Chapter 10

What is organizing?

The process by which managers establish working relationships among employees to achieve goals

Define:

Organization Structure: formal system of task & reporting relationship showing how workers use resources

Organization Chart: a diagram that shows the arrangement of work positions within an organization

What is the difference between the formal and informal structure of an organization?

Formal Structure: official structure of the organization

Informal Structure: the set of unofficial relationships among an organization’s members.

Discuss the pros and cons of the informal structure.

PROS CONSInformal Structure During times of

change, people benefit by access to interpersonal networks of emotional support & friendship that satisfy social needs

Susceptible to rumour

Benefit in task performance (informal learning)

Carry inaccurate info

Outsiders are left out (not part of shadow cabinet)

Breed resistance to change and even divert work efforts from important objectives

What does it mean to say that, for a manager structure is:

a) Structure is a characteristic of the work setting

b) Structure is something to be created?

What is a functional structure? Group together people with similar

skills who perform similar tasks, share technical expertise, interests and responsibilities

Works well in small organizations that produce only one or a few products. Stable environment with predictable problems and change is limited

Advantages Disadvantages Functional Structure Economies of Scale

with efficient use of resources

Difficult to pinpoint cost containment responsibilities, prod/srv quality, timeliness and innovation in change environment

Task assignment consistent with expertise and training

Growth of company exacerbates these issues.

High-quality technical problem solving

In-depth training & skill within function

Functional Chimney problem: lack of communication, coordination & problem solving across functions.

Clear career paths within function

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A functional structure is the bedrock of horizontal differentiation. It is the first “structure” that organizations adapt as they grow.

Research andDevelopment

Sales andMarketing

Manufacturing Materials Management

Finance

CEO

What is departmentalization? Another word for functional structure

Divisional form of departmentalization

Common in complex organizations, groups together people working on the same product, in same area with similar customers or on the same processes.

Product DivisionsProduct Divisions

Grouping activities around product groupsGrouping activities around product groups ExamplesExamples

GM, Chevrolet, CadillacGM, Chevrolet, Cadillac Coke, Sprite, DasaniCoke, Sprite, Dasani

Pros: easy to coordinate all activities Pros: easy to coordinate all activities associated with a product, quicker decision associated with a product, quicker decision making easy to assess performacemaking easy to assess performace

Cons: too much focus on own product, Cons: too much focus on own product, higher admin costshigher admin costs

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Product Division Structure

Vice PresidentSales and Marketing

Vice President Research and Development

Vice President Materials

Management

CEO

Vice President Finance

CannedSoups

Division

PDM

FrozenVegetableDivision

PDM

FrozenEntreesDivision

PDM

BakedGoods

Division

PDM

Centralized support functionsDivisions

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The Silo EffectThe Silo Effect

The main problem with a divisional The main problem with a divisional structure is that grouping people structure is that grouping people together means you are isolating together means you are isolating them from the other groupsthem from the other groups

This means that interdivisional This means that interdivisional communication is hard, and people communication is hard, and people tend to only focus on their own grouptend to only focus on their own group

Matrix StructureMatrix Structure

Attempt to avoid the Silo effect by Attempt to avoid the Silo effect by inserting horizontal lines of communication inserting horizontal lines of communication into the structureinto the structure

Ex: grouping people by function and Ex: grouping people by function and customer divisioncustomer division

Pros: better interdepartmental Pros: better interdepartmental communication and coordinationcommunication and coordination

Cons: more bosses to report to, requires Cons: more bosses to report to, requires well organized information systemswell organized information systems

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Matrix StructureCEO

Vice PresidentEngineering

Vice PresidentFinance

Vice PresidentPurchasing

Vice PresidentSales and Marketing

Vice President Research and Development

Product AManager

Product BManager

Product CManager

Product DManager

Product Team

Two-boss employee

The disadvantages of a matrix structure:

Two-boss system is susceptible to power struggles,

can create task confusion & work priority conflict

time consuming team meetings more expensive to add team leaders

to matrix structure

What is the scalar principle?

There should be a clear and unbroken chain of command linking every person in the org with higher levels of authority

What changes are occurring to the traditional chain of command? Businesses are trying to reduce

Height of chain of command to a more streamline horizontal structure.

This improves communication , speeds decision making and increases contact with the customer.

What is the unity-of-command principle? Each person should report to only

one supervisor.

What changes are occurring to the traditional unity-of-command principle? Orgs. Using more cross-functional

teams and becoming customer conscious so employees will be reporting to more than one boss

Explain the difference between a wide and narrow span of control.

  Wide span of control: manager

supervises many people; flat structures have wide spans of control (few levels of management)

Narrow span of control; only a few people are under a manager’s immediate supervision, happens in Tall structures so they are more costly , less efficient, less flexible and less customer sensitive

Which one seems to be more popular and why?

Wider span of control is more popular and it eliminates and empowers managers

Individual managers are taking responsibility for larger numbers of subordinates who operate with less direct supervision.

What is delegation?

Distributing and entrusting work to others

Explain the authority-and-responsibility principle. Authority should equal responsibility

when work is delegated

Discuss the difference between centralization and decentralization.

Centralization: decisions made at top level of organization

Decentralization: dispersion of decision-making authority throughout all levels or the org.

Clarify the difference between personal and specialized staff in an organization. Personal staff: provide technical

expertise for other parts of the organization. Fire safety officer at bank

Specialized staff: “assistant –to” for high level managers

Explain the difference between a…

line organization: responsible for work activities that make a direct contribution to the organizations outputs: president, managers, dept supervisors

a line-staff organization: special technical skills used to support line workers; HR, accounting

Explain the difference between a…

Functional authority require others to do as you say within boundaries of staff expertise