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Chapter 7

RSM100- Chapter 7 [Organizing the business enterprise].docx

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Rotman Commerce
John Oesch

Organizing the Business Enterprise [Chapter 7] What is an organizational structure?  Determinants of a structure include many elements working together such as the organizations purpose, mission, and strategy o Other affects include size, technology, and changes in environmental circumstances The chain of command  Most businesses prepare organization charts: illustrates the company’s structure and show employees where they fit into the firm’s operations  Eg. BOD PRESIDENT VP various managers  Chain of command: the reporting relationships within the company The building blocks of organizational structure  First step in developing a structure includes: o Specialization: determining who will do what o Departmentalization: determining how many people performing certain tasks can be best grouped together  These two tasks are the basic building blocks of all business organizations** Specialization  Process of identifying the specific jobs that need to be done and designating the people who will perform them  In small organizations, the owner may perform every job  As firms grow, they need to specialize in jobs  Certain advantages include; individual jobs can be performed more efficiently, the jobs are easier to learn, it is easier to replace people who leave  Disadvantages include; if jobs become too narrowly defined, people get bored, derive less satisfaction from jobs, and often lose sight of how their contributions fit into the overall organization Departmentalization  Process of grouping jobs into logical units  Allows the firm to treat a department as a profit centre- a separate company unit responsible for its own costs and profits  May occur along functional, customer, product, geographic, or process lines (or any combo of these): 1. Functional departmentalization  Departmentalization according to functions of activities  Usually have production, marketing, human resources, accounting, finance departments 2. Customer departmentalization  According to the types of customers likely to buy a given product  Makes shopping easier by providing identifiable store segments 3. Product departmentalization  Dividing an organization according to the specific product or service being created 4. Geographic departmentalization  According to the area of the country or world supplied 5. Process departmentalization  According to the production process used to create a good or service (putting pickles into a jar with water) Establishing the decision-making hierarchy  Development of hierarchy involves 3 step process: o Assigning tasks: determining who can make decisions and specifying how they should be made o Performing tasks: implementing decision that have been made o Distributing authority: determining whether the organization is to be centralized or decentralized 1. Assigning tasks  Responsibility: the duty to perform an assigned task  Authority: the power to make the decisions necessary to complete the task 2. Performing tasks  Trouble occurs when appropriate levels of responsibility and authority are not clearly spelled out between managers and subordinates  issues becomes delegation and accountability  Delegation: assignment of a task, a responsibility, or authority by a manager or subordinate there are 4 things to keep in mind o Decide on the nature of the work to be done o Match the job with the skills of subordinates o Make sure the person chosen understands the objectives he or she is supposed to achieve o Make sure subordinates have the time and training necessary to do the task  Accountability: liability of subordinates for accomplishing tasks assigned by managers 3. Distributing authority  Delegation involves specific relationship between managers and subordinates patterns of authority can be centralized or decentralized  Centralized organization: top managers retain most decision making rights for themselves; must approve lower level decisions before they are implemented o Tall organizational structure: many layers of management  Decentralized organization: lower and middle level managers are allowed to make significant decisions o Purpose of it is to make a company more responsive to its environment by breaking the co
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