Source: Image of office building, dark haired man, dark haired woman, blond haired man, blond haired woman, 3d arrow, images by Video Scribe, License held by Jeff Carroll. Image of storefront, Public Domain, http://bit.ly/1l51GoG; Image of org chart, Creative Commons, Jeff Carroll.
Hi. I'm Jeff. And in this lesson, we'll learn about organizations and their structures and how organizations are broken down into departments. So let's get started.
What is an organization? Everything from a single owner company to a large company can be an organization. An organization is characterized by a chain of command, which is the structure in which the command of a group is distributed from upper management to each individual employee.
Organizations may have different organizational structures. And we'll touch on the basics during this lesson and go into further detail in later lessons. It's highly recommended that an organization communicate about this structure using an organizational chart, which is a visual representation of the chain of command.
In very small companies, the organizational chart may have every employee on it. But in larger companies, it usually includes only the managers. For example, a president, vice president, regional manager, and district manager would be included on the chart. Here is an example of an organizational chart.
As you can see, each person is listed in a separate box and lines connect managers and those who report to them. For example, by looking at the organizational chart, you can tell that Janet Hayes, who is the vice president of sales is the boss of Steve Russell, the regional manager for the Midwest.
It's easy to see the span of control each manager has by looking at the organizational chart. Like a pyramid, you merely look for everyone who is under a specific person. The span of control covers all individuals who report to that person. And it also includes all the jobs that they and the specific manager are responsible for doing.
For example, Steve Russell, who we just mentioned, has a span of control that includes his Midwest territories and also includes Connie Anderson, the district manager for Illinois, and all of her work and territories. Gordon Bond, on the other hand, the vice president of operations has the span of control that includes Kim Parker as the director of IT and all of her responsibilities, as well as David Berg and the project management office responsibilities.
Sometimes in an organizational chart there will be individuals who are responsible for only one aspect of the business. This can be known as job specialization, which is the practice of concentrating on a definitive area of knowledge in the workplace. Production line skills can often result in job specialization. This can create boredom in the work if it's not challenging enough.
One way to handle this issue is to rotate multiple people through the position. Departmentalization is a method of clustering employees into groups to work together in a specific division. As you might have guessed, there are multiple ways to handle divisional structure, but let's run through the most common.
Product departmentalization, this is when departments are organized by a specific product, group of products, or product function. The advantage to this method is that it makes decision-making easy. Everyone is working towards similar product goals. The disadvantage is that there can be a duplication of effort across different products.
Process departmentalization, where departments are organized by different processes that the organization performs. The advantage to this method is that it streamlines the processes by which business functions. The disadvantage is that there can be duplication of equipment purchasing or use functional departmentalization when departments are organized by different purposes or functions.
The advantage is the easy coordination since everyone has a similar purpose. The disadvantage is that there is slow decision-making since the work must be coordinated with all the different product lines in an organization. Customer departmentalization, where departments are organized by the customer type. The advantage to this method is that the company can clearly focus on unique customer groups. The disadvantage is that it requires more administrative staff.
And finally, geographic departmentalization, departments are organized by geographic areas that the company is serving. The company can be more responsive to specific geographic needs this way, but it also requires more elaborate administration. Some organizations will use a combination of these methods based on what works best.
Organizations can even vary the departmentalization based on the different levels of the structure. For example, production managers might be grouped based on product, while mid-level managers are grouped based on geographic location. All right, good job.
In this lesson, we learned about organizations and what they are. We talked about using organizational charts to describe their structure. And we discussed the differing types of departmentalization that can be used to subdivide organizations. Thanks for your time, and have a great day.