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Chapter 8 Lecture

Management (MGT)
Course Code
Ingrid L.Stefanovic

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Chapter 8 .ppt / 01
Laurence, Hugh
MGTA03, Lec. 03
Organizing the Business
o How is business organized to produce goods and services and sell them
o Organizational structure
o Specification of the jobs to be done
o How those jobs relate to one another
o Organization often represented on organization charts
o Each box is a job in the business
o The boxes are joined to show the chain of command ± who reports to
o These charts are ideal representations of the way things are SUPPOSED to
o Business organization is built on
o Specialization
Determining who will perform specific tasks
Each job has ONLY certain tasks
Tasks are assigned to those skilled in performing them
o Departmentalization
Determining how to group specialists
o Specialization
o Division of labour
o Break the various jobs into components
o Each component performed by a specialist who is most efficient in that
o Hire specialists most efficiently to carry out the various components
o Hiring most efficiently
Does not mean one person for each component
You need only enough people to carry out those component that
must be done at the same time
If one person does step 1, and someone else step 2, and no more
step 1 operations are required until step 3 is complete, the step 1
specialists can also do step 3, then return to the next round of step
o As the business grows, there is more specialization
One person cannot handle al the steps
There is more demand for each step, so one person specializes in a
step and hands over the other steps to someone else
o Growth
In small businesses, the manager manages and does the accounting
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Chapter 8 .ppt / 02
But eventually, the manager hires an accountant as the task
becomes too time consuming
o Tasks are divided into components according to skill
Hire for the specific skill
x Cutting the grapes
x Crushing the grapes
x Making the wine
x Selling the wine
o Advantages
Jobs performed more efficiently
Jobs are easier to learn when broken down
Easier to replace employees who leave, as they do not take unique
skills with them
o Disadvantages
Employees become bored and indifferent when you treat them like
Employees derive no satisfaction from the job, bring nothing to it
and have no loyalty
Employees lose sight of missions and strategy
o Yet we find specialization in
Arts ± symphony orchestra players
Sports ± the position players in all team sports
Crafts ± people specialize in certain craft skills
Intellectual pursuits
o So boredom is not necessary result of specialization
o And neither is loss of satisfaction with the task
o Loss of focus on larger objectives, however, may be a problem inherent in
o Departmentalization
o Once jobs are specialized, you group the specialist into logical units
o This group is called departmentalization
Control and coordination are easier
Each department can become a profit centre, which may mean
better performance through competition
o Groupings are logical
Customers ± those who service specific customers, groups or types
of customers
Products or services provided
Processes for making products or providing services
Locations in different areas
Functions ± accounting, human relations, sales, inventory
o The Decision ± Making Hierarchy
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