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RSM219H1 (136)
Chapter 7

Chapter 7 Notes

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Rotman Commerce
Chris Bovaird

CHAPTER 7 – 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 chart – a physical depiction of the company’s structure showing employee titles and their relationship to one another THE BUILDING BLOCKS OF ORGANIZATIONAL STRUCTURE  The first step in developing the structure of any business, large or small, is twofold: o Specialization: determining who will do what o Departmentalization: determining how people performing certain tasks can best be grouped together Specialization  Job specialization – the process of identifying the specific jobs that need to be done and designating the people who will perform them Specialization and Growth  Job specialization has certain advantages: o Individual jobs can be performed more efficiently o The jobs are easier to learn o It is easier to replace people who leave the organization  If job specialization is carried too far and jobs become too narrowly defined o People get bored o Derive less satisfaction from their jobs o Often lose sight of how their contributions fit into overall organization Departmentalization – the process of grouping jobs into logical units  Profit centre – a separate company unite responsible for its own costs and profits  Departmentalization may occur along o Functional lines o Customer lines o Product lines o Geographic lines o Process lines ESTABLISHING THE DECISION-MAKING HIERARCHY  Mangers must explicitly define reporting relationships among positions so that everyone will know who has responsibility for various decisions and operations  A major question that must be asked about any organization is this: o Who makes which decisions?  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 2. Performing tasks: implementing decisions that have been made 3. Distributing authority: determining whether the organization is to be centralized or decentralized Assigning Tasks  Responsibility – the duty to perform an assigned task  Authority – the power to make the decisions necessary to complete a task Performing Tasks  Delegation – assignment of a task, a responsibility, or authority by a manager to a subordinate  Accountability – liability of subordinates for accomplishing tasks assigned by managers Fear of Delegating  There are four things to keep in mind when delegating: o Decide on the nature of the work to be done o Match the job with the skills of the subordinates o Make sure the person chosen understands the objectives he or he is supposed to achieve o Make sure subordinates have the time and training necessary to do the task  Experts pinpoint certain indicators that managers (particularly those in small businesses) are having trouble delegating effectively: o The feeling that employees can never do anything as well as they can o The fear that something will go wrong if someone else takes over a job o The lack of time for long-range planning because they are bogged down in day-to-day operations o The sense of being in the dark about industry trends and competitive products because of the time they devote to day-to-day operations  There are several reasons for this problem: o The fear that subordinates don’t really know how to do the job o The fear that a subordinate might “show the manager up” in front of others by doing a superb job o The desire to keep as much control as possible over how things are done o A simple lack of ability as to how to effectively delegate to others  The remedies in these instances are a bit different 1. Managers should recognize that they cannot do everything themselves 2. If subordinates cannot do a job, they should be trained so that they can assume more responsibility in the future 3. Managers should recognize that if a subordinate performs well, it reflects favourably on that employee’s manager 4. A manager who simply does not know how to delegate might need specialized training in how to divide up and assign tasks to others Distributing Authority  Centralized organizations – top managers retain most decision-making rights for themsel
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