Organizational Structure
What can performance standards be set with respect to?
1 quantity 2. quality 2. time used 4. cost
Potential advantages of the traditional functional approach to departmentalization
1. Economies of scale can be realized. When people with similar skills are grouped, more efficient equipment can be purchased, and discounts for large purchases can be used. 2. Monitoring of the environment is more effective. Each functional group is more closely attuned to developments in its own field and therefore can adapt more readily. 3. Performance standards are better maintained. People with similar training and interests may develop a shared concern for performance in their jobs. 4. People have greater opportunity for specialized training and in-depth skill development. 5. Technical specialists are relatively free of administrative work. 6. Decision making and lines of communication are simple and clearly understood.
What are the benefits of effective control systems?
1. Establish valid performance standards 2. Provide adequate information to employees 3. Ensure acceptability to employees 4. Maintain open communication 5. Use multiple approaches
The advantages to the product approach to departmentalization
1. Information needs are managed more easily. Less information is required because people work closely on one product and need not worry about other products. 2. People have a full-time commitment to a particular product line. They develop a greater awareness of how their jobs fit into the broader scheme. 3. Task responsibilities are clear. When things go wrong in a functional organization, functional managers can pass the buck ("That other department is messing up, making it harder for us to do our jobs"). In a product structure, managers are more independent and accountable because they usually have the resources they need to perform their tasks. Also, the performances of different divisions can be compared by contrasting their profits and other measures. 4. People receive broader training. General managers develop a wide variety of skills, and they learn to be judged by results. Many top executives received crucial early experience in product structures.
The control cycle/process
1. Setting performance standards 2. Measuring performance 3. Comparing performance against the standards and determining deviations 4. Taking action to correct problems and reinforce successes
A conventional Organizational Chart
1. The boxes represent different work. 2. The titles in the boxes show the work performed by each unit. 3. Reporting and authority relationships are indicated by solid lines showing superior-subordinate connections. 4. Levels of management are indicated by the number of horizontal layers in the chart. All persons or units that are at the same rank and report to the same person are on one level.
What does an internal audit assess?
1. What the company has done for itself 2. what the company has done for its customers or their recipients of its goods or services The company can be evaluated on a number of factors, including financial stability, production efficiency, sales effectiveness, human resources development, earnings growth, energy use, public relations, civic responsibility, and other criteria of organizational effectiveness. It reviews the companies past, present, and future including possible risks.
Benefits of an external audit (types of analysis)?
1. investigates other organizations for possible merger or acquisition 2. determines the soundness of a company that will be used as a major supplier 3. discovers the strengths and weaknesses of a competitor to maintain or better exploit the competitive advantage of the investigating organization.
What are the types of budgets?
1. sales budget 2. production budget 3. cost budget 4. cash budget 5. capital budget 6. master budget CCCMPS
The seven "deadly sins" of performance measurements to avoid
1. vanity 2. provincialism 3. narcissism 4. laziness 5. pettiness 6. inanity 7. frivolity
What is a network organization?
A collection of independent, mostly single-function firms that collaborate on a good or service
What is a development project?
A focused organizational effort to create a new product or process via technological advances
What is after action review?
A frank and openminded discussion of four basic questions aimed at continuous improvement
What is debt-equity ratio?
A leverage ratio that indicates the company's ability to meet its long-term financial obligations
What is the current ratio?
A liquidity ratio that indicates the extent to which short-term assets can decline and still be adequate to pay short-term liabilities
What is principle of exception?
A managerial principle stating that control is enhanced by concentrating on the exceptions to or significant deviations from the expected result or standard
What is activity-based costing (ABC)?
A method of cost accounting designed to identify streams of activity and then to allocate costs across particular business processes according to the amount of time employees devote to particular activities
What is six stigma quality?
A method of systematically analyzing work processes to identify and eliminate virtually all causes of defects, standardizing the processes to reach the lowest practicable level of any cause of customer dissatisfaction Defective-free performance fever than 3.4 defects per million 99.99966% accuracy lowers production cost and increases customer satisfaction
What is an internal audit?
A periodic assessment of a company's own planning, organizing, leading, and controlling processes
What is a broker?
A person who assembles and coordinates participants in a network
What is specialization?
A process in which different individuals and units perform different tasks
What is return of investment(ROI)?
A ratio of profit to capital used, or a rate of return from capital
What is a balance sheet?
A report that shows the financial picture of a company at a given time and itemizes assets, liabilities, and stockholders' equity
What is a sociotechnical Systems?
An approach to job design that attempts to redesign tasks to optimize operation of a new technology while preserving employees' interpersonal relationships and other human aspects of the work
What is differentiation?
An aspect of the organization's internal environment created by job specialization and the division of labor
What is an external audit?
An evaluation conducted by one organization, such as a CPA firm, on another
What is a management audit?
An evaluation of the effectiveness and efficiency of various systems within an organization
What is a profit and loss statement?
An itemized financial statement of the income and expenses of a company's operations
What is a matrix organization?
An organization composed of dual reporting relationships in which some employees report to two superiors—a functional manager and a divisional manage
What is a centralized organization?
An organization in which high-level executives make most decisions and pass them down to lower levels for implementation
What is a decentralized organization?
An organization in which lower-level managers make important decisions
What is a balanced scorecard?
Control system combining four sets of performance measures: financial, customer, business process, and learning and growth A combination of four sets of performance measures: 1. financial 2. customer satisfaction 3. business processes (quality and efficiency) 4. learning and growth
What is feedback control?
Control that focuses on the use of information about previous results to correct deviations from the acceptable standard
What is a functional organization?
Departmentalization around specialized activities such as production, marketing, and human resources
What is divisional organization?
Departmentalization that groups units around products, customers, or geographic regions
What is standardization?
Establishing common routines and procedures that apply uniformly to everyone
What is a standard?
Expected performance for a given goal: a target that establishes a desired performance level, motivates performance, and serves as a benchmark against which actual performance is assessed
What is management myopia?
Focusing on short-term earnings and profits at the expense of longer-term strategic obligations
What is coordination by plan?
Interdependent units are required to meet deadlines and objectives that contribute to a common goal
What is market control?
Involves the use of economic forces and the pricing mechanisms that accompany them to regulate performance. As a market for these transactions becomes establishes, two effects occur: 1. price becomes an indicator of the value of the good or service 2. price competition has the effect of controlling productivity and performance
What is transfer price?
Price charged by one unit for a good or service provided to another unit within the organization
What are accounting audits?
Procedures used to verify accounting reports and statements
What are the three bottom lines (triple bottom line)?
Profit, planet, and people.
What is departmentalization?
Subdividing an organization into smaller subunits
What are subunits?
Subdivisions of an organization
What is a dynamic network?
Temporary arrangements among partners that can be assembled and reassembled to adapt to the environment
What is stockholder's equity?
The amount accruing to the corporation's owners Assets = Liabilities + Stockholders' equity
What are liabilities?
The amounts a corporation owes to various creditors.
What is responsibility?
The assignment of a task that an employee is supposed to carry out
What is division of labor?
The assignment of different tasks to different people or groups
What is delegation?
The assignment of new or additional responsibilities to a subordinate
What is a hierarchy?
The authority levels of the organizational pyramid
What is feedforward control?
The control process used before operations begin, including policies, procedures, and rules designed to ensure that planned activities are carried out properly
What is concurrent control?
The control process used while plans are being carried out, including directing, monitoring, and fine-tuning activities as they are performed
What is integration?
The degree to which differentiated work units work together and coordinate their efforts
What is accountability?
The expectation that employees will perform a job, take corrective action when necessary, and report upward on the status and quality of their performance
What is span of control?
The number of subordinates who report directly to an executive or supervisor
What is formalization?
The presence of rules and regulations governing how people in the organization interact
What is coordination?
The procedures that link the various parts of an organization for the purpose of achieving the organization's overall mission
What is budgeting?
The process of investigating what is being done and comparing the results with the corresponding budget data to verify accomplishments or remedy differences; also called budgetary controlling
What is corporate governance?
The role of a corporation's executive staff and board of directors in ensuring that the firm's activities meet the goals of the firm's stakeholders
What are assets?
The values of the various items the corporation owns
What is coordination by mutual adjustment?
Units interact with one another to make accommodations to achieve flexible coordination
What are line departments?
Units that deal directly with the organization's primary goods and services
What are staff departments?
Units that support line departments
What is the unity of command principle?
a structure in which each worker reports to one boss, who in turn reports to one boss
What is authority?
the legitimate right to make decisions and to tell other people what to do
