Understanding Management

First Canadian Edition

Slides prepared by Janice Edwards College of the Rockies

Copyright 2009 Nelson Education Ltd.

Chapter 7

Structure and Fundamentals of Organizing

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Learning Objectives
1.

2.
3.

4.

Discuss the fundamental characteristics of organizing, including such concepts as work specialization, chain of command, span of management, and centralization versus decentralization. Describe functional and divisional approaches to structure. Explain the matrix approach to structure and its application to domestic and international organizations. Describe the contemporary team and virtual network structures and why they are being adopted by organizations.
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Copyright 2009 Nelson Education Ltd.

Learning Objectives (Contd)

5.

6.

7.

8.

Explain why organizations need coordination across departments and hierarchical levels, and describe mechanisms for achieving coordination. Identify how structure can be used to achieve an organizations strategic goals. Illustrate how organization structure can be designed to fit environmental uncertainty. Define production technology (manufacturing, service, and digital) and explain how it influences organization structure.
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Organizing

The deployment of organizational resources to achieve strategic goals. The deployment of organization resources is reflected in the division of labour into:

Specific departments and jobs Normal lines of authority Mechanisms for coordinating diverse organization tasks

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Organization Structure
The framework in which the organization defines how tasks are divided, resources are deployed, and departments are coordinated.
An Organization Chart is the visual representation of an organizations structure.

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Work Specialization

Tasks are subdivided into individual jobs. Employees perform only the tasks relevant to their specialized function. Jobs tend to be small, but they can be performed efficiently. There is a concern that employees may become isolated, and do only a single boring job. Many organizations are moving away from this principle.

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Chain of Command

Unbroken line of authority that links all persons in the organization and shows who reports to whom. Associated with two underlying principles: Unity of command. Scalar principle.

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Authority
Formal and legitimate right of a manager to make decisions, issue orders, and to allocate resources to achieve organizationally desired outcomes.

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Characteristics of Authority
Authority is vested in organizational positions, not people. Authority is accepted by subordinates. Authority flows down the vertical hierarchy.

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Accountability
Mechanism through which authority and responsibility are brought into alignment. People are subject to reporting and justifying task outcomes to those above them in the chain of command. Can be built into the organization structure.

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Delegation
Process managers use to transfer authority and responsibility to positions below them in the organization. Organizations encourage managers to delegate authority to lowest possible level.

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Line and Staff Authority

Line authority means that people in management positions have formal authority to direct and control immediate subordinates. Staff authority includes the right to advise, recommend, and counsel in the staff specialists area of expertise.

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Span of Management

The number of employees reporting to a supervisor. Traditional view, seven or so per manager. Many organizations today, 30 or more per manager. Generally, when supervisors must be closely involved with employees, span should be small.

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Factors Associated with Large Spans of Control

Work is stable or routine. Similar task is performed by everyone. A single location. Employees are highly trained. Rules and procedures are available. Support systems and personnel are available for supervisor. Little time is required in nonsupervisory activities. Personal preferences and styles of management favour a large span.
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Tall versus Flat Structure

Span of control used in an organization determines whether the structure is tall or flat. Tall structure has a narrow span and more hierarchical levels. Flat structure has a wide span, is horizontally dispersed and fewer hierarchical levels. The trend has been toward wider spans of control.

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Ex. 7.2 Reorganization to Increase Span of Management

for President of an International Metals Company

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Centralization versus Decentralization

Centralization: decision authority is located near the top of the organization.

Decentralization: authority is pushed downward to lower organizational levels.

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Figure 7.3

Five Approaches to Structural Design

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Figure 7.3

Five Approaches to Structural Design (Contd)

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Figure 7.3

Five Approaches to Structural Design (Contd)

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Team Approach

Cross-functional teams consist of employees from various functional departments who meet as a team to solve problems. Permanent teams solve ongoing problems; employees come from several functional areas.

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Virtual Network Structure

The firm subcontracts most of its major functions to separate companies and coordinates their activities from a small headquarters organization.

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Figure 7.6

Evolution of Organizational Structures

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Structural Design
Task Force: a temporary team or committee formed to solve a specific short-term problem. Project Manager: a person responsible for coordinating the activities of several departments.

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Ex. 7.9

Relationship of Strategic Goals to Structural Approach

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Structure Reflects the Environment

Increased differences occur among departments. Organizations need increased coordination among departments. Organizations must adapt to change.

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