Chapter 6: Organizing the Business

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

Organization Chart: Diagram depicting a company’s structure and showing employees where they fit into its operations.
Chain of Command: Reporting relationships within a company.

Specialization: Determining who will do what.
Departmentalization: Determining how people performing certain tasks can best be grouped together.

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

Departmentalization: Process of grouping jobs into logical units (product, process, functional, customer, geographic).
Profit Center: Separate company unit responsible for its own costs and profits.
Functional Departmentalization: Dividing an organization according to groups’ functions or activities.
Product Departmentalization: Dividing an organization according to specific products or services being created.
Process Departmentalization: Dividing an organization according to production processes used to create a good or service.
Customer Departmentalization: Dividing an organization to offer products and meet needs for identifiable customer groups.
Geographic Departmentalization: Dividing an organization according to the areas of the country or the world served by a business.

Establishment of a Decision-Making Hierarchy: Deciding who will be empowered to make which decisions and who will have authority over others.
Centralized Organization: Organization in which most decision-making authority is held by upper-level management.
Decentralized Organization: Organization in which a great deal of decision-making authority is delegated to levels of management at points below the top.

Flat Organizational Structure: Characteristic of decentralized companies with relatively few layers of management.
Tall Organizational Structure: Characteristic of centralized companies with multiple layers of management.

Delegation: Process through which a manager allocates work to subordinates.
1. Assigning responsibility - the duty to perform an assigned task.
2. Granting authority - the power to make the decisions necessary to complete the task.
3. Creating accountability - the obligation employees have for the successful completion of the task.

Line Authority: Organizational structure in which authority flows in a direct chain of command from the top of the company to the bottom.
Staff Authority: Authority based on expertise that usually involves counseling and advising line managers.
Staff Members: Advisers and counselors who help line departments in making decisions but who do not have the authority to make final decisions.
Committee and Team Authority: Authority granted to committees or teams involved in a firm’s daily operations.
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.

Functional Structure: Organization structure in which authority is determined by the relationships between group functions and activities.
Divisional Structure: Organizational structure in which corporate divisions operate as autonomous businesses under the larger corporate umbrella.
Matrix Structure: Organizational structure created by superimposing one form of structure onto another; can be temporary to complete a specific project.
International Organizational Structures: Approaches to organizational structure developed in response to the need to manufacture, purchase, and sell in global markets.

Team organization: Relies almost exclusively on project-type teams, with little or no underlying functional hierarchy.
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.
Virtual organization: Has little or no formal structure, a handful of permanent employees, a very small staff, and a modest administrative facility.

Informal Organization: Network, unrelated to the firm’s formal authority structure, of everyday social interactions among company employees.
Informal groups: Groups of people who decide to interact among themselves.

Grapevine: Informal communication network that runs through an organization; managers can minimize damage by maintaining open communication and responding to inaccurate information.

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

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