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Rotman Commerce (1,015)
RSM100Y1 (431)
Chapter 7

Chapter 7 summary

5 Pages
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Department
Rotman Commerce
Course Code
RSM100Y1
Professor
Michael Szlachta

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Chapter 7
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
Many elements work together to determine an organizations structure. Chief among
these are the organizations purpose, mission, and strategy
Organization charts illustrates the company’s structure and shows employees where they
fit into the firms operations
Chain of command the reporting relationships within the company
For example, the plant manager reports to the vice president of production, who, in
turn, reports to the president
The Building Blocks of an Organizational Structure
Job specialization the process of identifying the specific jobs that need to be done and
designating the people who will perform them
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
Departmentalization the process of grouping jobs into logical units
Control and coordination are made easier
Top managers can see how the various units are performing
Allows the firm to treat a department as a profit centre—a separate unit
responsible for its own costs and profits
Functional departmentalization departmentalization according to functions or activities
Such firms have production, marketing and sales, human resource, and accounting
and finance departments
Customer departmentalization departmentalization according to the types of customers
likely to buy a given product
The store is more efficient and customers get better service
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Product departmentalization dividing an organization according to the specific product or
service being created
Different divisions, each division is focused on a type of product
Geographic departmentalization departmentalization according to the area of the country
or world supplied
Process departmentalization departmentalization according to the production process
used to create a good or service
Establishing the decision making hierarchy
Responsibility the duty to perform an assigned task
Authority the power to make the decision necessary to complete the task
Delegation begins when a manager assigns a task to a subordinate
Accountability falls to the subordinate, who must the complete the task
Managers should recognize that they cant do everything themselves. If subordinates cannot
do a job, they should be trained so that they can assume more responsibility. Managers
should recognize that if a subordinate performs well, it reflects favourably on that
employees manager.
Centralized organization top management retains the right to make most decisions, and
top management must approve most lower-level decisions before they can be implemented
Decentralized organization much of the decision making authority is delegated to levels of
management at various points below the top level
Make a company more responsive to its environment by breaking the company into
more manageable units and giving those units more autonomy
Flat organizational structure an organization with relatively few layers of management
Tall organizational structure an organization with many layers of management
Span of control the number of people managed by one manager
Downsizing the planned reduction in the scope of an organizations activityalso affects
the span of control
When jobs are more diversified or prone to change, a narrow span of control is
preferable
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Description
Chapter 7 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 Many elements work together to determine an organizations structure. Chief among these are the organizations purpose, mission, and strategy Organization charts illustrates the companys structure and shows employees where they fit into the firms operations Chain of command the reporting relationships within the company For example, the plant manager reports to the vice president of production, who, in turn, reports to the president The Building Blocks of an Organizational Structure Job specialization the process of identifying the specific jobs that need to be done and designating the people who will perform them Advantagesindividual jobs can be performed more efficiently, the jobs are easier to learn, and it is easier to replace people who leave the organization Departmentalization the process of grouping jobs into logical units Control and coordination are made easier Top managers can see how the various units are performing Allows the firm to treat a department as a profit centrea separate unit responsible for its own costs and profits Functional departmentalization departmentalization according to functions or activities Such firms have production, marketing and sales, human resource, and accounting and finance departments Customer departmentalization departmentalization according to the types of customers likely to buy a given product The store is more efficient and customers get better service www.notesolution.com
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