UNIT 5

FOUNDATION OF ORGANIZING

Learning Outcomes:
• Introducing organizational structures
• Define authority
• Centralization and
decentralization
• Benefits of decentralization
 Key Elements
of Organization Structure
Work Authority and
Specialization Responsibility

Chain Centralization vs.

of Command Decentralization

Span of Control Departmentalization

FOM 6.2
Work Specialization
• Job is broken down into a number of steps
High
• Each step is completed by a separate individual
• Makes efficient use of the diversity of skills that workers have
Productivity
Low

Low Work Specialization High

FOM 6.3
The Chain of Command
Chief Executive
Officer

Executive Executive
President
Vice President Vice President

Vice Vice Vice Vice Vice

President President President President President

Region Region Region Region Region

1 2 3 4 5

District District District District District District District

A B C D E F G

FOM 6.4
Span of Control
• Number of employees that a manager can manage effectively
• Increased over the last several years
• Contingency variables impact number - the training and experience
employees have, complexity of tasks, physical proximity of manager
and employees, the company culture, and the preferred managing
style

FOM 6.5
 Flat and Tall
Lean Organization
Organization 1 1
8 4
64 16
Wide SOM Narrow SOM
512 64
256
1.024
4.096

4.096
Levels of management: 4
Number of managers: 585
Number of workers: 4,096
Levels of management: 6
Number of managers: 1,365
Number of workers: 4,096
Authority vs. Responsibility
• Obligation
Rights inherent
to perform
in managerial position to give orders and expect
• them to be followedwith authority
Goes hand-in-hand
• Related to one’s position--not the characteristics of person
 The Concept of Authority
Chief Executive
Officer

Research and Human

Finance Accounting Marketing Production
Development Resources

FOM 6.8
B. Centralization and
decentralization
The Degree of Centralization
Lower Higher

Decentralization
Top Management Control

Employee Empowerment
Centralization
Higher Lower
 Strategy

Contingency Human resources

Factors and
Organization
Technology
Design

Environmental
Uncertainty
FOM 6.11
Five Ways to Departmentalize
• Functional
• Product
• Customer
• Geographic
• Process
• Matrix
 Kinds of Departments

President

Financial Marketing Production Engineering H.Resource

Director Director Director Director Director

Departmentation by Function
 President

Radio Products TV Products VCD Products

Director Director Director

Departmentation by Product
 Marketing
Vice-President

Industrial Government Consumer

Sales Sales Sales
Director Director Director

Departmentation by Customer
 Vice-President

Southern Western Eastern

Region GM Region GM Region GM

Departmentation by Geography
 General
Superintendent

Superintendent Superintendent Superintendent

Project A Project B Project C

Plumbing Electrical Masonry

Supervisor Supervisor Supervisor

Departmentation by Process
 Board Chairman
Matrix structure
President
Cost Centers Other Services
Functions
Contract
Design Manufacturing Administration Purchasing Accounting

Alpha
Project

Beta
Project

Gamma
Project

Omega
Project

Future