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MGTA03-Ch.8.docx

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Management (MGT)
Course Code
MGTA01H3
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What is organizational structure
Each component of a business must fulfill its own purpose while
simultaneiously fitting in with the others
Organizational structurethe specification of the jobs to be done within
a business and how these jobs relate to one another
The chain of command
Organization chartsa physical depiction of the company’s structure
showing employee titles and their relationship to one another
Chain of commandreporting relationships within a business; the flow
of decision making power in a firm
When the chain of command is not clear many different kinds of
problems can result
The building blocks of organization structure
The first step in developing the structure of any business is twofold
Specializationdetermining who will do what
Departmentalizationdetermining how people performing certain tasks
can best be grouped together
Specialization
Job specializationthe process of identifying the specific jobs that need
to be done and designating the people who will perform them
All organizations have only one major “job” and that is to make a profit
from the good or service they are sellingbut that gets broken down into smaller
components
Each component is assigned to an individual
Specialization and growth
In a very small organization, the owner may perform every job, but
as it grows, so will the need to specialize jobs so that others can perform them
Job specialization is a natural part of organizational growth
Job specialization has certain advantagesindividual jobs can be
performed more efficiently, jobs are easier to learn, easier to replace people who
leave the organization
If job specialization is carried too far and jobs become 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
Departmentalizationthe process of grouping jobs into logical units
Control and coordination are narrowed and made easier, and top managers
can see more easily how various units are performing
Departmentalization allows the firm to treat a department as a profit
centera separate company unit responsible for its own costs and profits
Jobs are grouped logically, according to some common thread or purpose
In general departmentalization may occur along functional, customer,
product, geographic or process lines
Establishing the decision making hierarchy
Establishing the decisions making hierarchy is preceded by job
specialization and departmentalization
So managers must explicitly define reporting relationships among
positions so that everyone will know who has responsibility for various decisions and
operations
The goal is to figure out how to structure and stabilize the organizational
framework so that everyone works together to achieve common goals
The development of the decision making hierarchy generally results from
a three step process
Assigning tasksdetermining who can make decisions and
specifying how they should be made
Performing tasksimplementing decisions that have been made
Distributing authoritydetermining whether the organization is to
be centralized or decentralized
Assigning tasks
In a company with more than one person, individuals must work
out agreements about responsibilities and authority
Responsibilitythe duty to perform an assigned task
Authoritythe power to make decisions necessary to complete a
task
Performing tasks
Trouble occurs when appropriate levels of responsibility and
authority are not clearly spelled out in the working relationship between managers
and subordinates
Delegationassignment of a task, a responsibility or authority by
a manager to a subordinate
Accountabilityliability of subordinates for accomplishing tasks
assigned by managers
Fear of delegatingmany managers have trouble delegating tasks to
others
Then subordinates are not able to complete a task because it was
not sufficiently delegated by the manager
So they have a dilemma—they can’t do what the boss demands but
that boss will probably still hold them accountable
But 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
Decide on the nature of the work to be done
Match the job with the skills of subordinates
Make sure the person chosen understands the objectives
they are supposed to achieve
Make sure subordinates have the time and training
necessary to do the task

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Description
What is organizational structure • Each component of a business must fulfill its own purpose while simultaneiously fitting in with the others • Organizational structure—the specification of the jobs to be done within a business and how these jobs relate to one another The chain of command • Organization charts—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 the chain of command is not clear many different kinds of problems can result The building blocks of organization structure • The first step in developing the structure of any business is twofold • Specialization—determining who will do what • Departmentalization—determining how people performing certain tasks can best be grouped together Specialization • Job specialization—the process of identifying the specific jobs that need to be done and designating the people who will perform them • All organizations have only one major “job” and that is to make a profit from the good or service they are selling—but that gets broken down into smaller components • Each component is assigned to an individual • Specialization and growth— • In a very small organization, the owner may perform every job, but as it grows, so will the need to specialize jobs so that others can perform them • Job specialization is a natural part of organizational growth • Job specialization has certain advantages—individual jobs can be performed more efficiently, jobs are easier to learn, easier to replace people who leave the organization • If job specialization is carried too far and jobs become 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 • Departmentalization—the process of grouping jobs into logical units • Control and coordination are narrowed and made easier, and top managers can see more easily how various units are performing • Departmentalization allows the firm to treat a department as a profit center—a separate company unit responsible for its own costs and profits • Jobs are grouped logically, according to some common thread or purpose • In general departmentalization may occur along functional, customer, product, geographic or process lines Establishing the decision making hierarchy • Establishing the decisions making hierarchy is preceded by job specialization and departmentalization • So managers must explicitly define reporting relationships among positions so that everyone will know who has responsibility for various decisions and operations • The goal is to figure out how to structure and stabilize the organizational framework so that everyone works together to achieve common goals • The development of the decision making hierarchy generally results from a three step process • Assigning tasks—determining who can make decisions and specifying how they should be made • Performing tasks—implementing decisions that have been made • Distributing authority—determining whether the organization is to be centralized or decentralized • Assigning tasks • In a company with more than one person, individuals must work out agreements about responsibilities and authority • Responsibility—the duty to perform an assigned task • Authority—the power to make decisions necessary to complete a task • Performing tasks • Trouble occurs when appropriate levels of responsibility and authority are not clearly spelled out in the working relationship between managers and subordinates • Delegation—assignment of a task, a responsibility or authority by a manager to a subordinate • Accountability—liability of subordinates for accomplishing tasks assigned by managers • Fear of delegating—many managers have trouble delegating tasks to others • Then subordinates are not able to complete a task because it was not sufficiently delegated by the manager • So they have a dilemma—they can’t do what the boss demands but that boss will probably still hold them accountable • But 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 • Decide on the nature of the work to be done • Match the job with the skills of subordinates • Make sure the person chosen understands the objectives they are supposed to achieve • Make sure subordinates have the time and training necessary to do the task • Experts pinpoint certain indicators that managers are having trouble delegating effectively • The feeling that employees can never do anything as well as they can • The fear that something will go wrong is someone else takes over a job • The lack of time for long range planning because they are bogged down in day-to-day operations • The sense of being in the dark about industry trends and competitive products because of the time they devote to day to day operations • To overcome these tendencies, small business ownders must admit that they can never go back to running all aspects of the business and that they can in fact prosper—if they learn to let go and trust their employees • Some managers in big companies also don’t delegate as much or as well for a number of reasons • They fear that the subordinates don’t really know how to do the job • They fear that a subordinate might “show the manager up” in front of others by doing a superb job • The desire to keep as much control as possible over how things are done • A simple lack of ability to as to how to effectively delegate to others • The managers needs to recognize that they can’t do the job by themselves • If subordinates can’t do the job, they need to be trained • Mangers should recognize that if a subordinate performs well it reflects favourable on that employee’s manager • A manager who doesn’ tknow how to delegate migh need specialized training in how to divide up and assign tasks to othersDistributing authority • Delegation involves a specific relationship between managers and subordinates • Most businesses must also make decisions about general patterns of authority throughout the company • Centralized organizations—top mangers retain most decision making rights for themselves and top management must approve most lower level decisions before they can be implemented—eg. McDonalds • Decentralized organizations—lower and middle level managers are allowed to make significant decisions • The purpose of decentralization is to make a company more responsive to its environment by breaking the company into more manageable units and giving those units more autonomy • Reducing top heavy bureaucracies is also a common goal of decentralizations • Determining the optimum level of decentralization—can be difficult sometimes—you want to give managers autonomy, but not so much that each department/division is new competition and costing the company Tall and flat organizations • Flat organizational structure—an organization with relatively few layers of management—usually occurs when firms are dec
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