CHAPTER 8 ADAPTING ORGANIZATIONS TO TODAY S MARKETS Organizing or structuring begins with determining what work needs to be done Division of labor the dividing of the tasks among people Job specialization dividing tasks into smaller jobs Departmentalization process of setting up individual departments to do specialized tasks Organization chart shows relationships among people who is accountable for the completion of specific work and who reports to whom Bureaucracy designed rules and regulations to give managers control over employees bureaucracy Economies of scale the situation in which companies can reduce their production costs if they can purchase raw materials in bulk the average cost of goods goes down as production levels increase Fayol s Principles of Organization o Unity of command Each worker is to report to one and only one boss o Hierarchy of authority all workers should know to whom they report o Division of labor functions are to be divided into areas of specialization such as production marketing and finance o Subordination of individual interests to the general interest workers are to think of themselves as a coordinated team The goals of the team are more important than the goals of individual workers o Authority managers have the right to give orders and the power to enforce o Degree of centralization the amount of decision making power vested in top management should vary by circumstances o Clear communication channels all workers should be able to reach others in the firm quickly and easily o Order materials and people should be placed and maintained in the proper o Equity a manager should treat employees and peers with respect and justice o Esprit de corps a spirit of pride and loyalty should be created among people in obedience location the firm Max Weber and Organizational Theory o Weber put great trust in managers and felt the firm would do well if employees simply did what they were told o The less decision making employees had to do the better o Usually this would be the case used if we were dealing with uneducated and untrained workers o Weber emphasized Job descriptions Written rules decision guidelines and detailed records Consistent procedures regulations and policies Staffing and promotion based on qualifications o Weber was in favor of bureaucracy Hierarchy a system in which one person is at the top of the organization and there is a ranked or sequential ordering from the top down of managers who are responsible to that person Chain of command the line of authority that moves from the top of a hierarchy to the lowest level Bureaucracy an organization with many layers of managers who set rules and regulations and oversee al decisions Centralized authority an organization structure in which decision making authority is maintained at the top level of management Decentralized authority an organization structure in which decision making authority is delegated to lower level managers more familiar with local conditions than headquarters management could be LIST OF DIS ADVANTAGES OF DE CENTRALIZED PAGE 209 Span of control the optimal number of subordinates a manager supervises or should supervise o span of control gradually narrows at higher levels of the organization o the trend today is to adopt empowerment reduce the number of middle managers and hire more talented and better educated lower level employees Tall organization structure an organizational structure in which the pyramidal organization chart would be quite tall because of the various levels of managements o Span of control is usually small o Messages are distorted as it moved up the organization Flat organization structure an organization structure that has few layers of management and a broad span of control o Can respond readily to customer demands because lower level employees have authority and responsibility for making decisions o The flatter the structure the broader their spans of control Departmentalization the dividing of organizational functions into separate units o Usual way to departmentalize is by function design production marketing and accounting o Advantages of departmentalization Employees can develop skills in depth and progress within a department as they master more skills The company can achieve economies of scale by centralizing all the resources it needs and locate various experts in that area Employees can coordinate work within the function and top management can easily direct and control various departments activities LIST DIS ADVANTAGES FOR NARROW BROAD PAGE 211 o Disadvantages of departmentalization Departments may not communicate well Employees may identify with their department s goals rather than the organizations The company s response to external changes may be slow People may not be trained to take different managerial responsibilities rather they become narrow specialists Department members may engage in groupthink and may need input from outside to become more creative Ways to departmentalize o By product o By function o By customer group o By geographic location o By Process Line organization an organization that has direct two way lines of responsibility authority and communication running from the top to the bottom of the organization with all people reporting to only one supervisor Line personnel employees who are part of the chain of command that is responsible for achieving organizational goals Staff personnel employees who advise and assist line personnel in meeting their goals Matrix organization an organization in which specialists from different parts of the organization are brought together to work on specific projects but still remain part of a line and staff structure o its advantages are It gives managers flexibility in assigning people to projects It encourages interorganizational cooperation and teamwork It can produce creative solutions to product development problems It makes efficient use of organizational resources o Its disadvantages It s costly and complex It can confuse employees where their loyalty belongs with the project manager or with their functional unit It requires good interpersonal skills as well as cooperative employees and managers to avoid communication problems It may be only a temporary solution to a long term problem Cross functional self manages teams groups of employees from different departments who work together on a long term basis Networking using communications technology and other means to link
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