8/3/2019 Org Stucture
1/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
8-0
Bateman Snell
Management
5thEdition
Competingin theNew Era
8/3/2019 Org Stucture
2/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
8-1
Part ThreeOrganization Structure
Chapter OutlineFundamentals of Organizing
The Vertical StructureThe Horizontal StructureOrganizational IntegrationLooking Ahead
8/3/2019 Org Stucture
3/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
8-2
Learning Objectives
After studying Chapter 8, you will know:
how differentiation and integration influence your
organizations structure
how authority operates
the roles of the board of directors and the chief executive
officer
how span of control affects structure and managerial
effectivenesshow to delegate work effectively
the difference between centralized and decentralized
organizations
8/3/2019 Org Stucture
4/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
8-3
Learning Objectives (cont.)
After studying Chapter 8, you will know:
how to allocate jobs to work units
how to manage the unique challenges of the matrix
organization
the nature of important integrative mechanisms
8/3/2019 Org Stucture
5/33Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
8-4
Fundamentals Of Organizing
Organization chart
depicts the positions in the firm and how they are arranged
provides a picture of the reporting structure
Differentiation aspect of the organizations internal environment
division of labor - assignment of different tasks to different
people or groups
specialization - process in which different individuals and unitsperform different tasks
differentiation is high when there are many subunits and
many kinds of specialists who think differently
8/3/2019 Org Stucture
6/33Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
8-5
Fundamentals Of Organizing(cont.)
Integration
degree to which differentiated units work together and
coordinate their efforts
all the specialized tasks in an organization cannot be performed
completely independently
coordination - procedures that link the various parts of the
organization to achieve the organizations overall mission
any job activity that links different work units performs an
integrative function
the more a firm is differentiated, the greater the need for
integration among the units
8/3/2019 Org Stucture
7/33Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
8-6
Personnel Finance
Manufacturing Sales
Personnel Finance
Manufacturing Sales
Finance R&D Marketing Personnel
Chemical
Products
Metal
Products
President
Conventional Organization Chart
8/3/2019 Org Stucture
8/33Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
8-7
The Vertical Structure
Authority in organizations
authority - the legitimate right to make decisions and to tell
other people what to do
resides inpositions rather than people
in private business enterprises, owners have ultimate authority
traditionally authority has been the primary means of running an
organization
8 8
8/3/2019 Org Stucture
9/33Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
8-8
Authority in organizations (cont.)board of directors - elected by the stockholders to run the
organization
led by a chair
performs three functions selecting, assessing, rewarding, and perhaps replacing the CEO
determining the firms strategic direction and reviewing financial
performance
assuring ethical, socially responsible, and legal conduct
inside directors - the firms top managers who sit on the board
outside directors - are likely run other companies
successful boards tend to be active, critical participants in
determining company strategies
The Vertical Structure (cont.)
8 9
8/3/2019 Org Stucture
10/33Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
8-9
The Vertical Structure (cont.)
Authority in organizations (cont.)
chief executive officer(CEO) - occupies the top of the
organizational pyramid
authority officially vested in the board of directors is assigned to
the CEO
CEO personally responsible to the board and owners
top management team - typically comprised of the CEO,
president, chief operating officer, chief financial officer, and
other key executives
frequently meet with the CEO to make important decisions
8 10
8/3/2019 Org Stucture
11/33Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
8-10
The Vertical Structure (cont.)
Hierarchical levelshierarchy - the authority levels of the organizational pyramid
top management - strategic managers in charge of the entire
organization
middle management - in charge of plants or departmentslowest levels - made up of lower management and workers
called theoperational levelof the organization
trend in U.S. is to reduce the number of hierarchical layers
Span of control the number of subordinates who report directly to a manager
narrow spans produce tall organizations
wide spans produce flat organizations
8 11
8/3/2019 Org Stucture
12/33Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
8-11
Capability and
supportiveness
of manager
Similarity of jobs
and performance
measures
Ambiguity
of work
Optimal
Span of
Control
Subordinate
training andaccess to
information
Subordinate
preference for
autonomy
Factors Affecting The OptimalSpan Of Control
8 12
8/3/2019 Org Stucture
13/33Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
8-12
The Vertical Structure (cont.)
Delegation assignment of authority and responsibility to a subordinate
can occur between any two individuals in any type of
structure with regard to any task
responsibility - assignment of a task that an employee is
supposed to carry out
common for people to have more responsibility than authority
accountability - expectation that employees perform a job,
take corrective action when necessary, and report upward onthe status and quality of their performance
managers remain responsible and accountable for their own
actions and those of their subordinates
8-13
8/3/2019 Org Stucture
14/33Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
8-13
The Vertical Structure (cont.)
Delegation (cont.)
advantages of delegation
permits getting work done through others
manager saves time
manager frees herself/himself to devote energy to other
important, higher-level activities
provides subordinate with a more important job
from the organizations perspective, jobs are done more
efficiently and cost-effectively
8-14
8/3/2019 Org Stucture
15/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
8 14
Schedule checkpoints for
Reviewing progress
Follow through by discussing
Progress at appropriate intervals
Give the subordinate the authority, time, and resources
(people, money,equipment) to perform the assignment
Define the goal succinctly
Select the person for the task
Solicit the subordinates viewabout suggested approaches
Steps In Effective Delegation
8-15
8/3/2019 Org Stucture
16/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
8 15
The Vertical Structure (cont.)
Decentralization
result of the delegation of responsibility and authority
centralized organization - high-level executives make most
decisions and pass them down to lower levels for
implementation
decentralized organization - lower-level managers make
important decisions
most U.S. executives understand the importance of
decentralizing decision making
8-16
8/3/2019 Org Stucture
17/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
The Horizontal Structure
Basic concepts
departmentalization - subdividing the organization into
smaller subunits
line departments - have responsibility for the principle activities
of the firm
deal directly with the organizations primary goods and services
line managers typically have:
substantial authority and power
ultimate responsibility for major operating decisions accountability for bottom-line results
staff departments - provide specialized support for line units
moving toward role focused on strategic support and expert advice
8-17
8/3/2019 Org Stucture
18/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
The Horizontal Structure (cont.)
Functional organization
jobs (and departments) are specialized and grouped
according to business functions and the skills they require
e.g., production, marketing, R&D, human resources, and finance
at the most basic level, functional structure is organized
around the companys value chain
value chain - sequence of activities that flow from raw materials
to the delivery of a product or service
common in both large and small organizations
may be most appropriate in rather simple, stable
environments
8-18
8/3/2019 Org Stucture
19/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Functional organization (cont.)
advantages of functional structure include:
economies of scale can be realized
effective environmental monitoring
performance standards are better maintained
greater opportunity for specialized training and in-depth skill
development
technical specialists are relatively free of administrative work
decision making and lines of communication are simple and
clearly understood
The Horizontal Structure (cont.)
8-19
8/3/2019 Org Stucture
20/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
The Horizontal Structure (cont.)
Functional organization (cont.)disadvantages of functional structure
people may care more about their own function than about
company as a whole
may lose focus on overall product quality and customersatisfaction
managers do not develop knowledge of the other areas of the
business
become specialists, not generalists
conflicts arise among functions and communications suffer
accordingly
high differentiation may create barriers to coordination across
functions
8-20
G i V l Ch i A d
8/3/2019 Org Stucture
21/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Support activities
Primary activities
Generic Value Chain AndFunctional Structure
Service
Firm infrastructure
Human resource management
Technology developmentProcurement
Inbound
logistics
Operations Marketing
And sales
Outbound
logistics
8-21
8/3/2019 Org Stucture
22/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
ProcurementHuman
resources
Informationtechnology
services
Inbound
logisticsOperations
Outbound
logistics
Marketing
And salesService
President
Line departments
Staff departments
Functional Structure
8-22
8/3/2019 Org Stucture
23/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
The Horizontal Structure (cont.)
Divisional organizationunits grouped around products, customers, or geographic
regions
groups all functions into a single division
duplicates each function across all of the divisions
separate divisions may act almost as separate businesses
work autonomously to achieve the goals of the organization
several ways to create divisional structure
8-23
8/3/2019 Org Stucture
24/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Divisional organization (cont.)product divisions - all functions that contribute to a given
product are organized under one manager
advantages
information needs are managed more easily people have full-time commitment to a particular product line
task responsibilities are clear
people receive broader training
flexibility of structure better suits it for unstable environments
disadvantages
difficult to coordinate across product lines
managers may not acquire depth of functional knowledge
duplication of effort is expensive
The Horizontal Structure (cont.)
8-24
8/3/2019 Org Stucture
25/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Apparel Intimate Brands Support
Businesses
CEO (Les Wexner)
Victorias Secret
Bath & Body
Works
White Barn
Candle Co.
Lane Bryant
New York & Co.
Lerner New York
Express
Limited Stores
Structure
Express
Limited Stores
Design Services
Real Estate
Store Planning
Distribution
Services
Brand &Creative Services
Technology
Services
limitedthe
Product Divisions At The limited
8-25
8/3/2019 Org Stucture
26/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
The Horizontal Structure (cont.)
Divisional organization (cont.)customer and geographical divisions
build divisions around customer or geographical distinctions
advantages
can focus on customer needs
can provide faster and better service
disadvantage
duplication of activities across many customer groups and
geographic areas is expensive
8-26
8/3/2019 Org Stucture
27/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Generalmanagers for:
New York
Philadelphia
Boston
Generalmanagers for:
Cleveland
Chicago
St. Louis
Generalmanagers for:
Raleigh
Atlanta
Orlando
Generalmanagers for:
Seattle
San Francisco
Los Angeles
Generalmanagers for:
Dallas
Houston
Albuquerque
Northeast
regionalmanager
Midwest
regionalmanager
Southeast
regionalmanager
Pacific
regionalmanager
ChairmanCEO
Southwest
regionalmanager
Geographical Organization
8-27
8/3/2019 Org Stucture
28/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
The Horizontal Structure (cont.)
Matrix organizationhybrid form of organization
dual reporting relationships in which some managers report
to two superiors
one functional and one product
advantages
higher degree of flexibility and adaptability
disadvantages
violation of the unity of command principle
reporting to two superiors can create confusion
8-28
8/3/2019 Org Stucture
29/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Production
group
Two-boss
manager
Engineering
group
Two-boss
manager
Personnel
group
Two-boss
manager
Accounting
group
Two-boss
manager
Matrix Organizational Structure
Production
group
Two-boss
manager
Engineering
group
Two-boss
manager
Personnel
group
Two-boss
manager
Accounting
group
Two-boss
manager
Accounting
Project
Manager
A
Project
Manager
B
Project
managementProduction
Chairman
CEO
Engineering PersonnelFunctional
managers
8-29
8/3/2019 Org Stucture
30/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
The Horizontal Structure (cont.)
Matrix organization (cont.)matrix survival skills - depend on position in the matrix
the matrix diamond illustrates needed skills
matrix form today - resurgence based on:
pressures to consolidate costs and be faster to market
need for coordination across countries in global business
understanding of the matrix has increased
matrix is not a structure, but a process
relationships allow information to flow through theorganization
norms, values, and attitudes shape how people think
8-30
8/3/2019 Org Stucture
31/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Top ExecutiveNeeds to balance powerand emphasis between
functions and divisions
2-Boss Manager/EmployeeMust learn how to respond to two
Superiors and prioritize multiple
demands
Functional ManagerMust collaborate and
manage conflicts withproduct/division manager
Product ManagerMust collaborate and
manage conflicts withfunctional manager
The Matrix Diamond
8-31
8/3/2019 Org Stucture
32/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Organizational Integration
Coordination by standardizationstandardization - establishing common rules and procedures
that apply uniformly to everyone
constrains actions
integrates various units by regulating what people do
formalization - reliance on rules and regulations to promote
conformance
should apply to most (if not all) situations
most applicable in relatively stable and unchanging
circumstances
8-32
8/3/2019 Org Stucture
33/33
Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Organization Integration (cont.)
Coordination by plan interdependent units are required to meet deadlines and
objectives that contribute to a common goal
does not require a high degree of stability and routinization
units free to modify their actions as long as they are able to meet
deadlines and targets required for working with others
Coordination by mutual adjustment
involves feedback and discussion to jointly determine how to
approach problems and devise mutually agreeable solutions
allows for flexible coordination to deal with novel problems
costly from the standpoint of time