E QTKD1 Week 8

Chapter 8
Structuring organizations for today’s challenges

Denise Morrison
CEO of Campbel Soup
Company
GETTING TO KNOW
Chapter
Structure
1. Organizing for success
2. The changing organization
3. Decisions to make in structuring organizations
4. Organization models
7.1. Organizing for success
 Your business evolve into a company
with several departments:
production, marketing, accounting
and maintenance. The process of
setting up individual departments to
do specialized tasks is called
departmentalization.
7.1. Organizing for success
 Structuring and organization consists
of devising a division of labor; setting
up teams or departments to do
specific tasks and assigning
responsibility and authority to people.
 You may develop an organization
chart that shows relationships among
people: who is accountable for the
completion of specific work and who
reports to whom.
7.2. The changing organization
The development of organizational design
 Business growth led to economies of

scale (companies can reduce their
production costs by purchasing raw
materials in bulk).
 During the era of mass production,
organizational theorists emerged. Two
influential thinkers were Henri Fayol and
Max Weber.
Turning principles into organizational design
 A hierarchy: a system in which one person is

at the top of the organization and there is a
ranked or sequential ordering from the top
down of managers who are responsible to
that person.
 Chain of command: the line of authority that
moves form the top of a hierarchy to the
lowest level.
 Organization chart: a visual device that

shows relationships among people and
divides the organization’s work; it shows who
is accountable for the completion of specific
work and who reports to whom.
 Bureaucracy: an organization with many
layers of managers who set rules and
regulations and oversee all decisions.
President Typical organization chart
Manager A Manager A Manager A

(Production) (Production) (Production)
First-line First-line First-line First-line First-line First-line First-line First-line First-line

supervisor supervisor supervisor supervisor supervisor supervisor supervisor supervisor supervisor
7.3. 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 organizational structures
4. Departmentalization
Choosing centralized or decentralized authority
Decentralized authority
Centralized authority
An organizational structure
An organizational structure
in which decision-making
in which decision-making
authority is delegated to
authority is maintained at
lower-level managers more
the top level of management
familiar with local conditions
at the company’s
than headquarters
headquarters.
management could be
• Greater top-management control • Less responsiveness to customers

• More efficiency • Less empowerment
• Simper distribution system • Inter-organizational conflict
• Stronger brand/corporate image • Lower morale away from
headquarters
Advantages and disadvantages of centralized authority

• Better adaptation to customer • Less efficiency

wants • Complex distribution system
• More empowerment of workers • Less top-management control
• Faster decision making • Weakened corporate image
• Higher morale
Advantages and disadvantages of decentralized authority

Choosing the appropriate span of control
Span of control: the optimum number of subordinates a manager

supervises or should supervise
 Fewer chances for

 Reduced costs
advancement
 More responsiveness to
 Overworked managers
customers
 Loss of control
 Faster decision making
 Less management
 More empowerment
expertise
Advantages and disadvantages of a broad span of control

 Less empowerment
 More control by top
management  Higher costs
 More chances for  Delayed decision
advancement making
 Greater specialization  Less responsiveness to
customers
 Closer supervision
Advantages and disadvantages of a narrow span of control

The trend today is to expand the span of

control as organizations adopt
empowerment, reduce the number of
middle managers and hire more talented
and better educated lower-level employees.
Choosing between tall and flat organizational structures
• In the early 20th century, organizations

grew even bigger, adding layer after layer
of management to create tall
organizational structures.
• More recently, organizations have
adopted flat organizational structures
with fewer layers of management and a
broad span of control (many people
report to each manager)
Choosing between tall and flat organizational structures
A flat organizational structure

Weighing the advantages and disadvantages of departmentalization
• Departmentalization divides
organizations into separate units.
• Departmentalization groups workers
according to their skills, expertise or
resource use.
Weighing the advantages and disadvantages of departmentalization
 Departments may not
 Employees can develop communicate well
skills  Employees may identify with
their department’s goals rather
 The company can achieve than the organization’s
economies of scale  The company’s response to
 Employees can coordinate external changes may be slow
work within the function  People may not be trained to
and top management can take different managerial
easily direct and control responsibilities
various departments’  Department members may
activities engage in groupthink and may
need input form outside
Looking at alternative ways to departmentalize
Marketing manager
Trade books College texts Technical books
By product
President
Human
Production Marketing Finance Accounting
resources
By function
President
Commercialu Manufacturers
Consumers Institutions
sers
By customer group
Vice President
(international operations)
Canadian Japanese European Korean

division division division division
By geographic location
Production
manager
Cutters Dyers Stitchers
By process
1. Why are organizations becoming
flatter?
2. What are some reasons for having a
narrow span of control in a
organization?
3. What are the advantages and
disadvantages of departmentalization?
4. What are the various ways a firm can
departmentalize?
7.4. Organizational models
Line organizations
Line organizations: an organization that has

direct two-way lines of responsibility,
authority and communication running from
the top to the bottom of the organization
with all people reporting to only one
supervisor.
Line organizations
• Does not have any

specialists who provide
• There is unity in power
managerial support.
• Suitable for large-scale
• Not suitable for large-
businesses
scale businesses.
• Unable to handle
complex decisions.
Advantages and disadvantages of line organization

Line-and-staff organizations
Line personnel: are responsible for directly

achieving organizational goals and include
production workers, distribution people and
marketing personnel.
Staff personnel: advise and assist line
personnel in meeting their goals and
include those in marketing research, legal
advising, information technology and
human resource management.
Line-and-staff organizations
Line personnel: have formal authority

to make policy decisions.
Staff personnel: have authority to
advise line personnel and influence
their decisions, but they can’t make
policy changes themselves.
Matrix-style organizations
Matrix organization: an
organization in which
specialists from different parts
of the organization are brought
together to work on specific
projects but still remain part of
a line-and-staff structure.
Matrix-style organizations
It gives managers flexibility in It’s costly and complex

assigning people to projects
It can confuse employees about

It encourages inter- where their loyalty belongs-with
organizational cooperation the project manager or with their
and teamwork functional unit
It requires good interpersonal skills

It can produce creative as well as cooperative employees
solutions to product and managers to avoid
development problems. communication problems.
It makes efficient use of It may be only a temporary

organizational resources solution to a long-term problem
Advantages and disadvantages of matrix-style organization

The end …
Structuring organizations
for today’s challenges
Thank you

E QTKD1 Week 8

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Chapter 8

Structuring organizations for today’s challenges

 Business growth led to economies of

 A hierarchy: a system in which one person is

 Organization chart: a visual device that

President Typical organization chart

Manager A Manager A Manager A

First-line First-line First-line First-line First-line First-line First-line First-line First-line

When designing responsive organizations, firms

• Greater top-management control • Less responsiveness to customers

Advantages and disadvantages of centralized authority

• Better adaptation to customer • Less efficiency

Advantages and disadvantages of decentralized authority

Span of control: the optimum number of subordinates a manager

 Fewer chances for

Advantages and disadvantages of a broad span of control

Advantages and disadvantages of a narrow span of control

The trend today is to expand the span of

• In the early 20th century, organizations

A flat organizational structure

Trade books College texts Technical books

Canadian Japanese European Korean

Cutters Dyers Stitchers

Line organizations: an organization that has

• Does not have any

Advantages and disadvantages of line organization

Line personnel: are responsible for directly

Line personnel: have formal authority

It gives managers flexibility in It’s costly and complex

It can confuse employees about

It requires good interpersonal skills

It makes efficient use of It may be only a temporary

Advantages and disadvantages of matrix-style organization

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