Chapter 10: Organizing

Week 05
• Organizing as arranging and structuring work to accomplish
organizational goals. It’s an important process during which managers
design an organization’s structure.
• Organizational Structure is the formal arrangement of jobs within an
organization.
• Organizational Chart :The visual representation of an organization’s
structure
• Organizational Design: Creating or changing an organization’s
structure
Organizational Design
When managers create or change the structure, they’re engaged in
organizational design, a process that involves decisions about six key
elements:
1. Work Specialization,
2. Departmentalization,
3. Chain of Command,
4. Span of Control,
5. Centralization and Decentralization
6. Formalization
Work Specialization
• Work specialization, which is dividing work activities into separate job
tasks. Individual employees “specialize” in doing part of an activity
rather than the entire activity in order to increase work output.
• It’s also known as division of labor
• Example: At the Wilson Sporting Goods factory in Ada, Ohio, 150
workers make every football used in the National Football League.
Individual workers specialize in part of the activity such as molding,
stitching and sewing, lacing, and so forth.
Departmentalization
• Departmentalization is grouping of jobs together after deciding what
job tasks will be done by whom, common work activities need to be
grouped back together so work gets done in a coordinated and
integrated way.
• For example, a hotel might have departments such as front desk
operations, sales and catering, housekeeping and laundry, and
maintenance
Chain of Command
• The chain of command is the line of authority extending from upper
organizational levels to lower levels, which clarifies who reports to
whom. Managers need to consider it when organizing work because it
helps employees with questions such as “Who do I report to?” or
“Who do I go to if I have a problem?”
• To understand the chain of command, you have to understand three
other important concepts: authority, responsibility, and unity of
command.
Authority
• Authority: Authority refers to the rights inherent in a managerial
position to tell people what to do and to expect them to do it.
• Managers in the chain of command had authority to do their job of
coordinating and overseeing the work of others.
• Authority could be delegated downward to lower-level managers,
giving them certain rights while also prescribing certain limits within
which to operate.
Line authority vs Staff authority
• Line authority entitles a manager to direct the work of an employee.
It is the employer–employee authority relationship that extends from
the top of the organization to the lowest echelon, according to the
chain of command
• Staff authority functions to support, assist, advise, and generally
reduce some of their informational burdens.
• For example, In a manufacturing firm, line managers are typically in
the production and sales functions, whereas managers in human
resources and payroll are considered staff managers with staff
authority.
Responsibility
When managers use their authority to assign work to employees, those
employees take on an obligation to perform those assigned duties. This
obligation or expectation to perform is known as responsibility.
Employees should be held accountable for their performance
Unity of Command
• The unity of command principle states that a person should report to
only one manager.
• Without unity of command, conflicting demands from multiple bosses
may create problems.
• For example, Damian Birkel, a merchandising manager, found himself
reporting to two bosses—one in charge of the department-store
business and the other in charge of discount chains. Birkel tried to
minimize the conflict by making a combined to-do list that he would
update and change as work tasks changed.
Span of Control
• Span of control means the number of employees a manager can
efficiently and effectively manage.
• For example, assume two organizations, both of which have
approximately 4,100 employees. If one organization has a span of four
and the other a span of eight, the organization with the wider span
will have two fewer levels and approximately 800 fewer managers.
Wider spans are more efficient in terms of cost. However wider spans
may reduce effectiveness if employee performance worsens.
Centralization and decentralization
• Centralization is the degree to which decision making takes place at
upper levels of the organization. If top managers make key decisions
with little input from below, then the organization is more centralized.
On the other hand, the more that lower-level employees provide
input or actually make decisions.
• Decentralization is the degree to which lower-level employees
provide input or actually make decisions. The more that lower-level
employees provide input or actually make decisions, the more
decentralization.
Factor that affect organization’s use
of Centralization or Decentralization
Formalization
• How standardized an organization’s jobs are and the extent to which
employee behavior is guided by rules and procedures.
• For example, A customer comes into a branch of a large national drug
store and drops off a role of film for same-day developing 37 minutes
after the store policy cut-off time. Although the sales clerk knows he’s
supposed to follow rules, he also knows he could get the film
developed with no problem and wants to accommodate the
customer. So he accepts the film, violating policy, hoping that his
manager won’t find out
Traditional Organizational Designs
• Simple Structure: Most companies start as entrepreneurial ventures
using a simple structure, which is an organizational design with low
departmentalization, wide spans of control, authority centralized in a
single person, and little formalization.
• A functional structure is an organizational design that groups similar
or related occupational specialties together. You can think of this
structure as functional departmentalization applied to the entire
organization
Divisional Structure
• The divisional structure is an organizational structure made up of
separate business units or divisions. In this structure, each division has
limited autonomy, with a division manager who has authority over his
or her unit and is responsible for performance.
• In divisional structures, however, the parent corporation typically acts
as an external overseer to coordinate and control the various divisions,
and often provides support services such as financial and legal.
• For example, Walmart, has two divisions: retail (Walmart Stores,
International, Sam’s Clubs, and others) and support (distribution
centers).