ORGANIZING

CHAPTER 6
Management Functions
Leading
Planning Decision
Making
Organizing

Controlling
LEGAL FORMS|DEFINITION|KEY ACTIVITIES

NATURE OF
ORGANIZING
LEGAL FORMS OF
ORGANIZATION
SOLE PROPRIETORSHIP
Is a business owned and operated by one person.
ADVANTAGES:
Simple to organize and shut down
Few legal restrictions
Owner is free to make all decisions
Profit is taxed only once

DISADVANTAGES:
Owner takes responsibility for all the liability
Difficult to raise capital
Duration of the business is limited to the life of the proprietor
PARTNERSHIP
is an association of two or more partners to carry on as
co-workers of a business for profit.
ADVANTAGES:
Almost easy to organize
Few legal restrictions
Permit pooling the managerial skills and judgments and the
financial strengths of several people who have interest in the
enterprise
Does not pay taxes
Shared responsibilities on liabilities

DISADVANTAGES:
Divided decision-making authority
Potential damage to the business when partners disagree
Death of one partner means death of partnership
Permit pooling the managerial skills and judgments and
the financial strengths of several people who have
interest in the enterprise- Downside: divided decision-
making authority and potential damage to the business
when partners disagree

Does not pay taxes- partners pay their individual taxes

Limited Partnership- there must at least be one

general partner with unlimited liability (takes
responsibility for all the liability),but the rest may be
limited partners, who are financially liable only to the
extent of their investment in the venture.
(3) LIMITED LIABILITY COMPANY (LLC)
Owners, called members
Have limited personal liability for the
debts and actions of the LLC
No maximum number of members
Similar to a partnership
Provides management flexibility and
benefit of pass-through taxation.
Income is only taxed once.
CORPORATIONS
Are legal entities owned by shareholders, who in
general have no liability beyond loss of the value of their
stock

ADVANTAGES:
Have perpetual life
Easier to raise money, transfer ownership, and change
management

DISADVANTAGES:
Income is taxed twice: Corporation income tax and
personal income tax
Subject to many state and federal controls
COOPERATIVES
Are a special type of
organization owned by users or
customers, to whom earnings
are usually distributed tax-free
in proportion to patronage.

Each customer buys a share

initially for a few dollars and can
cast one vote to elect the board
members who manage the
cooperative.
ORGANIZING
Organizing is the process of arranging people and
other resources to work together to accomplish a goal.

Purpose is to create a division of labor and then

coordinate results to achieve a common purpose
 Planning
-to set the
direction

Organizing
-To create
structures

Leading Controlling
- To inspire -To ensure
effort results
ORGANIZATION
STRUCTURE
System of tasks, reporting relationships, and communication linkages
that link together the work of diverse individuals and groups
FORMAL STRUCTURES
Official structure of the organization
ORGANIZATION CHART
Diagrams reporting relationships and the
arrangement of work positions within an
organization
Reflects the basics of an organizations
formal structure
1. Division of Work
2. Supervisory Relationships
3. Communication Channels
4. Major Subunits
5. Levels of Management
INFORMAL
STRUCTURES
Behind every formal structure lies
an informal structure

Shadow organization made up

of the unofficial, but often critical,
working relationships between
organizational members

SOCIAL NETWORK ANALYSIS

One way of identifying formal
structures and their embedded
social relationships
FUNCTIONAL STRUCTURES
People with similar skills and performing
similar tasks are grouped together into formal
work units.

Members of functional departments share

technical expertise, interests and
responsibilities
FUNCTIONAL
STRUCTURES
ADVANTAGES:
Efficient use of resources
Tasks assignments are consistent with expertise and
training
High-quality technical problem solving
In-depth training and skill development within functions
Clear career paths within functions
FUNCTIONAL
STRUCTURES
DISADVANTAGES:

FUNCTIONAL CHIMNEYS/ FUNCTIONAL SILOS

PROBLEMS
- A lack of communication, coordination, and problem
solving across functions
- Functions become formalized not only on the
organizational chart, but also in the mind-sets of
people
DIVISIONAL
STRUCTURES
Groups together people working on the
same product, in the same area, with similar
customers, or on the same process
DIVISIONAL STRUCTURE
PRODUCT STRUCTURES
Group together jobs and activities that focused on a
single product or service.
They clearly link costs, profits, problems and
successes in a market area within a central point of
accountability..
DIVISIONAL
STRUCTURE
GEOGRAPHICAL STRUCTURE
Area structures
Together people and jobs performed in the same
location
DIVISIONAL
STRUCTURE
CUSTOMER STRUCTURES
Groups together jobs and activities that are serving
the same customers or clients
Goal is to best serve the special needs of the
different customer groups
DIVISIONAL
STRUCTURES
PROCESS STRUCTURE
Groups together jobs and activities that are part of the same
process

WORK PROCESS
Group of related tasks that collectively creates something of
value to a customer
 DIVISIONAL
STRUCTURE
ADVANTAGES:
More flexibility in responding to environmental changes
Improved coordination across functional departments
Clear points of responsibility for product or service delivery
Expertise focused on specific customers, products, and regions
Greater ease in changing size by adding or deleting divisions
DISADVANTAGES:
Increase costs through the duplication of resources and efforts across
divisions
Create unhealthy rivalries as divisions compete for resources and top
management attention
MATRIX STRUCTURE
Matrix Organization
Combines the functional and divisional structures
Gain the advantages and minimize the disadvantages of each
Creating permanent teams that cut across functions to support
specific products, program and project team.
Report to two bosses- one within the function and the other
within the team.
MATRIX STRUCTURE
MATRIX STRUCTURE
ADVANTAGES:
Better communication and cooperation across functions
Improved decision making; problem solving takes place at the team
level where the best information is available
Increased flexibility in adding, removing or changing operations to
meet changing demands
Better customer service; there is always a program, product or
project manager informed and available to answer questions
Better performance accountability through the program, product or
project managers
Improved strategic management; top managers are freed from
problem-solving to focus time on more strategic issues
MATRIX STRUCTURE
DISADVANTAGES:
Two-boss system
Team meetings in the matrix can take a lot of time, and the
teams may develop groupitis
Requirement of adding the team leaders to a matrix structure
can also result in higher costs
TEAM STRUCTURES
Uses permanent and temporary cross-functional teams to improve
lateral relations

CROSS-FUNCTIONAL TEAMS
Brings together members from different functional departments
TEAM STRUCTURES |NETWORK
STRUCTURES|BOUNDARILESS STRUCTURES

HORIZONTAL
ORGANIZATION
STRUCTURE
TEAM STRUCTURES
ADVANTAGES
Breaks down barriers and mobilizes talents
Improve performance by increasing the speed and quality of
decisions in many situations
Boost morale
Experience a greater sense of task involvement and
identification and this increases their enthusiasm for the job

DISADVANTAGES:
Conflicting loyalties for persons with both team and functional
assignments
Issues of time management and group process
NETWORK
STRUCTURES
Have a central core of full-time employees surrounded by
networks of outside contractors and partners that supply
essential services
Uses information technologies to link with networks of outside
suppliers and service contractors
Employs a minimum staff and contracts out as much work as
possible
NETWORK
STRUCTURES
NETWORK
STRUCTURES
STRATEGIC ALLIANCES
- Cooperation agreements with other firms to pursue business
activities of mutual interest.

Outsourcing Strategic Alliances

- Contract to purchase important services such as accounting or
document processing from other organization
Supplier Strategic Alliances
- Guarantee a smooth flow of quality supplies among the
partners
NETWORK
STRUCTURE
ADVANTAGES:
Help organizations stay cost-competitive by reducing overhead
and increasing operating efficiency

DISADVANTAGES:
The more complex the business, the more complicated it is to
control and coordinate the network of contracts and alliances
If one part of the network breaks down or fail to deliver, the
entire system suffers.
Lack of loyalty among contractors who are used infrequently
rather than on a long-term basis
BOUNDARYLESS
STRUCTURES
Eliminates internal boundaries among subsystems and external
boundaries with the external environment
BOUNDARYLESS
STRUCTURES
VIRTUAL ORGANIZATION
-Uses IT and the internet to engage a shifting network of strategic
alliances
-Calls an alliance into action to meet specific needs and objectives; when
the work is complete, the alliance rests until the next called into action
ORGANIZATIONAL
DESIGNS
CONTINGENCY | MECHANISTIC & ORGANIC
|TRENDS
ORGANIZATIONAL
DESIGNS
Process of choosing and
implementing structures to
accomplish the
organizations mission and
objectives
CONTINGENCY IN
ORGANIZATIONAL DESIGN
BUREAUCRACY
Form of organization based on logic, order, and the legitimate
use of formal authority
Vertical structure
Clear-cut division of labor, strict hierarchy of authority, formal
rules and procedures, and promotion based on competency
Use Mechanistic Design
ORGANIZATIONAL
DESIGN ALTERNATIVES
TRENDS IN ORGANIZATIONAL
DESIGN
1.Fewer levels of management
2.More delegation and empowerment
3.Decentralization and Centralization
4.Reduced Use of Staff
FEWER LEVELS OF
MANAGEMENT
CHAIN OF COMMAND
-Links all persons with successively higher levels of authority

SPAN OF CONTROL
- Number of persons directly reporting to a manager

Tall Structures
- Have narrow spans of control and many hierarchical levels
Flat Structures
- Have wide spans of control and few hierarchical levels
FEWER LEVELS OF
MANAGEMENT
MORE DELEGATION
AND EMPOWERMENT
DELEGATION
-Process of distributing and entrusting work to other persons

Authority and Responsibility Principle

- Authority should equal responsibility when work is delegated

EMPOWERMENT
- Allows others to make decisions and exercise discretion in their
work
DECENTRALIZATION AND
CENTRALIZATION
CENTRALIZATION
-Concentration of authority for most decisions at the top level of
an organization

DECENTRALIZATION
- Dispersion of authority to make decisions throughout all
organization levels
REDUCED USE OF
STAFF
LINE FUNCTIONS
-Accomplished the main mission or objectives of the organization
-Production, Sales and Finance
STAFF FUNCTIONS
-Provide technical expertise for other parts of the organization
-Helped the line accomplish these objectives by providing some
sort of advice or service
-Personnel, Procurement, Legal Counsel, and Market Research