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Rotman Commerce
John Oesch

University of Toronto RSM100 Test 2 Study Package 2/16/2011 RSM Chapter 7 Summary Organizational Structure The specification of the jobs to be done within a business and how those jobs relate to one other. Organizational Chart Illustrates the companys structure and show employees where they fit into the firms operations. Chain of demand The reporting relationships within the company. The Building blocks of Organization Structure 1) Specialization The process of identifying the specific jobs that need to be done and designating the people who will perform them. Determining who will do what Advantage individual jobs can be performed more efficiently, the jobs are easier to learn, and it is easier to replace people who leave the organization. On the other hand, if job specialization is carried too far, jobs become too narrowly defined, people get bored, derive less satisfaction. 2) Departmentalization The process of grouping jobs into logical units. Determining how people performing certain tasks can best be grouped together. Profit center A separate company unit responsible for its own costs and profits. i.e by assessing profits from sales of mens clothing to decide whether to expand or curtail promotion in that area. Functional departmentalization Departmentalization according to functions or activities. i.e. production department, marketing and sales, human resource. Customer departmentalization Departmentalization according to the types of customers likely to buy a given product. i.e. classic music department, R&B department Product departmentalization Dividing an organization according to the specific product or service being created Geographic departmentalization According to the area of the country or world supplied. Process departmentalization According to the production process used to create a good or service. Establishing the Decision Making Hierarchy 1) Assigning tasks determining who can make decisions and specifying how they should be made. Authority: the power to make the decisions necessary to complete the task. Responsibility: the duty to perform an assigned task. 2) Performing tasks implementing decisions that have been made. 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. 3) Distributing authority determining whether the organization is to be centralized or decentralized. Centralized organization: Top managers retain most decision-making rights for themselves. Decentralized organization: lower-and middle-level managers are allowed to make significant decisions. Flat organization structure: an organization with relatively few layers of management. Tall organizational structure: an organization with many layers of management. Span of control: the number of people managed by one manager. Downsizing: the planned reduction in the scope of an organizations activity. It usually means cutting substantial numbers of managers and workers and reducing the number and variety of products. creating a flatter corporate structure. end up with larger spans of control 3 Forms of Authority 1) Line Authority Authority that flows up and down the chain of command. Line department: departments directly linked to the production and sales of specific products. (if any line department fail to complete its task, the company cannot sell and deliver finished goods.) 2) Staff Authority Based on technical expertise and involves advising line managers about decisions. Including specialists in areas such as law, engineering, accounting, HR. Staff members help line departments in making decisions but do not generally have the authority to make final decisions 3) Committee and team authority Authority granted to committees or work teams that play central roles in the firms daily operations. Basic organizational structures Functional Structure The various units in the organization are formed based on the functions that must be carried out to reach organizational goals. Makes use of departmentalization by function. Divisional Structure Divides the organization into several divisions, each of which operates as a semi-autonomous unit and profit center. i.e. Division based on consumer products, industrial product, health care product. Advantage: 1) the company can evaluate the performance of each division independently. 2) The firm can take actions (like selling unprofitable divisions) within minimal disruption to its remaining business. Project organization
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