Exam 3 Study Guide : Introduction to Business

Advantages of Wide Span of Control

*Fewer levels of management means increased efficiency and reduced costs. *Increased subordinate autonomy leads to quicker decision-making. *This approach allows for greater organizational flexibility. *This approach creates higher levels of job satisfaction due to employee empowerment.

Strengths of Group Decision-Making

*Groups bring more information and knowledge to the decision-making process. *Groups offer a diversity of perspectives and, therefore, generate a greater number of disagreements. *Group decision-making results in a higher-quality decision than does individual decision-making. *Participation of group members increases the likelihood that a decision will be accepted.

Weaknesses of Group Decision-Making

*Groups typically take a longer time to reach a solution than an individual takes. *Group members may pressure others to conform, reducing the likelihood of alternatives. *The process may be dominated by one or a small number of participants. *Groups lack accountability, because it is difficult to assign responsibility for outcomes to any one individual.

Disadvantages of Narrow Span of Control

*More levels of management mean that it is more expensive. *Decision-making is slower due to vertical layers. *Top management are isolated. This approach discourages employee autonomy.

High-Performing Teams

*Need to practice good communication. *Need to communicate messages and give appropriate feedback that seeks to correct any misunderstandings. *Should be careful to critique ideas rather than criticize the person who suggests them. *Have great leaders. *Skilled team leaders divide work so that tasks are not repeated, help members set and track goals, monitor their team's performance, communicate openly, and remain flexible to adapt to changing goals or management demands.

Decentralization is usually desirable when the following conditions are met:

*The organization is very large, like ExxonMobil, Ford, or General Electric. *The firm is in a dynamic environment where quick, local decisions must be made, as in many high-tech industries. *Managers are willing to share power with their subordinates. *Employees are willing and able to take more responsibility. *The company is spread out geographically, such as Nordstrom, Caterpillar, or Ford.

Several factors must be considered when deciding how much decision-making authority should be delegated throughout the organization. These factors include:

*The size of the organization. *The speed of change in its environment. *Managers' willingness to give up authority. *Employees' willingness to accept more authority. *The organization's geographic dispersion.

Advantages of Narrow Span of Control:

*This approach allows a high degree of control. *Fewer subordinates may mean that the manager is more familiar with each individual. *Close supervision can provide immediate feedback.

Disadvantages of Wide Span of Control

*This approach allows for less control. *Managers may lack familiarity with their subordinates due to the large number. *Managers can be spread so thin that they can't provide necessary leadership or support. *There may be a lack of coordination or synchronization.

This organizing, or structuring, process is accomplished by:

-Determining work activities and dividing up tasks (division of labor). -Grouping jobs and employees (departmentalization). -Assigning authority and responsibilities (delegation).

The decision to create a more mechanistic or a more organic structural design is based on factors such as:

-The firm's overall strategy. -The size of the organization. -The stability of its external environment, among others.

Traditional Forms of Organizational Structure :

1)Planning 2)Organizing 3)Leading 4)Controlling

Disadvantages of the matrix structure include:

1)Power struggles. - Functional and product managers may have different goals and management styles. 2)Confusion among team members. - Reporting relationships and job responsibilities may be unclear. 3)Lack of cohesiveness. - Team members from different functional areas may have difficulty communicating effectively and working together as a team.

Advantages of the matrix structure include:

1)Teamwork. - By pooling the skills and abilities of various specialists, the company can increase creativity and innovation and tackle more complex tasks. 2)Efficient use of resources. - Project managers use only the specialized staff they need to get the job done, instead of building large groups of underused personnel. 3)Flexibility. - The project structure is flexible and can adapt quickly to changes in the environment; the group can be disbanded quickly when it is no longer needed. 4)Ability to balance conflicting objectives. - The customer wants a quality product and predictable costs. The organization wants high profits and the development of technical capability for the future. These competing goals serve as a focal point for directing activities and overcoming conflict. The marketing representative can represent the customer, the finance representative can advocate high profits, and the engineers can push for technical capabilities. 5)Higher performance. - Employees working on special project teams may experience increased feelings of ownership, commitment, and motivation. 6)Opportunities for personal and professional development. - The project structure gives individuals the opportunity to develop and strengthen technical and interpersonal skills.

How do mechanistic and organic organizations differ?

A mechanistic organization is characterized by a relatively high degree of job satisfaction, rigid departmentalization, many layers of management (particularly middle management), narrow spans of control, centralized decision-making, and a long chain of command. This combination of elements results in what is called a tall organizational structure. In contrast, an organic organization is characterized by a relatively low degree of job specialization, loose departmentalization, few levels of management, wide spans of control, decentralized decision-making, and a short chain of command. This combination of elements results in what is called a flat organizational structure.

Strategy

A plan of action or policy designed to achieve a major or overall aim.

Organization Chart

A visual representation of the structured relationships among tasks and the people given the authority to do those tasks.

What contemporary organizational structures are companies using?

Although traditional forms of departmentalization still represent how many companies organize their work, newer, more flexible organizational structures are in use at many firms.

Committee Structure

An organizational structure in which authority and responsibility are held by a group rather than an individual. *Committees are typically part of a larger line-and-staff organization. *Often the committee's role is only advisory, but in some situations the committee has the power to make and implement decisions. *Committees can make the coordination of tasks in the organization much easier. They bring diverse viewpoints to a problem and expand the range of possible solutions, but there are some drawbacks. *Committees can be slow to reach a decision and are sometimes dominated by a single individual. It is also more difficult to hold any one individual accountable for a decision made by a group. *Committee meetings can sometimes go on for long periods of time with seemingly little being accomplished.

Size

Another factor that affects how mechanistic or organic a company's organizational structure is.

Geographic Departmentalization

Based on the geographic segmentation of the organizational units (such as U.S. and Canadian marketing, European marketing, and Latin American marketing).

Product Departmentalization

Based on the goods or services produced or sold by the organizational unit (such as outpatient/emergency services, pediatrics, cardiology, and orthopedics).

Functional Departmentalization

Based on the primary functions performed within an organizational unit (marketing, finance, production, sales, and so on).

Customer Departmentalization

Based on the primary type of customer served by the organizational unit (such as wholesale or retail purchasers).

Process Departmentalization

Based on the production process used by the organizational unit (such as lumber cutting and treatment, furniture fishing, and shipping).

Organizing :

Coordinating and allocating a firm's resources so that the firm can carry out its plans and achieve its goals.

Work Teams

Groups whose members work intensely on a specific, common goal using their positive synergy, individual and mutual accountability, and complementary skills. *They require not only coordination but also collaboration, the pooling of knowledge, skills, abilities, and resources in a collective effort to attain a common goal. *A work team creates synergy, causing the performance of the team as a whole to be greater than the sum of team members' individual contributions.

Self-Managed Work Teams

Groups willing to expand the team concept to allow team members greater responsibility in making decisions, implementing solutions, and monitoring outcomes. *They manage themselves without any formal supervision, taking responsibility for setting goals, planning and scheduling work activities, selecting team members, and evaluating team performance.

Authority

Legitimate power, granted by the organization and acknowledged by employees, that allows an individual to request action and expect compliance. *Exercising authority means making decisions and seeing that they are carried out. *Most managers delegate, or assign, some degree of authority and responsibility to others below them in the chain of command.

What tools do companies use to establish relationships within their organizations?

Once companies choose a method of departmentalization, they must then establish the relationships within that structure. In other words, the company must decide how many layers of management it needs and who will report to whom. The company must also decide how much control to invest in each of its managers and where in the organization decisions will be made and implemented.

Why are companies using team-based organizational structures?

One of the most apparent trends in business today is the use of teams to accomplish organizational goals. Using a team-based structure can increase individual and group motivation and performance.

Staff Positions

Positions that are supportive in nature and have only indirect responsibility for an organization's basic objectives. *Individuals in staff positions provide the administrative and support services that line employees need to achieve the firm's goals. *Staff positions are found in areas such as legal counseling, managerial consulting, public relations, and human resource management.

Line Positions

Positions that have direct responsibility for the basic objectives of an organization. *In daily operations, individuals in these positions are directly involved in the processes used to create goods and services. *Line positions in organizations are typically in areas such as production, marketing, and finance.

Accountability

Responsibility for outcomes.

Groups

Social units of two or more people who share the same goals and cooperate to achieve those goals. Groups can be formal or informal in nature.

Problem-Solving Teams

Teams established to solve problems and make improvements at work. *They are typically made up of employees from the same department or area of expertise and from the same level of the organizational hierarchy. *These teams meet on a regular basis to share information and discuss ways to improve processes and procedures in specific functional areas. *They generate ideas and alternatives and may recommend a specific course of action, but they typically do not make final decisions, allocate resources, or implement change.

Cross-Functional Team

Teams made up of employees from about the same hierarchical level but different functional areas of the organization. *Many task forces, organizational committees, and project teams are cross-functional. Both problem-solving teams and self-managed teams may also be cross- functional teams. *Often the team members work together only until they solve a given problem or complete a specific project. *These teams allow people with various levels and areas of expertise to pool their resources, develop new ideas, solve problems, and coordinate complex projects.

Line-and-staff Organization

The addition of staff specialists to a line organization. *As an organization grows and becomes more complex, the line organization can be enhanced by adding staff positions to the design. *Staff positions provide specialized advisory and support services to line managers in the this organization.

Delegation of Authority

The assignment of direct authority and responsibility to a subordinate to complete tasks for which the manager is normally responsible. It makes the employees accountable to their supervisor.

Centralization

The degree to which formal authority is concentrated in one area or level of the organization. *In a highly centralized structure, top management makes most of the key decisions in the organization, with very little input from lower-level employees. *Lets top managers develop a broad view of operations and exercise tight financial controls. Can also help to reduce costs by eliminating redundancy in the organization. But it may also mean that lower-level personnel don't get a chance to develop their decision-making and leadership skills and that the organization is less able to respond quickly to customer demands.

Group Cohesiveness

The degree to which group members want to stay in the group and tend to resist outside influences (such as a change in company policies). *When group performance norms are high, group cohesiveness will have a positive impact on productivity.

Specialization

The degree to which tasks are subdivided into smaller jobs.

Departmentalization

The grouping of people, tasks, and resources into organizational units. A process that groups activities into different departments. *It facilitates the planning, leading, and control processes.

Work Groups

The groups who share resources and coordinate efforts to help members better perform their individual duties and responsibilities. *The performance of the group can be evaluated by adding up the contributions of the individual group members.

Norms

The implicit behavioral guidelines of the group, or the standards for acceptable and nonacceptable behavior.

Managerial Hierarchy

The levels of management within an organization; typically includes top, middle, and supervisory management. Each organizational unit is controlled and supervised by a manager in a higher unit. The person with the most formal authority is at the top of the hierarchy. The higher a manager, the more power he or she has. Thus, the amount of power decreases as you move down the management pyramid. At the same time, the number of employees increases as you move down the hierarchy.

Chain of Command

The line of authority that extends from one level of an organization's hierarchy to the next, from top to bottom, and makes clear who reports to whom. *Is shown in the organization chart and can be traced from the CEO all the way down to the employees producing goods and services. *Under the unity of command principle, everyone reports to and gets instructions from only one boss. *Unity of command guarantees that everyone will have a direct supervisor and will not be taking orders from a number of different supervisors. *Unity of command and chain of command give everyone in the organization clear directions and help coordinate people doing different jobs.

How does the informal organization affect the performance of the company?

The network of connections and channels of communication based on the informal relationships of individuals inside the organization is known as the informal organization. *Informal relationships can be between people at the same hierarchical level or between people at different levels and in different departments. *Some connections are work-related, such as those formed among people who carpool or ride the same train to work. Others are based on nonwork commonalties such as belonging to the same church or health club or having children who attend the same school.

Span of Control

The number of employees the manager directly supervises. Also called span of management. It can be as narrow as two or three employees or as wide as 50 or more. In general, the larger the span of control, the more efficient the organization.

Line Organization

The oldest and traditional form of organizational structure. *It is designed with direct, clear lines of authority and communication flowing from the top managers downward. *In which managers have direct control over all activities, including administrative duties.

How can the degree of centralization/decentralization be altered to make an organization more successful?

The optimal span of control is determined by the following five factors: 1. Nature of the task. - The more complex the task, the narrower the span of control. 2. Location of the workers. - The more locations, the narrower the span of control. 3. Ability of the manager to delegate responsibility. - The greater the ability to delegate, the wider the span of control. 4. Amount of interaction and feedback between the workers and the manager. - The more feedback and interaction required, the narrower the span of control. 5. Level of skill and motivation of the workers. - The higher the skill level and motivation, the wider the span of control.

Organization :

The order and design of relationships within a company or firm. It consists of two or more people working together with a common objective and clarity of purpose.

Division of Labor

The process of dividing work into separate jobs and assigning tasks to workers.

Decentralization

The process of pushing decision-making authority down the organizational hierarchy, giving lower-level personnel more responsibility and power to make and implement decisions. *Benefits include quicker-decision making, increased levels of innovation and creativity, greater organizational flexibility, faster development of lower-level managers, and increased levels of job satisfaction and employee commitment. *Can also be risky. If lower-level personnel don't have the necessary skills and training to perform effectively, they may make costly mistakes. Additionally, it may increase the likelihood of inefficient lines of communication, competing objectives, and duplication of effort.

Matrix Structure

This structure combines two different forms of departmentalization, functional and product, that have complementary strengths and weaknesses. *Is sometimes used in conjunction with the traditional line-and-staff structure in an organization. *It brings together people from different functional areas of the organization (such as manufacturing, finance, and marketing) to work on a special project.

Formal Groups

Those designated and sanctioned by the organization. Their behavior is directed towards accomplishing organizational goals.

Informal Groups

Those that are based on social relationships and are not determined or sanctioned by the organization.

What trends are influencing the way businesses organize?

To improve organizational performance and achieve long-term objectives, some organizations seek to reengineer their business processes or adopt new technologies that open up a variety of organizational design options, such as virtual corporations and virtual teams. Other trends that have strong footholds in today's organizations include outsourcing and managing global businesses.

Every organization has some kind of underlying structure. Typically, organizations base their frameworks on traditional, contemporary, or team-based approaches. Regardless of the structural framework a company chooses to implement, all managers must first consider what kind of work needs to be done within the firm.

Traditional structures are more rigid and group employees by function, products, processes, customers, or regions. Contemporary and team-based structures are more flexible and assemble employees to respond quickly to dynamic business environments.