Organization structureand communication

Section 4

OrganizingOrganizing

the process of establishing relationships among functions, personnel and physical factors.

the process of creating a structure for the organization that will enable its people to work together effectively

Organization structureOrganization structure

The structure or patterned relationships among people to accomplish planned activities for the achievement of set goals

Organization chartOrganization chart

a diagram of the functions, departments, or positions of an organization and how they are related

shows an organization’s structural skeleton with formal lines of authority

Types of organization structure

Line organizationLine organization

direct flow of authority

direct vertical relationships connecting the

position at each level

subordinates receive instructions from only

one supervisor

suitable for small firms

Line-and staff organizationLine-and staff organization

combines the direct flow of authority with staff departments that support

lines functions : directly affect the principal

work flow in an organization

staff functions : support activities that provide service to line departments

two basic types of staff positions:

– personal or general staff

– specialist staff

employees receive daily supervision from a line manager and specialized advice from staff

commonly used in medium and large sized firms

staff managers also have line authority over subordinates in their own departments

staff authority : the authority that supports, assists and advises holders of line authority

Classification by departmentalization

Functional organizationFunctional organization

A form of departmentalization in which everyone engaged in one functional activity is grouped together into one unit

used mainly by smaller firms

it brings together in one department all engaged in one activity

Product/market organizationProduct/market organization

A type of organization structure where a company is composed of divisions that bring together all those involved with a certain type of product or market.

Also known as divisional organization

A division resembles a separate business

each division is accountable for profit or loss

but not an independent entity

3 types: division by product, division by

geography/territory, and division by customer

Division by productDivision by product

Jobs and activities relating to a single product

or service are grouped under a division

different divisions for different products of the

same company

is logical when each product requires different

manufacturing technology and marketing

methods

Division by Division by geography/territorygeography/territory

Grouping together jobs and activities located in the same place

focus attention on unique characteristics and requirements of particular regions

logical when a plant must be located as close as possible to sources of raw materials or markets

Division by customerDivision by customer

Grouping together that serve specific customers or clients

sells most of its products to a particular customer

suitable for organizations with highly diversified lines of products

Matrix organizationMatrix organization

An organization structure in which specialists from different parts of the organization are brought together to work on special projects

each employee will report to both a function or divisional manager and to a project or group manager

A project structure is added to another more traditional structure

a project manager is selected to head the total effort

the project manager is responsible for organizing and coordinating all activities

Project members receive instructions from the project manager but maintain membership in their permanent departments

the project group will be disbanded and its members will return to their respective departments

Committee organizationCommittee organization

in which authority and responsibilities are jointly held by a group of individuals

most large organizations make widespread use of committees within the main organizational structure

committee may be permanent or ad hoc.

Advantages and disadvantages Advantages and disadvantages of different forms of organizational structure

Line

line and staff

functional

product/market

matrix

committee

Factors affecting organization Factors affecting organization structurestructure

Strategic choices– top management’s philosophy, products and

services range, and geographic areas served

– functional structure => if only need to respond to pressures from customers

– divisional structure => if chooses a wide range of product and.or geographic areas to be served

Technology

– technology becomes complex

=>from traditional to divisional structure

– matrix is desirable with advanced technology

Environment– complex environment

=> specialized staff are needed

– complex/dynamic environment

=>divisional organization structure

Size– smaller firms => functional structure

– an organization grows => product/market structure

– major operations throughout the world

=>matrix or divisional structure

Principles of successful Principles of successful organization structureorganization structure

should have objectives

clear lines of authority and accompanying

responsibility

min. no. of levels

unity of command => only one supervisor

flexible structure to permit changes

Contemporary Organization Contemporary Organization DesignDesign

to examine the firm and its situation

=> to design a form of organization

structure to meet its needs

2 alternatives : • downsizing• reengineering

Meaning of ReengineeringMeaning of Reengineering

periodically assess all aspects of business radical redesign of organizational processes

to achieve major improvements in costs, quality and speed

reduction of cycle time forgets the old way of doing things and

attempt to build the best system from scratch

Role of Information Role of Information TechnologyTechnology

Reengineering are often accompanied by the use of advanced computer system

technology removes limits to the way employees perform their work

reengineering does not result in any particular organizational form

flattening the structure by reducing no. of managers

may require workers to develop a broader range of skills

a long term process requiring major shifts and significant changes in organizational structure

DownsizingDownsizing

the act of reducing the no. of employees

as organization grows, additional management layers will be added

current trend => to reduce the size of corporate staff and middle management to reduce costs

Reasons of downsizingReasons of downsizing

Declining economic conditions, shifts in demand, ….

Advancement in technology

Advantages of downsizingAdvantages of downsizing

reduction of salaries

to cope with economic recession

to cut expenses by increasing employees’

efficiency

faster decision making, smoother

communication and increase in productivity

DisadvantagesDisadvantages

costs associated with the elimination of jobs

costs associated with training remaining

employees

morale will be affected

may result in lower quality

Problems raising from Problems raising from downsizingdownsizing

Financial

less no. of employee

morale

staff learn to be more flexible to cope with various job demands

automation job re-design emphasis on the quality of staff (to keep good

staff with attractive incentive programme and better training)

maintain staff morale

Less no. of employeesLess no. of employees

Methods to maintain moraleMethods to maintain morale

more generous compensation

communication and explanation to all staff

help laid off worker to look for other jobs

definitiondefinition

the act of assigning formal authority and

responsibility for completion of specific

activities to a subordinate

Responsibility the obligation of a subordinate to perform

assigned duties

Authority the power to act and make decisions

Accountability liability of subordinates to accomplish duties

Reasons for DelegationReasons for Delegation

Senior managers can concentrate on more important duties

enables decision to be taken near to the point of impact

gives staff the opportunity to experience decision-making and the consequences

encourage managers to learn how to cope with responsibility

enables organizations to be more flexible

contributes to staff development and motivation

Obstacles to delegationObstacles to delegationManager’s sideManager’s side

They can do it better

too disorganized or inflexible to plan ahead

lack confidence in their subordinates

to avert risk

fear a loss of power

Subordinates’ sideSubordinates’ side

Easier to ask the boss

feeling of insecurity

fear criticism or dismissal

lack the information

much work to do

no positive incentive

How can managers How can managers overcome those obstacles?overcome those obstacles?

create the kind of control system they need to feel secure about delegating a high degree of authority to subordinates

real freedom in accomplishing delegated tasks must be given to subordinates, even at the risk of allowing mistakes to occur so that subordinates may learn from mistake

try to improve communication and understanding between managers and subordinates

use of positive incentives such as additional pay, promotion opportunity and praise to motivate subordinates to accept more responsibilities

Centralized management

a system in which major decision-making authority and control are kept in the hands of a few top-level executives

Decentralized management

a system in which most decision-making authority and control are delegated to lower levels of management except those which must be exercised at the highest level.

Benefits of centralizationBenefits of centralization

Effective control and reduce decision-making time

a uniform plan of action

eliminate duplication of effort and activity

Drawbacks of centralizationDrawbacks of centralization

top executives have excessive workload

risk of abuse of power

bureaucracy with increase in paper work

orders given by managers not familiar with actual work

Benefits of decentralizationBenefits of decentralization

reduce the workload of top executives encourages more involvement of personnel decision-making closer to those affected disperse authority and power among many

people training and development of lower-level

managers

Drawbacks of Drawbacks of decentralizationdecentralization

Lack of uniformity of standards and policies

coordination problems

inter-unit rivalry

duplication of facilities, activities and efforts

Factors influencing the Factors influencing the degree of decentralizationdegree of decentralization

Strategy and organization’s environment size and rate of growth other characteristics

– cost and risk– manager’s preference and confidence – organization culture– abilities of lower-level managers

DefinitionDefinition

the number of subordinates reporting

directly to that manager

Advantages of wide spanAdvantages of wide span

give employees more freedom

lower administrative costs

increase morale

Disadvantages of wide spanDisadvantages of wide span

Managers are over-extending themselves

time of subordinates may be underutilized

manager unable to inspect the output

lose control over the group

Advantages of narrow spanAdvantages of narrow span

Easy access to managers and close supervision

managers have more time to planning

makes better direction and control

Disadvantages of narrow Disadvantages of narrow spanspan

Managers are underutilized and subordinates are over-controlled

higher administrative costs

communication problem

initiative may be stifled => morale problem

Factors affecting span of Factors affecting span of controlcontrol

Wide span Narrow spanType of workperformed

Routine/simple Creative/complex

Employee’straining/ability

High Low

Amount of paperwork involved

Less More

Effectiveness ofcommunciation

High Low

Manager’sability/skills/experience

High Low

Technology/computerization

Available Not available

Level ofmanagement

Lower Higher

Geographical Low High (scattered)

Informal organization is a self-group of

employees who possess informal

communication channel

Why people join?Why people join?

need for affiliation

seek for protection

get close to people who are attractive

get information through grapevine

Characteristics Characteristics

exert social control => conform to norms

tend to resist change that may threat to their survival

leaders tend to emerge gradually

grapevine

Problems of informal Problems of informal organizationorganization

may spread rumours

barrier to innovation

norm may cause performance below standard

BenefitsBenefits

loyalty to organization

supplement the formal communication network

Communication is the passing on ideas and information

the process of creating, transmitting and interpreting ideas, facts, opinions and feelings

Importance of communication Importance of communication (internal)(internal)

to establish and disseminate goals to develop plans to organize human and other resources to select, develop and appraise members to lead, direct and motivate staff to control performance to keep staff informed of what is going on

Importance (external)Importance (external)

Aware of the needs of customers, the

availability of suppliers, the claims of

stockholders, the regulations of

government, the concerns of society,….

Communication processCommunication process(elements)(elements)

Sender encoding message channel receiver decoding noise feedback

One-way communicationOne-way communication

The sender communicates without

expecting or getting feedback from the

receiver

Two-way communicationTwo-way communication

provides feedback to the sender

Organizational Organizational communication - formalcommunication - formal

Vertical– downward– upward

Lateral/horizontal

Diagonal

Informal communication - Informal communication - grapevinegrapevine

Characteristics

not controlled by management

perceived to be more believable and reliable

to serve self-interest

flow in any direction

Functions

supplement formal communication

helps to meet employees' needs

Methods of communication - Methods of communication - internalinternal

Oral/verbal communication

– spoken

– telephone extension

– interview/discussion

– business meetings

Written/Non-verbal methods– memorandum– minutes– letters– notices– house bulletins/House journals– reports– diagrams– body language

Methods of communication - Methods of communication - externalexternal

Compliment slips

Advertising and sales promotion

Annual report and accounts

Barriers to CommunicationBarriers to Communication

Differing perceptions language differences noise emotional reactions inconsistent verbal and non-verbal

communication distrust

Ways to effective Ways to effective interpersonal communicationinterpersonal communication

Overcoming differing perceptions

overcoming differences in language

overcoming noise

overcoming emotional reactions

overcoming distrust

redundancy

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