Chapter 7-Organizational Structure
frontline managers (manager, group leader, office manager)
Coordinate activities Supervise employees Report to middle managers Involved in day-to-day operations
disadvantages of specialization
Doing the same thing over and over sometimes leads to boredom and may eventually leave employees dissatisfied with their jobs (decreased performance and increased absenteeism and turnover)
how is a unit led in functional organizations
Each unit is headed by an individual with expertise in the unit's particular function
centralization
In organizational structure, where decision making is concentrated at the top of the organizational hierarchy.
centralization advantage
consistency in decision-making.
while frontline managers focus on
day-to-day operations
So what's better—a narrow span of control (with few direct reports) or a wide span of control (with many direct reports)?
depends on a number of factors, including frequency and type of interaction, proximity of subordinates, competence of both supervisor and subordinates, and the nature of the work being supervised
job specialization
dividing tasks into jobs
Depending on the organization and the size of the work units, they may be called
divisions, departments, or just plain groups
Specialization has several advantages
efficiency and jobs that are easier to learn and roles that are clearer to employees
extent of formal system in sustained success and maturity
maturing
extent of formal system in survival and early success phase
minimal to developing
flat
In organizational structure, when an organization has only a few layers of management
organizational chart
A diagram delineating the interrelationships of positions within the organization
customer division (For example, Johnson & Johnson's 200 or so operating companies are grouped into three customer-based business segments: consumer business (personal-care and hygiene products sold to the general public), pharmaceuticals (prescription drugs sold to pharmacies), and professional business (medical devices and diagnostics products used by physicians, optometrists, hospitals, laboratories, and clinics)
A divisional departmentalization based on customer segments
process division
A divisional departmentalization based on distinct stages of the production process.
geographical division
A divisional departmentalization based on geographical location.
product division (general motors-Buick, Cadillac, Chevrolet, and GMC)
A divisional departmentalization based on product lines
Divisional Organizations
A form of departmentalization in which each division contains most of the functional areas (production, marketing, accounting, finance, human resources); in other words, divisions are similar to stand-alone companies, and they function relatively autonomously.
matrix structure
A form of departmentalization that combines elements of functional and divisional structures.
narrow span of control
A span of control with few direct reports.
wide span of control
A span of control with many direct reports.
middle managers (operations managers, division manager, branch manager)
Allocate resources Oversee frontline managers Report to top management Develop and implement activities
disadvantage of functional organization
But homogeneity also has drawbacks: it can hinder communication and decision making between units and even promote interdepartmental conflict
aspect of designing an organizational structure
Identify the activities that need to be performed in order to achieve organizational goals. Break down these activities into tasks that can be performed by individuals or groups of employees.
As a company grows, however, it tends to add more layers between the top and the bottom; that is, it gets taller
In organizational structure, when an organization has many layers of management.
unity of command
Occurs when each employee reports to only one supervisor
Top Managers (CEO, COO, CFO, CIO)
Set objectives Scan environment Plan and make decisions
chain of command
The authority relationships among people working at different levels of the organization
There are trade-offs between the advantages and disadvantages of flat and tall organizations. Companies determine which trade-offs to make according to a principle called span of control
The number of people reporting to a particular manager.
Given the tendency toward flatter organizations and wider spans of control, how do managers handle increased workloads? They must learn how to handle delegation-
The process of entrusting work to subordinates.
advantages of functional organization
The structure is simple to understand and enables the staff to specialize in particular areas
advantage of product division
allows individuals in the division to focus all their efforts on the products produced by their division
common day examples of functional organization
business schools and college majors
Disadvantage of tall structure:
can slow down communication and decision making, causing the organization to become less efficient and productive.
If and when a company expands, it has to decide whether most decisions should still be made by individuals at the top or delegated to lower-level employees. The two options are-
centralization and decentralization
Divisions are similar in many respects to stand-alone companies, except that
certain common tasks, like legal work, tends to be centralized at the headquarters level
The patterns and structures that appear in an organization need to evolve over time as an organization grows or declines, often through four predictable phases:
entrepreneurship phase, survival and early success, sustained success, renewal (or decline)
extent of formal system in renewal (or decline)
extensive
the challenge of divisional organization is to
find the most appropriate way of structuring operations to achieve overall company goals.
newer organizations tend to adapt a
flat structure
two types of organizational structure
functional and divisional organizations
As you move up the pyramid, management positions
get more demanding, but they carry more authority and responsibility (along with more power, prestige, and pay
Departamentalization
grouping jobs into units
Functional Organization
groups together people who have comparable skills and perform similar tasks.
decentralization
in organizational structure, where decision-making is delegated to lower-level employees.
centralization disadvantage
lower-level managers will feel under-utilized and will not develop decision-making skills that would help them become profitable and might also fail to consider information that only front-line employees have or might actually delay the decision-making process.
extent of formal system in entrepreneurship phase
non-existent to minimal
Another thing to notice about a firm's chain of command is the
number of layers between the top managerial position and the lowest managerial level.
survival and early success
occurs as an organization begins to scale up and find continuing success
Once an organization has set its structure, it can represent that structure in an
organizational chart
top managers spend most of their time in
planning and decision making
Divisions can be formed according to
products, customers, processes, or geography.
disadvantage of product division
results in higher costs as corporate support services (such as accounting and human resources) are duplicated in each of the four divisions.
disadvantage of divisional organization
services must be duplicated across units, costs will be higher. In addition, some companies have found that units tend to focus on their own needs and goals at the expense of the organization as a whole.
functional organizations are typical for
small to medium-size companies, which group their people by business functions
Building an organizational structure engages managers in two key activities:
specialization and departmentalization
at the stage of survival and early success, it becomes appropriate to introduce structures that
support the standardization and formalization required to create effective coordination across the organization.
decentralization disadvantage
the divisions of the company might end up competing against each other, to the detriment of the organization as a whole
sustained success or maturity
the organization expands and the hierarchy deepens, now with multiple levels of employees.
entrepreneurship phase
the organization is usually very small and agile, focusing on new products and markets.
Why do companies restructure their organizational structure
to be competitive with their changing conditions
advantage of divisional organization
usually enhances the ability to respond to changes in a firm's environment.
renewal or decline
when an organization expands to the point that its operations are complex and need to operate somewhat autonomously. (might need to restructure)
When you're examining an organization chart, you'll probably want to know
whether each person reports to one or more supervisors: to what extent, in other words, is there unity of command?