BUSNESS 1 Chapter 6 Organizational Strategies n n

BUSİNESS 1

Chapter 6: Organizational Strategies n n n Organizing is the process managers use to structure the firm’s physical and human resources and coordinate individual efforts to meet specific objectives. An organization is a structure composed of people and other resources brought together to achieve organizational goals and objectives. Every company has a unique set of resources and objectives , as a result, no two organizations will be exactly alike. 2

n n Organization Charts An organization chart is a diagram showing the division of labor, the arrangement of jobs, the types of departments, and the chain of command in a company. The chain of command traces the lines of authority from the top manager to the supervisory jobs at the bottom of the organizational chart. Originating the military, the chain of command is designed to ensure that orders and information move along a carefully 3 defined path.

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n n The Formal Organization and Authority An organization is really made up of two organizations; formal-informal. The formal organization is the one pictured in the organization chart. It is defined by managers as they create departments, develop jobs, and assign responsibilities to individual workers. The informal organization is the shadow organization that emerges as people interact with one another on the job. 5

n n n Authority is the right to take action, to make decisions, to direct the work of others, and to give orders to obtain organizational objectives. Decentralization Versus Centralization Decentralization is to extent to which authority is delegated and spread throughout the organization. In highly decentralized companies, managers and employees at all levels have the power to make decisions about their work. 6

n Centralization means that decision-making authority is concentrated in the hands of a new managers at the top of the company. In a highly centralized company, most decisions are channeled up the chain of command to top managers. Employees at lower levels typically have little latitude in their jobs; they follow company policies, procedures, and rules. 7

n n Line and Staff Authority in Organizations There are two basic types of authority in organizations, line and staff authority. Line authority is the authority to issue orders to subordinates down the chain of command. Managers in change of key functional activities such as sales and production usually have line authority. Staff authority is the authority to assist and advise top management or line managers. There are two basic types of staff positions. Personal or general staff reports to the executive it serves. Assistant to the president. Absorb, analyze, synthesize information and 8

n Specialist staff is a second type of staff position. Specialist staff managers assist and advise the line managers in a firm by providing expert advice in their specialized areas. The personnel manager helps all managers recruit, screen and train employees. 9

n Functional authority means that a staff manager can exercise authority over line people in a specific, narrow area. 10

n n n Span of Control The span of control is the number of subordinates reporting directly to a manager. There is no ideal or best span of control. Early writers on management theory such as Fayol and Urwick recommended a very narrow span of control of only five or six subordinates. There is now a trend toward encouraging wider spans of control. In practice, the ideal span of control for someone depends on the situation. If workers perform routine tasks the manager’s span of control is likely to be wide. 11

n n Ø Ø On the other hand, top level managers may have narrow spans because they spend considarable time supervising vice-presidents, each of whom has a complex job. Several other factors can also affect the span of control. Manager’s personal traits Technology and computerization 12

n n Principles of Organization Early management experts such as Taylor, Follett, Fayol formulated principles of effective organizing. Their goal was to develop a set of guidelines or principles, that would make management more of a science and reduce its dependence on hit-or-miss ideas that often failed to produce results. 13

n Scalar principle states that there should be a clear and unbroken chain of command linking every position in the organization. When sending orders down the Scalar chain, it is best to stick to the chain of command rather than try to go around it. This ensures that all employees know to whom they report and from whom they receive directions. 14

n n Unity of command: Every person in an organization should report to one and only one manager. This principle ensures organizational consistency. Establishment of policies and procedures: Policies and procedures lay the groundwork of the organization; they establish the rules, letting everyone know what is expected, which behaviors are appropriate, and how work is to be accomplished. 15

n Ø Ø Ø Delegating of authority and responsibility: Managers should spread the authority and the responsibility for accomplishing specific tasks downward throughout the organization. Delegation involves three key component: Assigning responsibility Granting authority Creating accountability 16

n n Making responsibility equal to authority (parity of authority and responsibility) When a manager delegates work to an employee, there should be parity of authority and responsibility- that is, authority should equal responsibility. Responsibility without authority fails to get results and creates stress for employees. Authority without responsibility leads to abuses of power and choas. Under the participative style of the future, managers will create organizations that will encourage employees to assume responsibility and authority. 17

n Absoluteness of accountability means that accountabilty for subordinates’ successful completion of the tasks still rest on the manager’s shoulders. In other words, a manager can delegate authority and responsibility but not ultimate accountability. 18

n n n Types of Organizational Structures Flat and Tall Organizations Flat organization; an organization with wide spans of control and very few levels from top to bottom. Tall organization; an organization with narrow spans of control and many levels from to bottom. Today there is a definite trend toward flatter organizations and wider spans of control. There are two main reasons for this. First; flatter hierarchies mean that decisions are made more quickly andsecond, it means that several layers of middle 19 managers can be eliminated.

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n n n Line Organizations: A line organization is an organizational structure in which each manager is directly responsible for a crucial activity required to accomplish the organization’s goals. Line organizations are best suited for small companies. For a manucafturing company, these would include production, sales and finance for example. 21

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n n Line-Staff Organization A line-staff organization is an organizational structure that has both line and staff departments. 23

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n n n Ø Ø Ø Committee Organization A structure in which groups of workers, rather than individual managers, have the authority and responsibility for making decisions. Committees offer several advantages: Group judgment Larger pool of knowledge Improved motivation Training opportunities Built-in error correction 25

§ Ø Ø Ø Commities also suffer from numerous disadvantages: High costs Slow Threat of comprise Individual dominance Groupthink 26

n n n Matrix organization A structure in which a series of projects is superimposed horizontally on a traditional line-staff organization. The matrix organization includes all of the traditional functional departments, but it overlays special project groups over the functional structure. One or more employees from each functional department becomes a member of a project team for the life of the project. 27

n n The primary advantage of the matrix structure is its customer orientation. Often, each project in the matrix is a job for a certain customers. This structure allows the company to pay special attention to its customers. Another advantage is its ability to respond quickly to changes in customer needs. The matrix organization does have drawbacks, however. It violates the principle of unity of command; employees have two bosses. –a functional manager and a project manager. The matrix organization can be costly and complex. 28

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n n n Network Organization: A new structure that resembles a flat web of departments linked by communications network that crisscross the entire organization. Network organization will encourage its more knowledgable workers to be more independent, free to try innovations in their jobs. 30

n n Departmentalization The process through which a firm’s activities are grouped together and assigned to managers. Organizing Departments: There are five main ways to organize departments. They include organizing departments around; 31

1. 2. 3. 4. 5. Functions Product Customer Territories Time 32

1. Functional Departmentalization : Departmentalizing a company by function involves grouping activities around essential functions such as production, marketing and finance. Functional departmentalization is the most widely used approach to organizing departments. It is a simple, straightword, and logical way to organize. 33

2. 3. Product Departmentalization: In product departmentalization, the departments are built around products or product lines. For example manufacturer of baked goods; snack, foods, bread and cakes. Customer Departmentalization: Customer departmentalization involves organizing departments to serve the needs of particular customers. For example consumers, industrial consumers, construction industry customers. 34

4. 5. Territorial Departmentalization: In territorial departmentalization, separete departments are organized for the geographic areas in which the enterprise does business. Time (Sequence) Departmentalization: Companies often departmentalize by time, creating responsibilities by shifts. For example, many textile manufactures operate continuously, producing cloth in three eight-hour shifts. 35

n In practice, you are not likely to find a company that is organized only around functions, products, customers, or territories. The organization charts for most large firms are hybrids. In other words, they are a mixture of several different kinds of departmentalization. 36

n n n Organizational Culture The informal organization represents the informal contacts, communications, and ways of doing that employees always develop. It is the shadow organization that emerges as employees go about their business in their daily routine. Communication, the grapvine, and company culture are three important aspects of informal organization. 37

n n Communications in Organizations Communication is the transfer of meaningful information from a sender to a receiver. All organizations are networks of communications through which written memos, reports, procedures, and oral communications flow. In some organizations, communications tend to written and highly formalized. In others, there is more emphasis on oral, free-flowing, informal communications. 38

n n Rumors and the Grapevine Rumors and the grapevine are good examples of how the informal organizations operates. The grapevine is the network of informal communication in a firm. There are three reasons why rumors get started: lack of information-insecurity-emotional conflicts. 39

n n n Company Culture Company culture is the distinctive, unwritten code of conduct that governs behavior, attitudes, and relationships in an organization. Shared values and beliefs guide employees in how they do their jobs, treat each other, and treat customers. In well-managed, innovative firms, company culture plays a very important role. The informal, free-flowing communications and the decentralized decision making in such firms could send them out of control if employess went their own ways instead of working together. 40

n In the best-managed companies, managers have discovered that a positive culture has a favorable impact on employee morale, that is, the outlook workers have on their jobs and the entire company. When morale is high, workers express feelings of pride, trust, and a sense of having been treated fairly. Low morale takes on a variety of appearences, absenteeism, poor work quality and mistrust between workers and management. Low morale can be most damaging forces in any organization. 41