CHAPTER 8

Four Ways to Structure an Organization

1. Line Organizations 2. Line-and-Staff Organizations 3. Matrix-Style Organizations 4. Cross-Functional Self-Managed Teams

Esprit de corps

A spirit of pride and loyalty should be created among people in the firm.

Clear Communication Channels

All workers should be able to reach others in the firm quickly and easily.

Hierarchy of Authority

All workers should know to whom they report' manager should have the right to give orders and expect others to follow.

Disadvantages of a Matrix Structure

1. Costly and complex 2. Can confuse employees about where their loyalty belongs - with the project manager or with their functional unit 3. Requires good interpersonal skills as well as cooperative employees and managers to avoid communication problems 4. May be only a temporary solution to a long-term problem

Weber was in favor of

Bureaucracy; he believed that large organizations demanded clearly established rules and guidelines to be followed precisely

Cross-Functional Self-Managed Teams

Groups of employees from different departments who work together on a long-term basis; self-managed means that they are empowered to make decisions without management approval

Critical Managerial Function

Managing change

Organizational (corporate) Culture

The widely shared values within an organization that foster unity and cooperation to achieve common goals; the culture of an organization is usually reflected in its stories, traditions, and myths.

Networking

Uses communications technology and other means to link organizations and allow them to work together on common objectives

Two Organizational Systems

1. Formal Organization 2. Informal Organization

Job Specialization

Dividing tasks into smaller jobs Ex. Divide mowing task into mowing, trimming, and raking (many jobs can be done quickly and well when each person specializes)

Empowerment

Giving employees authority.

Restructuring

Redesigning an organization so it can more effectively and efficiently serve its customers.

Line Personnel

Responsible for directly achieving organizational goals, and include production workers, distribution people, and marketing personnel

Organization Chart

Shows relationships among people: who is accountable for the completion of specific work, and who reports to whom

Matrix Organization

Specialists from different parts of the organization work together temporarily on specific projects, but still remain part of a line-and-staff structure; a project manager can borrow people form different departments to help design and market new product ideas.

Degree of Centralization

The amount of decision-making power vested in top management should vary by circumstances.

Core Competencies

Those functions that the organization can do as well as or better than any other organization in the world.

Digital Natives

Young people who have grown up using the Internet and social networking.

Organizing

Begins with determining what work needs to be done and then dividing up the tasks.

Firms Make Decisions About (Organizational Issues):

1. Centralization vs. Decentralization 2. Span of Control 3. Tall vs. Flat Organizational Structures 4. Departmentalization

Disadvantages of Departmentalization

1. Departments may not communicate well 2. Employees may identify with their department's goals rather than the organization's 3. The company's response to external changes may be slow 4. People may not be trained to take different managerial responsibilities; rather, they tend to become narrow specialists 5. Department members may engage in groupthink (they think alike) and may need input form outside to become more creative

Benchmarking

Compares an organization's practices, processes, and products against the world's best

Advantages of Departmentalization

1. Employees can develop skills in depth and progress within a department as they master more skills 2. The company can achieve economies of scale by centralizing all the resources it needs and locate various experts in that area 3. Employees can coordinate work within the function, and top management can easily direct and control various departments' activities

Advantages of a Matrix Structure

1. Gives managers flexibility in assigning people to projects 2. Encourages inter organizational cooperation and teamwork 3. Can produce creative solutions to product development problems 4. Makes efficient use of organizational resources

Max Weber's Principles of Organization (Organizational Theory)

1. Job descriptions 2. Written rules, decision guidelines, and detailed records 3. Consistent procedures, regulations, and policies 4. Staffing and promotion based on qualifications

Companies that are the most successful in adapting to change have these common traits:

1. They listen to customers 2. They have inspirational managers who drive new ideas throughout the organizations 3. They often have had a close call with going out of business

Fayol's Principles of Organization

1. Unity of Command 2. Hierarchy of Authority 3. Division of Labor 4. Subordination of Individual Interests to the General Interest 5. Authority 6. Degree of Centralization 7. Clear Communication Channels 8. Order 9. Equity 10.Esprit de corps

Span of Control

Describes the optimal number of subordinates a manager supervises or should supervise; the trend today is to expand the span of control as organizations adopt empowerment, reduce the number of middle managers, and hire more talented and better educated lower-level employees.

Formal Organization

Details lines of responsibility, authority, and position (the structure shown on organization charts)

Informal Organization

Develops spontaneously as employees meet and form cliques, relationships, and lines of authority separate form the formal organization (human side of the organization that doesn't show on any organization chart)

Departmentalization

Divides organizations into separate units; traditionally done by function (design, production, marketing, and accounting); groups workers according to their skills, expertise, or resource use so act they can specialize and work together more effectively.

Division of Labor

Dividing up tasks among individuals involved.

Authority

Managers have the right to give orders and the power to enforce obedience; authority and responsibility are related.

Order

Materials and people should be placed and maintained in the proper location.

Centralized Authority

Occurs when decision making is concentrated at the top level of management

Decentralized Authority

Occurs when decision making is delegated to lower-level managers and employees more familiar with local conditions than headquarters management could be.

Much change is due to

The evolving business environment; more global competition, a declining economy, faster technological change, and pressure to preserve the natural environment.

Economies of Scale

The fact that companies can reduce their production costs by purchasing raw materials in bulk; the average cost of goods decreases at production levels rise.

Grapevine

The informal organization's nerve center; the system through which unofficial information flows between and among managers and employees (key people in the grapevine usually have considerable influence)

Chain of Command

The line of authority that moves from the top of the hierarchy to the lowest level.

Real Time

The present moment of the actual time in which an event takes place (Internet allows companies to send real-time data to organizational partners as they are developed or collected)

Departmentalization

The process of setting up individual departments to do specialized tasks.

Subordination of Individual Interests to the General Interest

Workers are to think of themselves as a coordinated team; the goals of the team are more important than the goals of individual workers.

Equity

A manager should treat employees and peers with respect and justice.

Hierarchy

A system in which one person is at the top of the organization and there is a ranked or sequential ordering from the top down of managers and others who are responsible to that person

Virtual Corporation

A temporary network organization made up of replaceable firms that join and leave as needed.

Organizational Chart

A visual device that shows relationships among people and divides the organization's work; it shows who reports to whom.

Staff Personnel

Advise and assist line personnel in meeting their goals, and include those in marketing research, legal advising, information technology, and human resource management.

Bureaucracy

An organization with many layers of managers; Max Weber used the word bureaucrat to describe a middle manager whose function was to implement top management's orders.

Tall Organizational Structures

An organizational structure in which the pyramidal organization chart would be quite tall because of the various levels of management.

Flat Organizational Structures

An organizational structure that has few layers of management and a broad span of control.

Division of Labor

Functions are to be divided into areas of specialization such as production, marketing, and finance.

Inverted Organization

Has contact people (like nurses) at the top and the chief executive officer at the bottom; management layers are few, and the manager's job is to assist and support frontline people, not boss them around.

Line Organization

Has direct two-way lines of responsibility, authority, and communication running from the top to the bottom of the organization, with everyone reporting to only one supervisor (many small businesses are organized this way)

Consumers today expect

High-quality products and fast, friendly service at a reasonable cost.

Unity of Command

Each worker is to report to one, and only one, boss