If top managers make key decisions with little input from below, then the organization is ________.

54) What are the four contingency variables that an organization's structure depends on?

A) strategy, size, technology, and equity

B) management, technology, equity, and degree of environmental uncertainty

C) management, funding, technology, and degree of environmental uncertainty

D) strategy, size, technology, and environmental uncertainty

Changes in banking regulations, a series of loan defaults by dotcom customers and a decline in

the California real estate market have forced Western Bank, a large regional West Coast bank, to

downsize in an effort to improve profitability and bolster its declining stock prices. Susan, a

regional branch supervisor for the Sacramento district, has been tasked with preparing a

management report concerning how these cuts are affecting bank operations and customer

service. Susan believes that the most important problem that has emerged concerns span of

control and decision-making authority within the bank. In the past, bank policy indicated that no

manager should supervise more than six subordinates and only managers could make decisions

for their individual units. However, with many of the middle managers being laid-off, upper

management has increased its span of control while still insisting on retaining control on decision

making at the unit level. The result is that upper managers spend all of their time putting out fires

and subordinates feel they are getting answers too slowly. Lower level employees are requesting

greater authority to make decisions on their own. However, they are not as experienced at

making decisions as upper-level managers. Susan believes that structural changes must be made

to help Western Bank deal with the new situation effectively.

86) Based upon the preceding description of Western Bank's situation, which aspect of the

current situation is inconsistent with Western Bank's decision to maintain a centralized form of

decision making?

A) Lower-level managers want a voice in decisions.

B) Lower-level managers are not as experienced at making decisions as upper-level managers.

C) The company is large.

D) The organization is facing a crisis.

87) Susan believes that Western Bank should be more adaptive and flexible. Which of the

following organizational structures is she likely to prefer?

A) formalized

B) mechanistic

C) organic

D) centralized

Lacey has been hired as a consultant for Jefferson Consulting. Her first assignment is to work

with one of Jefferson's newest clients, Custom Leather, Inc., a manufacturer of high-end leather

furniture. Custom Leather was founded over a decade ago with the idea that great looking,

comfortable leather furniture could be custom made and delivered to customers in 30 days.

Traditionally, retailers stock leather sofas to satisfy the desire to receive new furniture

fast limiting the choice of colors and style for the consumer. In stark contrast, Custom Leather

offers 13 different styles in over 70 different colors from rich, deep browns to sleek, silver

grays, to bright, ruby red through a select group of retail outlets. Each piece is built to the

customer's individual requirements and is shipped within 2-3 weeks. However, the emergence of

a new manufacturing technology has enabled a few, traditionally mass-production competitors to

offer greater customization, adversely affecting Custom Leather's competitive advantage. As a

result, Custom Leather is considering sweeping changes to current work processes and

organizational structure.

88) Many of Custom Leather's 75 employees are highly skilled and experienced artisans. Many

long-time employees are stockholders and all participate in its profit sharing plan. While there is

division of labor, the jobs most floor employees perform are not highly standardized.

Management has found that employees take great pride in their craft, and they require minimal

formal rules and little direct supervision. These traits are most typical of a(n) ________

organization.

A) matrix

B) mechanistic

C) organic

D) centralized

89) Custom Leather CEO, Standish, is considering doubling the size of his workforce in

conjunction with expanding the number of retail outlets that carry Custom Leather products.

Lacey tells him that he should expect the organization to become ________ as a result of this

change.

A) more mechanistic

B) more decentralized

C) more organic

D) less formalized

90) Lacey believes that Joan Woodward's work will be particularly pertinent in considering

Custom Leather's organizational structure, since Woodward believed that the effectiveness of the

organization was related to the fit between the firm's structure and ________.

A) culture

B) technology

C) accounting

D) operations

Answer: Work specialization is the process of dividing work activities into separate job tasks.

Individual employees "specialize" in doing part of an activity rather than the entire activity in

order to increase work output. It is also known as division of labor. It makes efficient use of the

diversity of skills that workers have.

Early proponents of work specialization believed that it could lead to great increases in

productivity. At the beginning of the twentieth century, that generalization was reasonable.

Because specialization was not widely practiced, its introduction almost always generated higher

productivity. But, at some point, the human diseconomies from division of labor—boredom,

fatigue, stress, low productivity, poor quality, increased absenteeism, and high turnover—exceed

the economic advantages.

Today, most managers continue to see work specialization as important because it helps

employees be more efficient. However, managers should remember that, at some point, work

specialization no longer leads to productivity. Thus, they should plan and organize accordingly.

Answer: The basis by which jobs are grouped together is known as departmentalization.

The five common forms of departmentalization are:

a. Functional departmentalization - Here jobs are grouped by the functions (i.e., marketing,

finance, human resources) performed. This leads to an increased efficiency in the organization

because people with similar specialties, common skills, knowledge, and orientations are put

together. It also leads to an increased coordination within functional areas. On the flip side, it

gives a limited view of the organizational goals.

b. Product departmentalization - Here jobs are grouped by product line. This allows the managers

to specialize in particular products and services. It also helps the managers to become experts in

their industry. On the other hand, this leads to duplication of functions. It also gives a limited

view of organizational goals.

c. Geographical departmentalization - Here jobs are grouped on the basis of a geographic region.

This helps in more effective and efficient handling of specific regional issues that arise. It also

helps in serving the needs of unique geographic markets. On the flip side, it leads to duplication

of functions.

d. Process departmentalization - This method groups jobs on the basis of product or customer

flow. This approach efficiently manages the flow of work activities. But, the major disadvantage

of this approach is that it can only be used with certain types of products.

e. Customer departmentalization - Here jobs are grouped on the basis of specific and unique

customers who have common needs. It allows specialists to handle customers' needs and

problems. But, this also leads to duplication of functions. It causes departments to have a limited

view of organizational goals.

Most large organizations continue to use combinations of most or all of these types of

departmentalization.

Now-a-days, a popular departmentalization trend is the increasing use of customer

departmentalization. Because getting and keeping customers is essential for success, this

approach works well because it emphasizes monitoring and responding to changes in customers'

needs. Another popular trend is the use of teams, especially as work tasks have become more

complex and diverse skills are needed to accomplish those tasks. One specific type of team that

more organizations are using is a cross-functional team, which is a work team composed of individuals

from various functional specialties.

Answer: The chain of command is the line of authority extending from upper organizational

levels to lower levels, which clarifies who reports to whom. Managers need to consider it when

organizing work because it helps employees with questions such as "Who do I report to?" or

"Who do I go to if I have a problem?"

Three other concepts that help in a better understanding of the concept of chain of command are

authority, responsibility, and unity of command.

Authority - Authority was a major concept discussed by the early management writers; they

viewed it as the glue that held an organization together. Authority refers to the rights inherent in

a managerial position to tell people what to do and to expect them to do it. Managers in the chain

of command had authority to do their job of coordinating and overseeing the work of others.

Authority could be delegated downward to lower-level managers, giving them certain rights

while also prescribing certain limits within which to operate. These writers emphasized that

authority was related to one's position within an organization and had nothing to do with the

personal characteristics of an individual manager.

Chester Barnard, an early management writer proposed the acceptance theory of authority.

According to this theory, authority comes from the willingness of subordinates to accept it. If an

employee did not accept a manager's order, there was no authority.

The early management writers also distinguished between two forms of authority: line authority

and staff authority. Line authority entitles a manager to direct the work of an employee. It is the

employer--employee authority relationship that extends from the top of the organization to the

lowest echelon, according to the chain of command. As a link in the chain of command, a

manager with line authority has the right to direct the work of employees and to make certain

decisions without consulting anyone. In the chain of command, every manager is also subject to

the authority or direction of his or her superior.

As organizations get larger and more complex, line managers find that they do not have the time,

expertise, or resources to get their jobs done effectively. In response, they create staff authority

functions to support, assist, advise, and generally reduce some of their informational burdens.

Responsibility - When managers use their authority to assign work to employees, those

employees take on an obligation to perform those assigned duties. This obligation or expectation

to perform is known as responsibility. Assigning work authority without responsibility and

accountability can create opportunities for abuse. Likewise, no one should be held responsible or

accountable for work tasks over which he or she has no authority to complete those tasks.

Unity of command - The unity of command principle which is one of Fayol's 14 management

principles states that a person should report to only one manager. Without unity of command,

conflicting demands from multiple bosses may create problems.

Answer: How many employees can a manager efficiently and effectively manage? That is what

span of control is all about.

The traditional view was that managers could not—and should not— directly supervise more

than five or six subordinates. Determining the span of control is important because to a large

degree, it determines the number of levels and managers in an organization—an important

consideration in how efficient an organization will be. All other things being equal, the wider or

larger the span, the more efficient an organization is.

The contemporary view of span of control recognizes that there is no magic number. Many

factors influence the number of employees that a manager can efficiently and effectively

manage. These factors include the skills and abilities of the manager and the employees, and the

characteristics of the work being done. For instance, managers with well-trained and experienced

employees can function well with a wider span. Other contingency variables that determine the

appropriate span include similarity and complexity of employee tasks, the physical proximity of

subordinates, the degree to which standardized procedures are in place, the sophistication of the

organization's information system, the strength of the organization's culture, and the preferred

style of the manager. The trend in recent years has been toward larger spans of control, which is

consistent with managers' efforts to speed up decision making, increase flexibility, get closer to

customers, empower employees, and reduce costs. Managers are beginning to recognize that they

can handle a wider span when employees know their jobs well and when those employees

understand organizational processes.

Answer: Centralization is the degree to which decision making takes place at upper levels of the

organization. If top managers make key decisions with little input from below, then the

organization is more centralized. On the other hand, the more that lower-level employees provide

input or actually make decisions, the more decentralization there is. Centralization-
decentralization is not an either-or concept. The decision is relative, not absolute——that is, an

organization is never completely centralized or decentralized.

Early management writers proposed that the degree of centralization in an organization depended

on the situation. Their goal was the optimum and efficient use of employees. Traditional

organizations were structured in a pyramid, with power and authority concentrated near the top

of the organization. Given this structure, historically centralized decisions were the most

prominent, but organizations today have become more complex and responsive to dynamic

changes in their environments. As such, many managers believe that decisions need to be made

by those individuals closest to the problems, regardless of their organizational level. In fact, the

trend over the past several decades—at least in U.S. and Canadian organizations—has been a

movement toward more decentralization in organizations.

Today, managers often choose the amount of centralization or decentralization that will allow

them to best implement their decisions and achieve organizational goals. What works in one

organization, however, won't necessarily work in another, so managers must determine the

appropriate amount of decentralization for each organization and work units within it.

As organizations have become more flexible and responsive to environmental trends, there has

been a distinct shift toward decentralized decision making. This trend, also known as employee

empowerment, gives employees more authority (power) to make decisions. In large companies

especially, lower-level managers are "closer to the action" and typically have more detailed

knowledge about problems and how best to solve them than do top managers.

Answer: The mechanistic organization (or bureaucracy) was the natural result of combining the

six elements of structure: work specialization, departmentalization, chain of command, span of

control, centralization and decentralization, and formalization. Adhering to the chain-of-
command principle ensured the existence of a formal hierarchy of authority, with each person

controlled and supervised by one superior. Keeping the span of control small at increasingly

higher levels in the organization created tall, impersonal structures. As the distance between the

top and the bottom of the organization expanded, top management would increasingly impose

rules and regulations.

Because top managers could not control lower-level activities through direct observation and

ensure the use of standard practices, they substituted rules and regulations. The early

management writers' belief in a high degree of work specialization created jobs that were simple,

routine, and standardized. Further specialization through the use of departmentalization increased

impersonality and the need for multiple layers of management to coordinate the specialized

departments. Thus, a mechanistic organization has the following characteristics:

a. high specialization

b. rigid departmentalization

c. clear chain of command

d. narrow spans of control

e. centralization

f. high formalization

The organic organization is a highly adaptive form that is as loose and flexible as the mechanistic

organization is rigid and stable. Rather than having standardized jobs and regulations, the

organic organization's loose structure allows it to change rapidly as required. It has division of

labor, but the jobs people do are not standardized. Employees tend to be professionals who are

technically proficient and trained to handle diverse problems. They need few formal rules and

little direct supervision because their training has instilled in them standards of professional

conduct. Thus, an organic organization has the following characteristics:

a. cross-functional teams

b. cross-hierarchical teams

c. free flow of information

d. wide spans of control

e. decentralization

f. low formalization

Answer: a. Strategy and structure - An organization's structure should facilitate the achievement

of goals. Since goals are influenced by the organization's strategies, it is logical that strategy and

structure should be closely linked. The flexibility and free-flowing information of the organic

structure works well when an organization is pursuing meaningful and unique innovations. The

mechanistic organization with its efficiency, stability, and tight controls works best for

companies wanting to tightly control costs.

b. Size and structure - There is considerable evidence that an organization's size significantly

affects its structure. Large organizations typically considered to be those with 2,000

employees tend to have more specialization, departmentalization, centralization, and rules and

regulations than do small organizations. However, once an organization grows past a certain size,

size has less influence on structure.

c. Technology and structure - Every organization uses some form of technology to convert its

inputs into outputs. The processes or methods that transform an organization's inputs into outputs

differ by their degree of routineness. In general, organizations adapt their structures to their

technology depending on how routine their technology is for transforming inputs into outputs. In

general, the more routine the technology, the more mechanistic the structure can be, and

organizations with more nonroutine technology are more likely to have organic structures.

d. Environmental uncertainty and structure - Some organizations face stable and simple

environments with little uncertainty; others face dynamic and complex environments with a lot

of uncertainty. Managers try to minimize environmental uncertainty by adjusting the

organization's structure. In stable and simple environments, mechanistic designs can be more

effective. On the other hand, the greater the uncertainty, the more an organization needs the

flexibility of an organic design.

Answer: The three traditional organizational designs are: the simple structure, functional

structure, and divisional structure. These structures tend to be more mechanistic in nature.

a. Simple structure - It is an organizational design with low departmentalization, wide spans of

control, authority centralized in a single person, and little formalization. As employees are

added, however, most do not remain as simple structures. The structure tends to become more

specialized and formalized. Rules and regulations are introduced, work becomes specialized,

departments are created, levels of management are added, and the organization becomes

increasingly bureaucratic. At this point, managers might choose a functional structure or a

divisional structure. These structures are fast, flexible, and inexpensive to maintain. On the

negative side, these structures are not appropriate when the organization starts growing.

Moreover, the reliance on one person is also very risky.

b. Functional structure - A functional structure is an organizational design that groups similar or

related occupational specialties together. This structure enjoys cost-saving advantages from

specialization (economies of scale, minimal duplication of people and equipment). It also groups

employees who have similar tasks with each other. On the negative side, the constant pursuit of

functional goals can cause managers to lose sight of what is best for the overall organization.

Moreover, the functional specialists become insulated and have little understanding of what other

units are doing.

c. Divisional structure - It is an organizational structure made up of separate business units or

divisions. In this structure, each division has limited autonomy, with a division manager who has

authority over his or her unit and is responsible for performance. In divisional structures,

however, the parent corporation typically acts as an external overseer to coordinate and control

the various divisions, and often provides support services such as financial and legal. The major

strength of this structure is that it focuses on results by holding division managers responsible for

what happens to their products and services. But, the duplication of activities and resources

encountered in such structures increases the cost and reduces the efficiency of the organization.

What is the term where decision

Which type of organizational structure has direct lines of communication and authority flowing from top managers downward?

What is organization departmentalization?

What are four contingency variables that the appropriateness of an organization's structure depends on?