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Organizational structure and design ?
An organization is a collection of people working together in a coordinated and structured fashion to achieve one or more goals.
Organization
A consciously coordinated social unit, composed of two or more people, that functions on a relatively continuous basis to achieve a common goal or set of goals
A social arrangement for the controlled performance of the collective goals
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Organizational structure and design ?
Social arrangements: Organizations are collection of peoples and machines in a structured way
Organization
Collective goals: Existence of organizations depend up achievement of common goals
Controlled performance: Controlled performance means deliberate allocated on resource between organization members which includes:
•Resource allocation•Control function
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Organizational structure and design ?
•Organizations are strongly influenced by the people that form part of them.
•Organizations can take in part of the personality of the people within them and their attitudes, perceptions and behaviors affect how an organization will operate.
Organization and people
•Organizations exist to allow accomplishment of work that could not be achieved by people alone.
•As long as the goals of an organization are appropriate, society will allow them to exist and they can contribute to society
Organization’s Role in Society
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Organizational structure and design ?
•Together they achieve what cannot achieve individually
•Overcome environmental and biological limitations•Increase productively due to:
•Work specialization / division of labour•Exchange•Synergy: Together we grow better
•Increased knowledge development and enhancement
•Transaction – cost economies approach to organization:
•Saving in time•Reduce cost
Why organizations exist?
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Our lives become, for better and for worse, a society of organizations. We are born in organizations and are educated in organizations that we can later work in organizations. At the same time, organizations supply us and entertain us, they govern us and harass us. Finally we are buried by organizations (Henry Mintzberg).
Images and perception of organizations
Organizational structure and design ?
1. Organizations are machines
2. Organizations are biological organism
3. Organizations are human brains
4. Organizations are cultures or subcultures
5. Organizations are sub systems
6. Organizations are political systems
7. Organizations are psychic prisons
8. Organizations are systems of change and transformation
9. Organizations are instruments of domination
Images/Metaphors of 0rganizations: Gereth Morgan
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Organizational structure and design ?
•By ownership: Private, private•By control: Managers, trustees•Activity: Retailer, manufactures, hospital•Legal structure: Partnership, company•Objective: Commercial, non commercial•Accountability•Source of finance: Debt, equity •Region: National or international
Classification of organizations
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Organizational structure and design ?
•Business organizations•Non business organizations
Basic Classification of organizations
Business organizations•Definition:•Legal•Capital •Profit objective
•Types :•Sole - proprietorship•Partnership•Company
•Activities:•Manufacturing•Mining•Energy•Retailing•Services
•Services are intangible•Services are inseparable•Services are heterogeneous
•Intellectual production
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Organizational structure and design ?
•Public organizations•Non profit organizations
Non business organization
Public organizations•Definition:•Run by government •Capital•Non-profit objective•Diverse nature
•Types :•Regulatory bodies•Health institutions•Educational institutions•Policy making bodies•Etc•Characteristics
•Accountable to parliament•Command resources•Base on fairness•Equality•Resource based not price based
Basic Classification of organizations
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Organizational structure and design ?
•Public organizations•Non profit organizations
Non business organization
Non profit organizations•Definition:•Formed for purpose •Capital•Non-profit objective•Public service
•Types :•Clubs•Trade unions•Associations•Charities•Professional association
Basic Classification of organizations
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What is Organizational Structure ?
Bringing the functional units of an organization into a well-conceived structure
Assigning authority and responsibility to individuals
Bringing the functional units of an organization into a well-conceived structure
Assigning authority and responsibility to individuals
Organizational structure:•Divides the jobs•Group the jobs into functional units•Coordinate the jobs•Assign authority •Assign responsibility •Ensure accountability
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Elements of Organizational Structure ?
•A component of organization structure that involves having each discrete step of a job done by a different individual rather than having one individual do the whole job•It is division of labour
•A component of organization structure that involves having each discrete step of a job done by a different individual rather than having one individual do the whole job•It is division of labour
1 - What is Work Specialization ?
Objectives:•Availability of experts•Efficient use of skills•Specialization in training•Specialized use of equipment and infrastructure
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Elements of Organizational Structure ?
•Systematic way of grouping the jobs under a specific head / function which were indentified during work specialization process•It is the basis for grouping the jobs
•Systematic way of grouping the jobs under a specific head / function which were indentified during work specialization process•It is the basis for grouping the jobs
2 – Departmentalization
Basis for departmentalization:•Function •Product•Process•Customer
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Elements of Organizational Structure ?
Chain of Command
The continuous line of authority that extends from the highest levels in an organization to the lowest levels and clarifies who reports to whom
•Authority : The rights inherent in a managerial position to give orders and expect them to be obeyed
•Responsibility: An obligation to perform assigned activities
Chain of Command
The continuous line of authority that extends from the highest levels in an organization to the lowest levels and clarifies who reports to whom
•Authority : The rights inherent in a managerial position to give orders and expect them to be obeyed
•Responsibility: An obligation to perform assigned activities
3- What is Chain of Command ?
Unity of Commend
The management principle that no person should report to more than one boss
Unity of Commend
The management principle that no person should report to more than one boss
4- Unity of command
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What are the Elements of Organizational Structure ?
The number of subordinates a manger can direct efficiently and effectivelyThe number of subordinates a manger can direct efficiently and effectively
5-What is the span of control ?
Factors affecting span of control:•Managerial capability•Nature of employees group•Nature of work•Task complexity•Standardisation of work
Wide span of control:•Reduces cost•Speedup decision making•Gives flexibility•Empowers manager
Narrow span of control:•Expensive as add more levels of management•Lead to difficulty in communication•Slow decision making•Long vertical structure that might lead to bureaucratic behaviour
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Centralization A function when decision-making authority is placed higher level DecentralizationThe pushing down of decision-making authority to the lowest levels of an organization
Centralization A function when decision-making authority is placed higher level DecentralizationThe pushing down of decision-making authority to the lowest levels of an organization
6- Centralization and Decentralization
What are the Elements of Organizational Structure ?
Situations of centralisation :•Normality in environment•Incapable lower managers•Non willingness of lower management to participate•Importance of decision•Risky situation•Keeping uniformity•Large company•Uniform implementation of strategy
Situations of decentralisation :•Complex environment•Capable lower managers•Willingness to participate•Minor decision•Geographical dislocation•Required for effective implementation of strategy
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6- Centralization and Decentralization
What are the Elements of Organizational Structure ?
Merits of centralisation :•Better coordination•Overall solution•Balanced allocation of resources•Better and reliable decision as they made at top by experienced managers•Low cost as less managers are engaged•Quick and centralized decision in crises•Standardised polices
Situations of decentralisation :•Less load at top management•Motivates lower management•Speedy decision are made locally•Decision in view of local context•Develops lower management
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The degree to which jobs within organization are standardized and extent to which employees is guided by rules and proceduresThe degree to which jobs within organization are standardized and extent to which employees is guided by rules and procedures
7- Formalization
What are the Elements of Organizational Structure ?
Situations of centralisation :•Normality in environment•Incapable lower managers•Non willingness of lower management to participate•Importance of decision•Risky situation•Keeping uniformity•Large company•Uniform implementation of strategy
Situations of decentralisation :•Complex environment•Capable lower managers•Willingness to participate•Minor decision•Geographical dislocation•Required for effective implementation of strategy
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8- Flat or tall
What are the Elements of Organizational Structure ?
CEO
Divisional head
Departmental head
Section head
Supervisor
Team leader
Assistant manager
Worker
Tall structure
An organization with large number of management levels and low span of control
Tall structure
An organization with large number of management levels and low span of control
Merits :•Narrow span of control•Small groups with more participation from each team member•Better career planning•Quick promotion
Demerits :•Low delegation•Control over innovation•Long channel•High costs•Slow decision making
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8- Flat or tall What are the Elements of Organizational Structure ?
CEO
Departmental head
Supervisor
Worker
Flat structure
An organization with small number of management levels and high span of control
Flat structure
An organization with small number of management levels and high span of control
Merits :•High delegation•Low cost•Speedy communication•Small channel
Demerits :•Overworked managers•Non specialised managers•Low morale •Low coordination•Less time for planning and more involvement in supervision
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Two basic Categories of Organizational Structures Mechanistic Organization
The bureaucracy; a structure that is high in specialization, formulization, and centralization
Organic Organization
A structure that is low in specialization, formulization, and centralization
Mechanistic Organization
The bureaucracy; a structure that is high in specialization, formulization, and centralization
Organic Organization
A structure that is low in specialization, formulization, and centralization
Various types of organizational structures
Mechanistic organization:•High work specialization•Rigid departmentalization•Narrow span of control due to tall structure•High formulization•Centralization
Organic organization :•Low work specialization•flexible departmentalization•Low direct supervision •Less formulization•Decentralization
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Types of organizational structure ?
•An organization that is low in specialization and formulization but high in centralization
•This Organization reflects the owner as president with all employees directly reporting to him
•An organization that is low in specialization and formulization but high in centralization
•This Organization reflects the owner as president with all employees directly reporting to him
Simple Structure
Employee2 Employee2 President President Employee 3 Employee 3
Employee 4Employee 4 Employee 5Employee 5
Employee 1Employee 1
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ADVANTAGES DISADVANTAGES•Allows the division of labor / work specialization
•Avoids duplication of tasks•Suitable for centralized or one activity •Helps top management in coordinating and controlling the entire organization
•Clarifies the roles/responsibilities of departments and employees
•Provides clear accountability at both the departmental and individual level
•Creates a rigid and slow moving organization
•Leads to a loss of innovation and innovation thinking as employee focus on following correct procedures and protocol
•Does not allow for sharing of information / ideas across departmental lines (which is viewed as being especially important in today’s knowledge economy)
•Focus on internal rather external side of the department
Plant ManagerPlant Manager
ManagerEngineering
ManagerEngineering
ManagerAccounting Manager
AccountingManager
MISManager
MISManager
Human ResourcesManager
Human ResourcesManager
PurchasingManager
Purchasing
•An organization in which similar and related occupational specialties are grouped together•Process of grouping the activities by functions •An organization in which similar and related occupational specialties are grouped together•Process of grouping the activities by functions
Functional Structure
Types of organizational structure ?
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ADVANTAGES DISADVANTAGES•Clear distinction of technical and support divisions
•Clear distinction of specialized functions and common functions
•Help in better hr managements based on specific departmental need
•Economies from processes are possible
•Coordination due to various process is difficult
•Conflict may arise•Use is possible in only process oriented organizations
Plant manager Plant manager
Milling Milling AssemblingAssembling Sanding Sanding Finising Finising Inspection Inspection
Types of organizational structure ?
•An organization in which activities reflect a process and so departmentalized in form of a process•An organization in which activities reflect a process and so departmentalized in form of a process
Process based Structure
MarketingMarketing PersonnelPersonnel PurchasingPurchasing FinanceFinance
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ManufacturingManufacturing
Supply and DistributionSupply and Distribution
Planning and EconomicsPlanning and Economics
MarketingMarketing
Vice President Lubricants And Waxes
Vice President Lubricants And Waxes
Vice PresidentFuels
Vice PresidentFuels
Vice President Chemicals
Vice President Chemicals
PresidentPresident
ManufacturingManufacturing
Supply and DistributionSupply and Distribution
Planning and EconomicsPlanning and Economics
MarketingMarketing
ManufacturingManufacturing
Supply and DistributionSupply and Distribution
Planning and EconomicsPlanning and Economics
MarketingMarketing
•An organization made up of self-contained units on the basis of products with With each has its own departments to perform the related tasks•An organization made up of self-contained units on the basis of products with With each has its own departments to perform the related tasks
Product based or Divisional StructureTypes of organizational structure ?
ADVANTAGES DISADVANTAGES•Product based specialization is possible •Specialized HR can be developed•Coordination and integration between
various functional units of different products is possible
•Economies based on mass scale production of each product is possible
•Economies by better coordination are possible
•Increases in costs•Increase in complexity•Failure to share resources sometimes due to
complex nature
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ADVANTAGES DISADVANTAGES•Places responsibility at a lower level •Places emphasis on local markets,
customers, stakeholders and problems•Improves coordination in a region•Takes advantage of economies of local
operations•Better face-to-face communication with
local interests•Furnishes measurable training ground for
general managers
•Requires more persons with general manager abilities
•Tends to make maintenance of economical central services difficult and may require services such as personnel or purchasing at the regional level
•Increases problem of top management control
•Inconsistency in standard
EngineeringEngineering
Western RegionWestern RegionSouthwest RegionSouthwest Region
ProductionProduction AccountingAccounting SalesSalesPersonnelPersonnel
Central RegionCentral RegionSoutheast RegionSoutheast RegionEastern RegionEastern Region
MarketingMarketing PersonnelPersonnel PurchasingPurchasing FinanceFinance
PresidentPresident
Types of organizational structure ?-------------------
•An organization in which activities in a given area or territory be grouped and assigned to a manager•An organization in which activities in a given area or territory be grouped and assigned to a manager
Geographical Structure
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ADVANTAGES DISADVANTAGES•Enables an organization to be more aligned with the needs of its customers
•Promotes innovation and innovative thinking as the organizational culture becomes more focused on problem solving / meeting customer needs than following processes and protocol
•Customer based work specialization is possible
•Individual departments can become too autonomous which makes setting and coordinating a single strategic direction to be followed difficult
•It limits the sharing of information / ideas across the organization lines (which is viewed as being especially important in today’s knowledge economy)
•Under utilisation of resources•Duplication of activities and cost
PresidentPresident
Community-CityBanking
Community-CityBanking
Real Estate &Mortgage loansReal Estate &
Mortgage loansCorporateBanking
CorporateBanking
Agricultural Banking
Agricultural Banking
InstitutionalBanking
InstitutionalBanking
Types of organizational structure ?
An organization in which activities reflect a primary interest in customersAn organization in which activities reflect a primary interest in customersCustomer based Product Structure
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Strategic Business Units (SBUs)Team structures Project StructureMatrix Structure
Modular structure Virtual Structure
Learning organization
Strategic Business Units (SBUs)Team structures Project StructureMatrix Structure
Modular structure Virtual Structure
Learning organization
Modern Organization DesignsTypes of organizational structure ?
Trend •Flat structures with the view to decentralize and increase delegation•Increase in responsibilities•Multidisciplinary teams i.e. matrix structures •Flexible structures•Hybrid structures in terms of combination and communication•Multi-tasking employees
Emerging trends in modern Organization Designs
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Modern Organization Designs
Chief StrategyOfficer (CSO)
Chief StrategyOfficer (CSO)
Chief Executive OfficerChief Executive Officer
Chief FinanceOfficer (CFO)Chief FinanceOfficer (CFO)
Chief OperatingOfficer (COO)
Chief OperatingOfficer (COO)
Chief InformationOfficer (CIO)
Chief InformationOfficer (CIO)
VP of HumanResources
VP of HumanResources
VP of Marketing
VP of Marketing
AdhesivePackagingDivision
AdhesivePackagingDivision
Industrial Products SBUIndustrial Products SBU Consumer Products SBUConsumer Products SBU
Tubes /Cores
Division
Tubes /Cores
Division
Paper DivisionPaper
DivisionReels
DivisionReels
Division
FlexiblePackagingDivision
FlexiblePackagingDivision
HighDensity Film
Division
HighDensity Film
Division
MetalEnds
Division
MetalEnds
Division
Rigid DivisionRigid
Division
The SBU structure groups similar division into business units and delegates authority and responsibility for each unit to a senior executive who reports
directly to CEO
The SBU structure groups similar division into business units and delegates authority and responsibility for each unit to a senior executive who reports
directly to CEO
Strategic Business Units (SBUs) / Divisional structure
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SBU / Divisional structure
Modern Organization Designs
ADVANTAGES DISADVANTAGES•Building block structure -- accommodates growth
•Better coordination in diverse markets
•Duplication, inefficient use of resources•Specializations are dispersed, creating silos of knowledge
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Teams is a situation when two or more people who interact dynamically, interdependently, and adaptively toward a common and valued goal, have specific roles or functions, and have a time-limited membership. Teams based structure consist of self-directed work teams organized around workProcesses with flat hierarchy, few management levels, Very little formalizationUsually found within divisional structure
Teams is a situation when two or more people who interact dynamically, interdependently, and adaptively toward a common and valued goal, have specific roles or functions, and have a time-limited membership. Teams based structure consist of self-directed work teams organized around workProcesses with flat hierarchy, few management levels, Very little formalizationUsually found within divisional structure
Team structure
Modern Organization Designs
Multi-Team System (MTS) for Patient Care
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Team structure
Modern Organization Designs
ADVANTAGES DISADVANTAGES•Responsive, flexible•Lower admin costs•More informed decisions
•Interpersonal training costs•Slower during team development•Stress due to ambiguous roles•Problems with supervisor role changes•Duplication of resources
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EngineeringEngineering
Quality ControlQuality Control
ManufacturingManufacturingPurchasingPurchasing
R & DR & D ContractAdministration
ContractAdministrationSchedulingScheduling
Project AProject A
EngineeringEngineering
Quality ControlQuality Control
ManufacturingManufacturingPurchasingPurchasing
R & DR & D ContractAdministration
ContractAdministrationSchedulingScheduling
Project BProject B
GeneralManagerGeneralManager
An organization in which activities require a great deal of planning, research and coordination
An organization in which activities require a great deal of planning, research and coordination
Project Structure
Modern Organization Designs
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Project structure
Modern Organization Designs
ADVANTAGES DISADVANTAGES•Simple•Fast•Cohesive•Cross-Functional Integration
•Expensive•Internal Strife•Limited Technological Expertise•Difficult Post-Project Transition
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Modern Organization Designs
An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager. Employees are temporarily assigned to a specific project team and have a permanent functional unit
An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager. Employees are temporarily assigned to a specific project team and have a permanent functional unit
Matrix Structure
Project CProject CManagerManager
Project BProject BManagerManager
Project AProject AManagerManager
EngineeringEngineering MarketingMarketing DesignDesign
CEOCEO
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Matrix structure
Modern Organization Designs
ADVANTAGES DISADVANTAGES•Uses resources and expertise effectively
•Improves communication, flexibility, innovation
•Focuses specialists on clients and products
•Supports knowledge sharing within specialty across groups
•Solution when two divisions have equal importance
•Increases goal conflict and ambiguity•Two bosses dilutes accountability•More conflict, organizational politics, and stress
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Logistics CompanyLogistics Company Core CompanyCore Company Manufacturing CompanyManufacturing Company
Sales and Marketing CompanySales and Marketing Company Finance CompanyFinance Company
Design CompanyDesign Company
•An organization in which a very few activities are carried out and as much as possible work is carried out by other organizations•continually evolving network of independent companies that are linked together to share skills, costs, and access to one another’s markets.
•An organization in which a very few activities are carried out and as much as possible work is carried out by other organizations•continually evolving network of independent companies that are linked together to share skills, costs, and access to one another’s markets.
Virtual StructureModern Organization Designs
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Virtual structure
Modern Organization Designs
ADVANTAGESADVANTAGES DISADVANTAGESDISADVANTAGES
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An organization in which non-vital functions are outsourced, which uses the knowledge and expertise of outside suppliers while retaining strategic control.
An organization in which non-vital functions are outsourced, which uses the knowledge and expertise of outside suppliers while retaining strategic control.
Modular StructureModern Organization Designs
ADVANTAGESADVANTAGES DISADVANTAGESDISADVANTAGES
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Learning organization
Modern Organization Designs
Organizational culture•Strong mutual relationships
•Sense of community•Caring•Trust
Organizational culture•Strong mutual relationships
•Sense of community•Caring•Trust
Learning organizationLearning organizationInformation sharing
•Open •timely
•Accurate
Information sharing•Open •timely
•Accurate
Leadership•Shared vision•Collaboration
Leadership•Shared vision•Collaboration
Organizational design•Boundary-less
•Teams•empowerment
Organizational design•Boundary-less
•Teams•empowerment
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Learning organization
Modern Organization Designs
•Change in structure on the basis of new knowledge•Awareness of vision at all levels•Open communication at all levels•High priority to organizational goals
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Emerging trends in modern organization designsTrend
•Flat structures with the view to decentralize and increase delegation•Increase in responsibilities•Multidisciplinary teams i.e. matrix structures •Flexible structures•Hybrid structures in terms of combination and communication•Multi-tasking employees
Emerging issues in modern organization designsIssue / problem
•Low motivation and morale•Delays and inappropriate decisions•Conflicts •Lack of coordination•High costs•Non alignment with environment•Non alignment with business model
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Assignment: read chapter 17 from pbp in relation with these slides. There
will be small test. We will also work on paper
questions next time.