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BUS 51 - Mosley7e ch04
1. Part 2
Planning and Organizing
Chapter 4
Fundamentals of
Organizing
Mosley ⢠Pietri
PowerPoint Presentation by Charlie Cook
The University of West Alabama
Š 2008 Thomson/South-Western
All rights reserved.
2. 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
Š 2008 Thomson/Southorganizations.
Western. All rights reserved.
4â2
3. Learning Objectives (contâd)
Learning Objectives (contâd)
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.
Š 2008 Thomson/SouthWestern. All rights reserved.
4â3
4. The Importance of Organization
⢠Failing to properly organize can lead to:
ď Excessive violation of the unity of command principle.
ď Failure to develop additional departments or work
groups when needed.
ď Unclear and improper assignment of duties and
responsibilities to new employees.
ď Ineffective use of organizational units and inadequate
development of human resources because of
improper decentralization of authority.
ď Conflicts between departments and between line
supervisors and staff personnel.
Š 2008 Thomson/SouthWestern. All rights reserved.
4â4
5. Stages in the Growth of an Organization
⢠Stage 1: The One-Person Organization
ď One person alone performs all of the basic activities
common to organizations.
⢠Stage 2: The Organization with Assistants
Added
ď Several persons perform different activities within the
organization.
ď Roles and responsibilities are becoming defined.
ď The span of control is widening, increasing the
challenge of managing the organization.
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4â5
6. EXHIBIT 4.1
John Moodyâs One-Person Organization
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4â6
7. EXHIBIT 4.2
John Moody Hires Assistants
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4â7
8. Stages in the Growth of an Organization
⢠Stage 3: The Line Organization
ď Each person in the organization has clearly defined
responsibilities and reports to an immediate
supervisor designated to manage specific activities.
ď Lines of responsibility and authority are clearly
defined.
ď Authority is centralized, allowing for quick response to
opportunities and problems.
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4â8
9. EXHIBIT 4.3
John Moodyâs Organization after Two Years
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4â9
10. EXHIBIT 4.4
The Span of Control in John Moodyâs Line Organization
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4â10
11. Stages in the Growth of an Organization
⢠Stage 4: The Line-and-Staff Organization
ď 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.
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4â11
12. EXHIBIT 4.5
John Moodyâs Line Organization after Ten Years
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4â12
13. EXHIBIT 4.6
John Moodyâs Line-and-Staff Organization
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4â13
14. Departmentalization
⢠Departmentalization
ď The organizational process of determining how
activities are to be grouped.
⢠Types of Departmentalization
ď Function
ď Product
ď Service
ď Process
ď Territory
ď Customer
ď Matrix
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4â14
15. Types of Departmentalization
⢠Functional Departmentalization
ď Grouping together common functions or similar
activities to form an organizational unit.
ďś
Example: production, sales, and finance.
⢠Advantages of Functional Departmentalization
ď Maintains power and prestige of the major functions
ď Creates efficiency through the principles of
specialization
ď Centralizes the organizationâs expertise, and permits
tighter top-management control of the functions.
ď Minimizes duplications of personnel and equipment.
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4â15
17. Types of Departmentalization (contâd)
⢠Functional Departmentalization Disadvantages
ď Total performance responsibility rests only at the top.
ď Narrow functional focus limits training and experience
of lower-lever managers to take over the top position.
ď Coordination between and among functions becomes
complex and more difficult as the organization grows
in size and scope (âsilo effectâ).
ď Individuals identify with their narrow functional
responsibilities, causing subgroup loyalties,
identification, and tunnel vision.
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4â17
18. Types of Departmentalization (contâd)
⢠Product Departmentalization
ď Grouping together all the functions associated with a
single product line.
⢠Product Departmentalization Advantages
ď Attention is increased on specific product lines or
services.
ď Coordination of functions at the division level is
improved.
ď Profit responsibility can be better placed.
ď Easier to obtain or develop executives who have
broad managerial experience in running a total entity.
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4â18
19. Types of Departmentalization (contâd)
⢠Product Departmentalization Disadvantages
ď Requires more personnel and material resources
ď May cause unnecessary duplication of resources and
ď equipment
ď Top management assumes a greater burden of
establishing effective coordination and control.
ď Top management must use staff support to create
and oversee policies that guide and limit the range of
actions taken by its divisions.
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4â19
20. Types of Departmentalization (contâd)
⢠Matrix Departmentalization
ď A hybrid type of departmentalization in which
personnel from several specialties are brought
together to complete limited-life tasks.
⢠Matrix Departmentalization Advantages
ď Hierarchy permits open communication and
coordination of activities among the relevant
functional specialists.
ď Hierarchical flexibility enables the organization to
respond rapidly to the need for change.
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4â20
21. EXHIBIT 4.8
Example of Matrix Departmentalization
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4â21
22. Types of Departmentalization (contâd)
⢠Matrix Departmentalization Disadvantages
ď The lack of clarity and coordination in assigned roles
for team members.
ď Conflicts that may occur between the project team
and the home office.
ď Conflicts in allocating team membersâ time due to the
assignment of members to more than one project.
ď Uncertainty about who will decide on the membersâ
advancement and promotion.
ď The lack of ârootsâ for team members assigned
repeatedly to multiple temporary assignments.
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4â22
23. Unity of Command
⢠Unity of Command Principle
ď Is the idea that everyone should report to and be
accountable to only one boss for performance of a
given activity.
ď Supports supervisors in evaluating performance,
passing down orders and information, and helping
subordinates to become better employees.
ď Tells employees who they should look to in the
organization for guidance and direction in carrying out
their tasks and responsibilities.
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4â23
24. Unity of Command
⢠The Importance of Unity of Command
ď Prevents duplication and conflict when orders are
passed down.
ď Decreases confusion as everyone is accountable to
only one person.
ď Provides a basis for supervisors and subordinates to
develop a knowledge of each otherâs strengths and
weaknesses.
ď Provides an opportunity for supervisors and
employees to develop supportive relationships.
ď It promotes higher morale.
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4â24
25. EXHIBIT 4.9
Violating the Unity of Command Principle
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4â25
26. Span of Control
⢠Span of Control Principle
ď States that there is a limit to the number of people a
person can supervise effectively.
⢠Narrower Span of Control at the Top
ď Top-level managers must solve a variety of different,
nonrecurring problems.
ď Middle managers cannot afford to be tied down by
large number of people reporting directly to them.
ď First-level managers are principally in direct contact
with their immediate employees.
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4â26
27. Span of Control (contâd)
⢠Tendency toward Wider Spans of Control
ď Improved abilities and capacities of both managers
and employees
ď Effectiveness of general supervision over close
Supervision
ď New developments in management have permitted
businesses to broaden their span of control and
supervise by results, without losing control.
ď Wider spans of control save the company money.
Š 2008 Thomson/SouthWestern. All rights reserved.
4â27
28. EXHIBIT 4.10
Narrow, Wide, and Very Wide Spans of Control
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4â28
29. 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?
Š 2008 Thomson/SouthWestern. All rights reserved.
4â29
30. Relationships Between Line and Staff
⢠Line Personnel
ď Carry out the primary
activities of a business.
⢠Staff Personnel
ď Have the expertise to assist
line people and aid top
management.
Š 2008 Thomson/SouthWestern. All rights reserved.
4â30
31. EXHIBIT 4.12
Line and Staff Contacts
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4â31
32. 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 managersâ 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.
Š 2008 Thomson/SouthWestern. All rights reserved.
4â32
33. Line and Staff: Authority
⢠Advisory Authority
ď The authority of most staff
departments to serve and
advise line departments.
⢠Line Authority
ď The power to directly
command or exact
performance from others.
⢠Functional Authority
ď A staff personâs limited line
authority over a given function.
Š 2008 Thomson/SouthWestern. All rights reserved.
4â33
34. Decentralization versus Centralization
⢠Decentralization
ď The extent to which authority is delegated from one
unit of the organization to another.
⢠Centralization
ď The extent to which authority is retained by upper
management in an organization.
Š 2008 Thomson/SouthWestern. All rights reserved.
4â34
35. EXHIBIT 4.14
Layers of Management Reflecting a Centralized
versus a Decentralized Structure
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4â35
36. Factors Affecting Decentralization
⢠Top management philosophy
⢠History of the organizationâs
growth
⢠Geographic location(s)
⢠Quality of managers
⢠Availability of controls
⢠The economy
⢠Mergers, acquisitions, and
joint ventures
Š 2008 Thomson/SouthWestern. All rights reserved.
4â36
37. Downsizing
⢠Downsizing
ď The process of eliminating unnecessary levels of
management and employees.
⢠Benefits of Downsizing
ď Immediate cost reductions
ď Speedier decision making
ď Improved communication in all directions
ď Increased responsiveness to customers and faster
product delivery
ď Removal of justification for existence by close
supervision and frequently requesting reports
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4â37
38. Downsizing (contâd)
⢠Costs of Downsizing
ď Loss of internal control as veteran supervisors leave.
ď Morale problems for remaining employees due to lack
of sensitivity in dismissing employees and threatened
job security
ď Increased workloads
ď Diminished chances of promotion
ď Social costs of disruptions in dismissed employees
lives.
Š 2008 Thomson/SouthWestern. All rights reserved.
4â38
39. Downsizing (contâd)
⢠Ways to Get Beyond Downsizing
ď Focus on the remaining employees
ďś Developing
a strategy of support
for survivors.
ď Focus on the future
ďś Create a strategic plan for growth
and development for the
organization.
Š 2008 Thomson/SouthWestern. All rights reserved.
4â39
40. Successful Reengineering Is Change
⢠Work unitsâfunctional departments to process teams.
⢠Jobsâsimple tasks to multidimensional work.
⢠Peopleâs rolesâcontrolled to empowered.
⢠Job preparationâpreparation to education.
⢠Compensation focusâactivity to results.
⢠Advancement criteriaâperformance to ability.
⢠Valuesâprotective to productive.
⢠Managersâsupervisors to coaches.
⢠Organizational structureâhierarchical to flat.
⢠Executivesâscorekeepers to leaders.
Š 2008 Thomson/SouthWestern. All rights reserved.
4â40
41. 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)
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4â41
42. EXHIBIT 4.16
Creative Organizational Structure of IAF
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4â42
Source: Graphic from The International Association of Facilitators (IAF) Website 2002âhttp://iaf-world.org. Reprinted by permission.
43. EXHIBIT 4.16
Creative Organizational Structure of IAF (contâd)
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4â43
Source: Graphic from The International Association of Facilitators (IAF) Website 2002âhttp://iaf-world.org. Reprinted by permission.
44. EXHIBIT 4.17
Nordstormâs Inverted Pyramid
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Source: Based on description found in Robert Spector and Patrick D. McCarthy, The Nordstrom
Way: The Inside Story of Americaâs #1 Customer Service Company (New York: Wiley, 1996).
4â44
45. Important Terms
Important Terms
â˘
â˘
â˘
â˘
â˘
â˘
â˘
â˘
â˘
advisory authority
decentralization
departmentalization
downsizing
functional authority
functional departmentalization
inverted pyramid
line-and-staff organization
line authority
Š 2008 Thomson/SouthWestern. All rights reserved.
â˘
â˘
â˘
â˘
â˘
â˘
â˘
â˘
â˘
line organization
line personnel
matrix departmentalization
product departmentalization
reengineering
span of control principle
staff personnel
unity of command principle
wagon wheel
4â45
46. Skill Builder 4-1
Proposed Change of Organization
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4â46