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Management-I
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Management-I
What is Management ?Management is the process of designing and
maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aims.
It is coordination and oversight of the work activities of others so that their activities are completed efficiently and effectively
Management-IModule 1- Introduction to management and Organization
Effectiveness Doing the right thing or completing activities so that organizational goals are attained or objectives are achieved.
Efficiency Doing things right or getting the most output from the least amount of inputs (time, money, etc.)
Definitions Of Management
Production-or Efficiency oriented Decision OrientedPeople oriented Function oriented
Production-or Efficiency oriented Definition
“Management is the art of knowing what you want to do then seeing that it is done in the best and cheapest way”
- According to Taylor
-Emphasis on Efforts and Results
• Decision Oriented Definition
“Management is simply the process of decision making and control over the action of human being for the expressed purpose of attaining pre-determined goals”
-According to Stanley Vance-Indicate manager’s activity
• People oriented Definition
“Management is the art of getting things done through and with people in formally organized groups.”
-According to Koontz
-Emphasis on relation with internal people
Function oriented Definition
“Management is a process involving planning, organizing, staffing, directing and controlling human efforts to achieve stated objective in an organization”
Characteristics of Management1. Management is intangible.2. Management is goal-oriented.3. Management is universal.4. Management is a social process.5. Management is a group activity.6. Management is a system of authority.7. Management is dynamic.8. Management is a science as well as an
art.9. Management is multidisciplinary.
Importance of Management
1. Optimum use of resources.2. Effective leadership and motivation.3. Establishes sound industrial relations.4. Achievement of goals.5. Improves productivity.6. Improves profitability.7. Increases efficiency.8. Enhances effectiveness.
Management as a Science• Management is a science because it has
all the characteristics of a science, namely:
1. Systematized body of knowledge.2. Management is a social science.3. Management is an inexact science.4. Manager vs. Scientist. (A scientist can
afford to wait until all the information is available but a manager cannot.)
5. Scientific management.
Management as an art
• Management is a art as it involves the use of knowhow and skills like any other art such as music, painting, etc.
• Management is an art because it requires:1. Use of knowledge.2. Creative art. (It combines human and
non-human resources in a useful way so as to achieve results.)
3. Personalized.4. Constant practice.
Management as a Profession
• Over the last few decades, factors such as growing size of business units, competition, separation of ownership from management have led to an increased demand for professionally qualified managers.
• The tasks of management have become quite specialized.
• Management is an emerging profession as it also carries the essential features of a profession as under:
Management V/s Administration
• There could be three different approaches inferred regarding management and Administration
– Administration is above management– Administration is a part of Management– Management and administration are same
No Basis of Difference Administration Management
1 Level in Organization Top Level Middle –Lower Level
2 Major Focus Policy formulation & objective determination
Policy execution for objective achievement
3 Scope of Function Broad and conceptual
Narrow and operation
4 Factor affecting Decisions External Internal
5 Employer-Employee relation Entrepreneur and owner
Employees
6 Qualities Required Administrative Technical
Difference between administration and management
Who are Managers?A Manager is someone who coordinates and oversee
the work of other people so that organizational goals can be accomplished.
A manger’s job is nit about personal achievement, It’s about helping others do their work.
Levels of Management:
Top Managers
Middle Managers
First Line Managers
Non managerial Employees
Non managerial employees
are ground level worker, laborer who are supposed to perform actual physical activity in the organization.
First Line managers The lowest level of management who manage the work of no
managerial employees. Typically are directly or indirectly involve with producing the
organization's products or servicing the organization's customer
The time horizon at this level is short, with the emphasis on accomplishing day to day goalssupervisors, shift managers, district managers, department managers office mangers
• Functions of First line manager : Plan day to day operations. Assigns job to workers. Provides supervision and control over work. Arranges materials, tools and equipments. Maintains discipline. Maintains close contact with employees involved in
operations.
Middle Level Managers Managers between the lowest level and top levels of the
organization who manage the work of first-line managers
Middle management is a link between top management and the first level management
Middle managers generally are concerned with the near future rather than with long-range planning.
e.g. regional managers, project leader, store managers, division manager, manager of quality control
Functions at middle level management are: Interprets and explains the policies framed by the top
management. Makes plans of intermediate range and prepares
long-range plans for review by top management. Establishes departmental policies. Issues detailed instructions. Reviews daily and weekly reports on production or
sales. Counsels subordinates on production. Trains other managers.
Top Level Managers Managers at or near the upper levels of the
organization structure who are responsible for making organisationwide decisions and establishing the goals and plans that affect the entire organization
Top level management is usually appointed, elected or designated by the organization's governing bodye.g. Executive vice president, president, managing director, chief operation officer, chief executive officer
• Functions at the top level of management are: Develops and reviews long-range plans and strategies. Evaluates overall performance of various departments and
ensures cooperation. Involved in selection of key personnel. Consults subordinate managers on subjects or problems of
general scope. Lays down standards of performance. Maintains good public relations. Provides guidance and directions.
The Functions of Management
• The five managerial functions around which managerial knowledge are organized:
• Planning• Organizing• Staffing• Leading• Controlling
Definition of Planning
Selecting missions and objectives and the actions to achieve them, which requires decision making.
• Planning is deciding in advance what to do, how to do it, when to do it and who is to do it.
• It a management function that involves defining goals, establishing strategies for achieving those goals, and developing plans to integrate and coordinate activities.
• A plan is a forecast for accomplishment.• It is a predetermined course of action.• It is to produce a scheme for future action, to
bring about specified results at s specified cost, in a specified period of time.
© 2008 Weihrich and Cannice 27Chapter 1. Management: Science, Theory, and Practice
Definition of Organizing
• Organizing involves establishing an intentional structure of roles for people to fill in an organization.
• In Organizing, Managers determine what activities are necessary to achieve the objectives and how these activities should be divided among the departments and employees.
© 2008 Weihrich and Cannice 28Chapter 1. Management: Science, Theory, and Practice
Definition of Staffing
• Staffing involves filling, and keeping filled, the positions in the organization structure.
© 2008 Weihrich and Cannice 29Chapter 1. Management: Science, Theory, and Practice
Definition of Leading
• Leading is influencing people so that they will contribute to organization and group goals.
© 2008 Weihrich and Cannice 30Chapter 1. Management: Science, Theory, and Practice
Definition of Controlling
• Controlling is measuring and correcting individual and organizational performance to ensure that events conform to plans
Management Functions
Fig. 1-1 Time Spent in Carrying Out Managerial Functions
How the Manager’s Job is Changing?• In India, in many companies even in the government,
there has been a move to link pay to performance.
• Tanishq , ABB India Ltd, BPL Ltd have implemented schemes for pay to be linked to performance at all levels of the organization.
• In today’s world, managers are dealing with changing workplace, security threats, ethical issues, global economic and political uncertainties and technological advancements.
• Because of the need for surviving in competition, how the managers manage is changing.
Exhibit 1–8Changes Impacting the Manager’s Job
THE CHANGING ORGANIZATION
Manager’s Challenges in Turbulent times
• In today’s turbulent world, managing in times of crisis and confusion is becoming a critical skill for managers in all kinds of organizations.
• Moreover, the frequency and intensity of crises have increased over the past couple of decades.
• Managers in all organizations deal with uncertainty and unexpected
events, whether it is something as small as the loss of a key employee or something as large and dramatic as a plant explosion.
• Challenges of being a manager- Being a manager is more of smart work than hard work- Must deal with a variety of personalities- Must motivate workers in the face of uncertainty
• Solid management skills and actions are the key to helping any organization to overcome a crisis and remain healthy, inspired and productive.
Management Skills• A manager’s job is complex and multidimensional and requires a
range of skills.
• The necessary skills for managing a department or an organization can be summarized in three categories:
1. Conceptual Skills.2. Human Skills.
3. Technical Skills.
Conceptual Skills• Conceptual skill is the ability to see the "big picture," to
recognize significant elements in a situation, and to understand the relationships among the elements.
• It involves the manager’s thinking, information processing and planning abilities.
• It involves knowing where one’s department fits into the total organization and how the organization fits into the industry, the community and the broader business.
• Conceptual skills are needed by all managers but are especially important for managers at the top.
• It means the ability to think strategically to take the broad, long-term view and social environment.
Human Skills• Human skill is the ability to work with people.• It is cooperative effort.
• It is teamwork.
• It is the creation of an environment in which people feel secure and free to express their opinions.
• It is the manager’s ability to work with and through other people and to work effectively as a group member.
• It includes the ability to motivate, facilitate, coordinate, lead, communicate and resolve conflicts.
• A manager with human skills encourages the participation of the subordinates.
• He likes other people and is liked by them.
Technical Skills• Technical skill is the understanding of and proficiency in the performance
of specific tasks.
• It includes mastery of the methods, techniques and equipment involved in specific functions such as engineering, manufacturing or finance.
• It also includes specialized knowledge, analytical ability and the competent use of tools and techniques to solve problems in that specific discipline.
• It is important at lower level management.
Skills Needed at Different Management Levels
Entrepreneurship
Entrepreneurship is a creative process that is centered in the notion of identifying market opportunities and unmet needs. It is building solutions that meet these needs and bring value to customers
MANAGEMENT HISTORY
Theory “Theory is the coherent group of assumption
put forth to explain the relationship between two or more observable facts and to provide , a sound basis for predicting, future events”
Why study management theory?- Theories provide a stable focus for understanding what we experience.- Theories enable us to communicate efficiently and thus move into more and more complex relationship with other people.- Theories help us to keep learning about our world.
• Factors causes Severe Competition– Technological innovations and their
dissemination (Spread) in business– Increase in capital investment– Freedom at national and international
market– Increasing buyer’s control in market
EVOLUTION OF MANAGEMENT THOUGHT
• Increase in size of business organisation• High degree of level of division on labor and
specialization• Increase in government regulation and control
to make business more socially-oriented• Organization union activities to pressures on
management• Pressure of various conflicting interest groups
to meet their demands from the organization
MGT/M2/SS
Increase in complexity in management
Management Thought Period
Early contribution Up to 19th century
Scientific management 1900-1930
Administrative/Operational 1916-1940
Human Relation Management 1930-1950
Social system approach 1940-1950
Decision theory Approach 1945-1965
Management Science Approach 1950-1960
Human Behavior Approach 1950-1970
System Approach 1960s onwards
Contingency approach 1970s onwardsMGT/M2/SS
EVOLUTION OF MANAGEMENT THOUGHT Approaches - Classical - Neo Classical - Modern
The Industrial Revolution, which began in Europe in the mid-1700s, was the starting point for the development of management concepts and theories.
The rapid growth in the number of factories during this period and the need to coordinate the efforts of large number of people in the production process necessitated the development of management theories and principles.
This evolved the Schools of Management Thoughts.
INTRODUCTION
There are various Management Schools:1. Classical School2. Behavioral School3. Quantitative School4. Systems School5. Contingency School6. Quality School
Schools of Management Thoughts
53
Time Line of Management Thought
54
Classical Management Theory
ClassicalManagement
Theory
ClassicalManagement
Theory
A theory that focused on finding the “one best way” to perform and manage tasks
Originated during England’s Industrial Revolution Manufacturers began mass-producing goods
in factories Textile industry was among the first Allowed production of standardized goods Depended on a constant flow of labor and
materials Owners needed to plan, organize, lead, control Focused on finding the “one best way”
55
Classical Management Theory
56
Classical Management Theory
ClassicalScientific
School
ClassicalScientific
School
Focused on the manufacturing environment
ClassicalAdministrative
School
ClassicalAdministrative
School
Emphasized the flow of information and how organizations should operate
Fredrick Winslow Taylor –Industrial Engineers.
Acknowledged as the father of scientific management.
Working at Midvale Steel Company. Taylor witnessed many inefficiencies. He sought to create a mental revolution among both workers and managers by defining clear guidelines for improving production efficiency.
Scientific Management
“Scientific management is concerned with knowing exactly what you want men to do and then see in that they do it in the best and cheapest way”
His primary concern was to increase productivity through greater efficiency in production and increased pay for workers
Scientific selection of workers and cooperation of labors and management
A clear division of tasks and responsibilities between management and workers.
Use of scientific methods to determine the best way of doing a job.
• Separation of planning and doing (supervisor and workers)
• Functional foremanship• Job analysis• Standardization• Scientific selection and training of workers• Financial incentives• Economy • Mental Revolution
Elements and tools of scientific management
• Separation of planning and doing (supervisor and workers)
• Functional foremanship– Planning Incharge
1. Route clerk2. Instruction card clerk3. Time and cost clerk4. Discipline clerk
– Production Incharge1. Speed boss2. Inspector3. Maintenance foreman4. Gang boss
• Job Analysis– Time- Consumption in particular movement– Motion - way of performing activities– Fatigue- Amt of Rest required during job
• Standardization – Instruments, tools, period of work, amount
of work, working condition, cost of production
• Scientific selection and training of workers– Work, Experience, Aptitude, Physical Strength
• Financial Incentives– Differential piece rate
• Economy– Optimum utilization of resources
• Mental revolution– Co-operation between management and
workers
Replacing rule of thumb (mere bases of estimates) with Science
Harmony in group actionCooperate with workers to ensure that
scientifically developed methods are being followed.
Maximum outputDevelopment of workersManagers analyze and plan work;
workers actually perform the tasks.
Principles of scientific Management
• Management not interested, WHY? • labour is cheap• profits are good• more responsibility for management • Workers are interested because• more security• training• higher wages
Consequences of Taylor’s Experiment
• Managers often implemented only the increased output side of Taylor’s plan.– They did not allow workers to share in increased
output.– Specialized jobs became very boring, dull.– Workers ended up distrusting Scientific
Management.• Workers could purposely “under-perform”• Management responded with increased use of
machines.• Aggressive attitude towards workers• Close strict supervision• Unions opposed differential piece rate
CRITICAL ANALYSIS OF SCIENTIFIC MANAGEMENTCRITICAL ANALYSIS OF SCIENTIFIC MANAGEMENT
“An approach to management that focuses on describing what managersdo and what constitutes good management practice”
Activities of an industrial organization◦ Technical (relating to Production)◦ Commercial (buying, selling and exchange)◦ Financial (search of capital & Optimum use)◦ Security (Protection of Property and person)◦ Accounting (including Statistic)◦ Managerial (planning, organizing, command, coordination
and control)
Henry Fayol’s Administrative Theory
There are three approach of studying Management theory by Fayol
• Managerial Qualities and Training• General Principles of Management• Elements of Management
• Physical (Health , Vigor)• Mental (ability to understand, judgment,)• Moral (energy, firmness, initiative, loyalty,
tact, & dignity)• Educational (Knowledge of the activities)• Technical (Skill to perform effectively)• Experience (arising from the work)
Managerial Qualities and Training
• Henri Fayol, developed a set of 14 principles:
1. Division of Labor: allows for job specialization. Fayol noted firms can have too much
specialization leading to poor quality and worker involvement.
2. Authority and Responsibility: Fayol included both formal and informal authority resulting from special expertise.
3. Unity of Command: Employees should have only one boss.
4. Line of Authority: a clear chain from top to bottom of the firm.
Fayol’s Principles
5. Centralization: the degree to which authority rests at the very top.
6. Unity of Direction: One plan of action to guide the organization.
7. Equity: Treat all employees fairly in justice and respect.
8. Order: Each employee is put where they have the most value.
9. Initiative: Encourage innovation.10. Discipline: obedient, applied, respectful
employees needed.
11. Remuneration of Personnel: The payment system contributes to success.
12. Stability of Tenure: Long-term employment is important.
13. General interest over individual interest: The organization takes precedence over the individual.
14. Esprit de corps: “union is strength” Share enthusiasm or devotion to the organization
• Planning
• Organization
• Commanding
• Coordination
• Controlling
Elements of Management
Basis of Difference
Taylor Fayol
Perspective Shop Floor Level Higher Mgt level
Focus Efficiency through work simplification & standardization
By observing certain principles
Orientation Production and engineering
Managerial function
Results Scientific observation & Measurement
Personnel Experience translated into universal truth
Overall Contribution
Basis for accomplishment onn production line
Systematic theory of Management
Difference between Scientific and Administrative Management
Authority is the power to hold people accountable for their actions.
Positions in the firm should be held based on performance not social contacts.
Position duties are clearly identified. People should know what is expected of them.
Lines of authority should be clearly identified. Workers know who reports to who.
Rules, Standard Operating Procedures (SOPs), & Norms used to determine how the firm operates.
• Sometimes, these lead to “red-tape” and other problems
Bureaucracy
Max Weber • Max Weber was a German
sociologist who developed the bureaucratic model.
• His rational bureaucracy states that employees performing a large variety of tasks in any organisation must follow established rules and regulations in order to ensure uniformity and rationality of output.
.• He therefore identified the characteristics of
an ideal bureaucracy to show how organizations should be run.
• According to Weber,
• “a bureaucracy is a highly structured, formalized and Impersonal organization”.
Max Weber’s Ideal Bureaucracy
Bureaucratic PrinciplesBureaucratic Principles
A Bureaucracyshould have
Written rules
System of taskrelationships
Hierarchy ofauthority
Fair evaluation and reward
• The behavioral school of management emphasized what the classical theorists ignored – the human element.
• The behavioral approach to management emphasized individual attitudes and behaviors and group processes, and recognized the significance of behavioral processes in the work-place.
• The behavioral management theory is also called the human relations theory as it addresses the human dimension of work.
BEHAVIORAL APPROACH
• A theory of motivation based upon a consideration of human needs had three assumptions:– Human needs are never completely satisfied.– Human behavior is purposeful and is motivated by the need
for satisfaction.– Needs can be classified according to a hierarchical structure
of importance from the lowest to highest.
• Several individuals and experiments contributed to this theory.– Elton Mayo– Abraham Maslow
The researchers and scholars associated with the Hawthorne experiments were Elton Mayo, Fritz Roethlisberger, T. N. Whitehead and William Dickson.
Study of worker efficiency at the Hawthorne Works of the General Electric Co. during 1924-1932.◦ Worker productivity was measured at various
levels of light illumination.◦ Researchers found that regardless of whether
the light levels were raised or lowered, productivity rose.
Actually, it appears that the workers enjoyed the attention they received as part of the study and were more productive.
The Hawthorne StudiesThe Hawthorne Studies
• Illumination Experiment• Really assembly test room experiments
– Incentives, rest period, changing working hours
• Mass interviewing Programm– Do you like your supervisor
• Bank wiring Observation Room Experiments– Fear of unemployment– Fear of raising the standards– Protection of slower workers– Satisfaction on the part of management
Group of 6 Women – (5) Assemblers and (1) Layout Operator
One Observer – Explained every incremental change and recorded results
Manipulated factors of production to measure effect on output:–Pay Incentives–Length of Work Day & Work Week–Use of Rest Periods–Company Sponsored Meals
Relay Assembly Test Experiments 1927-1929
1925-1927 – Objective Questions◦Work Conditions◦Work Relationships◦Yes/No Answers
1928-1932 – Conversational / Non-directive◦Attentive Sympathetic Listening◦Concern for personal needs◦ Increased in time from 30-90 minutes
Mass Interview Program at plant – 1925-1932
• They studied a group of 14 Male Workers who were wiring and soldering bank terminals.
• Few Special Conditions– Segregated work area– No Management Visits– Supervision would remain the same– Observer would record data only – no
interaction with workers
Bank Wiring Observation Group – 1931-1932
MASLOW’S HIERARCHY OF NEEDS PYRAMID
These include the most basic needs that are vital to survival such as the need for water, air, food and sleep.
These are the most basic and instinctive needs in the hierarchy because all needs become secondary until these physiological needs are met.
Physiological Needs.
• Once physiological needs are met, one’s attention turns to the safety and security in order to be free from threat of physical and emotional harm.
• Such needs might be fulfilled by:– Living in a safe area– Medical insurance– Job security– Financial reserves
Security Needs
• These include needs for belonging, love and affection.
• Relationships such as friendships, romantic, attachments and families help fulfill this need for companionship and acceptance, as does involvement in social, community or religion groups.
Social Needs
• Once a person feels a sense of belonging, the need to feel important arises.
• Esteem needs may be classified as internal or external.
• Some esteem needs are:– Self-respect– Achievement– Attention– Recognition– Reputation
Esteem Needs
• This is the highest level of Maslow’s hierarchy of needs.
• Self-actualizing people are self-aware, concerned with personal growth, less concerned with the opinions of others and interested fulfilling their potential.
• Self-actualized people tend to have needs such as:– Truth– Justice– wisdom
Self-actualizing Needs
• The quantitative management prespective emerged during World War II.
This approach focuses on achieving organizational effectiveness through the application of mathematical and statistical concepts.
The three main branches of the quantitative approach are:
1. Management Science2. Operations Management3. Management Information Systems
QUANTITATIVE APPROACH
Action can be expressed in terms of mathematical symbols, relationships and measurement data
Another name commonly used is Operations Research.
Management science techniques are widely used in the following areas:◦ Capital Budgeting and cash flow management.◦ Production scheduling.◦ Development of product strategies.◦ Planning for human resource development programs.◦ Maintenance of optimal inventory levels
This approach has been criticized for its overemphasis of mathematical tools.
Management Science
It deals with the effective management of the production process and the timely delivery of an organization's products and services.
It is concerned with:1) Inventory management2) Work scheduling3) Production planning4) Facilities location and design5) Quality assurance.
Operations Management
• MIS focuses on designing and implementing computer based information systems for business organizations.
• It converts raw data into information and provides the needed information to each manager at the right time, in the needed form.
• Charles Babbage was one of the earliest contributor to information system.
Management Information Systems
• A system is a set of interdependent parts which together form a unitary whole.
• The organization is a sub-system composed of four interdependent parts – task, structure, people and technology.
• This means is that as managers coordinate work activities in the various parts of the organization,
SYSTEMS APPROACH
Open and closed system• Closed System are not influenced by and not interact with
their environment.• Open System are influenced by and do interact with their
environment.
System Theory
INPUTSRaw MaterialHuman ResourcesCapitalTechnologyInformation
Transformation Process
•Employees work Activities•Management Activities•Technology and Operation Methods
OUTPUTS•Products and Services•Financial Results•Information•Human Results
FEEDBACK
“A management approach which says that organization are different , faces different situation (contingencies), and require different ways of managing.”
• Assumes there is no one best way to manage.
CONTINGENCY OR SITUATIONAL APPROACH
Popular Contingency variable◦ Organisation Size
As size increases, so do the problem of coordination. For instance, the type of organization structure appropriate for an organization of 50000 employee is likely to be inefficient for an organization of 50 employee.
◦Routineness of task technologyTo achieve its purpose, an organization
uses technology. Routine technologies require organizational structure, leadership style, And control system that differ from those required by customized or no routine technologies.
– Environmental UncertaintyThe degree of uncertainty caused by
environmental changes influence the management process. What works best in a stable and predictable environment may be totally inappropriate in a rapidly changing and unpredictable environment.
– Individual differencesIndividual differ in terms of their
desire for growth, autonomy, tolerance of ambiguity, and expectation. These and other individual difference are particularly important when managers select motivation techniques, leadership style, and job designs.
IMPORTANT TERMS• Organizing:- Arranging and structuring work
to accomplish organizational goals.• Organization:- An organization is a formal
group of people with one or more shared goals.
• Organizational Structure:- It is a formal arrangement of the job within an organization.
• Organizational chart: The organization structure which can be shown visually.
Organization Structure• Organization structure is the pattern of jobs
and groups of jobs in an organization.• It can be defined as the arrangement and
interrelationship of the component parts and positions of a company.
• An organization's structure specifies its division of work activities and shows how different functions or activities are linked.
• To some extent it also shoes the level of specialization of work activities.
• It indicates the organization’s hierarchy and authority structure and shows its reporting relationships.
• It provides the stability and continuity that allow the organization to survive the comings and goings of individuals and to coordinate its dealings with its environment.
Definition of Organization Structure
• Organizational Structure according to George and Jones, “ is the formal system of task and reporting relationships that controls, coordinates, and motivates employees so that they cooperate and work together to achieve an organization’s goals”
Organizing involves:1. The identification and classification of
required activities.2.The grouping of activities necessary to attain
objectives.3.The assignment of each grouping to a
manager with the authority (delegation) necessary to supervise it.
4.The provision for coordination horizontally (on the same or a similar organizational level) and vertically (for example, corporate headquarters, division, and department) in the organization structure.
Purpose of organization• Divides work to be done into specific jobs
and departments.• Assign tasks and responsibility associated
with individual jobs.• Coordinated diverse organizational tasks.• Clusters job into units.• Establishes formal lines of authority.• Allocates and deploy organizational
resources
Elements of organization structure
1. Specialization of activities.2. Standardization of activities.3. Coordination of activities.4. Centralization and decentralization of
decision making.5. Size of the work unit.
MGT/M3/SS
Determinants of Organizational Structure
• Strategy• Technology• People• Organization Size
Types of Organization Structure• The first task in designing an organization
structure is to identify all the activities of the organization and group them properly.
• This process of grouping the activities is commonly known as departmentation.
• The departmentation divides a large and complex organization into smaller and more flexible administrative units.
• It is the process of grouping activities and delegating authority to managers.
• There are various types of organization structures:
1. Line structure2. Line and staff structure3. Functional structure 4. Divisional structure5. Hybrid structure 6. Matrix structure
Line Structure• Line Structure is the simplest form of
organization and is most common among small companies.
• The authority is embedded in the hierarchical structure and it flows in a direct line from the top of the managerial hierarchy down to different levels of managers and subordinates and further down to the operative level of workers.
• It clearly identifies authority, responsibility and accountability at each level.
• These relationship in the hierarchy connect the position and tasks at each level with those above and below it.
• There is clear unity of command so that the person at each level is reasonably independent of any other person at the same level and is responsible only to the person above him.
Line StructurePRESIDENT
FOREMANC
WORKERS
FOREMANB
WORKERS
FOREMANA
WORKERS
PLANT MANAGER
Advantages of Line Structure• Because of the small size of the company
the line structure is simple and the authority are clear-cut, easily assignable and traceable.
• Communication is fast and easy.• Feedback from the employees can be acted
upon faster.• Effective Control and Discipline can be
easily exercised.
Disadvantages of Line Structure• In a rigid form of organization, there is a
tendency for the line authority to become dictatorial, it may be resented by the employees
• Also, there is no provision for specialists and specialization which is essential for the growth and optimization and hence for growing companies, pure line type of structure becomes ineffective
Line and Staff Structure• In this type of organization, the functional
specialists are added to the line, thus giving the line advantages of specialists.
• This type of Organizational Structure is most common among large enterprises.
• Staff is basically advisory in nature and usually does not possess and command authority over line managers.
Types of StaffTwo Types:General StaffSpecial Staff
General Staff: This group has general background which is
usually similar to the background of executives and serves as assistant to top management in one capacity or another
For Example: Special assistants, assistant managers, or in a
college setting as deputy chairpersons
Special Staff:• Unlike the general staff who generally
assists only one line executive, the specialized staff provides expert advice and service to all on a company wide basis
• This group has a specialized background in some functional area and it could serve in any of the following capacities:
1. Advisory Capacity2. Service Capacity3. Control Capacity
Advisory Capacity: The primary purpose of this group is to render specialized advice and assistance to management when needed. Some typical areas covered by advisory staff are legal, public relations and economic development.
Service Capacity: This groups provide a service which is useful to the
organization as a whole and not to any particular division or function.
Example: Personnel Department serving the organization by
procuring the needed personnel for all departments. Other example is Research and Development, Purchasing and so on
• Control Capacity: This group includes quality control staff who may have the authority to control the quality and enforce standards.
Line and Staff Structurepresident
Vice president
Public relationsadvisor
Legal council
Plant manager
personnelengineering
Supervisorassembly
SupervisorMachine shop
workers workers
staff
staff
line
staff
line
staff
line line
Advantages of Line and Staff• The specialized advice improves the quality
of the decisions resulting in operational economies
• Staff specialists are conceptually oriented towards looking ahead and have the time and training to assist in strategic planning and analyze the possible effects of expected future events
• Line Managers are generally occupied with their day –to –day current operation, they do not have the time or background for future planning and policy formulation
Disadvantages of Line and Staff• Confusion and Conflict arise between line and
staff.
• High Cost due to the confusion and conflict.
• Tendency of staff personnel to build their own image and worth.
• Building Staff Self Image, at the cost of undermining the authority and responsibility of line executives.
Functional Structure• This groups positions into departments
according to their main functional areas
• Some of the main functions of most organizations are those of production, marketing, finance, human resources, legal, research and development and so on
• The chain of command in each function leads to a functional head who in turns reports to the top manager
Functional Structure
V P M arke tin g V P F in an ce
C ou n try A C ou n try B
P rod u c t 1 P rod u c t 2 P rod u c t 3
V P O p era tion s V P R & D V P L eg a l is su es
C E O
Functional StructureAdvantages
• Clarity about career path
• Economies of Scale wothin function
• Specialisation• Co-ordination• In depth skill
development• Power & Prestige
Disadvantages• Boredom and
Monotony• Poor Decision
Making• Sub-unit conflict• Managerial Vaccume
Divisional Structure• Alternative to function structure is the
divisional structure which allows an organization to coordinate intergroup relationships more effectively.
• It involves grouping of people or activities with similar characteristics into a single department or unit.
• Also known as “self-contained structures”, organizations operates as if they were small organizations under a large organizational umbrella.
• The decision are generally decentralized so that the departments guide their own activities
• This facilitates communications, coordination, and control, thus contributing to the organizational success
• Also, because the units are independent and semi-autonomous , it provides satisfaction to the managers and this in turn improves efficiency and effectiveness
Forms of Divisional Structures
Basically three major forms of divisional structures that companies can choose from:
1. Product Structure
2. Customer Structure
3. Geography Structure
Product Structure• In this type of structure, the units are formed
according to the type of product. • More useful in multi-line corporations, where
product expansion and diversification and manufacturing and marketing characteristics of the production are of primary concern.
• While the general policies are decided upon by the top management within the philosophical guidelines of the organization, each division is autonomous and strive to improve and expand its own product line.
• Each Divisional General Manager is responsible for its costs, profits, failures and successes.
Product Structure
Advantages• Clear focus on
market segment helps meet customers’ needs
• Positive competition between divisions
• Better control as each division can act as separate profit centre
Disadvantages• Duplication of
functions (e.g. different sales force for each division)
• Negative effects of competition
• Lack of central control over each separate division
Customer Structure • Customer divisions are divisions set up to
service particular types of clients or customers.• These divisions cater to different needs of
various segments of customers.• The importance of customer satisfaction has
stimulated firms to search for creative ways to serve people better
• Organizations with customer-based departments are better able to satisfy customer-identified needs than organizations that base departments on non-customer factors
Division by Customers
Geographic Division• These are divisions designed to serve
different geographic areas.• Under this method, territory or location is
taken as the basis for organizing.• This is common in organizations that
operate over wide geographic areas such as banking, insurance and transportation firms.
• This type of organization structure is often adopted when it is important to provide products and services that are customized to the needs of different regions.
• Generally business firms resort to this structural form when similar operations are undertaken in different geographic areas as in chain retailing, wholesaling, automobile-assembling, etc.
Geographic Division
Geographic Division
Advantages
• Serve local needs better • Positive competition• More effective communication between firm
and local customers
Disadvantages
• Conflict between local and central management• Duplication of resources and functions
Hybrid Structure• Hybrid organizational structures combine
two or more traditional organizational design formats based on strategy and business needs.
• Hybrid structure is a form of departmentalization that adopts both functional and divisional structures at the same level of management.
• Many large organizations adopt this structure so as to incorporate the advantages of both functional and divisional structures.
• The functional structure is adopted to derive the benefits of economies of scale, greater competence of managers and efficiency in resource utilization.
• While the divisional structures is created to focus on products, services or markets.
Advantages of Hybrid Structure• The organization can achieve a specific
competency and economies of scale in prime functional areas along with focus on products, services and markets.
• It also facilitates adaptability and flexibility in handling diverse product or service lines, territories or differing needs of customers, through a partially divisional structure.
• It helps to strike balance between divisional and corporate goals.
Matrix Structure• The combining of functional and project
or product patterns of departmentation in the same organization structure.
• Attempts to maximize the strengths and minimize the weaknesses of both the functional and product bases.
• Superimpose a horizontal structure of authority, influence, and communication on the vertical structure.
• Facilitates the utilization of highly specialized staff and equipment.
Project or product A
Project or product B
Project or product C
Project or product D
Project or product E
Manufacturing Marketing Engineering Finance
Functions
Projects, products
Example of the Matrix Organization Model
MGT/M3/SS
Matrix Organization (in engineering)
MGT/M3/SS
• In figure marketing, HR, R&D, Finance, Production represent the functional department that comprise the horizontal hierarchy; the mangers of Product/Project A B & C represent divisional units operates vertically.
• Here, employee has to report to two matrix bosses. So it violates the rule of Unity of Command
• A matrix structure is often seen in construction (building bridge, dam), aerospace(designing or launching satellite), a consultancy firm where professional experts work together on a project.
Matrix Structure
Note the duplication of core functional skills across each product line.
•Matrix organizations provide clear accountability within a specific business function and allow more efficient allocation of specialized skills across the entire business.
MGT/M3/SS
Matrix Stages• Stage 1
– Is a traditional structure, generally a functional one. This structure follows the unity-of-command principle.
• Stage 2– Here, Managerial integrator positions are established . These are
developed so that individuals can take responsibility for particular projects (ex. project managers), overseas product launches (ex product manager) where coordination across functional departments is necessary.
• Stage 3– Here, the managerial integrators operate on a permanent basis(ex . Brand managers takes care of issues pertinent to a brand regularly)
• Stage 4– Is a mature matrix. Matrix Bosses have equal power.
Task Force
Teams
ProductManagers
ProductManagement Depts.
(1)
(2)
(3)
(4)
Evolutionary Steps to the Matrix Model
Guidelines for Making Matrix Management Effective
1. Define the objectives of the project or task.2. Clarify the roles, authority, and responsibilities of managers
and team members.3. Ensure that influence is based on knowledge and
information, rather than on rank.4. Balance the power of functional and project managers.5. Select an experienced manager for the project who can
provide leadership.6. Undertake organization and team development.7. Install appropriate cost, time, and quality controls that
report deviations from standards in a timely manner.8. Reward project managers and team members fairly.
MGT/M3/SS
When to consider a matrix structure?• If an organization product portfolio is very wide,
it may adopt product division but rapid developments in engineering & technology may necessitate it to adopt functional structure.
• When the external environment of org is changing and uncertain, and they have to process large amounts of information and coordinate activities to develop newer and better products.
• When org need to be flexible in using the functional resources across various products or projects.
Advantages of Matrix Organization
• Efficient use of resources• Flexibility in conditions of change and
uncertainty• Technical excellence• Freeing top management for long-range
planning• Improving motivation and commitment• Providing opportunities for personal
development
Disadvantages of Matrix Organization
• Administration costs are higher because of the additional hierarchy of project managers and their immediate support staff.
• As the individuals working within the matrix structure report to two bosses, unity of command may not be there.
• Due to the dual authority system and the need for greater communication, the possibility of conflicts is greater between functional managers and project managers.
• Individuals are too engrossed with maintaining good relations with their peers and tend to neglect the project goals and clients.
• Though it is adaptable to change, it is sometimes extremely slow in responding to changes.
ORGANIZATIONAL DESIGN• It is defined ass the process of developing
the organizational structure.• It plays a key role in determining an
appropriate organizational structure• The importance of designing a structure is
that is design an organization structure that is appropriate to the people, technology and tasks of the organization.
• Managers take into consideration a number of factor when designing organization structure.
Organizational Design• It is a process that involve decisions about
six key elements:1. Work specialization2. Departmentalization3. Chain of command4. Span of control5. Centralization and Decentralization6. Formalization
Work specialization• Work specialization is dividing work activities into
separate job tasks. Individual employees specialize in doing part o\f an activity rather than the entire activity in order to increase work output.
• It helps employee be more efficient.• However when it’s carried to extreme , work
specialization can lead to problem including boredom, fatigue, stress, poor quality, increase absenteeism, reduced performance, and increased turnover.
• Ex; Cairn , TATA steel, American Express, use minimal work specialization and instead give employee a broad range of tasks to do.
Departmentalization
• Departmentalization is a process in which an organization is structurally divided by combining jobs in departments according to some shared characteristic or basis.
Functional Geographic
Product Customer
Departmentalization Basis
Chain of commandThe continuous line of authority that extends
from upper levels of an organization to the lowest levels of the organization and clarifies who reports to who.
• To understand the chain of command, you have to understand three other concepts:AuthorityResponsibilityUnity of command
• Authority:- refers to the rights inherent in a managerial position to tell people what to do and to expect them to do it.
• Responsibility :- Responsibility is one’s obligation or expectation to perform the function assigned to the best of one’s ability in accordance with directions received.
• Unity of command:- the management principle that each person should report to only one manager.
Span of Management/Control• According to Kathryn M. Bartol and David
C. Martin, “ the span of management or span of control is the number of subordinates who report directly to a specific manager.”
The number of employees who can be effectively and efficiently supervised by a manager.• Narrow Span • Wide Span
• Wide span of control means one manager supervises many members
• Narrow span of control means one manager supervises a small number of members
Factors affecting Span of control
Skills and abilities of the managerEmployee characteristicsCharacteristics of the work being doneSimilarity of tasksComplexity of tasksStandardization of tasks
MGT/M3/SS
Tall Versus Flat Structure
• Tall Structure– A tall structure comprises many hierarchical levels
with narrow spans of control.– As the no of level increase , the effort and
expenditure involved in managing them also increases so it is an expensive affair
– Communication gets unduly complicated.– Numerous departments and level make the
planning and controlling tasks complicated.
MGT/M3/SS
• Flat Structure– It has a wide span of cont and fewer hierarchical
levels.– Here tasks are highly inter-related, as a result,
control and coordination are negatively affected.
MGT/M3/SS
Problems of Poor Span
• Over-supervision• Delay in decision• Problem in Communication• Decreased level of initiative an morale• Less opportunity for responsibility and
development• Higher Cost
Centralization and Decentralization
• Koontz and O’Donnell state, ‘the problem of centralization of authority is consequently a basic phase of the principle of delegation. To the extent the authority is not passed on, it is centralized.’
• Thus decentralization takes place when authority is delegated.
• According to Henri Fayol, “ Everything that goes to increase the importance of the subordinates’ role is decentralization, everything which goes to reduce it is centralization”
Centralization• Centralization is the systematic and consistent
reservation of authority at the central point within the organization.
• According to Henri Fayol, “ Everything that goes to increase the importance of the subordinates’ role is decentralization, everything which goes to reduce it is centralization”
• Every manager should reserve certain amount of authority for those decision which are of strategic nature and which can not be taken by the managers at the lowest level objectively and prospectively.
Factors affecting Centralization
• Leadership• Integration requirement• Uniform action• Emergency• Insufficiency of managerial manpower• Monetary and vital decisions
Advantages of Centralization• Fast decisions• Successful control• Safeguarding secrets• Stability of policy• Appraisal of departmental activity• Personal leadership• Market gain• Promotes Integration and coordination• To handle Emergent situation
Disadvantages of Centralization• Lack of specialization• Load on the top executive• Inappropriate and undeveloped decisions• Volatility when top executive is not available.• Ignorance of human factor• Misuse of power by top executive• Non-compliance• Dishonesty and partiality• Undesirable effect of motivation due the
dictatorial and repressive attitude of top executive.
Decentralization• Decentralization refers to the systematic
effort to delegate to the lowest level all authority except that which can only be exercised at central points.
• It generally spreads level by level from the top to the bottom.
• According to Keith Davis, ‘Dispersal of the authority and duties to the lowest unit in the organization so far as it is feasible is called decentralization.’
Factors affecting Decentralization• Load of top executives• Requirement for diversification• Hold on the market• Growth of Managers• Motivational development• Size of the organization• No of Levels in the org structure• Availability of manager with skill,
knowledge and ability
Advantages of Decentralization• Reduces load on top executives• Increased motivation• Enhance morale• Simplifies division of work• Leadership growth• Efficient control and supervision• Stability and continuity• Flexibility• Develops harmony
Disadvantages of Decentralization
• Difficulties of co-ordination• Waste of staff• Damaging in emergency• Problems of control• Increased administrative costs• Internal constraints
Formalization It is the degree to which jobs within the
organization are standardized and the extent to which employee behavior is guided by rules and procedures.
• It is the extent to which expectations regarding the means and ends of work are specified, written, and enforced.
• Highly formalized jobs offer little discretion over what is to be done.
• Low formalization means fewer constraints on how employees do their work.
• High formalization: Formal rules and procedures used to standardize operations– Usually associated with centralized
authority• Low formalization: Coordination by mutual
adjustment rather than formal rules & procedures– Usually associated with decentralized
authority
Organization Design ModelsThe Mechanistic Model
• Emphasizes importance of achieving high levels of production and efficiency through:– Extensive use of rules and
procedures– Centralized authority– High specialization of labor
The Organic Model• Emphasizes importance of
achieving high levels of production and efficiency through:– Limited use of rules and
procedures– Decentralized authority– Relatively low degrees of
specialization
Comparison of Mechanistic and Organic Structures
Process Mechanistic Structure Organic Structure
1. Leadership Includes no perceived confidence and trust between superiors and subordinates.
Includes perceived confidence and trust between superiors and subordinates.
2. Motivation Taps only physical, security, and economic motives, through use of fear and sanctions.
Taps a full range of motives through participatory methods.
3. Communication Information flows downward and tends to be distorted, inaccurate, and viewed with suspicion by subordinates.
Information flows freely: upward, downward, and laterally. The information is accurate and undistorted.
Comparison of Mechanistic and Organic Structures
Process Mechanistic Structure Organic Structure
4. Interaction Closed and restricted. Subordinates have little effect on departmental goals, methods, and activities.
Open and extensive. Both superiors and subordinates are able to affect departmental goals, methods, and activities.
5. Decision Relatively centralized. Occurs only at the top of the organization.
Relatively decentralized. Occurs at all levels through group processes.
6. Goal setting Located at the top of the organization, discouraging group participation.
Encourages group participation in setting high, realistic objectives.
Comparison of Mechanistic and Organic Structures
Process Mechanistic Structure Organic Structure
7. Control Centralized. Emphasizes fixing blame for mistakes.
Dispersed throughout the organization. Emphasizes self-control and problem solving.
8. Performance goals
Low and passively sought by managers, who make no commitment to developing the organization’s human resources.
High and actively sought by superiors, who recognize the need for full commitment to developing, through training, the organization’s human resources.
Team Structure
• What it is: A structure in which the entire organization is made up of work groups or teams.
• Advantages: Employees are more involved and empowered. Reduced barriers among functional areas.
• Disadvantages: No clear chain of command. Pressure on teams to perform.
Boundaryless Structure
What it is: A structure that is not defined by or limited to artificial horizontal, vertical, or external boundaries; includes virtual and network types of organizations.
• Advantages: Highly flexible and responsive. Draws on talent wherever it’s found..
• Disadvantages: Lack of control. Communication difficulties..
Contemporary Organizational Designs
