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Textbook Summary Chapter 7 A concise explanation of all of the topics covered in the book, minus the irrelevant examples and stories.

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Rotman Commerce
John Oesch

RSM 100Y1 Chapter 7 What is Organizational Structure? Organizational Structure: The specification of the jobs to be done within a business and how those jobs relate to one another. Determinants of Organizational Structure 1. Organization’s Purpose 2. Organization’s Mission 3. Organization’s Strategy 4. Organization’s Size 5. Organization’s Technology 6. Changes in Environmental Circumstances Chain of Command Organization Charts: Illustrates the company’s structure and show employees where they fit into the firm’s operations. Solid lines show the Chain of Command: The reporting relationships within the company. The Building Blocks of Organizational Structure Specialization: Determining who will do what Departmentalization: Determining how people performing certain tasks can best be grouped together. 1. Specialization Job specialization: The process of identifying the specific jobs that need to be done and designating the people who will perform them. As an organization grows, job specialization may need to occur. At the early stages of a small business, an individual may perform all jobs. However, as the business expands, more people need to be hired and given specific jobs to perform. If job specialization is carried too far, jobs become boring and people get bored. 2. Departmentalization Departmentalization: The process of grouping jobs into logical units. Control and coordination are narrowed and top managers are able to see how various units are performing. Firms can treat a department as a Profit center: a separate company unit responsible for its own costs and profits. 1. Functional Departmentalization: Departmentalize according to functions or activities. E.g. Production, marketing, sales, HR, etc. 2. Customer Departmentalization Departmentalize according to types of customers likely to buy a given product. 3. Product Departmentalization Dividing an organization according to the specific product or service being created. 4. Geographic Departmentalization Departmentalize according to the area of the country or world supplied. 5. Process Departmentalization Departmentalize according to the production process used to create the good or service. Establishing the Decision-Making Hierarchy A three step process is required for the development of this hierarchy. 1. Assigning Tasks Determining who makes decisions and specifying how they should be made. Who is SUPPOSED to do what and who is ENTITLED to do what. Responsibility: The duty to perform an assigned task. Authority: The power to make the decisions necessary to complete the task. 2. Performing Tasks Implementing the decisions. Delegation: Assignment of a task, responsibility or authority by a manager to a subordinate. Accountability: Liability of subordinates for accomplishing tasks assigned by managers. 1. Fear of Delegating Managers fear that the subordinate will never do it as well as the manager can, that the subordinates will be better than the manager, that they want to control everything, that they fail to do long-term planning because of their day-to-day operating style, that they do not know enough about the industry trends and that they are too involved in day-to-day operations. Managers must: a. Decide on the nature of the work to be done b. Match the job with the skills of subordinates c. Make sure the person chosen understands the objectives he or she is suppos
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