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Chapter 7: Organization, Teamwork, Communication

Organizational Structure
A firm’s shared values, beliefs, traditions, philosophies, rules and role models for behavior
The arrangement or relationship of positions with in an organization
Organizational Chart
Visual Display of the organizational structure, lines of authority (chain of command), staff relationships, permanent committee arrangements, and lines of communication
Division of labor into small, specific tasks and the assignment of employees to do a single task
Grouping of jobs into working units usually called departments, units, groups, or divisions
Functional Departmentalization
Grouping of jobs that perform similar functional activities, such as finance, manufacturing, marketing, and human resources

Departments managed by expert in the work done

Common in small organizations


Weakness: decision making that involves more than one department is slow and requires great coordination

Example: Green Mountain Coffee

Product Departmentalization
Organizes jobs around the product of the firm

Functional Activities (production, finance, marketing…) are located within each product department

Strength: simplifies decision making and helps coordinate all activities related to a product or product group

Weakness: duplicates functions and resources and emphasizes the product rather than achievement of the organization’s overall objectives

Example: PepsiCo Inc. (Combination)

Geographical Departmentalization
Groups jobs according to geographic location

Common in multinational companies

Strength: allows company to get closer to its customers and respond more quickly and efficiently to regional competitors

Weakness: requires large administrative staff and control system to coordinate operations, and tasks are duplicated among the different regions

Example: Coca-Cola, General Motors, Caterpillar, Diageo & PepsiCo Inc. (Combination)

Customer Departmentalization
Arranges jobs around the needs of various types of customers

Strength: allows the company to address the unique requirements of each group

Weakness: does not focus on the organization as a whole ant therefore requires a large administrative staff to coordinate the operations of the various groups

Example: Proctor & Gamble, Delta/British Airways Airlines (frequent flier/vacationer departments)

Delegation of Authority
Giving tasks to employees and empowering them to make commitments, use resources, and take whatever actions are necessary to carry out those tasks
Obligates employees to carry out assigned tasks satisfactorily and holds them accountable for the proper execution of their assigned work
Employees who accept an assignment and the authority to carry it out are answerable to a superior for the outcome
Degree of Centralization
The extent to which authority is delegated throughout an organization determines its degree of centralization
Centralized Organizations
Authority is concentrated at the top, very little decision-making authority is delegated to lower levels

Vast amount of responsibility for carrying out daily and routine producers is delegated to even the lowest levels of the organization

Common when the decisions to be made are risky and when low-level managers are not highly skilled in decision making

Example: U.S. Army, IRS, Postal Service

May take longer for the organization as a whole to implement decisions and to respond to changes and problems on a regional scale
Decentralized Organization
Decision-making authority is delegated as far down the chain of command as possible, lower level managers who interact with the external environment often develop a good understanding of it and thus are able to react quickly to changes

Requires lower-level managers to have great decision-making skills

Common when organization operates in a complex, unpredictable environment, businesses that face intense competition

Strengths: Increased responsiveness and productivity, enhances creativity, key to getting better and bigger

Trending in recent years

Example: Johnson & Johnson, GE, IBM, Google, BikeNon-profits benefit

Spans of Management
Number of subordinates who report to a superior

Wide Span of Management:

Narrow Span of Management: superiors and subordinates not in close proximity, manager has many responsibilities in addition to supervision, interactions between superiors and subordinates are frequent, problems are common

Wide Span of Management: superiors and subordinates are located closet to each other, manager has few responsibilities other than supervision, level of interaction between superiors and subordinates is low, few problems arise, subordinates are highly competent, set of specific operation producers governs the activities of both parties

Tall Organization
Many organizational layers

Narrow Span of Management

Weaknesses: Administrative costs are usually higher, slower communication

Example: McDonald’s

Flat Organization
Few organization layers

Wide Span of Management

Managers perform more administrative duties and spend more time supervisions/working with subordinates

Trending: Many decentralized companies are moving toward flat(ness?) too, often eliminating middle management

Examples: Avon, AT&T, Ford Motor Company

Line Structure
Direct lines of authority that extend from the top manager to employees at the lowest level of the organization

Simplest Structure

Requires managers to possess wide range of knowledge/skills

Strengths: clear chain of command, quick manager decisions

Most common in small businesses

Line-and-Staff Structure
Traditional line relationship between superiors and subordinates, and specialized managers (staff managers) are available to assist line managers

Strengths: Line managers focus on their area of expertise in the operation of the business, staff managers provide advice and support to line departments on specialized matters (finance, engineering, human resources, law)

Weaknesses: overstaffing, ambiguous lines of communication, employees frustrated with lack of authority to carry out certain decisions

Multidivisional Structure
Organizes departments into larger groups (divisions)

Strengths: permits delegation of decision-making, allows divisional/department managers to specialize, allow those closest to the action to make the decisions, better decisions made faster, tend to be more innovative, more likely to meet needs of particular customers

Weaknesses: creates work duplication, more difficult to realize economies of scale that result from grouping functions together

Example: Restructuring of PepsiCo

Matrix Structure (Project Management Structure)
Sets up teams from different departments, thereby creating two or more intersecting lines of authority

Superimposes project-based departments on the more traditional, function-based departments

Project teams bring in specialists

Employees are responsible to 2 managers: functional and project managers

Usually temporary


Strengths: Flexibility, enhanced cooperation, creativity, enables the company to respond quickly to changes, specific attention to specific issues

Weaknesses: Expensive, very complex, employees may be confused about priority authority

Example: NASA was one of the first organizations to use Matrix Structure

2+ individuals who communicate with one another, share a common identity, and have a common goal

Emphasize individual work products, individual accountability, and eve individual leadership

Performance depends on individual members

Small group whose members have complementary skills; have a common purpose, goals, and approach ;and hold themselves mutually accountable.

Share leadership roles, have both individual and mutual accountability, and create collective work products

Performance is based on creating knowledge center and a competency to work together to accomplish a goal

Virtual Teams

Trending in the U.S.

Team productivity peaks at about 5 members…

All teams are group, not all groups are teams.

Types of Groups: Committees
Permanent, formal group that does some specific task

Example: Compensation/Finance Committee

Types of Groups: Task Forces
Temporary group of employees responsible for bringing about a particular change

Typically from all departments and levels in an organization

Types of Teams: Project Teams
Run their operation, have total control of a specific work project, temporary

Similar to task forces

Membership from all across company hierarchy

Product Development Teams: devise, design, implement new product (may include customers)

Types of Teams: Quality-Assurance Teams (Quality Circles)
Small groups of workers brought together from throughout the organization to solve specific quality, productivity, or service problems
Typer of Teams: Self-directed Work Teams
Group of employees responsible for an entire work process or segment that delivers a product to an internal or external customer

Permit flexibility to change rapidly to meet competition or respond to customer needs

*empowered or given authority to make and implement work decisions

Design to give employees a feeling of ‘ownership’ of a whole job

Example: 3M

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