Principle and Practice of Management MGT

1. Organization
Structure
Chapter Eight
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2. 8-2
Learning Objectives
LO 1 Explain how differentiation and integration influence an
organization’s structure.
LO 2 Summarize how authority operates.
LO 3 Define the roles of the board of directors and the chief
executive officer.
LO 4 Discuss how span of control affects structure and
managerial effectiveness.
LO 5 Explain how to delegate effectively.
LO 6 Distinguish between centralized and decentralized
organizations.
LO 7 Summarize the ways organizations can be structured.
LO 8 Identify the unique challenges of the matrix organization.
LO 9 Describe important integrative mechanisms.

3. 8-3
Fundamentals of Organizing
Organization chart
 The reporting
structure and
division of labor in an
organization

4. 8-4
Conventional Organization Chart
Figure 8.1

5. 8-5
Fundamentals of Organizing
Differentiation
 the organization is
composed of many
different units that
work on different
kinds of tasks, using
different skills and
work methods.
Integration
 degree to which
differentiated work
units work together
and coordinate their
efforts

6. 8-6
Differentiation
Division of labor
 The assignment of
different tasks to
different people or
groups
Specialization
 A process in which
different individuals
and units perform
different tasks

7. 8-7
Integration
Coordination
 The procedures that link the various parts of an
organization for the purpose of achieving the
organization’s overall mission

8. 8-8
Authority in Organizations
Authority
 The legitimate right to make decisions and to tell
other people what to do.

9. 8-9
Hierarchical Levels
Hierarchy
 The authority levels of the organizational
pyramid
Corporate governance
 The role of a corporation’s executive staff and
board of directors in ensuring that the firm’s
activities meet the goals of the firm’s
stakeholders

10. 8-10
Span of Control
Span of control
 The number of subordinates who report directly
to an executive or supervisor
Tall, flat

11. 8-11
Delegation
Delegation
 The assignment of new or additional
responsibilities to a subordinate
Responsibility, Authority,
and Accountability

12. 8-12
Delegation
Responsibility
 The assignment of a task that an employee is
supposed to carry out
Accountability
 The expectation that employees will perform a
job, take corrective action when necessary, and
report upward on the status and quality of their
performance

13. 8-13
Advantages of Delegation
Leverages managers’ energy and talent
Allows managers to accomplish more than they
could on their own
Helps develop effective subordinates.
Promotes a sense of being an important,
contributing member of the organization, so
employees tend to feel a stronger commitment,
perform their tasks better, and engage in more
innovation

14. 8-14
Steps in Effective Delegation
Figure 8.2

15. 8-15
Decentralization
Centralized
organization
 An organization in
which high-level
executives make
most decisions and
pass them down to
lower levels for
implementation
Decentralized
organization
 An organization in
which lower-level
managers make
important decisions

16. 8-16
The Horizontal Structure
Line departments
 Units that deal
directly with the
organization’s
primary goods and
services
Staff departments
 Units that support
line departments

17. 8-17
The Functional Organization
Functional organization
 Departmentalization around specialized activities
such as production, marketing, and human
resources.

18. 8-18
Advantages of Functional
Organizations
1. Economies of scale can be realized
2. Monitoring of the environment is more effective
3. Performance standards better maintained
4. Greater opportunity for specialized training and skill
development
5. People have greater opportunity for specialized
training and in-depth skill Development
6. Decision making and lines of communication are
simple and clearly understood

19. 8-19
The Divisional Organization
Divisional
organization
 Departmentalization
that groups units
around products,
customers, or
geographic regions.

20. 8-20
Advantages of the
Product Approach
1. Information needs are managed more easily
2. People have a full-time commitment to a
particular product line
3. Task responsibilities are clear
4. People receive broader training

21. 8-21
The Divisional Organization

22. 8-22
The Matrix Organization
Matrix organization
 An organization composed of dual reporting
relationships in which some managers report to
two superiors—a functional manager and a
divisional manager

23. 8-23
Matrix Organizational Structure
Figure 8.5

24. 8-24
Advantages of a Matrix Design
Table 8.2

25. 8-25
Disadvantages of a Matrix Design
Table 8.2

26. 8-26
The Network Organization
Network
organization
 A collection of
independent, mostly
single-function firms
that collaborate on a
good or service

27. 8-27
The Network Organization
Dynamic network
 Temporary
arrangements among
partners that can be
assembled and
reassembled to
adapt to the
environment
Broker
 A person who
assembles and
coordinates
participants in a
network

28. 8-28
Coordination by Standardization
Standardization
 Establishing common
routines and
procedures that
apply uniformly to
everyone.
Formalization
 The presence of rules
and regulations
governing how
people in the
organization interact.

29. 8-29
Coordination by Plan
Coordination by plan
 Interdependent units are required to meet
deadlines and objectives that contribute to a
common goal

30. 8-30
Coordination by Mutual Adjustment
Coordination by
mutual adjustment
 Units interact with
one another to make
accommodations to
achieve flexible
coordination

31. 8-31
Reducing the Need for Information
Slack resources
 extra resources on
which organizations
can rely in a pinch so
that if they get
caught off guard,
they can still adjust
Creating self-
contained tasks
 changing from a
functional
organization to a
product or project
organization and
giving each unit the
resources it needs to
perform its task

32. 8-32
Increasing Information-Processing
Capability
1. Direct contact among managers who share a problem
2. Liaison roles to handle communication between two
departments
3. Task forces brought together temporarily to solve a
common problem
4. Teams, or permanent interdepartmental decision-
making groups
5. Product, program, or project managers
6. Matrix organizations

33. 8-33
Managing High Information-
Processing Demands
Figure 8.8