Fundamentals of

Organizing
Learning Objectives
1. Discuss the fundamental characteristics of organizing,
including such concepts as work specialization, chain of
command, span of management, and centralization versus
decentralization.
2. Describe functional and divisional approaches to structure.
3. Explain the matrix approach to structure and its application
to domestic and international organizations.
4. Describe the contemporary team and virtual network
structures and why they are being adopted by organizations.
Organizing
Process
a course of action, a route, a progression
Structure
an arrangement, a configuration, a construction

Organizing
The process of deploying resources to achieve
strategic goals
Organizing
Divides its labor into departments and jobs
Establishes formal lines of authority
Establishes mechanisms for coordinating
diverse tasks
Organizing process leads to creation of
an Organizational Structure
1. The set of formal tasks assigned to individuals
and departments.
2. Formal reporting relationships.
3. The design of systems to ensure effective
coordination of employees across departments.

Work Specialization
Also called division of Labor
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.
Chain of Command
Unbroken line of authority that links all
persons in an organization and shows who
reports to whom.
Associated with two underlying principles.
Unity of Command.
Scalar Principle.
2006 by South-Western, a division of Thomson Learning. All rights reserved.
7-9
Authority
Formal and legitimate right of
a manager to make decisions,
issue orders, and to allocate
resources to achieve
organizationally desired
outcomes.
Characteristics of Authority
Vested in the organizational
position, not the person.
Provides the manager with
positional power
Authority is accepted by the
subordinates
Authority flow from the top, down.
Responsibility
The duty to perform the task the employee has been
assigned.





Responsibility and Authority are delegated together and
make the employee accountable to superiors
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.
Delegation
Process managers use to transfer authority and
responsibility.

Organizations encourage managers to
delegate authority to lowest possible level.
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.
Line and Staff Organizations
Line departments perform the organizations
primary tasks.
Production, marketing, sales, R&D
Staff Departments provide specialized skills
in support of line departments.
Engineering, Human Resources, Legal,
Advise and council in areas of expertise


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 if supervisors must be
closely involved with employees
span should be small.
Large Spans of Control Factors
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 favor
a large span.
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.
Reorganization to Increase Span of Management for
President of an International Metals Company
Centralization versus Decentralization
Centralization decision authority is located
near the top of the organization.

Decentralization authority is pushed
downward to lower organizational levels.
Tendency toward decentralization
Greater use of employee skills
Less mechanistic
Relieve burden on manager to do everything
Decisions made closer to the action
Decisions are make quicker

Factors influencing Decentralization
Amount of change and uncertainty in the environment
Corporate strategy and culture
Size and dispersion of the organization
The risk of failure
The greater the risk, the higher up the decisions are made.
Organizational Structure (contd)
Formalization
The degree to which jobs within the
organization are standardized and the
extent to which employee behavior is
guided by rules and procedures.
Highly formalized jobs offer little
discretion over what is to be done.
Low formalization means fewer constraints
on how employees do their work.
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Mechanistic Versus Organic Organization
High specialization
Rigid departmentalization
Clear chain of command
Narrow spans of control
Centralization
High formalization
Cross-functional teams
Cross-hierarchical teams
Free flow of information
Wide spans of control
Decentralization
Low formalization
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Contingency Factors
Structural decisions are influenced by:
Overall strategy of the organization
Organizational structure follows strategy.
Size of the organization
Firms change from organic to mechanistic organizations as
they grow in size.
Technology use by the organization
Firms adapt their structure to the technology they use.
Degree of environmental uncertainty
Dynamic environments require organic structures;
mechanistic structures need stable environments.
Contingency Factors (contd)
Strategy Frameworks:

Innovation
Pursuing competitive advantage through
meaningful and unique innovations favors an
organic structuring.

Cost minimization
Focusing on tightly controlling costs requires a
mechanistic structure for the organization.
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Contingency Factors (contd)
Strategy and Structure
Achievement of strategic goals is facilitated by
changes in organizational structure that
accommodate and support change.
Size and Structure
As an organization grows larger, its structure
tends to change from organic to mechanistic with
increased specialization, departmentalization,
centralization, and rules and regulations.
Contingency Factors (contd)
Technology and Structure
Organizations adapt their structures to their
technology.
Routine technology = mechanistic organizations
Non-routine technology = organic organizations
Departmentalization
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Departmentalization by Type
Functional
Grouping jobs by
functions performed
Product
Grouping jobs by
product line
Geographical
Grouping jobs on the
basis of territory or
geography
Process
Grouping jobs on the basis
of product or customer
flow
Customer
Grouping jobs by type of
customer and needs

Copyright 2010 Pearson
Education, Inc. Publishing
as Prentice Hall

The Five Common Forms of Departmentalization
Copyright 2010 Pearson
Education, Inc. Publishing
as Prentice Hall

Geographical Departmentalization
Copyright 2010 Pearson
Education, Inc. Publishing
as Prentice Hall

Product Departmentalization
Process Departmentalization
+ More efficient flow of work activities
Can only be used with certain types of products
Customer Departmentalization
+ Customers needs and problems can be met by specialists
- Duplication of functions
- Limited view of organizational goals
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Common Organizational Designs
Traditional Designs
Simple structure
Low departmentalization, wide spans of control,
centralized authority, little formalization
Functional structure
Departmentalization by function
Operations, finance, marketing, human resources, and
product research and development
Divisional structure
Composed of separate business units or divisions with
limited autonomy under the coordination and control
the parent corporation.
Copyright 2010 Pearson
Education, Inc. Publishing
as Prentice Hall

Strengths and Weaknesses of Traditional
Organizational Designs
Five Approaches to Structural Design
Five Approaches to Structural Design
940
Contemporary Organizational Designs
Team Structure
What it is: A structure in which the entire organization is made up of
work groups or teams.
Advantages: Employees are more involved and empowered. Reduced
barriers among functional areas.
Disadvantages: No clear chain of command. Pressure on teams to perform.
Matrix-Project Structure
What it is: A structure that assigns specialists from different functional
areas to work on projects but who return to their areas when
the project is completed. Project is a structure in which
employees continuously work on projects. As one project is
completed, employees move on to the next project.
Advantages: Fluid and flexible design that can respond to environmental
changes. Faster decision making.
Disadvantages: Complexity of assigning people to projects. Task and
personality conflicts.
2006 by South-Western, a division of Thomson Learning. All rights reserved.
7-41
Five Approaches to Structural Design
Contemporary Organizational Designs
Boundaryless Structure
What it is: A structure that is not defined by or limited to artificial
horizontal, vertical, or external boundaries; includes virtual
and network types of organizations.
Advantages: Highly flexible and responsive. Draws on talent wherever its
found.
Disadvantages: Lack of control. Communication difficulties.
Removing External Boundaries
Virtual Organization
An organization that consists of a small core of full-time
employees and that temporarily hires specialists to work on
opportunities that arise.
Network Organization
A small core organization that outsources its major business
functions (e.g., manufacturing) in order to concentrate on what it
does best.
Modular Organization
A manufacturing organization that uses outside suppliers to
provide product components for its final assembly operations.
Todays Organizational Design
Challenges
Keeping Employees Connected
Widely dispersed and mobile employees
Building a Learning Organization
Managing Global Structural Issues
Cultural implications of design elements
Organizational Designs (contd)
The Learning Organization
An organization that has developed the capacity to continuously learn, adapt,
and change through the practice of knowledge management by employees.
Characteristics of a learning organization:
An open team-based organization design that empowers employees
Extensive and open information sharing
Leadership that provides a shared vision of the organizations future.
A strong culture of shared values, trust, openness, and a sense of
community.
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Terms to Know
organizing
organizational structure
organizational chart
organizational design
work specialization
departmentalization
cross-functional teams
chain of command
authority
responsibility
unity of command
span of control
centralization
decentralization
employee empowerment
formalization
mechanistic organization
organic organization
simple structure
functional structure
divisional structure
team structure
matrix structure
project structure
boundaryless organization
virtual organization
network organization
learning organization