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26 Apr 2012

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MGTA03 CHAPTER 8 11/24/2011 8:18:00 AM
All businesses have common structural and operating components; how
these components look and fit together varies from company to company.
Organizational structure: the specification of the jobs to be done
within a business and how those jobs relate to one another
Every company must develop the most appropriate structure for its
own unique situation
Organization chart: a 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 in a firm
When this is unclear, many problems can result
The first step in developing the structure of any business is two-fold:
1. Specialization: determining who will do what
2. Departmentalization: determining how people performing certain tasks
can best be grouped together
In a very small organization, the owner may perform every job
Job specialization: the process of identifying the specific jobs that
need to be done and designating the people who will perform them
o Natural part of organizational growth; neither a new idea nor
limited to factory work
o Has advantages: individual jobs can be performed more
efficiently, the jobs are easier to learn, it is easier to replace
people who leave the organization
o Disadvantages: if it is carried too far and jobs become too
narrowly defined, people get bored, derive less satisfaction
from their jobs, and often lose sight of how their contributions
fit into the overall organization
Departmentalization: the process of grouping jobs into logical units
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Departmentalized companies benefit from division of activities;
control and coordination are narrowed and made easier, and top
managers can see more easily how various units are performing
Allows firms to treat a department as a profit centre
Profit centre: a separate company unit responsible for its own
costs and profits
Jobs are grouped according to some common thread or purpose
In general, departmentalization may occur along functional,
customer, product, geographic, or process lines
Managers must explicitly define reporting relationships among
positions so everyone will know who has responsibility for various
decisions and operations
The goal: figure out how to structure the organizational framework
so everyone works together to achieve common goals
Development of the hierarchy: three-step process:
1. Assigning tasks: determining who can make decisions and
specifying how they should be made
2. Performing tasks: implementing decisions that have been made
3. Distributing authority: determining whether the organization is
to be centralized or decentralized
E.g. McDonalds has always been highly centralized, but has laid off
workers at its national office and established five regional offices
throughout the U.S.
Responsibility: the duty to perform an assigned task
Authority: the power to make the decisions necessary to complete
a task
E.g. a mid-level buyer for the Bay encounters an opportunity for a
large purchase at a good price, but lacks the authority to authorize
the purchase; the company’s policies on delegation and authority
are inconsistent
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Accountability: liability of subordinates for accomplishing tasks assigned by
Delegation: assignment of a task, a responsibility, or authority by a
manager to a subordinate
Subordinates may not be able to complete a task because their
manager has not delegated sufficient authority to them; dilemma:
can’t do with the boss wants, but will still be held accountable
Effective managers surround themselves with a team of strong
subordinates, and then delegate sufficient authority to those
subordinates to get the job done
Four things to keep in mind when delegating:
1. Decide on the nature of the work to be done
2. Match the job with the skills of the subordinates
3. Make sure the person chosen understands the objectives he or
she is supposed to achieve
4. Make sure subordinates have the time and training necessary to
do the task
Four indicators that managers (particular small businesses) are
having trouble delegating effectively:
1. The feeling that employees can never do anything as well as
they can
2. The fear that something will go wrong if someone else takes
over a job
3. The lack of time for long-range planning because they are
bogged down in day-to-day operations
4. The sense of being in the dark about industry trends and
competitive products because of the time they devote to day-to-day
Small business owners need to own up to the fact that they can’t
run everything on their own anymore
4 reasons why managers don’t delegate as much or as well as they
1. The fear that subordinates don’t really know how to do the job
2. The fear that a subordinate might “show the manager up” in
front of others by doing a superb job
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