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Chapter 8

MGMT 1 Chapter Notes - Chapter 8: It Follows, Morale, Outsourcing


Department
Management
Course Code
MGMT 1
Professor
Thomas Eppel
Chapter
8

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CHAPTER 8: STRUCTURING ORGANIZATIONS FOR TODAY’S CHALLENGES
EVERYONE’S REORGANIZING
- Adjusting to changing markets: normal function in capitalist economy
- Remain flexible enough to adapt to changing times
BUILDING AN ORGANIZATION FROM THE BOTTOM UP
-Organizing (structuring): begins with determining what work needs to be done, then
dividing up tasks among the people division of labor
- Identify each person’s strengths & assign right tasks to right person
-Job specialization: dividing tasks into smaller jobs
-Departmentalization: process of setting up individual departments to do specialized
tasks
- Assign authority and responsibility to people so that you can control whole
process
-Organizational chart: shows relationships among people: who is accountable for
completion of specific work, who reports to whom
- Monitor environment to see what competitors are doing & what customers
demand adjust to new realities
THE CHANGING ORGANIZATION
- Change due to evolving business environment: global competition, declining economy,
faster tech change, pressure to preserve natural environment
- Change in customer expectations
-Bureaucracy: reliance on rules
THE DEVELOPMENT OF ORGANIZATION DESIGN
- The bigger the plant, the more efficient production became
- Mass production
-Economies of scale: companies can reduce their production costs by purchasing raw
materials in bulk
- Average cost of goods decreases as production levels rises
- Mass production era: Henri Fayol & Max Weber
- Fayol’s Principles of Organization
- Book: General and Industrial Management
- Unity of command: worker report to 1 boss
- Hierarchy of authority: should know who to report to
- Division of labor: functions divided into areas of specialization
- Subordination of individual interests to general interest: think as coordinated
team. Goal of team > goal of individual
- Authority: managers have right to give orders & power to enforce obedience.
Whenever authority is exercised, responsibility arises
- Degree of centralization: amount of decision making power in top management
vary by circumstances
- Clear communication channels
- Order

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- Equity
- Esprit de corps: spirit of price & loyalty created among people in firm
- Max Weber & Organizational Theory
- Pyramid-shaped organization structure
- Employees: less decision making they had to do, the better
- Similar to Fayol’s, but emphasized:
- Job descriptions
- Written rules, decision guidelines, detailed records
- Consistent procedures, regulations, policies
- Staffing & promotion based on qualifications
-In favor of bureaucracy: term for an organization with layers of managers
- Bureaucrat: middle manager whose function was to implement top
management’s orders
TURNING PRINCIPLES INTO ORGANIZATIONAL DESIGN
-Hierarchy: system in which one person is at top of organization & there is ranked
ordering from top down of managers & others who are responsible to that person
-Chain of command: line of authority that moves from the top of hierarchy to lowest level
-Organization chart: visual device that shows relationships among people & divides
organization’s work; shows who reports to whom
DECISIONS TO MAKE IN STRUCTURING ORGANIZATIONS
- When designing responsive organizations: firms make decisions about organizational
issues
- 1. Centralization vs. decentralization
- 2. Span of control
- 3. Tall vs. flat organization structures
- 4. Departmentalization
CHOOSING CENTRALIZED OR DECENTRALIZED AUTHORITY
-Centralized authority: when decision making is concentrated at top level management
- I.e. target, McD’s
-Decentralized authority: when decision making is delegated to lower-level managers &
employees more familiar with local conditions than headquarters management could be.
I.e. Macy’s
CENTRALIZED
DECENTRALIZED
ADVANTAGES
- Greater
top-management
control
- More efficiency
- Simpler distribution
system
- Stronger brand/
- Better adaptation to
customer wants
- More empowerment
of workers
- Faster decision
making
- Higher morale
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corporate image
DISADVANTAGES
- Less responsiveness
to customers
- Less empowerment
- Interorganizational
conflict
- Lower morale away
from headquarters
- Less efficiency
complex distribution
system
- Less
top-management
control
- Weakened corporate
image 
CHOOSING THE APPROPRIATE SPAN OF CONTROL
-Span of control: optimal number of subordinates a manager supervises/ should
supervise
- Appropriate span gradually narrows at higher levels of organization bc work
becomes less standardized & managers need more face-to-face communication
- Trend today: expand span of control as organizations adopt empowerment,
reduce number of middle managers, hire more talented & better educated
lower-level employees
CHOOSING BETWEEN TALL AND FLAT ORGANIZATION STRUCTURES
-Tall organization structures: pyramidal organization chart would be quite tall bc of
various levels of management
- Message can be distorted moving through levels
-Flat organization structures: few layers of management & broad span of control
- Respond readily to customer demands bc lower level employees have authority &
responsibility for making decisions managers can be spared some day-to-day
tasks
- Large organizations match friendliness of small firms
- The flatter organizations become, the broader their spans of control managers
lose jobs
SPAN OF CONTROL
NARROW
BROAD
ADVANTAGES
- More control by top
management
- More chances for
advancement
- Greater specialization
- Closer supervision
- Less empowerment
- Higher costs
- Delayed decision
making
- Less responsiveness
to customers
DISADVANTAGES
- Reduced costs
- More responsiveness
to customers
- Faster decision
- Fewer chances for
advancement
- Overworked
managers
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