Understanding Business Ch 8

Flashcard maker : Lily Taylor
No matter what the size of the business, the principles of organization are much the same
Organizing, or structuring
begins with determining what work needs to be done; and then dividing the tasks
Division of labor
dividing the tasks to be completed
Job specialization
dividing tasks into smaller jobs
the process of setting up individual departments to do specialized tasks
Structuring an organization
consists of devising a division of labor; setting up teams or departments to do specific tasks; and assigning responsibility and authority to people.
Organization chart
shows relationships among people who is acceptable for the completion of specific work, and who reports to who
reliance of rules and regulations to give managers control over employees
mass production
methods for efficiently producing large quantities of goods
economies of scale
the fact that companies can reduce their production costs by purchasing raw materials in bulk
two influential thinkers during the era of mass production, organizations, theorists emerged
Henri Fayol, Max Weber
Fayols Principles of organization published in his book Administration industrielle et generale 1919, popularized in US under the title General and Industrial management 1949
Unity of command; Hierarchy of authority; division of labor; subordination of individual interests to the general interest; Authority; Degree of centralization; Clear communication channels; order; equity; esprit de corps
Unity of command
each worker is to report to one, and only one boss.
Hierarchy of authority
All workers should know to whom they report. Managers should have the right to give orders and expect others to follow
Division of labor
functions to be divided into areas of specialization such as production, marketing, and finance
Subordination of individual interests to the general interests
workers to think of themselves as a coordinated team . The goals of the team are more important than the goals of individual workers
Managers have the right to give orders and the power to enforce obedience. Authority and responsibility are related; whenever authority is exercised, responsibility arises
Degree of centralization
the amount of decision-making power vested in top management should vary by circumstances. In a smaller organization, it’s possible to centralize all decision making power in the top manager; In a larger organization, however, some decision making power for both major and minor issues, should be delegated to lower- level managers and employees
Clear communication channels
All workers should be able to reach others in the firm quickly and easily
Materials and people should be placed and maintained in the proper location
A manager should treat employees and peers with respect and justice
Esprit de corps
A spirit of pride and loyalty should be created among people in the firm
Max Weber and organizational theory
Max Weber’s book, The theory of Social and Economic Organizations appeared in the US in late 1940s much like Fayol’s. Weber a German sociologist and economist , promoted the pyramid-shaped organization structure that became popular in large firms. Weber put great trust in managers and felt the firm would do well if employees simply did what they were told
Webers principles of organization resembled Fayol’s in addition Weber emphasized:
Job Description; Written rules, decision guidelines, and detailed records; Consistent procedures, regulations, and policies; Staffing and promotion based on qualifications;;; he was in favor of bureaucracy
a system in which one person is at the top of the organization and is a ranked or sequential ordering from the top down of managers and others who are responsible to that person
chain of command
the line of authority that moves from the top of the hierarchy to the lowest level
organization chart
is a visual device that shows relationships among people and divides the organization’s work; it shows who reports to whom
giving employees authority, which works only when employees are given the proper training and resources to respond
Centralized authority
occurs when decision making is concentrated at the top level of management.
decentralized authority
occurs when decision making is delegated to lower-level managers and employees more familiar with local conditions than headquarters management could be
span of control
describes the optimal number of subordinates a manager supervises or should supervise. The appropriate span gradually narrows at higher levels of the organization because work becomes less standardized and managers need more face to face communication
tall organization structures
an organizational structure in which the pyramidal organization chart would be quite tall because of the various levels of management
flat organization structure
an organization structure that has few layers of management and a broad span of control
divides organizations into separate units, the traditional way to departmentalize is by function. Groups workers according to their skills, expertise, or resource us so that they can specialize and work together more efficiently
Advantages of departmentalization
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
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 goal rather than the organization’s. The purchasing department may find a good value somewhere and buy a huge volume of goods. That makes purchasing look good, but the high cost of storing the goods hurts overall profitability
3. The company’s response to external changes may be slow
4. People may not be trained to take different managerial responsibilities; rather, they tend to become narrow specialists
5. Department members may engage in groupthnk (they think alike) and may need input rom outside to become more creative
Organizational models
1. line organizations 2. line-and-staff organizations 3. matrix style organizations 4. cross-functional self managed teams
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 al people reporting to only one supervisor
disadvantages to line organizations in large organizations
being too inflexible, having few specialists or experts to advise people alone the line, and of having lengthy lines of communications
line personnel
employees who are part of the chain of command that is responsible for achieving organizational goals
staff personnel
employees who advise and assist line personnel in meeting their goals
both line and line-and-staff organization structures may suffer from inflexibility
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 line-and-staff structure
the matrix structure was developed in the aerospace industry and is now familiar in areas such as banking, management, consulting firms, accounting firms, and agencies and school systems
Matrix structure advantages
It gives managers flexibility in assigning people to projects
it encourages interorganizational cooperation and teamwork
it can produce creative solutions to product development problems
it makes efficient use of organizational resources
Matrix structure disadvantages
it’s costly and complex
it can confuse employees about where their loyalty belongs- with their functional unit
it requires good interpersonal skills as well as cooperative employees and managers to avoid communication problems
it may be only a temporary solution to a long term problem
cross-functional self-managed teams
are groups of employees from different departments who work together on a long-term basis
means that they are empowered to make decisions without management approval. the barriers among design, engineering, marketing, distribution, and other functions fall when interdepartmental teams are created
using communications technology and other means to link organizations and allow them to work together on common objectives
real time
the present moment or the actual time in which something takes place
virtual corporation
a temporary networked organization made up of replaceable firms that join and leave as needed
compares an organization’s practices, processes, and products against the world’s best
core competencies
those functions that the organization can do as well as or better than any other organization in the world
digital natives
young people who have grown up using the internet and social networking
redesigning an organization so it can more effectively and efficiently serve its customers
inverted organization
an organization that has contact people at the top and the chief executive officer at the bottom of the organization
traditional organization
top management
middle management
supervisory management
frontline workers
(pyramid chart)
inverted organization
empowered frontline workers (often in terms)
Support personnel
top management
organizational (or corporate) culture
widely shared values within an organization that provide unity and cooperation to achieve common goals
formal organization
the structure that details lines of responsibility, authority and position
informal organization
the system that develops spontaneously as employees meet and form cliques, relationships, and lines of authority outside the formal organzation

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