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RSM100Y1 Study Guide - Midterm Guide: Departmentalization, Profit Center, Flat Organization

Rotman Commerce
Course Code
John Oesch
Study Guide

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University of Toronto
RSM100 Test 2
Study Package

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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 company’s 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
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
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.
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

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Departmentalization according to the types of customers likely to buy a given product.
i.e. classic music department, R&B department
Product departmentalizationP
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
Accountability: liability of subordinates for accomplishing tasks assigned by
3)Distributing authority
determining whether the organization is to be centralized or decentralized.
Centralized organization: Top managers retain most decision-making rights for
Decentralized organization: lower-and middle-level managers are allowed to
make significant decisions.
Flat organization structure: an organization with relatively few layers of
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.
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