Chapter 7 - Creating a Flexible Organization

Communal Culture

Combines the positive traits of the networked culture and the mercenary culture—those of friendship, commitment, high focus on performance, and high energy. People's lives revolve around the product in this culture, and success by anyone in the organization is celebrated by all.

Line-and-staff structure

Utilizes the chain of command from a line structure but also provides line managers with specialists, called staff managers. This structure works much better for medium- and large-sized organizations than line management alone.

Fragmented Culture

Employees do not become friends, and they work "at" the organization, not "for" it. Employees have a high degree of autonomy, flexibility, and equality.

Organization

A group of two or more people working together to achieve a common set of goals. Five elements—job design, departmentalization, delegation, span of management, and chain of command—help to determine what an organization chart and the organization itself look like.

Narrow Span of Management

A narrow span exists when the manager has only a few subordinates. The span should be narrow when workers are physically located far from one another, the manager has much work to do in addition to supervising workers, a great deal of interaction is required between supervisor and workers, and new problems arise frequently.

Wide Span of Management

A wide span of management exists when a manager has a larger number of subordinates. Generally, the span of management may be wide when the manager and the subordinates are very competent, the organization has a well-established set of standard operating procedures, and few new problems are expected to arise.

Network Structure (Virtual Organization),

Administration is the primary function performed, and other functions such as engineering, production, marketing, and finance are contracted out to other organizations. Frequently, a network organization does not manufacture the products it sells. This type of organization has a few permanent employees consisting of top management and hourly clerical workers. Leased facilities and equipment, as well as temporary workers, are increased or decreased as the organization's needs change. Thus, there is limited formal structure associated with a network organization. Network structures consist of a lot of teams working together, rather than relying on one centralized leader. One noteworthy benefit is that firms with a network structure are more likely to survive the loss of an important member.

Delegation

Assigns work and power to other workers. The degree of centralization or decentralization of authority is determined by the overall pattern of delegation within the organization. It involves the following three steps: (1) assigning responsibility, (2) granting authority, and (3) assigning accountability. A decentralized firm is one that delegates as much power as possible to people in the lower management levels.

Networked Culture

Characterized by a base of trust and friendship among employees, a strong commitment to the organization, and an informal environment. A small nonprofit organization may seek to build a networked culture where employees look out for each other and believe strongly in the organizational mission. Building a networked culture in such an organization is important because employees may have to work long hours for relatively little pay, and a strong sense of community and commitment helps to keep productivity high and turnover low.

Matrix Structure

Combines vertical and horizontal lines of authority, forming a matrix shape in the organization chart. The matrix structure occurs when product departmentalization is superimposed on a functionally departmentalized organization. In a matrix organization, authority flows both down and across and individuals report to more than one superior at the same time.

Task Force

Committee established to investigate a major problem or pending decision. A firm contemplating a merger with another company might form a task force to assess the pros and cons of the merger.

Pros and Cons of Committees

Committees offer some advantages over individual action. Their several members are able to bring information and knowledge to the task at hand. Committees tend to make more accurate decisions and to transmit their results through the organization more effectively. However, committee deliberations take longer than individual actions. In addition, unnecessary compromise may take place within the committee, or the opposite may occur, as one person dominates (and thus negates) the committee process.

Assessing a Firm's Corporate Culture

Common indicators include the physical setting (building or office layouts), what the company says about its corporate culture (in advertising or news releases), how the company greets guests (formal or informal reception areas), how employees spend their time (working alone in an office or working with others).

Cross-Functional team

Consists of individuals with varying specialties, expertise, and skills that are brought together to achieve a common task. Frequently, cross-functional teams are charged with the responsibility of developing new products. Cross-functional team projects may be temporary, in which case the team is disbanded once the mission is accomplished, or they may be permanent. For cross-functional teams to be successful, team members must be given specific information on the job each performs. The team must also develop a sense of cohesiveness and maintain good communication among its members.

Informal Group

Created by the group members themselves to accomplish goals that may or may not be relevant to the organization. Workers may create an informal group to go bowling, form a union, get a particular manager fired or transferred, or meet for lunch. The group may last for several years or a few hours. Informal groups can be powerful forces in organizations. They can restrict output, or they can help managers through tight spots. They can cause disagreement and conflict, or they can help to boost morale and job satisfaction. They have the power to improve or worsen employee performance and productivity. Clearly, managers should be aware of informal groups and determine how to utilize them.

Ad Hoc Committee

Created for a specific short-term purpose, such as reviewing the firm's employee benefits plan.

Departmentalization by Location

Groups activities according to the defined geographic area in which they are performed. Departmental areas may range from whole countries (for international firms) to regions within countries (for national firms) to areas of several city blocks (for police departments organized into precincts). Departmentalization by location allows the organization to respond readily to the unique demands or requirements of different locations. Nevertheless, a large administrative staff and an elaborate control system may be needed to coordinate operations across many locations.

Departmentalization by Customer

Groups activities according to the needs of various customer populations groups activities according to the needs of various customer populations. The advantage of this approach is that it allows the firm to deal efficiently with unique customers or customer groups.

Departmentalization by Product

Groups activities related to a particular good or service. This approach is used often by older and larger firms that produce and sell a variety of products. Each department handles its own marketing, production, financial management, and human resources activities.

Departmentalization by Function

Groups jobs that relate to the same organizational activity. Most smaller and newer organizations departmentalize by function. Supervision is simplified because everyone is involved in the same activities and coordination is easy. The disadvantages of this method of grouping jobs are that it can lead to slow decision making and it tends to emphasize the department over the organization as a whole.

Tall Organization Characteristics

In a tall organization, administrative costs are higher because more managers are needed. Communication may become distorted because information has to pass up and down through more levels. When companies are cutting costs, one option is to decrease organizational height in order to reduce related administrative expenses.

Mercenary Culture

Involves a high degree of passion, energy, sense of purpose, and excitement for one's work. Large banks and investment firms often have mercenary cultures because the environment is fast-paced, the stakes are high, and winning is important. The term mercenary does not imply that employees are motivated to work only for the money, although financial gain does play a role. In this culture, employees are very intense, focused, and determined to win.

Job Design

Involves structuring the tasks and activities required to accomplish a firm's objectives into specific jobs so as to foster productivity and employee satisfaction.

Decentralized Organization

Management consciously attempts to spread authority widely across various organization levels.

Line Managers

Managers within a line structure make decisions and give orders to subordinates to achieve the organization's goals. A line structure's simplicity and clear chain of command allow line managers to make decisions quickly with direct accountability because the decision maker only has one supervisor to report to. Line managers have line authority, which means that they can make decisions and issue directives relating to the organization's goals. Line managers must rely on the staff managers for information.

Factors that can influence the extent to which a firm is decentralized

One is the external environment in which the firm operates. The more complex and unpredictable this environment, the more likely it is that top management will let lower-level managers make important decisions because lower-level managers are closer to the problems. Another factor is the nature of the decision itself. The riskier or more important the decisions that have to be made, the greater is the tendency to centralize decision making. Third factor is the abilities of lower-level managers. If these managers do not have strong decision-making skills, top managers will be reluctant to decentralize. Finally, a firm that has practiced centralization or decentralization is likely to maintain that same posture in the future.

Staff Managers

Provide support, advice, and expertise to line managers, thus eliminating the major drawback of line structures. Staff managers are not part of the chain of command like line managers are, but they do have authority over their assistants. Staff managers usually have either advisory authority or functional authority. Staff managers in a line-and-staff structure tend to have more access to information than line managers.

Standing Committee

Relatively permanent committee charged with performing a recurring task.

Centralized Organization

Systematically works to concentrate authority at the upper levels.

Functional Authority

The authority of staff managers to make decisions and issue directives about their areas of expertise.

Responsibility

The duty to do a job or perform a task. In most job settings, a manager simply gives the worker a job to do.

Advisory Authority

The expectation that line managers will consult the appropriate staff manager when making decisions

Grapevine

The informal communications network within an organization. It is completely separate from—and sometimes much faster than—the organization's formal channels of communication. Formal communications usually follow a path that parallels the organizational chain of command. Information can be transmitted through the grapevine in any direction—up, down, diagonally, or horizontally across the organizational structure.

Corporate Culture

The inner rites, rituals, heroes, and values of a firm. An organization's culture has a powerful influence on how employees think and act. It also can determine public perception of the organization.

Organizational height

The number of layers, or levels, of management in a firm. The span of management plays a direct role in determining the height of the organization - If the span of management is wide, fewer levels are needed, and the organization is flat. If the span of management is narrow, more levels are needed, and the resulting organization is tall.

Span of management (or span of control)

The number of workers who report directly to one manager. Spans generally are characterized as wide (many workers per manager) or narrow (few workers per manager). Wide spans generally result in flat organizations (few layers of management); narrow spans generally result in tall organizations (many layers of management).

Accountability

The obligation of a worker to accomplish an assigned job or task. Accountability is created but it cannot be delegated.

Informal Organization

The pattern of behavior and interaction that stems from personal rather than official relationships. Embedded within every informal organization are informal groups and the notorious grapevine.

Authority

The power, within the organization, to accomplish an assigned job or task.

Departmentalization

The process of grouping jobs into manageable units. Today, the most common bases for organizing a business into effective departments are by function, by product, by location, and by customer.

Specialization

The separation of a manufacturing process into distinct tasks and the assignment of different tasks to different people. Several factors combine to make specialization a useful technique for designing jobs, but high levels of specialization may cause employee dissatisfaction and boredom. One technique for overcoming these problems is job rotation.

Line Structure

The simplest and oldest form of organizational structure. The chain of command goes directly from person to person throughout the organization. A straight line could be drawn down through the levels of management, from the chief executive down to the lowest level in the organization.

Job Rotation

The systematic shifting of employees from one job to another. Provides a variety of tasks so that workers are less likely to become bored and dissatisfied. Helps workers stay interested in their jobs, develop new skills, and identify new roles where they may want to focus their energies in the future. Two other approaches to job design—job enlargement and job enrichment—also can provide solutions to the problems caused by job specialization.