1 Instructor’s Manual – Chapter 7 | Ferrell / Hirt / Ferrell: Business © 2016 by McGraw-Hill Education.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 7
Chapter 7: Organization, Teamwork, and
Communication
Use this Instructor’s Manual to facilitate class discussion and incorporate the unique features of the text’s
highlights. Follow-up via the Connect exercises is then encouraged to provide a holistic understanding of the
chapter.
C H A P T E R F O R E C A S T
Because a business’s structure can so profoundly affect its success, this chapter will examine organizational
L E A R N I N G O B J E C T I V E S
LO 7-1 Define organizational structure, and relate how organizational structures develop.
LO 7-3 Determine how organizations assign responsibility for tasks and delegate authority.
LO 7-5 Distinguish between groups and teams, and identify the types of groups that exist in
organizations.
LO 7-7 Analyze a business’s use of teams.
L E A R N T H E T E R M S
accountability (p. 212)
211)
decentralized organization (p. 213)
210)
group (p. 218)
multidivisional structure (p. 217)
211)
quality-assurance teams (or quality
221)
span of management (p. 214)
team (p. 218)
2 Instructor’s Manual – Chapter 7 | Ferrell / Hirt / Ferrell: Business © 2016 by McGraw-Hill Education.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 7
K E Y T E R M S A N D D E F I N I T I O N S
accountability
The principle that employees who accept an assignment and the
authority to carry it out are answerable to a superior for the outcome.
centralized organization
A structure in which authority is concentrated at the top, and very little
decision-making authority is delegated to lower levels.
committee
A permanent, formal group that performs a specific task.
customer
departmentalization
The arrangement of jobs around the needs of various types of
customers.
decentralized organization
An organization in which decision-making authority is delegated as far
down the chain of command as possible.
delegation of authority
Giving employees not only tasks but also the power to make
commitments, use resources, and take whatever actions are necessary
to carry out those tasks.
departmentalization
The grouping of jobs into working units usually called departments,
units, groups, or divisions.
functional
departmentalization
The grouping of jobs that perform similar functional activities, such as
finance, manufacturing, marketing, and human resources.
geographical
departmentalization
The grouping of jobs according to geographic location, such as state,
region, country, or continent.
grapevine
An informal channel of communication, separate from management’s
formal, official communication channels.
group
Two or more individuals who communicate with one another, share a
common identity, and have a common goal.
line-and-staff structure
A structure having a traditional line relationship between superiors and
subordinates and also specialized managers—called staff managers—
who are available to assist line managers.
line structure
The simplest organizational structure, in which direct lines of authority
extend from the top manager to the lowest level of the organization.
matrix structure
A structure that sets up teams from different departments, thereby
creating two or more intersecting lines of authority; also called a project-
management structure.
3 Instructor’s Manual – Chapter 7 | Ferrell / Hirt / Ferrell: Business © 2016 by McGraw-Hill Education.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 7
multidivisional structure
A structure that organizes departments into larger groups called
divisions.
organizational chart
A visual display of the organizational structure, lines of authority (chain
of command), staff relationships, permanent committee arrangements,
and lines of communication.
organizational culture
A firm’s shared values, beliefs, traditions, philosophies, rules, and role
models for behavior.
organizational layers
The levels of management in an organization.
product
departmentalization
The organization of jobs in relation to the products of the firm.
product-development
teams
A specific type of project team formed to devise, design, and implement
a new product.
project teams
Groups similar to task forces that normally run their operation and have
total control over a specific work project.
quality-assurance teams
(or quality circles)
Small groups of workers brought together from throughout the
organization to solve specific quality, productivity, or service problems.
responsibility
The obligation, placed on employees through delegation, to perform
assigned tasks satisfactorily and be held accountable for the proper
execution of work.
self-directed work team
(SDWT)
A group of employees responsible for an entire work process or segment
that delivers a product to an internal or external customer.
span of management
The number of subordinates who report to a particular manager.
specialization
The division of labor into small, specific tasks and the assignment of
employees to do a single task.
structure
The arrangement or relationship of positions within an organization.
task force
A temporary group of employees responsible for bringing about a
particular change.
team
A small group whose members have complementary skills; have a
common purpose, goals, and approach; and hold themselves mutually
accountable.
Ferrell / Hirt / Ferrell:
Business
Instructor’s Manual – Chapter 7
C O N T E N T O U T L I N E
The following section provides the flow of information using the LEARNING OBJECTIVES as a guide, KEY TERMS
learners will need to take away from the course and a notation of when to use POWERPOINT SLIDES with
LECTURE NOTES to drive home teaching points. There is also a reminder on when CONNECT activities can be
used. This is created so that you can facilitate in–class or online discussion effectively.
LO 7-1
Key Terms:
• Organizational culture
• Structure
• Organizational chart
PowerPoint Slides
PPT 7.4
PPT 7.5
Lecture Outline and Notes:
I. Organizational culture refers to a firm’s shared values, beliefs, traditions,
philosophies, rules, and role models for behavior.
A. Also referred to as corporate culture, an organizational culture exists in
every organization regardless of size, type, product, or profit objective.
B. In a sense, the organization’s culture provides a detailed map for
employees and outsiders as to how the organization functions.
1. A firm’s culture may be expressed formally through codes of ethics,
memos, manuals, and ceremonies.
2. A firm’s culture may be expressed informally through dress codes,
work habits, extracurricular activities, and stories. A firm’s culture is
more commonly expressed informally.
3. When values and philosophies are shared by all members of an
organization, they will be expressed in its relationships with
stakeholders.
C. Organizational culture helps ensure that all members of a company
problems within the firm.
D. Setting a positive organizational culture sets the tone for all other
decisions.
E. Organizational culture helps ensure that all members of a company
5 Instructor’s Manual – Chapter 7 | Ferrell / Hirt / Ferrell: Business © 2016 by McGraw-Hill Education.
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Instructor’s Manual – Chapter 7
PPT 7.7
PPT 1.7
PPT 7.8
II. Developing Organizational Structure
A. Structure is the arrangement or relationship of positions within an
organization.
1. Develops when managers assign work tasks and activities to specific
individuals or work groups and coordinate the diverse activities
within the organization in a way that facilitates the attainment of the
firm’s mission, strategic plans, and objectives.
3. How well an organization makes decisions, responds to problems,
and influences employees’ attitudes toward their work is largely
determined by the organization’s structure.
4. Well-structured organizations are usually very effective, competitive,
statement and goals.
B. Organizational structure is depicted through organizational charts—
visual displays of structure, lines of authority (chain of command), staff
C. Growth requires organizing—the structuring of human, physical, and
LO 7-2
Describe how specialization and departmentalization help an
organization achieve its goals.
Key Terms:
• Product
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Instructor’s Manual – Chapter 7
PPT 7.9
PPT 7.10
PPT 7.11
PPT 7.12
III. Assigning Tasks
A. In any organization, activities must be coordinated, assigned to work
groups, and controlled; this requires specialization and
departmentalization.
B. Specialization
1. After identifying all activities that must be accomplished, managers
then break these activities down into specific tasks that can be
handled by individual employees.
2. Specialization is the division of labor into small, specialized tasks and
the assignment of single tasks to employees.
a. Henry Ford revolutionized specialization by creating the
assembly line.
a. Specialization minimizes the time lost when workers shift from
one job to another.
b. Specialization may occur when activities to be performed are too
4. Overspecialization can have negative consequences: Employees may
become bored and dissatisfied with their jobs, leading to poor work
quality, injuries, and high employee turnover.
C. Departmentalization (Figure 7.2)
2. Most companies use more than one departmentalization plan to
enhance productivity.
group jobs into working units.
3. Functional departmentalization involves the grouping of jobs that
marketing, and human resources.
than one department may be slow, and it requires greater
coordination.
c. This form of departmentalization is common in small
organizations.
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Instructor’s Manual – Chapter 7
PPT 7.13
PPT 7.14
PPT 7.15
4. Product departmentalization is the grouping of jobs around the
firm’s products.
a. Each division develops and implements its own product plans,
monitors the results, and takes corrective action as necessary.
b. Some advantages are the coordination of all activities related to
the product and the simplification of the decision-making
process.
c. The disadvantages include duplicating specialized functions and
emphasizing one product rather than overall organizational
objectives.
5. Geographical departmentalization is the grouping of jobs by
geographical location, such as state, region, country, or continent.
a. An advantage is that organizations can respond to the unique
requirements of a geographic area.
duplicated among the different regions.
6. Customer departmentalization is the grouping of jobs around the
needs of various customers. Like geographical departmentalization,
customer departmentalization does not focus on the organization as
a whole, and requires a large staff to coordinate the operations of
delegate authority.
• Assigning Responsibility
o Span of Management
o Organizational Layers
• Delegation of authority
• Responsibility
• Decentralized
organization
• Span of management
• Organizational layers
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Instructor’s Manual – Chapter 7
PPT 7.17
PPT 7.18
PPT 7.19
IV. Assigning Responsibility
A. Delegation of Authority
1. Delegation of authority is not only giving tasks to employees but
also empowering them to make commitments, use resources, and
take whatever actions are necessary to carry out those tasks.
2. Delegation gives a responsibility, or obligation, to employees to
carry out assigned tasks satisfactorily.
3. The principle of accountability means that subordinates who accept
an assignment and the authority to carry it out are answerable to a
5. However, the act of delegating authority to a subordinate does not
relieve the superior of accountability for the delegated job.
1. The extent to which authority is delegated throughout an
organization determines its degree of centralization.
levels.
a. Organizations tend to be more centralized when the decisions to
be made are risky and low-level managers are not highly skilled
in decision making.
b. Overcentralization can cause problems in part because it may
take longer for the organization as a whole to implement
decisions and to respond to changes and problems on a regional
scale.
environment often develop a good understanding of it and are
able to react quickly to changes.
c. The delegation of authority to lower levels of managers may
increase productivity.
d. Decentralization requires that lower-level managers have strong
Ferrell / Hirt / Ferrell:
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Instructor’s Manual – Chapter 7
PPT 7.20
C. Span of Management
1. There is no simple guideline as to how many subordinates managers
should manage, but experts suggest:
a. Top managers should not directly supervise more than four to
eight people.
b. Lower-level managers, who supervise relatively routine tasks,
can manage a larger number of subordinates.
2. Span of management refers to the number of subordinates who
report to a particular manager. (Figure 7.4)
b. A narrow span of management exists when a manager directly
supervises only a few subordinates.
3. A narrow span is appropriate when superiors and subordinates are
competent, and operating procedures are in existence.
more common in decentralized firms.
management is narrow. Administrative costs are usually higher and
communications slower.
2. Organizations with few layers are considered flat and have wide
spans of management. In this type of structure, managers perform
more administrative duties and spend more time supervising and
working with subordinates.
spans of management, often by eliminating layers of middle
management.
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Instructor’s Manual – Chapter 7
LO 7-4
Compare and contrast some common forms of organizational
structure.
• Forms of Organizational Structure
o Matrix Structure
Key Terms:
• Line structure
• Line-and-staff structure
PPT 7.23
PPT 7.24
PPT 7.26
V. Forms of Organizational Structure
A. Line Structure
1. Line structure is based on direct lines of authority, from the top
executive to the lowest-level employee. (Figure 7.5)
2. Line structures are the simplest form and most common in small
businesses.
3. An advantage of the line structure is the clear chain of command
that enables managers to make decisions quickly; a mid-level
manager needs to consult only his or her immediate supervisor, not
several people.
4. A disadvantage of the line structure is that it requires managers to
be knowledgeable about the wide range of activities for which they
are responsible.
superiors and subordinates, and specialized managers—called staff
managers—are available to assist line managers. (Figure 7.6)
a. Line managers are directly involved in the operation of the
2. Line-and-staff organizations may experience overstaffing and
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Instructor’s Manual – Chapter 7
PPT 7.27
connect
Need help
understanding Line
vs. Staff Employees?
PPT 7.28
C. Multidivisional Structure
1. A multidivisional structure organizes departments into larger
groups, called divisions.
a. Just as departments can be formed on the basis of geography,
customer, product, or a combination of these, so too divisions
can be formed based on any of these methods of organizing.
D. Matrix Structure
1. A matrix structure, often called a project management structure,
sets up teams from different departments by creating two or more
intersecting lines of authority. Also called a project-management
to their functional or line departments after a project is finished.
2. An advantage of the matrix structure is that this form of organization
provides flexibility, enhances cooperation and creativity, and enables
organizations to respond quickly to changes.
3. The matrix structure is generally expensive and quite complex.
Employees may be confused about who has authority—the project
o Committees
o Task Forces
o Teams
• Committee
• Task force
• Project teams
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Instructor’s Manual – Chapter 7
PPT 7.30
PPT 7.32
PPT 7.33
VI. The Role of Groups and Teams in Organizations
A. Regardless of how they are organized, most of the essential work of
business occurs in individual work groups and teams.
1. A group has been defined as two or more individuals who
communicate with one another, share a common identity, and have
a common goal.
2. A team is a small group whose members have complementary skills;
a common purpose, goals, and approach; and who hold themselves
mutually accountable.
3. All teams are groups, but not all groups are teams. (Table 7.2)
4. Work groups emphasize individual products, individual
accountability, and even individual leadership; work teams share
leadership roles, have both individual and mutual accountability, and
needs to accomplish and the situation it faces.
C. A committee is usually a permanent, formal group that does some
about a particular change.
1. They typically come from all departments and levels of an
organization.
E. Teams
1. Teams have the advantages of being able to pool members’
knowledge and skills, creating more solutions to problems than can
2. Project teams are similar to task forces but normally run their own
operation and have total control over a specific work project. They
are almost always temporary, although a large project may last
formed to devise, design, and implement a new product.
4. Quality-assurance teams (or quality circles) are fairly small groups
Ferrell / Hirt / Ferrell:
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Instructor’s Manual – Chapter 7
5. A self-directed work team (SDWT) is a group of employees
responsible for an entire work process or segment that delivers a
product to an internal or external customer. Sometimes called self-
managed teams or autonomous work groups, SDWTs reduce the
need for extra layers of management and thus can help control
costs.
a. Self-directed work teams permit the flexibility to change rapidly
to meet the competition or respond to customer needs.
b. The defining characteristic of SDWTs is the extent to which it is
empowered or given authority to make and implement work
decisions.
LO 7-6
Describe how communication occurs in organizations.
• Communicating in Organizations
o Formal Communication
o Informal Communication Channels
o Monitoring Communications
o Improved Communication Effectiveness
Key Terms:
• Grapevine
PPT 7.35
VII. Communicating in Organizations
A. Communication within an organization can flow in a variety of directions
and from a number of sources, each using both oral and written forms of
communication. (Figure 7.8)
B. It is clear that the more successful the communication system is within
an organization, the more successful the firm is.
C. Alternatives to face-to-face communication are increasing due to
technological advances.
information with employees. Employees in different locations rely
on e-mail, social media, audio conferencing, fax, Internet,
videoconferencing, or other technological tools to accomplish their
goals.
2. A survey of managers and executives found that they feel 28 percent
of meetings are a waste of time and that information could be
communicated more effectively using other methods.
14 Instructor’s Manual – Chapter 7 | Ferrell / Hirt / Ferrell: Business © 2016 by McGraw-Hill Education.
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PPT 7.37
PPT 7.38
PPT 7.39
D. Formal Communication
1. Formal channels of communication are intentionally defined and
designed by the organization.
2. They represent the flow of communication within the formal
organizational structure as shown on organizational charts.
a. Upward communication flows from lower to higher levels of the
organization and includes such information as progress reports,
suggestions for improvement, inquiries, and grievances.
b. Downward communication refers to the traditional flow of
information from upper organizational levels to lower levels.
This type of communication involves directions, assignment of
tasks and responsibilities, performance feedback, and certain
details about the organization’s strategies and goals.
c. Horizontal communication involves the exchange of information
E. Informal Communication Channels
1. Friendships and other non-work, social relationships comprise the
a. The channel through which the most significant informal
communication flows.
b. Information passed along the grapevine may relate to the job or
organization, or it may be gossip and rumors unrelated to either.
c. Managers who understand how the grapevine works can utilize
it by feeding it facts to squelch rumors and incorrect
information. They can also obtain valuable information from the
grapevine that could improve decision making.
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PPT 7.41
F. Monitoring Communications
misusing their time and electronic devices at work
2. Many companies find it necessary to monitor employees’ computer
usage while they are working
productivity
G. Improving Communication Effectiveness
1. Without effective communication, the activities and overall
productivity of projects, groups, teams, and individuals will be
diminished.
2. One of the major issues of effective communication is in obtaining
feedback.
b. Managers should encourage employees to provide feedback,
even if it’s negative.
3. Strong and effective communication channels are a requirement for
company.
4. Communication is necessary in helping every organizational member
can be avoided if clear communication exists within the company.
PPT 7.42
H. Solve the Dilemma—Quest Star in Transition
A. Quest Star (QS), manufactures quality stereo loudspeakers, wants to
improve its ability to compete against Japanese firms.
of management.
1. Uses teams and peer pressure to accomplish the plant’s goals
instead of multiple management layers.