Management Chapter 7 Homework Discussion Question 1 Sandra Holt Manager Electronics

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CHAPTER 7

DESIGNING ADAPTIVE ORGANIZATIONS

CHAPTER OUTLINE

Are You Ready to Be a Manager?

I. Organizing the Vertical Structure

A. Work Specialization

B. Chain of Command

C. Span of Management

D. Centralization and Decentralization

II. Departmentalization

A. Vertical Functional Approach

B. Divisional Approach

C. Matrix Approach

D. Team Approach

III. Organizing for Horizontal Coordination

A. The Need for Coordination

B. Task Forces, Teams, and Project Management

IV. Factors Shaping Structure

A. Structure Follows Strategy

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 important because it follows the management function of planning. Planning and

strategy define what to do; organizing defines how to do it. Organization structure is a tool that

2. Describe the functional and divisional approaches to structure.

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

expertise, and resource use. A functional structure can be thought of as departmentalization by

organizational resources because each type of functional activity, personnel, engineering,

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

international organizations.

The matrix structure uses functional and divisional chains of command simultaneously in the

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

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

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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 function, divisional, or team structure. Coordination problems are amplified in the

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

7. Define production technology (manufacturing, service, and digital) and explain how it

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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

in inventory; and

LECTURE OUTLINE

INTRODUCTION

Nissan Motors was in trouble. Executive Carlos Ghosn saw that managers did not have clearly

defined areas of responsibility and authority, as well as poor communications between various

departments. The problem confronting Carlos Ghosn at Nissan is largely one of structural design.

Ghosn wants to use elements of structure to define authority and responsibility for managers,

promote accountability, and improve coordination so that Nissan can bring out new products and

regain a competitive edge.

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Are You Ready to Be a Manager?

This questionnaire helps students determine their ability to work in various organizational

structures.

I. ORGANIZING THE VERTICAL STRUCTURE

INSTRUCTOR’S NOTES___________________________________________________________

______________________________________________________________________________

____________________________________

Organizing is important because it follows from strategy. Strategy defines what to do; organizing

defines how to do it. Organizing is the deployment of organizational resources to achieve

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Exhibit 7.1: Organization Chart for a Water Bottling Plant

A. Work Specialization

1. Work specialization, sometimes called division of labor, is the degree to which

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 based upon two underlying

principles:

a. Unity of command means that each employee is held accountable to only one

supervisor.

b. The scalar principle refers to a clearly defined line of authority in the

organization that includes all employees.

New Manager Self-Test: 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 understand their beliefs about

leadership roles.

2. Authority, Responsibility, and Delegation

a. 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.

(1) Authority is vested in organizational positions, not people.

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

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 10 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.

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.

Spotlight on Skills: How to Delegate

The attempt by top management to decentralize decision making often gets bogged down

because middle managers are unable to delegate. Managers may cling tightly to their decision-

making and task responsibilities. Overcoming barriers to delegation is a major challenge. The

following tips can help managers delegate more effectively.

Delegate the whole task. Managers should delegate the entire task to one person rather than

dividing it among several people.

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C. Span of Management

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

2. Factors that determine the span of management include the following.

a. Subordinates’ work is stable and routine.

b. Subordinates perform similar work tasks.

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

is tall or flat.

a. A tall structure has an overall narrow span of management and more levels in

the hierarchy.

Exhibit 7.2: Reorganization to Increase Span of Management for

President of an International Metals Company

D. Centralization and Decentralization

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

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5. Factors that influence centralization versus decentralization include:

a. Greater change and uncertainty in the environment are usually associated with

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?

II. DEPARTMENTALIZATION

INSTRUCTOR’S NOTES_________________________________________________________

______________________________________________________________________________

____________________________________

Departmentalization is the basis for grouping individuals into departments and departments

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Exhibit 7.3: Five Approaches to Structural Design

Business Blooper: Renault

What if you accused three employees of being corporate spies trying to sell company secrets to

the likes of China and then, after firing them, discovered they weren’t spies at all? The case

A. Vertical Functional Approach

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.

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

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

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Rajeev Goyal served as a Peace Corps volunteer in Nepal from 2001 to 2003 where he taught

English in a village of fewer than 600 people. While there, he noticed how much time people

B. Divisional Approach

1. What It Is

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

2. How It Works

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

for each division.

b. The primary difference between divisional and functional structures is that the

Exhibit 7.4: Functional Versus Divisional Structures

3. Geographic – or Customer-Based Divisions

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

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Discussion Question #4: The divisional structure is often considered almost the opposite of a

functional structure. Do you agree? Briefly explain the major differences in these two

approaches to departmentalization.

Exhibit 7.5: Geographic-Based Global Organization Structure

Exhibit 7.6: Dual-Authority Structure in a Matrix Organization

C. Matrix Approach

1. What It Is

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

structures simultaneously in the same part of the organization.

b. The matrix has dual lines of authority.

c. The matrix structure provides a formal chain of command for both the functional

(vertical) and divisional (horizontal) relationships.

Exhibit 7.7: Global Matrix Structure

2. How It Works

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

(1) Two-boss employees report to two supervisors simultaneously and must

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Discussion Question #5: 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?

D. Team Approach

1. What It Is

2. How It Works

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

Discussion Question #2: Most organizations have been making greater use of teams in recent

years. What factors might account for this trend?

E. The Virtual Network Approach

1. What It Is

a. Outsourcing, which means farming out certain activities, has become a significant

trend.

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Exhibit 7.8: Network Approach to Departmentalization

2. How It Works

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

outsider specialists.

b. Services such as accounting are outsourced to separate organizations that are

Discussion Question #6: What is the virtual network approach to structure? Is the use of

authority and responsibility different compared with other forms of departmentalization?

Explain.

Spotlight on Skills: Smart Balance

Smart Balance has about 67 employees, but nearly 400 people are working for the company.

They started by making a buttery spread and now have a line of spreads, all-natural peanut

butter, nutrient-enhanced milk, cheese, sour cream, popcorn, and other products. Managers

F. Advantages and Disadvantages of Each Structure

1. Functional Approach