The decision-making authority of employees and managers is supported by the company’s organization structure. This structure helps the company achieve its goals by providing a framework for managers to divide responsibilities, effectively distribute the authority to make decisions, coordinate and control the organization’s work, and hold employees accountable for their work.
When managers design the organization’s structure, they use an organization chart to provide a visual representation of how employees and tasks are grouped and how the lines of communication and authority flow. An organization chart depicts the official design for accomplishing tasks that lead to achieving the organization’s goals, a framework known as the formal organization. Every company also has an informal organization –the network of interactions that develop on a personal level among workers. Sometimes the interactions among people in the informal organization parallel their relationships in the formal organization, but often interactions transcend formal boundaries. Crossing formal boundaries can help establish a more pleasant work environment, but it can also undermine formal work processes and hinder a company’s ability to get things done. Four factors must be taken into consideration when designing an effective organization structure: work specialization, chain of command, vertical organization, and horizontal organization and coordination.
Many organization charts look like this one, for Food Lion. The traditional model of an organization is a pyramid in which numerous boxes for the base and lead up to fewer and fewer boxes on higher levels, ultimately arriving at one box at the top. A glance at Food Lion’s organization chart reveals who has authority over whom, who is responsible for whose work, and who is accountable to whom.
Before designing an organizational structure, management must first decide on the optimal level of work specialization– the degree to which organizational tasks are broken down into separate jobs. Few employees have the skills to perform every task a company needs. Therefore, work specialization can improve organizational efficiency by enabling each worker to perform tasks that are well defined and that require specific skills. However, organizations can overdo specialization. If a task is defined too narrowly, employees may become bored with performing the same tiny, repetitious job over and over. They may also feel unchallenged and alienated.
Besides incorporating work specialization into an organizational structure, companies must also establish a chain of command, the unbroken line of authority that connects each level of management with the next level. The chain of command helps organizations function smoothly by making two things clear: who is responsible for each task, and who has the authority to make official decisions. All employees have a certain amount of responsibility –the obligation to perform the duties and achieve the goals and objectives associated with their jobs. As they work toward the organization’s goals, employees must also maintain their accountability, their obligation to report the results of their work to supervisors or team members and to justify any outcomes that fall below expectations. Managers ensure that tasks are accomplished by exercising authority, the power to make decisions, issue orders, carry out actions, and allocate resources to achieve the organization’s goals. Authority is vested in the positions that managers hold, and it flows down through the management pyramid. Delegation is the assignment of work and the transfer of authority and responsibility to complete that work.
The simplest and most common chain-of-command system is known as line organization because it establishes a clear line of authority flowing from the top down, as the Food Lion chart depicts. Everyone knows who is accountable to whom, as well as which tasks and decisions each is responsible for. However, line organization sometimes falls short because the technical complexity of a firm’s activities may require specialized knowledge that individual managers don’t have and can’t easily acquire. A more elaborate system called line-and-staff organization was developed out of the need to combine specialization with management control. In such an organization, managers in the chain of command are supplemented by functional groupings of people known as staff, who provide advice and specialized services but who are not in the line organization’s chain of command.
The number of people a manager directly supervises is called the span of management or span of control. When a large number of people report directly to one person, that person has a wide span of management. This situation is common in flat organizations with relatively few levels in the management hierarchy. In contrast, tall organizations have many hierarchical levels, usually with only a few people reporting to each manager. In such cases, the span of management is narrow. The chart above compares a tall versus a flat organization. The U.S. Army is a tall organization. It has many levels with a narrow span of management at each level so that relatively few people report to each manager on the level above them. In contrast, a flat organization, such as the Catholic Church, has relatively few levels with a wide span of management; therefore, more people report to each manager.
Organizations that focus decision-making authority near the top of the chain of command are said to be centralized. Centralization benefits a company by utilizing top management’s rich experience and broad view of organizational goals. Both line organizations and line-and-staff organizations tend to be centralized. However, the trend in business today is to decentralize. As Arthur Wainwright discovered, decentralization pushes decision-making authority down to lower organizational levels–such as department heads–while control over essential company-wide matters remains with top management. Implemented properly, decentralization can stimulate responsiveness because decisions don’t have to be referred up the hierarchy.
Many organizations use a traditional vertical structure to define formal relationships and the division of tasks among employees and managers. Vertical organization links the activities at the top of the organization with those at the middle and lower levels. In a vertical organization, companies define jobs and activities by using departmentalization --the arrangement of activities into logical groups that are then clustered into larger departments and units that form the total organization. Four common ways of departmentalizing are by function, division, matrix, and network. An organization may use more than one method of departmentalization, depending on its particular needs.
Departmentalization by function groups employees according to their skills, resource use, and expertise. Common functional departments include marketing, human resources, operations, finance, research and development, and accounting, with each department working independently of the others.
Splitting the organization into separate functional departments offers several advantages: (1) Grouping employees by specialization allows for the efficient use of resources and encourages the development of in-depth skills; (2) centralized decision making enables unified direction by top management; and (3) centralized operations enhance communication and the coordination of activities within departments. Despite these advantages, functional departmentalization can create communication barriers between departments, thereby slowing response to change, hindering effective planning for products and markets, and overemphasizing work specialization (which alienates employees). Moreover, employees may become too narrowly focused on departmental goals and lose sight of larger company goals. For these reasons, most large companies have abandoned the functional structure in the past decade or so.
Departmentalization by division establishes self-contained departments that encompass all the major functional resources required to achieve their goals--such as research and design, manufacturing, finance, and marketing. Many organizations use a structure based on product divisions- -grouping around each of the company’s products or family of products. Process divisions, also called process-complete departments, are based on the major steps of a production process. The third approach, customer divisions, concentrates activities on satisfying specific groups of customers. Geographic divisions enable companies spread over a national or an international area to respond more easily to local customs, styles, and product preferences.
Divisional departmentalization offers both advantages and disadvantages. First, because divisions are self-contained, they can react quickly to change, thus making the organization more flexible. In addition, because each division focuses on a limited number of products, processes, customers, or locations, divisions can offer better service to customers. Moreover, top managers can focus on problem areas more easily, and managers can gain valuable experience by dealing with the various functions in their divisions. However, divisional departmentalization can also increase costs by duplicating the use of resources such as facilities and personnel. Furthermore, poor coordination between divisions may cause them to focus too narrowly on divisional goals and neglect the organization’s overall goals. Finally, divisions may compete with one another for employees, money, and other resources, causing rivalries that hurt the organization as a whole.
Departmentalization by matrix is a structural design in which employees from functional departments form teams to combine their specialized skills. This structure allows the company to pool and share resources across divisions and functional groups. The matrix may be a permanent feature of the organization’s design, or it may be established to complete a specific project. Matrix departmentalization can help big companies function like smaller ones by allowing teams to devote their attention to specific projects or customers without permanently reorganizing the company’s structure. But matrix structures are not without drawbacks. One problem of a matrix structure is that team members usually continue to report to their functional department heads as well as to a project team leader. Another drawback is that authority tends to be more ambiguous and up for grabs, creating power struggles and other interpersonal conflicts. In a matrix organization, excellent communication and coordination are necessary to avoid conflicts.
Departmentalization by network is a method of electronically connecting separate companies that perform selected tasks for a headquarters organization. Also called a virtual organization, the network organization outsources engineering, marketing, research, accounting, production, distribution, or other functions. The biggest advantage of the network structure is its flexibility. Companies hire whatever services are needed and then change them once they are no longer needed. The limited hierarchy required to manage a network organization also permits the company to make decisions and react to change quickly. Additional advantages are that the organization can continually redefine itself, and a lean structure usually means employees have greater job variety and satisfaction. However, the network approach lacks hands-on control, because the functions are not in one location or company. Also, if one company in the network fails to deliver, the headquarters organization could suffer or even go out of business. Finally, strong employee loyalty and team spirit are less likely to develop, because the emotional connection between the employee and the organization is weak.
More and more businesses are transforming their traditional bureaucratic and hierarchical vertical structure into a horizontal organization. The horizontal organization uses the team concept to flatten hierarchies and integrate the many tasks of a business into a few smooth-flowing operations. The biggest benefit of horizontal organization is that everyone works together. Employees from various departments or functions are grouped around a few organization-wide, cross-functional core processes, and they are responsible for an entire core process from beginning to end. A typical core process group might include staff from finance, research and development, manufacturing, and customer service. All core processes lead to one objective: creating and delivering something of value to the customer. While some companies completely dismantle their vertical structure to create horizontal organizations, others prefer a hybrid organization –one that combines vertical and horizontal functions. In these firms, core processes are supported by organization-wide functional departments such as human resources and finance.
A team is a unit of two or more people who work together to achieve a goal. Teams differ from work groups in that work groups interact primarily to share information and to make decisions to help one another perform within each member’s area of responsibility. In other words, the performance of a work group is merely the summation of all group members’ individual contributions. By contrast, the members of a team have a shared mission and are collectively responsible for their work. By coordinating their efforts, team members generate a positive synergy and achieve a level of performance that exceeds what would have been accomplished if members had worked individually.
The type, structure, and composition of individual teams within an organization all depend on the organization’s strategic goals and the objective for forming the team. The most common type of informal team is the problem-solving team. Also referred to as quality circles, problem-solving teams usually consist of 5 to 12 employees from the same department who meet voluntarily to find ways of improving quality, efficiency, and the work environment. As the name implies, self-managed teams manage their own activities and require minimum supervision. Typically they control the pace of work and determination of work assignments. Functional teams, or command teams, are organized along the lines of the organization’s vertical structure and thus may be referred to as vertical teams. They are composed of managers and employees within a single functional department. The structure of a vertical team typically follows the formal chain of command.
Cross-functional have many benefits: (1) they facilitate the exchange of information between employees, (2) they generate ideas for how to best coordinate the organizational units that are represented, (3) they encourage new solutions for organizational problems, and (4) they aid the development of new organizational policies and procedures. At Harley-Davidson, there are three cross-functional teams called Circles — the Create Demand Circle, the Produce Product Circle, and the Provide Support Circle. The cross-functional circles are responsible for every motorcycle produced by Harley — from product conception to final design. Besides permanent circles such as the ones used at Harley-Davidson, cross-functional teams can take on a number of formats: A task force is a type of cross-functional team formed to work on a specific activity with a completion point. However, once the goal has been accomplished, the task force is disbanded. Special-purpose teams are created as temporary entities to achieve specific goals. However, special-purpose teams are different because they exist outside the formal organization hierarchy. Such teams remain a part of the organization but have their own reporting structures, and members view themselves as separate from the normal functions of the organization. In contrast to a task force, a committee usually has a long life span and may become a permanent part of the organization structure. Committees typically deal with recurring tasks.
Virtual teams are groups of physically dispersed members who work together to achieve a common goal. Virtual team members communicate using a variety of technological formats and devices such as company intranets, e-mail, electronic meeting software, and telephones. Occasionally, they may meet face-to-face. The biggest advantage of virtual teams is that members are able to work together even if they are thousands of miles and several time zones apart. Because virtual teams must function with less direct interaction among members, team members require certain competencies. Among these are project-management skills, time management skills, the ability to use electronic communication and collaboration technologies, the ability to work across cultures, and heightened interpersonal awareness.
One of the biggest advantages of teams is that the interaction of the participants leads to higher-quality decisions based on the combined intelligence of the group. Moreover, teams lead to increased acceptance of a solution. Team members who participate in making a decision are more likely to enthusiastically support the decision and encourage others to accept it. Another big advantage is that teams have the potential to unleash vast amounts of creativity and energy in workers. Motivation and performance are often increased as workers share a sense of purpose and mutual accountability. Organizational flexibility is another key benefit of using teams. Teamwork has a number of potential disadvantages. For one thing, power within the organization sometimes becomes realigned with teams. Successful teams mean that fewer supervisors are needed, and usually fewer middle and front-line managers. Another potential disadvantage is free riders-- team members who don’t contribute their fair share to the group’s activities because they aren’t being held individually accountable for their work. Aligning schedules, arranging meetings, and coordinating individual parts of a project can eat up a lot of time and money. Moreover, a team may develop groupthink, a situation in which pressures to conform to the norms of the group cause members to withhold contrary or unpopular opinions.
Team Size. Team size is one factor that contributes to a team’s overall effectiveness. The optimal size for teams is generally thought to be between 5 and 12 members. Clear sense of purpose. Team members clearly understand the task at hand, what is expected of them, and their role on the team. Open and honest communication. The team culture encourages discussion and debate. Team members speak openly and honestly, without the threat of anger, resentment, or retribution. They listen to and value feedback from others. As a result, all team members participate. Creative thinking. Effective teams encourage original thinking, considering options beyond the usual. Focused. Team members get to the core issues of the problem and stay focused on key issues. Decision by consensus. All decisions are arrived at by consensus. No easy, quick votes are taken.
For a team to be successful over time, it must also be structured to accomplish its task and to satisfy its members’ needs for social well-being. Effective teams usually fulfill both requirements with a combination of members who assume one of four roles: task specialist, socioemotional role, dual role, or nonparticipator. People who assume the task-specialist role focus on helping the team reach its goals. In contrast, members who take on the socioemotional role focus on supporting the team’s emotional needs and strengthening the team’s social unity. Some team members are able to assume dual roles, contributing to the task and still meeting members’ emotional needs. These members often make effective team leaders. At the other end of the spectrum are members who are nonparticipators, contributing little to reaching the team’s goals or to meeting members’ emotional needs.
Research shows that teams typically go through five definitive stages of development. Forming. The forming stage is a period of orientation and breaking the ice. Members get to know each other, determine what types of behaviors are appropriate within the group, identify what is expected of them, and become acquainted with each other’s task orientation. Storming. In the storming stage, members show more of their personalities and become more assertive in establishing their roles. Conflict and disagreement often arise during the storming stage as members jockey for position or form coalitions to promote their own perceptions of the group’s mission. Norming. During the norming stage, these conflicts are resolved, and team harmony develops. Members come to understand and accept one another, reach a consensus on who the leader is, and reach agreement on what each member’s roles are. Performing. In the performing stage, members are really committed to the team’s goals. Problems are solved, and disagreements are handled with maturity in the interest of task accomplishment. Adjourning. Finally, if the team has a limited task to perform, it goes through the adjourning stage after the task has been completed. In this stage, issues are wrapped up and the team is dissolved.
As the team moves through the various stages of development, two things happen. First, the team develops a certain level of cohesiveness, a measure of how committed the members are to the team’s goals. The team’s cohesiveness is reflected in meeting attendance, team interaction, work quality, and goal achievement. The second thing that happens as teams develop is the emergence of norms –-informal standards of conduct that members share and that guide their behavior. Norms define what is acceptable behavior. They also set limits, identify values, clarify what is expected of members, and facilitate team survival.
Conflict can be both constructive and destructive to a team’s effectiveness. Conflict is constructive if it increases the involvement of team members and results in the solution to a problem. Conflict is destructive if it diverts energy from more important issues, destroys the morale of teams or individual team members, or polarizes or divides the team. Team conflicts can arise for a number of reasons. First, teams and individuals may feel they are in competition for scarce or declining resources, such as money, information, and supplies. Second, team members may disagree about who is responsible for a specific task; this type of disagreement is usually the result of poorly defined responsibilities and job boundaries. Third, poor communication can lead to misunderstandings and misperceptions about other team members or other teams. In addition, intentionally withholding information can undermine trust among members. Fourth, basic differences in values, attitudes, and personalities may lead to clashes. Fifth, power struggles may result when one party questions the authority of another or when people or teams with limited authority attempt to increase their power or exert more influence. Sixth, conflicts can arise because individuals or teams are pursuing different goals.
Each team member has a unique style of dealing with conflict, but the members’ styles are primarily based on how competitive or cooperative team members are when a conflict arises. Avoidance may involve ignoring the conflict in the hope that it will subside on its own, or it may even involve physically separating the conflicting parties. Defusion may involve several actions, including downplaying differences and focusing on similarities between team members or teams, compromising on the disputed issue, taking a vote, appealing to a neutral party or higher authority, or redesigning the team. Confrontation is an attempt to work through the conflict by getting it out in the open, which may be accomplished by organizing a meeting between the conflicting parties. These three styles of conflict resolution come into play after a conflict has developed, but team members and team leaders can take several steps to prevent conflicts. First, by establishing clear goals that require the efforts of every member, the team reduces the chance that members will battle over their objectives or roles. Second, by developing well-defined tasks for each member, the team leader ensures that all parties are aware of their responsibilities and the limits of their authority. And finally, by facilitating open communication, the team leader can ensure that all members understand their own tasks and objectives as well as those of their teammates.
Organizing and Working in Teams
Effective Organization Structure Coordinate and Control Work Divide Responsibilities Promote Accountability Distribute Authority
Organization Chart Vertical Organization Chain of Command Work Specialization Horizontal Coordination Formal Organization Informal Organization
Organization Chart for Food Lion Grocery Chain Board of Directors President & CEO Chairperson VP Human Resources Senior VP Operations VP MIS VP Finance VP Special Projects VP Marketing VP Advertising VP Store Planning Regional Supervisors Area Supervisors Regional Operations Area Supervisors Regional Operations Area Supervisors VP Grocery Operations VP Perishable Operations VP Bakery Operations
Work Specialization Advantages Disadvantages Efficiency Boredom Productivity Alienation
Chain of Command Responsibility Accountability Authority Delegation
Simplified Line-and-Staff Structure President VP Production VP Marketing VP Finance Legal Department Human Resources Department Head of Accounting Department National Sales Manager Line Staff
Span of Management United States Army Roman Catholic Church General Colonels Majors Captains, Lieutenants Warrant Officers Sergeants Corporals Privates Pope Cardinals Archbishops, Bishops Priests
Vertical Organizations Network Matrix Division Function
Departmentalization by Function Skills Resource Use Expertise
Functional Departments Disadvantages <ul><li>Departmental Barriers </li></ul><ul><li>Slow Response Time </li></ul><ul><li>Ineffective Planning </li></ul><ul><li>Over-specialization </li></ul>Advantages <ul><li>Resource Allocation </li></ul><ul><li>Unified Direction </li></ul><ul><li>Improved Coordination </li></ul><ul><li>Better Communication </li></ul>
Departmentalization by Division Processes Products Geography Customers
Departmentalization by Division Advantages Disadvantages Flexibility Better Service Management Focus Wasting Resources Poor Coordination Competition
Departmentalization by Matrix PUBLISHER Book Team A Manager Book Team B Manager Editorial Manager Production Manager Design Manager Editor A Production Editor A Designer A Editor B Production Editor B Designer B
Departmentalization by Network Advantages Disadvantages Flexibility Responsiveness Variety Dispersed Functions Quality Control Employee Loyalty
Shared Information Neutral Individual Random or Varied Goal Synergy Responsibility Skills Shared Mission Positive Individual and Mutual Complementary Comparing Work Groups and Work Teams Work Groups Work Teams
Workplace Teams Problem-Solving Self-Managed Functional
Types of Cross-Functional Teams <ul><li>Circles </li></ul><ul><li>Task forces </li></ul><ul><li>Committees </li></ul><ul><li>Special purpose </li></ul>
Working in Teams Advantages <ul><li>Higher-quality decisions </li></ul><ul><li>Improved commitment </li></ul><ul><li>Creativity & motivation </li></ul><ul><li>Flexibility </li></ul>Disadvantages <ul><li>Power realignment </li></ul><ul><li>Free riders </li></ul><ul><li>Increased costs </li></ul><ul><li>Groupthink </li></ul>
Characteristics of Effective Teams <ul><li>Appropriate size and structure </li></ul><ul><li>Clear sense of purpose </li></ul><ul><li>Open honest communication </li></ul><ul><li>Creative thinking </li></ul><ul><li>Focused efforts </li></ul><ul><li>Decision by consensus </li></ul>
Member Social Behavior Low High Team Member Roles Task Specialist Role Dual Role Socioemotional Role Nonparticipator Role Member Task Behavior High Low
Five Stages of Team Development <ul><li>Forming </li></ul><ul><li>Storming </li></ul><ul><li>Norming </li></ul><ul><li>Performing </li></ul><ul><li>Adjourning </li></ul>
Stages of Development Cohesiveness <ul><li>Meeting attendance </li></ul><ul><li>Interaction </li></ul><ul><li>Work quality </li></ul><ul><li>Goal achievement </li></ul>Norms <ul><li>Behavior </li></ul><ul><li>Limits </li></ul><ul><li>Values </li></ul><ul><li>Expectations </li></ul>
Team Conflict <ul><li>Competition for scarce resources </li></ul><ul><li>Responsibility issues </li></ul><ul><li>Poor communication </li></ul><ul><li>Values, attitudes, and personalities </li></ul><ul><li>Authority issues </li></ul><ul><li>Goal incompatibility </li></ul>
Prevention Resolution Dealing With Conflict Confrontation Diffusion Well-Defined Tasks Communication Avoidance Clear Goals