Departmentalization
formal organization
The order and design of relationships with a firm;
consists of two or more people working together
with a common objective and clarity of purpose.
1 1
Departmentalization
departmentalization
The process of grouping jobs together so that
similar or associated tasks and activities can be
coordinated.
1 2
Organization Chart
President
Vice-Presidents
Finance Operations Marketing
Manager, Production Sales Distribution
accounting manager manager manager
Manager, Manager, Director Director
allocations & financial of human of customer
inventory control planning resources service
1 3
Basic Types of
Departmentalization
Based
Based onon the
the primary
primary
Functional
Functional functions
functions performed
performed
Based
Based on
on the
the goods/services
goods/services
Product
Product produced
produced oror sold
sold
Based
Based on
on the
the production
production
Process
Process process
process used
used
Based
Based on
on the
the primary
primary type
type of
of
Customer
Customer customer
customer served
served
Based
Based on
on the
the geographic
geographic
Geographic
Geographic segmentation
segmentation of
of organizational
organizational units
units
1 4
Functional Departmentalization
President
Legal Personnel Manufacturing Engineering Marketing Finance
1 Exhibit 7.2 5
Product Departmentalization
Administrator
and CEO
Head of Head of
Head of Head of Head of
outpatient / obstetrics /
pediatrics cardiology orthopedics
emergency gynecology
1 Exhibit 7.2 6
Process Departmentalization
Plant
superintendent
Lumber cutting
Furniture Furniture
and Shipping
assembly finishing
treatment
1 Exhibit 7.2 7
Customer Departmentalization
Vice president,
marketing
Marketing manager, Marketing manager, Marketing manager, Marketing manager,
railroad customers aircraft customers automotive military customers
customers
1 Exhibit 7.2 8
Geographic Departmentalization
Vice president,
marketing
Director,
Director, Director,
European
U.S. and Canadian South American
marketing
marketing marketing
1 Exhibit 7.2 9
Line-and-Staff Organization
President Line functions
Staff functions
Corporate Assistant to
attorney president
Vice president Vice president Vice president
of marketing of manufacturing of finance
Marketing Quality-
Advertising Internal
research control
specialist auditor
specialist engineer
Sales Sales Sales Cost Credit
Supervisor Supervisor Supervisor
manager manager manager accountant analyst
1 Exhibit 7.3 10
Contemporary Structures
Matrix
MatrixStructure
Structure
2 11
Contemporary Structures
matrix structure
An organizational structure that combines
functional and product departmentalization by
bringing together people from different
functional areas to work on a special project.
2 12
Matrix Structure
Advantages
Advantages Disadvantages
Disadvantages
Teamwork Power struggles
Efficient use of Confusion among
resources team members
Flexibility Lack of cohesiveness
Ability to balance
conflicting objectives
Higher performance
Opportunities for
development
2 13
Matrix Structure
2 Exhibit 7.4
14
Contemporary Structures
committee structure
An organizational structure in which authority
and responsibility are held by a group rather
than an individual.
2 15
Committee Structure
Advantages
Advantages Disadvantages
Disadvantages
Coordination of tasks Slow to reach decisions
is easier Sometimes dominated
Bring diverse by a single individual
viewpoints to a problem
Difficult to hold
Expand possible individuals accountable
solutions Meetings seem slow
and unproductive
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Managerial Hierarchy
authority
Legitimate power, granted by the organization and
acknowledged by employees, that allows an
individual to request action and expect compliance.
delegation of authority
The assignment of some degree of authority and
responsibility to persons lower in the chain of
command.
4 17
Span of Control
span of control
The number of employees a manager directly
supervises; also called span of management.
4 18
Chain of Command
chain of command
The line of authority that extends from one level of
an organization’s hierarchy to the next, from top to
bottom, and makes clear who reports to whom.
4 19
Narrow Span of Control
Advantages
Advantages Disadvantages
Disadvantages
Higher degree of More management levels,
control more expensive
Manager is more Slower decision making
familiar with Isolation of top
individuals
management
Close supervision can Discourages employee
provide immediate
autonomy
feedback
4 20
Wide Span of Control
Advantages
Advantages Disadvantages
Disadvantages
Increased efficiency Less control
and reduced costs Possible lack of
Quicker decision familiarity
making Managers spread thin
Greater flexibility Lack of coordination
Higher levels of job or synchronization
satisfaction
4 21
Optimal Span of Control
Factors
Factors Determining
Determining Optimal
Optimal Span
Span of
of Control
Control
1. Nature of task
2. Location of workers
3. Ability of manager to delegate responsibility
4. Interaction and feedback between workers and manager
5. Level of skill and motivation of workers
4 22
Degree of Centralization
centralization
The degree to which formal authority is
concentrated in one area or level of an
organization.
decentralization
The process of pushing decision-making authority
down the organizational hierarchy.
5 23
Degree of Centralization
Centralization
Centralization
Top management makes most key decisions
Managers have broad view of operations and
exercise tight financial controls
Reduces costs by eliminating redundancy
Lower level personnel don’t get leadership
opportunities
Organization is less responsive to customer
demands
5 24
Degree of Centralization
Decentralization
Decentralization
Quicker decision making
Increased levels of innovation and creativity
Greater organizational flexibility
Faster development of lower-level managers
Increased job satisfaction and employee commitment
Lower-level personnel may make costly mistakes
Increases likelihood of inefficient communication,
competing objectives, and duplication of effort
5 25
Factors Influencing Decision-Making
Authority
Size of the organization
Speed of change in environment
Managers’ willingness to give up authority
Employees’ willingness to accept more authority
Organization’s geographic dispersion
5 26
Degree of Centralization
Decentralization
Decentralization is
is desirable
desirable when…
when…
Organization
Organization is
is very
very large
large
Firm
Firm is
is in
in aa dynamic
dynamic environment
environment
where
where quick
quick decisions
decisions must
must be
be made
made
Managers
Managers are
are willing
willing to
to share
share
power
power with
with subordinates
subordinates
Employees
Employees areare willing
willing and
and able
able
to
to take
take more
more responsibility
responsibility
Company
Company is
is spread
spread out
out
5 geographically
geographically 27
Organizational Design
Considerations
Mechanistic
MechanisticOrganization
Organization
Relatively high degree of job specialization
Rigid departmentalization
Many layers of management
Narrow spans of control
Centralized decision making
Long chain of command
Tall organizational structure
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Organizational Design
Considerations
Organic
OrganicOrganization
Organization
Relatively low degree of job specialization
Loose departmentalization
Few layers of management
Wide spans of control
Decentralized decision making
Short chain of command
Flat organizational structure
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Mechanistic versus Organic
Structures
Firm’s
Firm’s overall
overall strategy
strategy
Size
Size of
of the
the organization
organization
Stability
Stability of
of its
its external
external environment
environment
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The Informal Organization
Functions
Functionsof
ofthe
theInformal
Informal Organization
Organization
Provides a source of friendships and social contact
for organization members
Helps employees feel better informed about and
connected with what is going on
Provides status and recognition not available from
the formal organization
Aids the socialization of new employees
Helps employees to be more aware of what is happening
in the workplace
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