Fundamentals of Organizing

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Business & Mgmt

Published on March 5, 2009

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Fundamentals of Organizing

FUNDAMENTALS OF ORGANIZING MANAGEMENT 6 th Ed. By: Richard Daft Prepared by: GREGAR DONAVEN E. VALDEHUEZA, MBA Lourdes College Instructor

LEARNING OBJECTIVES Discuss the fundamental characteristics of organizing, including such concepts as work specialization, chain of command, line and staff, and span of management. Explain when specific structural characteristics such as centralization and formalization should be used within organizations. Describe the functional approach to structure. Describe the divisional approach to structure. Explain the matrix approach to structure and its application to both domestic and international organizations. Explain the contemporary team and network structures and why they are being adopted by organizations. Discuss the advantages and disadvantages of the new virtual approach to organizing.

Discuss the fundamental characteristics of organizing, including such concepts as work specialization, chain of command, line and staff, and span of management.

Explain when specific structural characteristics such as centralization and formalization should be used within organizations.

Describe the functional approach to structure.

Describe the divisional approach to structure.

Explain the matrix approach to structure and its application to both domestic and international organizations.

Explain the contemporary team and network structures and why they are being adopted by organizations.

Discuss the advantages and disadvantages of the new virtual approach to organizing.

organizing - the deployment of organizational resources to achieve strategic goals. Strategy defines what to do; Organizing defines how to do it.

- the deployment of organizational resources to achieve strategic goals.

Organization structure is a tool that managers use to harness (control) resources for getting things done.

Organization structure is a tool that managers use to harness (control) resources for getting things done.

organization structure the set of formal tasks assigned to individuals and departments; formal reporting relationships, including lines of authority, decision responsibility, number of hierarchical levels, and span of manager’s control; The design of systems to ensure effective coordination of employees across departments.

the set of formal tasks assigned to individuals and departments;

formal reporting relationships, including lines of authority, decision responsibility, number of hierarchical levels, and span of manager’s control;

The design of systems to ensure effective coordination of employees across departments.

organizational chart - The visual representation of an organization’s structure.

- The visual representation of an organization’s structure.

Chief Accountant Financial Analyst Information Center Vice President Accounting Industrial Relation Manager Benefits Administrator Bottling Supervisor Bottling Plant Super-intendent Quality Control Manager Maintenance Supervisor Western Sales Midstate Sales Mountain Region Sales Director Human Resources Vice President Production Director Marketing President Accounts Payable Payroll Clerk

work specialization the degree to which organizational tasks are subdivided into individual jobs; also called division of labor . When work specialization is extensive, employees specialize in a single task. Jobs tend to be small, but they can be performed efficiently.

the degree to which organizational tasks are subdivided into individual jobs; also called division of labor .

chain of command an unbroken line of authority that links all individuals in the organization and specifies who reports to whom. Unity of command means that each employee is held accountable to only one supervisor. Scalar principle refers to a clearly defined line of authority in the organization that includes all employees.

an unbroken line of authority that links all individuals in the organization and specifies who reports to whom.

Chief Accountant Financial Analyst Information Center Vice President Accounting Industrial Relation Manager Benefits Administrator Bottling Supervisor Bottling Plant Super-intendent Quality Control Manager Maintenance Supervisor Western Sales Midstate Sales Mountain Region Sales Director Human Resources Vice President Production Director Marketing President Accounts Payable Payroll Clerk

authority the formal and legitimate right of a manager to make decisions, issues orders, and allocate resources to achieve organizationally desired outcomes.

the formal and legitimate right of a manager to make decisions, issues orders, and allocate resources to achieve organizationally desired outcomes.

characteristics of authority Authority is vested in organizational positions, not people. Authority is accepted by subordinates. Acceptance theory of authority argues that a manager has authority only if subordinates choose to accept his/her commands. Authority flows down the vertical hierarchy.

Authority is vested in organizational positions, not people.

Authority is accepted by subordinates.

Acceptance theory of authority argues that a manager has authority only if subordinates choose to accept his/her commands.

Authority flows down the vertical hierarchy.

responsibility The duty to perform the task or activity an employee has been assigned.

The duty to perform the task or activity an employee has been assigned.

accountability The fact that the people with authority and responsibility are subject to reporting and justifying task outcomes to those above them in the chain of command.

The fact that the people with authority and responsibility are subject to reporting and justifying task outcomes to those above them in the chain of command.

Chief Accountant Financial Analyst Information Center Vice President Accounting Industrial Relation Manager Benefits Administrator Bottling Supervisor Bottling Plant Super-intendent Quality Control Manager Maintenance Supervisor Western Sales Midstate Sales Mountain Region Sales Director Human Resources Vice President Production Director Marketing President Accounts Payable Payroll Clerk

delegation The process managers use to transfer authority and responsibility to positions below them in the hierarchy.

The process managers use to transfer authority and responsibility to positions below them in the hierarchy.

Chief Accountant Financial Analyst Information Center Vice President Accounting Industrial Relation Manager Benefits Administrator Bottling Supervisor Bottling Plant Super-intendent Quality Control Manager Maintenance Supervisor Western Sales Midstate Sales Mountain Region Sales Director Human Resources Vice President Production Director Marketing President Accounts Payable Payroll Clerk

line and staff departments Line departments perform tasks that reflect the organization’s primary goal and mission Staff departments include all those that provide specialized skills in support of line departments.

Line departments perform tasks that reflect the organization’s primary goal and mission

Staff departments include all those that provide specialized skills in support of line departments.

Chief Accountant Financial Analyst Information Center Vice President Accounting Industrial Relation Manager Benefits Administrator Bottling Supervisor Bottling Plant Super-intendent Quality Control Manager Maintenance Supervisor Western Sales Midstate Sales Mountain Region Sales Director Human Resources Vice President Production Director Marketing President Accounts Payable Payroll Clerk

line and staff authority Line authority is a form of authority in which individuals in management positions have the formal power to direct and control immediate subordinates. Staff authority is a form of authority granted to staff specialists in their area of expertise.

Line authority is a form of authority in which individuals in management positions have the formal power to direct and control immediate subordinates.

Staff authority is a form of authority granted to staff specialists in their area of expertise.

span of management the number of employees reporting to a supervisor; also called span of control . types: Tall structure – a management structure characterized by an overall narrow span of management and a relatively large number of hierarchical levels. Flat structure – a management structure characterized by an overall broad span of control and relatively few hierarchical levels.

the number of employees reporting to a supervisor; also called span of control .

types:

Tall structure – a management structure characterized by an overall narrow span of management and a relatively large number of hierarchical levels.

Flat structure – a management structure characterized by an overall broad span of control and relatively few hierarchical levels.

tall structure flat structure President EVP EVP EVP EVP President Manager Manager

Factors associated with less supervisor involvement Work performed by subordinates is stable and routine. Subordinates perform similar work tasks. Subordinates are concentrated in a single location. Subordinates are highly trained and need little direction in performing tasks. Rules and procedures defining task activities are available. Support systems and personnel are available for the manager. Little time is required in nonsupervisory activities such as coordination with other departments or planning. Manager’s personal preferences and styles favor a large span.

Work performed by subordinates is stable and routine.

Subordinates perform similar work tasks.

Subordinates are concentrated in a single location.

Subordinates are highly trained and need little direction in performing tasks.

Rules and procedures defining task activities are available.

Support systems and personnel are available for the manager.

Little time is required in nonsupervisory activities such as coordination with other departments or planning.

Manager’s personal preferences and styles favor a large span.

centralization the location of decision authority near top organizational levels. decentralization the location of decision authority near lower organizational levels.

the location of decision authority near top organizational levels.

the location of decision authority near lower organizational levels.

factors typically influences centralization & decentralization Greater change and uncertainty in the environment are usually associated with decentralization. The amount of centralization or decentralization should fit the firm’s strategy. In times of crisis or risk of company failure, authority may be centralized at the top.

Greater change and uncertainty in the environment are usually associated with decentralization.

The amount of centralization or decentralization should fit the firm’s strategy.

In times of crisis or risk of company failure, authority may be centralized at the top.

formalization the written documentation used to direct and control employees. Includes rule books, policies, procedures, job descriptions, and regulations.

the written documentation used to direct and control employees.

DEPARTMENTALIZATION another fundamental characteristic of organization structure which refers to the basis on which individuals are grouped into departments and departments into the total organization.

another fundamental characteristic of organization structure which refers to the basis on which individuals are grouped into departments and departments into the total organization.

five approaches to structural design Vertical functional approach. People are grouped together in departments by common skills and work activities, such as in an engineering department and an accounting department. Divisional approach. Departments are grouped together into separate, self-contained divisions based on a common product, program, or geographical region. Diverse skills rather than similar skills are the basis of departmentalization.

Vertical functional approach. People are grouped together in departments by common skills and work activities, such as in an engineering department and an accounting department.

Divisional approach. Departments are grouped together into separate, self-contained divisions based on a common product, program, or geographical region. Diverse skills rather than similar skills are the basis of departmentalization.

vertical functional Manufacturing Accounting Human Resources

ADVANTAGES Efficient use of resources, economies of scale. In-depth skill specialization and development. Career progress within functional departments. Top manager direction and control. Excellent coordination within functions. High-quality technical problem solving DISADVANTAGES Poor communication across functional departments. Slow response to external changes, lagging innovation. Decisions concentrated at top of hierarchy, creating delay. Responsibility for problems is difficult to pinpoint. Limited view of organizational goals by employees. Limited general management training for employees.

ADVANTAGES

Efficient use of resources, economies of scale.

In-depth skill specialization and development.

Career progress within functional departments.

Top manager direction and control.

Excellent coordination within functions.

High-quality technical problem solving

DISADVANTAGES

Poor communication across functional departments.

Slow response to external changes, lagging innovation.

Decisions concentrated at top of hierarchy, creating delay.

Responsibility for problems is difficult to pinpoint.

Limited view of organizational goals by employees.

Limited general management training for employees.

Vertical functional approach. People are grouped together in departments by common skills and work activities, such as in an engineering department and an accounting department. Divisional approach. Departments are grouped together into separate, self-contained divisions based on a common product, program, or geographical region. Diverse skills rather than similar skills are the basis of departmentalization.

Vertical functional approach. People are grouped together in departments by common skills and work activities, such as in an engineering department and an accounting department.

Divisional approach. Departments are grouped together into separate, self-contained divisions based on a common product, program, or geographical region. Diverse skills rather than similar skills are the basis of departmentalization.

divisional Product Division 2 Human Resources Manufac-turing Accoun-ting Product Division 1 Manufac-turing Human Resources Accoun-ting

ADVANTAGES Fast response, flexibility in an unstable environment. Fosters concern for customers’ needs. Excellent coordination across functional department. Easy pinpointing of responsibility for product problems. Emphasis on overall product and division goals. Development of general management skills. DISADVANTAGES Duplication of resources across divisions. Less technical depth and specialization in divisions. Poor coordination across divisions. Less top management control. Competition for corporate resources.

ADVANTAGES

Fast response, flexibility in an unstable environment.

Fosters concern for customers’ needs.

Excellent coordination across functional department.

Easy pinpointing of responsibility for product problems.

Emphasis on overall product and division goals.

Development of general management skills.

DISADVANTAGES

Duplication of resources across divisions.

Less technical depth and specialization in divisions.

Poor coordination across divisions.

Less top management control.

Competition for corporate resources.

Matrix approach. Functional and divisional chains of command are implemented simultaneously and overlay one another in the same departments. Two chains of command exist, and some employees report to two bosses. Team-based approach. The organization creates a series of teams to accomplish specific tasks and to coordinate major departments. Teams can exist from the office of the president all the way down to the shop floor. Network approach. The organization becomes a small, central hub electronically connected to other organizations that perform vital functions. Departments are independent, contracting services to the central hub for a profit. Departments can be located anywhere in the world.

Matrix approach. Functional and divisional chains of command are implemented simultaneously and overlay one another in the same departments. Two chains of command exist, and some employees report to two bosses.

Team-based approach. The organization creates a series of teams to accomplish specific tasks and to coordinate major departments. Teams can exist from the office of the president all the way down to the shop floor.

Network approach. The organization becomes a small, central hub electronically connected to other organizations that perform vital functions. Departments are independent, contracting services to the central hub for a profit. Departments can be located anywhere in the world.

matrix Product Division 2 Product Division 1 Human Resources Manufacturing Accounting

ADVANTAGES More efficient use of resources than single hierarchy. Flexibility, adaptability to changing environment. Development of both general and specialist management skills. Interdisciplinary cooperation, expertise available to all divisions. Enlarged tasks for employees. DISADVANTAGES Frustration and confusion from dual chain of command. High conflict between two sides of matrix. Many meetings, more discussion than action. Human relations training needed. Power dominance by one side of matrix.

ADVANTAGES

More efficient use of resources than single hierarchy.

Flexibility, adaptability to changing environment.

Development of both general and specialist management skills.

Interdisciplinary cooperation, expertise available to all divisions.

Enlarged tasks for employees.

DISADVANTAGES

Frustration and confusion from dual chain of command.

High conflict between two sides of matrix.

Many meetings, more discussion than action.

Human relations training needed.

Power dominance by one side of matrix.

Matrix approach. Functional and divisional chains of command are implemented simultaneously and overlay one another in the same departments. Two chains of command exist, and some employees report to two bosses. Team-based approach. The organization creates a series of teams to accomplish specific tasks and to coordinate major departments. Teams can exist from the office of the president all the way down to the shop floor. Network approach. The organization becomes a small, central hub electronically connected to other organizations that perform vital functions. Departments are independent, contracting services to the central hub for a profit. Departments can be located anywhere in the world.

Matrix approach. Functional and divisional chains of command are implemented simultaneously and overlay one another in the same departments. Two chains of command exist, and some employees report to two bosses.

Team-based approach. The organization creates a series of teams to accomplish specific tasks and to coordinate major departments. Teams can exist from the office of the president all the way down to the shop floor.

Network approach. The organization becomes a small, central hub electronically connected to other organizations that perform vital functions. Departments are independent, contracting services to the central hub for a profit. Departments can be located anywhere in the world.

team-based

ADVANTAGES Some advantages of functional structure. Reduced barriers among departments, increased compromise. Less response time, quicker decisions. Better morale, enthusiasm from employee involvement. Reduced administrative overhead. DISADVANTAGES Dual loyalties and conflict Time and resources spent on meetings Unplanned decentralization

ADVANTAGES

Some advantages of functional structure.

Reduced barriers among departments, increased compromise.

Less response time, quicker decisions.

Better morale, enthusiasm from employee involvement.

Reduced administrative overhead.

DISADVANTAGES

Dual loyalties and conflict

Time and resources spent on meetings

Unplanned decentralization

Matrix approach. Functional and divisional chains of command are implemented simultaneously and overlay one another in the same departments. Two chains of command exist, and some employees report to two bosses. Team-based approach. The organization creates a series of teams to accomplish specific tasks and to coordinate major departments. Teams can exist from the office of the president all the way down to the shop floor. Network approach. The organization becomes a small, central hub electronically connected to other organizations that perform vital functions. Departments are independent, contracting services to the central hub for a profit. Departments can be located anywhere in the world.

Matrix approach. Functional and divisional chains of command are implemented simultaneously and overlay one another in the same departments. Two chains of command exist, and some employees report to two bosses.

Team-based approach. The organization creates a series of teams to accomplish specific tasks and to coordinate major departments. Teams can exist from the office of the president all the way down to the shop floor.

Network approach. The organization becomes a small, central hub electronically connected to other organizations that perform vital functions. Departments are independent, contracting services to the central hub for a profit. Departments can be located anywhere in the world.

network Central Hub Designer Human Resources Agency Marketer Manufacturer

ADVANTAGES Global competitiveness. Workforce flexibility/challenge. Reduced administrative overhead. DISADVANTAGES No hands-on control. Can lose organizational part. Employee loyalty weakened.

ADVANTAGES

Global competitiveness.

Workforce flexibility/challenge.

Reduced administrative overhead.

DISADVANTAGES

No hands-on control.

Can lose organizational part.

Employee loyalty weakened.

virtual an organization that has few full-time employees and temporarily hires outside specialists to work on specific opportunities, then disband when objectives are met.

an organization that has few full-time employees and temporarily hires outside specialists to work on specific opportunities, then disband when objectives are met.

ADVANTAGES Can draw on expertise worldwide. Highly flexible and responsive. Reduced overhead costs. DISADVANTAGES Lack of control, weak boundaries. Greater demands on managers. Communication difficulties and potential for misunderstanding.

ADVANTAGES

Can draw on expertise worldwide.

Highly flexible and responsive.

Reduced overhead costs.

DISADVANTAGES

Lack of control, weak boundaries.

Greater demands on managers.

Communication difficulties and potential for misunderstanding.

- END - Suggestions? Clarification? Questions? Violent Reactions? If none, then HAVE A NICE DAY! 

Suggestions?

Clarification?

Questions?

Violent Reactions?

If none, then

HAVE A NICE DAY! 

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