Business 12th Edition Pride Solutions Manual 1

BUSINESS 12TH
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CHAPTER 7
Creating a Flexible Organization
INSTRUCTOR MANUAL RESOURCES

7.1 A Word from the Authors ..................................................................................................... 235
7.2 Transition Guide ................................................................................................................... 235
7.3 Quick Reference Guide ......................................................................................................... 236
7.4 Learning Objectives .............................................................................................................. 237
7.5 Brief Chapter Outline ............................................................................................................ 237
7.6 Comprehensive Lecture Outline ........................................................................................... 238
7.7 Textbook Answer Keys......................................................................................................... 246
7.7a Return to Inside Business.................................................................................... 246
7.7b Review Questions ............................................................................................... 246
7.7c Discussion Questions .......................................................................................... 249
7.7d Video Case 7.1: At Numi Organic Tea, Teams and Organizational
Culture Are Critical............................................................................................. 249
7.7e Case 7.2: HP’s Corporate Challenge: To Remain Agile and Responsive
in an Ever-Changing Environment ..................................................................... 250
7.7f Building Skills for Career Success ..................................................................... 251
234 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 7 Creating a Flexible Organization 235
7.8 Quizzes I and II ..................................................................................................................... 254

7.9 Answer Key for Quizzes I and II .......................................................................................... 256
7.10 Classroom Exercises ............................................................................................................. 257
7.10a Homework Activities .......................................................................................... 257
7.10b Classroom Activities ........................................................................................... 257
7.10c Exercise Handouts .............................................................................................. 257
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
236 Chapter 7 Creating a Flexible Organization
7.1 A WORD FROM THE AUTHORS

Having outlined in the preceding chapter the management of a business organization, in this chapter
we examine the organization itself. First, we define organization from a business perspective. Then
we discuss five dimensions of organizational structure: (1) job specialization, (2) departmentalization,
(3) centralization, (4) span of management, and (5) chain of command.
Next, we discuss the various methods of combining these individual elements within a single
business structure. We introduce four approaches to organizational structure—line, line-and-staff,
matrix, and network—and present the advantages and disadvantages of each. We conclude the
chapter with a brief discussion of how corporate culture, committees, informal groups, and the
grapevine affect an organization.
7.2 TRANSITION GUIDE
New in Chapter 7: Creating a Flexible Organization

 A new Inside Business feature describes Kraft’s decision to split the company into two sections:
snacks and groceries.
 A new example about Intel offering short-term job assignments has been added to the section
“Alternatives to Job Specialization.”
 A new example about how PepsiCo is dividing its products and locations has been added to the
section “Combinations of Bases.”
 A new Going for Success feature, “Dell Restructures to Jump-Start Innovation,” describes how
the company is using innovation as a means of restructuring.
 The Going for Success feature, “Google Changes Corporate Culture at Web Speed,” has been
deleted.
 The Career Success feature, “Your Green Career Path?” has been deleted.
 New examples about how Aqayo and GE use the matrix structure and cross-functional teams
have been added to the section “The Matrix Structure.”
 The Spotlight feature, “Top Ranked Barriers to Women in the Workplace,” has been deleted.
 A new Ethical Success or Failure? feature, “Internships—Who Benefits?,” describes how both
companies and students benefit from internships.
 A new example about how Goldman Sachs needs a culture change has been added to the
“Corporate Culture” section.
 The Sustaining the Planet feature, “GE’s Environmental Stewardship,” has been deleted.
 A new Sustaining the Planet feature, “Take the ‘R’ for Tomorrow,” describes how P&G
encourages social responsibility.
 A new Return to Inside Business about Kraft Foods has been provided at the end of the chapter.
 The Building Skills for Career Success section contains a new Social Media Exercise.
 The Exploring the Internet feature in Building Skills for Career Success has been deleted.
7.3 QUICK REFERENCE GUIDE

Instructor Resource Location
Transition Guide IM, p. 235
Learning Objectives Textbook, p. 188; IM, p. 237
Brief Chapter Outline IM, pp. 237–238
Comprehensive Lecture Outline IM, pp. 238–245
Going for Success Dell Restructures to Jump-Start Textbook, p. 195
Innovation
Ethical Success or Failure? Internships—Who Benefits? Textbook, p. 203
Sustaining the Planet Take the “R” for Tomorrow Textbook, p. 203
Inside Business Crafting a Split of Snacks and Groceries Textbook, p. 189
at Kraft
Return to Inside Business Textbook, p. 205
Questions and Suggested Answers, IM, p. 246
Marginal Key Terms List Textbook, pp. 206–207
Review Questions Textbook, p. 207
Questions and Suggested Answers, IM, pp. 246–248
Discussion Questions Textbook, p. 207
Questions and Suggested Answers, IM, p. 249
Video Case 7.1 (At Numi Organic Tea, Teams and Textbook, pp. 207–208
Organizational Culture Are Critical) and Questions Questions and Suggested Answers, IM, pp. 249–250
Case 7.2 (HP’s Corporate Challenge: To Remain Agile Textbook, pp. 208–209
and Responsive in an Ever-Changing Environment) and Questions and Suggested Answers, IM, pp. 250–251
Questions
Building Skills for Career Success Textbook, pp. 209–210
Suggested Answers, IM, pp. 251–253
IM Quiz I & Quiz II IM, pp. 254–256
Answers, IM, p. 256
Classroom Exercises IM, p. 257
7.4 LEARNING OBJECTIVES

After studying this chapter, students should be able to:
1. Understand what an organization is and identify its characteristics.
2. Explain why job specialization is important.
3. Identify the various bases for departmentalization.
4. Explain how decentralization follows from delegation.
5. Understand how the span of management describes an organization.
6 Describe the four basic forms of organizational structure.
7. Describe the effects of corporate culture.
8. Understand how committees and task forces are used.
9. Explain the functions of the informal organization and the grapevine in a business.
7.5 BRIEF CHAPTER OUTLINE

I. What Is an Organization?
A. Developing Organization Charts
B. Major Considerations for Organizing a Business
II. Job Design

A. Job Specialization
B. The Rationale for Specialization
C. Alternatives to Job Specialization
III. Departmentalization
A. By Function
B. By Product
C. By Location
D. By Customer
E. Combinations of Bases
IV. Delegation, Decentralization, and Centralization

A. Delegation of Authority
1. Steps in Delegation
2. Barriers to Delegation
B. Decentralization of Authority
V. The Span of Management

A. Wide and Narrow Spans of Management
B. Organizational Height
VI. Forms of Organizational Structure

A. The Line Structure
B. The Line-and-Staff Structure
C. The Matrix Structure
D. The Network Structure
VII. Corporate Culture
VIII. Committees and Task Forces
IX. The Informal Organization and the Grapevine
7.6 COMPREHENSIVE LECTURE OUTLINE
I. WHAT IS AN ORGANIZATION? An organization is a group of two or more people

working together to achieve a common set of goals. A neighborhood dry cleaner owned and
operated by a husband and wife team is an organization. So are IBM, Rubbermaid, and The
Home Depot.
A. Developing Organization Charts. An organization chart is a diagram that represents
the positions and relationships within an organization—that is, it reveals the company’s
organizational structure. (See Figure 7.1.)
1. The chain of command is the line of authority that extends from the highest to the
lowest levels of the organization.
2. In an organization chart, connections shown as broken lines are not part of the
direct chain of command; these people hold advisory, or staff, positions.
3. Most smaller organizations find organization charts useful. For two reasons,
however, many large organizations do not maintain complete, detailed charts.
a) It is difficult to chart accurately even a few dozen positions, much less the
thousands that characterize larger firms.
b) Larger organizations are almost always changing.
Teaching Tip: Enter “organization chart” in your favorite search engine and bring up some
examples of organization charts. Some good ones include the one for the Justice Department
(www.usdoj
.gov/dojorg.htm) and the one for the United Nations (http://www.un.org/en/aboutun/structure/org_
chart.shtml). Comparing these and the charts you found, what do you think constitutes a good
organizational chart?
B. Major Considerations for Organizing a Business

1. Job Design. Divide the work that is to be done by the entire organization into
separate parts and assign those parts to positions within the organization.
2. Departmentalization. Group the various positions into manageable units, or

departments.
3. Delegation. Distribute responsibility and authority within the organization.
4. Span of Management. Determine the number of subordinates who will report to
each manager.
5. Chain of Command. Establish the organization’s chain of command by designating
the positions with direct authority and those that are support positions.
II. JOB DESIGN

A. Job Specialization. Job specialization is the separation of all organizational activities
into distinct tasks and the assignment of different tasks to different people.
B. The Rationale for Specialization. Specialization is needed for several reasons.
1. The “job” of most organizations is simply too large for one person to handle.
2. When a worker has to learn only a specific, highly specialized task, that individual
should be able to learn to do it very efficiently.
3. The worker who is doing the same job over and over does not lose time changing
from one operation to another.
4. The more specialized the job, the easier it may be to design specialized equipment
for those who do it.
5. The more specialized the job, the easier is the job training.
Teaching Tip: As an example of job specialization, ask your students about the specialization in
their family as they were growing up. Chances are that each member of the family had some tasks
for which they were the family “expert.” For example, were they the computer guru in their house?
C. Alternatives to Job Specialization. Specialization can also have some negative

consequences, most notably employee boredom and dissatisfaction. There are possible
solutions to the problems caused by job specialization.
1. Job rotation is the systematic shifting of employees from one job to another.
2. It is also possible to use job enlargement and job enrichment. These topics, along
with other methods used to motivate employees, are discussed in Chapter 10.
III. DEPARTMENTALIZATION. Departmentalization is the process of grouping jobs into

manageable units. Common bases of departmentalization are:
A. By Function. Departmentalization by function groups jobs that relate to the same
organizational activity.
1. Most smaller and newer organizations base their departmentalization on function.
2. The disadvantages of this method are that it can lead to slow decision making and
that it tends to emphasize the department rather than the organization as a whole.
B. By Product. Departmentalization by product groups all activities related to a particular

good or service.
C. By Location. Departmentalization by location groups all activities according to the
defined geographic area in which they are performed.
D. By Customer. Departmentalization by customer groups all activities according to the
needs of various customer populations.
E. Combinations of Bases. Few organizations exhibit only one departmentalization base.
Many firms use several different bases within a single organization. (See Figure 7.2.)
Teaching Tip: Ask your students if any of them have ever worked for a restaurant or hotel. Ask them
what type of departmentalization they might have encountered. A hotel might have a specific group of
employees who only handle banquets and corporate meetings, which would be an example of customer-
based departmentalization. At a restaurant, things might be arranged by function. As part of the
discussion, ask students what improvements they might make.
IV. DELEGATION, DECENTRALIZATION, AND CENTRALIZATION. Delegation

assigns part of a manager’s work and power to other workers.
A. Delegation of Authority
1. Steps in Delegation. Three steps are generally involved in the delegation process.
(See Figure 7.3.)
a) The manager must assign responsibility. Responsibility is the duty to do a job
or perform a task.
b) A manager must grant authority, which is the power, within the organization,
to accomplish an assigned job or task.
Teaching Tip: Ask students if anyone has ever given them the responsibility for accomplishing a
task without giving them the authority to get it done.
c) The manager must create accountability. Accountability is the obligation of a

worker to accomplish an assigned job or task. Accountability is created, but it
cannot be delegated.
2. Barriers to Delegation. For several reasons, managers may be unwilling to
delegate work.
a) Many managers are reluctant to delegate because they want to be sure that the
work gets done.
b) A manager may fear that a subordinate will do the work so well that he or she
will attract the notice of top management and become a threat to the manager.
c) Some managers are so disorganized that they simply are not able to plan and
assign work effectively.
Teaching Tip: Consider using “The Delegator” exercise here. It is a five-minute individual quiz that
can be used as the basis for discussion regarding when it is and when it isn’t appropriate to delegate.
B. Decentralization of Authority. The pattern of delegation throughout an organization

determines the extent to which that organization is decentralized or centralized.
1. An organization in which management consciously attempts to spread authority
widely in the lower organization levels is said to be a decentralized organization.
2. An organization that systematically works to concentrate authority at the upper
levels is said to be a centralized organization.
3. A variety of factors can influence the extent to which a firm is decentralized.
a) The external environment in which the firm operates.
b) The nature of the decision to be made. The riskier or more important the
decision, the greater is the tendency to centralize decision making.
c) The ability of lower-level managers to make decisions.
d) A firm that has traditionally practiced centralization is likely to maintain that
centralization in the future, and vice versa.
4. In principle, neither decentralization nor centralization is right or wrong. What
works for one organization may or may not work for another.
V. THE SPAN OF MANAGEMENT. The fourth major step of organizing a business is

establishing span of management (or span of control), which is the number of workers who
report directly to one manager.
A. Wide and Narrow Spans of Management. A wide span of management exists when a
manager has a large number of subordinates. A narrow span exists when the manager
has only a few subordinates. Several factors determine the span that is better for a
particular manager.
B. Organizational Height. Organizational height is the number of layers, or levels, of
management in a firm.
1. The span of management plays a direct role in determining an organization’s
height. (See Figure 7.4.)
a) If spans of management are wider, fewer levels are needed, and the
organization is flat.
b) If spans of management are narrow, more levels are needed, and the resulting
organization is tall.
2. In a taller organization, administrative costs are higher because more managers are
needed. Communication among levels may become distorted.
3. All managers in a flat organization may have to perform more administrative duties
because there are fewer managers.
VI. FORMS OF ORGANIZATIONAL STRUCTURE. The four basic forms of organizational

structure are line, line-and-staff, matrix, and network.
A. The Line Structure. An organizational structure in which the chain of command goes
directly from person to person throughout the organization is called line structure.
1. Managers within a line structure, called line managers, make decisions and give
orders to subordinates to achieve the goals of the organization.
2. A line structure allows line managers to make decisions quickly with direct
accountability because the decision-maker only reports to one supervisor.
3. The downside of a line structure is that line managers are responsible for many
activities and therefore must have a wide range of knowledge about all of them.
Consequently, line structures are more popular in small organizations rather than in
medium and large size organizations where activities and issues are more
numerous and more complex.
B. The Line-and-Staff Structure. A line-and-staff structure utilizes the chain of
command from a line structure, but also provides line managers with specialists, called
staff managers.
1. Staff managers provide support, advice, and expertise to line managers. They are
not part of the chain of command like line managers are, but they do have authority
over their assistants.
2. Both line and staff managers are needed for effective management, but the two
positions differ in important ways. (See Figure 7.5.)
a) Line managers have line authority, which means that they can make decisions
and issue directives relating to the organization’s goals.
b) Staff managers have advisory and functional authority which means they can
consult with the line manager and only make decisions and issue directives
about their areas of expertise.
3. Conflict between line managers and staff managers can occur if line managers
perceive that staff managers are a threat to their authority or if staff managers
perceive that their recommendations are not being adopted by line management.
There are several ways to minimize this conflict.
a) Integrate line and staff managers into one team.
b) Ensure that the areas of responsibility of line and staff managers are clearly
defined.
c) Hold line and staff managers accountable for the results of their activities.
C. The Matrix Structure. The matrix structure combines vertical and horizontal lines of
authority.
1. The matrix structure occurs when product departmentalization is superimposed on

a functionally departmentalized organization. (See Figure 7.6.)
2. Authority flows both down and across.
3. In a matrix structure, people from different departments are assigned to a group,
called a cross-functional team, to work on a new project.
a) Frequently, cross-functional teams are charged with developing new products.
b) The project manager is in charge of the team.
c) Cross-functional teams may be temporary or permanent.
4. The matrix organization has several advantages.
a) Added flexibility is probably the most obvious advantage.
b) This structure can increase productivity, raise morale, and nurture creativity
and innovation.
c) Employees experience personal development by doing a variety of jobs.
5. The matrix organization also has several disadvantages.
a) Having employees report to more than one supervisor can cause confusion
about who has authority in various situations.
b) Like committees, teams may take longer to resolve problems and issues than
individuals working alone.
c) Because more managers and support staff may be needed, a matrix structure
may be more expensive to maintain than other forms of organizational structure.
D. The Network Structure. In a network structure (sometimes called a virtual
organization), administration is the primary function performed, and other functions
such as engineering, production, marketing, and finance are contracted out.
1. This type of organization has only a few permanent employees consisting of top
management and a few hourly clerical workers.
2. Leased equipment and facilities are temporary.
3. There is rather limited formal structure.
4. An obvious advantage is the flexibility that allows an organization to quickly adjust
to changes.
5. Some of the challenges faced by managers include the following:
a) Controlling the quality of work performed by other organizations
b) Low morale and high turnover among hourly workers
c) Vulnerability associated with relying on outside contractors
Teaching Tip: Consider using the 30- to 60-minute “Virtual Network Structure” exercise here. This
exercise will allow students to explore the complexities of building a network.
VII. CORPORATE CULTURE. A corporate culture is generally defined as the inner rites,
rituals, heroes, and values of a firm.
A. Corporate culture is generally thought to have a very strong influence on a firm’s

performance over time.
B. Goffee and Jones have identified four types of corporate cultures. (See Figure 7.7.)
1. Networked culture
2. Mercenary culture
3. Fragmented culture
4. Communal culture
Teaching Tip: Use the “What’s My Culture?” group exercise here. It takes approximately 15 to 20
minutes.
C. Some experts believe that cultural change is needed when the company’s environment is
changing significantly, when the industry is becoming more competitive, when the
company’s performance is mediocre, when the company is growing rapidly, or when the
company is about to become a truly large organization.
VIII. COMMITTEES AND TASK FORCES

A. Several types of committees can be used within an organizational structure.
1. An ad hoc committee is created for a specific short-term purpose, such as
reviewing the firm’s employee benefits plan.
2. A standing committee is a relatively permanent committee charged with
performing a recurring task.
3. A task force is a committee established to investigate a major problem or pending
decision.
B. Committees offer some advantages over individual action.
1. Several members are able to bring more information and knowledge to the task at
hand.
2. Committees tend to make more accurate decisions and to transmit their results
through the organization more effectively.
C. There are also disadvantages to using committees.
1. Committee deliberations take much longer than individual action.
2. Unnecessary compromise may take place within the committee.
IX. THE INFORMAL ORGANIZATION AND THE GRAPEVINE. Informal organization

describes the pattern of behavior and interaction that stems from personal rather than official
relationships.
A. An informal group is created by the group members themselves to accomplish goals that
may or may not be relevant to the organization.
1. Workers may create an informal group to go bowling, form a union, get a particular
manager fired or transferred, or share lunch.
2. Informal groups can be powerful forces in organizations. Managers who fight the
informal organization have a major obstacle to overcome.
B. The grapevine is the informal communications network within an organization.
1. The grapevine is completely separate from—and sometimes much faster than—the
organization’s formal channels of communication.
2. Managers would make a mistake if they tried to eliminate the grapevine. A more
rational approach is to recognize the existence of the grapevine as a part (though an
unofficial part) of the organization.
7.7 TEXTBOOK ANSWER KEYS
7.7a Return to Inside Business
Kraft Foods
1. Would you expect the two spinoffs to be flatter or taller, compared with the structure of
Kraft Foods before the split? Why?
The case states that some jobs were cut as the two spinoffs finalized their structure and
determined who would fill each position. Because of this, their structures are likely to be flatter
than that of Kraft Foods prior to the split. Also, standard operating procedures are probably
being carried over from Kraft, and most of the managers and employees will know each other.
This makes a wide span of management (flat structure) more workable than a narrow span of
management (tall structure).
2. The structure of the two spinoffs is geared toward location, for responsiveness to local
needs. How can each of the spinoffs use this structure as a global strength, not just a local
strength?
Students will suggest a variety of answers to this question. One answer is that managers from
each location should be sharing ideas on a regular basis so they can learn from each other,
turning local strengths into global strengths. Specifically, a new product that succeeds in one
location might be tested in another location to determine its appeal. Internal processes that work
in one location might be tested in other locations, as well. Corporate culture in both spinoffs can
influence such sharing.
7.7b Review Questions

1. In what way do organization charts create a picture of an organization?
Organization charts are diagrams that represent positions in the organization and the
relationships among them. They also illustrate the five considerations in the organizing process:
specialization, departmentalization, centralization, span of management, and chain of command.
2. What is the chain of command in an organization?
The chain of command is the line of authority that extends from the highest to the lowest levels
of the organization. Chains can be long as is typical in a large organization, or chains can be
short as is typical in a small business. No matter what the length, the communication along the
chain must be clear.
3. What determines the degree of specialization within an organization?
The degree of specialization within an organization is determined through division of the entire
organization’s work into separate parts and assignment of those parts to positions within the
organization. The ability to separate the activities into distinct tasks and having the people to
efficiently perform those tasks will help determine the degree of specialization.
4. Describe how job rotation can be used to combat the problems caused by job specialization.
In job rotation, each employee is shifted periodically to a different job. The idea behind job
rotation is to provide a variety of tasks so that workers are less likely to get bored and
dissatisfied.
5. What are the major differences among the four departmentalization bases?
The four most common bases of departmentalization are by function, by product, by location,
and by type of customers. Departmentalization by function groups jobs that relate to the same
organizational activity. Departmentalization by product groups activities related to a particular
good or service. Departmentalization by location groups activities according to the defined
geographic area in which they are performed. Departmentalization by customer groups
activities according to the needs of various customer populations.
6. Why do most firms employ a combination of departmentalization bases?
A departmentalization base is the scheme by which jobs are grouped into units. In fact, few
organizations exhibit only one departmentalization base. The most common bases are function,
product, location, and customer. The decision to use multiple bases is usually based on the
specific needs of the corporation and on the determination of which combination of bases will
enable the organization to accomplish its goals and objectives.
7. What three steps are involved in delegation? Explain each.
The three steps involved in delegation are (1) assigning responsibility, which is the duty to
perform the job or task; (2) granting authority, which is the power within the organization to
accomplish the task or job; and (3) creating accountability, which is the obligation of a
subordinate to accomplish an assigned task or job.
8. How does a firm’s top management influence its degree of centralization?
If top management consciously attempts to spread authority widely to the lower levels of
management, the firm is decentralized. If top management works to keep authority at the upper
levels, the firm is centralized.
9. How is organizational height related to the span of management?
If the span of management is generally narrow, more levels of management are needed,
resulting in a tall organization. If the span of management is wider, fewer levels are needed and
the organization is flat.
10. What are the key differences between line and staff positions?
Line managers have line authority, meaning they can make decisions and issue directives that
relate to the organization’s goals. Staff managers, by contrast, generally have either advisory or
functional authority.
11. Contrast line-and-staff and matrix forms of organizational structure.
The line-and-staff structure is characterized by
a. A chain of command line structure coupled with specialists (staff managers) who support
the line managers
b. Departmentalization by function
c. Formal patterns of delegation

d. A high degree of centralization
e. Clearly defined line and staff positions, with formal relationships between the two
The matrix structure features
a. Vertical and horizontal lines of authority
b. Departmentalization superimposed on a functionally departmentalized organization
c. Workers who report to more than one supervisor at a time
d. Cross-functional teams that include project managers
12. What is corporate culture? Describe the major types.
Corporate culture is generally defined as the inner rites, rituals, heroes, and values of a firm. It
can have a powerful influence on how its employees think and act, as well as determine how the
public perceives the organization.
There are four distinct types of corporate culture:
a. Networked culture is a relaxed and informal environment. There is a strong commitment
and a feeling of loyalty to the organization, characterized by a base of trust and friendship
among employees.
b. In the mercenary culture, employees are very intense, focused, and determined to win. In
addition to employees working to earn money, feelings of passion, energy, sense of purpose,
and excitement for one’s work play a large role in motivating an organization’s employees.
c. Fragmented culture suggests that employees do not necessarily become friends but have a
high degree of autonomy, flexibility, and equality. Employees in this type of culture
consider themselves as working “at” the organization, not “for” it.
d. In the communal culture, the positive traits of the networked culture and the mercenary
culture are combined. Traits such as friendship, commitment, high focus on performance, and
high energy contribute to the organization resulting in an environment where success by
anyone is celebrated by all.
13. Which form of organizational structure probably would lead to the strongest informal
organization? Why?
The matrix organization would probably lead to the strongest informal organization because it
allows interaction both vertically and horizontally. On the other hand, a line structure,
especially where staff members have very similar positions and status, could also lead to a
strong informal organization.
14. What is the role of the informal organization?
The role of the informal organization is whatever the group members who created it wish the
role to be. As indicated in the text, workers may create an informal group to go bowling, form a
union, get a particular manager fired or transferred, or share lunch. The members determine the
role and the rules.
7.7c Discussion Questions

1. How does the corporate culture of a local Best Buy store compare to that of a local
McDonald’s?
Best Buy appears to be a mercenary culture in that its workers appear to be goal oriented and
competitive as they sell high-priced electronics products and accessories. McDonald’s is more
of a communal culture in that its workers are much more regimented as they work in teams for
the common goal of superior customer service.
2. Which kinds of firms probably would operate most effectively as centralized firms? As
decentralized firms?
Production firms would probably operate most effectively as centralized firms because the
degree of specialized technical knowledge required is usually limited. Research firms, by
contrast, need to be decentralized because of the great degree and variety of specialized
knowledge required to do the job in such firms.
3. How do decisions concerning span of management and the use of committees affect
organizational structure?
Decisions concerning span of management and the use of committees affect basic
organizational structure by altering chains of command, delegation chains, individual
authorities, accountabilities, and so on.
4. How might a manager go about formalizing the informal organization?
A manager can formalize the informal organization by officially recognizing its presence and
structure. He or she can also rewrite the informal organization chart to more closely
approximate the formal organization IF that makes sense for the organization. Because the
informal organization comes from personal relationships, it might be better to recognize its
existence and “work with it” rather than attempting to formalize the informal organization.
7.7d Comments on Video Case 7.1

Suggestions for using this video case are provided in the Pride/Hughes/Kapoor Video Guide.
At Numi Organic Tea, Teams and Organizational Culture Are Critical

1. Numi’s customer service manager, Cindy Graffort, says the company is like a “living,
breathing organism.” What does she mean? How does the company’s culture reflect this
belief?
The customer service manager likely means the company is constantly growing and changing to
meet the needs of its customers, suppliers, employees, and community. Flexibility is the key to
this type of organic growth, and the company’s culture encourages flexibility in its operations—
for instance, workers are trained to do more than one task in their department, flextime permits
individuals to create their own shifts, and team meetings allow for changes in the way the group
gets its work done.
2. Numi’s distribution manager, Dannielle Oviedo, says her philosophy of management

means she gets involved in what her team is doing: “I do what I ask folks to do.” Do you
think she is a good delegator? Why or why not?
The distribution manager seems to be an excellent delegator, as demonstrated by her strategy of
training everyone in her department to complete multiple tasks, which grants them authority
and responsibility for their work. She also takes time to explain the reasons for changing things,
empowering her people to act on their own by giving them the bigger picture of the team’s and
the company’s goals.
3. What can you infer about Numi’s basis for departmentalization and its chain of
command?
Numi’s basis for departmentalization is probably functional, since it clearly has a customer
service department and a distribution center. It likely has a marketing department as well, which
is probably responsible for its Facebook and MySpace pages and the company blog. Since it
operates abroad, it may also have separate domestic and international sales departments.
Although Numi does not appear to have many layers of management, its chain of command is
likely narrow (few workers per manager) simply because the company is small.
7.7e Comments on Case 7.2

HP’s Corporate Challenge: To Remain Agile and Responsive
in an Ever-Changing Environment
1. How is corporate culture likely to affect HP’s ability to integrate acquired companies into
its organizational structure?
Students will be aware that any company HP acquires will already have a corporate culture in
place. If the corporate cultures clash or if employees have negative attitudes toward acquisition,
HP will have difficulty integrating a newly acquired company into its organizational structure.
As a result, HP’s executives must consider how to build on corporate culture to help an
acquisition fit within the parent company’s structure (and with other divisions within HP).
Students may suggest other ways that corporate culture might influence HP’s ability to integrate
acquisitions.
2. Analyze HP’s use of departmentalization. Why are its choices appropriate for a
technology company?
HP organizes its business according to function, product, and customer, a multi-pronged
approach to departmentalization that allows the company to use its resources productively while
being nimble enough to respond to technological developments and customer needs. For
example, organizing by function allows HP to make efficient use of centralized technology
groups such as data-center operations, rather than duplicating these functions in every unit.
Departmentalizing by product allows HP to focus on specific technology products that its
customers want and need. Departmentalizing by customer helps HP stay close to its markets,
understand any changes, and prepare for opportunities and threats that new technology might
bring.
3. Analyze HP’s approach to delegation and decentralization. Are its choices appropriate for
a technology company? Why or why not?
HP has delegated and decentralized day-to-day decisions so managers of each unit can take
action without needing or waiting for upper-management approvals. This is appropriate for a
technology company because managers often have to make quick decisions to contend with
rapid changes in the business environment, including technical breakthroughs or competitive
moves. If managers had to wait for upper-level approvals, HP might miss valuable
opportunities or see its business threatened by unexpected environmental shifts. At the same
time, HP has centralized some functions (such as research and development). Senior managers
for the corporation now decide how many projects HP Labs will pursue at one time and have
set standards for evaluating ongoing projects.
7.7f Building Skills for Career Success

1. Social Media Exercise
Zappo’s is a company that embraces the notion that customers come first. It is well known
that this company is customer-centered. One of the ways that is allows employees to
communicate with customers is through it blog www.zapposinsights.com/blog.
1. Take a look at this blog. What can you tell about the corporate culture of Zappo’s?
The following information was taken directly from the blog: The words corporate culture
still have many definitions to many people. At the base level, corporate culture is how the
individual team members, teams, and managers act on a daily basis. If you were to write out
a list of actions that you want your people to display on a daily basis, “trust” should be close
to the top. One of the phrases that our manager Robert Richman said that has stuck with me
is, “The quickest way to trust is through transparency.” This culture of trust and
transparency builds employee loyalty and commitment.
2. How do they approach customer service? Do you think it works? Why or why not?
The following information was taken directly from the blog: Having a strong company
culture is great, but the best culture in the world doesn’t matter if you do not take care of
your customers. From the Web site: “We are not an average company, our service is not
average, and we don’t want our people to be average. We expect every employee to deliver
WOW.” These messages are communicated throughout the organization, and the messages
are part of the culture. When a company embraces a philosophy as part of its core, and the
philosophy is not just a message but internal to every part of the organization, it works!
2. Journaling for Success
Assume that after leaving school, you are hired by your “dream company.”
1. What are the major corporate culture dimensions of your dream company?
In answering this question, students should examine the inner rites, rituals, heroes, and values
of a firm. Values are probably the most important and easiest to articulate. Some potentially
attractive values might include reward for performance, demonstrated caring for employees,
advancement from within, etc. In terms of heroes, students might suggest that people with
integrity and proven ability ought to be heroes. Rites and rituals might include aspects of
socialization that are so important to young people when they leave the ready-made social
setting of college.
2. Before accepting a job at your “dream company,” how will you find out about the
company’s corporate culture?
Information is readily available on the Internet, whether from corporate press releases, Web
sites, or news articles from sites such as www.findarticles.com. Better yet, students should try
to speak to young employees at the company, or even walk around if possible.
3. From Figure 7.7, identify the type of corporate culture that you prefer and explain
why.
This is a personal preference question. Students should be encouraged to provide thoughtful
reasons for their choice.
4. Thinking back to previous jobs that you have had, describe the worst corporate
culture you have ever experienced.
Again, this is a personal preference question. The instructor might consider having the students
compare answers to see if there are any consistent elements.
3. Developing Critical-Thinking Skills
Factors that influence the cultural environment within a company include the attitudes and
beliefs of employees; the decision-making process; the communications system; the reward and
promotion program; the organizational structure; rules, regulations, and policies; ethnic
diversity; risk taking; the training program; and dress and behaviors of employees.
To improve a company’s cultural environment, the employees must understand and support the
mission of the company. The mission sets the priorities, determines values, and influences
decisions. Employee behavior must be consistent with the mission. The communication system
must provide the proper flow of information to the sources where it is needed. Managers must
be examples that reflect the desired culture. Skills must be continually upgraded, if employees
are expected to perform at certain levels. Changes in technology and in the industry can impact
companies and be reflected in their cultural environment.
4. Building Team Skills
The organization chart on the following page is a line-and-staff structure. There are three staff
positions: one payroll and billing position and two appointment coordinators. The other
positions are line positions. In this organization, the span of control ranges from zero to seven
people. The executive vice-president works with builders to establish their programs and
provides the center managers with training, guidelines, and expectations. It is the responsibility
of the managers to run their centers in a courteous and profitable manner.
5. Researching Different Careers
The answers will vary. Emphasize that honesty is important in completing the assessment.
Nothing changes unless a plan is prepared to improve weaknesses. Possessing excellent skills,
knowing how to network, understanding one’s accomplishments, and having a positive attitude
are key factors in being promoted within a company, as well as in being hired to fill a better
position with another company.
7.8 QUIZZES I AND II

Quiz I
True-False Questions
Select the correct answer.
1. T F The step that distributes responsibility and authority within an organization is called
delegation.
2. T F Job specialization is the systematic shifting of employees from one job to another.
3. T F The obligation of a worker to accomplish an assigned job or task is called accountability.
4. T F Span of management and span of control are synonymous terms.
5. T F There are fewer conflicts when the areas of responsibility for line managers and staff
managers are clearly defined.
Multiple-Choice Questions
Circle the letter before the most accurate answer.
6. The line of authority extending from the top to the bottom of the organization is known as a(n)
a. informal organization.
b. line structure.
c. line-and-staff structure.
d. chain of command.
e. matrix structure.
7. In his book, The Wealth of Nations, __________ emphasized the power of specialization.
a. Karl Marx
b. Victor Vroom
c. George Washington
d. Adam Smith
e. Frederick Taylor
8. Grouping all jobs related to the same organizational activity is departmentalization by
a. function.
b. employee.
c. location.
d. customer.
e. product.
9. The act of distributing part of a manager’s work and power to workers is called
a. departmentalization.
b. organizing.
c. delegation.
d. decentralization.
e. job sharing.
10. When authority is spread to lower-level management, a business is said to be

a. centralized.
b. decentralized.
c. progressive.
d. tall.
e. upwardly mobile.
Quiz II
True-False Questions
Select the correct answer.
1. T F The span of management is the number of subordinates who will report to
each manager.
2. T F There seems to be a movement from variety in jobs to more specialization.
3. T F Most small and new organizations base departmentalization on customers.
4. T F When a manager has many subordinates, a wide span of management exists.
5. T F Staff managers usually provide support, advice, and expertise to line managers.
Multiple-Choice Questions
Circle the letter before the most accurate answer.
6. Two or more people working together in a predetermined way to achieve common goals is
known as a(n)
a. organization.
b. chain of command.
c. structure.
d. enterprise.
e. functional arrangement.
7. All of the following are reasons for job specialization except that
a. boredom from repetition is eliminated.
b. special equipment can be produced to do a specific job.
c. most jobs are too large for one person to handle.
d. a specialized job can be efficiently learned.
e. there is no loss of time by switching from one operation to another.
8. Employees at a chemical factory are systematically moved every two weeks among three
different departments in the organization. This is called
a. job trading.
b. specialization.
c. departmentalization by function.
d. job enlargement.
e. job rotation.
9. All of the following are departmentalization bases except

a. function.
b. product.
c. location.
d. customer.
e. employee.
10. A subordinate’s obligation to accomplish an assigned job is called
a. accountability.
b. responsibility.
c. job requirements.
d. delegation.
e. authority.
7.9 ANSWER KEY FOR QUIZZES I AND II
Quiz I
True-False Multiple-Choice
1. T 6. d
2. F 7. d
3. T 8. a
4. T 9. c
5. T 10. b
Quiz II
True-False Multiple-Choice
1. T 6. a
2. F 7. a
3. F 8. e
4. T 9. e
5. T 10. a
7.10 CLASSROOM EXERCISES

7.10a Homework Activities
 Developing an Organizational Chart. Have students research their favorite sports team on the
Internet and develop an organization chart for its management. Have them identify whether it is a
line-and-staff structure, a matrix organization, etc.
 Researching and Following a Company Throughout the Course (continuing assignment).
Have students research how their company is organized. Does it seem to be organized by
function, product, location, customer, or some combination of bases?
 Comparing Organizational Charts. Have students contact two very different local
organizations (retailing firm, manufacturing firm, church, civic club, etc.) and interview
managers to develop organization charts for each organization. How do they account for the
similarities and differences between them?
7.10b Classroom Activities

 The Delegator Exercise.
Make enough copies of “The Delegator” handout for each student. In class, each student should
have no more than five minutes to fill out the questionnaire. At the end of five minutes, give
students the scoring key and discuss the results. This assessment test helps show each student his
or her own willingness to delegate. Every task listed in the test would be a suitable task for an
administrative assistant to handle. A variation of this test is to see if students’ answers would
change if the administrative assistant had been with them for only six months (or for five years).
 What’s My Culture? Group Exercise.
Place students into groups of four or five and have them review the snippets of information
contained in the handout. They should have approximately 15 minutes to consider the values of
each of the five cultures outlined and develop a point of view as to which one or ones they
prefer. After 15 minutes, ask each group to report their conclusions and review the pros and cons
of each of the cultures outlined.
 Virtual Network Structure Exercise.
Have students form groups of four. Consider assigning background research such as the tasks faced
by a motion picture company, which will give the students an idea of the complexity of tasks
involved in bringing a group of contractors together. This is a longer exercise where it might be
appropriate to stop at intervals to determine how students are progressing in each of their groups.
 Boxed Insert: Dell Restructures to Jump-Start Innovation.
Have students read the information in the Going for Success feature. Then go to the Dell Web
site at www.dell.com and view the information on its corporate structure. Discuss how Dell is
organized and the impact the restructuring will have on the company’s goals. Is this an effective
restructuring strategy? Why or why not?
7.10c Exercise Handouts Follow on Next Pages
THE DELEGATOR
You are a manager for a busy, medium-sized company. You have recently been ill, and the doctor
has told you that you have to cut your workload in half. Your administrative assistant offers to take
over a number of the jobs you currently handle. The assistant has been with you for one year and has
been an excellent employee. Which activities will you delegate and to what degree? Respond using
the scale below.
0 Do not delegate.
1 Investigate and report back.
2 Investigate and recommend action.
3 Investigate and advise on action planned.
4 Investigate and take action; advise on action taken.
5 Investigate and take action.
____ 1. Reviewing your mail and e-mail, deciding what to discard, what to answer directly,
and what to pass along to you.
____ 2. Screening your calls and voice mail, deciding who gets to talk to you, who leaves a
message, and who is handled personally.
____ 3. Keeping your calendar, setting appointments, and deciding how much time each
person needs after discussing it with the caller.
____ 4. Tracking the budget for your department, making sure spending is in line with
expectations, and letting you know of any major discrepancy.
____ 5. Coordinating the absence reports for the nonmanagerial employees on the staff,
getting the information from each person every two weeks, filling in the forms, and
sending them to Human Resources.
____ 6. Calculating the numbers for the monthly revenue reports, generating revenue figures
and matching them to expense figures, highlighting the unusual changes for you to
discuss in the comments section of the reports.
____ 7. Handling the inquiries from field operations, including trying to find the answer to
their issues before discussing them with you.
____ 8. Handling inquiries from clients, including trying to find the answers to their issues
before discussing them with you.
____ 9. Supervising the word-processor and the file clerks, coordinating their work loads, and
managing their performance, including discipline if necessary.
____ 10. Tracking your projects and reminding you when deadlines are coming or when
something needs to be followed up.
The scoring for the test is shown here:
Level of Delegation Score

Do not delegate. 0 points
Investigate and report back. 1 point
Investigate and recommend action. 2 points
Investigate and advise on action planned. 3 points
Investigate and take action; advise on action taken. 4 points
Investigate and take action. 5 points
Overall Score
0–25: Not an effective delegator. You will constantly be monitoring other people’s
work rather than getting your own work done. This is a nonproductive stage
to be in for long. The exception to this is with new employees, to make sure
they can handle their responsibilities.
26–35: You will have more time free but will still spend a great deal of time simply
reviewing other people’s work. After a few reviews to make sure the work
is done properly, this is a waste of time.
36–45: You understand delegation. While still maintaining some connection with
the work of subordinates, you are free to focus on the specifics of your job.
46–50: You may be too far removed from the work of subordinates. In some areas,
particularly when it comes to handling client and field concerns, you may
want to have information on what happened and what was done. Delegation
does not mean ignoring what goes on in your department.
What’s My Culture?
In your groups, review and discuss the following corporate cultures. If these short descriptions
were all you knew about each culture, would you consider working there? Why or why not?
Hint: Consider what the “values” (a value being a conviction that certain behaviors are superior
to others) of each of these organizations might be. You have 15 minutes.
1. Joe Powers is the personnel director for ABC Company. The primary job of his department is
to make sure that all procedures are followed as ordered by top management. All procedures
are written down in great detail, and employees are obliged to write reports confirming that
they have followed all procedures correctly.
2. Keith Kelly loves being the CEO of the company he founded several years ago and is
committed to high levels of rapid growth. Highly charismatic, he trusts his “gut” in decision
making and makes sure he is involved in everything. After all, it is his company and he
knows best!
3. Vicki Smith enjoys working at XYZ Corp. All the bosses and other employees are her
friends. Everybody is so polite, and confrontation is frowned upon. When she was ill,
everyone covered for her. She doesn’t have to worry about being criticized, even if her
performance is off a little now and then. Better yet, she doesn’t feel pressured to show
initiative and figure out new ways to do things. Everybody knows what to do.
4. Heather Huezo is really excited about her new job. She is young, but knows that she will be
promoted if she is productive and responsive to the marketplace. She has been looking a long
time for a place where people are rewarded based on performance not on seniority. Heather
has always enjoyed being the winner; she is certain that will be the case now.
5. Peter has had a little difficulty explaining his new job to his parents, one of whom was a
teacher and the other in the military. His job is to develop new ideas for the company, to be
creative, and to make mistakes. He has been told if he doesn’t take risks and make any
mistakes he will be underperforming. “Just keep the ideas coming, young man! If they are
good we will make them work!”
What’s My Culture? Instructor Notes
1. ABC most likely has a fragmented culture, where there is very little trust among employees,
including top management. In fact, top management appears to be very controlling and
suspicious of the activities of their employees and does not seem to trust them to do their job. It
is unlikely that students would wish to work in such an organization. Some of the values of this
organization might be conformity, obedience, and adherence to rules.
2. Working for Keith Kelly might be great fun. He is charismatic and involved in everything. On
the other hand, it is clear that he always believes he is right. Such an attitude might lead to risk
taking that could have adverse consequences. Students might wish to work for such a company
for a while, but there are real pitfalls in this culture where the boss is king. Some of the values of
this organization might be risk taking, respect for the leader, and growth.
3. Wow, on the surface XYZ sounds like the answer to a dream come true for most employees.
Upon closer reflection, however, there clearly is no pressure for performance, and innovation
does not seem to be valued. In fact, it is possible that slackers are allowed to remain on the
payroll. Again, this is not an environment conducive to a good future. The values of this
organization might be compassion, concern for employees, and lifelong employment.
4. Heather’s company appears to have some of the characteristics of the “mercenary” culture. The
key to reward is performance, and it would appear to be highly competitive. For the right
individual, who is willing to perform and enjoys competition, this would be a great place to
work. This culture appears to prize competition, performance, and achievement toward a goal.
5. This is a culture focused on entrepreneurship, creativity, and adaptability. It also appears to be very
tolerant and flexible as long as people exhibit those characteristics. Again, for the right individual,
a great place to work. The values here are creativity, risk taking, flexibility, and tolerance.
Virtual Network Structure
In a network structure, there are a few permanent administrative employees consisting of top
management and clerical services. All other functions, such as manufacturing, marketing, and
finance, are contracted out. In this exercise, you are to construct a virtual network for a hypothetical
local live entertainment company. This company can put on plays, bring in singers or comedians, or
even sponsor sports events.
In your teams of four class members, first decide who will be the president, vice president, treasurer,
and secretary. Then decide what entertainment services you wish to provide to the college
community. List all of the functions that will have to be performed by outside contractors. Be as
detailed as possible. Finally, choose a spokesperson to present your findings to the class.
Virtual Network Structure Instructor Notes
This exercise can take anywhere from 30 minutes to an hour depending on the level of detail you
request from the students. You may also wish to provide students with background data regarding
how a Hollywood movie gets made, which will give them some idea of the complexity involved. See
http://www.essortment.com/lifestyle/hollywoodmovies_sxmv.htm for an example.
Encourage each team to first focus on specific types of entertainment determining the functions that
must be performed before moving on to a different type. For example, bringing in singers and
comedians will generate a different set of function needs than will a visit from a circus. They will
quickly find that they cannot get overly ambitious in their efforts. It would also be helpful to have
them think in terms of individual tasks, which can later be placed in groups to be done by specific
contractors. A variation of this exercise could be to assign each team of students a specific event.
The events could include a circus, musical groups, plays, etc.

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Creating a Flexible Organization

INSTRUCTOR MANUAL RESOURCES

7.8 Quizzes I and II ..................................................................................................................... 254

7.1 A WORD FROM THE AUTHORS

7.2 TRANSITION GUIDE

New in Chapter 7: Creating a Flexible Organization

7.3 QUICK REFERENCE GUIDE

7.4 LEARNING OBJECTIVES

7.5 BRIEF CHAPTER OUTLINE

II. Job Design

IV. Delegation, Decentralization, and Centralization

V. The Span of Management

VI. Forms of Organizational Structure

VII. Corporate Culture

VIII. Committees and Task Forces

IX. The Informal Organization and the Grapevine

7.6 COMPREHENSIVE LECTURE OUTLINE

I. WHAT IS AN ORGANIZATION? An organization is a group of two or more people

B. Major Considerations for Organizing a Business

2. Departmentalization. Group the various positions into manageable units, or

II. JOB DESIGN

C. Alternatives to Job Specialization. Specialization can also have some negative

III. DEPARTMENTALIZATION. Departmentalization is the process of grouping jobs into

B. By Product. Departmentalization by product groups all activities related to a particular

IV. DELEGATION, DECENTRALIZATION, AND CENTRALIZATION. Delegation

c) The manager must create accountability. Accountability is the obligation of a

B. Decentralization of Authority. The pattern of delegation throughout an organization

V. THE SPAN OF MANAGEMENT. The fourth major step of organizing a business is

VI. FORMS OF ORGANIZATIONAL STRUCTURE. The four basic forms of organizational

1. The matrix structure occurs when product departmentalization is superimposed on

A. Corporate culture is generally thought to have a very strong influence on a firm’s

VIII. COMMITTEES AND TASK FORCES

IX. THE INFORMAL ORGANIZATION AND THE GRAPEVINE. Informal organization

7.7 TEXTBOOK ANSWER KEYS

7.7a Return to Inside Business

7.7b Review Questions

c. Formal patterns of delegation

7.7c Discussion Questions

7.7d Comments on Video Case 7.1

At Numi Organic Tea, Teams and Organizational Culture Are Critical

2. Numi’s distribution manager, Dannielle Oviedo, says her philosophy of management

7.7e Comments on Case 7.2

7.7f Building Skills for Career Success

7.8 QUIZZES I AND II

10. When authority is spread to lower-level management, a business is said to be

9. All of the following are departmentalization bases except

7.9 ANSWER KEY FOR QUIZZES I AND II

7.10 CLASSROOM EXERCISES

7.10b Classroom Activities

7.10c Exercise Handouts Follow on Next Pages

The scoring for the test is shown here:

Level of Delegation Score

What’s My Culture? Instructor Notes

Virtual Network Structure

Virtual Network Structure Instructor Notes

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