Business Fifth Canadian edition, Griffin, Ebert Starke 2005 Pearson Education Canada Inc. CHAPTER...

Business Fifth Canadian edition, Griffin, Ebert & Starke

© 2005 Pearson Education Canada Inc.

CHAPTER 7CHAPTER 7

Organizing the Business Enterprise

7-2



Learning ObjectivesDiscuss the elements that influence a firm’s organizational structureDescribe specialization and departmentalization as the building blocks of organizational structureDistinguish between responsibility and authority and explain the differences in decision making in centralized and decentralized organizationsExplain the differences between functional, divisional, project, and international organization structuresDefine the informal organization and discuss intrapreneuring

7-3



Organizational Structure

The specification of the jobs to be done within a business and how those jobs are related to one another

Each organization must develop a structure that

meets its specific needs

7-4



Chain of Command

Organizational charts illustrate the company’s organizational structure

Shows employees’ positions and how they relate to each other

Demonstrates the the flow of decision making power

7-5



Developing the Organization Structure

Specializationdetermining who will do what task

Departmentalizationdetermining how those tasks should be grouped together to make the workplace more efficient

7-6



Specialization

Identify the tasks requiredIdentify the employees to complete the tasksJob specialization

using employees with special expertise to perform specialized tasks

Small organizations have fewer employees to complete all tasks (less specialization)As organizations grow, they can hire more employees and become more efficient through specialization

7-7



Profit Centres

Department units responsible for their own costs and profitsA “mini-business” unit

7-8



Departmentalization

Grouping jobs into logical units

increases efficiency through division of labourallows for better control & coordination top management can more easily monitor performance

Bases of Departmentalization

CustomerProductProcessGeographicFunctional

7-9



Customer Departmentalization

Industrial vs. ConsumerYouth vs. AdultFamily vs. Singles

Staff

M anagers

V ice Pres identSeniors Travel

M arket

Sta ff

M anagers

Vice Pres identCouples Travel

M arket

Sta ff

M anagers

Vice PresidentFam ily Travel

M arket

Pres ident & CEO

Trave l W ays Inc .

7-10



Product Departmentalization

Consumer office supplies vs. business office suppliesPhotocopiers vs. computersTax return preparation vs. company financial statements

Staff

M anagers

Vice PresidentPhotocop ier

Divis ion

Staff

M anagers

Vice PresidentCom puterDivis ion

Sta ff

M anagers

Vice PresidentTe lecom m unicationsEquipm ent Divis ion

President &CEO

Bus iness TechnologyInc .

7-11



Process Departmentalization

Groups based on the manufacturing process

assemblypaintingdryinginspection

Staff

M anagers

Vice Pres identParts Fabrication

Divis ion

Staff

M anagers

Vice Pres identAssem blyDivis ion

Sta ff

M anagers

Vice Pres identPa in ting Divis ion

Pres ident &CEO

Hi-Tech System s L td .

7-12



Geographic Departmentalization

Western vs. Eastern regionCanadian vs. American North America vs. Europe

Staff

M anagers

Vice Pres identW estern Region

Sta ff

M anagers

Vice Pres identCentra l Reg ion

Sta ff

M anagers

Vice Pres identEaste rn Region

Pres ident &CEO

College Publishers Ltd .

7-13



Functional Departmentalization

Based on activities performed

accounting & financemarketinghuman resourceproduction

Staff

M anagers

Vice Pres identAccounting &

Finance

Staff

M anagers

Vice Pres identM arke ting

Staff

M anagers

Vice Pres identHum an

Resources

Pres ident &CEO

Crysta l Re ta ile rs L td .

7-14



The Combination of Various Organizational Structures

V ic e Pres ide ntM ark e ting

C onsum erProduc ts

Indus tr ia lProduc ts

A lbe rtaPlant M a na ge r

C ons um e rProducts


Q ue becPla nt M a na ge r

C ons um erProduc ts


Nova S c otiaPla nt M ana ger

V ice Pre s ide ntProduc tion

V ic e Pres ide ntF inance

Pre s ide nt &C EO

7-15



The Decision Making Hierarchy

The decision making hierarchy defines who is responsible for making certain kinds of decisionsThree step process

assign decision making tasks to employees and determine decision criteriaimplement decisions distribute authority across the organization using a centralized or a decentralized approach

7-16



Task Assignment

Responsibilitythe duty to complete a task (a cashier can ring up a sales order on a point of purchase terminal)

Authoritymanagerial power to make the decisions required to complete the task (a store manager can make decisions about how to treat specific transactions, or can sign to authorize cheques or returns)

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Task Performance

Delegation the assignment of a task to a subordinate

Accountabilitythe liability that a subordinate has to complete to the best of his/her effort any task that has been delegated to them by a superior

7-18



Distribution of Authority

Centralization top managers reserve most of the decision making rights for themselves

Decentralization lower- and middle-level managers have some discretion in making decisions on their own

7-19



Span of Control

The number of subordinates that a manager is responsible for supervising

Wide span- many subordinates

Narrow span- very few subordinates

Complicated tasks require more supervision and a narrow span of control

7-20



Types of Authority

Line authorityStaff authorityCommittee/ team authority

7-21



Line Authority

The chain of command is direct and is indicated by a solid line in the organization chart

Authority flows in a straight line Authority flows from top to bottom

Line departmentsdepartments linked directly to the production and sale of a product whose success is vital to the firm

Line employeesthe “doers” in a department who must make the right decisions in order make the firm a success

7-22



Staff Authority

Staff that advise or provide support to line managers

do not have line authority to make decisionsassist line managers in doing their jobs more efficiently

Staff authority is indicated by a dotted line in the organization chart

legal staff, marketing research

7-23



Committee & Team Authority

Authority is granted to committees or work teamsCommittee members may include top managers and specially selected employeesCommittees may be permanent or temporaryTeams need to have decision making authority in order to complete their tasks efficientlyTeams will plan their work and complete the task independently

7-24



A Line and Staff Organization Chart

H um anR esources

D ept.

T rucks D ivision

Ma teria ls H a ndling Fa brica tion Pa inting Assem bly

Forks and S m a ll E a rthMovers D ivision

Line M a na gers T ools D ivision

Sta ff Ma na gers EngineeringD epa rtm ent

C LAR K EQ U IPME N T IN C .

7-25



Basic Organizational Structures

Functional

Divisional

Project

International

7-26



Functional Structure

Oldest & most commonly used

method Units are formed based on the functions that must be carried out

Staff

M anagers

Vice Pres identAccounting &

Finance

Staff

M anagers

Vice Pres identM arketing

Sta ff

M anagers

Vice Pres identHum an

Resources

Pres ident &CEO

Upbeat Prom otions L td .

7-27



Advantages of Functional Structure

Focuses attention on the key activities that must be performedExpertise develops within each functional areaEmployees have clearly defined career pathsThe structure is simple and easy to understandEliminates duplication of activities

7-28



Disadvantages of Functional Structure

Conflicts often arise between departmentsNo single function is responsible for overall organizational performanceEmployees in each functional area have a narrow view of the organizationCoordinating highly specialized functions may be difficultDecision making is slow

7-29



Divisional Structure

Divides the organization into separate divisionsEach operates as a semi-autonomous unit and profit centreDivisions can be based on key aspects of the firm’s function

productscustomersgeographyprocess

7-30



An Example of a Customer-Division Structure

Sta ff

M anagers

Vice Pres identW om en's

M arket

Sta ff

M anagers

Vice Pres identO ver "50"

M arket

Sta ff

M anagers

Vice Pres identM en's

M arket

Pres ident & CEO

Health Centre

7-31



Advantages of a Divisional Structure

Accommodates change and expansionIncreases accountabilityDevelops expertise in the various divisionsEncourages training for top management

7-32



Disadvantages of a Divisional Structure

Activities may be duplicated Lack of communication among divisions Adding diverse divisions may blur the focus of the organizationCompany politics may affect the allocation of resources

7-33



Project Organization

Used by organizations with new product opportunities or for special projects

Allows teams of specialists to work together as needed Traditional structures like line authority may be too restrictive

May involve the “matrix organization” where project manager and regular line managers share authority until the project is completed

7-34



International Organization

Firms that have operations in many countries may establish an international division to coordinate these activitiesconcentrate production in low-cost areas and then distribute and market globallyallow each of their businesses to function autonomously within local marketsproduce and sell products in whatever local market is appropriate without any consideration of national boundaries

7-35



International Division Structure

Retail Division A Retail Division B

Latin Am erica Europe Asia

InternationalDivision

CEO

7-36



Boundaryless Organization

The original structures, or boundaries, within the firm are eliminatedUseful to open firm up and facilitate open communication across the company

7-37



Team Organization

Depends on functioning teams of workersLittle formal structureEmployees float from project to project depending on firm’s resources and employees’ skillsIndividual team “units” may change direction, explore new ideas, and try new things without dealing with rigid bureaucratic structures

7-38



Virtual Organization

Has little formal structureLimited number of staffLimited administrative officeSpace is leased and basic support services are outsourced as neededMaximum flexibility to meet organizational needs

7-39



A Virtual Organization Model

Core Organization

ContractedAdministrative

Services

ContractedDistribution &

Logistics

ContractedManufacturing

in Asia

ContractedSales &

Marketing

7-40



The Informal Organization

Informal organization a naturally occurring network of relationships and communications that develops between staff despite the nature of the formal structurea powerful force that can alter the formal structure

7-41



Grapevine

An informal communication method that carries gossip & other information throughout the firm

communication is more rapid than formal channelscan be used creatively by management to facilitate the maintenance of the formal system

7-42



Intrapreneuring

Maintaining the creativity and innovation inherent in a small business, but in a larger organization

As businesses grow, innovation and creativity begin to sufferNew ideas can be stifled in an effort to preserve the status quo

“intrapreneurs” are like “entrepreneurs” but are employees who can help the firm to grow in exciting and creative ways

Business Fifth Canadian edition, Griffin, Ebert Starke 2005 Pearson Education Canada Inc. CHAPTER...

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