Chapter 10 Line And Staff Authority Line Departments Perform

CHAPTER 10

DESIGNING ADAPTIVE ORGANIZATIONS

CHAPTER OUTLINE

What Are Your Leadership Beliefs?

I. Organizing the Vertical Structure

A. Work Specialization

B. Chain of Command

New Manager Self-Test: Delegation

C. Matrix Approach

D. Team Approach

E. The Virtual Network Approach

III. Organizing for Horizontal Coordination

B. Structure Fits the Technology

ANNOTATED LEARNING OBJECTIVES

After studying this chapter, students should be able to:

1. Discuss the fundamental characteristics of organizing, including such concepts as work

specialization, chain of command, span of management, and centralization versus

decentralization.

Organizing is the deployment of organizational resources to achieve strategic goals. Organizing

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2. Describe functional and divisional approaches to structure.

Functional structure is the grouping of positions into departments based on similar skills,

expertise, work activities, and resource use. A functional structure can be thought of as

departmentalization by organizational resources because each type of functional activity such as

3. Explain the matrix approach to structure and its application to both domestic and

international organizations.

The matrix structure uses functional and divisional structures simultaneously in the same part of

the organization. The matrix structure has dual lines of authority. The functional hierarchy of

authority runs vertically, and the divisional hierarchy of authority runs horizontally. The matrix

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4. Describe the contemporary team and virtual network structures and why they are being

adopted by organizations.

The implementation of team concepts has been a widespread trend in departmentalization. The

vertical chain of command is a powerful means of control, but moving decisions through the

5. Explain why organizations need coordination across departments and hierarchical levels,

and describe mechanisms for achieving coordination.

Coordination refers to the quality of collaboration across departments. It is required whether

there is a functional, divisional, or team structure. Coordination problems are amplified in the

global arena, because units differ not only by goals and work activities but by distance, time,

6. Identify how structure can be used to achieve an organization’s strategic goals.

Structure depends on a variety of contingencies. The right structure is “designed to fit” the

contingency factors of strategy, environment, and technology. These three areas are changing

for organizations, creating a need for stronger horizontal coordination. Two strategies proposed

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7. Define production technology and explain how it influences organization structure.

Technology includes the knowledge, tools, techniques, and activities used to transform

organizational inputs into outputs. Joan Woodward described three types of manufacturing

technology.

a. Small-batch and unit production. Small-batch production firms produce goods in

batches of one or a few product products designed to customer specification. Examples

Service organizations include consulting companies, law firms, brokerage houses, airlines,

hotels, advertising companies, amusement parks, and educational organizations. Service

technology also characterizes departments such as legal, human resources, finance, and market

research in large corporations. Service technology involves:

• intangible output—services are perishable and, unlike physical products, cannot be stored

LECTURE OUTLINE

WHAT ARE YOUR LEADERSHIP BELIEFS?

The fit between a new manager and the organization is often based on personal beliefs about the

role of leaders. Things work best when organization design matches a new manager’s beliefs

about his or her leadership role. This exercise helps students identify whether their leadership

beliefs are primarily position based or nonhierarchical.

I. ORGANIZING THE VERTICAL STRUCTURE Exhibit 10.1

Organizing is the deployment of organizational resources to achieve strategic goals.

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Organization structure refers to:

• Formal tasks assigned to individuals and departments;

The organization chart is the visual representation of an organization’s structure that portrays

the characteristics of vertical structure. It delineates the chain of command, indicates

departmental tasks and how they fit together, and provides order and logic for the organization.

There are several important features of the vertical structure

A. Work Specialization

1. A fundamental principle is that work can be performed more efficiently if employees

2. Organizations are moving away from this principle because too much specialization

B. Chain of Command

1. The chain of command is an unbroken line of authority that links all persons in an

organization and shows who reports to whom. It is associated with two underlying

2. Authority, Responsibility, and Delegation

a. The chain of command illustrates the authority structure of the organization.

Authority is the formal and legitimate right of a manager to make decisions, issue

orders, and allocate resources to achieve organizational outcomes. Authority is

distinguished by three characteristics.

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b. Responsibility is the duty to perform the task or activity an employee has been

assigned. Managers are assigned the authority commensurate with responsibility.

Discussion Question #1: Sandra Holt, manager of Electronics Assembly, asked Hector Cruz, her

senior technician, to handle things in the department while Sandra worked on the budget. She

needed peace and quiet for at least a week to complete her figures. After ten days, Sandra

discovered that Hector had hired a senior secretary, not realizing that Sandra had promised

interviews to two other people. Evaluate Sandra’s approach to delegation.

NOTES________________________________________________________________________

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3. Line and Staff Authority

a. Line departments perform tasks that reflect the organization’s primary goal and

mission. In a software company, line departments make and sell the product.

C. Span of Management Exhibit 10.2

1. The span of management, or span of control, is the number of employees reporting

to a supervisor. This characteristic of structure determines how closely a supervisor

can monitor subordinates.

2. Factors that determine the span of management include:

a. Work performed by subordinates is stable and routine.

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d. Subordinates are trained and need little direction in performing tasks.

3. The average span of control used in an organization determines whether the structure

is tall or flat. A tall structure has an overall narrow span of management and more

D. Centralization and Decentralization

1. Centralization and decentralization pertain to the hierarchical level at which decisions

are made. Centralization means that decision authority is located near the top of the

organization. With decentralization, decision authority is pushed down the chain of

command to lower organization levels. The trend is toward decentralization, which

uses workers’ skills, relieves top managers, has well-informed people make decisions,

Discussion Question #8: Experts say that organizations are becoming increasingly

decentralized, with authority, decision-making responsibility, and accountability being pushed

farther down into the organization. How will this trend affect what will be asked of you as a new

manager?

NOTES________________________________________________________________________

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II. DEPARTMENTALIZATION Exhibit 10.3

Departmentalization is the basis for grouping individuals into departments and departments

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into the total organization. Managers make choices about how to use the chain of command to

group people together to perform their work. Five approaches to structural design reflect

different uses of the chain of command in departmentalization.

A. Vertical Functional Approach Exhibit 10.4

1. What It Is

a. Functional structure is the grouping of positions into departments based on

2. How It Works

a. The major departments under the president are groupings of similar expertise and

resources, such as accounting, human resources, production, and marketing. Each

Discussion Question #3: An organizational consultant was heard to say, “Some aspect of

functional structure appears in every organization.” Do you agree? Explain.

NOTES________________________________________________________________________

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B. Divisional Approach

1. What It Is

a. The divisional structure occurs when departments are grouped together based on

organizational outputs. Diverse departments are brought together to produce a

2. How It Works

a. Divisions are created as self-contained units with separate functional departments

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3. Geographic- or Customer-Based Divisions Exhibit 10.5

a. Grouping company activities by geographic region or customer group is an

Discussion Question #4: Some people argue that the matrix structure should be adopted only as

a last resort because the dual chains of command can create more problems than they solve.

Discuss. Do you agree or disagree? Why?

NOTES________________________________________________________________________

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C. Matrix Approach Exhibit 10.6, Exhibit 10.7

1. What It Is

a. The matrix approach combines aspects of both functional and divisional

structures simultaneously in the same part of the organization. The matrix has

2. How It Works

a. The dual lines of authority make the matrix structure unique. The success of the

matrix structure depends on the abilities of people in key matrix roles.

• Two-boss employees report to two supervisors simultaneously and must

Discussion Question #4: Some people argue that the matrix structure should be adopted only as

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a last resort because the dual chains of command can create more problems than they solve.

Discuss. Do you agree or disagree? Why?

NOTES________________________________________________________________________

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D. Team Approach

1. What It Is

a. The team approach is probably the most widespread trend in departmentalization.

2. How It Works

a. Cross-functional teams consist of employees from various functional

departments, responsible to meet as a team and resolve mutual problems. Team

members report to their functional departments, but also to the team. These teams

Discussion Question #2: How does relational coordination differ from teams and task forces?

Do you think relational coordination seems more valuable for a service technology or a

manufacturing technology? Explain your answer.

NOTES________________________________________________________________________

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E. The Virtual Network Approach

1. What It Is

a. The most recent approach to departmentalization extends the idea of horizontal

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coordination beyond the boundaries of the organization. Outsourcing, which

means farming out certain activities, has become a significant trend. Partnerships,

2. How It Works Exhibit 10.8

a. The organization may be viewed as a central hub surrounded by a network of

outsider specialists. Services such as accounting are outsourced to separate

organizations that are connected electronically to the central office. Networked

Discussion Question #5: What is the virtual network approach to structure? Is the use of

authority and responsibility different compared with other forms of departmentalization?

Explain.

NOTES________________________________________________________________________

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3. Virtual Network Advantages and Disadvantages Exhibit 10.9

a. The biggest advantages to a virtual network approach are flexibility and

competitiveness on a global scale. Organizations can benefit from a flexible

network approach that lets them shift resources and respond quickly. Flexibility

comes from the ability to hire whatever services are needed and to change a few

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focused and motivated, and coordinating activities so that everything functions as

c. Functional Approach

• Grouping employees by common task permits efficient resource use and

economies of scale. Departments enhance in-depth skill specialization and

d. Divisional Approach

• The organization is flexible and responsive to change because each unit is

small and tuned in to its environment. Concern for customer’s needs is high

e. Matrix Approach

• The matrix can by highly effective in a complex, rapidly changing

environment in which flexibility and adaptability are important. Conflict and

f. Team Approach

• The team approach eliminates barriers across departments, increases