1. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 7 Creating a Flexible Organization

2. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Learning Objectives 7-1Understand what an organization is and identify its characteristics. 7-2Explain why job specialization is important. 7-3Identify the various bases for departmentalization. 7-4Explain how decentralization follows from delegation. 7-5Understand how the span of management describes an organization.

3. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Learning Objectives (continued) 7-6Describe the four basic forms of organizational structure. 7-7Describe the effects of corporate culture. 7-8Understand how committees and task forces are used. 7-9Explain the functions of the informal organization and the grapevine in a business.

4. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Why Do Companies Reorganize?  Lower operating costs  Providing high-quality products to ensure customer satisfaction  Focused consumer targeting  Specialized products  Other reasons?

5. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 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 diagram that represents the positions and relationships within 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

6. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Chain of Command

7. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Major Considerations for Organizing a Business  Organizing a firm focuses on: Job design Departmentalization Delegation Span of management Chain of command

8. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Job Design  Job specialization is 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  Train new workers

9. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Risks:  Boredom  Higher absence rate  Low effort  Sabotage Alternatives:  Job rotation Retain interest Learn new skills Identify new roles  Job enlargement  Job enrichment Job Specialization: Risks and Alternatives

10. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Departmentalization  Departmentalization is the process of grouping jobs into manageable units  Most firms use one or more of the following: By function By product By location By customer

11. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Departmentalization Bases BasisType of FirmAdvantagesDisadvantages FunctionSmaller and newerSimplified supervision and coordination Slow decision-making Emphasizes department over company ProductOlder and largerEasier decision- making Integration of related activities Duplication of specialized activities Emphasizes product over company LocationDecentralized with regional needs Can respond to unique demands Large administrative staff and control system CustomerService-based or market-specific Can deal efficiently with unique customers Larger-than-usual administrative staff

12. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Multibase Departmentalization  Most firms use more than one basis for departmentalization to improve efficiency and to avoid overlapping positions

13. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Delegation, Decentralization, and Centralization  Delegation—assigning part of a manager’s work and power to other workers Steps in Delegation  Responsibility—the duty to do a job or perform a task  Authority—the power, within an organization, to accomplish an assigned task  Accountability—the obligation to accomplish an assigned job or task Barriers to Delegation  Fear the work will not get done  Fear the work will be done too well  Inability to plan and assign work effectively

14. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 1. Responsibility is the duty to do a job or perform a task 2. Authority is the power, within the organization, to accomplish an assigned job or task 3. Accountability is the obligation of a worker to accomplish an assigned job or task Delegation Process

15. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 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

16. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. The Span of Management  Span of management (or span of control) is the number of workers who report directly to one manager  Wide span Large number of subordinates to one manager  Narrow span Only a few subordinates to one manager

17. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. The Span of Management: Wide and Narrow

18. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Organizational Height  Organizational height—number of layers, or levels, of management in a firm 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. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Forms of Organizational Structure: Line Structure  Line Structure The chain of command goes directly from person to person throughout the organization Simplicity allows for quick decision making and direct accountability Most suitable for small organizations with lower volume of activities than medium or large organizations

20. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Forms of Organizational Structure: Line-and-Staff Structure  Line-and-Staff Structure Utilizes the chain of command from a line structure in combination with the assistance of staff managers Line managers make decisions and give orders to subordinates  Line authority—line managers can make decisions and issue directives related to organizational goals Staff managers provide support, advice, and expertise  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. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Line and Staff Managers  A line manager has direct responsibility for achieving the company’s goals and is in the direct chain of command  A staff manager supports and advises the line managers

22. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Forms of Organizational Structure: Line-and-Staff Structure (continued)  Line-and-Staff Structure (cont’d) Reasons for conflict between line and staff managers  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 between line and staff managers  Integrate line and staff managers into one team  Ensure that responsibilities are clearly defined  Hold both line and staff managers accountable for results

23. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Forms of Organizational Structure: Matrix 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

24. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. The Matrix Structure  A matrix is a complex structure in which employees have more than one supervisor Source: Ricky W. Griffin, Fundamentals of Management, 8th ed. Copyright © 2016, p. 180 by South-Western/Cengage Learning, Mason, OH. Adapted with permission.

25. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 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 The Matrix Structure: Advantages and Disadvantages

26. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Forms of Organizational Structure: Network Structure  Network Structure (Virtual Organization) Administration is the primary function, and most other functions 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

27. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 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)

28. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Types of Corporate Cultures  Networked culture Trust and friendship among employees Strong commitment to the organization Informal environment  Mercenary culture Passion, energy, sense of purpose, excitement for work Intense, focused, determined to win  Fragmented culture Employees not friends; work “at” (not “for”) organization Employees have autonomy, flexibility, equality  Communal culture Friendship, commitment, focus on performance, high energy Lives revolve around product; success is celebrated by all

29. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Corporate Cultures and Personalities Source: “Types of Corporate Culture,” in Rob Goffee and Gareth Jones, The Character of a Corporation (New York: HarperCollins, 1998). Copyright © 1998 by Rob Goffee and Gareth Jones. Permission granted by Rob Goffee and Gareth Jones.

30. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Corporate Culture: When to Change Cultural change is needed when:  A company’s environment changes  The industry becomes more competitive  Company performance is mediocre  The company is growing or becomes a large firm  Examples: Goldman Sachs General Mills Alcoa Aetna

31. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Committees and Task Forces  An ad hoc committee is created for a specific short-term purpose Example: Reviewing employee benefits plan Disbands when work is finished  A standing committee is a relatively permanent committee charged with performing a recurring task Example: Budget review committee  A task force is a committee established to investigate a major problem or pending decision Example: Assessing pros and cons of a merger

32. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Advantages Members bring different knowledge and skills to task Tend to make accurate decisions Transmit results through the organization more effectively Disadvantages Deliberations take longer Unnecessary compromise may take place One person may dominate Committees: Advantages and Disadvantages

33. Copyright ©2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. The Informal Organization Pattern of behavior and interaction that stems from personal rather than official relationships  Informal groups Formed by the members themselves to accomplish goals that may or may not be relevant to the organization Can be powerful forces in organizations exerting positive as well as negative influences  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