Chapter 6 Mini Sim Exercise: Organizing the Business
Organizing the Business MY PROGRESS - 58% Decision Point: Levels of Delegation Janeen looks at David, Shannon, and Consuela with a rueful smile. "You know, this whole process hasn't been easy for me," she admits. "This business is my baby, and it's been difficult to give up control. I started out by trying to do everything myself, and when I saw that wasn't going to work out, I took my first baby steps." David laughs. "Yeah, delegation hasn't been Janeen's strong suit, but we've come a long way." Consider the statements below and drag them to the appropriate level of delegation, from the lowest level of delegation at the top, to the highest at the bottom. When you are done, click Submit.
- Here's what I need you to do. (The work is assigned and clear instructions are given about what is to be done. There is no freedom to act independently.)- Look into this and give me your input. Then, I'll let you know what I decide. (Some inputs are taken but the final decision is taken by the superior.)- Look into this and let me know what you think, and we'll figure it out together. (Decision making is shared.)- Look into this and let me know what you decide, but make sure that I give you the go-ahead before you proceed. (Decision can be taken by the subordinate but the final approval still comes from the superior.)- Look into this and handle it as you see fit. No need to check back with me. (Complete freedom to decide on the course of action with waiting for approval from the superior.)
Decision Point: The Final Organizational Structure It's been a long afternoon, but you think you've been able to help Janeen make sense of the organizational structure of her business. Based on what you've developed, how would you best describe the organizational structure?
Authority in the company is determined by the relationships between the group functions and activities. That was the best choice. Janeen's company has a functional structure, so it's structured around basic business functions.
Decision Point: Adding a Yoga Studio Janeen continues. "About five years ago, I met David. He had a yoga and meditation studio, and we decided that this would be a natural extension of the spa services that I was offering. So I hired David. His end of the business started growing pretty quickly. We needed a couple more yoga instructors to keep up with demand, so I decided to promote him to the manager of that part of the business, and let him do the hiring and scheduling and all that." "Let me see if I've got this straight," you say, and you go up to the easel and start putting up sticky notes of your own. "As I understand you, the organization now looks something like this. Am I on track here?" Which of the following would best depict the organization chart you've put together for Janeen?
Chart Gamma. That was the best choice. On an organization chart, each box represents a job, and the solid lines define the chain of command -- the reporting relationship within the company. David (the yoga/meditation manager) reports directly to Janeen (as do the nail technicians, massage therapists, receptionist, and aestheticians). The two yoga instructors and the meditation instructor report to David.
Decision Point: The Organization Chart After Hiring a Spa Manager Janeen goes on. "One of the problems that I noticed as we grew is that I had to spend a lot more time on the business end of the business, so I decided to hire Shannon as spa manager. She's sort of David's counterpart, except on the spa side of the business. She now does all the training, scheduling, hiring, and the like for the massage therapists, nail techs, and aestheticians. I also hired Consuela as the office manager, and one of the first things she did was to hire another receptionist because we were having more evening and weekend hours." You start putting more sticky notes on the organization chart on the easel. "Okay, Janeen," you tell her. "Time for another check here. If I'm reading you correctly, the organization now looks something like this. Are we still on the same page?" Based on what Janeen has described, what should the updated organization chart now look like? Select an option from the choices below and click Submit. You can click each layout thumbnail below to see the enlarged view.
Chart Kappa. That was the best choice. Remember that the solid lines in an organization chart define the chain of command -- the reporting relationships within the company. The spa manager and office manager report directly to Janeen (along with the wellness manager). You'll notice that the receptionists now report to the office manager.
Decision Point: The Organization Chart You ask Janeen for a copy of the current organization chart, and she confesses that they don't have one. "Let me explain," says Janeen. "I started this business about 8 years ago as a day spa. We offered facials, therapeutic massages, pedicures, and manicures, so I had some aestheticians, massage therapists, and nail technicians, as well as a receptionist." While she is talking, she is putting up sticky notes on an easel in her office. You look at what she has posted on the easel. How would this organization be best described?
Flat organizational structure with a wide span of control. That was the best choice. There is only one layer of management in the company, so it would be considered a flat organizational structure. Additionally, because all employees report directly to Janeen, she has a wide span of control.
Decision Point: Forms of Organization What type of organization is reflected in the organization chart for Janeen's company?
Line organization. That was the best choice. Line organization is the type of authority that flows up and down the chain of command. It is depicted by a solid line on the organization chart.
Mentoring Moment: Tall Versus Flat Organizations They say that a picture is worth 1,000 words, so take a look at the two organizational structures shown below. If you count the squares, you'll notice that both organizations have the same number -- the president and 30 employees. Flat Organization But look at how differently these organizations are structured. In the organization shown at the top, each manager has a very narrow span of control: only two people report to each manager, and there are five layers of management in the organization. That's what is known as a tall organization structure. Now look at the way the second organization is structured. The president has six people reporting to him or her, and each of those managers has four direct reports. Each manager has a wider span of control, and this results in the organization having a flat organizational structure -- only three layers of management. Which is better? The short answer is, it depends. There are advantages and disadvantages to both. You be the judge. Advantages of Tall Organization Disadvantages of Tall Organization Tighter control by managers Greater specialization More promotional opportunities Disadvantages of Tall Organization Higher costs because there are more managers Longer decision-making time Less empowerment Advantages of Flat Organization Lower costs because fewer managers Faster decision making More employee empowerment Disadvantages of Flat Organization Less control by managers Overworked managers with many direct reports Fewer opportunities for promotion
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Mentoring Moment: The Delegation Process When you hear the word "leader," what qualities come to mind? Strength? Confidence? Determination? Delegation probably isn't one of the words that came to mind, and yet the ability to delegate is one of the key elements of being an effective leader. A leader doesn't do everything him- or herself. Rather, he or she knows how to manage their time, resources, and people. He or she knows what, how, and when to delegate. Good delegation is about balancing responsibility with authority and accountability. Let's take a look. The process of delegation begins when the manager passes on some of his or her responsibility to an employee, and the employee now has an obligation to perform the assigned duty. "I'd like you to handle this customer's complaint" is an example of transferring responsibility. But responsibility without authority is meaningless. Authority is the power to make the decisions necessary to carry out the responsibility that has been assigned. If the customer wants a refund for a defective product, but you don't have the authority to issue the refund, having responsibility for handling the customer's complaint is simply an exercise in frustration -- for both you and the customer. Once you've accepted the responsibility and the authority, accountability is created. You're now obligated to complete the task, resolve the customer's complaint, and be held accountable for the results produced. Think about these elements of delegation as the legs of a stool. The stool won't stand without all three legs; each leg is equally important and interdependent. The same is true with responsibility, authority, and accountability in delegation.
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Decision Point: Growing with a Nutritional Consultant Just when you think that you've got the organization figured out, Janeen grins broadly at you. "Wait -- there's more," she admits. "I'm bringing on a nutritional consultant at the beginning of the month. She will be offering diet and nutrition coaching to our clients on both the spa and the wellness sides of our business. She'll sell some nutritional supplements, of course, but what's really exciting is that she wants to add a beverage bar in the reception area, where she'll sell juices and herbal teas. She's also talking about maybe adding cooking classes in the future, or expanding the beverage bar to add smoothies and maybe even cleanses. We all think this area of the business can really take off, but of course that would mean adding more people and maybe even adding more space. The thing is, I don't know if this person should be on the spa side of the business, the wellness side, or if she should be an entirely separate department. What are your thoughts?" What should your response to Janeen be?
This should be set up as a separate department reporting to Janeen. This was the best choice, because the nutritional consultant will be serving clients on both the spa and wellness sides of the business. Janeen may even consider making this department its own profit center -- a separate company unit responsible for its own costs and profits.
Decision Point: What to Delegate to Shannon Janeen recognizes that she needs to start delegating more to those who work for her. Which of the following would be the least appropriate task to delegate to Shannon, the spa manager?
convert a storage room. This was the best choice. Converting the storage room to a hydrotherapy room is likely going to be a major expense, so Janeen should make the decision as the owner of the business. However, it would be wise for her to seek Shannon's input before making the decision.
Janeen is thrilled that you're following along with her. She goes on. "Business was great, and as more people came to know about us, we had opportunities to expand the services we offered. David came up with the idea to hire an acupuncturist and a reflexologist, so I promoted him to wellness manager, and those two new people reported to him." Your head is starting to spin and you add more sticky notes to the "organization chart" on the easel. Based on what you currently see, what type of departmentalization does the spa utilize?
functional departmentalization. That was the best choice. Although an argument could be made that the spa has two customer groups (spa customers and wellness customers), at this point, the spa has functional departmentalization.
