Chapte

r
7
How the Managerial
Hierarchy Operates
within a Business
Organization
Learning Goals

1 Define management and the three 5 Contrast the types of business

types of skills necessary for decisions and list the steps in
managerial success. the decision-making process.

2 Explain the role of vision and ethical 6 Define leadership and compare
standards in business success. different styles of leadership.

3 Summarize the benefits of planning 7 Discuss the meaning and

and distinguish strategic, tactical, importance of corporate culture.
and operational planning.
8 Identify the five major forms of
4 Describe the strategic planning departmentalization and four
process. main types of organization
structures.
 What is Management?
 Management is the process of achieving organizational
objectives through people and other resources.
 Top Management

 Develop long-
range strategic
plans for the
organization.

 Inspire
executives and
employees to
achieve their
vision for the
company’s future.
 Middle Management
 Focus on specific
operations,
products, or
customer groups
within an
organization.

 Responsible for
developing detailed
plans and
procedures to
implement the firm’s
strategic plans.
 Supervisory Management
 Implement the
plans developed by
middle managers.

 Responsible for non-

manager employees.

 Motivate workers
to accomplish daily,
weekly, and monthly
goals.
 Skills Needed for
Management Success
 Technical skills
 Manager’s ability to understand and use the
techniques, knowledge, and tools and
equipment of a specific discipline or department.
 Human skills
 Interpersonal skills that enable a manager to
work effectively with and through people.
 Conceptual skills
 Ability to see the organization as a unified whole
and to understand how each part of the overall
organization interacts with other parts.
 Managerial Functions
Planning Controlling
 Process of anticipating  Evaluating an
future events and organization’s
conditions and performance to
determining courses of determine whether it
action for achieving is accomplishing its
organizational objectives.
objectives.
Organizing
 Blending human and 1. Establish
material resources performance
through a formal
standards.
structure of authority.
2. Monitor actual
Directing performance.
 Guiding and motivating 3. Compare actual
employees to accomplish
organizational objectives.
performance with
established
standards.
4. Take corrective action
if required.
 Setting a Vision and Ethical
Standards
 Vision is the perception of marketplace needs
and the methods an organization can use to
satisfy them.
 Must be focused yet adaptable to changes
in the business environment.
 Long-term success is also tied to the ethical
standards that the top management team
sets.
 High ethical standard can also encourage,
motivate,
and inspire employees to achieve goals.
 Ethical company list
 Importance of Planning
 There are different types and levels of
plans.

 Organizations should have a

comprehensive planning framework.
 From mission statement to objectives and
goals
 Narrow functional plans

 Plans outline the steps the company will

take to meet outlined goals and objectives.
Planning at Different
Organizational Levels
The Strategic Planning
Process
SWOT Analysis
 Managers as Decision Makers
 Decision making is the process of recognizing
a problem or opportunity, evaluating alternative
solutions, selecting and implementing an
alternative, and assessing the results.

 Programmed decision involves simple,

common problems with predetermined solutions.

 Nonprogrammed decision involves a complex,

unique problem or opportunity with important
consequences for the organization.
How Managers Make
Decisions
 Managers as Leaders
 Leadership is the ability to direct or
inspire people to attain certain goals.

 Involves the use of influence or power.

 Three traits are common among many

leaders:
 Empathy
 Self-awareness
 Objectivity in dealing with others
Leadership Styles
 Autocratic
Leadership
 Make decisions on own
without consulting
employees.
 Democratic
Leadership
 Involve employees in
decisions, delegate
assignments, and ask
employees for
suggestions.
 Free-Rein Leadership
 Leave most decisions to
employees.
Corporate Culture
 Corporate Culture:
Organization’s system
of principles, beliefs,
and values.

 Managers use
symbols, rituals,
ceremonies, and
stories to reinforce
corporate culture.
Organizational Structures
 Organization: structured grouping of
people working together to achieve
common goals.
 Three key elements:
 Human interaction
 Goal-directed activities
 Structure
Organizational Chart
 Departmentalization
Process of dividing work activities into units within the
organization.
 Product departmentalization: organized based on the
goods and services a company offers.
 Geographical departmentalization: organized by
geographical regions within a country or, for a
multinational firm, by region throughout the world.
 Customer departmentalization: organized by the
different types of customers the organization serves.
 Functional departmentalization: organized by
business functions such as finance, marketing, human
resources, and production.
 Process departmentalization: organized by work
processes
necessary to complete production of goods or services.
Different Forms of
Departmentalization
 Delegating Work Assignments
 Delegation is the act of assigning work activities to
subordinates.
 Providing employees with the responsibility and the necessary
authority for completing tasks.
 Employees have accountability, or responsibility for the results
of the way they perform their assignments.
 Authority and responsibility move down; accountability moves
up.
 Span of management is the number of
subordinates, or direct reports, a supervisor manages.
 Centralization: decision making is retained at the
top of the management hierarchy.
 Decentralization: decision making is located at the
lower levels. Many firms believe it enhances their
flexibility and responsiveness to customer needs.
 Types of Organizational
Structures
Line Organizations
 Oldest and simplest form; direct flow of authority

from CEO to subordinates.

 Chain of command indicates who directs which

activities and who reports to whom.

Line-and-Staff Organizations
 Combines line departments and staff

departments.
 Line departments participate directly in decisions

that affect the core operations of the organization.

 Staff departments lend specialized technical

support.
Line and Staff Organizations
 Committee Organizations
 Authority and responsibility are in the
hands of a group of individuals.
 Often part of a line-and-staff structure.
 Often develop new products.
 Tend to act slowly and conservatively.
 Often make decisions by compromising
conflicting interests rather than
choosing best alternative.
 Matrix Organizations
 Project management structure that links
employees from different parts of the
organization to work together on specific
projects.
 Employees report to a line manager and a project

manager.
Advantages: Disadvantages:
 Flexibility in adapting  Integrating skills of many
to changes. specialists into a
 Focus on major coordinated team.
problems or products.  Team members’
permanent functional
 Outlet for employees’
managers must adjust
creativity and the employees’ regular
initiative. workloads.
The Matrix Organization