"The MGMT Solution," Vocabulary from Chapter 9

Functional departmentalization organizes work and workers into separate units responsible for particular business functions or areas of expertise. A common functional structure might have individuals organized into accounting, sales, marketing, production, and human resources departments.

First, it allows work to be done by highly qualified specialists.

As companies grow, functional departmentalization may also lead to slower decision making and produce managers and workers with narrow experience and expertise.

Product departmentalization organizes work and workers into separate units responsible for producing particular products or services.

Customer departmentalization organizes work and workers into separate units responsible for particular kinds of customers.

Another advantage is that geographic departmentalization can reduce costs by locating unique organizational resources closer to customers.

Matrix departmentalization is a hybrid structure in which two or more forms of departmentalization are used together. The most common matrix combines the product and functional forms of departmentalization, but other forms may also be used.

Third, because of the high level of cross-functional interaction, matrix departmentalization requires significant coordination between managers in the different parts of the matrix.

Authority is the right to give commands, take action, and make decisions to achieve organizational objectives. Traditionally, organizational authority has been characterized by the following dimensions: chain of command, line versus staff authority, delegation of authority, and degree of centralization.

The chain of command is the vertical line of authority that clarifies who reports to whom throughout the organization. People higher in the chain of command have the right, if they so choose, to give commands, take action, and make decisions concerning activities occurring anywhere below them in the chain.

One of the key assumptions underlying the chain of command is unity of command, which means that workers should report to just one boss.

Staff authority is the right to advise but not command others who are not subordinates in the chain of command.

The second transfer that occurs with delegation is that the manager gives the subordinate full authority over the budget, resources, and personnel needed to do the job.

Decentralization is the location of a significant amount of authority in the lower levels of the organization. An organization is decentralized if it has a high degree of delegation at all levels.

Job rotation attempts to overcome the disadvantages of job specialization by periodically moving workers from one specialized job to another to give them more variety and the opportunity to use different skills.

Job enlargement increases the number of different tasks that a worker performs within one particular job. Instead of being assigned just one task, workers with enlarged jobs are given several tasks to perform.

Job enrichment attempts to overcome the deficiencies in specialized work by increasing the number of tasks and by giving workers the authority and control to make meaningful decisions about their work.

In contrast to job rotation, job enlargement, and job enrichment, which focus on providing variety in job tasks, the job characteristics model (JCM) is an approach to job redesign that seeks to formulate jobs in ways that motivate workers and lead to positive work outcomes.

Skill variety is the number of different activities performed in a job.

Task identity is the degree to which a job, from beginning to end, requires completion of a whole and identifiable piece of work.

Mechanistic organizations are characterized by specialized jobs and responsibilities; precisely defined, unchanging roles; and a rigid chain of command based on centralized authority and vertical communication.

By contrast, organic organizations are characterized by broadly defined jobs and responsibility; loosely defined, frequently changing roles; and decentralized authority and horizontal communication

Reengineering changes an organization’s orientation from vertical to horizontal. Instead of taking orders from upper management, lower- and middle-level managers and workers take orders from a customer who is at the beginning and end of each process.

Instead of simplifying work so that it becomes increasingly specialized, reengineering complicates work by giving workers increased autonomy and responsibility for complete processes.

In essence, reengineering changes work by changing task interdependence, the extent to which collective action is required to complete an entire piece of work.

In pooled interdependence, each job or department contributes to the whole independently.

In sequential interdependence, work must be performed in succession, as one group’s or job’s outputs become the inputs for the next group or job.

By reducing the handoffs between different jobs or groups, reengineering decreases sequential interdependence.

Finally, reengineering increases reciprocal interdependence by making groups or individuals responsible for larger, more complete processes in which several steps may be accomplished at the same time.

Empowering workers means permanently passing decision-making authority and responsibility from managers to workers.

But the knowledge and information are irrelevant and useless. Knowledge isn’t power; the ability to act on knowledge is power.

When workers are given the proper information and resources and are allowed to make good decisions, they experience strong feelings of empowerment.

Empowerment can lead to changes in organizational processes because meaning, competence, impact, and self-determination produce empowered employees who take active rather than passive roles in their work.

First, because modular organizations pay for outsourced labor, expertise, or manufacturing capabilities only when needed, they can cost significantly less to run than traditional organizations.

Except for the core business activities that they can perform better, faster, and cheaper than others, modular organizations outsource all remaining business activities to outside companies, suppliers, specialists, or consultants. The term modular is used because the business activities purchased from outside companies can be added and dropped as needed, much like adding pieces to a three-dimensional puzzle.

In this sense, the term virtual organization means the organization that exists “at the moment.” Virtual organizations have a number of advantages. They let companies share costs, and because members can quickly combine their efforts to meet customers’ needs, they are fast and flexible. Finally, because each member of the network alliance is the best at what it does, virtual organizations should in theory provide better products and services in all respects.

Also, companies may reduce their competitive advantage in two ways if they mistakenly outsource a core business activity.

The greatest disadvantage, however, is that tremendous managerial skills are required to make a network of independent organizations work well together, especially since their relationships tend to be short and based on a single task or project.

But with the horizontal, interorganizational processes that characterize virtual organizations, the job of a broker is to create and assemble the knowledge, skills, and resources from different companies for outside parties, such as customers.

The second way to make networks of virtual organizations more manageable is to use a virtual organization agreement that, somewhat like a contract, specifies the schedules, responsibilities, costs, payouts, and liabilities for participating organizations.