Transcript Lecture 14.ppt

Lecture 14
Chapter
7
Organizing The
Business Enterprise
Chapter Outline
What is Organizational Structure?
The Building Blocks of Organizational
Structure
Establishing The Decision-Making
Hierarchy
Basic Forms of Organizational
Structure
Informal Organization
Hierarchy For Decisions
• After specialization and
departmentalization - Next step establish
decision making hierarchy
• Define reporting relationships
– Who is responsible for decisions and
operations
Hierarchy For Decisions
• Question who makes which decision
• The answer does not focus on individuals
• The right answer is decision making
hierarchy
• Decision making hierarchy results from a
three step process
Hierarchy For Decisions
• Assign Tasks
– Who makes decisions and specifying how
they should be made
– Who is supposed to do what is a complex
question
– Need to work out agreements about authority
and responsibility
• Responsibility
– Duty to perform an assigned task
• Authority
– Power to make the decision necessary to complete the
task
Hierarchy For Decisions
• Problem: level of responsibility and
authority are not clearly delineated in the
relationship
• Perform Tasks
– Implementing decision that have been made
• Here the issue arises of delegation and
accountability
– Delegation is when a manager assigns a task to the
employee
– Accountability, falls to the subordinate who must
complete the task
Small Business Delegation Fear
o Employee Can’t Do As Well
o Something Will Go Wrong
o No Long-Range Plan because you do
everyday fire fighting
o Not Up-To-Date On Industry Trends &
Competitive Products
o Solution: do not run show independently
Big Business
Delegation Fear
o Subordinate Doesn’t Know Job
o Subordinate “Show Manager Up”
o Desire To Retain Control
o Inability To Effectively Delegate
o Solution:
o Cannot do everything themselves
o Train subordinates if they cant perform
o Subordinate performs well it will reflect favorably
Hierarchy For Decisions
• Make decisions about general pattern of
authority
• Distribute Authority
– Determining whether the organization is to be
centralized or decentralized
– Centralized organizations
• Authority is held by upper level management
– Decentralized authority
• Authority is delegated to lower level of
management
Hierarchy For Decisions
• Assign Tasks
– Responsibility
– Authority
• Perform Tasks
– Delegation
– Accountability
• Distribute Authority
– Centralization
– Decentralization
Centralized/Tall Structure
Boss (Makes All Decisions)
Subordinate
Subordinate
Subordinate
Flat Organization
Span Of Control
Narrow
Wide
Forms of authority
• Line authority
– Authority flows in a direct chain of command
from the top to the bottom
– Line department
• Linked to production and sales of products
• Staff authority
– Authority based on expertise
– Staff members
• Individuals who aid the line department in making
decisions but cannot take final decision
Forms of authority
• Committee and team authority
• Authority granted to committees involved
in a firms daily operations
Forms of authority
Line vs. Staff Authority
Staff Managers
Leader
Advisor
Manager
Advisor
Manager
Line Managers
Manager
Line/Staff Organization
Committee/Team Authority
Leader
Team
(Advisors and/or
Decision-makers)
Managers
Managers
Managers
Basic Organizational
Structures
• Functional:
– Used in small and medium sized firms
– Based on functions
– specialization within functional areas
– Centralized
– Makes accountability difficult
Basic Organizational
Structures
• Divisional
– Relies on product departmentalization
– Separate departments/divisions producing
and marketing products
– Example: Heinz
• Food service, pet food, frozen food
Basic Organizational
Structures
• Matrix Organization
– Teams are formed and team members report
to two or more managers
– One manager has functional expertise while
the other one has product or project
orientation
– Semi permanent / permanent in organizations
• International structure
Functional Organization
Marketing
HQ
Finance
Copyright 2005 Prentice- Hall, Inc.
Operations
7-23
Divisional Organization
Copyright 2005 Prentice- Hall, Inc.
7-24
Matrix Organization
Copyright 2005 Prentice- Hall, Inc.
7-25
International Division
Structure
CEO
Retail
Division
A
Retail
Division
B
Retail
Division
C
Latin
America
Europe
Copyright 2005 Prentice- Hall, Inc.
Asia
7-26
21st Century Organizations
• Boundaryless
• Team – no functional hierarchy
• Virtual – no formal structure
• Learning – continuous improvements with
continuous employee learning and
development. Also transforms with
changing needs and demands
Virtual Organization
Informal Organizations
• Informal Groups- Interact Among
Themselves
• Grapevine – informal communication
network
Intrapreneuring
Process of creating and maintaining the
innovation and flexibility of a small business
environment within the confines of a large
organization
Intrapreneuring
Intrapreneur