz
Solid vertical lines on an organization chart indicate relationships among
staff positions.
employees.
delegated positions.
the chain of command.
line and staff positions.
The systematic shifting of employees from one job to another is called job
specialization.
rotation.
sharing.
enlargement.
enrichment.

36. Chapter Quiz
Grouping all activities according to the geographic area in which they are located is departmentalization by
function.
employee.
product.
customer.
location.
In a ______ organization, administrative costs are higher because more managers are needed.
long
flat
tall
short
broad

37. Chapter Quiz The power to accomplish an assigned job is called
authority.
accountability.
responsibility.
delegation.
obligation.

38. Answers to Chapter Quiz
Solid vertical lines on an organization chart indicate relationships among
staff positions.
employees.
delegated positions.
the chain of command.(Correct)
line and staff positions.
The systematic shifting of employees from one job to another is called job
specialization.
rotation. (Correct)
sharing.
enlargement.
enrichment.

39. Answers to Chapter Quiz
Grouping all activities according to the geographic area in which they are located is departmentalization by
function.
employee.
product.
customer.
location. (Correct)
In a __________ organization, administrative costs are higher because more managers are needed.
long
flat
tall (Correct)
short
broad

40. Answers to Chapter Quiz
The power to accomplish an assigned job is called
authority. (Correct)
accountability.
responsibility.
delegation.
obligation.