This document discusses organizational structure and how businesses organize their jobs. It covers key topics such as determining an organizational structure based on a business's purpose, size, and environment. The building blocks of organizational structure include specialization, where jobs are identified, and departmentalization, where jobs are grouped. Common bases for departmentalization are by customer, product, process, geography, and function. The document also examines establishing hierarchies, assigning responsibilities and authority, and centralization vs. decentralization of decision-making. Basic forms of organizational structure like functional, divisional, matrix and international are presented.

1. Chapter 6
Organizing the Business
Enterprise

2. Sr. Chapter Chapter Heading
No.No.
1. 3 Understanding the Global context of business (031012)
2. 4 Conducting Business Ethically and Responsibly (250212)
3. 6 Organizing the Business Enterprise (030312)
4. 7 Understanding Entrepreneurship and Small Business (0312)
5. 8 Managing Human Resources
6. 9 Understanding Employee Motivating, Satisfying and Leadership
7. 11 Understanding Marketing Processes and Consumer Behavior
8. 16 Managing Quality and Productivity
9. 17 Managing Information Systems and Communication Technology
10. 19 Understanding Money and Banking
11. 20 Intermediate Term and Lease Financing

3. Marks Distribution
50 Terminal Examination
20 Mid Term Examination
15 Quizzes
15 Final Assignment
3

4.  WHAT IS ORGANIZATIONAL STRUCTURE
 Determinants of Organization
 Chain of Command
 THE BUILDING BLOCKS OF ORGANIZATIONAL
STRUCTURE
 Specialization
 Departmentalization
 Customer Departmentalization
 Product Departmentalization
 Process Departmentalization
 Geographic departmentalization
 Functional Departmentalization

5.  ESTABLISHING THE DECISION-MAKING HIERARCHY
 Assigning Tasks: Responsibility and Authority
 Performing Tasks: Delegation and Accountability
 Fear of Delegating
 Distributing Authority: Centralization and Decentralization
 Tall and Flat organizations
 Span of Control
 Three forms of authority
 Line Authority
 Staff Authority
 Committee and Team Authority
 BASIC FORMS OF ORGANIZATIONAL STRUCTURE
 Functional Organization
 Divisional Organization
 Matrix Organization
 International Organization
 Organizational Design for 21st century
 Boundary-less organization
 The team organization
 The virtual organization
 The learning organization

6. Organizational Structure
 The specification of the jobs to be done
within a business and how those jobs
are related to one another
Each organization must
develop a structure that
meets its specific needs
7-6

7. Definitions
 Determinants of Organization
 Purpose, Mission & Strategy
 Size, technology and changes in environment
 Organizational Chart:
 Diagram depicting a company’s structure
and showing employees where they fit into
its operations
 Chain of Command:
 Reporting relationships within a company
7

8. THE BUILDING BLOCKS OF
ORGANIZATIONAL STRUCTURE
 Job Specialization
 The process of identifying the specific jobs
that need to be done and designing the
people who will perform them
 Departmentalization
 The process to determine how jobs should
be grouped together in logical units to
make the workplace more efficient

9. BASIS OF
DEPARTMENTALIZATION
1. Customer: according to types of customers likely to buy a given
product. E.g. women and men departments; wholesale and
retail department.
2. Product: Departmentalization according to specific products
being created. Example: When a computer store has a
department for printers, for hardware, for software, etc. often
used in manufacturers.
3. Process: Departmentalization according to production processes
used to create a good or service. Sewing Department, Cutting
department etc in a garment factory
4. Geographic: Departmentalization according to areas served by
a business.
5. Functional: Departmentalization according to the function or
activities of similar groups. Example: When a company has a
different department for marketing, accounting, etc.
9

10. Customer Departmentalization
 Industrial vs. President & CEO
Consumer Travel Ways Inc.
 Youth vs. Adult Vice President Vice President Vice President
 Family vs. Market
Seniors Travel
Market
Couples Travel
Market
Family Travel
Singles
Managers Managers Managers
Staff Staff Staff

11. Product Departmentalization
 Consumer office President & CEO
supplies vs. Business
business office
Technology
Inc.
supplies
 Photocopiers vs.
computers
Vice President Vice President Vice President
Division Division Equipment Division
 Tax return Photocopier Computer Telecommunications
preparation vs.
company financial
statements Managers Managers Managers
Staff Staff Staff
7-11

12. Process Departmentalization
President & CEO
 Groups based Hi-Tech Systems
on the Ltd.
manufacturing
Vice President Vice President
process Division Division
Vice President
Painting Division
Parts Fabrication Assembly
 assembly
 painting
 drying Managers Managers Managers
 inspection
Staff Staff Staff
7-12

13. Geographic
Departmentalization
 Western vs. President & CEO
Eastern region College
Publishers Ltd.
 Canadian vs.
American Vice President Vice President Vice President
Western Region Central Region Eastern Region
 North America
vs. Europe
Managers Managers Managers
Staff Staff Staff
7-13

14. Functional
Departmentalization
 Based on activities President & CEO
Crystal Retailers
performed Ltd.
 accounting & finance
 marketing Vice President
Vice President
Vice President
Finance Resources
 human resource
Marketing
Accounting & Human
 production
Managers Managers Managers
Staff Staff Staff

15. The Combination of Various
Organizational Structures

16. ESTABLISHING THE DECISION-
MAKING HIERARCHY
1. Assign tasks
2. Perform tasks
3. Distribute Authority
16

17. Assign Tasks
Responsibility:
Duty to perform an assigned task
Authority:
Power to make the decisions necessary
to complete a task
17

18. Perform Tasks
Delegation:
assignment of a task, responsibility, or
authority by a manager to a subordinate
Accountability:
Liability of subordinates for
accomplishing tasks assigned by
managers
18

19. Distributing Authority
Centralized organizations
Top managers hold most
decision-making authority
Decentralized organizations
Lower level managers hold
significant decision-making
authority

20. Distributing Authority
Span of Control: The number of subordinates that a manager is responsible for
supervising
Wide span- many subordinates- Flat Organization
Narrow span- very few subordinates- Tall Organization
Flat organizations: Characteristic of decentralized companies with relatively few
layers of management and relatively wide spans of control.
Tall organizations: Characteristic of centralized companies with multiple layers
of management and relatively narrow spans of control.
20

21. Organizational Structure and Span of Control

22. Forms of Authority
 Line Authority
 Line Departments
 Staff Authority
 Staff Members
 Committee and Team
Authority

23. Forms of Authority
 Several different forms of authority develop in most organizations,
regardless of the organizational structure.
 Line authority: When authority flows up and down the chain of
command. Classic example: the military.
 Line departments: Departments with a direct link to the production and
sales of a specific product. Examples include: manufacturing,
assembly, sales, and distribution. Each line department is essential to
an organization’s success. Line employees are the producers in the
company.
 Staff authority: When authority is based on expertise that usually
involves advising line managers. Examples include: legal, accounting,
human resources. They help line departments in making decisions. E.g.
marketing department seeks attorney advice for signing new contract.
 Staff members: Assist line departments in making decisions, but do not
have the authority to make final decisions.
 Team and committee authority: Authority granted to teams or
committees that play central roles in the firm’s daily operations. This
form of authority has recently emerged across a wide spectrum of
companies.

24. Basic Forms of
Organizational Structure
Functional
Organization
Divisional
Organization
Matrix
Organization International
Organization

25. Basic Forms of
Organizational Structure
 Functional organization: Structured around basic business
functions such as marketing, operations, and finance. Examples
can be found in most small to medium businesses.
 Divisional organization: Corporate divisions operate as
autonomous businesses under the larger corporate umbrella.
This structure relies on product departmentalization. Examples
include General Electric, and The Walt Disney Company. The
create product based divisions. Each may be managed as a
separate enterprise.
 Matrix organization: Teams are formed, and team members
report to two or more managers. In some firms the matrix
structure is temporary, while in other firms it is permanent.
Examples include: Martha Stewart Living, Omnimedia, and
many large consulting firms. It was created by NASA. It relies
on committee and team authority.
 International organization: Approach developed in response to
the need to manufacture, purchase, and sell in global markets.
Typically an international structure evolves as international
operations escalate.

26. A Matrix Organization
MARTHA STEWART
Area Media Group Merchandising Group
Specialists
Radio/ Network/ Kmart Catalog Sears Specialty
Magazines Books Internet
Newspaper Cable TV line line Paint retailing
Cooking
Entertainment
Weddings
Crafts
Gardening
Home
Holidays
Children

27. An International Organization
CEO
Retail Retail International
Division A Division B Division
Latin
Europe Asia
America

28. An International Organization
 Many organizations initiate international
expansion with a small team of
specialists, evolve into a separate
division as shown in the slide, and
ultimately (if they experience success in
foreign markets) integrate international
operations into their standard business
units.

29. The Future of
Organizational Structure
 Boundary-less Organizations
 Team Organizations
 Virtual Organizations
 Learning Organizations

30. The Future of
Organizational Structure
 Organizational structure continues to change as organizations seek new
ways to compete effectively within a rapidly changing business
environment. Emerging forms include (these characteristics):
1. Boundary-less: Organizations in which traditional boundaries and
structures are minimized or eliminated. Example: Wal-Mart has tied its
key suppliers into its information system for seamlessfaultless
inventory management.
2. Team: Organizations that rely almost exclusively on project-type
teams. Examples: Xerox and Apple are moving in this direction.
3. Virtual: Organizations that have little or no formal structure, relying
heavily on temporary workers, leased facilities, and outsourced
services. Examples: Global Research Consortium operates this way,
and University of Phoenix is moving in this direction.
4. Learning: Organizations that strive to integrate continuous
improvement with continuous employee learning and development.
Example: Shell Oil Company.
5. Learning org. works to facilitate the lifelong learning and personal
development to all employees and continuous respond to change.

31. The Informal Organization
A Powerful Dynamic
 Informal Groups
 The grapevinegossip
 Intrapreneuring

32. The Informal Organization
A Powerful Dynamic
 The informal organization is the network of everyday
social interactions among employees, which do not
follow formal lines of communication. The informal
organization can be as powerful—if not more so—
than the formal organization.
 Informal groups: Groups of people who decide to
interact among themselves. Their impact on the
organization can be positive, negative, or neutral.
 The grapevinegossip: Informal communication
network that runs through the organization. You
need to have open channels of communication and
responding vigorously in order to eliminate its level.

33. The Informal Organization
A Powerful Dynamic
Intrapreneuring: Harnessingtie
together the energy of the informal
organization to improve productivity by
creating the innovation and flexibility of
a small-business environment within
the confines of a large organization.
Compaq, Rubbermaid, 3M, and Xerox
are examples of companies that
support intrapreneuring.