Business lecture CHAPTER 8

• Hierarchy ­­ A system in which one person is at the top of an organization and there is a ranked or sequential ordering from the top down.. • Chain of Command ­­ The line of authority

EVERYONE

• Adjusting to changing markets is normal in capitalist economies. 

THE CHANGING ORGANIZATION LO 8­2

• Often change in organizations is due to evolving business environments:

- More global competition

- Declining economy

- Faster technological change

- Pressure to protect the environment

• Mass production of goods led to complexities in organizing businesses.

HENRI FAYOL

MAX WEBER

Two Major Organizational Theorists

HENRI FAYOL

• Degree of  centralization

• Clear communication  channels

MAX WEBER

Level

Mid-Front Line/Supervisory

CEO CFO COO Sales Mgrs

Plant Mgrs.

Superviso rs

ForemenManagement

Pyramid

HIERARCHIES and COMMAND LO 8­2

• When following Fayol and Weber, managers 

control workers.

• Hierarchy ­­ A system in which one person is at the  top of an organization and there is a ranked or 

sequential ordering from the top down.

• Chain of Command ­­ The line of authority that 

moves from the top of the hierarchy to the lowest 

TYPICAL ORGANIZATION CHART LO 8­2

• Bureaucracy ­­ An organization with many layers of  managers who set rules and regulations and oversee  all decisions.

• It can take weeks or months to have information passed down to lower­level employees

• Bureaucracies can annoy customers

• Centralized Authority ­­ When decision­making is  concentrated at the top level of management.

ORGANIZATIONAL STRUCTURES LO 8­3

• Structures determine the way the company 

responds to employee and customer needs

• Tall Organization Structures ­­ An organizational  structure in which the organization chart would be tall 

• Flat Organization Structures ­­ An organizational 

STRUCTURE

LO 8­3

DEPARTMENTALIZATION LO 8­3

• Departmentalization ­­ Divides organizations into  separate units.

• Workers are grouped by skills and expertise to 

specialize their skills

ADVANTAGES of  DEPARTMENTALIZATION

DISADVANTAGES of  DEPARTMENTALIZATION

WAYS to DEPARTMENTALIZE LO 8­3

WAYS to DEPARTMENTALIZE LO 8­3

LINE­and­STAFF ORGANIZATION

LINE PERSONNEL LO 8­4

• Line Personnel ­­ Workers responsible for directly  achieving organizational goals, and include 

production, distribution and marketing employees.

• Line personnel have authority to make policy 

decisions

STAFF PERSONNEL LO 8­4

• Staff Personnel ­­ Employees who advise and assist  line personnel in meeting their goals, and include 

marketing research, legal advising, IT and human 

resource employees.

ORGANIZATION

LO 8­4

• Matrix Organization ­­ Specialists from different 

parts of the organization work together temporarily on  specific projects, but still remain part of a line­and­staff  structure.

SAMPLE MATRIX  ORGANIZATION

• Creative solutions to product development 

problems are produced

• It’s complex.

• Employees may be confused about where their loyalty belongs

CROSS­FUNCTIONAL  SELF­MANAGED TEAMS

LO 8­4

• Cross­Functional Self­Managed Teams ­­ 

Groups of employees from different departments who  work together on a long­term basis.

• A way to fix the problem of matrix­style teams is 

to establish long­term teams

• Empower teams to work closely with suppliers, 

• What’s the difference between line and staff 

personnel?

• What management principle does a matrix­style organization challenge?

• What’s the main difference between a matrix­style organization’s structure and the use of cross­

REAL­TIME BUSINESS LO 8­5

• Networking ­­ Using communications technology to  link organizations and allow them to work together.

• Most companies are no longer self­sufficient; 

they’re part of a global business network

• Real Time ­­ The present moment or actual time in 

Comparing an organization’s practices, processes, and products against the world’s best

Benchmarking and Outsourcing

If a company can’t match the benchmark, they may try to outsource.

Benchmarking and Outsourcing

Assigning various functions, such as accounting, production, security, billing, maintenance, and legal work to outside organizations

Benchmarking and Outsourcing

OUTSOURCED?

LO 8­5

ADAPTING to  MARKET CHANGES

• What benefits would a database of personal information, like past  purchases, provide Amazon?

RESTRUCTURING LO 8­5

• Restructuring ­­ Redesigning an organization so it  can more effectively and efficiently serve its 

customers.

• Inverted Organization ­­ An organization that has  contact people at the top and the CEO at the bottom 

of the organizational chart.

ORGANIZATIONS

LO 8­5

• What is an inverted organization?

• Why do organizations outsource functions?

• What is organizational culture?