Fundamentals of Management, 8th ed

Establishing Reporting Relationships

The third basic element of organizing is the establishment of reporting relationships

among positions. The purpose of this activity is to clarify the chain of command and

the span of management.

Chain of Command

Chain of command is an old concept, first popularized in the

early years of the twentieth century. For example, early writers about the

chain of command

argued that clear and distinct lines of authority need to be established among all positions in

product

departmentalization

Grouping activities

around products or

product groups

customer

departmentalization

Grouping activities

to respond to and

interact with specific

customers or

customer groups

location

departmentalization

Grouping jobs on the

basis of defined

geographic sites or

areas

chain of command

A clear and distinct

line of authority

among the positions

in an organization

166

Part 3: Organizing

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an organization. The chain of command actually has two components. The first, called unity

of command, suggests that each person within an organization must have a clear reporting

relationship to one and only one boss (as we see later, newer models of organization design

routinely—and successfully—violate this premise). The second, called the scalar principle,

suggests that there must be a clear and unbroken line of authority that extends from the

lowest to the highest position in the organization. The popular saying “The buck stops

here” is derived from this idea—someone in the organization must ultimately be responsible

for every decision.