ORGANIZATION STRUCTURE

1
Chapter 13

• ORGANIZATION STRUCTURE

2
Management Talk

• Our company today is leaner, faster, more
  flexible and more efficient in short much more
  competitive. But our journey is far from
  finished. Building upon our recent success and
  momentum, we are determined to drive GM to the
  next level to sustained success.
• Rick Wagoner, General Motors, Chairman and CEO

3
Objectives

• Read an organizational chart
• List the four types of organizational structures
  and explain the advantages and disadvantages of
  each type
• Name the factors that affect the type of
  structure an organization adopts
• Describe the roles of the chief executive officer
  and the board of directors

4
Understanding Management
General Motors has a long, proud history of being
one of the biggest car manufacturers in the
world. By the 1980s and 1990s, however, the
company was losing profits to newer, more
efficient manufacturers. Since then, the company
has updated its factories and streamlined its
operations in order to reduce costs.
5
Management Skills

• How would consolidating six divisions help
  General Motors improve serviced and cut costs?
  What are the possible drawbacks of merging the
  separate divisions?
• Have you ever been in a situation at home or work
  where there were too many people in charge of
  completing a task? What suggestions would you
  make to simplify the process?

6
Sec. 13.1 Understanding how organizational
structures work

• Can you describe a graphic organizer you have
  used in school or the classroom?
• What are the benefits of using them?
• Why is it important for businesses to have
  organization charts?

7
What Youll Learn

• How to read an organizational chart
• The four main types of organizational structures
• The difference between staff and line functions
• The benefits of adopting a matrix or team
  structure

8
Why is this important?

• Without an appropriate organizational structure,
  a business will not succeed

9
What is an Organization Structure?

• A way to organize employees into some kind of
  structure to meet goals
• Minimizes confusion
• Coordinates activities by clearly identifying
  which individuals are responsible for which tasks

10
Types of Organizational Structures?

• Line Structure
• Line and Staff Structure
• Matrix Structure
• Team Structure
• Organizational Chart
• A visual representation of a businesss
  organizational structure

11
Line Structure

• Authority originates at the top and moves
  downward
• Common among small companies
• Line Functions
• Functions that contribute directly to company
  profits
• Production managers, sales reps, and marketing
  managers

12
Line Structure

• Line Managers
• Collect and analyze all information needed to
  carry out their responsibilities
• Example
• Production Managers
• Hire and fire all of the assembly-line workers in
  their departments
• Order all supplies for their department

13
Line and Staff Structure

• Mid-sized and large companies
• Other employees hired to help line managers
  perform activities they cannot
• Staff Functions
• Advise and support line functions
• Staff departments include legal, human
  resources, and public relations
• Help line departments do their jobs
• Authority is limited to making recommendations to
  line managers

14
Matrix Structure

• Allows employees from different departments to
  come together temporarily to work on special
  project teams
• Provides flexibility to respond quickly to a
  customer need by creating a team of people who
  devote all of their time to a project then return
  to their departments or join a new project team
• I.E. Boeing assigns employees to project
  teams when it creates to design a new aircraft

15
Matrix Structure
16
Team Structure

• Brings together people with different skills in
  order to meet a particular objective
• Belief is that the company will meet customer
  needs more effectively than traditional
  structures
• Senior managers need not approve decisions by
  lower-level managers
• Teams have the authority to make final decisions
• Employee preferred due to its focus on completing
  a project rather than a task

17
Flat vs. Tall Structures

• Flat structure Small number of levels and broad
  span of management at each level
• Manager must be able to delegate well
• Advantages
• Great Job Satisfaction
• More Delegation
• Increased communication between levels of
  management
• Tall Structure Has many levels with small spans
  of management
• Power is centralized on the top levels and there
  is more employee control
• Advantages
• Greater control
• Better Performance

18
FLAT
TALL
Span of Management 51 (Seven Levels)
Span of Management 81 (Four Levels)
19
Extension Activity!!!

• Design an organizational chart that illustrates
  the organizational structure of Fremd High School
  
• You can interview school staff for information
• You can navigate the Fremd website to understand
  departmental structures and how to structure your
  organizational chart (Line, Line and Staff,
  Matrix, and/or Team)
• Use Microsoft Word or Inspiration to build out
  your organization chart

20
What Makes an Organization Effective?

• Knowing Your Customers and Responding to Their
  Needs
• To succeed in the business world, companies must
  change to keep up with customer needs
• What are some ways that Kodak has done this?
  (established first simple camera in 1888)

21
13. 1 Chapter Summary

• Companies use organizational charts to visually
  represent their organizational structures
• Businesses generally adopt one of the following
  four organizational structures line structure,
  line and staff structure, matrix structure, or
  team structure

22
Sec. 13.2 Creating an Organizational Chart

• List leadership roles or committee appointments
  that you have had
• What were the positive and negative experiences
  that you had in these roles
• How might a small companys growth into a large
  corporation might change its management structure?

23
What Youll Learn

• The different ways in which companies organize
  their departments
• Why a companys structure needs to change as the
  company grows
• The role of the chief executive officer
• The role of the board of directors

Why is this Important?
Managers both help create and work within
organizational structures.
24
Factors Affecting Organizational Structure

• Size of the business and kinds of products or
  services it produces
• Structures will differ between
• High-teach company employing 50,000 in eight
  countries (Motorola, Inc.)
• Small retail business with just a dozen employees
  (Bobs Hardware Store)

25
SIZE

• As a company grows, organizational structure
  must change with it
• Organizational Life Cycle Stages
• Stage 1 Growth through creativity
• Stage 2 Growth through direction
• Stage 3 Growth through delegation,
  coordination, and collaboration

26
Stage 1 Growth through creativity

• Entrepreneurs create products or services for
  which there is a market
• Business is small in structure
• Lack formal structures, policies, and objectives
• Founder is involved in every aspect of the
  business and makes all the decisions
• Current Importance
• An idea that appeals to consumers

27
Stage 2 Growth through direction

• Company grows in size
• Company founder is no longer solely responsible
  for all decision making
• Professional managers hired to plan, organize,
  and staff
• Managers create written policies, procedures, and
  plans
• Rules and systems for hiring, firing, and
  rewarding employees are implemented
• Set up
• Systems for employees to communicate
• Financial controls/Budget constraints for
  departments
• Formal Rules are on decision-making are
  formulated

28
Stage 3 Growth through delegation,
coordination, and collaboration

• Problems occur which include
• Companys structure can become too rigid and
  decision making becomes too centralized
• Lower-level employees feel left out of the
  decision-making process
• Top executives find themselves too far removed
  from the customer to make good decisions
• To combat these problems, stage 3 is implemented
  which includes
• Delegation of duties to lower-level employees in
  attempt to decentralize
• Focuses on
• Motivating people at lower levels
• Allows senior executives to devote more of their
  time to long-term management issues
• Set up
• Systems for employees to communicate
• Financial controls/Budget constraints for
  departments
• Formal Rules are on decision-making are
  formulated

29
The Changing Nature of a Companys Organizational
Structure

• How have the needs of Apple Computer changed over
  time?
• Stage 1
• When a company is young, it depends heavily on
  technical geniuses who had a brilliant idea for a
  user-friendly desktop computer.
• They turned this idea into a multimillion dollar
  company by introducing the Apple II computer in
  the 1970s

1976
30
The Changing Nature of a Companys Organizational
Structure

• Stage 2
• As a company grows, it needs managers with
  excellent managerial skills. To continue to
  grow, in the 1980s Apple Computer replaced its
  co-founder, Steven Jobs, with a professional
  manager. The new CEO, John Sculley, helped
  introduce the companys Macintosh Computer

1984
31
The Changing Nature of a Companys Organizational
Structure

• Stage 3
• Managers learn to delegate authority. In 1996
  company founder Steven Jobs returned to Apple as
  interim CEO in an effort to breathe new life into
  a company that had fallen on hard times. Apples
  organizational structure allowed it to introduce
  several important products in the 1990s,
  including the iMac and now in the 21st Century,
  the iPod and iPhone.

32
Type of Product or Service

• The number of levels within an organization
  increases as the level of technical complexity
  increases with producing a product or service

33
Organizing a Company into Departments

• Organizing Departments by Work Functions
• Production
• Actual creation of companys goods or services
• Marketing
• Product development, pricing, distribution,
  sales, and advertising
• Finance
• Maintaining a companys financial statements and
  obtaining credit so a company can grow
• Human Resources
• Hiring employees and placing them in appropriate
  jobs

34
Organizing a Company into Departments

• Each function includes various positions
• Production
• Engineering, Manufacturing, Quality Control
• Marketing
• Advertising, Sales, Market Research
• Finance
• Accounting and Credit
• Advantages
• Allows for functional specialization
• Negative Effects
• Conflicts may develop between departments with
  different goals
• Production department not concerned about
  advertising
• Create managers whose scope is relatively narrow
• Marketing manager may know a great deal about
  marketing, but lack skills in other aspects of
  the business

35
Organizing a Company into Departments

• Organizing Departments by Product
• Single manager oversees all activities needed to
  produce and market a product
• Advantages
• Allows employees to identify with the product
  rather than with their particular job function
• Develops a sense of common purpose
• Helps identify which products are profitable
• Allows for training executive personnel by
  letting them experience a broad range of
  functional activities
• Negative Effects
• Departments could become overly competitive, to
  the detriment of the company as a whole
• Activities are duplicated for each division
  multiple marketing departments for each
  different product

36
Organizing a Company into Departments

• Organizing Departments in Other Ways
• Geographical region
• North America v Asia
• Type of Customer
• Sales to
• Governments
• For-profit businesses
• Nonprofit organizations

37
Understanding the Role of Company Leadership

• Committees
• An organized group of people appointed to
  consider or decide upon certain matters
• I.E. homecoming dance, food drive, blood drive,
  Grant-A-Wish, etc.
• Guidelines that managers must set
• Clearly define the committees function
• Establish authority figures within a committee
• Set Clear Goals for members to attain

38
Understanding the Role of Company Leadership

• Chief Executive Officer (CEO)
• The most important executive in a company (Top
  Executive)
• Together with other senior managers, the CEO
• Makes decisions about meeting the companys
  objectives
• Sets the companys objectives
• Determines who fills senior management positions
• Develops the companys long-term strategies
• Attends the companys annual stockholders
  meeting and answers questions about the companys
  activities
• Takes charge of the company in a crisis
• Works with the board of directors

39
Understanding the Role of Company Leadership

• Board of Directors
• In companies owned by stockholders, approves all
  major management decisions
• Meet four to six times a year
• The legal representative of a companys
  stockholders
• Inside Board Members Work for the company
• Outside Board Members Do not work for the
  company
• Examines all major decisions to ensure it is in
  best interest of companys stockholders
• Makes it more difficult for corporate managers to
  act in ways that benefit them personally at the
  expense of the companys owners

40
13. 2 Chapter Summary

• The type of structure a company adopts depends on
  many factors including the companys size and its
  products or services
• Many companies are organized by work functions.
  Others are organized by product, region, or
  customer
• An organization may form a committee to decide
  upon certain matters
• Senior management, led by the companys chief
  executive officer, initiates or approves all of a
  companys major decisions
• A board of directors approves all major decisions
  made by corporate management

41
Math Skills

• Lindholm Technologies, a high-tech company that
  specializes in computer graphics, has decided to
  reorganize its corporate structure into a team
  structure. By organizing into teams, Lindholm
  expects to be able to eliminate three mid-level
  managers, each earning 82,000 a year. It also
  expects to hire two additional entry-level
  employees, to be paid about 25,000 a year each.
  If the cost of the reorganization itself is
  75,000, how much can the company expect to save
  after two years?

42
Assessing Computer Skills

• Choose a major U.S. company, such as IBM, Apple,
  Home Depot, Coca-Cola, General Mills, McDonalds.
  Using the Internet, find out how the company you
  selected is organized and identify the top six
  managers. Also, if you can, obtain a copy of
  the companys organizational chart.