Principles of Management

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❖ All organizations wrestle with structural design and reorganization

The deployment of organizational resources to achieve strategic goals

❖ Division of labor

❖ Lines of authority

❖ Coordination

❖ Organizing is important because it follows from strategy

Organizing structure defines:

 The set of formal tasks assigned to

individuals and departments

 Formal reporting relationships

 The design of the systems to ensure effective

coordination

❖ Work Specialization is the degree to which

organizational tasks are subdivided into

individual jobs; also called division of labor

❖ Chain of Command is an unbroken line of authority that links all individuals in the

organization and specifies who reports to whom

❖ Authority is vested in organizational

positions, not people

❖ Authority flows down the vertical hierarchy

❖ Authority is accepted by subordinates

❖ Responsibility is the duty to perform the task

or activity as assigned

❖ Accountability is the mechanism through

which authority and responsibility are

aligned

❖ Delegation is the process managers use to

transfer authority and responsibility down

the chain

Line departments perform primary business tasks

❖ Sales

❖ Production

Staff departments support line departments

❖ Marketing

❖ Labor relations

❖ Research

❖ Accounting

❖ Human Resources

❖ Line authority means that people in

management positions have formal

authority to direct and control immediate

subordinates

❖ Staff authority is narrower and includes the

right to advise, recommend, counsel in the

staff specialists’ area of expertise

❖ The number of employees reporting to a supervisor

❖ Less supervision/larger spans of control

❖Work is stable and routine

❖Subordinates perform similar work

❖Subordinates are in one location

❖Highly trained/require little direction

❖Rules and procedures are defined

❖Few planning or nonsupervisory activities

❖Manager’s preference

❖ Tall structure have more levels and narrow span

❖ Flat structure have a wide span and fewer levels

❖ Centralization – decision authority is located near the top of the organization

❖ Decentralization – decision authority is pushed downward to all levels

❖ Factors that influence centralization versus decentralization:

❖Change and uncertainty are usually associated with decentralization

❖Strategic fit

❖Crisis requires centralization

Basis for grouping positions into departments

and departments into the total organization

❖ Vertical functional approach

❖Grouping of positions into departments

based on skills, expertise, work activities, and

resource use

❖ Divisional approach

❖Grouping based on organizational output

❖Product, program, business

Geographic or Customer-based divisions group activities by geography or customer

❖ Matrix approach combines functional and

divisional approaches

❖Improve coordination and information

❖Dual lines of authority

❖ Team approach is a very widespread trend

❖Allows managers to delegate authority

❖Flexible, responsive

❖ Extends idea of horizontal coordination and

collaboration

❖ Could be a loose interconnected group

❖i.e., outsourcing

Virtual network structure means that the firm subcontracts most of its major functions to

separate companies

❖ Companies need more flexibility than

vertical structure can offer

❖Meet fast-shifting environment

❖Break down barriers between departments

❖Need integration and coordination

❖ Lack of coordination and cooperation can

cause information problems

❖Growing global challenge

❖ Radical redesign of business

processes to achieve dramatic

improvements in cost, quality,

service, and speed

❖ Project Manager –

person responsible

for coordinating

activities of several

departments for

the completion of

a specific project

Task Force – a temporary

team or committee formed

to solve a specific short-term

problem involving several

departments

Cross-functional Team –

furthers horizontal

coordination by including

members across the

organization

❖ Frequent, timely, problem-solving

communication carried out through

[employee] relationships of shared goals,

shared knowledge, and mutual respect.

❖ Business performance is

influenced by structure

❖ Strategic goals should drive

structure

❖ Structure should facilitate

strategic goals

❖ Knowledge, tools, techniques, and activities

should match production activities

❖ Manufacturing firms can be categorized

according to:

❖Small-batch and unit production

❖Large-batch and mass production

❖Continuous process production

❖ The technical complexity of each type of

firm differs