Organization Organization Structure Structure

Chapter 08Chapter 08

McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.

Learning ObjectivesLearning Objectives

LO 1 Explain how differentiation and integration influence an organization’s structure

LO 2 Summarize how authority operatesLO 3 Define the roles of the board of directors and the

chief executive officerLO 4 Discuss how span of control affects structure and

managerial effectivenessLO 5 Explain how to delegate effectively

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Learning Objectives (cont.)Learning Objectives (cont.)

LO 6 Distinguish between centralized and decentralized organizations

LO 7 Summarize the ways organizations can be structured

LO 8 Identify the unique challenges of the matrix organization

LO 9 Describe important integrative mechanisms

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Fundamentals of OrganizingFundamentals of Organizing

Organization chart The reporting

structure and division of labor in an organization

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Conventional Organization ChartConventional Organization Chart

8-5Figure 8.1

Fundamentals of OrganizingFundamentals of Organizing

Differentiation the organization is

composed of many different units that work on different kinds of tasks, using different skills and work methods.

Integration these differentiated

units are put back together so that work is coordinated into an overall product

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Differentiation Differentiation

Division of labor The assignment of

different tasks to different people or groups

Specialization A process in which

different individuals and units perform different tasks

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Integration Integration

Coordination The procedures that link the various parts of an

organization for the purpose of achieving the organization’s overall mission

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Authority in OrganizationsAuthority in Organizations

Authority The legitimate right

to make decisions and to tell other people what to do.

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Authority in OrganizationsAuthority in Organizations

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Hierarchical LevelsHierarchical Levels

Hierarchy The authority levels of the organizational pyramid

Corporate governance The role of a corporation’s executive staff and

board of directors in ensuring that the firm’s activities meet the goals of the firm’s stakeholders

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Span of ControlSpan of Control

Span of control The number of subordinates who report directly

to an executive or supervisor Tall, flat

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QuestionQuestion

What is the assignment of new or additional responsibilities to a subordinate?

A.Subordination B.Delegation C.Designation D.Allocation

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Delegation Delegation

Delegation The assignment of new or additional

responsibilities to a subordinate Responsibility, Authority, and Accountability

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DelegationDelegation

Responsibility The assignment of a

task that an employee is supposed to carry out

Accountability The expectation that

employees will perform a job, take corrective action when necessary, and report upward on the status and quality of their performance

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Advantages of delegationAdvantages of delegation

Leverages managers’ energy and talent Allows managers to accomplish more than they

could on their own Helps develop effective subordinates. Promotes a sense of being an important,

contributing member of the organization, so employees tend to feel a stronger commitment, perform their tasks better, and engage in more innovation

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Steps in Effective DelegationSteps in Effective Delegation

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Figure 8.2

DecentralizationDecentralization

Centralized organization An organization in

which high-level executives make most decisions and pass them down to lower levels for implementation

Decentralized organization An organization in

which lower-level managers make important decisions

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The Horizontal StructureThe Horizontal Structure

Line departments Units that deal

directly with the organization’s primary goods and services

Staff departments Units that support

line departments

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The Functional OrganizationThe Functional Organization

Functional organization Departmentalization

around specialized activities such as production, marketing, and human resources.

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The Functional OrganizationThe Functional Organization

8-21Figure 8.3

Advantages of Functional OrganizationsAdvantages of Functional Organizations

1. Economies of scale can be realized2. Effective monitoring of the environment3. Performance standards better maintained4. Greater opportunity for specialized training and skill

development5. Technical specialists are relatively free of

administrative work6. Decision making and lines of communication are

simple and clearly understood

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The Divisional OrganizationThe Divisional Organization

Divisional organization Departmentalization that groups units around

products, customers, or geographic regions.

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Advantages of Divisional OrganizationsAdvantages of Divisional Organizations

1. Information needs are managed more easily2. People have a full-time commitment to a

particular product line3. Task responsibilities are clear4. People receive broader training

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The Divisional OrganizationThe Divisional Organization

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Figure 8.4

The Matrix OrganizationThe Matrix Organization

Matrix organization An organization composed of dual reporting

relationships in which some managers report to two superiors—a functional manager and a divisional manager

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Matrix Organizational StructureMatrix Organizational Structure

8-27Figure 8.5

Advantages of a Matrix DesignAdvantages of a Matrix Design

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Disadvantages of a Matrix DesignDisadvantages of a Matrix Design

8-29Table 8.3

The Network OrganizationThe Network Organization

Network organization A collection of independent, mostly single-

function firms that collaborate on a good or service

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The Network OrganizationThe Network Organization

8-31Figure 8.7

The Network OrganizationThe Network Organization

Dynamic network Temporary

arrangements among partners that can be assembled and reassembled to adapt to the environment

Broker A person who

assembles and coordinates participants in a network

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QuestionQuestion

___________ is establishing common routines and procedures that apply uniformly to everyone.

A. Coordination by standardizationB. Coordination by planC. Coordination by mutual adjustmentD.Coordination by service

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Coordination by StandardizationCoordination by Standardization

Standardization Establishing common

routines and procedures that apply uniformly to everyone.

Formalization The presence of rules

and regulations governing how people in the organization interact.

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Coordination by PlanCoordination by Plan

Coordination by plan Interdependent units are required to meet

deadlines and objectives that contribute to a common goal

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Coordination by Mutual AdjustmentCoordination by Mutual Adjustment

Coordination by mutual adjustment Units interact with

one another to make accommodations to achieve flexible coordination

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Reducing the Need for InformationReducing the Need for Information

Slack resources extra resources on

which organizations can rely in a pinch so that if they get caught off guard, they can still adjust

Creating self-contained tasks changing from a

functional organization to a product or project organization and giving each unit the resources it needs to perform its task

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Increasing Information-Processing Increasing Information-Processing CapabilityCapability

1. Direct contact among managers who share a problem2. Liaison roles to handle communication between two

departments3. Task forces to brought together temporarily to solve a

common problem4. Teams--permanent interdepartmental decision-making

groups5. Product, program, or project managers6. Matrix organizations

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Managing High Information-Managing High Information-Processing DemandsProcessing Demands

8-39Figure 8.8

Destination CEO: Royal Phillips ElectronicsDestination CEO: Royal Phillips Electronics

Do you think Philips uses a centralized or decentralized organization? Why?

In which type of organizational design would you prefer to work? Why?

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