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Chapter 8 Organizing the Business Enterprise Notes
What is Organizational Structure?
x organizational structure : the specification of the jobs to be done within a business and how these jobs relate to one another
The Chain of Command
x organization charts : physical depiction of company’s structure showing employees titles and their relationship to one another
x chain of command : reporting relationships within a business; the flow of decision-making power in a firm
The Building Blocks of Organizational Structure
Specialization
x job specialization : process of identifying specific jobs that need to be done and designating the people who will perform them
x in a sense, all organizations have only one major “job”, but this job, of course, is broken into smaller components
x in turn, each component is assigned to an individual
Specialization and Growth
x in a very small organization, the owner may perform every job, however, as the firm grows, so does the need to specialize jobs
so that others can perform them
x job specialization is a natural part of organizational growth; it is neither a new idea nor limited to factory work
x job specialization has certain advantages: individual jobs can be performed more efficiently, the jobs are easier to learn, and it is
easier to replace people who leave the organization
x on the other hand, if job specialization is carried too far and jobs become too narrowly defined, people get bored, derive less
satisfaction from their jobs, and often lose sight of how their contributions fit into the overall organization
Departmentalization
x departmentalization : the process of grouping jobs into logical units
x profit centre—a separate company unit responsible for its own costs and profits
x departmentalization may occur along functional, customer, product, geographic, or process lines (or any combination of these)
Establishing the Decision – Making Hierarchy
Assigning Tasks
x in any company with more than one person, individuals must work out agreements about responsibilities and authority
x responsibility : the duty to perform an assigned task
x authority : the power to make the decisions necessary to complete a task
Performing Tasks
x trouble occurs when appropriate levels of responsibility and authority are not clearly spelled out in the working relationships
between manages and subordinates, here, the issues become delegation and accountability
x delegation : assignment of a task, a responsibility, or authority by a manager to a subordinate
x accountability : liability of subordinates for accomplishing tasks assigned by managers
Fear of Delegating
x there are four things to keep in mind when delegating:
¾ decide on the nature of the work to be done
¾ match the job with the skills of subordinates
¾ make sure the person chosen understands the objectives he or she is supposed to achieve
¾ make sure subordinates have the time and training necessary to do the task
Distributing Authority
Centralized Organizations
x centralized organization : top managers retain most decision-making rights for themselves
Decentralized Organization
x decentralized organization : lower- and middle-level managers are allowed to make significant decisions
x the purpose of decentralization is to make a company more responsive to its environment by breaking the company into more
manageable units, and giving those units more autonomy, and reducing top-heavy bureaucracies
Tall and Flat Organizations
x flat organizational structure : an organization with relatively few layers of management
x tall organizational structure : an organization with many layers of management
Span of Control
x span of control : the number of people managed by one manager
x downsizing : the planned reduction in the scope of an organization’s activity
Basic Organizational Structures
The Functional Structure
x functional structure : various units are included in a group based on functions that need to be performed for the organization to
reach its goals; functional structure makes use of departmentalization by function
Advantages Disadvantages
1. It focuses attention on the key activities that
must be performed.
1. Conflicts may arise among the functional areas.
2. No single function is responsible for overall organizational performance.
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Document Summary

N departmentalization the process of grouping jobs into logical units profit centre a separate company unit responsible for its own costs and profits departmentalization may occur along functional, customer, product, geographic, or process lines (or any combination of these) 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 objectives he or she is supposed to achieve. N functional structure various units are included in a group based on functions that need to be performed for the organization to reach its goals; functional structure makes use of departmentalization by function. N informal organization a network of personal interactions and relationships among employees unrelated to the firm"s formal authority structure grapevine an informal communications network that carries gossip and other information throughout an organization. Summary of learning objectives: discuss the elements that influence a firm"s organizational structure.

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