OrgMan Notes

Module 1:

Principles of Management
Define Management
Management is the process of designing & maintaining an environment in which individuals,
working together in groups, efficiently accomplish selected aims.
Ø As managers, people carry out the managerial functions of planning, organizing, staffing,
leading, & controlling.
Ø Management applies to any kind of organization.
Ø It applies to managers at all organizational levels.
Ø The aim of all managers is the same: to create a surplus.
Ø Managing is concerned with productivity, this implies effectiveness & efficiency.

Define Organization
Organizations which can be defined as group of people working together to create a surplus.
Ø In business organizations, this surplus is profit.
Ø In nonprofit organizations, such as charitable organizations, it may be the satisfaction of
needs.

Features of Management
Ø Organized activities
Ø Existence of objectives
Ø Relationship among resources
Ø Working with & Through people
Ø Decision- Making

Management & Organization

Ø Administration is above management
Ø Administration is part of management
Ø Management & administration are same

Administration is above management

Ø “administration is that phase of business enterprise that concerns itself with the overall
determination of institutional objectives & the policies necessary to be followed in
achieving those objectives.”
Ø “Management on the other hand, is an executive function which is primarily concerned
with carrying out broad policies laid down by the administration.”

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Difference between Administration & Management

Administration is a part of management

Ø Management is a generic name for the total process of executive control in industry or
commerce.
Ø It is a social process entailing responsibility for the executive & economic planning &
regulation of the operation of an enterprise, in the fulfillment of a given purpose or task.
Ø Administration is that part of management which is concerned with the installation &
carrying out the procedures by which it is laid down & communicated, & the process of
activities regulated & checked against plans.

Management & Administration are same

Ø Management & administration are synonymous; the difference between the two terms
lies mostly in their usage in different countries or different fields of human
organizations.
Ø The distinction between the two terms may be drawn by analyzing the origin of the
word “administration”.
Ø The government often uses the word administrator, instead of manager, to handle &
manage its affairs

The Functions of Management

Ø Management can be break down into 5 managerial functions : planning, organizing,
staffing, leading & controlling
Ø Management as an essential for any organization

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Managerial functions as at different organizational levels

Functions of Top Management

Ø To analyze, evaluate & deal with the external environmental forces
Ø To establish overall long-term goals strategy & policies of the company including the
master budget to allocate resources.
Ø To create an organizational framework consisting of authority responsibility
relationships.
Ø To appoint departmental & other key executives.
Ø To provide overall leadership to the company.
Ø To represent the company to the outside world, e.g. ; trade associations, government,
trade unions, etc.
Ø To exercise overall review & control on the company’s operations &
Ø To coordinate the activities & efforts of different departments.

Functions of Middle Management

Ø To interpret & explain the policies framed by top management .
Ø To compile & issue detailed instructions regarding operations.
Ø To maintain close contacts with operating results so as to evaluate performance.
Ø To participate in operating decisions
Ø To cooperate among themselves so as to integrate or coordinate various parts of a
division or a department

Functions of Supervisory Management

Ø To plan day-to-day production within the goals laid down by higher authorities.
Ø To assign jobs to workers to make arrangements for their training & development.
Ø To supervise & control workers & maintain personal contact with charge hands.
Ø To arrange materials & tools & to maintain machinery.
Ø To advise & assist workers by explaining work procedures, solving their problems, etc

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Importance of Management
Ø Effective Utilization of Resources
Ø Development of Resources
Ø To Incorporate Innovations
Ø Integrating Various Interest Groups
Ø Stability in the Society

Skills of Management
Ø Technical skills
Ø Human skills
Ø Conceptual skills
Ø Design skills

Nature of Management
Ø Management as an activity (or a process )
I. Planning
II. Organizing
III. Staffing
IV. Directing &
V. Controlling

Ø Management as a discipline
I. Management education is gaining popularity in the present –day-times.
II. Scholars are interested in study of management discipline, for purposes of conducting
research studies & making new & valuable contributions to this discipline
III. Practitioners of management are much interested in a study of management discipline
IV. Management discipline is growing into specialized branches of management like
production, marketing, personnel, finance & several others

Ø Management as a group ( class or team or society)

I. Micro-level : the economic results, in terms of the attainment of common objectives, of
the group-endeavor
II. Macro-level : the survival, growth & prosperity of the economy would be determined by
the integrity, competence & efforts of the total management class

Ø Management as an economic resource (or a factor of production) . The economist has

been all the time been speaking of 4 factors viz , land, labour, capital & enterprise.

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Management science or Art
Management science or art differ in the following ways :
Ø Commonsense is vague as compared to scientific knowledge
Ø Flagrant inconsistency often appears in commonsense whereas logical consistency is the
basic of science
Ø Science systematically seeks to explain the events with which it deals, commonsense
ignores the need for explanation
Ø The scientific method deliberately exposes claims to the critical evaluation of
experimental analysis, commonsense method fails to test conclusions in any scientific
fashion

Management as profession
“Profession is an occupation for which specialized knowledge, skills & training are required &
the use of these skills is not meant for self-satisfaction but these are used for larger interests of
the society & the success of the use of these skills is measured not in terms of money alone.”

Characteristics of profession
Ø Existence of knowledge
Ø Acquisition of knowledge
Ø Professional association
Ø Ethical codes
Ø Service motive

Objectives/Advantages or Significance of Management

Ø Micro level
Ø Macro level

Micro Level
Enterprise level
Ø Maximum results with minimum inputs
I. Securing results in terms of production, sales, employee satisfaction
II. Maintaining a balance between the internal environment of the enterprise & the
external environment

Ø Ensuring maximum prosperity for both employers & employees

I. Stability of employment
II. Satisfactory working conditions
III. Fair remuneration
IV. Job-satisfaction
V. Justice & human treatment

Ø Ensuring survival, growth & prestige of the enterprise

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Macro Level
Ø To further the process of economic growth
Ø To ensure social welfare
Ø Generation of employment opportunities
Ø Helping maintain healthy industrial relations
Ø Conversion of challenges into opportunities

Role of Management Principles

Ø To increase efficiency
Ø To crystallize the nature of Management
Ø To carry on Researches
Ø To attain social objectives

Evolution of Management Thought

Ø Many different contributors of writers & practitioners have resulted in different
approaches to management, & these make up a “management theory jungle”

Taylor & Scientific Management

Ø The concept of scientific management was introduced by Frederick Taylor in USA in the
beginning of 20th century.
Ø Scientific management was concerned essentially with improving the operational
efficiency at the shop floor level
Ø “scientific management is concerned with knowing exactly what you want men to do &
then see in that they do in the best & cheapest way”

Elements & Tools of Scientific Management

Ø Separation of planning & doing
Ø Functional Foremanship
Ø Job analysis
1. Time study involves the determination of time a movement takes to complete
2. Motion study involves the study of movements in parts which are involved in doing a
job & thereby eliminating the wasteful movements & performing only necessary movements
3. Fatigue study shows the amount & frequency of rest required in completing the
work.
Ø Standardization
Ø Scientific selection & training of workers
Ø Financial Incentives
Ø Economy
Ø Mental Revolution

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Principles of Scientific Management
Ø Replacing rule of Thumb with science
Ø Harmony in Group Action
Ø Co-operation
Ø Maximum output
Ø Development of workers
Ø A more equal division of responsibility between management & workers
Ø Mental revolution on the part of management & workers

Merits of Scientific Management

Ø More production & higher profits
Ø Job-satisfaction
Ø Personality development
Ø Higher standard of living

Fayol’s Administrative management

Ø Henry Fayol was a French mining engineer who turned a leading industrialist & a
successful manager
Ø Perhaps the real father of modern operational management theory is the French
industrialist Henry Fayol.
Fayol found that activities of an industrial organization could be divided into 6 groups such as :
1. Technical (relating to production)
2. Commercial (buying, selling & exchange)
3. Financial (search for capital & its optimum use )
4. Security (protection of property & person)
5. Accounting (including statistics ) &
6. Managerial (planning, organization, command, coordination, & control )

Managerial qualities & training

Ø Physical (health, vigour , & address )
Ø Mental (ability to understand & learn, judgment, mental vigour, & capability)
Ø Moral (energy, firmness, initiative, loyalty, tact, & dignity)
Ø Educational (general acquaintance with matters not belonging exclusively to the
function performed)
Ø Technical (peculiar to the function being performed) &
Ø Experience (arising from the work )

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General Principles of Management
Ø Division of work
Ø Authority & Responsibility
Ø Discipline
Ø Unity of Command
Ø Unity of Direction
Ø Subordination of Individual to General Interest
Ø Remuneration of Personnel
Ø Centralization
Ø Scalar chain
Ø Order
Ø Equity
Ø Stability of Tenure
Ø Initiative
Ø Esprit de corps

Role & Functions of a manager &

activities of management
Functions of Manager
Ø Planning
Ø Organizing
Ø Staffing
Ø Directing
Ø Controlling

Nature Management Functions

Ø Management functions are universal
Ø Management functions have interactive quality
Ø Although management process suggests a sequential arrangement of functions its not
always possible in the performance of managerial functions strictly in a sequence
Ø Since there are many managerial functions often a question arises which management
function is more important so that managers devote more time to that

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Diagram

Role of Manager
Ø Interpersonal Role
Ø Informational Role
Ø Decisional Role

Management Role

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Functions at Various Levels of Management

Top Management
Ø Top management of an organization consists of board of directors, chairman & chief
executive officer

Functions of Board of Directors

Ø A board is elected by the owners (shareholders) & is responsible to them as their agent
for managing the affairs of the organization.
Ø Board has authority to manage subject to the limitations imposed by the Memorandum
of Association & Articles of Association of the company as well as the provisions of the
Companies Act

Board of Directors
Divided into 6 categories :
Ø trusteeship, function implying that board must use the property of the company
Ø Determination of basic objectives & policies of the organization
Ø Selection of top executives & determination of overall organization structure
Ø Approval of financial matters like

M1S1

10
Managing in a Global World
Management
The process of working with people and resources to accomplish organizational goals.
 Efficiently.
 Effectively.

The Four Functions of Management

Planning
Systematically making decisions about which goals and activities to pursue.
Planning Helps you Deliver Value
 Sets the stage for action.
 Can also be described as delivering strategic value.
 Traditionally top-down, now a dynamic and continual process throughout the
organization.
 Creating value requires considering a new and changing set of factors.
Examples of Planning Activities:

Leading
Stimulating people to be high performers.
Leading Mobilizes your people
 Today’s leaders must be good at mobilizing and inspiring people to fully engage in work
and contribute their ideas.
 Great work must be done via great teamwork.

Organizing
Assembling and coordinating the resources needed to achieve goals.
Organizing Resources Achieves Goals
 Goal is to build a dynamic organization.
 Effective managers using new forms of organizing; consider people as their most
valuable resource.
 Build organizations that are flexible and adaptive.

Controlling
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Monitoring and reacting to performance.
Controlling Means Learning and Changing
 Must include monitoring performance and making necessary changes.
 Now and in the future, key challenges involve continually learning and changing.

Managing Requires All Four Functions

Managing Today
May involve all functions simultaneously on daily basis.
Managers should develop abilities with all four functions.
 Beneficial to career and life.

Four Different Levels of Managers

Top-Level Managers
• Senior executives responsible for the overall management and effectiveness of the
organization.
• Strategic managers.
Middle-Level Managers
• Managers located in the middle layers of the organizational hierarchy, reporting to top-
level executives.
• Tactical managers.
Frontline Managers
• Lower-level managers who execute the operational activities of the organization.
• Link between management and nonmanagement personnel.
Team Leader
• Employees who are responsible for facilitating successful team performance.
• Also creates and supports a positive social climate, challenges the team and provides
feedback.
• Serves as team’s liaison with other stakeholders.

Three Roles That All Managers Perform

Three Types of Roles
• Interpersonal roles.
• Informational roles.
• Decisional roles.

Exhibit 1.3 Transformation of Management Roles and Activities

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Managers Need Three Broad Skills
Technical Skills
 Ability to perform a specialized task involving a particular method or process.
 For example, web design.
Conceptual and Decision Skills
 Ability to identify and resolve problems for the benefit of the organization and its
members.
 For example, picking a location for a new office.
Interpersonal and Communication Skills
Ability to lead, motivate, and communicate effectively with others.
People skills.
Successful managers often demonstrate high emotional intelligence (E Q).
 Understand yourself.
 Manage yourself.
 Deal effectively with others.

Exhibit 1.4 Skill Importance at Different Managerial Levels

Major Challenges Facing Managers

1. Globalization.
2. Technological change.
3. The importance of knowledge and ideas.
4. Collaboration across organizational boundaries.
5. Increasingly diverse labor force.
Business Operates on a Global Scale
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  Today’s enterprises are global, with offices and production facilities all over the world.
 Globalization made possible by the Internet for both large and small firms.
Technology Is Advancing Continuously
 Complicates things and creates new opportunities.
 Impact felt by businesses, individual employees, and managers.
 Online sites allow development of social capital.

Impact of Technology
Reed Hastings, the Netflix chief, had a global vision that disrupted the television industry.

Major Challenges Facing Managers

Knowledge Needs Managing
 Knowledge management is set of practices aimed at discovering and harnessing an
organization’s intellectual resources.
Collaboration Boosts Performance
 Collaboration requires communication among departments, divisions, or other subunits.
 Customers can also be collaborators.
Diversity Needs to Be Leveraged
 Labor force becoming more diverse.
 Increase in diversity will accentuate differences in employees’ values, attitudes words
work, and norms of behavior.
 Effective managers must also find ways to connect with diverse customers, suppliers,
and government officials.
Summary
 Globalization, technological change, importance of knowledge and ideas, collaboration
across organizational boundaries, diverse labor force.

Sources of Competitive Advantage

Innovation
 The introduction of new goods and services.
 Often the most important innovation is not the product itself, but how it is delivered.
Quality
• The excellence of your product (goods or services).
• Historically, quality referred to attractiveness, lack of defects, reliability, and long-term
dependability.
Service
• The speed and dependability with which an organization delivers what customers want.
• Continually meeting the changing needs of customers to establish mutually beneficial
long-term relationships.

Speed

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 • Fast and timely execution, response, and delivery of results.
• Speed combined with quality is a measure that a company is operating efficiently.

Cost Competitiveness
• Keeping costs low to achieve profits and be able to offer prices that are attractive to
consumers.
• Requires efficiency.
Sustainability
• Reducing resource use and waste, especially for polluting and nonrenewable resources.
• Addressing sustainability issues often produces bottom-line benefits.

The Best Managers Deliver All Six Advantages

All Six Advantages
 Don’t assume that you can settle for delivering just one source of competitive
advantage.
 Trade-offs may occur among the sources of competitive advantage, but this doesn’t
need to be a zero-sum game.

M1S2

The Organizational Environment and

Culture
Open Systems
 Organizations that affect and are affected by their environments and other systems.
 Inputs are goods and services that organizations take in and use to create products or
services.
 Outputs are the products and services organizations create.

External Environment
 All relevant forces outside a firm’s boundaries.

Gordon Logan, founder of Sport Clips, created the successful business after conducting market
research that showed there was little competition in the men’s haircut market.

The Macroenvironment

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Macroenvironment
 The general environment; includes governments, economic conditions, and other
fundamental factors that generally affect all organizations.
 May be uncontrollable.

Exhibit 3.1: Environments

Laws and Regulations Protect and Restrain Organizations

United States Regulators
 National Labor Relations Board ([Link]).
 Federal Communications Commission ([Link]).
 Nuclear Regulatory Commission ([Link]).
 Occupational Safety and Health Administration ([Link]).
 Environmental Protection Agency ([Link]).
 Federal Reserve System ([Link]).
 Food and Drug Administration ([Link]).

The Economy Affects Managers and Organizations

Economic Factors
 Interest and inflation rates.
 Unemployment rates.
 Stock market.

Venezuelan president Nicolás Maduro won reelection in 2018 despite leading his oil-rich nation
into a shattering economic depression that has prompted one of the worst migration crises in
recent Latin American history.

Technology is Changing Every Business Function

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Technological Advances
 Create new products.
 Provide more efficient ways to manage and communicate.

Demographics describe your employees and customers

Demographics
Statistical characteristics of a group or population such as age, gender, and education level.
Factors that are affecting the size and composition of the labor force include:
 Population growth.
 Education and skill levels of the workforce.
 Immigration.
 Women.

Social values shape attitude toward your company and its products
Societal Trends
• Have major implications for management of the labor force, corporate social actions,
and strategic decisions about products and markets.
• Companies introducing more supportive policies, including family leave, flexible working
hours, and childcare assistance.
• Prominent issues related to natural resources.
• Companies’ responses to social issues may affect their reputation.

The Competitive Environment

Competitive Environment
The immediate environment surrounding a firm; includes suppliers, customers, rivals, and the
like.

Exhibit 3.2: Porter’s Five Forces

Rivals can be domestic or global

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Identify the Competition
 Small domestic firms.
 Strong regional competitors.
 Big new domestic companies exploring new markets.
 Global firms.
 Newer ventures.

Analyze How They Compete

 Competitors use tactics such as price reductions, new-product introductions, and
advertising campaigns to gain advantage over their rivals.

New Entrants Appear When Barriers to Entry Are Low

Barriers to Entry
Conditions that prevent new companies from entering an industry.
Includes:
 Government policy.
 Capital requirements.
 Brand identification.
 Cost disadvantages.
 Distribution channels.

Nike spokesperson Serena Williams, whose celebrity endorsement enhances Nike’s strong
branding.

Customers Determine Your Success

Customers
• Final consumers are those who purchase products in their finished form.
• Intermediate consumers are customers who purchase raw materials or wholesale
products before selling them to final customers (B2B companies).
• Customer service means giving customers what they want or need, the way they want
it, the first time.

Competitors’ products can complement or substitute for yours

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Substitutes
 A potential threat; customers use it as an alternative, buying less of one kind of product
but more of another.
 Firms can develop substitutes with technological advances and economic efficiencies.
Complements
 A potential opportunity; customers buy more of a given product if they also demand
more of the complementary product.

Suppliers provide your resources

Suppliers
 Provide the resources needed for production: people, raw materials, information, and
financial capital.
 Switching costs are fixed costs buyers face when they change suppliers.
 Supply chain management is the managing of the network of facilities and people that
obtain materials from outside the organization, transform them into products, and
distribute them to customers.

Keeping Up with Changes in the Environment

Environmental Uncertainty
When management lacks information to understand or predict the future.
Uncertainty arises from:
 Complexity—The number of issues a manager must attend to and the degree to which
they are interconnected.
 Dynamism—The degree of discontinuous change that occurs within an industry.

Environmental Scanning Keeps You Aware

Environmental Scanning
 Searching for and sorting through information about the environment.
Competitive Intelligence
 Information that helps managers determine how best to manage in the competitive
environment.
 Environments can be attractive or unattractive.

Exhibit 3.3: Attractive and Unattractive Environments

Scenarios, Forecasting, and Benchmarking

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Scenarios
 A narrative that describes a particular set of future conditions.
 Best-case, worst-case.
Forecasting
 Method for predicting how variables will change the future.
Benchmarking
 The process of comparing an organization’s practices and technologies with those of
other companies.

Responding to the environment

Effective Responses
• Adapting to the environment.
• Influencing the environment.
• Selecting a new environment.
Adapt to the External Environment
• Empowerment shares power with employees at all levels to enhance their contributions
to the organization.

Exhibit 3.4: Four Structural Approaches for Managing Uncertainty

Responding to the Environment

Adapting at the Boundaries
 Buffering is creating supplies of excess resources in case of unpredictable needs.
 Smoothing is leveling normal fluctuations at the boundaries of the environment.
Adapting at the Core
 Flexible processes allow for adaptation in the technical core to meet the varied and
changing demands of customers.

Influence your environment

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Independent Strategies
Strategies that an organization acting on its own uses to change some aspect of its current
environment.
 Competitive aggression.
 Competitive pacification.
 Public relations.
 Voluntary action.
 Legal action.
 Political action.
Cooperative Strategies
Strategies used by two or more organizations working together to manage the external
environment.
 Contracts.
 Cooptation.
 Coalition.

Exhibit 3.5: Ways That Managers Can Influence Their Environment

Change the boundaries of the Environment

Strategic Maneuvering
 An organization’s conscious efforts to change the boundaries of its task environment.
 Domain selection is the entrance to a new market or industry with an existing expertise.
 Diversification is a firm’s investment in a different product, business, or geographic
area.
 Mergers happen when one or more companies combine with another.
 Acquisitions happen when one firm buys another.
 Divestiture is when a firm sells one or more businesses.

Alphabet Inc. is an American multinational conglomerate created through a corporate

restructuring of Google on October 2, 2015. Its portfolio encompasses industries such as
technology, life sciences, investment capital, and research.
Prospectors
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  Continuously change the boundaries of their task environment by seeking new products
and markets, diversifying and merging, or acquiring new enterprises.
Defenders
 Stay within a stable product domain as a strategic maneuver.

Three criteria help you choose the best approach

1. Managers need to change what matters and can be changed.
2. Managers should use the most appropriate response.
3. Managers should choose responses that offer the most benefit at the lowest cost.

Your Organization’s Internal Environment and Culture

Internal Environment
• All relevant forces inside a firm’s boundaries.
• Managers, employees, resources, and organizational culture.

What is Organizational Culture?

Organizational Culture
 The set of assumptions about the organization and its goals and practices that members
of the company share.

Strong Culture
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  Everyone understands and believes in the firm’s goals, priorities, and practices.

Weak Culture
 Different people hold different values, there is confusion about corporate goals, and it is
not clear from one day to the next what principles should guide decisions.

Companies give clues about their culture

Culture Clues
• Corporate mission statements and official goals.
• Business practices.
• Symbols, rites, and ceremonies.
• The stories people tell.

Annie’s C E O John Foraker pictured. Everyone at Annie’s shares a common passion for food,
people, and the planet we all share.

Four Types of Organizational Cultures

Four Types
 Clan culture is internally oriented and flexible.
 Hierarchical culture is internally oriented by more focus on control and stability.
 Market culture is externally oriented and focused on controls.
 Adhocracy is externally oriented and flexible.

Exhibit 3.7: Competing-Values Model of Culture

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Managers can leverage culture to meet external challenges
Approaches to Managing Culture
• Craft an inspirational vision of “what can be” for the organizational culture.
• “Walk the talk” by actually doing the things you want others to do—and show that you
are serious about and committed to long-term change.
• Celebrate and reward members who behave in ways that exemplify the desired culture.
• Also includes hiring, socializing newcomers, and promoting employees on basis of the
new corporate values.

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Module 2:

Organizing for Success

Fundamentals of Organizing
Organization Chart
 The reporting structure and division of labor in an organization.
 The chart on the next slide resembles those familiar to Max Weber when he wrote
about bureaucracy in the early 20th century.

Exhibit 7.1 A Conventional Organization Chart

Mechanistic Organization
 A form of organization that seeks to maximize internal efficiency.

Organic Structure
 An organizational form that emphasizes flexibility.

Exhibit 7.2 Comparison of Mechanistic and organic organizations

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Differentiation
 An aspect of the organization’s internal environment created by job specialization and
the division of labor.

Integration
 The degree to which differentiated units are put back together so that work is
coordinated into an overall product.

Differentiation Creates Specialized Jobs

Organizational Structure
 Division of labor is the assignment of different tasks to different people or groups.
 Specialization is a process in which different individuals and units perform different
tasks.
 Differentiation is high when an organization has many subunits and many specialists
who think differently.

Integration Coordinates Employees’ Efforts

Coordination
The procedures linking various parts of an organization for the purpose of achieving the
organization’s overall mission.
The more highly differentiated the firm, the greater the need for integration among its units.
 Vertical differentiation.
 Horizontal differentiation.
 Structural differentiation.

The Vertical Structure

Vertical Structure
 A firm’s vertical structure—authority, span of control, delegation, and centralization—
shapes reporting relationships, responsibility, and accountability.

Authority is the Vertical Glue

Authority
The legitimate right to make decisions and tell other people what to do.
In private enterprises, the owners have ultimate authority.
In larger companies, top management has several components.
 Board of directors.
 Chief executive officer.
 Top management team.

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Formal position authority is generally the primary means of running an organization.
Authority is not always position-dependent.
 Informal authority is also important.
Trend toward reducing the hierarchical layers.

Span of control and layers influence a manager’s authority

Span of Control
The number of subordinates who report directly to an executive or supervisor.

Narrow spans.
 Tall organization with many reporting levels.
Wide spans.
 Flat organization with fewer reporting levels.

S.D. Shibulal, cofounder and former managing director and C E O of Infosys.

Exhibit 7.3 The optimal span of control is a balancing act

Delegation is how managers use others’ talents

Delegation
The assignment of new or additional responsibilities to a subordinate.
 The most fundamental process of management at all levels.
Responsibility means that a person is assigned a task to carry out.
Accountability means the subordinate’s manager has right to expect subordinate to perform
the job, and right to take corrective action if the subordinate fails to do so.
Managers remain responsible and accountable.

Exhibit 7.4 Advantages of Delegation

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Exhibit 7.5 Steps in Effective delegation

Decentralizing spreads decision-making power

Centralized Organization
 An organization in which high-level executives make most decisions and pass them
down to lower levels for implementation.

Decentralized Organization
An organization in which lower-level managers make important decisions.
 Allows people to take faster action.

Decentralization
Burgerville was founded in 19 61 by George Propstra in Vancouver, Washington. Burgerville is
known for its progressive business practices and commitment to local resources.

The Horizontal Structure

Subdivisions
Line departments are units that deal directly with the organization’s primary goods and
services.
Staff departments are units that support line departments.
 Include research, legal, accounting, public relations, and human resources departments.
Three basic approaches to departmentalization: functional, divisional, and matrix.

28
Functional Organizations Foster Efficient Experts
Functional Organization
• Departmentalization around specialized activities such as production, marketing, and
human resources.

Exhibit 7.6 The functional organization

Advantages of the Functional Approach

1. Economies of scale can be realized.
2. Monitoring of the environment is more effective.
3. Performance standards are better maintained.
4. There is greater opportunity for specialized training and in-depth skill development.
5. Technical specialists are relatively free of administrative work.
6. Decision making and lines of communication are simple and clearly understood.

Divisional Organization Increase customer Focus

Divisional Organization
 Departmentalization that groups units around products, customers, or geographic
regions.

Exhibit 7.7 The Divisional Organization

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Advantages of the Product Approach
1. Information needs are managed more easily.
2. People have a full-time commitment to a particular product line.
3. Task responsibilities are clear.
4. Managers receive broader training.

Matrix organizations Try to be the best of both worlds

Matrix Organization
 An organization composed of dual reporting relationships in which some managers
report to two superiors—a functional manager and a divisional manager.

Exhibit 7.8 Matrix Organizational Structure

Advantages of the Matrix Structure

1. Cross-functional problem solving leads to better-informed and more creative decisions.
2. Decision making is decentralized.
3. Extensive communications networks help process large amounts of information.
4. Higher management levels are not overloaded with operational decisions.
5. Resource utilization is efficient.
6. Employees learn collaborative skills.
7. More career options become available.

 Violates the unity-of-command principle.

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Network Organizations are built on collaboration
Network Organization
 A collection of independent, mostly single-function firms that collaborate on a good or
service.

Exhibit 7.9 Example of a network organization

Modular Network
Temporary arrangements among partners that can be assembled and reassembled to adapt to
the environment.
Also called a virtual network.
Broker is a person who assembles and coordinates participants in a network.
 Roles of a broker include designing, process engineering, and nurturing.

Organizational Integration
Integration and Coordination
 The more differentiated the organization, the more difficult the integration.
 Division of labor causes different units to develop different orientations.
 Managers can use a variety of approaches to foster coordination among interdependent
units and people.

Standardization coordinates work through rules and routines

Standardization
 Establishing common routines and procedures that apply uniformly to everyone.
 Formalization: the presence of rules and regulations governing how people in the
organization interact.

Organizations of all types have established routines and standard operating procedures so
employees, customers, and other stakeholders know how to act and interact with one another.

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Plans set a common direction
Method of Coordination
With coordination by plan, interdependent units create deadlines and objectives that
contribute to a common goal.
 Allows some flexibility, as long as deadlines are met.

Mutual Adjustment allows flexible coordination

Method of Coordination
With coordination by mutual adjustment, units interact with one another to make
accommodations to achieve flexible coordination.
 Simplest and most flexible method.
 Good method for teams.
 Make take more time.

Coordination Requires Communication

Managing High Uncertainty and Heavy Information Demands
1. Reduce the need for information.
 Create slack resources.
 Create self-contained tasks.
2. Increase information-processing capability.
 Invest in information systems.
 Engage in knowledge management.

Exhibit 7.10 Managing High Information-Processing Demands

Organizational Agility
Agility
 Being able to act fast to meet customer needs and respond to other outside pressures.
 The best structures for agility depend on the organization’s strategy, customers, and
technology.

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Strategies promote organizational agility
Strategies
 Organize around core capabilities.
 Develop strategic alliances.
 Create a learning organization.
 Participate in a high-involvement organization.

Strategic Alliance
Hyundai and Uber have aligned to develop autonomous "personal air vehicles." Shown here at
the 2020 Consumer Electronics Show, the electric-powered air vehicle will shuttle up to four
passengers at 180 miles per hour for 60 miles.

Agile Organizations Focus on Customers

Organizing for Quality Improvement
Total quality management (T Q M).
 An integrative approach to management that supports the attainment of customer
satisfaction through a wide variety of tools and techniques that result in high-quality
goods and services.

Six sigma quality approach analyzes defects.

I S O 9001 is a series of voluntary quality standards developed by a committee working under
the International Organization for Standardization.

Exhibit 7.11 Demings’s 14 points of quality

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Technology Can Support Agility

Technology
The systematic application of scientific knowledge to a new product, process, or service.
Basic technology configurations, according to research by Woodward:
 Small batch technologies.
 Large batch technologies.
 Continuous process technologies.

Organizing for Flexible Manufacturing

Mass customization allows organizations try to produce both high-volume and high-variety
products at the same time.
 Computer integrated manufacturing (C I M) helps make mass customization possible.
 Flexible factories provide more production options and variety of products.

Lean manufacturing strives for the highest possible productivity and total quality, cost
effectively, by eliminating unnecessary steps in production process and continually striving for
improvement.

Organizing for Speed

Just-in-time (J I T) system calls for subassemblies and components to be manufactured in very
small lots and delivered to next stage of production process just as they are needed.
 Companywide philosophy oriented toward eliminating waste and improving materials
throughout all operations.
 Many believe this practice will continue to grow as it is applied more to services,
distribution, and new-product development.

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