Learning Objectives

Identify the 3 levels of management and the responsibilities at every level.Discuss various choices for organizing a business, and create an organization chart.Understand exactly how specialization helps do organizations more efficient.Discuss the different ways the an organization deserve to departmentalize.Explain other vital terms concerned this chapter such together chain of command, delegation that authority, and also span the control.

You are watching: Which of the following is external to a firm and exists independently of a company?


If you check out our chapter on Management and also Leadership, you will certainly recall developing a strategic arrangement for your brand-new company, Notes-4-You. When a company has completed the planning process, that will need to organize the company so the it can implement that plan. A manager engaged in arranging allocates resources (people, equipment, and money) to achieve a that company objectives. Successful supervisors make sure that every the tasks identified in the planning procedure are assigned to some person, department, or team and also that everyone has actually the resources required to execute assigned activities.

Levels the Management: exactly how Managers space Organized

A usual organization has several layers that management. Think of this layers as developing a pyramid favor the one in figure 9.1, through top managers occupying the narrow an are at the peak, first-line managers the broad base, and also middle-managers the levels in between. Together you move up the pyramid, management positions get much more demanding, but they carry much more authority and also responsibility (along with an ext power, prestige, and pay). Top managers spend many of your time in planning and decision making, if first-line managers focus on day-to-day operations. For evident reasons, there room far an ext people v positions at the base of the pyramid 보다 there room at the other two levels. Let’s look in ~ each monitoring level in much more detail.

Figure 9.1: level of Management

Top Managers

Top managers room responsible for the health and also performance the the organization. They collection the objectives, or performance targets, design to straight all the tasks that need to be carry out if the company is walk to accomplish its mission. Top-level executives routinely scan the external setting for opportunities and also threats, and also they redirect firm efforts as soon as needed. They invest a considerable part of their time planning and making major decisions. They stand for the agency in vital dealings with other businesses and also government agencies, and they promote it to the public. Task titles at this level frequently include chief executive officer (CEO), chief financial officer (CFO), chief operation officer (COO), president, and vice president.

Middle Managers

Middle managers are in the center of the management hierarchy: they report to optimal management and also oversee the tasks of first-line managers. Lock responsible for developing and also implementing activities and allocation the resources needed to accomplish the objectives set by optimal management. Usual job titles include operations manager, division manager, tree manager, and also branch manager.

First-Line Managers

First-line managers supervise employees and also coordinate their activities to make certain that the work-related performed transparent the company is continuous with the plans of both top and middle management. It’s at this level the most human being acquire their very first managerial experience. The project titles vary considerably however include together designations as manager, group leader, office manager, foreman, and also supervisor.

Let’s take a fast survey that the management hierarchy at Notes-4-You. As president, you room a member of top management, and you’re responsible because that the overall performance of her company. Girlfriend spend lot of her time setup performance targets, come ensure that the firm meets the purposes you’ve collection for it— enhanced sales, higher-quality notes, and also timely distribution.

Several middle supervisors report come you, including your to work manager. As a middle manager, this individual concentrates on implementing 2 of your objectives: creating high-quality notes and also distributing lock to customers in a fashionable manner. To achieve this task, the work manager monitor the job-related of 2 first-line managers—the note-taking supervisor and the copy supervisor. Every first-line manager supervises number of non-managerial employee to make certain that their work-related is constant with the to plan devised through top and also middle management.

Organizational Structure: how Companies gain the project Done

Building an organizational structure engages supervisors in 2 activities: job specialization (dividing tasks right into jobs) and departmentalization (grouping jobs into units). An organizational structure outlines the miscellaneous roles in ~ an organizational, which location report to which, and also how an organization will departmentalize its work. Take keep in mind than an organizational structure is an setup of positions it is most appropriate for your company at a specific point in time. Provided the rapidly changing environment in i beg your pardon businesses operate, a structure that functions today could be outdated tomorrow. It is why friend hear so often about companies restructuring—altering existing business structures come become an ext competitive once conditions have changed. Let’s now look at how the processes of specialization and departmentalization space accomplished.


Organizing activities into swarm of related work that deserve to be taken on by details individuals or groups is dubbed specialization. This element of developing an organizational structure is twofold:

Identify the activities that must be performed in order to achieve organizational goals.Break under these activities into tasks that can be perform by individuals or groups of employees.

Specialization has actually several advantages. Very first and foremost, it leader to efficiency. Imagine a instance in which each department was responsible for paying its own invoices; a person taking care of this role a few times a mainly would most likely be much less reliable than who whose task was to pay the bills. In enhancement to boosting efficiency, specialization results in work that are simpler to learn and also roles that space clearer come employees. Yet the method has disadvantages, too. Act the same thing over and also over occasionally leads come boredom and also may eventually leave employees dissatisfied v their jobs. Prior to long, companies may notification decreased performance and increased absenteeism and also turnover (the percentage of workers that leave one organization and must be replaced).


The following step in designing an business structure is departmentalization—grouping devoted jobs into meaningful units. Depending upon the organization and the dimension of the work-related units, they might be referred to as divisions, departments, or simply plain groups.

Traditional groupings the jobs an outcome in different organizational structures, and for the sake of simplicity, we’ll emphasis on two types—functional and divisional organizations.

Functional Organizations

A functional organization groups together world who have comparable skills and perform comparable tasks. This form of company is reasonably typical for little to medium-size companies, which group their world by organization functions: accountants space grouped together, together are human being in finance, marketing and also sales, human resources, production, and research and also development. Every unit is top by an separation, personal, instance with specialization in the unit’s details function. Examples of typical functions in a business enterprise encompass human resources, operations, marketing, and finance. Also, service colleges will frequently organize according to functions discovered in a business.

There space a variety of advantages come the useful approach. The framework is an easy to understand and permits the staff to specialization in certain areas; everyone in the marketing team would most likely have similar interests and also expertise. However homogeneity also has drawbacks: it have the right to hinder communication and also decision making between units and even encourage interdepartmental conflict. The marketing department, for example, could butt heads through the bookkeeping department due to the fact that marketers want to invest as lot as feasible on advertising, if accountants desire to control costs.

Divisional Organizations

Large suppliers often find it unruly to operate as one large unit under a functional organizational structure. Slim size makes it an overwhelming for supervisors to oversee operations and serve customers. To rectify this problem, most large companies space structured as divisional organizations. Lock are comparable in numerous respects to stand-alone companies, except that particular common tasks, like legal work, has tendency to be central at the headquarters level. Each department functions reasonably autonomously since it consists of most of the sensible expertise (production, marketing, accounting, finance, person resources) needed to accomplish its objectives. The challenge is to find the many appropriate method of structuring to work to achieve overall company goals. Toward this end, departments can be formed according come products, customers, processes, or geography.

Product Divisions

Product division means that a firm is structured according to that is product lines. General Motors, for example, has 4 product-based divisions: Buick, Cadillac, Chevrolet, and GMC.1 Each department has its very own research and advance group, its own manufacturing operations, and its very own marketing team. This permits individuals in the division to emphasis all their efforts on the products produced by their division. A downside is the it results in higher costs together corporate support services (such as audit and human being resources) are replicated in each of the four divisions.

Customer Divisions

Some companies choose a customer division structure due to the fact that it enables them to better serve their assorted categories of customers. Thus, Johnson & Johnson’s two hundred or for this reason operating companies are grouped into three customer-based service segments: consumer service (personal-care and also hygiene products sold come the general public), pharmaceuticals (prescription drugs offered to pharmacies), and professional company (medical devices and also diagnostics commodities used through physicians, optometrists, hospitals, laboratories, and also clinics).2

Process Divisions

If goods move through numerous steps throughout production, a company might opt for a process division structure. This type works well at Bowater Thunder Bay, a Canadian company that harvests trees and also processes wood into newsprint and also pulp. The very first step in the production process is harvesting and also stripping trees. Then, large logs are offered to wood mills and also smaller logs space chopped up and also sent come Bowater’s mills. In ~ the mill, wood chips room chemically converted into pulp. About 90 percent is sold to other manufacturers (as raw material for home and also office products), and the remaining 10 percent is further processed into newspaper print. Bowater, then, has actually three divisions: tree cutting, chemistry processing, and finishing (which provides newsprint).3

Geographical Divisions

Geographical division permits companies that operate in several locations to be responsive to customers at a neighborhood level. Adidas, for example, is organized according to the areas of the world in which it operates. They have actually eight various regions, and each one reports the performance individually in their annual reports.4

Figure 9.2: Adidas Group geographic divisions

Summing increase Divisional Organizations

There are pluses and minuses linked with divisional organization. On the one hand, divisional framework usually enhances the capacity to respond to transforms in a this firm environment. If, ~ above the various other hand, services must be duplicated across units, expenses will be higher. In addition, some suppliers have discovered that units tend to focus on their own needs and goals at the cost of the company as a whole.

The original version the this chapter contained H5P content. This content is not supported in cloned books. You might want to eliminate or replace this section.

The company Chart

Once an company has collection its structure, it deserve to represent that structure in one organization chart: a chart delineating the interrelationships the positions in ~ the organization. An example organization chart is presented in number 9.3, making use of our “Notes-4-You” example from chapter 8.

Figure 9.3: An organizational chart because that “Notes-4-Youg”

Imagine putting yourself in ~ the peak of the chart, together the that company president. You would certainly then fill in the level directly listed below your name with the names and also positions of the human being who work straight for you—your accounting, marketing, operations, and also human sources managers. The next level identifies the world who job-related for these managers. Because you’ve began out small, no your accounting manager nor your person resources manager will certainly be at this time managing anyone directly. Her marketing manager, however, will oversee one person in advertising and also a sales super (who, in turn, monitor the sales staff). Her operations manager will oversee two individuals—one come supervise note-takers and also one to supervise the human being responsible for making copies. The lines between the location on the chart indicate the reporting relationships; because that example, the Note-Takers super reports straight to the operations Manager.

Although the structure says that you will communicate only through your four straight reports, this no the method things generally work in practice. Behind every formal interaction network over there lies a network that informal communications—unofficial relationships amongst members of one organization. You might find that over time, you receive interactions directly indigenous members of the sales staff; in fact, you might encourage this line of communication.

Now let’s look at the graph of an organization that counts on a divisional structure based on goods or solutions produced—say, a theme park. The top layers of this company’s company chart can look prefer the one in figure 9.4a (left next of the diagram). We see that the president has two direct reports—a vice president in fee of rides and also a vice chairman in charge of concessions. What about a bank that’s structured according to its client base? The bank’s company chart would start like the one in number 9.4b. As soon as again, the company’s peak manager has actually two direct reports, in this situation a VP the retail-customer accounts and also a VP of commercial-customer accounts.

Figure 9.4a-b: business charts for divisional structures

Over time, carriers revise their business structures come accommodate growth and also changes in the exterior environment. It’s no uncommon, because that example, because that a certain to embrace a sensible structure in its early years. Then, as it i do not care bigger and more complex, it might move to a divisional structure—perhaps to accommodate brand-new products or come become much more responsive to certain customers or geography areas. Some companies might ultimately count on a combination of functional and also divisional structures. This can be a an excellent approach because that a credit card company that concerns cards in both the joined States and also Europe. An synopsis of this firm’s company chart might look favor the one in number 9.5.

Figure 9.5: An organization with a combination of functional and also divisional structures

Chain the Command

The upright connecting lines in the company chart present the firm’s chain of command: the government relationships amongst people working at various levels that the organization. The is come say, they present who reports come whom. Once you’re examining an company chart, you’ll more than likely want to recognize whether each human being reports come one or much more supervisors: come what extent, in other words, is there unity that command? To understand why unified of command is an essential organizational feature, think about it native a an individual standpoint. Would certainly you desire to report to more than one boss? What happens if you get conflicting directions? whose directions would certainly you follow?

There are, however, problems under which an organization and also its employees can advantage by violating the unity-of-command principle. Under a matrix structure, for example, employees from miscellaneous functional areas (product design, manufacturing, finance, marketing, human being resources, etc.) form teams to integrate their skills in working on a particular project or product. This matrix company chart could look choose the one in the following figure.

Figure 9.6: A graph of a matrix structure

Nike sometimes uses this form of arrangement. Come design brand-new products, the company may create product teams consisted of of designers, marketers, and other specialists with expertise in certain sports categories—say, running shoes or basketball shoes. Every team member would be evaluated by both the team manager and the head the his or her sensible department.

Span that Control

Another point to notification about a this firm chain of command is the variety of layers in between the top managerial position and the shortest managerial level. As a rule, new organizations have actually only a couple of layers that management—an organizational structure it is often dubbed flat. Let’s say, for instance, that a member of the Notes-4-You sales employee wanted to express concern about slow sales amongst a certain group of students. That person’s message would have to filter increase through only two monitoring layers—the sales supervisor and the marketing manager—before getting to the president.

As a agency grows, however, it often tends to add an ext layers in between the top and also the bottom; the is, it gets taller. included layers the management have the right to slow under communication and also decision making, bring about the organization to end up being less efficient and also productive. It is one factor why plenty of of today’s institutions are restructuring to become flatter.

There are trade-offs between the advantages and defect of flat and tall organizations. Companies determine which trade-offs to do according come a principle called span that control, which measures the variety of people report to a certain manager. If, for example, you eliminate layers of administration to do your organization flatter, you finish up raising the number of people reporting to a certain supervisor. If friend refer ago to the organization chart for Notes-4-You, you will do it recall that, under your present structure, 4 managers report come you together the president: the heads of accounting, marketing, operations, and human resources. In turn, two of this managers have actually positions reporting to them: the proclaiming manager and also sales supervisor report to the marketing manager, while the notetakers supervisor and also the copiers at sight report to the work manager. Stop say the you remove a layer of monitoring by gaining rid the the marketing and also operations managers. Your organization would it is in flatter, but what would occur to her workload? together president, you will do now have six direct reports fairly than four: bookkeeping manager, proclaiming manager, sales manager, notetaker supervisor, copier supervisor, and also human sources manager.

So those better—a narrow expectancy of manage (with few direct reports) or a large span of control (with countless direct reports)? The answer come this inquiry depends on a variety of factors, including frequency and kind of interaction, proximity the subordinates, competence that both supervisor and also subordinates, and also the nature of the occupational being supervised. Because that example, you’d expect a much wider span of manage at a nonprofit call facility than in a hospital emergency room.

Delegating Authority

Given the propensity toward flatter establishments and broader spans that control, exactly how do managers handle increased workloads? They have to learn just how to handle delegation—the process of entrusting occupational to subordinates. Unfortunately, numerous managers room reluctant to delegate. Together a result, castle not just overburden us with jobs that can be taken on by others, but they also deny subordinates the opportunity to learn and also develop new skills.

Responsibility and Authority

As owner that Notes-4-You, you’ll more than likely want to regulate every facet of her business, especially during the start-up stage. However as the organization grows, you’ll need to assign duty for performing particular tasks to other people. You’ll also have to accept the fact that responsibility alone—the duty to do a task—won’t be sufficient to obtain the task done. You’ll need to grant subordinates the authority they need to finish a task—that is, the power to make the important decisions. (And they’ll also need sufficient resources.) Ultimately, you’ll additionally hold your subordinates accountable for their performance.

The initial version that this chapter contained H5P content. This contents is not supported in copy books. You might want to eliminate or replace this section.

Centralization and also Decentralization

If and also when your agency expands (say, by offering note-taking solutions at other schools), you’ll need to decide whether many decisions must still it is in made by people at the optimal or delegated come lower-level employees. The first option, in which most decision do is focused at the top, is called centralization. The 2nd option, which diffusion decision making transparent the organization, is dubbed decentralization.

Centralization has actually the advantage of consistency in decision-making. Due to the fact that in a centralized model, vital decisions room made by the same top managers, those decisions often tend to be more uniform 보다 if decisions were made through a variety of different people at lower levels in the organization. In most cases, decision can also be made much more quickly detailed that top management does not shot to control too numerous decisions. However, centralization has actually some crucial disadvantages. If top administration makes virtually all crucial decisions, climate lower-level supervisors will feeling under-utilized and also will not develop decision-making an abilities that would assist them come to be promotable. One overly central model might likewise fail to consider information that just front-line employees have actually or might actually delay the decision-making process. Think about a situation where the sales manager because that an account is meeting with a customer representative who renders a inquiry for a distinct sale price; the customer provides to to buy 50% more product if the sales manager will alleviate the price through 5% for one month. If the sales manager had actually to attain approval native the head office, the opportunity can disappear before she might get approval – a competitor’s sales manager might be the customer’s following meeting.

An overly decentralized decision model has actually its dangers as well. Imagine a case in i m sorry a company had adopted a geographically-based divisional structure and also had significantly decentralized decision making. In order to expand its business, mean one division decided to broaden its territory right into the geography of another division. If headquarters approval because that such a move was not required, the divisions of the agency might end up competing against each other, to the detriment of the organization as a whole. Carriers that wish to maximize your potential must discover the right balance between centralized and decentralized decision making.

See more: A _______ Is Invested By Managers In A Diversity Of Stocks, Bonds, And Other Securities.

The original version of this chapter included H5P content. This contents is not supported in copy books. You may want to remove or replace this section.