Chapter 6: Organizing the Business

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Vocabulary flashcards for Chapter 6, covering key terms related to organizing a business.

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39 Terms

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Organizational Structure

Specification of the jobs to be done within an organization and the ways in which they relate to one another.

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Organization Chart

Diagram depicting a company’s structure and showing employees where they fit into its operations.

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Chain of Command

Reporting relationships within a company.

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Specialization

Determining who will do what.

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Departmentalization

Determining how people performing certain tasks can best be grouped together.

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Job Specialization

The process of identifying the specific jobs that need to be done and designating the people who will perform them.

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Departmentalization

Process of grouping jobs into logical units such as product, process, function, customer, or geography.

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Profit Center

Separate company unit responsible for its own costs and profits.

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Functional Departmentalization

Dividing an organization according to groups’ functions or activities.

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Product Departmentalization

Dividing an organization according to specific products or services being created.

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Process Departmentalization

Dividing an organization according to production processes used to create a good or service.

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Customer Departmentalization

Dividing an organization to offer products and meet needs for identifiable customer groups.

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Geographic Departmentalization

Dividing an organization according to the areas of the country or the world served by a business.

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Establishment of a Decision-Making Hierarchy

Deciding who will be empowered to make which decisions and who will have authority over others.

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Centralized Organization

Organization in which most decision-making authority is held by upper-level management.

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Decentralized Organization

Organization in which a great deal of decision-making authority is delegated to levels of management at points below the top.

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Flat Organizational Structure

Characteristic of decentralized companies with relatively few layers of management.

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Tall Organizational Structure

Characteristic of centralized companies with multiple layers of management.

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Span of Control

Number of people supervised by one manager.

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Delegation

Process through which a manager allocates work to subordinates.

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Assigning responsibility

The duty to perform an assigned task.

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Granting authority

The power to make the decisions necessary to complete the task.

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Creating accountability

The obligation employees have for the successful completion of the task.

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Line Authority

Organizational structure in which authority flows in a direct chain of command from the top of the company to the bottom.

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Staff Authority

Authority based on expertise that usually involves counseling and advising line managers.

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Staff Members

Advisers and counselors who help line departments in making decisions but who do not have the authority to make final decisions.

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Committee and Team Authority

Authority granted to committees or teams involved in a firm’s daily operations.

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Work Team

Group of operating employees who are empowered to plan and organize their own work and to perform that work with a minimum of supervision.

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Functional Structure

Organization structure in which authority is determined by the relationships between group functions and activities.

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Divisional Structure

Organizational structure in which corporate divisions operate as autonomous businesses under the larger corporate umbrella.

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Matrix Structure

Organizational structure created by superimposing one form of structure onto another; may be temporary.

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International Organizational Structures

Approaches to organizational structure developed in response to the need to manufacture, purchase, and sell in global markets.

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Team organization

Relies almost exclusively on project-type teams, with little or no underlying functional hierarchy.

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Learning organization

Works to facilitate the lifelong learning and personal development of all of its employees while continually transforming itself to respond to changing demands and needs.

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Virtual organization

Has little or no formal structure, a handful of permanent employees, a small staff, and a modest administrative facility.

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Informal Organization

Network, unrelated to the firm’s formal authority structure, of everyday social interactions among company employees.

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Informal groups

Groups of people who decide to interact among themselves.

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Grapevine

Informal communication network that runs through an organization.

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Intrapreneuring

Process of creating and maintaining the innovation and flexibility of a small-business environment within the confines of a large organization.