UNIT-II

Designing Organizational Structures

Organization

Organization refers to the institution where in the management functions are performed

Organizing: is one of the functions of management, which means to achieve the plans.

Process of Organization

Determination of objectives, strategies, plans and policies

Determination of activities Separation and grouping of activities Delegation of authority Delegation of responsibility Establish inter-relationships Providing physical facilities and proper

environment

Principles of Organization

Unity of objectives Co-ordination Organizational efficiency Span of management Scalar principle Delegation of authority and responsibility Unity of command Balance Flexibility Leadership facilitation

Design of Organization structure

The main objective of an organization structure is to ensure that efforts of all the people working in various sections are co-ordinated and integrated for achieving the task in the most efficient and effective way with minimum consumption of resources i.e. economical ways

Design of Organization structure

Formal organization structure: According to classical theorists the formal organization is built an four pillars

1) Division of labour

2) Scalar functional processes

3) Structure

4) Span of control

Definition: An organization is formal when the activities of two or more persons are consciously coordinated towards common objectives.

Design of Organization structure

Informal organization: Informal organization arises spontaneously based on friendship or some common interest and not based on rules, regulation and procedures. It is developed by the employees themselves and not by the formal authority.

Definition: Informal organization brings cohesiveness to a formal organization. It brings to the members of formal organization a feeling of belonging of status, self-respect and social satisfaction.

Basics concepts related to the organization

Organizational Hierarchy Authority and Responsibility

Authority is the power to give commands and to use discretion vested in that particular position or Job.

Responsibility is the obligation on the part of the subordinate to complete the given job.

Basics concepts related to the organization

Delegation of Authority The process of transferring authority from top to

the lower levels in the organization is called delegation.

Two types of Delegation 1. Centralized2. De-centralized Span of Management Number of all kinds of relationships (N)=n(2n-1+n-1)Where n=number of subordinates reporting to a manager

Factors determining the degree of decentralization

How significant and costly is the decision? How big is the organization? Does the department have enough economic resource

and managerial talent? How was the business built? What is the philosophy of the management? What is the competency of managers? Is there adequate number of managers? How sophisticated are the control techniques? What is the extent of geographical area over which the

activities are dispersed?

Basics concepts related to the organization

Departmentation: For the sake of efficient supervision and control, the factory/enterprise is divided into different departments. Each department is entrusted with a particular function for carrying out particular activity each departmental head is expected to control and supervise the work in his department.

Definition: The process of dividing the work and then grouping them into units and subunits or departments for the purpose of administration.

Basics concepts related to the organization

Method of Departmentation By function: It is divided into primary function to be performed

such as, finance, marketing, production, personnel etc. By product: All activities related to a particular product line may

be grouped together. By process: In this method, the manufacturing activity are sub

divided on the basis of their process of production, such as lathe department, milling department, drilling department, etc

By geographical region: This method may be adopted when the enterprise produces and sells in the wide market, often in international markets.

Basics concepts related to the organization

Flat and Tall organizations

Flat organization:-Which have relatively few or even one level of management.

Flat is also known as wider span of control Flat organization

Basics concepts related to the organization

Wide Span - Advantages Fewer levels of management and decision making Lower supervision costs Subordinates feel more satisfied with greater decision

making authority

Wide Span - Disadvantages Makes it difficult to supervise the subordinates directly Flat structures may not work as the business expands

Basics concepts related to the organization

Tall organization:- have many levels of management

-involves narrow span of managementNarrow Span - Advantages Allows for tight control and supervision Communication with subordinates is easier

Narrow Span - Disadvantages Costs related to mgt and administration tend to increase Coordination becomes difficult Too much supervision may hinder initiation and

motivation

Types of Organizations

1.Line organizations:- is also called military or scalar organization. is said to be the oldest and most traditional type of organizations. Managers in this organizations have direct responsibility for the results.

Merits Demerits

Simplicity Undue reliance

Discipline Personal limitations

Co-ordination Overload of work

Effective Communication Dictorial way

Economical Unsuitable for large concerns

Unity of command Scope of Favoritism

Prompt Decision General interest may be overlooked

2.Line and Staff Organization:-

Drawn from earlier civilization and armies. Staff managers support the functions of the line

managers. Line and staff organization is a service organization. Line and staff organization in a manufacturing unit. Line and staff in the armed forces.

2.Line and Staff Organization:-

Merits Demerits

Planned specialization Chances of misinterpretation

Quality decisions Chances of friction

Prospect for personal growth

Ineffective staff in the absence of authority

Less wastage Expensive

Training ground for personnel

Loss of initiative by line executives

3.Functional organization:-

F.W.Taylor suggested functional organization in his theory of Scientific management in support of his ‘one best way’ of doing things.

The planning and implementation tasks are divided to ensure the division of labour.

The foremen involved in the planning task.

3. Functional Organization:-Merits Demerits

Separation of work Indiscipline

Specialization Shifting of responsibility

Narrow range with high depth

Kills the initiative of workers

Ease in selection and training

Overlapping of authority

Reduction in prime cost Lack of coordination between functions

Scope of growth and development of business

4.Committee Organization:-

A committee is formed when two or more persons are appointed to work as a team to arrive at a decision on the matters referred to it.

Merits:-

Pools up the organization resources in terms of knowledge, skills and experience.

Represents groups, facilitates group decisions It yields good results It reduces the fear of two much authority It motivates all the concerned

Demerits:-

Responsibility for decisions cannot be fixed on a particular person.

It calls for high degree of coordination. It involves high cost in terms of time and

money.

5.Matrix organization:-

Also called Project organization. It is a combination of all relationships in the

organization vertical, horizontal and diagonal. It is mostly used in complex projects. It provides a high degree of operational

freedom.

Merits:-

Offers operational freedom and flexibility. Seeks to optimize the utilization of resources. It focus on end results. It maintains professional identity. It holds an employee responsible for

management of resources.

Demerits:-

Very complex to manage. Violates unity of command. Employee may find it frustrating to work with

two bosses. Requires too much time for meeting and

collaboration.

6.Virtual Organization:-

Virtual organization structure does not physically exist, but its effect is felt.

Merits:- Enable for doing business with less capital, less HR

and other inputs. Provide flexibility of operations. React to the environment demands most efficiently.

Demerits:-

Companies do not have strong foundations or strengths in their operations.

Organizations have to heavily depend on out sourcing.

Failure in network results in the failure of the entire organization.

7.Cellular Organization Structure

Organizations structured around the units/cells that complete the entire assembly process are called cellular organizations.

In cellular organizations, workers manufacture total product or sub-assemblies in teams (cells).

Every team (cell) of workers has the responsibility to improve or maintain the quality and quantity of its products.

These cells comprise self-managed teams. They monitor themselves and also correct where necessary on their own.

Merits

Organizational structures are highly adaptable to the work which needs to be performed and supportive of innovation.

A minimal amount of structure is required as a condition of enabling productive work.

By nature, adapts to the complexity and unpredictability of its environment as needed.

Entrepreneurial energy and activity, both internal to and external to the organization, are each nurtured in this environment.

Interdependent relationships and self-organizing practices are each enabled and supported.

Demerits

The relative newness of this emergent model means that there is no significant literature regarding its effectiveness.

The model is based on some naive assumptions about human nature and the capacity for changeability and negotiated roles.

Significant negotiation may be required to address differences in relative power among the participants.

Certain people may be excluded from full participation in this organizational model because of the dynamics and expectations of participation.

8.Team Organization Structure:-

A structure in which the entire organization is made up of work groups or teams is known as team structure.

Team structures are both permanent and temporary in nature as situation demands.

‘We report to each other’ is the main feature of team structure.

A cross functional team comprises members from different functional departments such as marketing, finance, HR, production etc.

Project teams are convened for a particular task or project and these get dissolved once task is completed.

Merits

Team-based organizations filter decision making down to all levels of management, while traditionally structured organizations rely on top management to make decisions.

Team-based organizations require that all employees participate in the decision-making process.

Employees feel they are part of the total organization, rather than members of an individual department.

Consequently, team-based organizations run more efficiently and effectively, giving them a competitive edge in today's global market.

Demerits

Team-based organizations value team performance over individual performance. Thus, motivating individuals in a team-based organization can be more challenging.

In addition, team-based organizations are decentralized rather than hierarchical. This lack of centralization is another disadvantage of team-based organizations, because decentralization can lead to coordination and control problems for management.

9.Boundaryless Organization Structure

An organization has external boundaries that separate it from its suppliers and customers, and internal boundaries that provide demarcation to departments. This rigidity is removed in boundary less organizations, where the goal is to develop greater flexibility and responsiveness to change and to facilitate the free exchange of information and ideas.

It is made up of self-managing and cross-functional teams that are organized around core business processes. The teams include employees from different functional areas as well as customers and suppliers.

Merits and Demerits

Merits Boundary less organization is able to achieve greater

integration and coordination. They are able to adapt to environmental changes.

Demerits However, it can be difficult to overcome political and

authority boundaries. It can be time consuming to manage the democratic

process to coordinate the efforts of many stakeholders.

10.Inverted pyramid Organization Structure

This is a structure, which is wide at the top and norrow at the base.

It includes a few levels of management. For instance, sales people and sales support staff sit on the top as the key decision makers for all the issues related to sales and dealing with the customers.

Since the sales staffs are in touch with the customer and aware of the requirements of the customers, they are given all the freedom to follow their own best judgment at all levels.

Inverted Pyramid figure

Merits

1. In this structure the customers are given the first preference. This way it becomes very simple to know their preferences and plan the strategies of the organization accordingly.

2. Front line employees are given more responsibility and authority in the organization than the top management because they are closest to the customers.

3. Decentralization of authority and responsibility place a very important role in prompt and timely decisions.

4. The inverted pyramid structure motivates the employees as they are placed in a better position than the top management.

Demerits

1. This structure may be dangerous because the role of top management is shifted to supporting one from that of commanding one which ultimately leads to the direction less- organization.

2. In this structure there is absence of clear authority and responsibility levels as a result of which people become confused and business veers out of control.

3. Frontline supervisor cannot make strategies regarding organizations  even though they have proper understanding  of the customers because they are not equipped to do so.

Organic vs Mechanistic StructuresOrganic Mechanistic

Joint Specialization:Employees work together and coordinate tasks

Individual specialization:Employees work separatelyand specialize in one task

Complex integrating mechanisms:task forces and teams are primaryintegrating mechanisms

Simple integrating mechanisms:Hierarchy of authority well-defined

Decentralization:Authority to control tasks is delegated.Most communication lateral

Centralization:Decision-making kept as high as possible.Most communication is vertical.

Mutual Adjustment:Face-to-face contact for coordination.Work process tends to be unpredictable

Standardization:Extensive use made of rules & StandardOperating Procedures

Much verbal communication Much written communication

Informal status based on perceived brilliance

Informal status in org based on size of empire

Organization is network of persons orteams. People work in different capacitiessimultaneously and over time

Organization is a network of positions, corresponding to tasks. Typically each person corresponds to one task