REORGANIZATION is for
• Many companies are reorganizing, especially those
in decline. Including:
- Auto makers
• Adjusting to changing markets is normal in capitalist
• Companies must go back to basic organizational
principles and firm up the foundation.
STRUCTURING an ORGANIZATION
• Create a division of labor
• Set up teams or departments
• Allocate resources
• Assign tasks
• Establish procedures
• Adjust to new realities
THE CHANGING ORGANIZATION
• Often change in organizations is due to evolving
- More global competition
- Declining economy
- Faster technological change
- Pressure to protect the environment
• Customer expectations have also changed
Consumers today want highquality products
with fast, friendly service and all at low cost.
• Mass production of goods led to complexities in
• Economies of Scale
Companies can reduce
their production costs by
purchasing raw materials
• The average cost of
goods decreases as
production levels rise.
• Unity of command
• Hierarchy of authority
• Division of labor
• Subordination of
individual interests to
the general interest
• Degree of
• Clear communication
• Esprit de corps
ORGANIZATIONS BASED on
• Organizations in which
employees have no more
than one boss; lines of
authority are clear.
• Rigid organizations that often
don’t respond to customers
• Employees just need to do what
• In addition to Fayol’s principles,
- Job descriptions
- Written rules, decision guidelines
and detailed records
- Consistent procedures,
regulations and policies
- Staffing and promotion based on
HIERARCHIES and COMMAND
• When following Fayol and Weber, managers
• Hierarchy A system in which one person is at the
top of an organization and there is a ranked or
sequential ordering from the top down.
• Chain of Command The line of authority that
moves from the top of the hierarchy to the lowest
• Organization Chart
A visual device that
among people and
divides the organization’s
work; it shows who
reports to whom.
TYPICAL ORGANIZATION CHART
• Bureaucracy An organization with many layers of
managers who set rules and regulations and oversee
• It can take weeks or months to have information
passed down to lowerlevel employees.
• Bureaucracies can annoy customers.
• What do the terms division of labor and job
• What are the principles of management outlined
• What did Weber add to the principles of Fayol?
• Centralized Authority When decisionmaking is
concentrated at the top level of management.
delegated to lowerlevel
managers and employees
more familiar with local
SPAN of CONTROL
• Span of Control The optimal number of
subordinates a manager supervises or should
• When work is standardized, broad spans of
control are possible.
• Appropriate span narrows at higher levels of the
• The trend today is to reduce middle managers
and hire better lowlevel employees.
• Structures determine the way the company
responds to employee and customer needs.
• Tall Organization Structures An organizational
structure in which the organization chart would be tall
because of the various levels of management.
• Flat Organization Structures An organizational
structure that has few layers of management and a
broad span of control.
• Departmentalization Divides organizations into
• Workers are grouped by skills and expertise to
specialize their skills.
1) Employees develop skills and progress within a
department as they master skills.
2) The company can achieve economies of scale.
3) Employees can coordinate work within the
function and top management can easily direct
1) Departments may not communicate well.
2) Employees may identify with their department’s goals
rather than the organization’s.
3) The company’s response to external changes may
4) People may not be trained to take different
managerial responsibilities, instead they become
WAYS to DEPARTMENTALIZE
WAYS to DEPARTMENTALIZE