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University of Toronto Scarborough
Management (MGT)
Zachariah Campbell

CHAPTER 8: Organizing the Business Enterprise What Is Organizational Structure?: - All businesses have common structural & operating components, each with a specific purpose - Each has to fill own purpose & fit in w/ others - Organizational structure: the specification of the jobs to be done within a business & how those jobs relate to one another The Chain of Command - Organization charts: a physical depiction of the company’s structure showing employee titles & their relationship to one another; solid lines are chain of command, each box represents a job within the company - Chain of Command: reporting relationships within a business; the flow of decision making power in a firm; not clear & can cause many problems The Buildstg Blocks Of Organizational Structure: - 1 step in developing structure of any business = building blocks: o Specialization: determining who will do what o Departmentalization: determining how people performing certain tasks can be best grouped together Specialization - Job specialization: the process of identifying the specific jobs that need to be done & designating the people who will do & perform them - All organizations have one major “job” but need many people to complete this job (ex. making a shirt) - In a small organization, the owner can do all jobs - As firms grow, so does the need to specialize jobs so that other can perform them (ex. Debbi Fields & Mrs. Fields Cookies) - Advantages: individ jobs performed better, jobs easier to learn, easier to replace people who leave - Disadvantages: too much specialization makes things boring and people want to leave, people lose sight of how their contributions fit in overall organization Departmentalization - Departmentalization: the process of grouping jobs into logical units - Companies that use it benefit from division of activities - Managers can see easily how different units are performing - Profit centre: a separate company unit responsible for its own costs & profits - Departmentalization can occur along: functional, product, geographic, process lines or any combo of them Establishing The Decision-Making Hierarchy: - After jobs specialized & grouped into depts, need to organize decision=making - Managers must explicitly define reporting relationships among positions - Goal is to figure out how to structure & stabilize organizational framework so everyone works together to achieve common goals - Development of hierarchy comes from 3 step process: o Assigning tasks: determining who can make decisions & specifying how they should be made – responsibility & authority o Performing tasks: implementing decisions that have been made – delegation & accountability o Distributing authority: determining whether the organization is to be centralized or decentralized Assigning Tasks - Who supposed to do what - Individuals must work out agreements about responsibilities & authority - Responsibility: the duty to perform an assigned task - Authority: the power to make the decisions necessary to complete a task - People see an opportunity to do something but don’t have enough authority to do it – uh oh! Performing Tasks: - Trouble happens when there aren’t distinguished levels of responsibility & authority between managers & subordinates - Issues = delegation & accountability - Delegation: assignment of a task, a responsibility, or authority by a manger to a subordinate - Accountability: liability of subordinates for accomplishing tasks assigned by managers - If subordinate doesn’t do task well/quickly, they can be punished - People can be given responsibility to do something from an upper hand (they become the subordinate of that person) but don’t have enough authority to do it = dilemma - 4 things to keep in mind when delegating: o Decide on nature of work to be done o Match job w/ skills of subordinates o Make sure person chosen knows what they have to do o Make sure subordinates have time & training to do task - Mangers in small businesses have trouble delegating effectively because: o Feeling employees can’t do things as well as they can o Fear something will go wrong if someone else does job o Lack of time for long range planning because they are so focused on day-to-day operations o Sense of being in dark about industry trends and competitive products because of time they devote to day-to-day operations - Mangers in large business have trouble delegating because: o Scared that subordinates don’t really know how to job o Fear subordinate might “show manager up” (actually, looks very good on the manager) o Desire to keep as much control as possible over how things are done o Lack of ability to effectively delegate to others (should be trained) Distributing Authority: - Centralized organizations: top managers retain most decision making rights for themselves - Decentralized organizations: lower and middle-level managers are allowed to make signification decisions; makes company more responsive to environment by breaking company into more manageable units & giving units more autonomy o Determining optimum level of decentralization – read page 117, on General Motors  they were decentralized, it became too expensive and difficult to keep up with different cars being made at different places, so they had to recentralize in order to reduce costs; Home Depot example - Flat organizational structure: an organization with relatively few layers of management, decentralized firms have flat structure (ex. law firm + associates) - Tall organizational structure: an organization with many layers of management, centralized firms have tall structure, lots of delays in info flow since it needs to get through so many people (ex. military) - *too few layers can create chaos & inefficiency, too many layers can create rigidity & bureaucracy - Span of control: the number of people managed by one manager o In flat – span of control = wide o In tall – span of control = narrow o Employee’s abilities & s
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