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Chapter 8

Chapter 8 Notes

Management (MGT)
Course Code
Chris Bovaird

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Chapter 8 Notes: Organizing the Business Enterprise
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
The Chain of Command: Reporting relationships within a business; the flow of decision-
making power in a firm
Organization Charts: A physical depiction of the company’s structure showing employee
titles and their relationship to one another
The Building Blocks of Organizational Structure
2 steps in developing the structure of business: Specialization & Departmentalization
Determining who will do what
Job Specialization: The process of identifying the specific jobs that need to be done
and designating the people who will perform them
One major job is to make a profit, but divided into many different components
Job specialization is a natural part of organizational growth
One person cannot perform all the tasks as firms grow
Advantages Disadvantages
Individual jobs can be performed more
efficientlyJobs become too narrowly defined
Easier to learn the jobsPeople get bored = less satisfaction from
Easier to replace the people who leave
the organization Lose sight of how their contributions fit
into the overall organization
The process of grouping jobs into logical units
Control and coordination are narrowed
Easier for top managers to see how diff. units are doing
Allows firm to treat a department as a profit centre (a separate company unit
responsible for its own costs and profits)
Occurs along functional, customer, product, geographic, process lines
Establishing the Decision- Making Hierarchy
Managers must explicitly define reporting relationships among positions
Goal: Figure out how to structure and stabilize the organizational framework
3 Steps to Develop a Decision- Making Hierarchy
1.) Assigning Tasks: Determining who can make decisions and specifying how they
should be made
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Responsibility: The duty to perform an assigned task
Authority: The power to make the decisions necessary to complete a task
2.) Performing Tasks: Implementing decisions that have been made
Troubles occur when appropriate lvl of responsibility and authority are not
Delegation: Assignment of a task, responsibility, or authority by a manager
to a subordinate
Accountability: Liability of a subordinate for accomplishing tasks assigned
by managers
Fear of Delegating
Managers have trouble to delegate tasks
Subordinates may not be able to complete a task, but are still
accountable for the task
oFeeling that employees cant do as well as themselves
oFear something would go wrong
oLack of time for long-range planning
oSense of being in the dark about industry trends and competitive
oFear that a subordinate might surpass the manager by doing a
superb job
oDesire to keep as much control as possible over how things are
oLack of ability as to how effectively delegate to others
4 things to remember when delegating
Decide on the nature of the work to be done
Match the job with the skills of subordinates
Make sure the person chosen understands the task
3.) Distributing Authority: Determining whether the organization is to be
Distributing Authority
Centralized Organizations (eg/ military)
Top managers retain most decision- making rights for themselves
Must approve most lower- level before they can be implemented
Decentralized Organizations
Lower and middle level managers are allowed to make significant decisions
Purpose: to make a company more responsive to its environment by breaking the
company into more manageable units and reducing top-heavy bureaucracies
Determining the Optimum Level of Decentralization
Disadvantages: It could become very loose
Tall and Flat Organizations
Flat Organizational Structure: An organization with relatively few layers of
Tall Organizational Structure: An organization with many layers of management
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