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MANAGEMENT: A GLOBAL AND ENTREPRENEURIAL PERSPECTIVE by Weihrich, Cannice, and Koontz

Chapter

8
Organization Structure: Departmentation

2008 Weihrich and Cannice

Chapter 8. Organizational Structure: Departmentation

After studying this chapter, you should understand:

1. The basic patterns of traditional departmentation and their advantages and disadvantages. 2. Matrix organizations. 3. Strategic business units. 4. Organization structures for global enterprises. 5. The virtual and boundaryless organizations. 6. That there is no single best pattern of departmentation.
2008 Weihrich and Cannice

Chapter 8. Organizational Structure: Departmentation

Departmentation by Enterprise Function


Most widely employed basis for organizing activities and is present in almost every enterprise at some level in the organization structure. No generally accepted terminology for functional departments: A manufacturing enterprise employs the terms production, sales, and finance; a wholesaler is concerned with such activities as buying, selling, and finance; and a railroad is involved with operations, traffic, and finance.

2008 Weihrich and Cannice

Chapter 8. Organizational Structure: Departmentation

Fig. 8-1 Departmentation by Enterprise Function

2008 Weihrich and Cannice

Chapter 8. Organizational Structure: Departmentation

Departmentation by Territory or Geography

Rather common in enterprises that operate over wide geographic areas.

2008 Weihrich and Cannice

Chapter 8. Organizational Structure: Departmentation

Fig. 8-2 Departmentation by Territory or Geography

2008 Weihrich and Cannice

Chapter 8. Organizational Structure: Departmentation

Fig. 8-3 Departmentation by Customers

2008 Weihrich and Cannice

Chapter 8. Organizational Structure: Departmentation

Fig. 8-4 Departmentation by Product

2008 Weihrich and Cannice

Chapter 8. Organizational Structure: Departmentation

Matrix Organization

The combining of functional and project or product patterns of departmentation in the same organization structure.

2008 Weihrich and Cannice

Chapter 8. Organizational Structure: Departmentation

Fig. 8-5 Matrix Organization (in engineering)

2008 Weihrich and Cannice

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Guidelines for Making Matrix Management Effective


1. Define the objectives of the project or task. 2. Clarify the roles, authority, and responsibilities of managers and team members. 3. Ensure that influence is based on knowledge and information, rather than on rank. 4. Balance the power of functional and project managers. 5. Select an experienced manager for the project who can provide leadership. 6. Undertake organization and team development. 7. Install appropriate cost, time, and quality controls that report deviations from standards in a timely manner. 8. Reward project managers and team members fairly.
2008 Weihrich and Cannice

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Strategic Business Units (SBUs)

Distinct little businesses set up as units in a larger company to ensure that a certain product or product line is promoted and handled as though it were an independent business.

2008 Weihrich and Cannice

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Fig. 8-6 Strategic Business Units

2008 Weihrich and Cannice

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Organization Structures for the Global Environment

Organization structures differ greatly for enterprises operating in the global environment. The kind of structure depends on a variety of factors, such as the degree of international orientation and commitment.
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The Virtual Organization

A rather loose concept of a group of independent firms or people that are connected often through information technology. These firms may be suppliers, customers, and even competing companies.
2008 Weihrich and Cannice

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Boundaryless Organization

Jack Welch, former CEO at GE (General Electric), stated his vision for the company as a boundaryless company, an open, antiparochial environment, friendly toward the seeking and sharing of new ideas, regardless of their origin. The purpose was to remove barriers between the various departments as well as between domestic and international operations.
2008 Weihrich and Cannice

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Choosing the Pattern of Departmentation


There is no one best way of departmentation that is applicable to all organizations and all situations. Managers must determine what is best by looking at the situation they face. The jobs to be done and the way they should be done The people involved and their personalities The technology employed in the department The users being served Other internal and external environmental factors in the situation
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KEY IDEAS AND CONCEPTS FOR REVIEW

Departmentation by enterprise function Departmentation by territory or geography Departmentation by customer group Departmentation by product

Matrix organization (or grid, or project, or product) Strategic business unit Organization structures for global enterprises Virtual organization Boundaryless organization

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