mosley 9e ppt_ch04

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CHAPTER 4

FUNDAMENTALS OF ORGANIZING


• Identify the advantages and disadvantages of the functional, product, and matrix departmentalization approaches

• Explain the principles of unity of command and span of control

• Describe the difference between line and staff• Understand how to avoid excessive conflict

between line and staff• Explain the three types of authority found in

organizations

LEARNING OBJECTIVES

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• Understand the stages of organization growth• Distinguish between centralization and

decentralization• Discuss the benefits and costs of downsizing• Explain the four types of contemporary

organizational approaches• Understand the relationship between

management philosophy, strategy, and newer forms of organization

LEARNING OBJECTIVES

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• One-person organization• Organization with assistants added• Line organization: Concerned with the primary

functions of the firm• Production, sales, and office administration/

finance• Line-and-staff organization: Staff positions are

added to serve the basic line departments • Helps accomplish the organization objectives

more effectively

STAGES IN GROWTH OF AN ORGANIZATION

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• Quick, decisive action on problems is possible because authority is centralized

• Lines of responsibility and authority are clearly defined• Evasion of responsibility is minimized and

accountability is maximized

ADVANTAGES OF LINE ORGANIZATION

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• Determining how activities are to be grouped• Types

• Service• Process• Territory• Customer• Functional• Product• Matrix

DEPARTMENTALIZATION

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EXHIBIT 4.7 - FUNCTIONAL DEPARTMENTALIZATION AT THE TOP MANAGEMENT LEVEL

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• Maintains the power and prestige of the major functions

• Creates efficiency through the principles of specialization

• Centralizes the organization’s expertise• Permits tighter top-management control of the

functions• Minimizes costly duplications of personnel and

equipment

ADVANTAGES OF FUNCTIONAL DEPARTMENTALIZATION

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• Responsibility for total performance rests at the top

• Narrow functional focus limits the training of managers to take over the top position

• Coordination between and among functions becomes complex and more difficult as the organization grows in size and scope

• Functional responsibilities are identified by causing subgroup loyalties, identification, and tunnel vision

DISADVANTAGES OF FUNCTIONAL DEPARTMENTALIZATION

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EXHIBIT 4.8 - EXAMPLE OF PRODUCT DEPARTMENTALIZATION

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• Attention can be directed toward specific product lines or services

• Coordination of functions at the product division level is improved

• Profit responsibility can be better placed• Easier for the organization to obtain or develop

executives who have managerial experience in running a total entity

ADVANTAGES OF PRODUCT DEPARTMENTALIZATION

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• More personnel and material resources are required

• Unnecessary duplication of resources and equipment maybe caused

• Greater burden for top management to establish effective coordination and control

DISADVANTAGES OF PRODUCT DEPARTMENTALIZATION

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EXHIBIT 4.9 - EXAMPLE OF MATRIX DEPARTMENTALIZATION

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DISADVANTAGES OF MATRIX DEPARTMENTALIZATION

• Permits open communication and coordination of activities among the relevant functional specialists

• Its flexibility enables the organization to respond rapidly to change

Advantages

• Lack of clarity and coordination in assigned roles• Conflict occur when:

• Requirements result in decisions contrary to the philosophy and viewpoint of the home office

• Team members are assigned to more than one project• Lack of roots for employees due to the temporary nature

of assignments

Disadvantages

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• Everyone should report to and be accountable to only one boss

• Reasons for its importance• Prevents duplication and conflict when orders

and instructions are passed down• Decreases confusion and blame games

UNITY OF COMMAND PRINCIPLE

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• Provides an opportunity for a supervisor and the employees to:

• Learn about each other’s strengths and weaknesses• Develop supportive relationships • Realize their individual and group potential in

achieving organizational objectives

• Promotes higher morale

UNITY OF COMMAND PRINCIPLE

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• There is a limit to the number of people a person can supervise effectively

• Narrower span of control at the top• Top-level managers - Solve a variety of different,

nonrecurring problems• Middle managers - Develop long-range plans,

work with outside interest groups, and coordinate the activities of the organization

• First-level managers - Are concerned with clearly defined areas of operation

SPAN OF CONTROL PRINCIPLE

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EXHIBIT 4.11 - NARROW, WIDE, AND VERY WIDE SPANS OF CONTROL

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EXHIBIT 4.12 - FACTORS CONTRIBUTING TO A NARROW OR WIDE SPAN OF CONTROL

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• The greater the supervisor’s capacity, the more people he or she can supervise

• General supervision is more effective than close supervision

• New developments in management• Wider spans of control save the company

money

REASONS FOR THE TENDENCY TOWARD WIDER SPANS OF CONTROL

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EXHIBIT 4.13 - FACTORS CONTRIBUTING TO A NARROW OR WIDE SPAN OF CONTROL

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• Line personnel: Carry out the primary activities of a business

• Staff personnel: Have the expertise to assist line people and aid top management

• Reasons for the conflicts between line and staff• Staff personnel give direct orders to line

personnel• Lack of good human relations practices• Confusions due to the overlapping of authority

and responsibility

RELATIONSHIPS BETWEEN LINE AND STAFF

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• Belief that staff people are not knowledgeable about the conditions at the operating level

• Attempt of the staff people to influence line decisions against line managers’ wishes

• Misuse of staff personnel by the top management

• Narrow viewpoint of the organization by the departments

RELATIONSHIPS BETWEEN LINE AND STAFF

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• Delineating authority • Types of authority

• Advisory authority: Authority of staff departments to serve and advise line departments

• Line authority: Power to directly command or exact performance from others

• Functional authority: Staff person’s limited line authority over a given function

• Having effective communication between people and between departments

AVOIDING EXCESSIVE LINE-STAFF CONFLICT

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• Decentralization: Extent to which authority is delegated from one unit of the organization to another

• Decentralized organization• Important decisions related to their units are

made by the middle and lower levels of management

• Centralized organization• Important decisions that concerns all the units

or levels are made by the top management

DECENTRALIZATION VERSUS CENTRALIZATION

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FACTORS AFFECTING DECENTRALIZATION

Top-management philosophy

History of the organization’s

growth

Geographic location(s)

Quality of managers Availability of controls Economy

Mergers, acquisitions, and

joint ventures

External business environment

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• Eliminating unnecessary levels of management • To become leaner and more efficient

• Benefits• Immediate cost reductions• Speedier decision making• Communication improves in all directions• Increased responsiveness to customers • Faster product delivery• Tendency for each level to justify its existence is

removed

DOWNSIZING

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• Costs• Loss of control• Loss of loyal, effective managers when done in

an insensitive manner• Morale problems and threatened job security

for remaining employees • Increased workloads• Diminished chances of promotion• Social costs for the dismissed employees

• Remaining managers must adapt to vague lines of authority and develop team building skills

DOWNSIZING

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• Focusing on the remaining employees by developing strategy of support

• Developing strategic plans for growth and development for the organization

• Developing effective work teams• Reengineering: Rethinking and redesigning

processes to improve the cost, quality, service, and speed• Can be very expensive

WAYS TO GET BEYOND DOWNSIZING

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• Work units - Functional to process teams• Jobs - Simple tasks to multidimensional work• Roles - Controlled to empowered• Job preparation - Preparation to education• Focus of compensation - Activity to results

TYPES OF CHANGES OCCURRING AFTER REENGINEERING

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• Advancement criteria - Performance to ability• Values - Protective to productive• Managers - Supervisors to coaches• Organizational structure - Hierarchical to flat• Executives - Scorekeepers to leaders

TYPES OF CHANGES OCCURRING AFTER REENGINEERING

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EXHIBIT 4.14 - NORDSTORM’S INVERTED PYRAMID

Source: Based on description found in Robert Spector and Patrick D. McCarthy, The Nordstrom Way: The Inside Story of America’s #1 Customer Service Company (New York: Wiley, 1996).

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• Wagon wheel: Organization form with:• Hub of the wheel - Customers• Series of spokes - Business functions or teams• Outer rim - Chief executive and the board

THE WAGON WHEEL AND TEAM STRUCTURES

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• Team structure: Utilizes permanent and temporary cross-functional teams to improve horizontal coordination and cooperation• Provide speed and flexibility to meet the

challenges associated with the dynamic business environments

• Provide the opportunity to use the diverse talents to achieve effective outcomes

THE WAGON WHEEL AND TEAM STRUCTURES

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EXHIBIT 4.16 - EXAMPLE OF A VIRTUAL NETWORK

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• Firms are shifting to increased decentralization, team development, and empowerment due to global competition

• Strategies identified by Michael Porter• Cost leadership strategy: Attempts to lower

costs below competitors by focusing on creating efficiencies within organizational systems

• Differentiation strategy: Gaining a competitive advantage through goods and/or services that are unique or different from the competition

MANAGEMENT PHILOSOPHY, STRATEGY, AND ORGANIZATION

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TYPES OF VARIABLES

• Determine the course of developments and the results achieved by the organization

• Include independent variables that can be altered or changed by the organization and its management

Causal variables

• Reflect the internal state and health of the organization

Intervening variables

• Dependent variables that reflect the achievements of the organization

End-result variables

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EXHIBIT 4.18 - ORGANIZATIONAL STRATEGY AND STRUCTURE: A FIT PERSPECTIVE

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• Advisory authority• Cost leadership strategy• Decentralization• Departmentalization• Differentiation strategy• Downsizing• Functional authority• Functional

departmentalization• Inverted pyramid• Line-and-staff organization• Line authority

• Line organization• Line personnel• Matrix departmentalization• Network structure• Product departmentalization• Reengineering• Span of control principle• Staff personnel• Team structure• Unity of command principle• Wagon wheel

IMPORTANT TERMS

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mosley 9e ppt_ch04

Education