Organizing and Organization

Chapter Highlights and Glossary of Key Terms:

I. Business Organizations as Systems System - A self collection of interacting and independent components, working toward a common purpose. A. Characteristics of Organizational Systems Primary Tasks Defined duties that are necessary because of the nature of the systems products or services. Hierarchy of Systems The process whereby self-contained subsystems develop within a parent organization, such as a laboratory within a hospital. Open Systems Systems that interact with their environment by both receiving and delivering products and services. Equilibrium A state of stability within and between the system and its environment. Self-Regulation The feedback process by which the system monitors performance and provides information to its members.

Organizing and Organization

. B. Functions of Organizational Systems Input Mechanism The process through which needed resources are acquired and replaced. Transformation The internal process whereby resources received through the input channels are converted into the products and services produced by the organization. Output Mechanism The process of delivering the goods and services produced to the external environment. II. Structure of Organizations Formal Bureaucracy The officially sanctioned lines of authority assigned by the owners of the organization. Informal Groups Alliances that form outside the boundaries of the formal bureaucracy from the interaction and allegiance of people with common interests.

Organizing and Organization

A. Formal Organizational Structure 1. Design elements and factors 2. Design strategies and models a. Bureaucratic models b. Situational models B. Characteristics of Formal and Informal Groups 1. Leaders 2. Followers 3. Group goals 4. Shared opinions 5. Performance and commitment expectations 6. Sanctions C. Group Management and Coordination

Organizing and Organization

IV. Authority Authority The empowerment by formal job classification of an individual to make commitments and act on behalf of the organization. A. Responsibility B. Job-Related Authority C. Types and Roles of Authority Line Authority supervisory responsibility assigned through the formal delegation of authority. Staff Authority Influence exerted through the control of support services, such as the business office and personnel, which provide recommendations to the line manager and set institution-wide policies. Functional Authority The power to enforce directives, such as physicians medical orders, within the context and boundaries of a clearly defined specialty and span of control.

Organizing and Organization

D. Delegation of Authority Delegation The temporary assignment of the authority and responsibility to perform a duty normally perfromed by a supervisor. 1. Delegation routes 2. When to delegate 3. Fear of delegation V. Organization Charts Organization Chart The formal written presentation of the structural plan of the organization. A. Traditional Organization Chart Format B. Alternative Chart Format VI. Principles of Organizational Structure and Authority A. Departmentalization Departmentalization The grouping together of related activities to expedite the production process.

Organizing and Organization

Specialization The process of having an individual or group of people who are highly trained in a specific and limited area or task, with specialized work space and equipment, to effectively produce a product or service. B. Decentralization Decentralization The process of assigning the decision-making process to those who are actually permorming the work. C. Unity of Command Unity of Command The process of ensuring that each individual reports to only one supervisor. D. Scalar Principle Scalar Principle A linear system of authority providing a direct vertical link from the board of directors to the lowest-level worker. E. Span of Control Span of Control The theory that there is a definable limit to the number of people one person can effectively supervise, within the limits of specific work parameters and situations.

Organizing and Organization

F. Exception Principles Exception Principle The principle of referring for resolution by a superior only those things that cannot be solved by the employees at their own level.

Organizing
Process

a course of action, a route, a progression

an arrangement, a configuration, a construction

Structure

Organizing

The process of deploying resources to achieve strategic goals

The process of organizing takes place within a structure reflected by the way in which the organization

Divides its labor into departments and jobs Establishes formal lines of authority Establishes mechanisms for coordinating

diverse tasks

Organizing process leads to creation of an Organizational Structure

Formal tasks assigned

Formal reporting relationships

Systems design for coordination across

departments

Features of Organizational Structure

President
Vice President Vice President Vice President

Work Specialization

Also called division of Labor Specialists get good at a specific task Efficiency increases Employees are selected based on specific skills Training is geared toward increased efficiency. Based on a mechanistic organization

Chain of Command
An unbroken line of authority

Unity of Command-Everyone has only one

supervisor Scalar Principle-Everyone has at least one boss. Everyone is included

Authority
The formal rights of a

manager to manage Vested in the organizational position, not the person. Provides the manager with positional power Authority is accepted by the subordinates Authority flow from the top, down.

Responsibility
The duty to perform the task the employee has been

assigned.

Responsibility and Authority are delegated together

and make the employee accountable to superiors

Line and Staff Organizations

Line departments perform the organizations

primary tasks.

Production, marketing, sales

Staff Departments provide specialized skills in

support of line departments.

Engineering, Human Resources, Legal, Advise and council in areas of expertise

Span of Management (Control)

The number of employees reporting to a

supervisor. Size varies with the

type of organization, skill of the subordinates, Geographic dispersion Managerial skill and preference

Centralization
Decision making is done high in the

organization Tendency toward decentralization

Greater use of employee skills Less mechanistic Relieve burden on manager to do everything Decisions made closer to the action Decisions are make quicker

Factors influencing Decentralization

Amount of change and uncertainty in the environment

Corporate strategy and culture

Size and dispersion of the organization The risk of failure The greater the risk, the higher up the decisions are made.

Departmentalization or Structure

Functional Approach
Grouping of positions based on skills of functions.

General Manager Marketing Manufacturing Sales

Advantages and Disadvantages of Functional Organization Structures

Advantages

Efficient use of resources In depth skills Specialized career development Coordination within functions Excellent technical problems solving Disadvantages Poor communications across functions Slow response to external changes Requires high level coordination Limited general management training

Divisional Approach
Based on outputs e.g. products

Beverage Can Mfg. Corp. International Operations Trucking

Bottle Plant

Advantages and Disadvantages of Divisional Structure

Advantages

Customer oriented Faster response to varied environmental changes Coordination between functions within structure Easy to fix blame Emphasis on overall product and division goals Disadvantages Duplicate resources Less specialization within divisions Less top management control Competition for corporate resources

Matrix Organization

Two sets of bosses-functional and divisional.

Violates the chain of command, e.g. two bosses, not clear line of

authority. Attempts to lower the risks of functional and divisional structures Requires employee to manage two sets of bosses.

Team Structure
Delegate authority
Push decision making to the lowest level Gain commitment from workers
Marketing

Sales

Production

Engineering

Team Approach
Advantages Same as functional departments Reduces barriers among functions Lower response time Better morale and enthusiasm Less overhead Disadvantages Lots of meetings Dual loyalties

Network or Value Chain Management

Do what you do well, sub-contract everything else to those who do

better than you. Look for the best industry practices Management the value chain rather than the organization Advantages

Increased competitiveness Flexibility Reduced costs Requires a different kind of management Need to sell the concept Less control

Disadvantages