BUS 51 - Mosley7e ch04

Part 2

Planning and Organizing

Chapter 4

Fundamentals of
Organizing

Mosley • Pietri
PowerPoint Presentation by Charlie Cook
The University of West Alabama

© 2008 Thomson/South-Western
All rights reserved.

Learning Objectives
Learning Objectives
After reading and studying this chapter, you should
be able to:
1. Understand the stages of organization growth.
2. Identify the advantages and disadvantages of the
functional, product, and matrix departmentalization
approaches.
3. Explain the principles of unity of command and span
of control.
4. Describe the difference between line and staff.
5. Understand how to avoid excessive conflict between
line and staff.
6. Explain the three types of authority found in
© 2008 Thomson/Southorganizations.
Western. All rights reserved.
4–2

Learning Objectives (cont’d)
Learning Objectives (cont’d)
After reading and studying this chapter, you should
be able to:
7. Distinguish between centralization and
decentralization.
8. Discuss the benefits and costs of downsizing.
9. Understand the relationship between management
philosophy, strategy, and newer forms of organization.

© 2008 Thomson/SouthWestern. All rights reserved.

4–3

The Importance of Organization
• Failing to properly organize can lead to:
 Excessive violation of the unity of command principle.
 Failure to develop additional departments or work

groups when needed.
 Unclear and improper assignment of duties and

responsibilities to new employees.
 Ineffective use of organizational units and inadequate

development of human resources because of
improper decentralization of authority.
 Conflicts between departments and between line

supervisors and staff personnel.

4–4

Stages in the Growth of an Organization
• Stage 1: The One-Person Organization
 One person alone performs all of the basic activities

common to organizations.

• Stage 2: The Organization with Assistants
Added
 Several persons perform different activities within the

organization.
 Roles and responsibilities are becoming defined.
 The span of control is widening, increasing the
challenge of managing the organization.

4–5

EXHIBIT 4.1

John Moody’s One-Person Organization


4–6

EXHIBIT 4.2

John Moody Hires Assistants


4–7

• Stage 3: The Line Organization
 Each person in the organization has clearly defined

responsibilities and reports to an immediate
supervisor designated to manage specific activities.
 Lines of responsibility and authority are clearly

defined.
 Authority is centralized, allowing for quick response to

opportunities and problems.


4–8

EXHIBIT 4.3

John Moody’s Organization after Two Years


4–9

EXHIBIT 4.4

The Span of Control in John Moody’s Line Organization


4–10

• Stage 4: The Line-and-Staff Organization
 The firm evolves to an organization structure in which

staff positions are added to serve the basic line
departments and help them accomplish the
organization objectives more effectively.


4–11

EXHIBIT 4.5

John Moody’s Line Organization after Ten Years


4–12

EXHIBIT 4.6

John Moody’s Line-and-Staff Organization


4–13

Departmentalization
• Departmentalization
 The organizational process of determining how

activities are to be grouped.

• Types of Departmentalization
 Function
 Product
 Service
 Process
 Territory
 Customer
 Matrix


4–14

Types of Departmentalization
• Functional Departmentalization
 Grouping together common functions or similar

activities to form an organizational unit.


Example: production, sales, and finance.

• Advantages of Functional Departmentalization
 Maintains power and prestige of the major functions
 Creates efficiency through the principles of

specialization
 Centralizes the organization’s expertise, and permits
tighter top-management control of the functions.
 Minimizes duplications of personnel and equipment.
4–15

EXHIBIT 4.7

Functional Departmentalization at the Top Management Level


4–16

Types of Departmentalization (cont’d)
• Functional Departmentalization Disadvantages
 Total performance responsibility rests only at the top.
 Narrow functional focus limits training and experience

of lower-lever managers to take over the top position.
 Coordination between and among functions becomes

complex and more difficult as the organization grows
in size and scope (“silo effect”).
 Individuals identify with their narrow functional

responsibilities, causing subgroup loyalties,
identification, and tunnel vision.

4–17

• Product Departmentalization
 Grouping together all the functions associated with a

single product line.

• Product Departmentalization Advantages
 Attention is increased on specific product lines or

services.
 Coordination of functions at the division level is
improved.
 Profit responsibility can be better placed.
 Easier to obtain or develop executives who have

broad managerial experience in running a total entity.
4–18

• Product Departmentalization Disadvantages
 Requires more personnel and material resources
 May cause unnecessary duplication of resources and
 equipment
 Top management assumes a greater burden of

establishing effective coordination and control.
 Top management must use staff support to create

and oversee policies that guide and limit the range of
actions taken by its divisions.

4–19

• Matrix Departmentalization
 A hybrid type of departmentalization in which

personnel from several specialties are brought
together to complete limited-life tasks.

• Matrix Departmentalization Advantages
 Hierarchy permits open communication and

coordination of activities among the relevant
functional specialists.
 Hierarchical flexibility enables the organization to

respond rapidly to the need for change.

4–20

EXHIBIT 4.8

Example of Matrix Departmentalization


4–21

• Matrix Departmentalization Disadvantages
 The lack of clarity and coordination in assigned roles

for team members.
 Conflicts that may occur between the project team

and the home office.
 Conflicts in allocating team members’ time due to the

assignment of members to more than one project.
 Uncertainty about who will decide on the members’

advancement and promotion.
 The lack of “roots” for team members assigned

repeatedly to multiple temporary assignments.
4–22

Unity of Command
• Unity of Command Principle
 Is the idea that everyone should report to and be

accountable to only one boss for performance of a
given activity.
 Supports supervisors in evaluating performance,

passing down orders and information, and helping
subordinates to become better employees.
 Tells employees who they should look to in the

organization for guidance and direction in carrying out
their tasks and responsibilities.

4–23

Unity of Command
• The Importance of Unity of Command
 Prevents duplication and conflict when orders are

passed down.
 Decreases confusion as everyone is accountable to

only one person.
 Provides a basis for supervisors and subordinates to

develop a knowledge of each other’s strengths and
weaknesses.
 Provides an opportunity for supervisors and

employees to develop supportive relationships.
 It promotes higher morale.


4–24

EXHIBIT 4.9

Violating the Unity of Command Principle


4–25

Span of Control
• Span of Control Principle
 States that there is a limit to the number of people a

person can supervise effectively.

• Narrower Span of Control at the Top
 Top-level managers must solve a variety of different,

nonrecurring problems.
 Middle managers cannot afford to be tied down by

large number of people reporting directly to them.
 First-level managers are principally in direct contact

with their immediate employees.

4–26

Span of Control (cont’d)
• Tendency toward Wider Spans of Control
 Improved abilities and capacities of both managers

and employees
 Effectiveness of general supervision over close

Supervision
 New developments in management have permitted

businesses to broaden their span of control and
supervise by results, without losing control.
 Wider spans of control save the company money.


4–27

EXHIBIT 4.10

Narrow, Wide, and Very Wide Spans of Control


4–28

EXHIBIT 4.11

Factors Contributing to a Narrow or Wide Span of Control

Factors
• How physically close are the people performing the
work?
• How complex is the work?
• How much supervision is required?
• How much nonsupervisory work is required of the
supervisor?
• How much organizational assistance is furnished to the
supervisor?

4–29

Relationships Between Line and Staff
• Line Personnel
 Carry out the primary

activities of a business.

• Staff Personnel
 Have the expertise to assist

line people and aid top
management.


4–30

EXHIBIT 4.12

Line and Staff Contacts


4–31

EXHIBIT 4.13

Some Reasons for Conflict between Line and Staff Personnel

• Staff personnel give direct orders to line personnel.
• Good human relations are not practiced in dealings between line
and staff personnel.
• Overlapping authority and responsibility confuse both line and
staff personnel.
• Line people believe that staff people are not knowledgeable about
conditions at the operating level.
• Staff people, because of their expertise, attempt to influence line
decisions against line managers’ wishes.
• Top management misuses staff personnel or fails to use them
property.
• Each department views the organization from a narrow viewpoint
instead of looking at the organization as a whole.


4–32

Line and Staff: Authority
• Advisory Authority
 The authority of most staff

departments to serve and
advise line departments.

• Line Authority
 The power to directly

command or exact
performance from others.

• Functional Authority
 A staff person’s limited line

authority over a given function.

4–33

Decentralization versus Centralization
• Decentralization
 The extent to which authority is delegated from one

unit of the organization to another.

• Centralization
 The extent to which authority is retained by upper

management in an organization.


4–34

EXHIBIT 4.14

Layers of Management Reflecting a Centralized
versus a Decentralized Structure


4–35

Factors Affecting Decentralization
• Top management philosophy
• History of the organization’s
growth
• Geographic location(s)
• Quality of managers
• Availability of controls
• The economy
• Mergers, acquisitions, and
joint ventures

4–36

Downsizing
• Downsizing
 The process of eliminating unnecessary levels of

management and employees.

• Benefits of Downsizing
 Immediate cost reductions
 Speedier decision making
 Improved communication in all directions
 Increased responsiveness to customers and faster

product delivery
 Removal of justification for existence by close
supervision and frequently requesting reports
4–37

Downsizing (cont’d)
• Costs of Downsizing
 Loss of internal control as veteran supervisors leave.
 Morale problems for remaining employees due to lack

of sensitivity in dismissing employees and threatened
job security
 Increased workloads
 Diminished chances of promotion
 Social costs of disruptions in dismissed employees
lives.


4–38

Downsizing (cont’d)
• Ways to Get Beyond Downsizing
 Focus on the remaining employees
 Developing

a strategy of support
for survivors.
 Focus on the future
 Create a strategic plan for growth
and development for the
organization.


4–39

Successful Reengineering Is Change
• Work units—functional departments to process teams.
• Jobs—simple tasks to multidimensional work.
• People’s roles—controlled to empowered.
• Job preparation—preparation to education.
• Compensation focus—activity to results.
• Advancement criteria—performance to ability.
• Values—protective to productive.
• Managers—supervisors to coaches.
• Organizational structure—hierarchical to flat.
• Executives—scorekeepers to leaders.

4–40

EXHIBIT 4.15

Internal
Systems
Model

Causal Variables determine
the course of developments
within an organization and the
results achieved by the
organization. (Examples: skills,
and behavior)
Intervening Variables reflect the
internal state and health of the
organization. (Examples: loyalties,
perceptions of organization
members)
End-Result Variables are
dependent variables that reflect
the achievements of the
organization. (Examples:
productivity, costs, and earnings)


4–41

EXHIBIT 4.16

Creative Organizational Structure of IAF


4–42

Source: Graphic from The International Association of Facilitators (IAF) Website 2002—http://iaf-world.org. Reprinted by permission.

EXHIBIT 4.16

Creative Organizational Structure of IAF (cont’d)


4–43

Source: Graphic from The International Association of Facilitators (IAF) Website 2002—http://iaf-world.org. Reprinted by permission.

EXHIBIT 4.17

Nordstorm’s Inverted Pyramid


Source: Based on description found in Robert Spector and Patrick D. McCarthy, The Nordstrom
Way: The Inside Story of America’s #1 Customer Service Company (New York: Wiley, 1996).

4–44

Important Terms
Important Terms
•
•
•
•
•
•
•
•
•

advisory authority
decentralization
departmentalization
downsizing
functional authority
functional departmentalization
inverted pyramid
line-and-staff organization
line authority


•
•
•
•
•
•
•
•
•

line organization
line personnel
matrix departmentalization
product departmentalization
reengineering
span of control principle
staff personnel
unity of command principle
wagon wheel

4–45

Skill Builder 4-1

Proposed Change of Organization


4–46

BUS 51 - Mosley7e ch04

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