Chapter 7 Notes v2.docx

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Department
Business Administration
Course
BUS 100
Professor
Kim Milnes
Semester
Fall

Description
Thomas Davies Bus 100 Chapter 7 – Organizing the Business Enterprise What is Organizational Structure 1) Organizational Structure = the specification of the jobs to be done within a business and how those jobs relate to one another a) Each component has specific purpose, but cannot isolate – all must work together b) Method of integration dependant on the company, each must find own success formula Determinants of Organization Structure 1) Organization’s purpose, mission, strategy all affect structure 2) Rarely fixed for long period of time a) May change due to external enviro. (2008 crash), new goals, etc. b) Technology – eliminate jobs, create new jobs 3) The Chain of Command a) Organizational chart = physical depiction of the company’s structure showing employee titles and their relationship to one another  Chain of command = reporting relationships within a business; the flow of decision making power Specialization 1) Job specialization = process of identifying specific jobs and designating the people responsible 2) Specialization and Growth a) Larger the firm = more specialization (more jobs, not enough time) b) Natural part of organizational growth c) Fine line between highly specialized and over specialized (= bored employees)  Advantages: more efficient, jobs easier to lean, easier to replace people  Disadvantages: narrow jobs, boredom, loss of overall organizational picture 3) Departmentalization a) The process of grouping jobs into logical units  Allows top managers to better assess sectional performance  Each department acts as profit centre (separate company responsible for own costs/profits) b) Departmentalization focuses on 1(or more) of: functional, customer, product, process, geographic  Functional departmentalization (1) According to functions of activities (2) Ex. Production dept., Sales dept., Accounting/Finance dept., etc. (3) Pros: Focuses on key activities, prevents duplication of work, simple structure (4) Cons: conflicts between depts., lack of overall picture, slow decision making  Customer Departmentalization (1) According to types of customers likely to buy given product (2) Ex. Men’s Clothing, Women’s Clothing, Kids, etc.  Product Departmentalization (1) According to the products being created or sold 1 Thomas Davies Bus 100 (2) Ex. (bank) Consumer Loans, Commercial Loans, Personal Banking  Process Departmentalization (1) According to the production process being used to create the product/service  Geographic Departmentalization (1) According to the area of the country/world supplied (2) Ex. NA, Euro, China, Japan, Rest of World  Larger companies often departmentalize at multiple levels Establishing the Decision-Making Hierarchy 1) Assigning Tasks a) Responsibility = duty to perform assigned task b) Authority = power to make decision necessary to complete a task c) Must be consistent/logical  Ex. Purchaser for Bay responsible for purchasing next season’s line must also have authority to make said purchase 2) Performing Tasks a) Delegation = assignment of a task/responsibility/authority by manager to subordinate b) Accountability = liability of subordinates for accomplishing tasks assigned by managers c) Importance of delegation:  Need time to do long-range planning, remain up-to-date with trends and competition d) People don’t delegate because:  Believe subordinates cannot do job as well  Fear subordinates will “show them up”  Desire to control everything e) However, managers need to have effective subordinates (effective + reflects well on manager) f) Considerations for delegating  Decide on the nature of the work to be done  Match the job with the skills of subordinates  Make sure the person understands the objective they are supposed to achieve  Make sure subordinate had time/training necessary to complete task g) Distributing Authority  Centralized authority = top managers retain most decision-making rights (1) Ex. McDonalds uses this to maintain standards (2) All restaurants must follow precise buying/making/packaging standards  Decentralized authority = lower- and middle- level managers allowed to make significant decisions (1) Goal: make company more response to local enviro. (2) Challenging/improving practices rewarded h) Span of control  Number of people managed by one manager  Dependant on manager/employee skills, jobs performed, how re
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