Business A Changing World 9th Edition Ferrell Solutions Manual 1

Chapter 07 - Organization, Teamwork, and Communication
BUSINESS A CHANGING WORLD 9TH EDITION FERRELL

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OBJECTIVES
LO 7-1 Define organizational structure, and relate how organizational structures develop.
LO 7-2 Describe how specialization and departmentalization help an organization achieve its goals.
LO 7-3 Determine how organizations assign responsibility for tasks and delegate authority.
LO 7-4 Compare and contrast some common forms of organizational structure.
LO 7-5 Distinguish between groups and teams and identify the types of groups that exist in
organizations.
LO 7-6 Describe how communication occurs in organizations.
LO 7-7 Analyze a business’s use of teams.
KEY TERMS AND DEFINITIONS
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 A structure in which authority is concentrated at the top and very little decision-
organization making authority is delegated to lower levels.
committee A permanent, formal group that performs a specific task.
customer The arrangement of jobs around the needs of various types of customers.
departmentalization
decentralized A structure in which decision-making authority is delegated as far down the

organization chain of command as possible.
delegation of authority Giving employees not only tasks but also empowering them 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.
7-1
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functional The grouping of jobs that perform similar functional activities, such as finance,
departmentalization manufacturing, marketing, and human resources.
geographical The grouping of jobs according to geographic location, such as state, region,
departmentalization country, or continent.
grapevine An informal channel of communication, separate from management’s formal,

official communication channels.
7-2
group Two or more individuals who communicate with one another, share a common
identity, and have a common goal.
line-and-staff A structure that has a traditional line relationship between superiors and
structure 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.
multidivisional A structure that organizes departments into larger groups called divisions.
structure
organizational chart A visual display of the organizational structure, chain of command, and other
relationships.
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 The organization of jobs in relation to the products of the firm.

departmentalization
product-development A specific type of project team formed to devise, design, and implement a new
teams product.
project teams Groups that are similar to task forces, but normally run their operation and have
total control over a specific work project.
quality-assurance Small groups of workers brought together from throughout the organization to
teams (or quality solve specific quality, productivity, or service problems.
circles)
responsibility The obligation placed on employees to perform assigned tasks satisfactorily and
be held accountable for the proper execution of work.
self-directed work A group of employees responsible for an entire work process or segment that
team (SDWT) delivers a product to an internal or external customer.
7-3
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; a common purpose,
goals, and approach; and hold themselves mutually accountable.
LECTURE OUTLINE AND NOTES

(PPT notations below refer to the Premium Content slides.)
PPT 7.4 Enter the World of Business: Green Mountain Coffee Roasters (GMCR) Empowers
Employees
PPT 7.5
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.
PPT 7.6
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.
PPT 7.7-7.8
C. Organizational culture helps ensure that all members of a company share values
and suggests rules for how to behave and deal with 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 share values
and suggests rules for how to behave and deal with problems within the
organization. Table 7.1 shows the impact of organizational culture on business
performance.
PPT 7.9 Going Green: Best Buy Emphasizes Teamwork and Communication to Promote
Sustainability
7-4
PPT 7.10
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 required to
reach the firm’s objectives.
2. Structure determines the arrangement and relationship of positions within the
organization in a way that facilitates the attainment of the firm’s mission,
strategic plans, and objectives.
PPT 7.11-7.12
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, and
sustained over the long term.
a. For example, the organizational structure of TOMS Shoes consists of two
parts: a for-profit component and a non-profit component. This structure
helps the firm achieve its mission statement and goals.
PPT 7.13
B. Organizational structure is depicted through organizational charts—visual
displays of structure, lines of authority (chain of command), staff relationships,
permanent committee arrangements, and lines of communication.
PPT 7.14
C. Growth requires organizing—the structuring of human, physical, and financial
resources to achieve objectives in an effective and efficient manner. For instance,
as a clothing store evolves and grows, it requires the hiring of more employees
and involves more complex organizational structures.
PPT 7.15-7.16
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.
3. The rationale for specialization is efficiency.
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
numerous for one person to handle.
7-5
PPT 7.17
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.
PPT 7.18-7.24
C. Departmentalization
1. Departmentalization is the grouping of jobs into working units that are
usually called departments, units, groups, or divisions.
2. Most companies use more than one departmentalization plan to enhance
productivity.
a. Even cities such as Corpus Christi use departmentalization to group
jobs into working units.
3. Functional departmentalization involves the grouping of jobs that perform
similar functional activities, such as finance, manufacturing, marketing, and
human resources.
a. Advantages include supervision by experts and easier supervision of
employees.
b. The biggest disadvantage is that decision making involving more than
one department may be slow, and it requires greater coordination.
c. This form of departmentalization is common in small organizations.
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.
1) Campbell’s Soup uses product departmentalization, but also engages
in geographic departmentalization in various regions.
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.
b. Grouping by location can require a large administrative staff and control
system to coordinate operations, and tasks are 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 the various groups.
PPT 7.25
IV. Assigning Responsibility
A. Delegation of Authority
7-6
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.
PPT 7.26
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 superior for
the outcome.
4. The process of delegation establishes a pattern of relationships and
accountability between superior and subordinates.
5. However, the act of delegating authority to a subordinate does not relieve the
superior of accountability for the delegated job.
PPT 7.27
B. Degree of Centralization
1. The extent to which authority is delegated throughout an organization
determines its degree of centralization.
2. In a centralized organization, authority is concentrated at the top level, and
very little decision-making authority is delegated to lower 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.
3. A decentralized organization is one in which authority is delegated as far
down the chain of command as possible.
a. Decentralization is characteristic of organizations that operate in complex
and unpredictable environments.
b. Lower-level managers who interact with the external 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 decision-
making skills.
e. In recent years, the trend has been toward more decentralized
organizations.
PPT 7.28
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.
7-7
2. Span of management refers to the number of subordinates who report to a

particular manager.
a. A wide span of management exists when a manager directly supervises a
large number of employees.
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 not close
together, the manager has many other responsibilities, frequent interaction is
needed, and problems are common.
4. A wide span is appropriate when superiors and subordinates are close
together, the manager has few other responsibilities, a low level of interaction
is needed, few problems arise, subordinates are competent, and operating
procedures are in existence.
5. Narrow spans are typical in centralized firms, while wide spans are more
common in decentralized firms.
PPT 7.29
D. Organizational layers are the levels of management in an organization.
1. A company with many layers is considered tall; its span of 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.
3. Companies that decentralize flatten their structures and widen their spans of
management, often by eliminating layers of middle management.
PPT 7.30-7.36
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.
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.
B. Line-and-Staff Structure
1. A line-and-staff structure has a traditional line relationship between
superiors and subordinates, and specialized managers—called staff
managers—are available to assist line managers.
a. Line managers are directly involved in the operation of the business,
while staff managers provide advice and support on specialized matters.
b. Staff managers do not have direct authority over line managers, but they
do have authority over their own subordinates.
7-8
2. Line-and-staff organizations may experience overstaffing and ambiguous

lines of communication. Employees may become frustrated because of the
lack of authority to carry out decisions.
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.
b. Permits delegation of decision making authority so that division and
department managers can specialize and decisions are made better and
faster. They allow those closest to the action to make decisions that will
affect them.
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 structure.
a. Employees are responsible to two managers.
b. Matrix structures are usually temporary; team members go back 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 manager or the
immediate supervisor.
PPT 7.37
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.
PPT 7.38
4. Work groups emphasize individual products, individual accountability,
and even individual leadership; work teams share leadership roles, have
both individual and mutual accountability, and create collective work
products.
7-9
B. The type of groups an organization establishes depends on the tasks it needs to

accomplish and the situation it faces.
PPT 7.39
C. A committee is usually a permanent, formal group that does some specific task.
D. A task force is a temporary group of employees responsible for bringing about a
particular change.
1. They typically come from all departments and levels of an organization.
PPT 7.40
E. Teams
1. Teams have the advantages of being able to pool members’ knowledge and
skills, creating more solutions to problems than can individuals, and
enhancing employee acceptance of and commitment to team goals.
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 several years.
PPT 7.41
3. Product-development teams are a special type of project team formed to
devise, design, and implement a new product.
4. Quality-assurance teams (or quality circles) are fairly small groups of
workers brought together from throughout the organization to solve specific
quality, productivity, or service problems.
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.
PPT 7.42 Responding to Business Challenges: Creating a Corporate Culture…Virtually
PPT 7.43
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.
B. It is clear that the more successful the communication system is within an
organization, the more successful the firm is.
PPT 7.44
C. Alternatives to face-to-face communication are increasing due to technological
advances.
1. Many companies use internal networks called intranets to share 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.
7-10
PPT 7.45
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.
PPT 7.46
c. Horizontal communication involves the exchange of information among
colleagues and peers on the same organizational level, such as across and
within departments. Horizontal communication informs, supports, and
coordinates activities both within the department and with other
departments.
d. Diagonal communication occurs when individuals from different units
and organizational levels communicate.
PPT 7.47
E. Informal Communication Channels
1. Friendships and other non-work, social relationships comprise the informal
organization of a firm, and their impact can be great.
2. The grapevine is an informal channel of communication, separate from
management’s formal, official communication channels.
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.
PPT 7.48
F. Monitoring Communications
1. Technological advances have created problems with employees misusing
their time and electronic devices at work
2. Many companies find it necessary to monitor employees’ computer usage
while they are working
a. Must balance respect for privacy with need to maintain productivity
7-11
PPT 7.49
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.
a. Listening is a skill that involves hearing, and most employees listen much
more than they actively communicate to others.
b. Managers should encourage employees to provide feedback, even if it’s
negative.
3. Strong and effective communication channels are a requirement for
companies to distribute information to different levels of the company.
4. Communication is necessary in helping every organizational member
understand what is expected of him or her. Many business problems can
be avoided if clear communication exists within the company.
PPT 7.50 Solve the Dilemma: Quest Star in Transition
Boxed Text Discussion Questions
Going Green, Best Buy Emphasizes Teamwork and Communication to Promote Sustainability
Surveys indicated that customers wanted Best Buy to provide sustainable solutions to the electronic waste
(e-waste) problem. As a result, Best Buy created a Sustainability and Corporate Responsibility Scorecard
that provides employees with metrics enabling them to measure their progress toward the company’s
sustainability initiatives. Best Buy collects consumers’ used electronics, and its partners work to give these
products a “second life” by repairing them or using their parts for other products.
1. Why did Best Buy feel the need to embrace sustainability?

Best Buy sells consumer electronics that easily become obsolete and can be hard to break down in
landfills. However, consumers are often unsure what to do with their electronics when they are
finished with them. They often end up in the trash. With e-waste becoming a major issue,
consumers wanted Best Buy to take action to reduce the e-waste in landfills. After surveys
indicated that customers wanted Best Buy to provide sustainable solutions to the e-waste problem,
the company set out to do just that.
2. Why is communication so important in achieving Best Buy’s sustainability goals?
Communication is important to inform consumers about Best Buy’s initiatives and provide them
with alternatives to throwing their e-waste into the trash. It is also essential for Best Buy employees
to contribute to the company’s goals. For this reason, Best Buy created a Sustainability and
Corporate Responsibility Scorecard that provides employees with metrics enabling them to measure
their progress toward the company’s sustainability initiatives. It has also trained employees on ways
to educate consumers about energy-saving technologies.
3. Describe how Best Buy has used teamwork to increase sustainability within its operations.
Best Buy teams up with employees to educate consumers. It also teams up with employees on ways
to increase the company’s sustainability, such as by not having Best Buy drivers leave their trucks
idling in front of store locations. Additionally, Best Buy teams up with recycling companies to
tackle the problem of e-waste. Best Buy collects consumers’ used electronics, and its partners work
to give these products a “second life” by repairing them or using their parts for other products. This
collaboration is essential for creating an effective waste reduction program.
7-12
Responding to Business Challenges, Creating a Corporate Culture...Virtually

Yammer supplies internal social networking for organizations and encourages employees to engage in
social networking. Yammer enables global employees to communicate easily in real time, cutting down
significantly on e-mail. Many companies use Yammer and the equivalent to track ideas from conception
through production and beyond in a streamlined fashion
1. How does Yammer contribute to a firm’s corporate culture?

Yammer allows employees to easily develop relationships and a commitment to their companies.
Employees often share jokes, light banter, and personal information over Yammer. This
camaraderie can be very important to an organization as it increases employee collaboration and
contributes to job satisfaction.
2. How can Yammer be used as a way to improve productivity?

Yammer allows employees to connect with one another in real-time—much more quickly than can
be achieved using e-mail. This has the ability to more easily connect employees from around the
world. Many companies also use Yammer and the equivalent to track ideas from conception
through production and beyond in a streamlined fashion.
3. What are some potential pitfalls of Yammer, and how can these pitfalls be avoided?
Employees may treat Yammer as any other social networking site. They may be freer with their
comments than they should be. These comments on Yammer could potentially be used in
performance reviews, promotion decisions, and legal proceedings. For this reason, companies like
Xerox are advising employees using Yammer to make sure their online language uses discretion
and professionalism. With this in mind, employees can still connect with others while doing so in a
way not likely to get them in trouble later.
Solve the Dilemma: Quest Star in Transition

Quest Star (QS), which manufactures quality stereo loudspeakers, wants to improve its ability to compete
against Japanese firms. Accordingly, the company has launched a comprehensive quality-improvement
program for its Iowa plant. The QS Intracommunication Leadership Initiative (ILI) has flattened the layers
of management. The program uses teams and peer pressure to accomplish the plant’s goals instead of
multiple management layers with their limited opportunities for communication. Under the initiative,
employees make all decisions within the boundaries of their responsibilities, and they elect team
representatives to coordinate with other teams. Teams are also assigned tasks ranging from establishing
policies to evaluating on-the-job safety.
However, employees who are not self-motivated team players are having difficulty getting used to their
peers’ authority within this system. Upper-level managers face stress and frustration because they must train
workers to supervise themselves.
7-13
1. What techniques or skills should an employee have to assume a leadership role within a work
group?
To assume a leadership role within a work group, an employee should have a very good technical
knowledge of the tasks conducted by the team. This individual should also have some conceptual skills
in order to relate to the various activities performed within the group. Finally, human relations skills are
necessary for the leader to provide information to the rest of the group and for the members of the
group to give feedback to their leader.
2. If each work group has a team representative, what problems will be faced in supervising these
representatives?
Each team representative is likely to defend the interests of his or her own group and to neglect the
actions that may favor the performance of the other groups. In other words, the degree of collaboration
between teams is likely to be low.
3. Evaluate the pros and cons of the system developed by QS.

The program introduced by QS is likely to lead to greater employee involvement, innovation, improved
collaboration between employees of each team, and employees’ enhanced sense of accomplishment.
Overall, it is likely to increase the firm’s productivity and competitiveness. However, the cons are that
employees have to learn how to supervise themselves, something they were not used to doing under the
old system. As a result, they are having difficulty getting used to their peers’ authority under the new
system. Training programs are necessary to teach employees how to supervise themselves and work
together in teams.
SUPPLEMENTAL LECTURE
Informal Leaders within an Organization
Within an organization, there may be informal leaders—individuals who have no formal authority over
others yet can influence the behavior of others. The story below points out how managers can use informal
leaders to achieve desired objectives.
Dr. John Alvarez was hired to be the dean of continuing education for Wilson University. Alvarez would be
responsible for a large evening program of credit classes for part-time students. He inherited an efficient
staff, along with Dr. Irvin Luce, the assistant dean (second in command), an administrator with many years’
experience at Wilson University. Dr. Luce was to assist the dean in any way possible.
The new dean was experiencing his first taste of administration, and things were moving along fairly well.
Yet the new dean felt his objectives were not being achieved as rapidly as he had hoped. To better equip
himself for his new responsibilities, Dr. Alvarez enrolled in a management course in a neighboring
university and found the course offered great advice.
One day, the professor of the management class lectured on the topic of the informal leader. The gist of the
professor’s lecture was this:
An informal leader wields power in an organization, power of which the informal leader may not even be
aware. When new challenges arise, workers tend to discover first what reaction the informal leader has to
7-14
the new event. Once that knowledge is obtained, the group will usually follow the lead of the informal
leader. Here is an illustration of the informal leader in action.
Ellsworth Livingston took over as principal of Longfellow Elementary School on August 10. Before classes
had started, he had scheduled several informal get-togethers with his teaching faculty, mostly women.
Rather than read bulletins and memos from the school district headquarters, Ellsworth went out of his way
to learn as much as he could about the teachers. Without being obvious, Ellsworth carefully observed each
of the teachers. Seeing them interact informally told him volumes about the social networks at Longfellow
Elementary School.
Ellsworth was especially interested in identifying the faculty’s informal leader. By the time classes began,
he had zeroed in on Mrs. Nila Pratt, a third-grade teacher. How did Ellsworth determine that Nila Pratt was
the informal leader? Here are the clues from Ellsworth’s observations.
When teachers clumped together for conversation during refreshment breaks, the biggest circle formed
around Nila, and those in Nila’s circle would press her for opinions on everything. If Nila told a joke, it
always received rumbling laughter. In open forums when Nila voiced an opinion, every teacher in the room
turned around to see what she was saying. Also, in the open forum, other teachers would preface their
remarks with a lead-in such as: “Well, it’s just like Nila says....” When Nila had her students working on an
autumn display for the bulletin board, all the teachers came by to get ideas on how they should do their
bulletin boards. On and on the episodes went. There was no doubt in Ellsworth’s mind that he had spotted
the informal leader.
Once Ellsworth had determined that Nila Pratt was the informal leader, he used that knowledge to help
achieve his objectives. When he was about to come out with a new procedure for the teachers to follow, he
quietly checked the idea with Nila Pratt. If Nila showed reservations about the new procedure, Ellsworth
found out what was wrong and altered his plan until Nila would approve. If she liked the plan, Ellsworth
knew he was home free. Whether she knew it or not, Nila was helping Ellsworth implement just about
anything he had in mind for Longfellow Elementary School. All went smoothly because Ellsworth had been
astute enough to find the informal leader in the organization.
The professor of management concluded his lecture on informal leaders, and class was dismissed. The new
dean, John Alvarez, walked to his car and drove back to Wilson University. As he was driving, a
thunderbolt of thought and insight hit the new dean.
“Great day! The informal leader in my organization is the number-two man, Dr. Irvin Luce, the assistant
dean. The secretaries adore him. The program directors are constantly asking him for advice. He is the focal
point of conversation groups. I must start treating him the way Ellsworth treated Mrs. Nila Pratt.”
The new dean returned to his office armed with a secret weapon: He knew who the informal leader was.
The new dean developed a beautiful rapport with Dr. Irvin Luce and informally consulted him on just about
every possible innovation for the evening program. As a result, the entire evening program began to move
forward by leaps and bounds, largely because the new dean had been able to find the informal leader in his
organization.
7-15
Discussion Questions:
1. Mrs. Nila Pratt was the informal leader in the management professor’s illustration, and Dr.
Luce, the assistant dean, was the informal leader in the new dean’s organization. Why do certain
individuals become the informal leaders in an organization?
There may be many reasons why certain individuals become informal leaders. Informal leaders like
Nila Pratt and Dr. Luce have likely been at the organization for a long time. They establish friendly
rapports with the other employees. They will likely display a good degree of expertise in whatever
business they are in since many look to them for advice. They also display leadership qualities, albeit
informally, such as charisma.
2. Is it ethical for managers to “use” informal leaders in an organization to achieve their

objectives?
Students’ answers may vary.
CONTROVERSIAL ISSUE
Why Isn’t Delegation Working Here?
One of the purposes for studying organizational structure is to determine what the authority relationships
are, what the tasks are, and who is responsible for carrying out those tasks. The following story illustrates
what happens when the delegation of responsibility is not given to the person in charge of a group of
subordinates.
Billy Wagner was a born salesman. He had worked for several companies over the years as a successful
salesman. Several times he had been named salesman of the year.
Billy foresaw that metal buildings were a new frontier, and he began to sell them—metal buildings for
farms, small businesses, schools, and churches. Billy covered all of Iowa, and he was quite successful in
selling the metal buildings. Business was booming so much in Billy’s territory that the metal-building
manufacturer and the construction crews were having a problem keeping up with his sales.
To add to the problem, the original manager of the firm (the woman who had hired Billy) resigned and took
a job at an airport. Her replacement was full of vim, vigor, and vitality and was determined to get the
company rolling again, even though there were some logistical problems that caused the firm to fall further
and further behind schedule. After talking to many people (but not Billy) in the firm about the lag in
schedule, the new manager finally arrived at a solution. He decided to talk to Billy.
“Billy,” the new manager said confidently, “I know how we can keep up with the schedules. We just need
to place a little responsibility in some hands that are strong enough and mature enough to handle it. My
investigations have led me to conclude that you can handle this assignment. Now, here’s the plan. Once you
have sold a metal building and the construction contract is signed, you are responsible for seeing that the
building is erected by the completion date specified in the contract. Understand?”
Billy Wagner thought a moment. He realized this was the kind of challenge that he had always wanted—
supreme authority over metal-building delivery. To make sure he understood the new manager, Billy
wanted to check one minor item.
7-16
“I take it that this means that I’m in charge of the construction crews and can order extra workers and assign
overtime as needed, right? And those crews and their straw bosses will know that my word is law, right?”
“Hold on,” the manager choked, “You can’t be in charge of the crews.”
Billy wasn’t through with this argument. “Boss, if I can’t be in charge of the crews and get them moving as
I see best, then there’s no way you can hold me responsible for having those buildings up in time.”
These were not words that the new manager wanted to hear. “Now, Billy, you just have to learn how to get
along with those crew chiefs, to work with them, and to be cooperative. You just don’t get the point.”
Actually, it was the manager who was not getting the point.
Discussion Questions:
1. What was the organizational problem in this story?

The organizational problem deals with the delegation of authority. Delegation of authority means not
only giving tasks to employees but empowering them to make commitments, use resources, and take
whatever actions necessary to carry out those tasks. Since Billy cannot efficiently make sure the
buildings are done on time without having authority over the crew, the manager is not delegating
authority properly.
2. Can someone be responsible for something over which that person does not have authority?
Probably not, or at least not easily. The manager might hold Billy responsible despite Billy’s
objections, but if the crews won’t listen to Billy because he does not have authority over them, then
there is not much Billy can do to get the buildings done on time unless he offers some kind of incentive
(which he might not have the authority to do either). If it’s not in his power to perform the tasks
satisfactorily, then he cannot exhibit responsibility for something that he can’t wield control over.
3. How should the new manager have handled Billy’s request to be in charge, to be able to order
extra workers, to assign overtime, and to know that his word was law?
Students may have differing opinions, but if the new manager wants to delegate the responsibility of
getting the new buildings done on time, then he must give Billy the resources to do so. If he didn’t want
to give up so much authority, perhaps he could’ve negotiated with Billy in some way to give Billy more
control (and hence greater authority over the crews) and yet retain some authority over the situation
himself.
So You Want a Job In Managing Organizational Culture, Teamwork, and

Communication?
How has technology created new job positions?
The area of corporate communications provides lots of opportunities for specific jobs that facilitate
communication systems. Thanks to technology, there are job positions to help disseminate information
through online newsletters, intranets, crowdsourcing, or internal computer networks to share
information to increase collaboration. In addition to the many advances using electronic
7-17
communications, there are technology concerns that create new job opportunities. Monitoring
workplace communications such as the use of e-mail and the Internet have created new industries.
There have to be internal controls in the organization to make sure that the organization does not
engage in any copyright infringement. If this is an area of interest, there are specific jobs that provide
an opportunity to use your technological skills to assist in maintaining appropriate standards in
communicating and using technology.
REVISIT THE WORLD OF BUSINESS, Green Mountain Coffee Roasters Empowers

Employees
GMCR sells coffee and beverage selection through a coordinated, multichannel distribution network of
wholesale and consumer direct operations. It has a decentralized and flat organizational structure with
few layers of management. It also has a culture in which employees are involved in creating ideas and
coming up with solutions together. With continued growth, GMCR must carefully manage its
communications channels to ensure that employees will continue to be heard.
1. Describe how GMCR uses a decentralized and flat organizational structure.

GMCR has few layers of management, making the organizational structure flatter and decentralized
because company decisions are more spread out among the GMCR workforce. This structure gives
all employees responsibility for implementation. Although GMCR has functional departments that
vary across the company, there is an openness of communication that allows employees regular
access to all levels of the organization. The company uses voice-mail or e-mail to inform groups of
decisions and encourages employees to voice their opinions and ideas in response. At the same
time, the company follows an agenda to keep things from becoming chaotic.
2. How does empowerment work at GMCR?

Employees feel empowered because they feel as if their voices and their input are being heard.
They are involved in creating ideas and coming up with better solutions together in a collaborative
environment. The responsibility for getting things done is shared equally among company
employees. They are more empowered to make important decisions and work toward implementing
the company vision.
3. What are some of the challenges GMCR must overcome as it continues to expand?
The larger a company becomes, the harder it is to maintain strong channels of communication.
There is always a risk that the corporate culture might become diluted in pursuit of profits. GMCR
has already had difficulty in some of its accounting procedures, which has created some scrutiny
over its practices. GMCR must therefore strive to ensure that employees continue to be heard and
that the company also maintains a strong ethical culture.
7-18
CHECK YOUR PROGRESS
1. Identify four types of departmentalization and give an example of each type.
Departmentalization is grouping jobs into working units usually called departments, units, groups, or
divisions. Functional departmentalization is the grouping of jobs that perform similar functional
activities, such as finance, manufacturing, marketing, and human resources. Product
departmentalization is grouping jobs around the products of a firm. Geographical departmentalization is
grouping jobs by geographic location, such as country, region, or an even smaller area. Customer
departmentalization is grouping jobs around the needs of various types of customers, which allows an
organization to respond to the needs of each group of customers. (Examples of these
departmentalization types will vary according to the examples given by students).
2. Explain the difference between groups and teams.
In a group, two or more individuals communicate with one another, share a common identity, and have
a common goal. The purpose of the group is the same as the broader organizational mission, whereas
the team has a specific purpose that is defined by the team itself. The leadership roles in the team are
shared, and both the team members and the whole team are accountable for the results of their work. In
a group, the leadership is clearly focused on one person; thus, each individual is accountable.
A team requires a collective effort and the participation of all team members, two characteristics that
are not necessarily required in a group. All teams are groups, but not all groups are teams.
3. What are self-managed work teams and what tasks might they perform that traditionally are
performed by managers?
A self-managed work team is a group of employees responsible for an entire work process or segment
that delivers a product to an internal or external customer. They might be given the authority to
implement work decisions, especially when problems arise in the production process.
4. Explain how delegating authority, responsibility, and accountability are related.
All of these are related, but there is a difference in the meaning of each of these words. Delegation of
authority is the assigning of tasks to employees while giving them the power to make commitments, use
resources, and take actions necessary to accomplish them. Responsibility is the obligation to carry out
assigned tasks satisfactorily. Accountability is the answerability of a subordinate to a superior for the
outcome of an assigned task.
5. Distinguish between centralization and decentralization. Under what circumstances is each

appropriate?
A centralized organization is one in which top-level managers delegate very little authority to lower-
level employees. A decentralized organization is one in which authority is delegated as far down the
chain of command as possible. A centralized organization is appropriate when the decisions to be made
are risky and when low-level managers are not highly skilled in decision making. Decentralization is
appropriate when the organization operates in complex and unpredictable environments.
7-19
6. Define span of management. Why do some organizations have narrow spans and others wide
spans?
Span of management is the number of subordinates who report to a particular manager. A wide span of
management exists when a manager directly supervises a large number of employees. A narrow span of
management exists when a manager directly supervises only a few subordinates. The nature of spans of
management in a company depends on the physical distance between managers and subordinates, on
the managers’ responsibilities other than supervision, and on the degree of interaction required between
managers and subordinates. Other factors include the frequency of problems, the competence of
subordinates, and the existence of specific operating procedures.
7. Discuss the different forms of organizational structure. What are the primary advantages and
disadvantages of each form?
The process of delegation establishes a pattern of authority and accountability, often called
bureaucracy, within the organization. Various forms of bureaucracy include line structure, line-and-
staff structure, and matrix structure, as well as committees.
A line structure is based on direct lines of authority that extend from the top executive to employees at
the lowest level of an organization. This structure provides a clear chain of command, but it also
requires managers to possess a wide range of knowledge.
In the line-and-staff structure there is a line relationship between superiors and subordinates, and line
departments are directly involved in the operation of the organization. Specialized managers, called
staff managers, are available to assist line managers.
The matrix structure involves setting up teams from different departments and creating two or more
intersecting lines of authority. The matrix structure improves cross-pollination of ideas but is generally
temporary.
8. Discuss the role of the grapevine within organizations. How can managers use it to further the
goals of the firm?
The grapevine is an informal channel of communication, separate from management’s formal, official
communication channels. Astute managers try to identify informal leaders to gain their support for the
organization’s objectives. Managers can use the grapevine to their advantage, feeding it facts to squelch
rumors and incorrect information. They can also obtain valuable facts from the grapevine to improve
decision making.
9. How have technological advances made electronic oversight a necessity in many companies?
Technological advances as alternatives to face-to-face communication have caused problems as

employees face information overload. Electronic oversight is necessary in many companies to insure
that employees use technology appropriately and efficiently.
7-20
10. Discuss how an organization’s culture might influence its ability to achieve its objectives. Do you
think that managers can “manage” the organization’s culture?
When an organization’s culture consists of values shared by all members of the organization, results
can be positive as all members work toward shared objectives. Managers can “manage” an
organization’s culture by establishing values and rules through authority, partly in organizational and
policy manuals, and by example. The manager’s awareness of a company’s culture is management’s
strongest tool in dealing with problems and weaknesses.
GET INVOLVED
1. Explain, using a specific example (perhaps your own future business), how an organizational
structure might evolve. How would you handle the issues of specialization, delegation of
authority, and centralization? Which structure would you use? Explain your answers.
Students’ answers will vary.
2. Interview the department chairperson in charge of one of the academic departments in your
college or university. Using Table 8.1 as a guideline, explore whether the professors function
more like a group or a team. Contrast what you find here with what you see on your school’s
basketball, football, or baseball team.
Students’ answers will vary.
BUILD YOUR SKILLS
1. Typically, most people categorize very few of the teams they’ve been involved with as “really great.”
2. Obviously, most—if not all—of the circled items should come from column two.
3. Some ideas that you might want to bring out in the discussion generated from this question are:
 Everybody pulls together.
 Enthusiasm runs high.
 Believe in what you’re doing.
 Be passionate about achieving your team’s goals.
 There was a clear challenge.

 The teams must feel like they can make a difference.
 Team members need to take individual responsibility for doing their best.
 Team members need to look out for each other and care about each other as individuals.
 Have a clearly-defined and clearly-communicated vision or goal for the team—one that everybody
on the team can take ownership of.
 Establish some guidelines among the team members that include adopting the characteristics of a
“Good Team Experience” from the chart.
7-21
BUILD YOUR BUSINESS PLAN
You really need to encourage students to have a positive outlook about working with others on a team. At
this point, students have been working on their group’s business plan for 6 weeks to 2 months. Surprise the
students by walking into class and having them evaluate how well their groups are doing. Have them
complete a simple evaluation form of each member’s contribution to date on the business proposal. This is
an ideal time for such an activity because they still have plenty of time to resolve any problems the group
might be having and still end up with a strong group project.
SEE FOR YOURSELF VIDEOCASE: ROWE Helps Organizations Improve Productivity

While Increasing Employee Satisfaction
Case Overview
ROWE, which stands for Results Only Work Environment, is a non-traditional working system that allows
employees to choose when and where they want to work. Best Buy is one company that is implementing
ROWE successfully. After a survey revealed that Best Buy employees felt micromanaged to the point
where they wanted to quit, Best Buy decided to try out the ROWE system and moved toward a
decentralized structure. One study revealed that employee turnover had been reduced by 45 percent. ROWE
works so well because through ROWE, employees are judged only on their productivity. Working at home
or in another chosen environment allows employees to focus free from distraction. Today ROWE’s
founders operate a consulting firm to help companies implement the system. Overall, ROWE seems to
increase employee satisfaction and save costs with increased productivity.
Questions for Discussion
1. What about Best Buy’s organizational culture was driving employees to quit?
Employees felt micromanaged by their supervisors to the point where their work environment was
intolerable, causing them to quit.
2. How did ROWE help solve Best Buy’s problems while increasing productivity and loyalty?
ROWE has allowed people more freedom and flexibility in their jobs and a better work/life
balance. Employees choose when and where they work, just as long as they get their tasks done.
This allows them to feel more in control of their jobs and generally has led to happier and more
productive employees. ROWE works so well because employees are motivated to get their tasks
done so they can move on to more enjoyable activities—they cut out the time wasting that is
epidemic in traditional offices and focus on getting their tasks done.
3. What other companies might benefit from implementing a ROWE system?

Students can use their imaginations in this answer, as long as they defend their reasoning.
7-22
TERM PAPER OR PROJECT TOPICS
These topics could be assigned as individual or collaborative projects:

1. Specialization Techniques of Henry Ford
2. A Comparison of Policy Manuals (Employee Handbooks) in Selected Firms
GUEST SPEAKER SUGGESTIONS
1. A professor or teacher to talk about organizational structure.

2. A representative from a business firm to speak about changes in organizational structure for that firm.
TEACHING SUGGESTIONS
1. Start the session with a “writing to learn” exercise. Select three or four of the questions in “Check Your
Progress.” Have students choose one of the three or four selected questions and write their answers.
Allot only a few minutes for this writing exercise. Call on volunteers or randomly call on students for
answers.
2. Cover desired portions of chapter content using the “Lecture Outline and Notes.” If students have been
assigned the chapter as a reading assignment, not every fact in the chapter needs to be given in a
lecture. Instead, instructors may prefer to use the “Supplemental Lecture” or “Controversial Issue”
material to reinforce the reading assignment.
3. Having students draw organizational charts will help reinforce the characteristics of each of the
organizational forms. After the students have drawn their charts individually, have them compare their
drawings in pairs (or possibly in teams).
4. 4. Students should have read the boxed material. Go over the discussion questions in class.
Spending time on the discussion questions, the case study, the boxed material, etc., helps students
analyze and think about what they have learned.
7-23

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Chapter 07 - Organization, Teamwork, and Communication

BUSINESS A CHANGING WORLD 9TH EDITION FERRELL

KEY TERMS AND DEFINITIONS

committee A permanent, formal group that performs a specific task.

decentralized A structure in which decision-making authority is delegated as far down the

grapevine An informal channel of communication, separate from management’s formal,

organizational layers The levels of management in an organization.

product The organization of jobs in relation to the products of the firm.

span of management The number of subordinates who report to a particular manager.

structure The arrangement or relationship of positions within an organization.

LECTURE OUTLINE AND NOTES

1. Develops when managers assign work tasks and activities to specific

1. Delegation of authority is not only giving tasks to employees but also

2. Span of management refers to the number of subordinates who report to a

2. Line-and-staff organizations may experience overstaffing and ambiguous

B. The type of groups an organization establishes depends on the tasks it needs to

Boxed Text Discussion Questions

1. Why did Best Buy feel the need to embrace sustainability?

Responding to Business Challenges, Creating a Corporate Culture...Virtually

1. How does Yammer contribute to a firm’s corporate culture?

2. How can Yammer be used as a way to improve productivity?

Solve the Dilemma: Quest Star in Transition

3. Evaluate the pros and cons of the system developed by QS.

Informal Leaders within an Organization

2. Is it ethical for managers to “use” informal leaders in an organization to achieve their

Why Isn’t Delegation Working Here?

1. What was the organizational problem in this story?

So You Want a Job In Managing Organizational Culture, Teamwork, and

How has technology created new job positions?

REVISIT THE WORLD OF BUSINESS, Green Mountain Coffee Roasters Empowers

1. Describe how GMCR uses a decentralized and flat organizational structure.

2. How does empowerment work at GMCR?

CHECK YOUR PROGRESS

1. Identify four types of departmentalization and give an example of each type.

2. Explain the difference between groups and teams.

4. Explain how delegating authority, responsibility, and accountability are related.

5. Distinguish between centralization and decentralization. Under what circumstances is each

Technological advances as alternatives to face-to-face communication have caused problems as

BUILD YOUR SKILLS

 There was a clear challenge.

BUILD YOUR BUSINESS PLAN

SEE FOR YOURSELF VIDEOCASE: ROWE Helps Organizations Improve Productivity

3. What other companies might benefit from implementing a ROWE system?

TERM PAPER OR PROJECT TOPICS

These topics could be assigned as individual or collaborative projects:

GUEST SPEAKER SUGGESTIONS

1. A professor or teacher to talk about organizational structure.

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