MGM101H5 Chapter 8: MGM101 Ch. 8

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18 Feb 2016
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Chapter 8: Organizing
Organization architecture: Totality of a firm’s organization, including formal
organizational structure, control systems, organizational culture, and people
Organization structure includes 3 aspects:
1. Location of decision-making responsibilities
2. Formal division of the organization into subunits
3. Establishment of integrating mechanisms to coordinate the subunits’ activities
Controls: Metrics used to measure the performance of subunits and judge how well
managers are running them
People: Human capital of an organization; not just the employees but the strategies used to
recruit, compensate, motivate, and retain these employees and the type of people they are
in terms of their skills, values, etc.
Vertical differentiation: Location of decision-making responsibilities within a structure;
“layers”
Horizontal differentiation: Formal division of the organization into subunits
Integrating mechanisms: Mechanisms for coordinating subunits
Centralization: The concentration of decision-making authority at a high level in
management hierarch
Pros:
1. Can facilitate coordination between subunits
2. Can help ensure that decisions are consistent with organizational objectives
3. Can avoid duplication of activities by various subunits within the organization
4. By concentrating power and authority in one individual or a management team,
centralization can give top-level managers the means to bring about needed major
organizational changes
Decentralization: Vesting decision-making authority in lower-level managers/employees
Pros:
1. Top management can become overburdened when decision-making authority is
centralized
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