Chapter :v Organization Design and structure

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What is Organizing? MeaningOrganizing or Organizing in management refers to the relationship between people, work and resources used to achieve the common objectives (goals).

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Definition of Organizing

According

to Theo Haimann, "Organizing is the process of defining and grouping the activities of the enterprise and establishing the authority relationships among them. According to Louis Allen, "Organizing is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives."1/23/2013 4

Principles of OrganisationA

principle is a rule which is generally accepted by all. It is a guideline for solving problems and difficulties. The principles of organisation are called as "Classical Principles" because they are old and some of them are adopted from Henry Fayol"s principles of management.

The most common principles of organisation are Objectives, Specialization, Co-ordination, Authority and Responsibility, which are often abbreviated as the OSCAR principles.1/23/2013 5

Designing an Organisation1. Objectives The objectives of the organisation should be clearly defined. Every single individual in the organisation should understand these objectives. This will enable them to work efficiently and help the organisation to achieve its objectives. 2. Specialization Every single individual in the organisation should be asked to perform only one type of function (work). This function should be related to his educational background, training, work-experience, ability, etc., in other words, there should be a division of work and specialization in the organisation. This will increase the efficiency, productivity and profitability of the organisation.1/23/2013 6

Cont..

3. Co-ordination

The efforts of all the individuals, departments, levels, etc. should be co-coordinated towards the common objectives of the organisation. Therefore, managers must try to achieve co-ordination.4. Authority Every individual should be given authority (power) to perform his responsibilities (duties). This authority should be clearly defined. Authority should be maximum at the top level and it should decrease as we come to the lower levels. There should be a clear line of authority which joins all the members of the organisation from top to bottom. This line of authority should not be broken. It should be short, i.e. there should be few levels of management.

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5. Responsibility

The responsibility (duties) of every individual should be clearly defined. This responsibility is absolute, i.e. it cannot be delegated. The responsibility given to an individual should be equal to the authority given to him. 6. Span of ControlSpan of control means the maximum number of subordinates which one superior can manage effectively. The span of control should be as small as possible. Generally, at the top level, the span of control should be 1:6, while at the lower level, it should be 1:20. Span of control depends on many factors such as nature of job, ability of superior, skill of subordinate, etc.1/23/2013 8

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7. Balance

There should be a proper balance between the different levels, functions and departments of the organisation. Similarly, there should be a proper balance between centralization and decentralization, authority and responsibility, etc. If there is no balance between these factors then the organisation will not function smoothly.8. Chain of Command The chain of command should be very short. That is, there should be very few levels of management. If not, there will be many communication problems and delays in execution of workflow.1/23/2013 9

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9. Delegation Authority and responsibility should be delegated to the lowest levels of the organisation. Therefore, the decisions can be made at the lowest competent level. The authority delegated to an individual should be equal to his responsibility. 10. Continuity The organisation structure should have continuity. That is, the enterprise should be able to use the organisation structure for a long period of time. The organisation structure should be able to achieve not only present objectives but also future objectives of the enterprise.1/23/2013 10

Importance of Organisation in Building Management Structure1.

Facilitates Efficient Management: A good organisation avoids confusion, delays and duplication of work. It increases the promptness and efficiency, and it motivates the employees to do their best. All this results in efficient management. Thus, we can say, good organisation facilitates efficient management.

2. Optimum Utilization of Human Resources A good organisation facilitates division of labour and specialization. It helps in selecting the "Right person for the right Job." It clearly defines the authority and responsibility of each employee. It also motivates them to do their best. All this results in optimum utilization of human resources.

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3. Helps in Growth of Enterprise A good organisation helps in the growth, diversification and expansion of the enterprise. Today's big and giant enterprises are the results of their best organisation. 4. Utilizes Science and Technology A good organisation utilizes the benefits of science and technology. It provides the industries with the latest machines. It provides the consumers with the latest products. This results in cost reduction and maximum satisfaction. 1/23/2013

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5. Facilitates Co-ordination A good organisation co-ordinates the activities of different individual, groups and departments in order to achieve the objectives of the business. 6. Encourages Creativity, Initiative and Innovation A good organisation encourages creativity in the enterprise. This results in brings new ideas, imaginations, visions, methods, etc. It also encourages initiative and innovations.1/23/2013 13

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7. Motivates the Employees A good organisation provides the employees with a better working environment, good remuneration, reasonable freedom, etc. All this results in job satisfaction for the employees. So a good organisation motivates the employees to give good results. 8. Facilitates Delegation of Authority A good organisation facilitates delegation of authority. That is, the top executives can keep the important work for themselves, and they can delegate (surrender or give) the less important work to their subordinates. This encourages the subordinates to develop leadership qualities and to 1/23/2013 14 achieve the objectives of the business.

Characteristics of Organisation. It is the basic function of the management. . It is the process of grouping activities to achieve the organisational objectives.

. Organisation helps in granting the authorities.. Organisation co-ordinates among various functions and its departments.

. Effective communication possible through round organisational structures.. Organisation is an association of men who unit together to obtain general objectives of an organisation.1/23/2013 15

Job designJob

design essentially involves integrating job responsibilities or content and certain qualifications that are required to perform the same. It outlines the job responsibilities very clearly and also helps in attracting the right candidates to the right job. Further it also makes the job look interesting and specialized.

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There are various steps involved in job design that follow a logical sequence, those that were mentioned earlier on.The sequence is as follows: What tasks are required to done or what tasks is part of the job? How are the tasks performed? What amount are tasks are required to be done? What is the sequence of performing these tasks?

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Cont..The whole process of job design is aimed to address various problems within the organisational setup, those that pertain to ones description of a job and the associated relationships. More specifically the following areas are fine tuned: Checking the work overload. Checking upon the work under load. Ensuring tasks are not repetitive in nature. Ensuring that employees don not remain isolated. Defining working hours clearly. Defining the work processes clearly.1/23/2013 18

Benefits of Job Design

Employee

Input: A good job design enables a good job feedback. Employees have the option to vary tasks as per their personal and social needs, habits and circumstances in the workplace. Employee Training: Training is an integral part of job design. Contrary to the philosophy of leave them alone job design lays due emphasis on training people so that are well aware of what their job demands and how it is to be done.

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Work

/ Rest Schedules: Job design offers good work and rest schedule by clearly defining the number of hours an individual has to spend in his/her job. Adjustments: A good job designs allows for adjustments for physically demanding jobs by minimizing the energy spent doing the job and by aligning the manpower requirements for the same. Job design is a continuous and ever evolving process that is aimed at helping employees make adjustments with the changes in the workplace. The end goal is reducing dissatisfaction, enhancing motivation and employee engagement at the 20 1/23/2013

The Job Characteristics Approach

The job characteristics approach was popularized by Hack man and Oldham. Skill variety: The employees must be able to utilize all their skills and develop new skills while dealing with a job. Task Identity: The extent to which an identifiable task or piece or work is required to be done for completion of the job. Task Significance: How important is the job to the other people, what impact does it create on their lives? Autonomy: Does the job offer freedom and independence to the individual performing the same. Feedback: Is feedback necessary for improving performance. These are different approaches but all of them point to more or less the same factors that need to be taken into consideration like interest, efficiency, productivity, motivation etc. All these are crucial to effective job design.1/23/2013

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Job RotationJob

Rotation is a management approach where employees are shifted between two or more assignments or jobs at regular intervals of time in order to expose them to all verticals of an organization. It is a pre-planned approach with an objective to test the employee skills and competencies in order to place him or her at the right place. In addition to it, it reduces the monotony of the job and gives them a wider experience and helps them gain more insights.1/23/2013 22

OBJECTIVES

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Job EnrichmentOrganizations

are increasingly facing the heat of attrition, which is not good to health of the same. Lots of time, money and resources are spent into training an individual for a particular job and when he / she leaves the return on that investment equals null. Often it is not for the money that people leave; that may be the reason with the frontline staff but as we move towards the upper levels of organisational hierarchy, other reasons gain prominence. Many of those who quit their jobs complain of their 1/23/2013 24 jobs as uninteresting!

Benefits of Job Enrichment

Research

studies on job enrichment found out decreased levels of absenteeism among the employees, reduced employee turnover and a manifold increase in job satisfaction. There are certain cases however where job enrichment can lead to a decrease in productivity, especially when the employees have not been trained properly. Even after the training the process may not show results immediately, it takes time to reflect in the 1/23/2013 25 profit line.

Job enlargementJob enlargement is a job design technique wherein there is an increase in the number of tasks associated with a certain job. In other words, it means increasing the scope of ones duties and responsibilities. The increase in scope is quantitative in nature and not qualitative and at the same level. Job enlargement is a horizontal restructuring method that aims at increase in the workforce flexibility and at the same time reducing monotony that may creep up over a period of time. It is also known as horizontal loading in that the responsibilities increase at the same level and not 1/23/2013 26 vertically.

Benefits of Job EnlargementReduced

Monotony: Howsoever interesting the job may appear in the beginning, sooner or later people complain of boredom and monotony. Job enlargement if planned carefully can help reduce boredom and make it more satisfying and fulfilling for the employees. Increased Work Flexibility: There is an addition to the number of tasks an individual performs. There is thus an increased scope of carrying out tasks that are versatile and yet very similar in certain aspects. No Skills Training Required: Since the individual has already been performing the task in the past, there is no great requirement for imparting of new skills. However people and time management interventions may be required. The job thus gets more motivational for the one performing it.1/23/2013 27

Job analysis

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Job description and job specification

Job

description and job specification are two integral parts of job analysis.They

define a job fully and guide both employer and employee on how to go about the whole process of recruitment and selection. Both data sets are extremely relevant for creating a right fit between job and talent, evaluate performance and analyze training needs and measuring the worth of a particular job.1/23/2013 29

Work teamA group

of employees that works semi autonomously on recurring tasks. Work teams are most useful where job content changes frequently and employees with limited skills and a specific set of duties are unable to cope.

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Departmentation

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Functional DepartmentationFunctional

Departmentation: - This is the simplest form of Departmentation when grouping of departments is done on the basis of functions such as production finance marketing sales purchase and personnel etc, it is known as functional Departmentation.Further

sub divisions of the functions may be formed like marketing can be divided in to advertisement sales and after sales service. So we can classify functions into two parts.1/23/2013 32

Products Dept.Products:

- When grouping of activities and departments formed are given name on the basis of products manufactured in an organization, it is called products Departmentation.It

is applied where there is a large range of products are manufactured. When there are several product lines and each product line consists of a variety of items, functional classification fails to give balanced emphasis on each product.Apart

form this use; product or services may be made the basis of major divisions by a departmental store, a banking concern and an insurance company. Again, manufacturing an marketing departments may subdivide 1/23/2013 33 their activities on the basis of products.

Territories Dept.Territories: - Like the products basis, geographical regions are adopted for main division as well as for subdivision purposes. When activities of an organization are physically dispersed in different locations territorial Departmentation is adopted. Units that are located at different areas are made so many self-contained divisions of the organization. Marketing activities are very often subdivided on the basis of geographical areas. This form of Departmentation can be useful where business is on national or international level. For e.g.. Indian railways, insurance company use territorial 1/23/2013 34 Departmentation.

Customers Dept.Customers:

- When departments are formed to cater different kind of customers it is known as customer Departmentation this basis of classification is widely followed in subdividing activities of the marketing department.When

the products are offered to market through various channels and outlets, it has the special merit of supplying goods in accordance with the peculiar needs of customers.Customers

may be classified according to buying capacity or nature like whole sale, retail and export or 1/23/2013 government or general public. Most departmental stores 35

Types of Organization DesignFunctional

structure is one of the simplest types of organizational design. Employees are grouped into major work functions, which are then arranged into a hierarchy. Some common categories include finance, marketing, and sales.Each

of these categories will typically have an executive lead, managers, and staff. Larger companies may have supervisors who report to the managers, while other staff members report to them.1/23/2013 36

Divisional or product structureDivisional

or product structure is one of the most complex types of organizational design. It consists of a top executive who oversees several small departments. Rather than having a hierarchy of executives, managers, and staff, the structure consists of highly-specialized groups run by an assortment of managers.

While this type of organizational design enables leaders to narrow their focus, there is also the risk of duplicating efforts as there are so many managers dealing with similar issues. 1/23/2013 37

Matrix structureMatrix

structure is a combination of the functional and divisional types of organizational design. As with divisional structure, there is a manager or executive responsible for overseeing each category.The

hierarchy is similar to functional design because each division has separate teams for each project or major function. For this reason, an employee will typically report to two managers, one who manages the project and another who manages the category. Common categories include finance, sales, and manufacturing. 1/23/2013 38

Matrix structure

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customer type of organizational designThe

customer type of organizational design is determined by the needs of the customer base.A

top executive typically oversees several vice presidents, each assigned to a different kind of customer. This enables each department to specialize in a specific type of product or service delivery and its particular challenges.

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Geographical organizational designGeographical

organizational design divides departments by location. Typically one executive oversees several different offices that have the resources to run essentially on their own.This

type of design is used primarily when geographic differences have an impact on the way a business is run. It relies on managers with specific knowledge of an area to make informed business decisions that could not be made by a corporate group.1/23/2013 41

Situational influences on organization design

Top

managers of most organizations typically put a great deal of thought into designing an appropriate structure. What that appropriate structure is depends on four contingency variables: the organizations strategy, size, technology, and degree of environmental uncertainty. Strategy and Structure: An organizations structure should facilitate the achievement of goals. Because goals are influenced by the organizations strategies, its only logical that strategy and structure should be closely linked. More specifically, structure should follow strategy. If managers significantly change the organizations strategy, they 1/23/2013 will need to modify the structure to accommodate 42

Cont..

Most current strategy frameworks tend to focus on three dimensions: (1) innovation, which reflects the organizations pursuit of meaningful and unique innovations; (2) cost minimization, which reflects the organizations pursuit of tightly controlled costs; and (3) imitation, which reflects an organizations seeking to minimize risk and maximize profit opportunities by copying the market leaders. What structural design works best with each?1/23/2013 43

Technology and StructureEvery

organization has at least one form of technology to convert its inputs into outputs. For instance, workers at Maytag Corporation build its washers, dryers, and other home appliances on a standardized assembly line. Employees at Kinkos Copies produce custom jobs for individual customers. And employees at Bayer AG work on a continuous-flow production line for manufacturing its pharmaceuticals. Each of these organizations represents a different type of technology.1/23/2013 44

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The

first category, unit production, described the production of items in units or small batches.The

second category, mass production, described large batch manufacturing.Finally,

the third and most technically complex group, process production, included continuousprocess production.

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Environmental Uncertainty and StructureWhy should an organizations structure be affected by its environment? Because of environmental uncertainty! Some organizations face relatively stable and simple environments; others face dynamic and complex environments. Because uncertainty threatens an organizations effectiveness, managers will try to minimize it. One way to reduce environmental uncertainty is through adjustments in the organizational structure.

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Difference between formal and informal organisation1.

2.

3.

4.

Formal organisation is made under proper assigning of duties and delegation of authorities . Every employee under formal organisation is responsible for their works . But in informal organisation , no such delegation of authorities and assigning any duties but it made automatic and increase organisation culture. Formal organisation is made under proper appointment of employee under recruitment , selection and training but informal organisation is made under good relation , talking in factory canteen , discussion free time in office . Formal organisation is very necessary for business without this no co-ordination . But there is no necessity of any informal organisation. . Formal organisation sometime become burdens on 47 1/23/2013

Fig.

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authorityauthority

- the power or right to give orders or make decisions.Authority

in management is the formal or legitimate authority specified in a charter that gives a project manager the authority to act in the name of the sponsoring executive or on behalf on the organization.

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Cont..

There are different types of authority. Positional authority: refers to the project manager's authority enforced through the project charter. Coercive authority (also referred as penalty authority): refers to motivating staff by punishment and is predicated on fear of losing status, positions, bonuses or jobs. Expert authority: is earned if the team respects one's skills as a project manager or subject-matter expert. Referent authority: refers to the ability to influence others through charisma, personality, and charm. Reward authority: refers to positive reinforcement and 1/23/2013 50

PowerPower is frequently defined as the ability to influence the behavior of people with or without resistance. The term authority is often used for power perceived as legitimate by the social structure. Power can be seen as evil or unjust, but the exercise of power is accepted as endemic to humans as social beings. In the corporate environment, power is often expressed as upward or downward. With downward power, a company's superior influences subordinates. When a company exerts upward power, it is the subordinates who influence the decisions of the leader (Greiner & Schein, 1988).1/23/2013 51

ResponsibilityResponsibility

indicates the duty assigned to a position. The person holding the position has to perform the duty assigned. It is his responsibility.The

term responsibility is often referred to as an obligation to perform a particular task assigned to a subordinate. In an organisation, responsibility is the duty as per the guidelines issued.

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Characteristics of Responsibility

The

essence of responsibility is the obligation of a subordinate to perform the duty assigned. It always originates from the superior-subordinate relationship. Normally, responsibility moves upwards, whereas authority flows downwards. Responsibility is in the form of a continuing obligation. Responsibility cannot be delegated. The person accepting responsibility is accountable for the performance of assigned duties. It is hard to conceive responsibility without authority.1/23/2013 53

delegationThe

key to effective delegation of tasks is the transference of decision-making authority and responsibility from one level of the organization to the level to which the tasks have been delegated.In

order to effectively delegate work, some guidelines should be followed: Determine what each worker can most effectively accomplish; decide whether the worker should just identify a problem or also propose a solution; consider whether the person can handle the challenge of the task; be clear in the objectives of the task; encourage questions; explain why the task is important;1/23/2013 54

Cont..

determine

if the person has the appropriate

resources, budget, data, or equipment get the job done on a deadline; create progress reviews as part of the project planning; and be prepared to live with less than perfect results. Authority should be delegated in terms of expected results. Generally, the more specific the goal, the easier it is to determine how much authority someone 1/23/2013 55 needs.

differenceAuthority It is the legal right of a person or a superior to command his subordinates. Authority is attached to the position of a superior in concern. Responsibility It is the obligation of subordinate to perform the work assigned to him. Responsibility arises out of superior-subordinate relationship in which subordinate agrees to carry out duty given to him.

Authority can be delegated by a superior to a subordinateIt flows from top to bottom.

Responsibility cannot be shifted and is absolute.It flows from bottom to top

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Basis

Delegation

Decentralization

Meaning

Right to take decisions is Managers delegate some of shared by top management their function and authority and other level of to their subordinates. management. Freedom is not given to the subordinates as they have to work as per the instructions of their superiors. It is a routine function Freedom to work can be maintained by subordinates as they are free to take decision and to implement it. It is an important decision of an enterprise. It is an outcome which explains relationship between top management and all other departments. Decentralization is an optional policy at the discretion of top

Freedom of Work

Nature

Process

Delegation is a process which explains superior subordinates relationship

Significance

Delegation is essential for creating the organization 1/23/2013

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Scope

Scope of delegation is limited as superior delegates the powers to the subordinates on individual bases. Responsibility remains of the managers and cannot be delegated

Scope is wide as the decision making is shared by the subordinates also.

Responsibility

Responsibility is also delegated to subordinates.

Degree

Degree of delegation varies from concern to concern and department to department. When delegation of authority is done to the fullest possible extent, it gives use to decentralization.Delegated authority can be taken back. It is considered as a general policy of top management and 1/23/2013 is

Decentralization is total by nature. It spreads throughout the organization i.e. at all levels and all functions Decentralization can be called as extension of delegation.

Considerable freedom

Withdrawal

Freedom of Action Very little freedom to the subordinates58

centralizationCentralization

is said to be a process where the concentration of decision making is in a few hands. All the important decision and actions at the lower level, all subjects and actions at the lower level are subject to the approval of top management. According to Allen, Centralization is the systematic and consistent reservation of authority at central points in the organization. The implication of centralization can be :Reservation of decision making power at top level. Reservation of operating authority with the middle level managers. Reservation of operation at lower level at the 59 directions of the top level. 1/23/2013

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Under

centralization, the important and key decisions are taken by the top management and the other levels are into implementations as per the directions of top level. For example, in a business concern, the father & son being the owners decide about the important matters and all the rest of functions like product, finance, marketing, personnel, are carried out by the department heads and they have to act as per instruction and orders of the two people. Therefore in this case, decision making power remain in the hands of father & son. 1/23/2013 60

Emerging concept in organizingRe-engineering Teamwork Network

organization structure Downsizing organization Boundary - less organization

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Reengineering

Systematic

starting over and re-inventing the way a firm, or a business process, gets its work done. Defined by Michael Hammer and James Campy (in their 1993 book 'Reengineering The Corporation') as "Fundamental rethinking and radical redesign of business process to achieve dramatic improvements in critical measures of performance such as cost, service, and speed."

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Fig..

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Teamwork

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Teamwork

is "work done by several associates with each doing a part but all subordinating personal prominence to the efficiency of the whole. Benefits of Teamwork Problems solving Accomplish tasks faster Healthy competition Developing Relationships Everyone has unique qualities In healthcare (safety)1/23/2013 65

Network Organizational StructureThe

organizational structure of a company is the formal and informal framework of organizational policies, such as hierarchical levels, lines of communication and reporting, and the rights and responsibilities of employees.An

organizational structure should reflect the appropriate culture the company is trying to instill in their workplace; this is crucial in a network structure because organizations are accountable for the business ethics of all partners in their supply chain.1/23/2013 66

Fig..

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DownsizingWhen

you get involved in the downsizing process, you need to make business decisions that are best for your company and try to leave out the personal feelings that can come with letting employees go.In

a business enterprise, downsizing is reducing the number of employees on the operating payroll.Some

users distinguish downsizing from a layoff , with downsizing intended to be a permanent downscaling and a layoff intended to be a temporary downscaling in which employees may 1/23/2013 68 later be rehired.

Boundary - less organizationless organizations transcend the rigid lines of bureaucracy and divisional boundaries within a corporation and ignore the borders where the corporation itself is separated from its markets, customers and 'stakeholders'" defines Finance.Boundary Focusing

on fluid and adaptive behavior, these organic structures welcome and thrive on change. The informal managerial style is well suited for intricate and non-standard work.

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ExamplesThe

four main types of boundary less organizations are modular organization, strategic alliance, network organization, and virtual organization.Modular

and virtual organizations outsource all non-essential functions. When two companies collaborate to form a partnership that is beneficial to all parties, they are a strategic alliance. A network organization is one in which companies outsource their major business functions in order to focus more on what they are in business to do,70 1/23/2013