Organizational structure provides a stable, logical, and clear cut pattern of relationships within which managers and employees can work toward organizational goals. But this is only a framework. It does not “run” by itself. People interacting through an organizational structure need rules by which they can make that structure work effectively. By analogy, the United States government structure includes the Executive Branch (the Presidency and various agencies), the Legislative Branch (Congress) and the judicial system (the federal courts) and this structure is operated according to the rules set forth in the United States Constitution.
Managers set and apply the rules for people acting in an organizational structure by virtue of their authority and power. Formal authority, a type of power, is what we usually associate with organizational structure and management. But the two terms are intertwined. How effectively manages can use their authority depends in part on how they understand and use power, which, at its core, is the ability to exert influence on other people.
How to distribute formal authority throughout the organizational structure is a key organizing decision. Managers clearly cannot do everything that must be one to carry out the strategic plan for an organization. Hence, they must decide how much authority to delegate to lower ranking managers or non-managers,. Delegation involves the sharing of power with others. This article deals with managerial decisions about distributing authority in organizational structures. It also discusses how people derive their authority and power in organizations, and explores attitudes toward power. Before we look at various aspects of distributing authority, let us consider the broader idea of power.
Employment “The Nordstrom Way”:
The customer pointed out to the Nordstrom salesperson that she had bought a pair of shoes at Bloomingdale’s (a competitor) that were too small for her. She liked the style, but Bloomingdale’s didn’t have her size. After being fitted with the same shoe of the proper size, the customer started to pay for the shoes. The salesperson instead suggested that he merely take the too small shoes in exchange for the new purchase. When the customer reminded the sales person that she had not bought the first pair at Nordstrom the salesperson said to her, ‘If I take these shoes for you, you won’t have any reason to return to Bloomingdale’s’.
Such stories abound when people talk about Nordstrom. A Sixty Minutes segment recounted an occasion where a salesperson even changed the tire on a customer’s car. Such anecdotes underscore the value of empowerment in the corporate arena. Empowerment involves granting employees the freedom and responsibility to do their jobs as they think best, without constantly having to appeal to higher authorities for permission. It enables them to make on the spot decisions without getting caught up in bureaucratic red tape. At Nordstrom, empowerment is integral to success in serving customers. Nordstrom is renowned for its empowerment of employee.
Since being founded in 1901 as a shoe store in Seattle, Washington, Nordstrom has developed into one of the country’s leading fashion specialty retailers. As of 1992, Nordstrom operated 52 stores scattered through Washington, Oregon, California, Utah, Alaska, Virginia, Maryland, New Jersey, Illinios and Minnesota. During the preceding decade, net sales climbed from $769 million to $3.4 billion.
Nordstrom management’s policy toward employees has made such growth and financial success possible. One way that Nordstrom managers have enfranchised their employees is by using the term “associate” instead of “employee”. While on the surface this may seem merely a cosmetic change, the Nordstrom terminology underscores managers’ commitment to their people. The company management emphasizes customer satisfaction as the single overriding goal.
As a corollary, Nordstrom associates are encouraged to pay more attention to their customers’ needs than to their bosses’ needs. This means that salespeople are free to do whatever they think necessary to serve their customers’ needs best. Some salespeople choose to keep a log of their customers’ purchase. This is an individual choice, not a company policy. The salesperson also determines how much of his or her pay comes from salary or commission. Again, choice is vested in the associate.