Organization

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ObjectivesTo understandDefinition of organization?Organizational structureOrganizational chart

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OrganizationA socialunitof people that isstructuredand managed to meet aneedor to pursue collectivegoals. All organizations have amanagementstructurethat determinesrelationshipsbetween the differentactivitiesand themembers, and subdivides andassignsroles,responsibilities, andauthorityto carry out differenttasks. Organizations areopensystems--they affect and are affected by theirenvironment.An organization is a collection of people working together in a coordinated and structured fashion to achieve one or more goals.

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What Is Organizing?OrganizingArranging the activities of the enterprise in such a way that they systematically contribute to the enterprises goals.

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Purposes of OrganizingDivides work to be done into specific jobs and departments.Assigns tasks and responsibilities associated with individual jobs.Coordinates diverse organizational tasks.Clusters jobs into units.Establishes relationships among individuals, groups, and departments.Establishes formal lines of authority.Allocates and deploys organizational resources.

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Defining Organizational StructureOrganizational StructureThe formal arrangement of jobs within an organization.Organizational DesignA process involving decisions about six key elements:Work specializationDepartmentalizationChain of commandSpan of controlCentralization and decentralizationFormalization

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Work SpecializationThe degree to which tasks in the organization are divided into separate jobs with each step completed by a different person.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 jobOverspecialization can result in human diseconomies from boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover.

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Departmentalization

The process through which an organizations activities are grouped together and assigned to managers; the organization wide division of work.

Functional Grouping jobs by functions performedProductGrouping jobs by product lineGeographicalGrouping jobs on the basis of territory or geographyProcess Grouping jobs on the basis of product or customer flowCustomerGrouping jobs by type of customer and needs

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Figure 1.1: Departmentalization

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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.

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AuthorityThe rights inherent in a managerial position to tell people what to do and to expect them to do it.ResponsibilityThe obligation or expectation to perform.Unity of CommandThe concept that a person should have one boss and should report only to that person.

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Chain of Command

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Span of ControlThe number of employees who can be effectively and efficiently supervised by a manager and report to a particular manager.Width of span is affected by:Skills and abilities of the managerEmployee characteristicsCharacteristics of the work being doneSimilarity of tasksComplexity of tasksPhysical proximity of subordinatesStandardization of tasks

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Figure 1.3 Tall Versus Flat Organizations

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Centralization and DecentralizationCentralizationThe degree to which decision-making is concentrated at a single point in the organizations.Organizations in which top managers make all the decisions and lower-level employees simply carry out those orders.A function of how much decision-making authority is pushed down to lower levels in an organization; the more centralized an organization, the higher the level at which decisions are madeDecentralizationThe pushing down of decision-making authority to the lowest levels of an organization. Organizations in which decision-making is pushed down to the managers who are closest to the action.Employee EmpowermentIncreasing the decision-making authority (power) of employees.

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FormalizationThe degree to which jobs within the organization are standardized and the extent to which employee behavior is guided by rules and procedures.Highly formalized jobs offer little discretion over what is to be done.Low formalization means fewer constraints on how employees do their work.

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Contingency FactorsStructural decisions are influenced by:Overall strategy of the organizationOrganizational structure follows strategy.Size of the organizationFirms change from organic to mechanistic organizations as they grow in size.Technology use by the organizationFirms adapt their structure to the technology they use.Degree of environmental uncertaintyDynamic environments require organic structures; mechanistic structures need stable environments.

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Contingency Factors (contd)Strategy Frameworks:InnovationPursuing competitive advantage through meaningful and unique innovations favors an organic structuring.Cost minimizationFocusing on tightly controlling costs requires a mechanistic structure for the organization.ImitationMinimizing risks and maximizing profitability by copying market leaders requires both organic and mechanistic elements in the organizations structure.

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Organizational Chart

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Terms to Knoworganizingorganizational structureorganizational designwork specializationdepartmentalizationchain of commandauthorityresponsibilityunity of commandspan of controlcentralization

decentralizationemployee empowermentformalizationresponsibilityunity of commandspan of controlcentralizationdecentralizationemployee empowermentformalization

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Group DiscussionForm a group of 4 or 5 people.Discuss one of the elements of organizational design.Choose one of departmentalization form and describe it by making the organizational chart!*

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