Chapter 7: Creating a Flexible Organization GBS151, Class June 11, 2013 Notes Compiled by Nicolas C. Rouse, Instructor, Phoenix College

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1 Chapter Objectives 1. Understand what an rganizatin is and identify its characteristics. 2. Explain why jb specializatin is imprtant. 3. Identify the varius bases fr departmentalizatin. 4. Explain hw decentralizatin fllws frm delegatin. 5. Understand hw the span f management describes an rganizatin. 6 Describe the fur basic frms f rganizatinal structure. 7. Describe the effects f crprate culture. 8. Understand hw cmmittees and task frces are used. 9. Explain the functins f the infrmal rganizatin and the grapevine in a business. 1. What is an Organizatin? An rganizatin is a grup f tw r mre peple wrking tgether t achieve a cmmn set f gals. A neighbrhd dry cleaner wned and perated by a husband and wife team is an rganizatin. S are IBM, Rubbermaid, and The Hme Dept. Develping Organizatin Charts. An rganizatin chart is a diagram that represents the psitins and relatinships within an rganizatin that is, it reveals the cmpany s rganizatinal structure. (See Figure 7.1.) The chain f cmmand is the line f authrity that extends frm the highest t the lwest levels f the rganizatin. In an rganizatin chart, cnnectins shwn as brken lines are nt part f the direct chain f cmmand; these peple hld advisry, r staff, psitins. Mst smaller rganizatins find rganizatin charts useful. Fr tw reasns, hwever, many large rganizatins d nt maintain cmplete, detailed charts. It is difficult t chart accurately even a few dzen psitins, much less the thusands that characterize larger firms. Larger rganizatins are almst always changing. Five Steps fr Organizing a Business Jb design. Divide the wrk that is t be dne by the entire rganizatin int separate parts, and assign thse parts t psitins within the rganizatin. Departmentalizatin. Grup the varius psitins int manageable units, r departments. Delegatin. Distribute respnsibility and authrity within the rganizatin. Span f management. Determine the number f subrdinates wh will reprt t each manager. Chain f cmmand. Establish the rganizatin s chain f cmmand by designating the psitins with direct authrity and thse that are supprt psitins. 2. Jb Design Jb Specializatin. Jb specializatin is the separatin f all rganizatinal activities int distinct tasks and the assignment f different tasks t different peple. The Ratinale fr Specializatin. There are several reasns why at least sme specializatin is needed. The jb f mst rganizatins is simply t large fr ne persn t handle. When a wrker has t learn nly a specific, highly specialized task, that individual shuld be able t learn t d it very efficiently. Page 1 f 6

2 The wrker wh is ding the same jb ver and ver des nt lse time changing frm ne peratin t anther. The mre specialized the jb, the easier it may be t design specialized equipment fr thse wh d it. The mre specialized the jb, the easier is the jb training. Alternatives t Jb Specializatin. Specializatin can als have sme negative cnsequences, mst ntably emplyee bredm and dissatisfactin. There are pssible slutins t the prblems caused by jb specializatin. Jb rtatin is the systematic shifting f emplyees frm ne jb t anther. It is als pssible t use jb enlargement and jb enrichment These tpics, alng with ther methds used t mtivate emplyees, are discussed in Chapter Departmentalizatin Departmentalizatin is the prcess f gruping jbs int manageable units. Cmmn bases f departmentalizatin are: By Functin. Departmentalizatin by functin grups jbs that relate t the same rganizatinal activity. Mst smaller and newer rganizatins base their departmentalizatin n functin. The disadvantages f this methd are that it can lead t slw decisin making and that it tends t emphasize the department rather than the rganizatin as a whle. By Prduct. Departmentalizatin by prduct grups all activities related t a particular gd r service. By Lcatin. Departmentalizatin by lcatin grups all activities accrding t the defined gegraphic area in which they are perfrmed. By Custmer. Departmentalizatin by custmer grups all activities accrding t the needs f varius custmer ppulatins. Cmbinatins f Bases. Few rganizatins exhibit nly ne departmentalizatin base. Many firms use several different bases within a single rganizatin. (See Figure 7.2.) 4. Delegatin, Decentralizatin, and Centralizatin Delegatin assigns part f a manager s wrk and pwer t ther wrkers. Steps in Delegatin. Three steps are generally invlved in the delegatin prcess. (See Figure 7.3.) The manager must assign respnsibility. Respnsibility is the duty t d a jb r perfrm a task. The manager must grant authrity. Authrity is the pwer, within the rganizatin, t accmplish an assigned jb r task. The manager must create accuntability. Accuntability is the bligatin f a wrker t accmplish an assigned jb r task. Accuntability is created, but it cannt be delegated. Barriers t Delegatin. Fr several reasns, managers may be unwilling t delegate wrk. Many managers are reluctant t delegate because they want t be sure that the wrk gets dne. A manager fears that a subrdinate will d the wrk s well that he r she will attract the ntice f tp management and becme a threat t the manager. Page 2 f 6

3 Sme managers are s disrganized that they simply are nt able t plan and assign wrk effectively. Decentralizatin f Authrity. The pattern f delegatin thrughut an rganizatin determines the extent t which that rganizatin is decentralized r centralized. An rganizatin in which management cnsciusly attempts t spread authrity widely in the lwer rganizatin levels is said t be a decentralized rganizatin. An rganizatin that systematically wrks t cncentrate authrity at the upper levels is said t be a centralized rganizatin. A variety f factrs can influence the extent t which a firm is decentralized. The external envirnment in which the firm perates. The nature f the decisin t be made. The riskier r the mre imprtant the decisin, the greater the tendency t centralize decisin making. The ability f lwer-level managers t make decisins. A firm that has traditinally practiced centralizatin is likely t maintain that centralizatin in the future, and vice versa. In principle, neither decentralizatin nr centralizatin is right r wrng. What wrks fr ne rganizatin may r may nt wrk fr anther. 5. The Span f Management The furth majr step f rganizing a business is establishing span f management (r span f cntrl), which is the number f wrkers wh reprt directly t ne manager. Wide and Narrw Spans f Cntrl. A wide span f management exists when a manager has a large number f subrdinates. A narrw span exists when the manager has nly a few subrdinates. Several factrs determine the span that is better fr a particular manager. Organizatinal Height. Organizatinal height is the number f layers, r levels, f management in a firm. (See Figure 7.4.) The span f management plays a direct rle in determining an rganizatin s height. (See Figure 7.4.) If spans f management are wider, fewer levels are needed, and the rganizatin is flat. If spans f management are narrw, mre levels are needed, and the resulting rganizatin is tall. In a taller rganizatin, administrative csts are higher because mre managers are needed. Cmmunicatin amng levels may becme distrted. All managers in a flat rganizatin may have t perfrm mre administrative duties because there are fewer managers. 6. Frms f Organizatinal Structure The fur basic frms f rganizatinal structure are line, line-and-staff, matrix, and netwrk. The Line Structure. An rganizatinal structure in which the chain f cmmand ges directly frm persn t persn thrughut the rganizatin is called line structure. Managers within a line structure, called line managers, make decisin and give rders t subrdinates t achieve the gals f the rganizatin. A line structure allws line managers t make decisins quickly with direct accuntability because the decisin-maker nly reprts t ne supervisr. Page 3 f 6

4 The dwnside f a line structure is that line managers are respnsible fr many activities and therefre must have a wide range f knwledge abut all f them. Cnsequently, line structures are mre ppular in small rganizatins rather than in medium and large size rganizatins where activities and issues are mre numerus and mre cmplex. The Line-and-Staff Structure. A line-and-staff structure utilizes the chain f cmmand frm a line structure, but als prvides line managers with specialists, called staff managers. Staff managers prvide supprt, advice, and expertise t line managers. They are nt part f the chain f cmmand like line managers are, but they d have authrity ver their assistants. Bth line and staff managers are needed fr effective management, but the tw psitins differ in imprtant ways. Line managers have line authrity, which means that they can make decisins and issue directives relating t the rganizatin s gals. Staff managers have advisry and functinal authrity which means they can cnsult with the line manager and nly make decisins and issue directives abut their areas f expertise. Cnflict between line managers and staff managers can ccur if line managers perceive that staff managers are a threat t their authrity r if staff managers perceive that their recmmendatins are nt being adpted by line management. There are several ways t minimize this cnflict. Integrate line and staff managers int ne team. Ensure that the areas f respnsibility f line and staff managers are clearly defined. Hld line and staff managers accuntable fr the results f their activities. The Matrix Structure. The matrix structure cmbines vertical and hrizntal lines f authrity. The matrix structure ccurs when prduct departmentalizatin is superimpsed n a functinally departmentalized rganizatin. Authrity flws bth dwn and acrss. In a matrix structure, peple frm different departments are as-signed t a grup, called a crss-functinal team, t wrk n a new prject. Frequently, crss-functinal teams are charged with develping new prducts. The prject manager is in charge f the team. Crss-functinal teams may be temprary r permanent. Figure 7.6 illustrates a typical matrix rganizatin. The matrix rganizatin has several advantages. Added flexibility is prbably the mst bvius advantage. This structure can increase prductivity, raise mrale, and nurture creativity and innvatin. Emplyees experience persnal develpment by ding a variety f jbs. The matrix rganizatin als has several disadvantages. Having emplyees reprt t mre than ne supervisr can cause cnfusin abut wh has authrity in varius situatins. Page 4 f 6

5 Like cmmittees, teams may take lnger t reslve prblems and issues than individuals wrking alne. Because mre managers and supprt staff may be needed, a matrix structure may be mre expensive t maintain than ther frms f rganizatinal structure. The Netwrk Structure. In a netwrk structure (smetimes called a virtual rganizatin), administratin is the primary functin per-frmed, and ther functins such as engineering, prductin, marketing, and finance are cntracted ut. This type f rganizatin has nly a few permanent emplyees cnsisting f tp management and a few hurly clerical wrkers. Leased equipment and facilities are temprary. There is rather limited frmal structure. An bvius advantage is the flexibility that allws an rganizatin t quickly adjust t changes. Sme f the challenges faced by managers include the fllwing: Cntrlling the quality f wrk perfrmed by ther rganizatins Lw mrale and high turnver amng hurly wrkers Vulnerability assciated with relying n utside cntractrs 7. Crprate Culture Crprate Culture. A crprate culture is generally defined as the inner rites, rituals, heres, and values f a firm. Crprate culture is generally thught t have a very strng influence n a firm s perfrmance ver time. Gffee and Jnes have identified fur types f crprate cultures. (See Figure 7.7.) Netwrked culture Mercenary culture Fragmented culture Cmmunal culture Sme experts believe that cultural change is needed when the cmpany s envirnment is changing significantly, when the industry is becming mre cmpetitive, when the cmpany s perfrmance is medicre, when the cmpany is grwing rapidly, r when the cmpany is abut t becme a truly large rganizatin. 8. Cmmittees and Task Frces Several types f cmmittees can be used within an rganizatinal structure. An ad hc cmmittee is created fr a specific shrt-term purpse, such as reviewing the firm s emplyee benefits plan. A standing cmmittee is a relatively permanent cmmittee charged with perfrming a recurring task. A task frce is a cmmittee established t investigate a majr prblem r pending decisin. Cmmittees ffer sme advantages ver individual actin. Several members are able t bring mre infrmatin and knwledge t the task at hand. Cmmittees tend t make mre accurate decisins and t transmit their results thrugh the rganizatin mre effectively. Page 5 f 6

6 There are als disadvantages t using cmmittees. Cmmittee deliberatins take much lnger than individual actin. Unnecessary cmprmise may take place within the cmmittee. 9. The Infrmal Organizatin and the Grapevine Infrmal rganizatin describes the pattern f behavir and interactin that stems frm persnal rather than fficial relatinships. Infrmal Grups. An infrmal grup is created by the grup members themselves t accmplish gals that may r may nt be relevant t the rganizatin. Wrkers may create an infrmal grup t g bwling, frm a unin, get a particular manager fired r transferred, r share lunch. Infrmal grups can be pwerful frces in rganizatins. Managers wh fight the infrmal rganizatin have a majr bstacle t vercme. The Grapevine. The grapevine is the infrmal cmmunicatins netwrk within an rganizatin. The grapevine is cmpletely separate frm and smetimes much faster than the rganizatin s frmal channels f cmmunicatin. Managers wuld make a mistake if they tried t eliminate the grapevine. A mre ratinal apprach is t recgnize the existence f the grapevine as a part (thugh an unfficial part) f the rganizatin. Page 6 f 6