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4. Organizing
4.1 Organizational Charts and Designs
4.2 Centralized and Decentralized Organization
4.3 Span of Control
4.4 Authority and Unity of Command
4.5 Incentives and Motivation Tools
4.6 Maslow’s Hierarchy of Needs
4.7 McGregor’s Theory X and Theory Y
4.8 Expectancy Theory
4.9 Equity Theory
4.10 Herzberg’s 2 Factor Theory
4.11 Job Design
4.1 Organizational Charts and Designs
Organization How we bring people, resources, and information together to perform a task
Organization Chart The best way to show an organizational design
CEO
VP VP VP
HR Mgr
Middle Mgr Middle Mgr Middle Mgr Middle Mgr
Workers, employees, non-managerial personnel
Middle Mgr
Classic Line and Staff Organization
Organization Charts • Show connections
of positions and lines of authority
• Show general structure
• Do NOT show quality of managers or the nature of the work being done
CEO
Functional Organization
Production Marketing Finance
Mfg Quality Advertising Sales Accounting
Functional Organization
CEO
Product Organization
Paint &Primer Div.
CleaningCompounds
HomeProducts
Production
Marketing
Accounting
Production
Marketing
Accounting
Production
Marketing
Accounting
Product Organization
CEO
Geographic Organization
NorthAmericanDiv.
EuropeanDiv.
AsianDiv.
Production
Marketing
Accounting
Production
Marketing
Accounting
Production
Marketing
Accounting
Geographic Organization
Organization comes from planning. Design the way you plan to compete.
4.2 Centralized and Decentralized Organization
Centralization
Where in the organization key decisions are made
Centralization Centralized Organizations = Key decisions are made at the top
Decentralized Organizations = Key decisions are made at many levels
You cannot tell the degree of centralization by looking at the org chart
A Centralized Organization
CEO
Functional Organization
Production Marketing Finance
Mfg Quality Advertising Sales Accounting
Functional Organization
A Decentralized Organization
CEO
Paint &Primer Div.
CleaningCompounds
HomeProducts
Production
Marketing
Accounting
Production
Marketing
Accounting
Production
Marketing
Accounting
Large dispersed organizations often use a decentralized structure
CEO
Geographic Organization
NorthAmericanDiv.
EuropeanDiv.
AsianDiv.
Production
Marketing
Accounting
Production
Marketing
Accounting
Production
Marketing
Accounting
Geographic Organization
Centralized Organizations • Tend to reduce costs
by being efficient and standardized
• Most popular when you make only a few product types
• Not very flexible and may not work in unstable periods
Decentralized Organizations • More flexible and
better able to adapt to changing circumstances
• Popular when you make lots of different products or serve lots of different customer groups
• Typically higher costs than centralized
As the degree of centralization changes, an organization may need different managers.
4.3 Span of Control
Span of Control
How many people report directly to a manager
You can increase span of control when: • The manager can
easily monitor employees
• The employees have similar jobs
• The employees are well-trained and formally organized into teams
Span of Control = 3
VP
CEO
VP VP
CEO
VP
Span of Control = 6
CEO
Span of Control = 9
CEOVP
CEO
VP VP
Flattening the Organization
Tall (Vertical)
Flat (Horizontal)
The appropriate span of control depends on how much supervision employees need
Flattening Organizations
Flat Organization = Lower costs and better up/down communications
Tall Organization = Higher costs but managers have more time to plan and analyze
Always make your organization as flat as you can without losing control.
4.4 Authority and Unity of Command
Organizations have both formal and informal authorities. Both affect how things work
You can increase span of control when: • The manager can
easily monitor employees
• The employees have similar jobs
• The employees are well-trained and formally organized into teams
Line of Authority (Chain of Command)
VP
CEO
VP VP
Line of Authority
Unity of Command Each person should
be responsible to one clear superior who
directs them
Matrix Organization Poor Unity of Command
CEO
Paint &Primer
CleaningCompounds
HomeProducts
Production
Marketing
Accounting
Production
Marketing
Accounting
Production
Marketing
Accounting
Production
Marketing
Accounting
Formal and Informal Authority
Formal Authority = Based on organizational structure and policy
Informal Authority = Based on technical ability, seniority, reputation, and personal influence
All organizations have some degree of informal authority. Always that person whom everyone turns to
Informal Communications
“I heard it on the grape vine!”
Informal authority and communications are usually considered important in an organization.
4.5 Incentives and Motivation Tools
Once we put people in our organization, we have to motivate them do the work we need done
Motivation = “The intention of achieving a goal, leading to goal directed behavior” Columbia Encyclopedia
Incentive = “Something that incites or has a tendency to incite to determination or action” Merriam Webster Dictionary
Theories of Motivation
Needs Based = Motivation is the result of individuals trying to satisfy their own needs
Process Based = Motivation is a rational process where individuals make choices based on their own situation
Carrots and Sticks
Rewards and Punishments
Positive Reinforcement Positive action = Reward
Punishment Negative action = Punishment
Negative Reinforcement Positive action = Nothing bad
Extinction Negative action = Nothing good
Reinforcement Theory
Rewards can be either intrinsic or extrinsic - from the inside or the outside
Intrinsic Motivation We do something because we gain a sense of achievement and accomplishment Fun, challenge, or a sense of personal satisfaction
Extrinsic Motivation We do something because we want to earn an external reward A bonus, a certificate, praise from peers, or recognition from management
Human beings are incredibly complex. No single theory of motivation can explain us completely.
4.6 Maslow’s Hierarchy of Needs
Of all the needs-based theorists, Abraham Maslow is the most commonly used
Maslow’s Hierarchy
We are motivated by the lowest unmet need
Maslow’s Hierarchy
We are motivated by the lowest unmet need
S.A.
Esteem
Social
Security/Safety
Physiological
Physiological = Basic needs for food, water, air, and shelter
Safety/security = Need for protection and confidence in survival in the future
Social = Need for friendship, respect, and acceptance
Esteem = Need for recognition of our unique personal worth
Self Actualization = When someone has meet all their lower-level needs and now seeks only intrinsic motivators
Safe, comfortable work area
Salary, health insurance
Team-building and office parties
Titles, parking spots, recognition
Opportunities for growth and experience S.A.
Esteem
Social
Security/Safety
Physiological
Maslow is easy to understand and intuitive, but too simple to be really useful
ERG Theory A more complex interpretation of needs and motivation than Maslow provides Developed by Clayton Alderfer
Existence = Maslow’s Physiological and Safety needs. May also be known as “Deficiency Needs”
Relatedness = Maslow’s Social needs
Growth = Maslow’s Esteem and Self-Actualization needs
Relatedness and Growth may also be known as “Growth Needs”
ERG Theory Needs are NOT hierarchal and we can be motivated by different needs at the same time
If we cannot meet one set of needs, we may focus on another set
Maslow is more familiar and easier to understand for most managers, but ERG is better at explaining real people.
4.7 McGregor’s Theory X and Theory Y
Douglas McGregor describes motivational approaches based on manager’s beliefs about employees
Theory X - Authoritarian Approach Employees only work for extrinsic rewards and must be watched and pushed
Theory Y - Participative Approach Employees seek satisfaction in work and should be included in managerial decisions
Theory X Managers Assume that: • Employees need
constant reward and punishment
• Employees cannot be trusted and need constant supervision
• Employees hate their jobs and only work for the money
Theory Y Managers Assume that: • Employees view
work as fulfilling and satisfying
• Employees can be trusted to work well without supervision
• Employees have the ability to solve problems creatively on their own
Theory X Organizations:
• Small spans of control and lots of managers/levels
• Emphasis on rewards and punishments to motivate
• Lots of micromanagement and high employee turnover
Theory Y Organizations: • Large spans of control
and few managers • Emphasis on team-
work and cooperation to motivate
• Frequent promotion opportunities
Theory X
Scientific management, needs-based motivation theories, and higher costs
Theory Y
Professional management, process-based motivation theories, and lower costs
Theory Y can be a more difficult and scary motivational approach but it is usually worth it.
4.8 Expectancy Theory
Expectancy theory is process-based and tells us what kinds of incentives will really motivate people
Expectancy theory is the result of rational analysis where people ask themselves 3 questions about a possible reward…
The 3 Questions of Expectancy Theory 1. Will hard work lead to
the right outcome? “Do I Expect to be able to reach this goal?”
2. Will reaching the goal deliver the reward? “Do I expect my success to be rewarded?”
3. Will the reward be valuable? “Is this worth all the work it will take to get it?”
Expectancy Theory Terms
InstrumentalityExpectancy Valence
Do I expect to be able to reach the goal?
Will I get the reward if I do reach the goal?
Is it worth the effort?
Effort Performance Reward
An answer of “NO” to any question means the incentive offers no motivation at all
Desirability of Reward
Difficulty of Goal
Motivation
Motivation drops to zero when the goal becomes so difficult you can’t expect to each it
100 Units
Best week ever = 100 units
Units Produced
60 Units
50 Units
Goal = 50 100 120
Setting goals is the search for the Goldilocks zone, where the difficulty and rewards are “Just Right”
Management By Objective MBO Incentive system where managers and employees agree on goals and rewards. Challenge is in finding agreement and valence MBO systems align goal-setting and planning
The trick with Expectancy Theory is setting exactly the right goals. Usually takes experience.
4.9 Equity Theory
Equity theory is process-based and tells us how people REALLY judge the value of rewards
Equity theory says that we don’t judge value in absolute terms. We judge it in comparison to what others get
We look at a person or group of people and compare our treatment to theirs
Referent
Who is/are my referents?
They are people like you, with similar jobs and inputs.
If you are a clerk in accounting, you don’t compare yourself to the CEO
“Joe. Your work has been excellent. I am giving you a $10,000 bonus!”
“$10,000? That’s nice but you do know that everyone else got $15,000?”
Equity Theory is about justice, where things should be fair.
When we receive a reward, the next step is to compare it to the referent. “Is the reward fair?”
Inputs = Things I contribute:
- hard work - Loyalty - Education - Skills - Experience - Seniority
Outputs = Things I receive:
- Pay - Promotions - Recognition - Opportunities - Respect - Trust
Do I get the same outputs as my referents, when my inputs are as good or better?
Equity theory demands fairness but life is seldom fair. The best approach is to discourage people from sharing salaries.
4.10 Herzberg’s 2 Factor Theory
Frederick Herzberg tells us that what motivates us is very different than what satisfies us - or doesn’t satisfy us
Motivators
Hygiene Factors
Herzberg vs MaslowS.A.
Esteem
Social
Security/Safety
Physical/Physiological
Hygiene Factors - Environmental factors around the job that can cause dissatisfaction and demotivation
Motivators - Intrinsic factors of the job that cause employees to want to work harder and accomplish more
Hygiene FactorsCompany policiesSupervision and relationshipsWorking ConditionsSalarySecurity
MotivatorsAchievementRecognitionInteresting workIncreased responsibilityAdvancement and growth
The key point here:
Both hygiene factors and motivators affect motivation but not in the same ways
Once upon a time, there was a great company with terrible restrooms
Fixing hygiene factors can fix demotivation, but only motivators can really inspire employees to work
Herzberg on the Design of Jobs Job Enrichment Adding motivators like recognition, responsibility, achievement, and personal growth makes employees want to work harder
Herzberg’s ideas are most valuable when we apply them to the design of jobs.
4.11 Job Design
If organizations really want employees to work hard, managers need to pay attention to how employee’s jobs are designed
Herzberg tells us that motivators have almost unlimited potential to motivate employees.
MotivatorsAchievementRecognitionInteresting workIncreased responsibilityAdvancement and growth
Scientific Management and Job Specialization
Easy to train and manage but seriously boring
Easy to train and manage but seriously boring
As the nature of businesses changed, we needed more motivated employees
Job Design Approach EffectsJob Enrichment Adds responsibility and
gives workers more control over how they do their jobs. Increased motivation
Job Enlargement Adds a larger variety of tasks to a job. Makes the work less boring and gives workers a greater sense of satisfaction
Job Rotation Circulates workers through a number of different jobs over time. Reduces boredom and gives a broader range of skills
When enlarging and enriching jobs, it is critical to think about what kinds of tasks we add, as well as how many
Skill Variety Task Identity Task Significance Autonomy Feedback
Job Characteristics Model
Meaningfulness Responsibility Knowledge of results
Motivation Performance Satisfaction Absenteeism Turnover
Core Job Characteristics
Psychological States Outcomes
Once upon a time, I met 3 men cutting stone…1st - “I am earning 5$ an hour” 2nd - “I am a craftsman, carving the best blocks I can”
“I am building a cathedral”
The best source of long-term employee motivation is the design of jobs.