business organizational structure

• 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 s

Chapter 13

ORGANIZATION STRUCTURE

“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

• 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

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

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?

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?

What You’ll Learn

 How to read an organizational chart

 The four main types of organizational

Why is this important?

“Without an appropriate organizational structure, a business will not succeed”

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

Types of Organizational Structures?

Line Structure

• Authority originates at the

top and moves downward

• Common among small

Mid-level Managers Lower-level Managers

Non-management Employees

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

CFO

Senior Managers

Mid-level Managers Lower-level Managers

Non-management Employees

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

President

Vice President, Sales

Vice President, Marketing Advertising PersonnelSales Fabrication Assembly

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

Personnel Finance Personnel Finance

Planners and analysts

Project Manager

Production Group Engineering Group Personnel Group Accounting Group

• Teams have the authority to make final decisions

• Employee preferred due to its focus on completing a project rather than a task

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

Span of Management 8:1

(Four Levels)

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

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)

structure

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 company’s growth into

a large corporation might change its

management structure?

What You’ll Learn

 The different ways in which companies

organize their departments

 Why a company’s 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.”

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

(Bob’s Hardware Store)

“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

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

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

Stage 3: Growth through delegation,

coordination, and collaboration

• Problems occur which include:

– Company’s 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

The Changing Nature of a Company’s 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

The Changing Nature of a Company’s 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 company’s Macintosh Computer

1984

The Changing Nature of a Company’s 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 Apple’s

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

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”

Organizing a Company into Departments

Vice President, Production

Advertising Manager

Sales Manager

Engineering Manager

Manufacturing Manager

Vice President, Finance

Market Research Manager

Quality Control Manager

Accounting Manager

Credit Manager

Organizing a Company into Departments

• Each function includes various positions

– Conflicts may develop between departments with different goals

– Create managers whose scope is relatively narrow

skills in other aspects of the business

Organizing a Company into Departments

Organizing Departments by Product

– Single manager oversees all activities needed to produce and market a product

Technology

Organizing a Company into Departments

Organizing Departments in Other Ways

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 committee’s function

• Establish authority figures within a committee

• Set Clear Goals for members to attain

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:

1 Makes decisions about meeting the company’s objectives

2 Sets the company’s objectives

3 Determines who fills senior management positions

4 Develops the company’s long-term strategies

5 Attends the company’s annual stockholders’ meeting and answers questions about the company’s activities

6 Takes charge of the company in a crisis

7 Works with the board of directors

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 company’s 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 company’s stockholders

• Makes it more difficult for corporate managers to act in

ways that benefit them personally at the expense of the company’s owners

13 2: Chapter Summary

 The type of structure a company adopts depends on

many factors including the company’s 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 company’s chief

executive officer, initiates or approves all of a company’s major decisions

 A board of directors approves all major decisions made

by corporate management

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 level employees, to be paid about $25,000 a

entry-year each If the cost of the reorganization itself

is $75,000, how much can the company expect

to save after two years?

Assessing Computer Skills

• Choose a major U.S company, such as IBM, Apple, Home Depot, Coca-Cola,

General Mills, McDonald’s 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 company’s organizational

chart.