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Chapter 7

Chapter7-org. design

Rotman Commerce
Course Code
Michael Szlachta

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7-1. Organizational Structure
Division of labour and the patterns of coordination, communication, work flow,
and formal power that direct the activities of the organization.
The specification of the jobs to be done within a business and how those jobs are
related to one another (definition)
Organization chart: illustrate the company’s organizational structure
Shows employees positions and how they relate to each other
Demonstrates the flow of decision making power
Chain of command: the reporting relationships within the company (solid
lines in chart)
7-2. The building blocks of organizational structure
The first step in developing the structure is twofold
Specialization: determining who will do what
---Job specialization: identify the specific jobs required and designate who will
do what
-Small companies have fewer employees so less specialization
-as organizations grow, they can hire more employees and become more
efficient through specialization
*Division of labour:
Determining who will do what task
A narrow subset of tasks required to complete the product or service
Increases work efficiency: easier to learn, easier to replace people who leave

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Definition: the process of grouping jobs into logical units
(How employees and their activities are grouped together)
A fundamental strategy for coordinating organizational activities because it
affects behavior: Creates common supervision, formal work teams
Common measures of performance
allows the firm to treat a department as a profit centre
(profit cetre: a separate company unit responsible for its own costs and
Traditional forms:
1.Simple 2. Functional 3. Customer 4. Product 5. Process 6.
1.Functional departmentalization: based on functions or activities performed
-accounting & finance
-human resource

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2.Customer departmentalization: based on types of customers likely to buy a
given product
-industrial vs. consumer
-youth vs. adult
-family vs. singles
3.Product departmentalization: based on specific product or service being
-consumer office supplies vs. business office supplies
-photocopiers vs. computers
-tax return preparation vs. company financial statements
4.Geographic departmentalization: based on area of the country or world
-western vs. eastern region
-Canadian vs. American
-North America vs. Europe
5.Process departmentalization: groups based on the manufacturing process
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