BBA-PT XXXIV Business Management Chapter 8

BBA-PT XXXIV Business Management

• Course: Introduction to Business (4th edition)
• Instructor: Milaika Capella Ras, MBA
• Session: 4, February 3, 2024
• Course offered at: Inter-Continental University of the Caribbean
• Accreditation: ACBSP (Accredited)
• Textbooks: Jeff Madura

Chapter 8: Prepare for the Road Ahead - Organizational Structure

• Outline of Chapter 8: Organizational structure, Accountability, Distributing authority, Other structures, Departmentalizing
• Organizational Structure: Allocation of employees to various job tasks, firm's expenses, firm's earnings, and firm's value.
• Organizational Structure - 1: Identifies responsibilities for each job position, relationships among these positions and how employees recognize the work performed by other positions. Illustrated using an organization chart to show the chain of command.
• Organization Chart Example: Shows a hierarchy with the Board of Directors at the top, followed by the President, Chief Financial Officer, Vice-Presidents (Marketing and Operations), various managers, and employees (Accountants, Sales Reps, Advertising Assistants, Assembly Line Workers, Warehouse Workers).
• Chain of Command: Key roles: President (or CEO) has ultimate responsibility for success; Attempts to coordinate all divisions and provides direction for the firm. Vice-Presidents normally oversee specific divisions and report to the president. The chain ensures that managers make decisions to maximize the firm's value rather than serving their own interests.
• Organizational Structure - 2: Organizational structure variations among organizations depending on: Span of control: Number of employees directly managed by a manager. Narrow spans have fewer employees reporting to a manager than wide spans. Organizational height: Tall organizations have many layers while short (or flat) organizations have fewer layers. Use of line positions (established to make decisions) versus staff positions (established to support the line positions).
• Span of Control: Number of employees managed directly by each manager. Narrow spans have fewer employees reporting, whereas wide spans have more.
• Organizational Height: Tall organizations have many layers; short (or flat) organizations have few layers.
• Narrow vs Wide Span of Control: Visual examples showcasing the different structures (President, Vice-President, Managers and employees).
• Board of Directors: A set of executives responsible for monitoring the activities of the firm's president and other high-level managers.
• Board of Directors - 2: Boards focus on major issues rather than day-to-day activities: Approve key business proposals (mergers, acquisitions). Can initiate changes in the firm (replacing CEO, restructuring). Conflicts of interest prevent board members from making decisions best for shareholders.
• Accountability: Ensures accountability at all levels, including high-level managers, by using internal control systems and processes to ensure employees are doing their job; frequent and accurate reporting of financial data is also necessary.
• Distribution of Authority:
  • Centralization: Most authority held by high-level managers; middle and supervisory managers do not make many decisions.
  • Decentralization: Authority spread among several divisions or managers, enabling autonomous divisions.
• Advantages of Decentralization: Improved decision-making, faster response to changes, enhanced motivation and job satisfaction, reduced workload for top management, encouragement of innovation, better use of local expertise, development of managerial skills, improved customer service, and increased flexibility.
• Disadvantages of Decentralization: Lack of coordination, duplication of effort, uneven decision quality, loss of control for top management, higher costs, difficulty maintaining uniformity, risk of suboptimization, challenges in accountability, potential conflicts, limited perspective at lower levels, difficulty in implementing changes, and risk of misaligned decisions.
• Downsizing and decentralization: Companies cut expenses by eliminating job positions, which leads to flatter organizational charts with fewer managers; Resultant managerial tasks delegated to other employees (decentralization) increases manager's span of control.
• Organizational Structures: Line organization (President, CFO, VPs, Managers, and employees); Line-and-staff organization (President, Directors, VPs, Managers, and employees); other relevant examples (Matrix).
• Types of Organizational Structures: Line and Line-Staff Organizations. Comparison between Line and Line-Staff Organizations: Aspects (Structure, Decision-Making, Specialization, Flexibility, and Cost); Line Organization: Simple and direct chain of command, Decision-making is centralized in line managers, Limited specialization, Low flexibility, and lower costs; Line-Staff Organization: Chain of command with added staff roles, Line managers make decisions with staff input, High specialization in staff positions, High flexibility, and higher costs.
• Structure and Employee Input: How the organization's structure impacts employee involvement; focus on decision-making, problem-solving, and overall contribution to the business. The relationship between structure and employee input is critical for efficient, motivated, and collaborative workforce.
• Example of a matrix organization: Shows a chart with President and multiple Vice-Presidents of finance, marketing, and operations with financial managers, Salespeople, and Production Workers on a similar level; Each level of managers and workers has a representative for each function.
• Structure and Employee Input - 2: Informal Structure: Network of relationships and communication among employees naturally; Shaped by personal connections rather than formal roles. Includes informal interactions.
• Structure and Employee Input - 3: Intrapreneurship: Practice of fostering entrepreneurial behaviors (innovation, creativity) within the organizational structure. How employees take initiative to develop new products, processes, or solutions for the organization.
• Connection Between Informal Structure and Intrapreneurship: Informal structure encourages informal intrapreneurship by creating an atmosphere that allows comfortable sharing of ideas and collaboration across departments, informal networks.
• Grapevine: Informal communication network among employees: Advantages (increase job satisfaction from top to bottom); Disadvantages (incorrect or unfavorable information, affecting employee morale)
• Departmentalizing: Process of dividing an organization into distinct units or departments responsible for specific tasks to streamline operations, improve efficiency, and ensure accountability. Examples: By function, product, geographic location, customer, process.