Organizing

Dr. Jangkung Handoyo Mulyo, M.Ec.

Span of controlSpan of control

Span of control: the number of subordinates a Span of control: the number of subordinates a manager can supervise efficiently and effectively. manager can supervise efficiently and effectively. It’s another vertical dimension that managers must It’s another vertical dimension that managers must address when designing an appropriate address when designing an appropriate organization structure.organization structure.

Classical view: although there was no consensus Classical view: although there was no consensus on a specific ideal number, the classicists favor on a specific ideal number, the classicists favor small spans (typically small spans (typically no more than sixno more than six) in order to ) in order to maintain close control. maintain close control.

Span of controlSpan of control

They argued that as a They argued that as a manager rose in organizational manager rose in organizational hierarchyhierarchy, he had to deal with , he had to deal with a greater variety of a greater variety of complex and ill-structured problemcomplex and ill-structured problem, so , so top executive top executive should have smaller span of control than did middle should have smaller span of control than did middle managersmanagers, etc., etc.

Why is the span of control concept important? To a large Why is the span of control concept important? To a large degree, it determines the number of levels and degree, it determines the number of levels and managers an organization has. The wider/larger span of managers an organization has. The wider/larger span of control, the more efficient the organization design. control, the more efficient the organization design.

Wider spans are more efficient in terms of costWider spans are more efficient in terms of cost. . ButBut at at some point, some point, wider spans reduce effectivenesswider spans reduce effectiveness..

Contrasting spans of control

Organization level Assuming span of 4 Assuming span of 8

1 (highest) 1 1

2 4 8

3 16 64

4 64 512

5 256 4096

6 1024

7 (lowest) 4096

Span of 4 Span of 8

Operative: 4096 Operative: 4096

Managers(level 1-6):1365 Managers(level 1-4):585

The wider spans have two fewer levels and approximately 800 fewer managers. If the average manager made $ 35,000 a year, the organization with the wider span would save$ 28 million a year in management salaries alone. Obviously, wider spans are more efficient in terms of cost. But at some point, wider spans reduce effectiveness.

Span of control

The contemporary view: Even in organizations that haven’t restructured, we know, recognize and understand that the most effective and efficient span of control is increasingly determined by looking at a number of contingency variables. For instance the more training and experience subordinates have, the less direct supervision they will need.Therefore, managers who have well-trained and experienced employees can function quite well with a wider span.

Span of control

Other contingency variables that will determine the appropriate spans include: similarity of subordinate tasks, the complexity of those tasks, the physical proximity of subordinates, the degree to which standardized procedures are in place, the sophistication of the organization’s management information system, the strength of the organization’s culture, and the preferred style of the manager.

Centralization and decentralizationCentralization and decentralization

One of the factor that characterizes an One of the factor that characterizes an organization’s structure is the amount of organization’s structure is the amount of centralization, which is a function of how much centralization, which is a function of how much decision making authoritydecision making authority has been has been delegated to delegated to lower level of managementlower level of management..Centralization-decentralization is a relative, not Centralization-decentralization is a relative, not an absolute concept.an absolute concept.The classical viewThe classical view: traditionally organizations : traditionally organizations were structured in the form of a were structured in the form of a pyramid pyramid with a with a concentration of authority and power at the topconcentration of authority and power at the top. . This explains the historical popularity of relatively This explains the historical popularity of relatively centralized decision making. centralized decision making.

Centralization and decentralization

The contemporary view: decision should be made by those people who have the best information to make those decision, regardless of their level in the organization.How important it is for managers to respond quickly and effectively to the environmental change.One aspect of decentralization is the concept of empowerment, that is “ a managerial approach in which employees are given substantial authority and say to make decisions on their own”.

Centralization and decentralization

Employee has the real ‘power’ in the organization because they’re the ones dealing with day-to-day problems and others situations.Empowering employee implies delegating more authority and operating responsibility to them.

Factors Influencing the Amount of Centralization-Decentralization

No More Centralization More Decentralization

1 Environment is more stable Environment is more complex, uncertain

2 Lower-level managers are not as capable or experienced at making decisions

Lower-level managers are capable and experienced at making decisions

3 Lower-level managers do not want to have a say in decisions

Lower-level managers want a voice in decisions

4 Decisions are more significant Decisions are relatively minor

5 Organization is facing a crisis or the risk of company failure

Corporate culture is more open to allowing managers to have a say in what happens

6 Company is large Company is geographically dispersed

7 Effective implementation of company strategies depends on managers retaining more say over what happens

Effective implementation of company strategies depends on managers having more involvement and flexibility to make decisions

Division of labor Division of labor

The classical view:The classical view: Rather than an entire job being done by one Rather than an entire job being done by one

individual, individual, it’s broken down into a number it’s broken down into a number of steepsof steeps, each step being completed by a , each step being completed by a separate individual.separate individual.

In essence, In essence, individual specialize in doing individual specialize in doing part of an activity rather than the entire part of an activity rather than the entire activityactivity..

Makes Makes efficient use of the diversityefficient use of the diversity of skillsof skills and and capabilitiescapabilities that employees have. that employees have.

Unending source of increased productivityUnending source of increased productivity

Division of labor

The contemporary view: Early 1960s There is a point at which human drawback (or

diseconomies) from division of labor exceed the economic advantage. These human diseconomies can bee seen in the form of boredom, job stress, low productivity, poor quality, increased absenteeism, and high turnover.

Productivity could be increased by enlarging, rather than narrowing, the scope of job activity.

DepartmentalizationDepartmentalization

The process of grouping individuals into The process of grouping individuals into separate units or departments to separate units or departments to accomplish organizational goals. accomplish organizational goals.

Departmentalization: functional, product, Departmentalization: functional, product, geographic, customer, casting, etc.geographic, customer, casting, etc.

Functional Departmentalization

Plant Manager

ManagerEngineering

ManagerAccounting

Manager Manufacturing

Customer Departmentalization

DirectorOf Sales

ManagerRetail Account

ManagerWholesale Account

ManagerGovernment account

Geographic Departmentalization

Vice PresidentFor Sales

Sales DirectorWestern Region

Sales DirectorSouthern Region

Sales DirectorEastern Region

Process Departmentalization

Plant Superintendent

CastingDepartment

Manager

PressDepartment

Manager

Finishing Department

Manager