Chapter 08 – Structuring Organizations for Today’s Challenges
8-16
PPT 8-12
Organizations Based on Fayol’s
Principles
ORGANIZATIONS BASED on
FAYOL’S PRINCIPLES
8-12
LO 8-2
• Organizations in which
employees have no more
than one boss; lines of
authority are clear.
• Rigid organizations that often
don’t respond to customers
quickly.
PPT 8-13
Weber’s Principles
WEBER’S PRINCIPLES
8-13
LO 8-2
• Employees just need to do what
they’re told.
• In addition to Fayol’s principles,
Weber emphasized:
– Job descriptions
– Written rules, decision guidelines
and detailed records
– Consistent procedures,
regulations and policies
– Staffing and promotion based on
qualifications
Chapter 08 – Structuring Organizations for Today’s Challenges
8-17
c. WEBER’S PRINCIPLES were similar to
Fayol’s with the addition of:
i. Job descriptions
ii. Written rules, decision guidelines, and
detailed records
iii. Consistent procedures, regulations, and
policies
iv. Staffing and promotions based on quali-
fications
d. Weber believed large organizations need
clearly established rules and guidelines, or
BUREAUCRACY.
e. Weber’s emphasis on bureaucracy eventual-
ly led to RIGID POLICIES AND PROCE-
DURES.
f. Some organizations today, such as UPS, still
thrive on rules and guidelines.
g. In other organizations, bureaucracy has not
been effective.
C. TURNING PRINCIPLES INTO ORGANIZATION
DESIGN
1. Managers used the concepts of Fayol and We-
ber to design organizations so that managers
could CONTROL WORKERS.
a. A HIERARCHY is 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 respon-
sible to that person.
Chapter 08 – Structuring Organizations for Today’s Challenges
8-18
PPT 8-14
Hierarchies and Command
HIERARCHIES and COMMAND
8-14
LO 8-2
• When following Fayol and Weber, managers
control workers.
• Hierarchy — A system in which one person is at the
top of an organization and there is a ranked or
sequential ordering from the top down.
• Chain of Command — The line of authority that
moves from the top of the hierarchy to the lowest
level.
Chapter 08 – Structuring Organizations for Today’s Challenges
8-19
b. The CHAIN OF COMMAND is the line of au-
thority that moves from the top of a hierarchy
to the lowest level.
c. The ORGANIZATION CHART is a visual
device that shows relationships among peo-
ple and divides work.
d. Some organizations have a dozen LAYERS
OF MANAGEMENT between the chief ex-
ecutive officer and the lowest-level employ-
ee.
2. BUREAUCRACY is an organization with many
layers of managers who set rules and regula-
tions and oversee all decisions.
3. In a bureaucracy, decision making may take too
long to satisfy customers.
4. To make customers happy, firms are reorganiz-
ing to give employees more power to make de-
cisions on their own, known as EMPOWER-
MENT.
learning objective 3
Evaluate the choices managers make in structuring organizations.
III. DECISIONS TO MAKE IN STRUCTURING OR-
GANIZATIONS
A. CHOOSING CENTRALIZED OR DECENTRALIZED
AUTHORITY
1. CENTRALIZED AUTHORITY is an organizing
structure in which decision-making authority is
Chapter 08 – Structuring Organizations for Today’s Challenges
8-20
PPT 8-15
Organizational Charts
ORGANIZATIONAL CHARTS
7-15
LO 8-2
• Organization Chart —
A visual device that
shows relationships
among people and
divides the organization
’
s
work; it shows who
reports to whom.
PPT 8-16
Typical Organization Chart
TEXT FIGURE 8.1
Typical Organization Chart
TYPICAL ORGANIZATION CHART
8-16
LO 8-2
PPT 8-17
Bureaucratic Organizations
BUREAUCRATIC ORGANIZATIONS
8-17
LO 8-2
• Bureaucracy — An organization with many layers of
managers who set rules and regulations and oversee
all decisions.
• It can take weeks or months to have information
passed down to lower-level employees.
• Bureaucracies can annoy customers.
test
prep
PPT 8-18
Progress Assessment
TEST PREP
8-18
• What do the terms division of labor and job
specialization mean?
• What are the principles of management outlined
by Fayol?
• What did Weber add to the principles of Fayol?
Chapter 08 – Structuring Organizations for Today’s Challenges
8-21
maintained at the top level of management at
the company’s headquarters (text examples:
McDonald’s and Target).
2. However, today’s rapidly changing markets tend
to favor decentralization and delegation of au-
thority.
3. DECENTRALIZED AUTHORITY is an organi-
zation structure in which decision–making au-
thority is delegated to lower-level managers
more familiar with local conditions than head-
quarters management could be (text example:
Macy’s).
B. CHOOSING THE APPROPRIATE SPAN OF CON-
TROL
1. SPAN OF CONTROL refers to the optimum
number of subordinates a manager supervises
or should supervise.
a. At lower levels, a WIDE SPAN OF CON-
TROL is possible.
b. The appropriate span narrows at higher lev-
els of the organization.
2. The span of control VARIES WIDELY.
a. The trend now is to expand the span of con-
trol as organizations get rid of middle man-
agers.
b. The span of control can be increased
Chapter 08 – Structuring Organizations for Today’s Challenges
8-22
PPT 8-19
Centralization or Decentralization?
• Centralized Authority — When decision-making is
concentrated at the top level of management.
CENTRALIZATION or
DECENTRALIZATION?
8-19
LO 8-3
• Decentralized
Authority — When
decision-making is
delegated to lower-level
managers and employees
more familiar with local
conditions than
headquarters is.
PPT 8-20
Centralization and Decentralization
TEXT FIGURE 8.2
Advantages and Disadvantages of
Centralized versus Decentralized
Management
CENTRALIZATION and
DECENTRALIZATION
8-20
LO 8-3
PPT 8-21
Span of Control
SPAN of CONTROL
8-21
LO 8-3
• Span of Control — The optimal number of
subordinates a manager supervises or should
supervise.
• When work is standardized, broad spans of
control are possible.
• Appropriate span narrows at higher levels of the
organization.
• The trend today is to reduce middle managers
and hire better low-level employees.
lecture enhancer 8-4
CHOOSING THE RIGHT SPAN OF
CONTROL
Several factors affect the number of people a manager can ef-
fectively supervise. (See the complete lecture enhancer on
page 8.78 of this manual.)
Chapter 08 – Structuring Organizations for Today’s Challenges
8-23
through empowerment and the use of tech-
nology.
C. CHOOSING BETWEEN TALL AND FLAT ORGAN-
IZATION STRUCTURES
1. A TALL ORGANIZATION STRUCTURE is one
in which the pyramidal organization chart would
be quite tall because of the various levels of
management.
a. Tall organizations have MANY LAYERS OF
MANAGEMENT.
b. Communication is distorted as it flows
through these layers.
c. The cost of all these managers and support
people is high.
2. Because of these problems, organizations have
moved toward flatter organizations.
3. A FLAT ORGANIZATION STRUCTURE is an
organization structure that has few layers of
management and a broad span of control.
a. These structures are much MORE RE-
SPONSIVE TO CUSTOMER DEMANDS
because decision-making power may be
given to lower-level employees.
b. The FLATTER organizations became, the
larger the SPAN OF CONTROL became.
D. WEIGHING THE ADVANTAGES AND DISAD-
VANTAGES OF DEPARTMENTALIZATION
Chapter 08 – Structuring Organizations for Today’s Challenges
8-24
PPT 8-22
Organizational Structures
ORGANIZATIONAL STRUCTURES
8-22
LO 8-3
• Structures determine the way the company
responds to employee and customer needs.
• Tall Organization Structures — An organizational
structure in which the organization chart would be tall
because of the various levels of management.
• Flat Organization Structures — An organizational
structure that has few layers of management and a
broad span of control.
PPT 8-23
Flat Organizational Structure
TEXT FIGURE 8.3
A Flat Organization Structure
FLAT ORGANIZATIONAL
STRUCTURE
8-23
LO 8-3
PPT 8-24
Advantages and Disadvantages of
the Different Spans of Control
TEXT FIGURE 8.4
Advantages and Disadvantages of a
Narrow versus a Broad Span of Control
ADVANTAGES and DISADVANTAGES of
the DIFFERENT SPANS of CONTROL
8-24
LO 8-3
Chapter 08 – Structuring Organizations for Today’s Challenges
8-25
1. DEPARTMENTALIZATION is dividing organiza-
tional functions into separate units.
a. The traditional way to departmentalize is by
function.
b. FUNCTIONAL STRUCTURE is the grouping
of workers into departments based on simi-
lar skills, expertise, or resource use.
2. ADVANTAGES of functional departmentaliza-
tion:
a. Workers can specialize and work together
more effectively.
b. It may save costs (efficiency).
c. Skills can be developed in depth.
d. Resources can be centralized to allow for
economies of scale.
e. There is good coordination within the func-
tion.
3. DISADVANTAGES of departmentalization:
a. Departments may not communicate well.
b. Employees identify with the department ra-
ther than the total organization.
c. Response to external change is slow.
d. Employees may not be trained in different
management responsibilities and become
narrow specialists.
e. People in the same department tend to think
alike (engage in GROUPTHINK) and need
Chapter 08 – Structuring Organizations for Today’s Challenges
8-26
PPT 8-25
Departmentalization
DEPARTMENTALIZATION
8-25
LO 8-3
• Departmentalization — Divides organizations into
separate units.
• Workers are grouped by skills and expertise to
specialize their skills.
PPT 8-26
Advantages of Departmentalization
ADVANTAGES of
DEPARTMENTALIZATION
8-26
LO 8-3
1) Employees develop skills and progress within a
department as they master skills.
2) The company can achieve economies of scale.
3) Employees can coordinate work within the
function and top management can easily direct
activities.
PPT 8-27
Disadvantages of
Departmentalization
DISADVANTAGES of
DEPARTMENTALIZATION
8-27
LO 8-3
1) Departments may not communicate well.
2) Employees may identify with their department’s
goals rather than the organization’s.
3) The company’s response to external changes may
be slow.
4) People may not be trained to take different
managerial responsibilities, instead they become
specialists.
5) Department members may engage in groupthink and
may need outside input.
Chapter 08 – Structuring Organizations for Today’s Challenges
8-27
outside input to become creative.
4. LOOKING AT ALTERNATIVE WAYS TO DE-
PARTMENTALIZE
a. By PRODUCT (A book publisher might have
departments for trade books, textbooks, and
technical books.)
b. By CUSTOMER GROUP (A pharmaceutical
company might have separate departments
that focus on the consumer market, on hos-
pitals, and on doctors.)
c. By GEOGRAPHIC LOCATIONS (There may
be operations in Asia, Europe, and South
America.)
d. By PROCESS (A firm that makes leather
coats may have one department to cut the
leather, another to dye it, and a third to sew
the coat.)
e. Some firms use a COMBINATION of de-
partmental techniques, called HYBRID
FORMS.
learning objective 4
Contrast the various organizational models.
IV. ORGANIZATIONAL MODELS
A. There are several ways to structure an organization
to accomplish goals.
1. Traditional organizational models are giving way
to new structures, although there may be prob-
lems.
2. Some newer models violate traditional man-
agement principles.
Chapter 08 – Structuring Organizations for Today’s Challenges
8-28
PPT 8-28
Ways to Departmentalize
TEXT FIGURE 8.5
Ways to Departmentalize
WAYS to DEPARTMENTALIZE
8-28
LO 8-3
PPT 8-29
Ways to Departmentalize
WAYS to DEPARTMENTALIZE
8-29
LO 8-3
critical thinking
exercise 8-2
HOW DO ORGANIZATIONS GROUP
ACTIVITIES?
This exercise asks students to search the websites of several
organizations to identify the primary method of departmentali-
zation. (See the complete exercise on page 8.86 of this manu-
al.)
test
prep
PPT 8-30
Progress Assessment
TEST PREP
8-30
• Why are organizations becoming flatter?
• What are some reasons for having a narrow span
of control in an organization?
• What are the advantages and disadvantages of
departmentalization?
• What are the various ways a firm can
departmentalize?
Chapter 08 – Structuring Organizations for Today’s Challenges
8-29
B. LINE ORGANIZATIONS
1. A LINE ORGANIZATION is an organization that
has direct two-way lines of responsibility, author-
ity, and communication running from the top to
the bottom of the organization, with all people
reporting to only one supervisor (i.e., the military
and small businesses).
a. The line organization has no specialists for
management support.
b. Line managers can issue orders and enforce
discipline.
2. DISADVANTAGES IN LARGE ORGANIZA-
TIONS:
a. Too inflexible
b. Few specialists to advise line employees
c. Lines of communication too long
d. Unable to handle complex decisions
3. Such organizations usually become line-and–
staff organizations.
C. LINE-AND-STAFF ORGANIZATIONS
1. Line-and–staff organizations have both line and
staff personnel.
2. LINE PERSONNEL are employees who are part
of the chain of command that is responsible for
achieving organizational goals.
3. STAFF PERSONNEL are employees who ad-
vise and assist line personnel in meeting their
goals.
4. Line personnel have FORMAL AUTHORITY to
Chapter 08 – Structuring Organizations for Today’s Challenges
8-30
PPT 8-31
Four Ways to Structure an
Organization
FOUR WAYS to STRUCTURE an
ORGANIZATION
8-31
LO 8-4
1. Line Organizations
2. Line-and-Staff
Organizations
3. Matrix-Style
Organizations
4. Cross-Functional Self-
Managed Teams
PPT 8-32
Line Organizations
LINE ORGANIZATIONS
8-32
LO 8-4
• Line Organization — Has direct two-way lines of
responsibility, authority and communication running
from the top to the bottom. Everyone reports to one
supervisor.
• There are no specialists, legal, accounting,
human resources or information technology
departments.
• Line managers issue orders, enforce discipline
and adjust the organization to changes.
lecture enhancer 8-5
THE MANHATTAN PROJECT
To build the world’s first atomic bomb, the military turned to
General Leslie Groves, known for his administrative ability,
organizational skill, and decisiveness. (See the complete lec-
ture enhancer on page 8.79 of this manual.)
lecture enhancer 8-6
GREATER EFFICIENCY, FEWER
JOBS
Line jobs are not always safe. As Campbell’s employees saw,
with greater efficiency there was less need for large staffs.
(See the complete lecture enhancer on page 8.79 of this manu-
al.)
PPT 8-33
Line Personnel
LINE PERSONNEL
8-33
LO 8-4
• Line Personnel — Workers responsible for directly
achieving organizational goals, and include
production, distribution and marketing employees.
• Line personnel have authority to make policy
decisions.
PPT 8-34
Staff Personnel
STAFF PERSONNEL
8-34
LO 8-4
• Staff Personnel — Employees who advise and assist
line personnel in meeting their goals, and include
marketing research, legal advising, IT and human
resource employees.
PPT 8-35
Sample Line–and-Staff
Organization
TEXT FIGURE 8.6
A Sample Line-and-Staff Organization
SAMPLE LINE-and-STAFF
ORGANIZATION
8-35
LO 8-4