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Fourth Edition ESSENTIALS BUSINESS Ronald J. Ebert & Ricky W. Griffin Copyright ©2003 Prentice Hall, Inc. PART 2 . . . . . . . . . . . . . . . . . . . . . . . . Understanding the Business of Managing

Chapter 6:

Chapter 6 Organizing the Business Enterprise.

“Anyone can do any amount of work provided it isn't the work he's supposed to be doing at the moment”. ~ Robert Benchley:

“Anyone can do any amount of work provided it isn't the work he's supposed to be doing at the moment”. ~ Robert Benchley

Key Topics:

Key Topics Organizational structure. Specialization and departmentalization. Responsibility, authority, delegation, and accountability. Functional, divisional, matrix, and international organizational structures. The informal organization and entrepreneuring.

Discussion:

Discussion How much the people are more productive when they’re doing work that they enjoy?. who has decision-making authority—is one of the elements that you should carefully examine when search for a job that is a good fit for you?.

Organizational Structure:

Organizational Structure Specification\ requirements of the jobs to be done within an organization and how those jobs relate to one another Every organization must develop the structure that is most appropriate for it.

Discussion :

Discussion What are the elements which influence the shape of the organization structure?.

What Elements Influence Organizational Structure?:

Organizational structure is usually quite fluid! External Environment Technology Size Strategy Mission Purpose What Elements Influence Organizational Structure?

Designing the Organizational Structure?:

Designing the Organizational Structure? Since all of these elements except the purpose and mission are subject to frequent change, organizational structure in most successful organizations is quite fluid. Discussion : how each element could impact organizational structure?.

Organization Chart:

Organization Chart CONTEMPORARY LANDSCAPE SERVICES, INC. President/Owner Mark Ferguson Retail Shop Manager Nursery Manager Landscape Operations Manager Buyer Office Manager Buyer Supervisor Residential Manager Commercial Manager

Organization chart:

Organization chart Organization chart : A diagram depicting a company’s structure and showing employees where they fit into its operations. Chain of command : The reporting relationships within a company that are illustrated on the organization chart. Discussion : why it’s important for new employees to see an organization chart?.

The Building Blocks of Organizational Structure:

The Building Blocks of Organizational Structure SPECIALIZATION What needs to be done, and who will do it?. DEPARTMENTALIZATION Customer Geographic Product Functional Process

The Building Blocks of Organizational Structure:

The Building Blocks of Organizational Structure Specialization : The process of identifying the specific jobs that need to be done and designating the people who will perform them. The need to specialize jobs becomes especially important as organizations grow. Importance of specialization?.

The Building Blocks of Organizational Structure:

The Building Blocks of Organizational Structure Departmentalization : Departmentalization The process of grouping jobs into logical units. In general, it occurs along the following lines (or any combination of them): Customer : according to types of customers likely to buy a given product. Example: When a company divides callers into new and current customers in order to sell them the appropriate products. E.g. women and men departments; wholesale and retail department. Product : Departmentalization according to specific products being created. Example: When a computer store has a department for printers, for hardware, for software, etc. often used in manufacturers.

The Building Blocks of Organizational Structure:

The Building Blocks of Organizational Structure Process : Departmentalization according to production processes used to create a good or service. Example: When a garment factory has a department for cutting, for sewing, etc. Geographic : Departmentalization according to areas served by a business. Example: When a food company has a department to serve each region of the U.S. Functional : Departmentalization according to the function or activities of similar groups. Example: When a company has a different department for marketing, accounting, etc.

Function versus process-based organisation:

Function versus process-based organisation Sales New Product Development Order Fulfillment R&D Manu facturing Customer

Cross-Functionality of Processes:

Cross-Functionality of Processes Process : New product development process Needs Research D esign Test Product Process Design Equip design Product start Marketing R&D Manufacturing

Which organizational structure do you recommend?:

Which organizational structure do you recommend? Most medium and large companies are departmentalized in different ways at different levels. For example , within each geographic department, a firm might be organized on a functional basis.

What is the Decision-Making Hierarchy:

What is the Decision-Making Hierarchy It defines who makes which decisions in the organization?.

The Decision-Making Hierarchy:

The Decision-Making Hierarchy Assigning Tasks Performing Tasks Distributing Authority

The Decision-Making Hierarchy:

The Decision-Making Hierarchy Assigning tasks is a matter of responsibility—who has the duty to complete a task--and authority—who has the power to make the decisions necessary to complete a task. In most successful organizations, responsibility and authority for each task are closely linked and balanced. Performing tasks involves delegation—the assignment of a task to a subordinate—and accountability—the subordinate’s liability to actually perform the task. Effective delegation is crucial to effective organizations. Distributing authority relates to the pattern of who holds authority in the organization. Is authority concentrated in the hands of senior managers, or is it pushed down to the lower levels of the organization?.

Discussion:

Discussion Have you ever been in situations where instructions were not clearly communicated?. What was the effect on worker productivity?. Was the task performed adequately?. Why or why not?. How did the worker feel in this situation?.

Delegating authority:

Delegating authority Delegating authority tends to be especially difficult for small business owners for the following reasons: Many fear that employees can’t do anything as well as they can. Many fear that something will go wrong if someone else takes over a job. Many lack time for long range planning that is required for delegation. Many have a sense that they are in the dark about industry trends and competition because of the time they devote to day-to-day operations. (they do not have knowledge and experience).

Issues With Delegating:

Issues With Delegating Big Business Managers: Fear that subordinates don’t really know how to do the job. Fear that a subordinate might “show up” \humiliate the manager by doing well. Desire for control. Lack of delegating ability.

Discussion :

Discussion How to solve the problem of lack of delegation?. Acknowledge subordinates limitations.. Train subordinates to delegate. Recognize that successful subordinates reflect well on the manager. Seek training in how to delegate effectively.

Discussion:

Discussion What are the benefits of delegating effectively?. The drawbacks of not delegating effectively?.

Centralized and Decentralized Organizations:

Centralized and Decentralized Organizations Centralized Decentralized Lower level managers hold significant decision-making authority. Top managers hold most decision-making authority.

Organizational Structure and Span of Control:

Relatively narrow span of control. Relatively wide span of control. Organizational Structure and Span of Control

Organizational Structure and Span of Control:

Organizational Structure and Span of Control The concepts of tall and flat organizations are closely related to the degree of centralization: Flat organizations : Characteristic of decentralized companies with relatively few layers of management and relatively wide spans of control. Tall organizations : Characteristic of centralized companies with multiple layers of management and relatively narrow spans of control. Span of control : The number of people who report to each manager. In tall organizations, span of control tends to be narrow, while in flat organizations, span of control tends to be wide.

Discussion:

Discussion Identify the elements that influence span of control?. complexity and similarity of subordinates’ tasks, the subordinates’ abilities, the supervisor’s managerial skills, etc).

Forms of Authority:

Forms of Authority Line Authority. Line Departments. Staff Authority. Staff Members. Committee and Team Authority.

Forms of Authority:

Forms of Authority Several different forms of authority develop in most organizations, regardless of the organizational structure. Line authority : When authority flows up and down the chain of command. Classic example : the military. Line departments : Departments with a direct link to the production and sales of a specific product. Examples include: manufacturing, assembly, sales, and distribution. Each line department is essential to an organization’s success. Line employees are the producers in the company. Staff authority : When authority is based on expertise that usually involves advising line managers. Examples include: legal, accounting, human resources. They help line departments in making decisions. E.g. marketing department seeks attorney advice for signing new contract. Staff members : Assist line departments in making decisions, but do not have the authority to make final decisions. Solid lines and dotted lines Team and committee authority : Authority granted to teams or committees that play central roles in the firm’s daily operations. This form of authority has recently emerged across a wide spectrum of companies.

Basic Forms of Organizational Structure:

Basic Forms of Organizational Structure Divisional Organization International Organization Functional Organization Matrix Organization

Basic Forms of Organizational Structure:

Basic Forms of Organizational Structure Functional organization : Structured around basic business functions such as marketing, operations, and finance. Examples can be found in most small to medium businesses. Divisional organization : Corporate divisions operate as autonomous businesses under the larger corporate umbrella. This structure relies on product departmentalization. Examples include General Electric, and The Walt Disney Company. The create product based divisions. Each may be managed as a separate enterprise. Matrix organization : Teams are formed, and team members report to two or more managers. In some firms the matrix structure is temporary, while in other firms it is permanent. Examples include: Martha Stewart Living, Omni media, and many large consulting firms. It was created by NASA. It relies on committee and team authority. International organization : Approach developed in response to the need to manufacture, purchase, and sell in global markets. Typically an international structure evolves as international operations escalate.

A Matrix Organization :

A Matrix Organization MARTHA STEWART Media Group Magazines Books Internet Radio/ Newspaper Network/ Cable TV Merchandising Group Kmart line Catalog line Sears Paint Specialty retailing Area Specialists Cooking Entertainment Weddings Crafts Gardening Home Holidays Children

An International Organization:

An International Organization CEO Retail Division A Retail Division B International Division Latin America Europe Asia

An International Organization:

An International Organization The previous slide shows a typical example of an international organizational structure. Many organizations initiate international expansion with a small team of specialists, evolve into a separate division as shown in the slide, and ultimately (if they experience success in foreign markets) integrate international operations into their standard business units.

The Future of Organizational Structure:

The Future of Organizational Structure Boundary less Organizations Team Organizations Virtual Organizations Learning Organizations

The Future of Organizational Structure:

The Future of Organizational Structure Organizational structure continues to change as organizations seek new ways to compete effectively within a rapidly changing business environment. Emerging forms include (these characteristics): Boundary-less : Organizations in which traditional boundaries and structures are minimized or eliminated. Example: Wal-Mart has tied its key suppliers into its information system for seamless\faultless inventory management. Team : Organizations that rely almost exclusively on project-type teams. Examples: Xerox and Apple are moving in this direction. Virtual : Organizations that have little or no formal structure, relying heavily on temporary workers, leased facilities, and outsourced services. Examples: Global Research Consortium operates this way, and University of Phoenix is moving in this direction. Learning : Organizations that strive to integrate continuous improvement with continuous employee learning and development. Example: Shell Oil Company. Learning org. works to facilitate the lifelong learning and personal development to all employees and continuous respond to change.

The Informal Organization A Powerful Dynamic:

Informal Groups The grapevine\gossip Entrepreneuring The Informal Organization A Powerful Dynamic

The Informal Organization A Powerful Dynamic:

The Informal Organization A Powerful Dynamic The informal organization is the network of everyday social interactions among employees, which do not follow formal lines of communication. The informal organization can be as powerful—if not more so—than the formal organization. Informal groups : Groups of people who decide to interact among themselves. Their impact on the organization can be positive, negative, or neutral. The grapevine\gossip : Informal communication network that runs through the organization. You need to have open channels of communication and responding vigorously in order to eliminate its level.

The Informal Organization A Powerful Dynamic:

The Informal Organization A Powerful Dynamic Entrepreneuring: Harnessing\tie together the energy of the informal organization to improve productivity by creating the innovation and flexibility of a small-business environment within the confines of a large organization. Compaq, Rubbermaid, 3M, and Xerox are examples of companies that support entrepreneuring.

Chapter Review:

Chapter Review What is an organization chart? What purpose does it serve?. An organization chart represents the firm’s structure and shows where employees fit into the hierarchy. Organization charts depict the extent of line and staff authority, departmentalization, and span of control at various levels. Explain the significance of size as it relates to the organizational structure. Describe the changes that are likely to occur as an organization grows. Larger firms develop more complex organizational structures. As a firm’s size increases, job specialization (and at least some decentralization) becomes increasingly important, followed by departmentalization, and a more definitive decision-making hierarchy.

Chapter Review:

Chapter Review Why is a company’s informal organization important?. The everyday social connections among employees can transcend formal job related relationships, creating a very powerful dynamic that can either support or disrupt a firm’s effectiveness. What is the difference between responsibility and authority?. Responsibility is the duty to perform an assigned task, and authority is the power to make the decisions necessary to compete that task. Responsibility and authority should be closely linked for any given assignment.

Chapter Review :

Chapter Review Why do some managers have difficulties in delegating authority?. Why does this problem tend to plague smaller businesses?. Some of the reasons managers have difficulty delegating authority include: Fear that employees can’t do anything as well as they can Fear that something will go wrong if someone else does it Fear that that employees will “show up” the manager Too bogged down in day-to-day activities to delegate Don’t know how to delegate Want to keep control Delegating is especially difficult for small business owners because they typically began by doing everything themselves and having complete control.

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