Summarize the following chapter in your words: (Basic elements of organizing)

The Organizing Process organization.2 As you will see in this chapter, managing the basic frameworks that organizations use to get their work donestructureis a fundamental part of the management process. This chapter discusses many of the critical elements of organization structure that managers can control and is the first of five devoted to organizing, the second basic managerial function identified in Chapter 1. In Part 3, we describe managerial planningdeciding what to do. Organizing, the subject of Part 4, focuses on how to do it. We first elaborate on the meaning of organization structure. Subsequent sections explore the basic elements that managers use to create the organization.

The Elements of Organizing Imagine asking a child to build a castle with a set of building blocks. She selects a few small blocks and other larger ones. She uses some square ones, some round ones, and some triangular ones. When she finishes, she has her own castle, unlike any other. Another child, presented with the same task, constructs a different castle. He selects different blocks, for example, and combines them in different ways. The children's activitieschoosing certain combinations of blocks and then putting them together in unique waysare in many ways analogous to the manager's job of organizing.3

Organizing is deciding how best to group organizational elements. Just as children select different kinds of building blocks, managers can choose a variety of structural possibilities. And just as the children can assemble the blocks in any number of ways, so, too, can managers put the organization together in many different ways. Understanding the nature of these building blocks and the different ways in which they can be configured can have a powerful impact on a firm's competitiveness.4 In this chapter, our focus is on the building blocks themselvesorganization structure. In Chapter 12 we focus on how the blocks can be put togetherorganization design. There are six basic building blocks that managers can use in constructing an organization: designing jobs, grouping jobs, establishing reporting relationships between jobs, distributing authority among jobs, coordinating activities among jobs, and differentiating among positions. The logical starting point is the first building blockdesigning jobs for people within the organization.

Key points

Organizing: Deciding how best to group organizational activities and resources.

organization structure: The set of elements that can be used to configure an organization job design: The determination of an individual's work-related responsibilities.

job specialization: The degree to which the overall task of the organization is broken down and divided into smaller component parts.

Designing Jobs The first building block of organization structure is job design. Job design is the determination of an individual's work-related responsibilities.5 For a machinist at Caterpillar, job design might specify what machines are to be operated, how they are to be operated, and what performance standards are expected. For a manager at Caterpillar, job design might involve defining areas of decision-making responsibility, identifying goals and expectations, and establishing appropriate indicators of success. The natural starting point for designing jobs is determining the level of desired specialization.

Job specialization is the degree to which the overall task of the organization is broken down and divided into smaller component parts. Job specialization evolved from the concept of division of labor. Adam Smith, an eighteenth-century economist, first discussed division of labor in his case study about how a pin factory used it to improve productivity.6 He described how one man pulled the wire from a spool, another straightened it, a third cut it, a fourth ground the point, and so on. Smith claimed that ten men working in this fashion were able to produce 48,000 pins in a day, whereas each man working alone could produce only 20 pins per day. The first examples of the impact of specialization came from the automobile assembly line pioneered by Henry Ford and his contemporaries. Mass-production capabilities stemming from job specialization techniques have had a profound impact throughout the world. During the twentieth century, high levels of low-cost production transformed U.S. society into one of the strongest economies in the history of the world.7 Job specialization in its purest form is simply a normal extension of organizational growth. For example, when Walt Disney started his company, he did everything himselfwrote cartoons, drew them, added character voices, and then marketed them to theaters. As the business grew, though, he eventually hired others to perform many of these same functions. As growth continued, so, too, did specialization. For example, as animation artists work on Disney movies today, they may specialize in generating computer images of a single character or doing only background scenery. Others provide voices, and marketing specialists develop promotional campaigns. And today, the Walt Disney Company has literally thousands of different specialized jobs. Clearly, no one person could perform them all.

Benefits and Limitations of Specialization Job specialization provides four benefits to organizations.8 First, workers performing small, simple tasks will become very proficient at each task. Second, transfer time between tasks decreases. If employees perform several different tasks, some time is lost as they stop doing the first task and start doing the next. Third, the more narrowly defined a job is, the easier it is to develop specialized equipment to assist with that job. Fourth, when an employee who performs a highly specialized job is absent or resigns, the manager is able to train someone new at relatively low cost. Although specialization is generally thought of in terms of operating jobs, many organizations have extended the basic elements of specialization to managerial and professional levels as well.9 On the other hand, job specialization can have negative consequences. The foremost criticism is that workers who perform highly specialized jobs may become bored and dissatisfied. The job may be so specialized that it offers no challenge or stimulation. Boredom and monotony set in, absenteeism rises, and the quality of the work may suffer. Furthermore, the anticipated benefits of specialization do not always occur. For example, a classic study conducted at Maytag found that the time spent moving work in process from one worker to another was greater than the time needed for the same individual to change from job to job.10 Thus, although some degree of specialization is necessary, it should not be carried to extremes, because of the possible negative consequences. Managers must be sensitive to situations in which extreme specialization should be avoided. And indeed, several alternative approaches to designing jobs have been developed in recent years.

Alternatives to Specialization: To counter the problems associated with specialization, managers have sought other approaches to job design that achieve a better balance between organizational demands for efficiency and productivity and individual needs for creativity and autonomy. Five alternative approaches are job rotation, job enlargement, job enrichment, the job characteristics approach, and work teams.

Job Rotation: Job rotation involves systematically moving employees from one job to another. A worker in a warehouse might unload trucks on Monday, carry incoming inventory to storage on Tuesday, verify invoices on Wednesday, pull outgoing inventory from storage on Thursday, and load trucks on Friday. Thus the jobs do not change; instead, workers move from job to job. Unfortunately, for this very reason, job rotation has not been very successful in enhancing employee motivation or satisfaction. Jobs that are amenable to rotation tend to be relatively standard and routine. Workers who are rotated to a "new" job may be more satisfied at first, but satisfaction soon wanes. Although many companies (among them American Cyanamid, Bethlehem Steel, Ford, Prudential Insurance, TRW, and Western Electric) have tried job rotation, it is most often used today as a training device to improve worker skills and flexibility. Job rotation is also being used more to increase flexibility and lower costs. That is, because workers who can perform multiple jobs can be moved around to different jobs when demand shifts, the business can often get by with fewer workers.

Job Enlargement On the assumption that doing the same basic task over and over is the primary cause of worker dissatisfaction, job enlargement was developed to increase the total number of tasks workers perform. As a result, all workers perform a wide variety of tasks, which presumably reduces the level of job dissatisfaction. Many organizations have used job enlargement, including IBM, Detroit Edison, AT&T, the U.S. Civil Service, and Maytag. At Maytag, for example, the assembly line for producing washing-machine water pumps was systematically changed so that work that had originally been performed by six workers, who passed the work sequentially from one person to another, was performed by four workers, each of whom assembled a complete pump.14 Unfortunately, although job enlargement does have some positive consequences, these are often offset by some disadvantages: (1) Training costs usually increase, (2) unions have argued that pay should increase because the worker is doing more tasks, and (3) in many cases the work remains boring and routine even after job enlargement.

Job Enrichment A more comprehensive approach, job enrichment, assumes that increasing the range and variety of tasks is not sufficient by itself to improve employee motivation.15 Thus job enrichment attempts to increase both the number of tasks a worker does and the control the worker has over the job. To implement job enrichment, managers remove some controls from the job, delegate more authority to employees, and structure the work in complete, natural units. These changes increase subordinates' sense of responsibility. Another part of job enrichment is to continually assign new and challenging tasks, thereby increasing employees' opportunity for growth and advancement. AT&T was one of the earliest companies to try job enrichment. In one experiment, eight typists in a service unit prepared customer service orders. Faced with low output and high turnover, management determined that the typists felt little responsibility to clients and received little feedback. The unit was changed to create such typing team. Typists were matched with designated service representatives, the task was changed from ten specific steps to three more general steps, and job titles were upgraded. As a result, the frequency of order processing increased from 27 percent to 90 percent, the need for messenger service was eliminated, accuracy improved, and turnover became practically nil.16 Other organizations that have tried job enrichment include Texas Instruments, IBM, and General Foods. Job enrichment is also being used in some banks today, with employees in branches being trained to work as tellers, open new accounts, and accept loan applications. By training all of its employees to perform multiple tasks, Orlando-based Anderen Bank has been able to reduce the average number of employees at each of its branches from 10 to four.17 This approach, however, also has disadvantages. For example, work systems need to be analyzed before enrichment, but this seldom happens, and managers rarely ask for employee preferences when enriching jobs. And note that while Anderen Bank employees get to do more tasks and have greater responsibility, the firm's goal was to lower labor cost. The impact of the changes on employee morale, performance, and turnover have not been assessed.

Job Characteristics Approach The job characteristics approach is an alternative to job specialization that does take into account the work system and employee preferences.18 As illustrated in Figure 11., the job characteristics approach suggests that jobs should be diagnosed and improved along five core dimensions:

1. Skill variety, the number of things a person does in a job.

2. Task identity, the extent to which the worker does a complete or identifiable portion of the total job.

3. Task significance, the perceived importance of the task.

4. Autonomy, the degree of control the worker has over how the work is performed.

5. Feedback, the extent to which the worker knows how well the job is being performed.

The higher a job rates on those dimensions, the more employees will experience various psychological states. Experiencing these states, in turn, presumably leads to high motivation, high-quality performance, high satisfaction, and low absenteeism and turnover. Finally, a concept called growth-need strength is presumed to affect how the model works for different people. People with a strong desire to grow, develop, and expand their capabilities (indicative of high growth-need strength) are expected to respond strongly to the presence or absence of the basic job characteristics; individuals with low growth-need strength are expected not to respond as strongly or consistently. A large number of studies have been conducted to test the usefulness of the job characteristics approach. The Southwestern Division of Prudential Insurance, for example, used this approach in its claims division. Results included moderate declines in turnover and a small but measurable improvement in work quality. Other research findings have not supported this approach as strongly. Thus, although the job characteristics approach is one of the most promising alternatives to job specialization, it is probably not the final answer.

Work Teams Another alternative to job specialization is work teams. Under this arrangement, a group is given responsibility for designing the work system to be used in performing an interrelated set of tasks. In the typical assembly-line system, the work flows from one worker to the next, and each worker has a specified job to perform. In a work team, however, the group itself decides how jobs will be allocated. For example, the work team assigns specific tasks to members, monitors and controls its own performance, and has autonomy over work scheduling.

Grouping Jobs: Departmentalization: The second building block of organization structure is the grouping of jobs according to some logical arrangement. The process of grouping jobs is called departmentalization. After establishing the basic rationale for departmentalization, we identify some common bases along which departments are created.

Rationale for Departmentalization: When organizations are small, the owner-manager can personally oversee everyone who works there. As an organization grows, however, personally supervising all the employees becomes more and more difficult for the owner-manager. Consequently, new managerial positions are created to supervise the work of others. Employees are not assigned to particular managers randomly. Rather, jobs are grouped according to some plan. The logic embodied in such a plan is the basis for all departmentalization.

Common Bases for Departmentalization: Figure 11.2 presents a partial organizational chart for Apex Computers, a hypothetical firm that manufactures and sells computers and software. The chart shows that Apex uses each of the four most common bases for departmentalization: function, product, customer, and location.

Figure 11.2 Bases for Departmentalization Organizations group jobs into departments. Apex, a hypothetical organization, uses all four of the primary bases of departmentalizationfunction, product, customer, and location. Like Apex, most large organizations use more than one type of departmentalization. Marketing Marketing Design Computers President Software Manufacturing Finance Finance Dallas Phoenix Industrial sales Consumer sales Chicago St. Louis Northwest U.S. Southwest U.S. Central U.S. Southeast U.S. Northeast U.S.

Functional Departmentalization: The most common base for departmentalization, especially among smaller organizations, is by function. Functional departmentalization groups together those jobs involving the same or similar activities. (The word function is used here to mean organizational functions such as finance and production, rather than the basic managerial functions, such as planning or controlling.) The computer department at Apex has manufacturing, finance, and marketing departments, each an organizational function. This approach, which is most common in smaller organizations, has three primary advantages. First, each department can be staffed by experts in that functional area. Marketing experts can be hired to run the marketing function, for example. Second, supervision is facilitated because an individual manager needs to be familiar with only a relatively narrow set of skills. And, third, coordinating activities inside each department is easier. On the other hand, as an organization begins to grow in size, several disadvantages of this approach may emerge. For one, decision making tends to become slower and more bureaucratic. Employees may also begin to concentrate too narrowly on their own unit and lose sight of the total organizational system. Finally, accountability and performance become increasingly difficult to monitor. For example, determining whether a new product fails because of production deficiencies or a poor marketing campaign may not be possible.

Product Departmentalization: Product departmentalization, a second common approach, involves grouping and arranging activities around products or product groups. Apex Computers has two product-based departments at the highest level of the firm. One is responsible for all activities associated with Apex's personal computer business, and the other handles the software business. Most larger businesses adopt this form of departmentalization for grouping activities at the business or corporate level. Product departmentalization has three major advantages. First, all activities associated with one product or product group can be easily integrated and coordinated. Second, the speed and effectiveness of decision making are enhanced. Third, the performance of individual products or product groups can be assessed more easily and objectively, thereby improving the accountability of departments for the results of their activities. Product departmentalization also has two major disadvantages. For one, managers in each department may focus on their own product or product group to the exclusion of the rest of the organization. For example, a marketing manager may see her or his primary duty as helping the group rather than helping the overall organization. For another, administrative costs rise because each department must have its own functional specialists for areas such as market research and financial analysis.

Customer Departmentalization: Under customer departmentalization, the organization structures its activities to respond to and interact with specific customers or customer groups. The lending activities in most banks, for example, are usually tailored to meet the needs of different kinds of customers (business, consumer, mortgage, and agricultural loans). Figure 11.2 shows that the marketing branch of Apex's computer business has two distinct departmentsindustrial sales and consumer sales. The industrial sales department handles marketing activities aimed at business customers, whereas the consumer sales department is responsible for wholesaling computers to retail stores catering to individual purchasers. The basic advantage of this approach is that the organization is able to use skilled specialists to deal with unique customers or customer groups. It takes one set of skills to evaluate a balance sheet and lend a business $500,000 for operating capital, and a different set of skills to evaluate an individual's creditworthiness and lend $20,000 for a new car. However, a fairly large administrative staff is required to integrate the activities of the various departments. In banks, for example, coordination is necessary to make sure that the organization does not over-commit itself in any one area and to handle collections on delinquent accounts from a diverse set of customers.

Location Departmentalization: Location departmentalization groups jobs on the basis of defined geographic sites or areas. The defined sites or areas may range in size from a hemisphere to only a few blocks of a large city. The manufacturing branch of Apex's computer business has two plantsone in Dallas and another in Phoenix. Similarly, the design division of its software design unit has two labsone in Chicago and the other in St. Louis. Apex's consumer sales group has five sales territories corresponding to different regions of the United States. Transportation companies, police departments (precincts represent geographic areas of a city), and the Federal Reserve Bank all use location departmentalization. The primary advantage of location departmentalization is that it enables the organization to respond easily to unique customer and environmental characteristics in the various regions. On the negative side, a larger administrative staff may be required if the organization must keep track of units in scattered locations.

Other Forms of Departmentalization: Although most organizations are departmentalized by function, product, customer, or location, other forms are occasionally used. Some organizations group certain activities by time. One of the machine shops of Baker Hughes in Houston, for example, operates on three shifts. Each shift has a superintendent who reports to the plant manager, and each shift has its own functional departments. Time is thus the framework for many organizational activities. Other organizations that use time as a basis for grouping jobs include some hospitals and many airlines. In other situations, departmentalization by sequence is appropriate. Many college students, for instance, must register in sequence: seniors on Monday, juniors on Tuesday, and so on. Other areas that may be organized in sequence include credit departments (specific employees run credit checks according to customer name) and insurance claims divisions (by policy number).

Other Considerations Two final points about job grouping remain to be made. First, departments are often called something entirely differentdivisions, units, sections, and bureaus are all common synonyms. The higher we look in an organization, the more likely we are to find departments referred to as divisions. H. J. Heinz, for example, is organized into five major divisions. Nevertheless, the underlying logic behind all the labels is the same: They represent groups of jobs that have been yoked together according to some unifying principle. Second, almost any organization is likely to employ multiple bases of departmentalization, depending on level. Although Apex Computer is a hypothetical firm that we created to explain departmentalization, it is quite similar to many real organizations in that it uses a variety of bases of departmentalization for different levels and different sets of activities.

Establishing Reporting Relationships The third basic element of organizing is the establishment of reporting relationships among positions. Suppose, for example, that the owner-manager of a small business has just hired two new employees, one to handle marketing and one to handle production. Will the marketing manager report to the production manager, will the production manager report to the marketing manager, or will each report directly to the owner-manager? These questions reflect the basic issues involved in establishing reporting relationships: clarifying the chain of command and the span of management. We should also note before proceeding, though, that in addition to formal departmental arrangements (as described earlier) and prescribed reporting relationships (as discussed below), there is also considerable informal interaction that takes place among people in any organization. The Technically Speaking box on page304 entitled "What Looks Like a Game of Cat's Cradle Played by Mice on Speed?" describes one popular tool for keeping track of the increasingly complex networks characteristic of modern organizations.

Chain of Command Chain of command is an old concept, first popularized in the early years of the twentieth century. For example, early writers on the chain of command argued that clear and distinct lines of authority need to be established among all positions in an organization. The chain of command actually has two components. The first, called unity of command, suggests that each person within an organization must have a clear reporting relationship to one and only one boss (as we see in Chapter 12, newer models of organization design routinelyand successfullyviolate this premise). The second, called the scalar principle, suggests that there must be a clear and unbroken line of authority that extends from the lowest to the highest position in the organization. The popular saying "The buck stops here" is derived from this ideasomeone in the organization must ultimately be responsible for every decision.

Narrow Versus Wide Spans: Another part of establishing reporting relationships is determining how many people will report to each manager. This defines the span of management (sometimes called the span of control). For years, managers and researchers sought to determine the optimal span of management. For example, should it be relatively narrow (with few subordinates per manager) or relatively wide (with many subordinates)? One early writer, A. V. Graicunas, went so far as to quantify span of management issues.22 Graicunas noted that a manager must deal with three kinds of interactions with and among subordinates: direct (the manager's one-to-one relationship with each subordinate), cross (among the subordinates themselves), and group (between groups of subordinates) The number of possible interactions of all types between a manager and subordinates can be determined by the following formula: I = N(2N/2 + N - 1) where I is the total number of interactions with and among subordinates and N is the number of subordinates. If a manager has only two subordinates, six potential interactions exist. If the number of subordinates increases to three, the possible interactions total 18. With five subordinates, there are 100 possible interactions. Although Graicunas offers no prescription for what Nshould be, his ideas demonstrate how complex the relationships become when more subordinates are added. The important point is that each additional subordinate adds more complexity than the previous one did. Going from nine to ten subordinates is very different from going from three to four. Another early writer, Ralph C. Davis, described two kinds of spans: an operative span for lower-level managers and an executive span for middle and top managers. He argued that operative spans could approach 30 subordinates, whereas executive spans should be limited to between three and nine (depending on the nature of the managers' jobs, the growth rate of the company, and similar factors). Lyndall F. Urwick suggested that an executive span should never exceed six subordinates, and General Ian Hamilton reached the same conclusion.23 Today we recognize that the span of management is a crucial factor in structuring organizations but that there are no universal, cut-and-dried prescriptions for an ideal or optimal span.24 Later we summarize some important variables that influence the appropriate span of management in a particular situation. First, however, we describe how the span of management affects the overall structure of an organization.

Tall Versus Flat Organizations: Imagine an organization with 31 managers and a narrow span of management. As shown in Figure 11.3, the result is a relatively tall organization with five layers of management. With a somewhat wider span of management, however, the flat organization shown in Figure 11.3 emerges. This configuration has only three layers of management. What difference does it make whether the organization is tall or flat? One early study at Sears found that a flat structure led to higher levels of employee morale and productivity.25 Researchers have also argued that a tall structure is more expensive (because of the larger number of managers involved) and that it fosters more communication problems (because of the increased number of people through whom information must pass). On the other hand, a wide span of management in a flat organization may result in a manager's having more administrative responsibility (because there are fewer managers) and more supervisory responsibility (because there are more subordinates reporting to each manager). If these additional responsibilities become excessive, the flat organization may suffer.26 Many experts agree that businesses can function effectively with fewer layers of organization than they currently have. The Franklin Mint, for example, reduced its number of management layers from six to four. At the same time, the CEO increased his span of management from six to 12. In similar fashion, IBM has eliminated several layers of management. The British firm Cadbury PLC, maker of Cadbury Dairy chocolates, Trident gum, and other confectionary products, recently eliminated a layer of management separating the CEO and the firm's operating units. And Allergan announced in 2011 that a major reorganization will result in the elimination of an organizational layer to maintain the company's lean and efficient business model.27 The specific reasons for the change were to improve communication between the CEO and the operating unit heads and to speed up decision making.28 One additional reason for this trend is that improved communication technologies such as e-mail and text messaging allow managers to stay in touch with a larger number of subordinates than was possible even just a few years ago.

Determining the Appropriate Span Of course, the initial question remains: How do managers determine the appropriate span for their unique situation? Although no perfect formula exists, researchers have identified a set of factors that influence the span for a particular circumstance.30 Some of these factors are listed in Table 11.1. For example, if the manager and subordinates are competent and well trained, a wide span may be effective. Physical dispersion is also important. The more widely subordinates are scattered, the narrower the span should be. On the other hand, ifall the subordinates are in one location, the span can be somewhat wider. The amount of nonsupervisory work expected of the manager is also important. Some managers, especially at the lower levels of an organization, spend most or all of their time supervising subordinates. Other managers spend a lot of time doing paperwork, planning, and engaging in other managerial activities. Thus these managers may need a narrower span. Some job situations also require a great deal of interaction between supervisor and subordinates. In general, the more interaction that is required, the narrower the span should be. Similarly, if there is a fairly comprehensive set of standard procedures, a relatively wide span is possible. If only a few standard procedures exist, however, the supervisor usually has to play a larger role in overseeing day-to-day activities and may find a narrower span more efficient. Task similarity is also important. If most of the jobs being supervised are similar, a supervisor can handle a wider span. When each employee is performing a different task, more of the supervisor's time is spent on individual supervision. Likewise, if new problems that require supervisory assistance arise frequently, a narrower span may be called for. If new problems are relatively rare, though, a wider span can be established. Finally, the preferences of both supervisor and subordinates may affect the optimal span. Some managers prefer to spend less time actively supervising their employees, and many employees prefer to be more self-directed in their jobs. A wider span may be possible in these situations. For example, the Case Corporation factory in Racine, Wisconsin, makes farm tractors exclusively to order in five to six weeks. Farmers can select from among a wide array of options, including engines, tires, power trains, and even a CD player. A wide assortment of machines and processes is used to construct each tractor. Although workers are highly skilled operators of their particular machines, each machine is different. In this kind of setup, the complexities of each machine and the advanced skills needed by each operator mean that one supervisor can oversee only a small number of employees.31 In some organizational settings, other factors may influence the optimal span of management. The relative importance of each factor also varies in different settings. It is unlikely that all eight factors will suggest the same span; some may suggest a wider span, and others may indicate a need for a narrow span. Hence, managers must assess the relative weight of each factor or set of factors when deciding the optimal span of management for their unique situation.

Distributing Authority Another important building block in structuring organizations is the determination of how authority is to be distributed among positions. Authority is power that has been legitimized by the organization.32 Distributing authority is another normal outgrowth of increasing organizational size. For example, when an owner-manager hires a sales representative to market his products, he needs to give the new employee appropriate authority to make decisions about delivery dates, discounts, and so forth. If every decision requires the approval of the owner-manager, he is no better off than he was before he hired the sales representative. The power given to the sales representative to make certain kinds of decisions, then, represents the establishment of a pattern of authoritythe sales representative can make some decisions alone and others in consultation with co-workers, and the sales representative must defer some decisions to the boss. Two specific issues that managers must address when distributing authority are delegation and decentralization.

The Delegation Process Delegation is the establishment of a pattern of authority between a superior and one or more subordinates. Specifically, delegation is the process by which managers assign a portion of their total workload to others.

Reasons for Delegation The primary reason for delegation is to enable the manager to get more work done. Subordinates help ease the manager's burden by doing major portions of the organization's work. In some instances, a subordinate may have more expertise in addressing a particular problem than the manager does. For example, the subordinate may have had special training in developing information systems or may be more familiar with a particular product line or geographic area. Delegation also helps develop subordinates. By participating in decision making and problem solving, subordinates learn about overall operations and improve their managerial skills.

Parts of the Delegation Process In theory, as shown in Figure 11.4, the delegation process involves three steps. First, the manager assigns responsibility or gives the subordinate a job to do. The assignment of responsibility might range from telling a subordinate to prepare the report to placing the person in charge of a task force. Along with the assignment, the individual is also given the authority to do the job. The manager may give the subordinate the power to requisition needed information from confidential files or to direct a group of other workers. Finally, the manager establishes the subordinate's accountabilitythat is, the subordinate accepts an obligation to carry out the task assigned by the manager. For instance, the CEO of AutoZone will sign off for the company on financial performance only when the individual manager responsible for each unit has certified his or her own results as being accurate. The firm believes that this high level of accountability will help it avoid the kind of accounting scandal that has hit many businesses in recent times.35 These three steps do not occur mechanically, however. Indeed, when a manager and a subordinate have developed a good working relationship, the major parts of the process may be implied rather than stated. The manager may simply mention that a particular job must be done. A perceptive subordinate may realize that the manager is actually assigning the job to her. From past experience with the boss, she may also know, without being told, that she has the necessary authority to do the job and that she is accountable to the boss for finishing the job as "agreed."

Problems in Delegation Unfortunately, problems often arise in the delegation process. For example, a manager may be reluctant to delegate. Some managers are so disorganized that they are unable to plan work in advance and, as a result, cannot delegate appropriately. Similarly, some managers may worry that subordinates will do too well and pose a threat to their own advancement. And, finally, managers may not trust the subordinate to do the job well. Similarly, some subordinates are reluctant to accept delegation. They may be afraid that failure will result in a reprimand. They may also perceive that there are no rewards for accepting additional responsibility. Or they may simply prefer to avoid risk and therefore want their boss to take all responsibility. There are no quick fixes for these problems. The basic issue is communication. Subordinates must understand their own responsibility, authority, and accountability, and the manager must come to recognize the value of effective delegation. With the passage of time, subordinates should develop to the point at which they can make substantial contributions to the organization. At the same time, managers should recognize that a subordinate's satisfactory performance is not a threat to their own career, but an accomplishment by both the subordinate who did the job and the manager who trained the subordinate and was astute enough to entrust the subordinate with the project. Ultimate responsibility for the outcome, however, continues to reside with the manager. Richard Branson, the founder of Virgin Records and now the owner of over 300 companies within the Virgin Group, learned the importance of delegation early in his career. When Virgin Records first began, employees had the freedom to take charge of any responsibilities they had the ability and desire to do. However, as the employee count reached 100, Branson feared the company was becoming too slow. To maintain employee flexibility but prevent slowdown, he split the company in half and pinpointed talented employees from Virgin Records to run it. Branson has continued this strategy as his empire has grown, identifying employees with management potential and fostering employee empowerment through systematic delegation.

Decentralization and Centralization: Just as authority can be delegated from one individual to another, organizations also develop patterns of authority across a wide variety of positions and departments. Decentralization is the process of systematically delegating power and authority throughout the organization to middle and lower-level managers. It is important to remember that decentralization is actually one end of a continuum anchored at the other end by centralization, the process of systematically retaining power and authority in the hands of higher-level managers. Hence, a decentralized organization is one in which decision-making power and authority are delegated as far down the chain of command as possible. Conversely, in a centralized organization, decision-making power and authority are retained at the higher levels of management. When H. Ross Perot ran EDS, he practiced centralization; his successors have used decentralization. No organization is ever completely decentralized or completely centralized; some firms position themselves toward one end of the continuum, and some lean the other way.37 What factors determine an organization's position on the decentralization-centralization continuum? One common determinant is the organization's external environment. Usually, the greater the complexity and uncertainty of the environment, the greater is the tendency to decentralize. Another crucial factor is the history of the organization. Firms have a tendency to do what they have done in the past, so there is likely to be some relationship between what an organization did in its early history and what it chooses to do today in terms of centralization or decentralization. The nature of the decisions being made is also considered. The costlier and riskier the decisions, the more pressure there is to centralize. Organizations also consider the abilities of lower-level managers. If lower-level managers do not have the ability to make high-quality decisions, there is likely to be a high level of centralization. If lower-level managers are well qualified, top management can take advantage of their talents by decentralizing; in fact, if top management does not, talented lower-level managers may leave the organization.38 A manager has no clear-cut guidelines for determining whether to centralize or decentralize. Many successful organizations, such as General Electric and Johnson & Johnson, are quite decentralized. Equally successful firms, such as McDonald's and Walmart, have remained centralized. IBM has recently undergone a transformation from using a highly centralized approach to a much more decentralized approach to managing its operations. A great deal of decision-making authority was passed from the hands of a select group of top executives down to six product and marketing groups. The reason for the move was to speed the company's ability to make decisions, introduce new products, and respond to customers. In contrast, Royal Dutch Shell, long operated in a highly decentralized manner, has recently gone through several major changes, all intended to make the firm more centralized. New CEO Peter Voser went so far as to note that "fewer people will make strategic decisions."39 Yahoo Inc. has also initiated a change to become more centralized.

Coordinating Activities A fifth major element of organizing is coordination. As we discuss earlier, job specialization and departmentalization involve breaking jobs down into small units and then combining those jobs into departments. Once this has been accomplished, the activities of the departments must be linkedsystems must be put into place to keep the activities of each department focused on the attainment of organizational goals. This is accomplished by coordinationthe process of linking the activities of the various departments of the organization.42

The Need for Coordination The primary reason for coordination is that departments and work groups are interdependentthey depend on one another for information and resources to perform their respective activities. The greater the interdependence between departments, the more coordination the organization requires if departments are to be able to perform effectively. There are three major forms of interdependence: pooled, sequential, and reciprocal.43 Pooled interdependence represents the lowest level of interdependence. Units with pooled interdependence operate with little interactionthe output of the units is pooled at the organizational level. Gap clothing stores operate with pooled interdependence. Each store is considered a "department" by the parent corporation. Each has its own operating budget, staff, and so forth. The profits or losses from each store are "added together" at the organizational level. The stores are interdependent to the extent that the final success or failure of one store affects the others, but they do not generally interact on a day-to-day basis. In sequential interdependence, the output of one unit becomes the input for another in a sequential fashion. This creates a moderate level of interdependence. At Nissan, for example, one plant assembles engines and then ships them to a final assembly site at another plant, where the cars are completed. The plants are interdependent in that the final assembly plant must have the engines from engine assembly before it can perform its primary function of producing finished automobiles. But the level of interdependence is generally one waythe engine plant is not necessarily dependent on the final assembly plant. Reciprocal interdependence exists when activities flow both ways between units. This form is clearly the most complex. Within a Marriott hotel, for example, the reservations department, front-desk check-in, and housekeeping are all reciprocally interdependent. Reservations has to provide front-desk employees with information about how many guests to expect each day, and housekeeping needs to know which rooms require priority cleaning. If any of the three units does not do its job properly, all the others will be affected.

Structural Coordination Techniques Because of the obvious coordination requirements that characterize most organizations, many techniques for achieving coordination have been developed. Some of the most useful devices for maintaining coordination among interdependent units are the managerial hierarchy, rules and procedures, liaison roles, task forces, and integrating departments.44

The Managerial Hierarchy Organizations that use the hierarchy to achieve coordination place one manager in charge of interdependent departments or units. In Walmart distribution centers, major activities include receiving and unloading bulk shipments from railroad cars and loading other shipments onto trucks for distribution to retail outlets. The two groups (receiving and shipping) are interdependent in that they share the loading docks and some equipment. To ensure coordination and minimize conflict, one manager is in charge of the whole operation.

Rules and Procedures Routine coordination activities can be handled via rules and standard procedures. In the Walmart distribution center, an outgoing truck shipment has priority over an incoming rail shipment. Thus, when trucks are to be loaded, the shipping unit is given access to all of the center's auxiliary forklifts. This priority is specifically stated in a rule. But, as useful as rules and procedures often are in routine situations, they are not particularly effective when coordination problems are complex or unusual.

Liaison Roles We introduced the liaison role of management in Chapter 1. As a device for coordination, a manager in a liaison role coordinates interdependent units by acting as a common point of contact. This individual may not have any formal authority over the groups but instead simply facilitates the flow of information between units. Two engineering groups working on component systems for a large project might interact through a liaison. The liaison maintains familiarity with each group as well as with the overall project. She can answer questions and otherwise serve to integrate the activities of all the groups.

Task Forces A task force may be created when the need for coordination is acute. When interdependence is complex and several units are involved, a single liaison person may not be sufficient. Instead, a task force might be assembled by drawing one representative from each group. The coordination function is thus spread across several individuals, each of whom has special information about one of the groups involved. When the project is completed, task force members return to their original positions. For example, a college overhauling its degree requirements might establish a task force made up of representatives from each department affected by the change. Each person retains her or his regular departmental affiliation and duties but also serves on the special task force. After the new requirements are agreed on, the task force is dissolved.

Integrating Departments Integrating departments are occasionally used for coordination. These are somewhat similar to task forces but are more permanent. An integrating department generally has some permanent members as well as members who are assigned temporarily from units that are particularly in need of coordination. One study found that successful firms in the plastics industry, which is characterized by complex and dynamic environments, used integrating departments to maintain internal integration and coordination.45 An integrating department usually has more authority than a task force and may even be given some budgetary control by the organization. In general, the greater the degree of interdependence, the more attention the organization must devote to coordination. When interdependence is pooled or simple sequential, the managerial hierarchy or rules and procedures are often sufficient. When more complex forms of sequential or simpler forms of reciprocal interdependence exist, liaisons or task forces may be more useful. When reciprocal interdependence is complex, task forces or integrating departments are needed. Of course, the manager must also rely on her or his own experience and insights when choosing coordination techniques for the organization. Moreover, informal interactions among people throughout the organization can also serve to effectively coordinate activities

Electronic Coordination Recent advances in electronic information technology are also providing useful mechanisms for coordination. E-mail, for example, makes it easier for people to communicate with one another. This communication, in turn, enhances coordination. Similarly, many people in organizations today use electronic scheduling, at least some of which is accessible to others. Hence, if someone needs to set up a meeting with two colleagues, he can often check their electronic schedules to determine their availability, making it easier to coordinate their activities. Local networks, increasingly managed by hand-held electronic devices, are also making it easier to coordinate activities. Bechtel, for example, now requires its contractors, subcontractors, and suppliers to use a common web-based communication system to improve coordination among their myriad activities. The firm estimates that this improved coordination technology routinely saves it thousands of dollars on every big construction project it undertakes.

Differentiating Between Positions The last building block of organization structure is differentiating between line and staff positions in the organization. A line position is a position in the direct chain of command that is responsible for the achievement of an organization's goals. A staff position is intended to provide expertise, advice, and support for line positions. In many modern organizations these differences are beginning to disappear, and in a few the difference has been eliminated altogether. However, there are still sufficient meaningful differences to warrant discussion.

Differences Between Line and Staff The most obvious difference between line and staff is purposeline managers work directly toward organizational goals, whereas staff managers advise and assist. But other distinctions exist as well. One important difference is authority. Line authority is generally thought of as the formal or legitimate authority created by the organizational hierarchy. Staff authority is less concrete and may take a variety of forms. One form is advise authority. In this instance, the line manager can choose whether to seek or to avoid input from staff; and even when advice is sought, the line manager might still choose to ignore it. Another form of staff authority is called compulsory advice. In this case, the line manager must consider the advice but can choose to heed it or ignore it. For example, the pope is expected to listen to the advice of the Sacred College of Cardinals when dealing with church doctrine, but he may follow his own beliefs when making decisions. Perhaps the most important form of staff authority is called functional authorityformal or legitimate authority over activities related to the staff member's specialty. For example, a human resource staff manager may have functional authority when there is a question of discrimination in hiring. Conferring functional authority is probably the most effective way to use staff positions because the organization is able to take advantage of specialized expertise while also maintaining a chain of command. The Ethically Speaking box entitled "A Panel of Your Peers" on page 314 shows how the chief ethics officer at a major corporation exercises her staff authority.

Administrative Intensity Organizations sometimes attempt to balance their emphasis on line versus staff positions in terms of administrative intensity. Administrative intensity is the degree to which managerial positions are concentrated in staff positions. An organization with high administrative intensity is one with many staff positions relative to the number of line positions; low administrative intensity reflects relatively more line positions. Although staff positions are important in many different areas, they tend to proliferate unnecessarily. All else being equal, organizations would like to devote most of their human resource investment to line managers because, by definition, they contribute to the organization's basic goals. A surplus of staff positions represents a drain on an organization's cash and an inefficient use of resources. Many organizations have taken steps over the past few years to reduce their administrative intensity by eliminating staff positions. CBS cut hundreds of staff positions at its New York headquarters, and IBM cut its corporate staff workforce from 7,000 to 2,300. Burlington Northern generates almost $7 billion in annual sales and manages a workforce of 43,000 with a corporate staff of only 77 managers. Ford and General Motors have both downsized dramatically through job cuts and plant closings.

NOTE: summary should cover all the contents in the chapter,

and be specific to the point.