Chapter #8 - Organizing
Organizing as a management function
- Organizing: The process of arranging people and other
resources to work together to accomplish a goal
- Organization structure: The system of tasks, workflows,
reporting relationships, and communication channels that
link together diverse individuals and groups
- Formal Structures
o The structure of the organization in its official state
o An organization chart is a diagram describing reporting relationships and the formal arrangement of work
positions within an organization
o An organization chart identifies the following aspects of formal structure:
The division of work – positions and titles show work responsibilities
Supervisory relationships – lines show who reports to whom
Communication channels – lines show formal communication flows
Major subunits – positions reporting to a common manager are shown
Levels of management- vertical layers of management are shown
Different Types of Formal Structures
- Departmentalization – is the process of grouping people and jobs into work units
V.P. Marketing V.P. Finance V.P. Human Resources
GM Sales GM Advertising GM Products
1. Functional Structures – groups together with similar skills who perform similar tasks
o They share technical expertise, interests, and responsibilities
o If each function does its work properly, the expectation is that the business as a whole will operate successfully
o Are not limited to businesses.
o Work well for small organizations producing few products or services.
o Potential advantages of functional structures:
High-Quality Technical problem solving skills
In-depth training and skill development
Clear career paths within functions
Economies of scale.
Task assignments consistent with expertise and training o Potential disadvantages of Functional Structures:
Difficulties in pinpointing responsibilities.
Functional chimneys problem – is a lack of communication and coordination across functions
Sense of cooperation and common purpose break down.
Narrow view of performance objectives.
Excessive upward referral of decisions.
Cannot move from one department to another
They are highly specialized and skilled in a particular department and will not be able to adjust in
Lack of coordination between different
They all have unique cultures
Delay in turnaround
2. Divisional Structures – Group together people who work
on the same product or process, serve similar customers,
and/or are located in the same area or geographical
o Common in complex organizations.
o Avoid problems associated with functional
o Types of divisional structures and how they group
job and activities:
Product structures focus on a single product or service.
Geographical structures focus on the same location or geographical region.
Customer structures focus on the same customers or clients.
Process structures focus on the same processes.
o Product – groups together people and jobs focused on a single product or service
They clearly identify costs, profits, problems, and successes in a market area with a central point of
This prompts managers to be responsive to changing market demands and customer tastes
o Geography – groups together people and jobs performed in the same location
Deutsche Post World Net
Global logistics services provider
500 000 employees in over 220
Structured into five divisions
(divided into type of products)
o Mail Asian Division North American Europe
o Express – DHL
o Financial Services
Potential Advantages of divisional structures
Expertise focused on specific Manager
customers, products, and regions
More flexibility in responding to environmental changes. Clear points of responsibility.
Greater ease in restructuring.
Potential Disadvantages of divisional structures
Among divisions there is a lot of competition
o If one division develops a good product, they will not share the products with other
Differences of culture among the different division
Duplication of resources
Competition and poor coordination across divisions
Emphasis on divisional goals at expense of organizational goals
o Customer Structures
Groups together people and jobs that serve the same customers or clients
Goal is to best serve the special needs of the different customer groups
o Process structures
Groups jobs and activities that are part of the same processes
Work Process – is a group related tasks that collectively creates a valuable work product
3. Matrix Structures
o Combines functional and divisional structures to gain advantages and minimize disadvantages of each.
Marketing Finance IT
Project A Manager Manager Manager
o Used in:
o Potential advantages of matrix structures:
Better cooperation across functions.
Improved decision making; problem solving takes place at the team level where the best information is
Increased flexibility in restructuring, adding, removing, or changing operations to meet changing demands
Better customer service; there is always program, product, or project manager informed and available to
Better performance accountability through the program, product, or project managers
Improved strategic management; top managers are freed from lower-level problem solving to focus more
time on strategic issues o Potential disadvantages of matrix structures:
Two-boss system is susceptible to power struggles.
Two-boss system can create task confusion and conflict in work priorities.
Team meetings are time consuming.
Team may develop “groupitis.”
Increased costs due to adding team leers to structure.
Balance between the projects
Managers might be over loaded with work
Creates a lot of conflict because they have more than one manager to report to
o Which project gets the most priority
4. Team structures
o Extensively use permanent and temporary teams to solve problems, complete special projects, and accomplish
o Often use cross-functional teams composed of members from different functional departments.
o Project teams are convened for a specific task or project and disbanded once completed.
o Potential advantages of team structures:
Eliminates difficulties with communication and decision making.
Eliminates barriers between operating departments.
Greater sense of involvement and identification.
Increased enthusiasm for work.
Improved quality and speed of decision making.
o Potential disadvantages of team structures:
Conflicting loyalties among members.
Excessive time spent in meetings.
Effective use of time depends on quality of interpersonal relations, group dynamics, and
5. Network Structures
o A central core that is linked Business Core Accounting and
through networks of and Packaging (Garment Marketing) Planning
relationships with outside contractors and suppliers of essential services
o Own only core components and use strategic Technology Warehousing and alliances or
outsourcing to provide other components
o Potential advantages of network structures: Shipping
Firms can operate with fewer full-time employees and less complex internal systems.
Reduced overhead costs and increased operating efficiency.
Permits operations across great distances.
o Potential disadvantages of network structures: Control and coordination
problems may arise from
Potential loss of control over
Potential lack of loyalty among
infrequently used contractors.
outsourcing can be
Who are you going to report
to? Who gets the first priority
All contracts have a high
6. Boundaryless organizations
o Eliminate interna