The document provides an overview of organizational design and structure. It discusses key concepts such as departmentalization, establishing reporting relationships, allocating authority, and the basic forms of organizational design. Specifically, it addresses: 1) The importance of organizational design in enabling groups to coordinate resources and activities to produce value. Different approaches to departmentalization and their advantages and disadvantages are examined. 2) The need to establish clear reporting relationships to clarify lines of authority and responsibility within the organizational structure. 3) How authority is allocated through concepts like line and staff authority, and functional authority. Line authority flows down the chain of command while staff authority allows advising those with line authority.

1. Contents
Introduction…………………………………………………………………………….. 1
Organization Design……………………………………………………………………. 3
Departmentalization…………………………………………………………….……… 6
Establishing Relationship Report………………………………………………….…… 10
Allocating Authority…….……………………………………………………………... 11
Coordinating Activities………………………………………………………………… 16
Basic Forms of Organizational Design………………………………..………………… 18
Current Issues in Organizational Design………………………………………………... 24
References………..……………………………………………………………………… 27
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2. 0. Introduction:
Organizational structure is formal and informal framework of policies and rules, within which an
organization arranges its lines of authority and communications, and allocates rights and duties.
Organizational structure determines the manner and extent to which roles, power, and
responsibilities are delegated, controlled, and coordinated, and how information flows between
levels of management. “Organization” is a word many people use loosely. Some would say it
includes all the behavior of all participants. Other would equate with the total system of social
and cultural relationships. Still others refer to it as an enterprise, such as the United States Steel
Corporation or the Department of Defense. But for most participating managers, the term
organization implies a formalized intentional structure of roles or positions.
In the first place, people working together must fill certain roles. In the second place, the roles
people asked to fill should be intentionally designed to ensure that required activities are done
and that activities are fit together so that people can work smoothly, effectively, and efficiently
in groups. Certainly, most managers believe they are organizing when they establish such an
intentional structure. It is often said that good people can make any organization pattern work.
Some even assert that vagueness in an organization is a good thing in that it forces teamwork,
since people know that they must corporate to get anything done. However, there can be no
doubt that good people and those who want to corporate will work together most effectively if
they know their parts they are to play in any team operation and the way their roles relate to one
another. This is as true in business or government as it is in football or in a symphony orchestra.
Designing and maintaining these systems of roles is basically the managerial function of
organizing.
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3. For an organizational role to exist and be meaningful to people, it must incorporate (1) verifiable
objectives, which are major part of planning; (2) a clear idea of the major duties or activities
involved; and (3) an understood area of discretion or authority so that the person filling the role
knows what he or she can do to accomplish goals. In addition to make a role work out
effectively, provision should be made for supplying needed information and other tools
necessary for performance in that role.
It is in this sense that we think of organizing as
1. The identification and classification of required activities,
2. The grouping of activities necessary to attain objectives,
3. The assignment of each grouping to a manager with the authority (delegation)
necessary to supervise it, and
4. The provision for coordination horizontally (on the same or a similar organizational
level) and vertically (for example, corporate headquarters, division, and department) in
the organization structure.
An organization structure should be designed to clarify who is to do what tasks and who is
responsible for what results, to remove obstacles to performance caused by confusion and
uncertainty of assignment, and to furnish decision-making and communications networks
reflecting and supporting enterprise objectives.
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4. 1. Organizational Design:
Organizational design is about enabling a group of people to combine, coordinate, and
control resources and activities in order to produce value, all in a way appropriate to the
environment in which the business competes. So, designing is not just an one-step action but
rather it is a process. This means that, you cannot have a pre-dominant form which is fixed
forever. It must be constantly change and evolve with its changing environment. Appropriate
organizational design enables an organization to execute better, learn faster, and change more
easily. Organization Design is one of –or maybe the most important– determinant things which
each manager must know to be successful in implementing strategy in an organization. To do so,
they must be masters in strategy, accounting, psychology, information technology, and many
other fields. To be successful in organizational design, it is not important to be good in just one
or two fields and the areas are interdependent to each others.
In every job, worker’s actions are influenced by the situation in which the person works in. As a
result, to achieve an effective performance, companies must align various organizational
features. Organization design interventions deal with modifying elements of an organization’s
structure, including the division of labor, allocation of decision rights, choice of coordinating
mechanisms, delineation of organizational boundaries, and networks of informal relationships.
Organizational performance is the result of the interaction of strategy, organizational context,
and individual behavior. This means managers need to choose the right approach to the right
markets, create processes to deliver quality goods and/or services to those markets, and motivate
people to act in line with the company’s objectives. Organizational design takes into account all
three critical performance factors: strategy, organization, and motivation.
If you want to know about organization design, you have to know the basic forms of structure.
Consider an architecture analogy – if you know different types of structures commonly used for
building a house for example, town-house, studio flat, blocks of flats, open plan, detached, semi-
detached, terraced – you can then accept or reject structures that do not fit your purpose.
Functional structures, process structures, product, geographical, market structures, matrix or
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5. project organizations, boundarlyess organizations, and so forth are different forms of an
organization’s structures.
Figure – 1
However, structure is not the only consideration. For organizational design, there are a series of
policies that are controllable by management and can influence employee behavior. They can be
described in five categories and depicted as a star model (Figure – 1&2).
This model clearly demonstrates that changing the structure impacts on each of the other aspects
of the organization. For things to work well you need to design not simply re-structure.
Figure – 2 Star model
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6. Figure – 3 Input-Output Models
In this model of designing/redesigning, we have an input-output diagram where structure and
design decisions take place in the processing elements (people, work, formal organization,
informal organization, see Figure – 3) where you are working to get balance and harmony among
these elements in order to produce the required outputs. The challenge in trying to achieve a
design that results in this balance is in being able to look beyond the ‘structure’ of your
organization, whether it is hierarchy, matrix, network or something else, to the design that lies
behind it. You need to be able to make sound judgments on what to change and what to leave –
remembering that as soon as you change one element, it will affect all the other elements. To
compound the challenge, you are trying to make this judgment in a context where customer
requirements and environmental demands are constantly shifting.
There are some principles in organizational design. First one is principle of “Division of Labour”
which the manager decides about departmentalization and specialization. In designing, the
manager must think about how to divide labors between different parts of the organization and
also there must be some specialization for each job. Second is principle of “Unity of command”
which includes defining the line of command and also having one superior in the company. The
third principle is “Authority and Responsibility” which itself consists of line and staff authority
and authority and power. The last two principles are “Spans of Control” and “Contingency
Factors”. Spans of control is deciding about the levels of control in the organization and also
deciding about centralization and decentralization of the departments of the company.
Contingency factors in designing an organization is thinking about Environment and technology
and having the Knowledge technology which is about task variability & problem analyzability.
2. Departmentalization:
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7. It’s the basis on which individuals are grouped into departments and departments into total
organizations. Managers should make choices about how to use the series of command to group
people together to perform their work. There are five approaches to structural design that reflect
different uses of the chain of command in departmentalization.
Ι. Vertical functional approach
People are grouped together in departments by common skills and work activities, such as an
engineering department and an accounting department.
ΙΙ. Divisional Approach
Departments are grouped together into separate, self-contained divisions based in a common
product, program, or geographical region. Diverse skills rather than similar skills are the basis of
departmentalization.
ΙΙΙ. Horizontal matrix approach
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8. Functional and divisional chains of command are implemented simultaneously and overlay one
another in the same departments. Two chains of command exist, and some employees report to
two bosses.
Ις. Team-based approach
The organization creates a series of teams to accomplish specific tasks and to coordinate major
departments. Teams can exist from the office of the president all the way down to the shop floor.
ς. Network Approach
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9. The organization becomes a small, central hub electronically connected to other organizations
that perform vital functions. Departments are independent, contracting services to the central hub
for a profit. Departments can be located anywhere in the world.
Each approach to structure serves a distinct purpose for the organization, and each has
advantages and disadvantages. The basic difference among structures is the way in which
employees are departmentalized and to whom they report.
2.1 Advantages of Departmentalization:
 Department can be staffed by experts with specialized training.
 Consistency among departments for repetitive activities.
 Shared management responsibility.
 Supervision is facilitated.
 Coordination within the department is easier.
2.2 Disadvantages of Departmentalization:
 Personnel unfamiliar with procedures performed in their department by others.
 Inter-department documentation of activities is often not accessible.
 Delays when there are problems.
 Decision making becomes slow.
 Accountability and performance are difficult to monitor.
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10. 2.3 Major forms of Departmentalization:
 Functional Departmentalization - Grouping activities by functions performed. Activities
can be grouped according to function (work being done) to pursue economies of scale by
placing employees with shared skills and knowledge into departments for example human
resources, IT, accounting, manufacturing, logistics, marketing, and engineering. Functional
departmentalization can be used in all types of organizations.
 Product Departmentalization - Grouping activities by product line. Tasks can also be
grouped according to a specific product or service, thus placing all activities related to the
product or the service under one manager. Each major product area in the corporation is
under the authority of a senior manager who is specialist in, and is responsible for,
everything related to the product line. LA Gear is an example of company that uses product
departmentalization. Its structure is based on its varied product lines which include women’s
footwear, children’s footwear and men’s footwear.
 Customer Departmentalization - Grouping activities on the basis of common customers or
types of customers. Jobs may be grouped according to the type of customer served by the
organization. The assumption is that customers in each department have a common set of
problems and needs that can best be met by specialists. The sales activities in an office
supply firm can be broken down into three departments that serve retail, wholesale and
government accounts.
 Geographic Departmentalization - Grouping activities on the basis of territory. If an
organization's customers are geographically dispersed, it can group jobs based on geography.
For example, the organization structure of Coca-Cola has reflected the company’s operation
in two broad geographic areas – the North American sector and the international sector,
which includes the Pacific Rim, the European Community, Northeast Europe, Africa and
Latin America groups.
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11.  Process departmentalization - Grouping activities on the basis of product or service or
customer flow. Because each process requires different skills, process departmentalization
allows homogenous activities to be categorized. For example, the applicants might need to go
through several departments namely validation, licensing and treasury, before receiving the
driver’s license.
3. Establishing Reporting Relationship:
It’s one of the most important factors on the organizational because every position must
report to another position. HRIS keeps track of this departmental organizational information
through the Reporting Relationship fields. This data can be updated through the
Establish/Maintain Position workflow to initially enter or maintain any changes in the
organizational structure. These changes must be approved by the ECC Team Assistants; it will
be reflected in HRIS. The data maintained in HRIS for the reporting relationship will also export
to another part, so it is most important that this data be kept up to date and exact. This action is
processed in the Establish/Maintain Position workflow.
The third basic element of organizing is the establishment of reporting relationship among
positions. The purpose of this activity is to clarify the chain of command and the span of
management. Chain of command is an old concept, first popularized in the early years of the 20th
century. The chain of command actually has two components; the first, called unity commended,
suggests that each person within an organizational must have a clear reporting relationship to one
and only one boss. The second, called the scalar principle, suggests that must be a clear unbroken
line of authority that extends from the lowest to the highest position in the organizational.
On the other hand, the internal audit manager shall report directly to the Board of Directors
through an established Audit Committee designated by the Board—and report administratively
to the General Manager. The intent of this reporting relationship is to establish auditor
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12. independence by reporting directly to the Board and General Manager, while emphasizing
executive-level teamwork among the internal auditor, the General Manager, and the Board.
For daily operational matters, the internal audit manager shall report directly to the General
Manager. The internal audit manager shall also report to the Board of Directors, or its designated
audit committee, at least once every three months.
The internal audit manager shall file all internal audit reports, audit plans, and all other written
audit documents, directly to the Board of Directors, or its designated audit committee, and the
General Manager. The internal audit manager also shall prepare quarterly summary report of
audit activities to the Board of Directors and the General Manager. Each summary report will
include comments about major audit findings and recommendations.
4. Allocating Authority:
Most businesses will have various aims and objectives and it is important that employees in the
organization know these objectives and work towards them. For example, for a business wants to
try to improve the quality of the service that they provide, a customer service employees should
be nice to customers or give them the best quality service when dealing with them. In any
organization, it is highly likely that a person will have responsibility for managing a number of
other people in the organization. In some cases it might just be the responsibility for looking after
one other person and in other cases it might be very many. The number of people that one person
has responsibility for is termed the span of control. The more people an individual has
responsibility for the wider the span of control is said to be. Chief executives are responsible for
the overall activities of an organization, but each manager or supervisor is responsible for the
organization of his/her own department.
4.1 Line and Staff Authority:
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13. Line units and personnel conduct major business of the organization like production and
marketing functions. Staff units and personnel assist the line units by providing specialized
expertise and services like accounting and public relations. Line authority flows down the chain
of command. For example, line authority gives a production supervisor the right to direct an
employee to operate a particular machine, and it gives the vice president of finance the right to
request a certain report from a department head. Therefore, line authority gives an individual a
certain degree of power relating to the performance of an organizational task.
Two important clarifications should be considered, however, when discussing line authority: (1)
line authority does not ensure effective performance, and (2) line authority is not restricted to
line personnel. The head of a staff department has line authority over his or her employees by
virtue of authority relationships between the department head and his or her directly-reporting
employees.
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14. Staff authority is the right to advise or counsel those with line authority. For example, a quality
control manager aids a production manager by determining the acceptable quality level of
products or services at a manufacturing company, initiating quality programs, and carrying out
statistical analysis to ensure compliance with quality standards. Therefore, staff authority gives
staff personnel the right to offer advice in an effort to improve line operations.
Functional authority is referred to as limited line authority. It gives a staff person power over a
particular function, such as safety or accounting. Usually, functional authority is given to specific
staff personnel with expertise in a certain area. For example, members of an accounting
department might have authority to request documents they need to prepare financial reports.
Functional authority is a special type of authority for staff personnel, which must be designated
by top management.
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15. 4.2 Line and Staff Conflict:
Conflict between line and staff personnel is almost inevitable. Although minimal conflict due to
differences in viewpoints is natural, conflict on the part of line and staff personnel can disrupt an
entire organization. There are many reasons for conflict. Poor human relations, overlapping
authority and responsibility, and misuse of staff personnel by top management are all primary
reasons for feelings of resentment between line and staff personnel. But there are several ways to
minimize conflict. One way is to integrate line and staff personnel into a work team. The success
of the work team depends on how well each group can work together in efforts to increase
productivity and performance.
Another solution is to ensure that the areas of responsibility and authority of both line and staff
personnel are clearly defined. With clearly defined lines of authority and responsibility, each
group may better understand their role in the organization. A third way to minimize conflict is to
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16. hold both line and staff personnel accountable for the results of their own activities. In other
words, line personnel should not be entirely responsible for poor performance resulting from
staff personnel advice.
4.3 Delegation:
Tasks have to be given to other people to do. When this happens there is a transfer of some level
of authority. You might, for example, have been in a shop and the cashier has had to ask their
manager or supervisor if s/he will come and sign something or do something with the till. This
might relate to a refund or the exchange of a product, for example. If a worker is given the
authority to be able to carry out these types of task it is referred to as delegation. A person can
delegate the authority for another person to be able to carry out a certain task. What they cannot
do is delegate responsibility. Ultimately, the responsibility for the way the business operates lies
with those who own the business or who have been given the responsibility to carry out such a
task. Exactly what those responsibilities are might be specified in a person's job description.
4.4 Traditional Allocation:
− By seniority and experiences: the more experiences the more important role.
− By gender: Characteristically different jobs, varies in different cultures.
− By Qualification: the higher level the more responsibility.
− By Individual Contribution: suitability, eligibility and personal skills.
5. Coordinating Activities:
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17. Coordination activities is a becoming a very important factor that plays in an organization.
Basically it's the linking of the two or more organizational members and/or units so they can
perform the required functions together well. Coordinating can be achieved by many several
ways such as programming, feedback and culture.
Programming is recommended for most of the companies to get the suitable plans and to guide
our organization. Policies and rules are also considered from the programming section which can
manage the organization behaviors. Communication skills and interaction will help the
organization to identify itself as a learning organization. Through feedbacks of these
communications and conversations, you will get the best coordination of the organization. Also
sharing ideas, beliefs and values are assisting the coordinating part of the organization hence it
reflects the staff points of view.
5.1 Vertical Coordination:
It's a process of ensuring that each successive stage in the production, processing, and marketing
of a product is appropriately managed and interrelated to the next, so that decisions about what to
produce, and how much, are communicated as efficiently as possible from the consumer to the
producer. Vertical integration is a type of vertical coordination, but the latter does not necessarily
require that a single organization own or control all of the stages. For example, the use of
contracts and marketing agreements between buyers and sellers plus the availability of timely.
Basically it's the linking of work units separated by hierarchal level. Direct supervision is a way
to gain the vertical coordinating hence the supervisors have the communication skills and ability
to coordinate other staffs. Implementing the rules and procedures will be governing the routine
events which will be leading to a successful coordination. Working together in a team with a
visional goal is a cooperative idea to enhance the idea of vertical coordination since all of the
members are working and performing from the same purpose.
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18. 5.2 Horizontal Coordination:
It’s another type of coordination which is focusing on the Linking of work units (individuals,
teams, departments) at the same hierarchal level. It's like dealing with members or units for the
same operational or functional level. Direct contact between members in the same level will be
serving as the way considered horizontal coordination. Establishment of integrating roles
between the units and members will be useful since it will work as a coordination point between
the different units. Applying multiple command systems will also perform the actions in such a
faster way by combining two or more units or groups together. The below example shows an
image of command systems:
5.3 Coordination Factors:
There are many factors that may affect the coordinating process. Formality of the organization's
structure will play a very important role to decide the coordination possibility. Also the
interpersonal orientation may cause a difficulty to handle the coordinating process, that's why it's
very important to know the focus purpose, whether it is task or relationship focus. An origination
should find the proper procedure to handle the time management in gaining knowledge of results
or consequences of actions, in a result will be leading to a time oriented organization. Also the
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19. goals and visions should not be conflicted with other units' goals; therefore the organization top
management must pay an attention to similar issues which may affect the coordination scale.
6. Basic Forms of Organization Design:
Typically, design is approached as an internal change under the guidance of an external facilitator.
Managers and members work together to define the needs of the organization then create systems to meet
those needs most effectively. The facilitator assures that a systematic process is followed and encourages
creative thinking.
The basic forms of organization design:
1. Simple structure
2. Functional structure
3. Multidivisional structure
4. Strategic Business Units (SBUs)
5. Conglomerate structure
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20. Simple structure: The simple structure is a structure in which the owner-manager makes all
major decisions and monitors all activities while the staff serves as an extension of the manager’s
supervisory authority. Typically, the owner-manager actively works in the business on a daily
basis. Informal relationships, few rules, limited task specialization, and unsophisticated
information systems characterize this structure. Frequent and informal communications between
the owner-manager and employees make coordinating the work to be done relatively easy. The
simple structure is matched with focus strategies and business level strategies, as firms
implementing these strategies commonly compete by offering a single product line in a single
geographic market. Local restaurants, repair businesses, and other specialized enterprises are
examples of firms using the simple structure.
Simple structure model
Functional structure: The functional structure consists of a chief executive officer and a limited
corporate staff, with functional line managers in dominant organizational areas such as
production, accounting, marketing, R&D, engineering, and human resources. This structure
allows for functional specialization, thereby facilitating active sharing of knowledge within each
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21. functional area. Knowledge sharing facilitates career paths as well as professional development
of functional specialists.
However, a functional orientation can negatively affect communication and coordination among
those representing different organizational functions. For this reason, the CEO must work hard to
verify that the decisions and actions of individual business functions promote the entire firm
rather than a single function. The functional structure supports implementing business-level
strategies and versification. When changing simple to a functional structure, firms want to avoid
introducing value-destroying bureaucratic procedures such as failing to promote innovation and
creativity.
Functional structure model
Multidivisional Structure: With continuing growth and success, firms often consider greater
levels of diversification. Successfully using a diversification strategy requires analyzing
substantially greater amounts of data and information when the firm offers the same products in
different markets(market or geographic diversification) or offers different products in several
markets(product diversification). In addition, trying to manage high levels of diversification
through functional diversifications creates serious coordination and control problems, a fact that
commonly leads to a new structural form.
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22. The multidivisional structure consists of operating divisions, each representing a separate
business or profit center in which the top corporate officer delegates responsibilities for day-to-
day operations and business-unit strategy to division managers. Each division represents a
distinct, self-contained business with its own functional hierarchy. It has three major benefits: (1)
it enables corporate officers to more accurately monitor the performance of each business, which
simplifies the problem of control; (2) it facilitates comparisons between divisions, which
improves the resource allocation process; and (3)it stimulates managers of poorly performing
divisions to look for ways of improving performance. Partly because of its value to diversified
corporations, some consider the multidivisional structure to be one of the twentieth century’s
most significant organizational innovations.
Strategic Business Units (SBUs): During the past ten years, large companies have restructured
into strategic business units (SBUs). An SBU is a grouping of functional units that have the
responsibility for profit (or loss) of part of the organization’s core business. SBUs are divisions
(or groups) composed of independent prod-market segments that are given primary responsibility
and authority for the management of their own functional areas. It may be in any size or level,
but it has its own unique mission, identifiable competitors, external market focus and control of
its business functions. Idea is to decentralize the strategic elements. Each strategic business is
large enough to maintain its own project and program managers. The executive in charge of the
strategic business unit may act as the sponsor for all of the program and project managers within
the SBU. The major benefit of this type of structuring is that it allows the SBU to work more
closely with the customer. It is a customer-focused organizational structure.
Conglomerate structure: Appropriate for large corps with many prod lines in several unrelated
industries. A holding company is formed with several subsidiaries in it. So as companies’
growth in size and increase in complexity, they need more sophisticated work-flows. They need
a more advanced structure based on their needs.
Today there are some new forms of structuring in organizations. Here are three of them:
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23. 1. Team structure
2. Matrix Structure
3. Project Structure
Team structure: Team structure organizes separate functions into a group based on one overall
objective. Teams are given the power to be as innovative as they want. Some teams may have a
group leader who is in charge of the group. Since the organization is made up of groups to
perform the functions of the company, teams must perform well because they are held
accountable for their performance.
Matrix structure: The matrix organization is an attempt to combine the advantages of the pure
functional structure and the product organizational structure. This form is identically suited for
companies, such as construction, that are “project-driven”. The figure below shows a typical
Matrix organization.
In a matrix organization, each project manager reports directly to the vice president and the
general manager. Since each project represents a potential profit centre, the power and authority
used by the project manager come directly from the general manager.
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24. Advantages of a pure matrix organizational form, to project management, include:
• Because key people can be shared, the project cost is minimized
• Conflicts are minimal, and those requiring hierarchical referrals are more easily resolved
• There is a better balance between time, cost and performance
• Authority and responsibility are shared
• Stress is distributed among the team
Project Structure: A project structure is an organizational structure in which employees
continuously work on projects. This is like the matrix structure; however when the project ends
the employees don’t go back their departments. They continuously work on projects in a team
like structure. Each team has the necessary employees to successfully complete the project. Each
employee brings his or her specialized skill to the team.
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25. 7. Current Issues in Organizational Design:
One of the most challenging things which companies face today is the working environment
which is rapidly changing. The only way they can survive in this situation is adapting themselves
with this changing environment. They need to continuously adapt themselves with pace which is
faster or equal to the speed of the changes in the world. They need to restructure and restructure
again and again to be in a place which is more advanced than the environment or at least be on
the same level.
Organizations are all around us and shape our lives in many ways. But what contributions do
organizations make? Why are they important? The table below lists seven reasons organizations
are important to you and so society. First, organizations bring together resources to accomplish
specific goals. Consider Northup Grumman Newport News (formerly Newport News
Shipbuilding), which builds nuclear-powered, Nimitz-class aircraft carriers. Putting together an
aircraft carrier is an incredibly complex job involving 47,000 tons of precision-welded steel,
more than 1 million distinct parts, 900 miles of wire and cable, and more than seven years of
hard work by 17,800 employees. How could such a job be accomplished without an organization
to acquire and coordinate these varied resources?
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26. Organizations also produce goods and services that customers want at competitive prices. Bill
Gates, who built Microsoft into a global powerhouse, asserts that the modern organization “is
one of the most effective means to allocate resources we’ve ever seen. It transforms great ideas
into customer benefits on an unimaginably large sale.” Companies look for innovative ways to
produce and distribute desirable goods and services more efficiently. Two ways are through e-
business and through the use of computer-based manufacturing technologies. Redesigning
organizational structures and management practices can also contribute to increased efficiency.
Organizations create a drive for innovation rather than a reliance on standard products and
outmoded approaches to management and organization design.
Today, organizations adapt to and influence a rapidly changing environment. Consider Google,
provider of the Internet’s most popular search engine, which continues to adapt and evolve along
with the evolving Internet. Rather than being a rigid service, Google is continually adding
technological features that create a better service by accretion. At any time, Google’s site
features several technologies in development in development so that engineers get ideas and
feedback from users. Some large businesses have entire departments charged with monitoring
the external environment and finding ways to adapt to or influence that environment.
Through all of these activities, organizations create value for their owners, customers, and
employees. Managers analyze which parts of the operation create value and which parts do not; a
company can be profitable only when the value it creates is greater than the cost of resources.
Vizio Inc., a growing force in the flat-panel television industry, for example, creates value by
using existing LCD technology and developing an equity partnership with a contract
manufacture rather than producing television in-house. By keeping its costs low, the California-
based company has been able to sell flat-panel TVs as about half cost of those sold by major
electronics manufactures.
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27. Organizations exist to do the following:
Bring together resources to achieve desired
goals and outcomes
Produce goods and services efficiently
Facilitate innovation
Use modern manufacturing and
information technologies
Finally, organizations have to cope with and accommodate today’s challenges of workforce
diversity and growing concerns over ethics and social responsibility, as well as find effective
ways to motivate employees to work together to accomplish organizational goals.
Reference
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Sep 7, 1998, pp.52
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Natorp Boulevard, Mason, OH 45040 USA
• Flamholtz, E.G., Das, T.K. & Tsui, A.S. "Toward an Integrative Framework of
OrganizationalControl," Accounting, Organizations and Society, 10(1), 1985, pp. 35-50.
• Hitt M. A., Ireland D., Hoskisson R. E., (2009) Strategic management: competitiveness and
globalization: concepts & cases (pp. 314-315) South-Western Cengage Learning, Mason, OH
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