CHAPTER 8

STRUCTURING ORGANIZATIONS FOR TODAY’S CHALLENGES

NAMES OF THE GROUP MEMBERS

MARCHALL TONDI SAULUS PUTRA (1707531037)

MARLINA ELISABETH HASIBUAN (1707531043)

ANAK AGUNG ISTRI MITA SURYANI (1707531046)

I GDE ARYA UTAMA WICAKSANA (1707531049)

Learning Goal 1

Building An Organization From The Bottom Up

One of the first step is to organize your business. Organizing, or structuring, begins ith
determining what work needs to be done (mowing, edging, trimming) and then dividing up the
tax among the three of you this called division of labor. The success of a firm often depends on
management ability to identify each workers strength and assign the right tax to the right person.
Many jobs can be done quickly and well when each person specialist. Dividing tax into smaller
job is called job specialization. For example, you might divide the mowing tax into mowing,
trimming, raking.

If your business is successful you will probably hire ore workers to help. You might organize
them into teams or departments to do various tax. One team might mow while another uses
blowers to clean up leaves and debris. If you are really successful overtime, you might hire an
accountant to keep records, various people to handle advertsing, and a crew to maintain the
equipment.

The process to setting up individual departments to do specialist tax is called

departmentalization. Finally, you will assign authority and responsibility to people so that you
can control the whole process. If something went wrong in the accounting department, for
example, you would know who was responsible.

You may develop an organization chart that shows reationsh among people : who is accountable
for the completion of specific word and who reports to whom. Finally, you’ll monitor the
environment to see wat competitors and what cutomers are demanding. Then you must adjust to
the new realities. For example, a major lawn care company may begin promoting in your area.
You might have make some organizations changes to offer event better services competitive
prices.
 Learning Goal 3

DECISIONS TO MAKE IN STRUCTURING ORGANIZATIONS

When designing responsive organizations, firms have to make decisions about several
organizational issues : (1) centralization versus decentralization (2) span of control (3) tall versus
flat organization structures, and (4) departmentalization

Choosing Centralized or Decentralized Authority

Centralized Authority occurs when decisions making is concentrates at the top level of
management. The retailing giant Target, for example has a very centralized form of management.
Fortune magazine commented that Target is top-down that the CEO personally interviews
candidates for the top 600 positions. That doesn’t mean Target hasn’t adapated to different
circumtances.

McDonalds’s believes that purcahsing, promotion, and other such decisions are best
handled centrally. There’s usually little need for each McDonald’s restaurant in the United States
to carry different food products. McDonald’s thus leans toward centralized authority. Hoewver,
today’s rapidly changing markets, added to global differences in concumer tastes, tend to favor
some decentralization and thus more delegation authority, even at McDonalds. Its restaurants in
England offer tea, those in France offer a Croque McDo (a hot ham-and-cheese sandwich), those
in Japan sell rice, and Chinnese McDonald’s offer taro amd red bean desserts.

Decentralized authorityoccurs when decision making is delegated to lower level

managers and employees more familiar with loocal condition than headquarters management
could be. JCPenny customers in California , for example, demand clothing styles different from
what customers Minnesota or Maine like. It makes senses to delegates tos tore mangers in
various cities the authority to buy,price, and promote merchandise appropriate for each area. In
response to the economic crisis that began in 2008, Macy’s department store is also shifting to
local tastes. The plan, called “My Macy’s,” proved successful in test market. Both Home Depot
and Lowe’s also responded to the financial crisis with similar moves toward catering to local
markets.
 Advantages
Centralized
 Greater top-management control
 More effeciency
 Simpler distribution system
 Stronger brand/corporate image
Decentralized
 Better adaptation to customer wants
 More empowerment of workers
 Faster decision making
 Higher morale
Disadvantages
Centralized
 Less responsiveness to customers
 Less empowerment
 Interoraganizational conflict
 Lower morale away from headquarter
Decentralized
 Less efficiency
 Complex distribution system
 Less top-management control
 Weakened corporate image

Choosing the Appropriate Span of Control

Span of Controldescribes the optmal number of subordinates a manger supervises or should

supervise. What is the “right” span of control?At lower levels, where work is standadized, it’s
possible to implement a broad span of contro; (15 to 40 workers). For example, one supervisor
can be responsible for 20 or more workers assembling computes or clenaing movie theaters. The
appropriate span gradually narrows hiher levels of the organizations because work becomes less
standardized and managers need more face-to-face communication.

The trend today is to expand the span of control as organizations adopt empowerment, reduce the
number of middle managers, hire more talented and better educated lower-level employees.
Information technology also allows managers to handle more information, so the san can
broaded still.

At Rowe Furniture in Salem, Virginia, the manufacturing chief dismantled the assembly line and
empwered the poeple who had limited functions-like sewing,gluing, and stapling-with the
freedom to make sofas as they saw fit. Productivity anf quality soared.
 Advantages Disadvantages
Narrow Narrow
 More Control by top management  Less empowerment
 More chances for advancement  Higher Costs
 Greater sepcialization  Delayed decision making
 Closer supervision  Less responsiveness to customers
Broad Broad
 Reduced costs  Fewer chances to advancement
 More responsiveness to customers  Overworked managers
 Faster decisions making  Loss of control
 More empowerment  Less management expertise

Choosing between Tall and Flat Organizations Structures

In the early 20th century, organizatons grew even bigger, adding layer after layer of management
to create tall organizations structures, Some had as many 14 levels, and the span of control was
small (few people reported to each manager).

Imagine how a mesagge, management assistants, secretaries, asisstent secrestaries, supervisors,

trainers, and so on The cost off all these managers and support people wa high, th epaperwork
they generated wa enormous abd the ineffeciencies in communication and decision making were
often intolerablle. Flat structure and can repond readily customer demands beacuse lower-level
employees have authority and responsibility for makin decisions, and managers can be spared
some day to day tasks. In a bookstore with a flat organizations structure , employees may have
authority to arrange shelves by category, process special order for customers and so on.
 Large organizations use flat structures to try to match the frienliness of small firms,
whose workers often know customers by name. The flatter organizations become, the broder
their spans control, which mean some managers lose theit jobs.

Weighing the Advantages and Disadvantages of Departmentalization

Departmentalization divides organizations into seperate units. The traditional way to

departmentaliza is by function-suc as design, production, marketing, and accounting.
Departmentalization groups workers according to their skills, espertise, or resource use so that
they can specialized and work together more effectively. It may also save costs and thus improve
efficiency. Other advantages include the following :

1. Employees can develop skills in depth and progress within a department as they master
more skills
2. The company can achieve economies of scale by centralizing all the resources it needs
and locate various experts in that area.
3. Employees can coordinate work within the function, and top management can easily
direct and control various departments activities.

Disadvantages of departmentalization by function include the following :

1. Departments may not communicate well. For example, production may be so isolated
from marketing that it does not get needed feedback from customers.
2. Employees may identify with their department’s goals rather than the organization’s. The
purchasing departments may find a good value somewhere and buy huge volume of
goods. That makes purchashing look good, but the high cost storing the goods hurts
overall profitabillity.
3. The company response external changes may be slow
4. People may not be trained to take different managerial responsibilities; rather, tahey tend
to become narrow specialist.
5. Department members may engage in groupthink (they think alike) and may need input
from outside to become more creative.
 Looking at Alternatives Ways to Departmemntalize Functional sepearation isn’t always
the most responsive form of organizations. So what are the alternatives? One way is by
product. A book publisher might have a trade book department (for books sold to the general
public), a textbook department, and a technical book department, each with seperate
development and marketing processes. Such product-focused departmentalization usually
results in good customer relations.

Some organizations departmentalize by customer group. A pharmaceutical company

might have one department for the consumer market, another that calls on hospitals (the
institutionals market), and another that targets doctors. You can see how customer groups can
benefit from having specialists satisfying their need.

Some firms group their units by geographic location because customers vary so greatly
by region. Japan, Europe, and South Americca may desercve seperate departments with
obvious benefits.

The decision about how to departmentalize depends on the nature of the product and the
customers. A few firms find that it’s most efficient to seperate activities by process. For
example, a firm that mkaes leather coats may have one department cut leather, another dye it,
and a third sew the coat together. Such specialization enables employees to do a better job
because they can focus on learning a few critical skills.

Some firms use a combination of departmentalization techniques to create hybrid forms.

For example, a company couls departmentalize by function, geographic location, and
customer groups.
Learning Goal 4

Organization Models

Now that we've explored the basic issues of organizational design, we can explore in depth the
various ways to structure an organization. Well look at four models: (1) line organizations, (2)
line-and-staff organizations, (3) matrix-style organizations, and (4) cross-functional self-
managed teams.

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.

Line Personnel -- Workers responsible for directly achieving organizational goals, and include
production, distribution and marketing employees. Line personnel have authority to make policy
decisions.

Staff Personnel -- Employees who advise and assist line personnel in meeting their goals, and
include marketing research, legal advising, IT and human resource employees.
Line-and-Staff
Organizations
SAMPLE LINE-and-STAFF
LG4
ORGANIZATION

8-18

Matrix Organization

Specialists from different parts of the organization work together temporarily on specific
projects, but still remain part of a line-and-staff structure Emphasis is on product development,
creativity, special projects, communication and teamwork.
Matrix-Style
Organizations
SAMPLE MATRIX
LG4
ORGANIZATION

8-20

Managers have flexibility in assigning people to projects. Inter-organizational cooperation and

teamwork is encouraged. Creative solutions to product development problems are produced.

Efficient use of organizational resources. It’s costly and complex. Employees may be confused
about where their loyalty belongs. Good interpersonal skills and cooperative employees are a
must.

Cross-Functional Self-Managed Teams

Groups of employees from different departments who work together on a long-term basis.

A way to fix the problem of matrix-style teams is to establish long-term teams.

Empower teams to work closely with suppliers, customers and others to figure out how to create
better products.

Cross-functional teams work best when the voice of the customer is heard.

Teams that include customers, suppliers and distributors go beyond organizational boundaries.

Government coordinators may assist in sharing market information beyond national boundaries.
Going Beyond Organizational Boundaries

Cross-functional teams work best the voice of the customer is brought in, especially in product
development tasks. Suppliers and distributors should be on the team as weel. A cross-functional
team that includes customers, suppliers, and distributors goes byeond organizational boundaries.
When suppliers and distributors are in other countries, cross-functional team may share market
information across national boundaries. Govenment coordinators may assist such projects, letting
cross-functional teams break the barriers between government and business. Cross-functional
teams are only one way businesses can interact with other companies.