Introduction to Business – 198

Management And Organizational History



Pre Reading Comment Page 144 – 165, Chapter 6 & 9

There is much material in these chapters that we will not cover.  Read these lecture notes first, and then read the appropriate portions of the textbook.



Lecture Notes


Lecture Summary

The key components of this lecture are:

  • Understanding what is management
  • Understanding what is organizational behavior and why it is important
  • Learning the varied purposes of organizations
  • Understanding how organizations are structured


What Is management

Activity 1: How is being a manager different than any other employee?  What do managers do that other employees don’t?


 “Management is the art of getting things done through others.” – Mary Parker Follet


Creating an environment where others can be productive is very different than being productive yourself.  Unfortunately, we often promote individuals into management – not because they have the skills to manage others – but because they have been very good at getting the job done as a line worker.  However, the best machinist is often not a good choice to be the manager of other machinists; the best professor may not a good choice to be a dean.


Managers need to learn to move from being very good at getting things done to very good at getting others to get things done.  Humans are the only input into the production process that has to be actively managed, has to be motivated.  If you have a computer with a specific set of characteristics – it does what that type of computer does.  With people it is not so straight forward.  At some level humans have to want to work. 


Think back on the jobs you have had – did you work harder at some and not as hard, maybe even as little as possible, in some other jobs?  Human motivation is a fascinating and complex subject. 


The complexity of managing human beings in organizations is largely a result of the unique nature of each human being.  There are no hard and fast rules that apply to all people all the time.  Think of the simple decision to come to class today.  There are probably a dozen different reasons why students came to this class today. Ranging from: I paid for the class, to I would feel guilty if I did not come, to I might learn something, to the person I sit next to is fun to chat with.  And these motivations change over time – what motivates you today may not motivate you 10 years from now.


 We will spend little time in class discussing this question.  However, most of chapter 9 is devoted to this topic. 


What Is Organizational Behavior?


Organizational Behavior is the systematic study of how people interact in organizations.  The term “systematic study” is critical.  Many people think they know a lot about human behavior.  We have all observed ourselves and our fellow human beings and believe we know something of why we act the way we do.


Unfortunately many of our perceptions of how human’s act is not based on systematic study but is instead based on anecdotal evidence and cultural myths.



Purposes of Organizations?


What is the purpose of an organization?


The easy answer in some cases is profit maximization.  While this is at least partially true for many for-profit organizations, it is clearly not the case for not-for-profit and governmental organizations.  Even with many for-profit organizations, there are competing objectives beyond profit -- continuity of the business, environmental awareness, providing employment for the general community or specifically for family members, et cetera.


The purpose of any organization should be described in the organization’s mission statement, but it may also be more privately understood (as in “we are keeping this business running so our grandchildren will have jobs when they move into the business.” 


Related to the issue of multiple purposes is the question of multiple constituencies.  We often think in terms of the stakeholders of an organization.  Who are the individuals or groups of individuals who are influenced by the actions of the organization?  Who has a stake in the future of the organization?


Activity 3 Identify all of the stakeholders that are affected by a local pizza company that sells into the university community.


Note the length of the lists.


Managers need to maintain relationships with all of these groups and need to consider the impact on each group of the actions of the managers.  While the purpose of the organization may not be to meet the needs of each of the stakeholders, if stakeholders become dissatisfied with the organization, it typically creates problems for the organization.


Organizational Structure


The text has a good discussion of the areas of management – operations, marketing, et cetera.  One of the biggest challenges that managers face is connecting all of these areas of management into one coordinated organization. 


Line and staff managers

In addition to managers being characterized by their functional area, they can also be split into being either line or staff.  Line managers are directly in the chain of command from the top to the bottom of the organization.  Staff managers however do not have authority because they are in the chain of command – their authority comes from their having responsibility and expertise regarding an aspect of the organization (marketing, human resource management or information systems)


As chapter 6 discusses, there are multiple ways to organize the people in an organization – each of the alternatives has various advantages and disadvantages.  For example, an organization can be relatively flat with authority highly delegated throughout the organization.  This will result in fewer layers of management, lower costs, and potentially more rapid response to changes in the operating environment.  However, the level of supervision and oversight in the organization will be greatly reduced.


Departmentalizing an organization

To best assign responsibility, limit complexity, and provide the optimal service to customers, businesses often break themselves into departments.  There are five major approaches used.  Here is an example of how each might be used in a company:


Customer departmentalization:  You organize around who you sell to.  A department store often has Men’s wear, children’s clothing, etc.  Oshkosh Truck has a department for military sales, one for municipal sales, etc.  You assume your customers want very different things from you, so you organize yourself to respond to specific customer needs.


Product departmentalization:  Your products are so unique, that the best way to support them is to have a separate unit for each.  Best Buy does this with a department for computers, one for TVs, etc.  You also find this with manufacturing companies like Kimberly Clark, where they have a division for medical products, one for baby products, etc, since each is manufactured very differently.


Process departmentalization:  This is newer.  You look at fundamental business processes and organize around them.  An example is Oder to Cash (OTC) used by many companies to monitor the internal process of taking an order, filling it, and getting paid for it.  By having one department handle all steps in this process, they find they can get the steps done faster and make fewer mistakes (and they get paid faster for their sales).


Geographic Departmentalization:  As companies go global or cover large regions of the US, they often find they need to have separate divisions for each region.  Taco Bell, for instance, may have a Southwest region, and Northeast region, etc.  It not only lets them manage each region more closely, but it may allow for some variations between regions, such as a slightly different menu in the northeast.


Functional Departmentalization:  This is the oldest form of department and is represented by your business major.  We break a company down into an accounting department, a marketing department, operations, information systems, etc.  This has the advantage of letting people work with people who have a background similar to their own, but it may be an artificial break and fuel internal rivalries (which function is most important?)


Activity #5:  What kind of departmentalization have you seen in places where you were employed?  What recommendations would you make about this form of organization?


Activity #6:  One important aspect of management is accountability and control.  How would you know if a manager was being successful in each one of these department models?  What kind of accountability standards could you set?  What performance measures might you use as part of the manager’s performance review and pay incentives?


Management Issues in the Business Plan

Many new businesses are so small that you may think there is no need for departments or even for any organization.  But you will discover even very small businesses organize products or processes or expenses.  This organization is then connected to accounting efforts and to information systems.  Review the departmental table from Activity 5 and 6.  Review your business from each perspective.  For instance, will you review your sales and expenses by product, or by type of customer or by geography?  Will you compete based on process efficiency?  Will you hire workers based on functional expertise?  Will you manage some functions internally (like production) and outsource other functions (like advertising, debt collection, employee training)? Create an organizational chart that illustrates how you will organize your business information.


Summary of Beyond the Book – expectations for the final

You should understand:

  • What is management
  • What is organizational behavior and why it is important
  • The varied and complex purposes of organizations
  • How organizations are structured