BUSINESS CUSTOM 2/E VOL. 1 Chapter 8 Readings (very detailed and helpful)

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26 Feb 2011
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Chapter 8: 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 (i.e. the structure of the Red Cross will not work for the
University of Toronto)
The Chain of Command
oOrganization chart: a physical depiction of the companys structure showing employee
titles and their relationship to one another (i.e. Board of DirectorsPresidentVP
Finance, VP Sales, VP Production, VP HR, VP Marketing and so on)
oChain of command: reporting relationships within a business; the flow of decision-
making power in a firm (i.e. the plant manager reports to the VP for production who, in
turn, reports to the president)
THE BUILDING BLOCKS OF ORGANIZATIONAL STRUCTURE
The first step to developing the structure of any business, large or small, is twofold:
Specialization: determining who will do what
oJob specialization: the process of identifying the specific jobs that need to be done and
designating the people who will perform them (i.e. process of making shirts)
oADVANTAGES:
- Individual jobs can be performed more efficiently
-jobs are easier to lean
-Easier to replace people who leave the organization
oDISADVANTAGES:
-jobs become too narrowly defined
-People get bored
-Derive less satisfaction from their jobs
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-Often lose sight of how their contributions fit into the overall organization
SPECIALIZATION AND GROWTH
-In a very small organization, the owner may perform every job but as the firm
grows, so does the need to specialize jobs so that other can perform them
Departmentalization: determining how people performing certain tasks can best be
grouped together
oDepartmentalization: the process of grouping jobs into logical units
Control and coordination are narrowed and made easier, and top managers can see
more easily how various units are performing
Allows the firm to treat a department as a profit centre
May occur along functional, customer, product, geographic, or process lines (or
any combination of these)
oProfit centre: a separate company unit responsible for its own costs and profits
These two tasks are the basic building blocks of all business organizations.
ESTABLISHING THE DECISION-MAKING HIERARCHY
Managers must explicitly define reporting relationships among positions so that everyone
will know who has responsibility for various decisions and operations
The development of this hierarchy generally results from a three-step process:
1.Assigning tasks: determining who can make decisions and specifying how they should
be made
oResponsibility: the duty to perform an assigned task
oAuthority: the power to make the decisions necessary to complete a task
2.Performing tasks: implementing decisions that have been made
oDelegation: assignment of a task, a responsibility, or authority by a manger to a
subordinate
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