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CHAPTER 7
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Chapter 7 Creating a Flexible Organization 235
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236 Chapter 7 Creating a Flexible Organization
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Chapter 7 Creating a Flexible Organization 237
III. Departmentalization
A. By Function
B. By Product
C. By Location
D. By Customer
E. Combinations of Bases
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238 Chapter 7 Creating a Flexible Organization
Teaching Tip: Enter “organization chart” in your favorite search engine and bring up some exam-
ples 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 or-
ganizational chart?
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Chapter 7 Creating a Flexible Organization 239
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 conse-
quences, most notably employee boredom and dissatisfaction. There are possible solu-
tions 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.
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240 Chapter 7 Creating a Flexible Organization
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 discus-
sion, ask students what improvements they might make.
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.
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Chapter 7 Creating a Flexible Organization 241
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.
V. THE SPAN OF MANAGEMENT. The fourth major step of organizing a business is estab-
lishing 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 par-
ticular 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 organiza-
tion 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.
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242 Chapter 7 Creating a Flexible Organization
3. All managers in a flat organization may have to perform more administrative duties
because there are fewer managers.
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Chapter 7 Creating a Flexible Organization 243
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, ritu-
als, heroes, and values of a firm.
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244 Chapter 7 Creating a Flexible Organization
A. Corporate culture is generally thought to have a very strong influence on a firm’s per-
formance 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.
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Chapter 7 Creating a Flexible Organization 245
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.
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246 Chapter 7 Creating a Flexible Organization
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 deter-
mined 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 man-
agement (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, turn-
ing local strengths into global strengths. Specifically, a new product that succeeds in one loca-
tion 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.
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Chapter 7 Creating a Flexible Organization 247
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 ro-
tation 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 ge-
ographic 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 or-
ganizations 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 spe-
cific needs of the corporation and on the determination of which combination of bases will ena-
ble 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 per-
form the job or task; (2) granting authority, which is the power within the organization to ac-
complish the task or job; and (3) creating accountability, which is the obligation of a subordi-
nate 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 man-
agement, the firm is decentralized. If top management works to keep authority at the upper lev-
els, 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, result-
ing 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
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248 Chapter 7 Creating a Flexible Organization
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Chapter 7 Creating a Flexible Organization 249
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250 Chapter 7 Creating a Flexible Organization
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Chapter 7 Creating a Flexible Organization 251
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 ac-
tion 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 opportuni-
ties 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 corpo-
ration now decide how many projects HP Labs will pursue at one time and have set standards
for evaluating ongoing projects.
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252 Chapter 7 Creating a Flexible Organization
ty 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 cul-
ture 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 be-
liefs of employees; the decision-making process; the communications system; the reward and
promotion program; the organizational structure; rules, regulations, and policies; ethnic diversi-
ty; 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 deci-
sions. 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 posi-
tions are line positions. In this organization, the span of control ranges from zero to seven peo-
ple. 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 po-
sition with another company.
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Chapter 7 Creating a Flexible Organization 253
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254 Chapter 7 Creating a Flexible Organization
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.
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Chapter 7 Creating a Flexible Organization 255
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 dif-
ferent departments in the organization. This is called
a. job trading.
b. specialization.
c. departmentalization by function.
d. job enlargement.
e. job rotation.
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256 Chapter 7 Creating a Flexible Organization
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
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Chapter 7 Creating a Flexible Organization 257
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258 Chapter 7 Creating a Flexible Organization
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 per-
son needs after discussing it with the caller.
____ 4. Tracking the budget for your department, making sure spending is in line with expec-
tations, and letting you know of any major discrepancy.
____ 5. Coordinating the absence reports for the nonmanagerial employees on the staff, get-
ting 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 some-
thing needs to be followed up.
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Chapter 7 Creating a Flexible Organization 259
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.
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260 Chapter 7 Creating a Flexible Organization
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 com-
mitted to high levels of rapid growth. Highly charismatic, he trusts his “gut” in decision mak-
ing 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, every-
one covered for her. She doesn’t have to worry about being criticized, even if her perfor-
mance 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 mis-
takes he will be underperforming. “Just keep the ideas coming, young man! If they are good
we will make them work!”
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Chapter 7 Creating a Flexible Organization 261
1. ABC most likely has a fragmented culture, where there is very little trust among employees, in-
cluding 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. Up-
on 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 indi-
vidual, 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.
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262 Chapter 7 Creating a Flexible Organization
In a network structure, there are a few permanent administrative employees consisting of top man-
agement 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 communi-
ty. 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.
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Chapter 7 Creating a Flexible Organization 263
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 come-
dians 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.
© 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.