CyberSummary

DEVELOPING ORGANIZATIONAL STRUCTURE

Rarely is an organization, or any group of individuals working together, able to achieve common objectives without some form of structure, whether that structure is explicitly defined or only implied. Structure is the arrangement or relationship of positions within an organization. An organization's structure develops when managers assign work tasks and activities to specific individuals and work groups and coordinate the diverse activities required to reach the firm's objectives. Organizational charts are visual displays of organizational structure, chain of command, and other relationships. Growth requires organizing--the structuring of human, physical, and financial resources to achieve objectives efficiently and effectively.

SPECIALIZATION

An organization must first determine what activities are required to achieve its objectives and then break these activities down into specific tasks that can be handled by individual employees. This division of labor into small, specific tasks and the assignment of employees to do a single task is called specialization. The rationale for specialization is efficiency: It minimizes the time lost when workers shift from one task to another, and it facilitates training. It may be necessary when the activities to be performed are too numerous for one person. Overspecialization can have negative consequences, such as employee boredom and dissatisfaction.

DEPARTMENTALIZATION

After assigning specialized tasks to individuals, managers next organize workers doing similar jobs into groups to make them easier to manage. Departmentalization is the grouping of jobs into working units called departments, units, groups, or divisions. Most companies use more than one method of departmentalization to enhance productivity. Functional departmentalization groups together jobs that perform similar functional activities--such as finance, manufacturing, marketing, and human resources--with each group managed by an expert in that function. Product departmentalization organizes jobs around the products of the firm. Geographical departmentalization groups jobs according to geographic location, such as a state, region, country, or continent. Customer departmentalization arranges jobs around the needs of various types of customers. Each of these departmentalization methods has advantages and disadvantages.

THE ROLE OF GROUPS AND TEAMS IN ORGANIZATIONS

Regardless of how they are organized, most of the essential work of business occurs in individual work groups and teams. A group has traditionally been defined as two or more individuals who communicate with one another, share a common identity, and have a common goal. However, businesses are moving toward greater use of teams, which are small groups whose members have complementary skills; a common purpose, goals, and approach; and who hold themselves mutually accountable. All teams are groups, but not all groups are teams. A work group's performance depends on what its members do as individuals, while a team's performance is based on collective products.

Teams are becoming more common as businesses try to boost productivity and become more competitive. Teams can pool and make greater use of members' knowledge and skills than can individuals working alone; create more solutions for solving problems than can individuals; enhance employee acceptance of, understanding of, and commitment to team goals; motivate and involve workers; boost innovativeness and productivity; and reduce costs.

The type of groups an organization establishes depends on the tasks it needs to accomplish and the situation it faces. A committee is usually a permanent formal group that does same specific task. A task force is a temporary group of employees--who typically come from across all departments and levels of an organization--responsible for bringing about a particular change. Project teams are similar to task forces, but normally they actually run their operation and have total control of a specific work project. Product-development teams are a special type of project team formed to devise, design, and implement a new product. Quality-assurance teams (or quality circles) are fairly small groups of workers brought together from throughout the organization to solve specific quality, productivity and service problems. A self-directed work team (SDWT) is group of employees responsible for an entire work process or segment that delivers a product to an internal or external customer.

ASSIGNING RESPONSIBILITY AND DELEGATING AUTHORITY

After workers have been organized into groups and assigned their tasks, they must be given the responsibility to carry out their assigned activities. Management must determine the extent to which responsibility will be delegated throughout the organization, the chain of command of authority, and how many employees will report to each manager.

Delegation of authority gives not only tasks to employees, but also the power to make commitments, use resources, and take whatever actions are necessary to carry out those tasks. Delegation gives a responsibility, or obligation, on employees to carry out assigned tasks satisfactorily and holds them accountable for the proper execution of their assigned work. The principle of accountability means that employees who accept an assignment and the authority to carry it out are answerable to a superior for the outcome. The process of delegating authority establishes a pattern of relationships and accountability between superior and subordinates.

The extent to which authority is delegated throughout an organization determines its degree of centralization. In a centralized organization, authority is concentrated at the top, and very little decision-making authority is delegated to lower levels. Businesses tend to be more centralized when the decisions to be made are risky and when low-level managers are not highly skilled in decision making. Overcentralization can cause serious problems for a company, 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. A decentralized organization is one in which decision-making authority is delegated as far down the chain of command as possible. Decentralization is characteristic of organizations that operate in complex, unpredictable environments. Delegating authority to lower levels of managers may increase a firm's productivity.

Experts suggest that top managers should not directly supervise more than four to eight people, while lower-level managers who supervise routine tasks are capable of managing a much larger number of subordinates. Span of management refers to 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 exists when a manager directly supervises only a few subordinates. A narrow span of management is appropriate when superiors and subordinates are not in close proximity, the manager has many responsibilities in addition to supervising, interaction between superiors and subordinates is frequent, and problems are common. A wide span of management is appropriate when superiors and subordinates are located close to one another, the manager has few responsibilities other than supervision, the level of interaction between superiors and subordinates is low, few problems arise, subordinates are highly competent, and a set of specific operating procedures governs everyone's activities. Narrow spans of management are typical in centralized organizations, while wide spans of management are more common in decentralized firms.

Organizational layers refer to the levels of management in an organization. Tall organizations have many layers of management and narrow spans of management. Because managers supervise fewer employees, administrative costs are higher and decision making is slower. Flat organizations have fewer levels of management and wide spans of management. These managers have more administrative duties and spend more time supervising.

FORMS OF ORGANIZATIONAL STRUCTURE

Along with assigning tasks and the responsibility for carrying them out, managers must consider how to structure their authority relationships--that is, what structure the organization itself will have, how it will appear on the organizational chart.

The simplest organizational structure, line structure, has direct lines of authority that extend from the top manager to employees at the lowest level of the organization. This structure has a clear chain of command, enabling managers to make decisions quickly, but requires that managers possess a wide range of knowledge. Line structures are most common in small businesses.

The 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. Line managers focus on their area of expertise, while staff managers provide advice and support to line departments on specialized matters. This structure may result in overstaffing and ambiguous lines of communication.

A multidivisional structure groups departments together into larger groups called divisions, organized on the basis of geography, customer, product, or a combination. Multidivisional structures permit delegation of decision-making authority, allowing divisional and department managers to specialize. They allow better, faster, more innovative decisions and help each division focus on the unique needs of its customers. However, the divisional structure creates duplication of resources.

A matrix structure, also called a project-management structure, sets up teams from different departments, thereby creating two or more intersecting lines of authority. Project departments are superimposed on the more traditional, function-based departments. These structures are generally temporary. Matrix structures provide flexibility, enhanced cooperation and creativity, and responsiveness, but they are generally expensive and quite complex.

COMMUNICATING IN ORGANIZATIONS

Communication within an organization can flow in a variety of directions and from a number of sources, using both oral and written communication forms. There are both formal and informal communication flows within organizations.

Formal channels of communication are intentionally defined and designed by the organization. They represent the flow of communication within the formal organizational structure, as shown on organizational charts. Formal communication may flow upward, downward, horizontally, and diagonally.

Along with the formal channels of communication shown on an organizational chart, all firms communicate informally as well, through friendships and other nonwork social relationships. The most significant informal communication occurs through the grapevine, an informal channel of communication, separate from management's formal, official communication channels. Information passed along the grapevine may relate to the job or organization, or it may be gossip and rumors unrelated to either, and it may be surprisingly accurate. Managers can use the grapevine to their advantage.

ORGANIZATIONAL CULTURE

Organizational culture, also called corporate culture, refers to the organization's shared values, beliefs, traditions, philosophies, rules, and heroes. It gives the members of an organization meaning and suggests rules for how to behave and deal with problems within the organization. It may be expressed formally through codes of ethics, memos, manuals, and ceremonies, but it is more often expressed informally through dress codes, work habits, extracurricular activities, and stories.