QUIZ 2 (paper test)
Next week: 16 October, 2025
Chapter 5, 7 and 8
(Please review the handouts carefully &
bring pencils with you)
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Because learning changes everything.®
Chapter 8
Structuring Organizations for
Today’s Challenges
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Chapter Contents
Organizing for Success
The Changing Organization
Decisions to Make in Structuring Organizations
Organizational Models
Managing the Interactions among Firms
Adapting to Change
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Learning Objectives
LO 8-1 Outline the basic principles of organizational management.
LO 8-2 Compare the organizational theories of Fayol and Weber.
LO 8-3 Evaluate the choices managers make in structuring organizations.
LO 8-4 Contrast the various organizational models.
LO 8-5 Identify the benefits of interfirm cooperation and coordination.
LO 8-6 Explain how organizational culture can help businesses adapt to
change.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Organizing
Building an Organization from the Bottom Up
• Determine what work needs to be done
• Create a division of labor à divide tasks among employees
• Divide tasks into smaller jobs through job specialization à improve job performance
& efficiency
• Set up teams or departments / units to do specialized tasks (departmentalization).
• Allocate resources.
• Assign specific tasks.
• Establish procedures.
• Develop an organization chartà shows relationships among people and divides work
• Adjust to new realities.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
A division of labor Job specialization
Employee A focuses on making drinks. à Preparing espresso, making cream cheese,
drawing latte art
Employee B bakes cakes.
Employee C handles cash.
Employee D serves drinks. Departmentalization
Employee E manages supplies and Operations Team (barista, baker, cleaner )
inventory. Customer Service Team (server, cashier)
…
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Figure 8.1 Typical Organization Chart
This is a rather standard chart with managers for major functions and supervisors
reporting to the managers. Each supervisor manages three employees.
Access the text alternative for slide images.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Decisions to Make in Structuring Organizations
Choosing Centralized or Decentralized Authority
• Centralized authority – Decision-making authority is maintained at the
top level of management at the company’s headquarters.
o It can result in standardized operations, uniform image and high-quality
service
o It can limit the flexibility to immediately respond to regional or local market
changes and trends.
• Decentralized authority – Decision-making authority is delegated to
lower-level managers more familiar with local conditions than
headquarters management could be.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Figure 8.2 Advantages and Disadvantages of Centralized
versus Decentralized Authority
blank Centralized Decentralized
• Greater top-management control. • Better adaptation to customer wants.
• More efficiency. • More empowerment of workers.
Advantages • Simpler distribution system. • Faster decision making.
• Stronger brand/ corporate image. • Higher morale.
• Less responsiveness to customers. • Less efficiency.
• Less empowerment. • Complex distribution system.
Disadvantages • Interorganizational conflict. • Less top-management control.
• Lower morale away from • Weakened corporate image.
headquarters.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Choosing the Appropriate Span of Control
• Span of control – The optimum number of subordinates a manager supervises
or should supervise.
o Depends on a number of factors, and can vary from one manager to another.
o Standardization of work à broad spans of control
o At higher levels of the organization à narrow spans of control (less standardized
work, more face-to-face communication)
o The trend today: reduce middle managers, and hire better low-level employees.
o Empowerment and better-educated lower-level à increase the span of control
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Figure 8.4 Advantages and Disadvantages of a Narrow
versus a Broad Span of Control
blank Broad Narrow
• Reduced costs. • More control by top management.
• More responsiveness to customers. • More chances for advancement.
Advantages • Faster decision making. • Greater specialization.
• More empowerment. • Closer supervision.
• Fewer chances for advancement. • Less empowerment.
• Overworked managers. • Higher costs.
Disadvantages • Loss of control. • Delayed decision making.
• Less management expertise. • Less responsiveness to
customers.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Choosing between Tall and Flat Organizational Structures
• Tall organization structure – An organizational structure in which the
pyramidal organization chart would be quite tall because of the various levels of
management.
• Flat organization structure – An organizational structure that has few layers
of management and a wide span of control.
• The trend today: flatten the organization = eliminating several layers à
improve efficiency in communication & decision-making, allow employees
to get closer to customers
• Flat > Tall because because businesses can respond quickly to customer
demands.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Figure 8.3 A Flat Organizational Structure
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Departmentalization
• Departmentalization – The dividing of organizational functions into separate
units / departments.
• An organization can elect to departmentalize in the following ways: customer
group, product, functional, geographic, process, and hybrid.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Figure 8.5 Ways to Departmentalize 1
A company may want to
departmentalize by several
different ways: product,
function, customer group,
geographic location, or
process. In each case the
structure must fit the firm’s
goals.
For example, a publisher
may wish to departmentalize
by product and a
manufacturer by function.
Access the text alternative for slide images.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Figure 8.5 Ways to
Departmentalize 2
For example, a pharmaceutical
company may wish to
departmentalize by customer
group, a computer company by
geographic location (countries),
and a leather manufacturer by
process.
Access the text alternative for slide images.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Weighing the Advantages and Disadvantages of Departmentalization
Advantages: Disadvantages:
• Employees develop skills and • Different departments may not communicate well.
progress within a department as they
master skills. • Employees may identify with their department’s goals
• The company can achieve rather than the organization’s.
economies of scale.
• The company’s response to external changes may be
• Employees can coordinate work slow.
within the function, and top
management can easily direct • People may not be trained to take different managerial
activities. responsibilities; instead they become specialists.
• Groupthink: Department members may engage in
groupthink (they think alike) and may need outside
input.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Organizational Models: LINE
• Line organization – Has direct two-way lines of responsibility, authority, and
communication running from the top to the bottom, with all people reporting to
only one supervisor.
o There are no specialists or legal, accounting, human resource, or information
technology departments.
o Line managers issue orders, enforce discipline, and adjust the organization to
changes.
o Follows Fayol's traditional management rules
o Works well in unchanging environment
o Responsibility and authority are clearly defined.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Organizational Models: LINE-AND-STAFF
Line-and-Staff Organizations
• Line personnel – Employees who are part of the chain of command that is
responsible for achieving organizational goals.
o Have authority to make policy decisions
• Staff personnel – Employees who advise and assist line personnel in meeting
their goals.
o Includes marketing research, legal advising, IT, and human resource management.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Figure 8.6 A Sample
Line-and-Staff
Organization
Access the text alternative for slide images.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Organizational Models: MATRIX
Matrix-Style Organizations
• Matrix organization – 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.
o Emphasis is on product development, creativity, special projects, rapid
communication, and interdepartmental teamwork.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Figure 8.7 A Matrix Organization
In a matrix organization,
project managers are in
charge of teams made up of
members of several
departments. In this case,
project manager 2
supervises employees A, B,
C, and D. These employees
are accountable not only to
project manager 2 but also
to the head of their individual
departments. For example,
employee B, a marketing
researcher, reports to project
manager 2 and to the vice
president of marketing.
Access the text alternative for slide images.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
A Matrix Organization in the Aerospace industry
President
Vice President Vice President Vice President Vice President Vice President
(Project management) (Manufacturing) (Flight Systems) (Finance) (Engineering)
Procurement Flight Systems Aerospace
Project Falcon Budget analysts
Officer Analyst Engineer
Quality Assurance
Project Orion
Specialist
Project Nova Avionics Engineer
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Matrix-Style Organizations
Advantages: Disadvantages:
• Managers have flexibility in assigning • It’s costly and complex.
people to projects.
• Employees may be confused where
• Interorganizational cooperation and their loyalty belongs.
teamwork is encouraged.
• Good interpersonal skills and
• Creative solutions to product cooperative employees are a must.
development problems are produced.
• It may only be a temporary solution to a
• Organizational resources are used long-term problem.
efficiently.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Cross-Functional Self-Managed Teams
Cross-Functional Self-Managed Teams
• Groups of employees from different departments who work together on a long-
term basis.
o Helps fix the problem of matrix-style teams by establishing long-lived teams.
o Teams are empowered to make decisions without management approval.
o Leadership is shared.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Managing the Interactions Among Firms
Transparency and Virtual Organizations
• Virtual corporation – A temporary networked organization made up of
replaceable firms that join and leave as needed, connected through digital
networks.
• Benchmarking – Compares an organization’s practices, processes, and
products against rivals (usually the world’s best).
o Can lead to competitive advantage.à seek technological knowledge & new processes outside
o If an organization is not able to efficiently perform the function themselves they will outsource
the function
à to retain the functions that the organization considers its core competencies
• Core competencies – Those functions that the organization can do as well as
or better than any other organization in the world à outstanding performance
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Figure 8.8 A Virtual Corporation
A virtual corporation has no
permanent ties to the firms that
do its production, distribution,
legal, and other work. Such
firms are flexible enough to
adapt to changes in the market
quickly.
Access the text alternative for slide images.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Centralized or Decentralized?
At Toyota, regional divisions such as Toyota North America and
Toyota Europe have the freedom to make decisions on product
design, marketing, and supplier partnerships. Local managers can
Decentralized
adapt quickly to market changes and customer preferences in their
regions, while still following the company’s overall strategy. This
flexibility allows Toyota to respond effectively to local needs.
At Apple Inc., major decisions about product design, pricing, and
marketing are made at the company’s headquarters in California.
Local offices and Apple Stores follow strict guidelines from top Centralized
management to maintain consistent quality and brand image
worldwide. This central control ensures uniform standards but leaves
little room for local decision-making.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Tall or flat?
A large insurance company has multiple management layers,
including team leaders, department heads, division managers,
and vice presidents before reaching the CEO. Employees
report through several levels of authority, creating clear Tall
supervision and control. However, communication can be slow
because messages must pass through many layers.
A small software start-up with ten employees has only one
manager who oversees the entire team. Each employee
handles multiple roles, such as coding, marketing, and Flat
customer support. Decisions are made quickly through open
discussions, but the lack of formal structure can sometimes
lead to confusion about responsibilities.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Organizational Models
A mid-sized clothing manufacturer has production supervisors and
sales managers who report to the general manager. Supporting them
are staff specialists in accounting, human resources, and quality Line and staff
control who provide advice and assistance. While staff departments
offer expertise, only the line managers have the authority to make
final decisions on production and sales matters.
A small printing shop owned by Mr. Tan has a supervisor who
oversees three employees handling printing, binding, and delivery.
Everyone reports directly to Mr. Tan. There are no specialized Line organization
departments such as HR or accounting. All major decisions – from
pricing to scheduling – are made by the owner, ensuring simple
and direct communication.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Organizational Models
At an automobile company, a team of engineers, procurement
specialists, and quality experts work together continuously to
Cross-functional
improve car design and production efficiency. They operate as
self-managed
a self-managed group, making decisions collectively without
needing top management approval. This structure promotes
innovation and strong teamwork across departments.
An electronics company developing a new smartphone brings
together engineers, designers, and marketers from different
departments. Each team member reports to both their
functional manager and the project manager leading the Matrix-style
smartphone project. Once the project is completed, the
team members return to their regular departments and
responsibilities. This structure encourages collaboration and
innovation but is short-term in nature.
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.