Organizing

Lecture 8
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Principles of Organization

Unity of Command and Direction

Chain of Command
Span of Management (flat and tall organizations)
Division of Labor (specialization,
departmentalization, integration)
Coordination
Balanced Responsibility and Authority
Delegation
Flexibility
Exhibit 62

Balanced Responsibility and

Authority

Responsibility

The obligation to achieve objectives by

performing required activities.

Authority
The right to make decisions, issue orders, and use
resources.

Accountability
The evaluation of how well individuals meet their
responsibilities.
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Balanced Responsibility and Authority (contd)

Delegation
The process of assigning responsibility and
authority for accomplishing objectives.

Flexibility
The ability to adapt to exceptions to the rules,
policies, and procedures of the organization.

Authority
Formal Authority (or Structure)
The organizationally-sanctioned way of getting the
job done.
Organizational charts illustrate formal lines of
authority in firms.

Informal Authority
The patterns of relationships and communication
that evolve as employees interact and communicate
that is not sanctioned by the organization.
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Levels of Authority
Authority to Inform
Inform a superior of action alternatives and the superior
makes the decision.

Authority to Recommend
List alternatives/actions and recommend one action;
superior makes action decision.

Authority to Report
Select and implement a course of action, reporting action
to superior.

Full Authority
Acting independently without supervision.

Line and Staff Authority

Line Authority

The responsibility to make decisions and issue orders down the chain
of command.

Staff Authority

The responsibility to advise and assist line and other personnel.

Functional authority

The right of staff personnel to issue orders to

line personnel in established areas of
responsibility.

Dual line and staff authority

Staff personnel exercise line authority within

their own departments.
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Line and Staff Authority (contd)

General staff
Work for only one manager and help the
manager in any way needed.

Specialist staff
Help anyone in the organization who needs it.

Centralized and Decentralized

Authority

Centralized Authority

Important decisions are made by top managers.

Decentralized Authority
Important decisions are made by middle and
first-line managers.

Organization Design
Contingency Factors Affecting Structure

Environment (mechanistic versus organic)

Production technology
Strategy (structure follows strategy)
Size of the organization (larger = more formal)

Organization Chart
A graphic illustration of the organizations management
hierarchy and departments and their working relationships.

Management level, chain of command, division and type of

work, and departmentalization.

Organization Chart

Exhibit 65

Departmentalization
Departmentalization
The grouping of related activities into units.

Functional departmentalization
Based on the internal operations or functions that the
employees perform and the resources needed to
accomplish that work.

External, or output, departmentalization

Based on activities or factors outside the organization:
product, customer, or territory.

Multiple Departmentalization
Hybrid structure: matrix and divisional (SBUs)

Types of Departmentalization

Exhibit 66

Types of Departmentalization (contd)

Exhibit 66 contd

Multiple Departmentalization
Hybrid structures using combinations of
functional and product departmentalization
Matrix Departmentalization
Unity of command
Coordination issues

Divisional Departmentalization
Strategic business units (SBUs)
Conglomerate structures: profit centers

Matrix Departmentalization

Exhibit 67

New Approaches to
Departmentalization

Horizontal Team Organization

Has an all-directional focus to increase speed of response,

individual accountability, flexibility, knowledge sharing,
and coordination.
Networks

Boundaryless interrelationships among different organizations.

Virtual Organization

A continually evolving group of companies that unite

temporarily to exploit specific opportunities or to attain
strategic advantages and then disband when objectives are met.