1 Organizational structure and design ? An organization is a collection of people working together in a coordinated and structured fashion to achieve one.

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Organizational structure and design ?

An organization is a collection of people working together in a coordinated and structured fashion to achieve one or more goals.

Organization

A consciously coordinated social unit, composed of two or more people, that functions on a relatively continuous basis to achieve a common goal or set of goals

A social arrangement for the controlled performance of the collective goals

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Social arrangements: Organizations are collection of peoples and machines in a structured way

Organization

Collective goals: Existence of organizations depend up achievement of common goals

Controlled performance: Controlled performance means deliberate allocated on resource between organization members which includes:

•Resource allocation•Control function

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•Organizations are strongly influenced by the people that form part of them.

•Organizations can take in part of the personality of the people within them and their attitudes, perceptions and behaviors affect how an organization will operate.

Organization and people

•Organizations exist to allow accomplishment of work that could not be achieved by people alone.

•As long as the goals of an organization are appropriate, society will allow them to exist and they can contribute to society

Organization’s Role in Society

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•Together they achieve what cannot achieve individually

•Overcome environmental and biological limitations•Increase productively due to:

•Work specialization / division of labour•Exchange•Synergy: Together we grow better

•Increased knowledge development and enhancement

•Transaction – cost economies approach to organization:

•Saving in time•Reduce cost

Why organizations exist?

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Our lives become, for better and for worse, a society of organizations. We are born in organizations and are educated in organizations that we can later work in organizations. At the same time, organizations supply us and entertain us, they govern us and harass us. Finally we are buried by organizations (Henry Mintzberg).

Images and perception of organizations


1. Organizations are machines

2. Organizations are biological organism

3. Organizations are human brains

4. Organizations are cultures or subcultures

5. Organizations are sub systems

6. Organizations are political systems

7. Organizations are psychic prisons

8. Organizations are systems of change and transformation

9. Organizations are instruments of domination

Images/Metaphors of 0rganizations: Gereth Morgan

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•By ownership: Private, private•By control: Managers, trustees•Activity: Retailer, manufactures, hospital•Legal structure: Partnership, company•Objective: Commercial, non commercial•Accountability•Source of finance: Debt, equity •Region: National or international

Classification of organizations

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•Business organizations•Non business organizations

Basic Classification of organizations

Business organizations•Definition:•Legal•Capital •Profit objective

•Types :•Sole - proprietorship•Partnership•Company

•Activities:•Manufacturing•Mining•Energy•Retailing•Services

•Services are intangible•Services are inseparable•Services are heterogeneous

•Intellectual production

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•Public organizations•Non profit organizations

Non business organization

Public organizations•Definition:•Run by government •Capital•Non-profit objective•Diverse nature

•Types :•Regulatory bodies•Health institutions•Educational institutions•Policy making bodies•Etc•Characteristics

•Accountable to parliament•Command resources•Base on fairness•Equality•Resource based not price based


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•Public organizations•Non profit organizations

Non business organization

Non profit organizations•Definition:•Formed for purpose •Capital•Non-profit objective•Public service

•Types :•Clubs•Trade unions•Associations•Charities•Professional association


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What is Organizational Structure ?

Bringing the functional units of an organization into a well-conceived structure

Assigning authority and responsibility to individuals

Bringing the functional units of an organization into a well-conceived structure

Assigning authority and responsibility to individuals

Organizational structure:•Divides the jobs•Group the jobs into functional units•Coordinate the jobs•Assign authority •Assign responsibility •Ensure accountability

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Elements of Organizational Structure ?

•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 job•It is division of labour

•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 job•It is division of labour

1 - What is Work Specialization ?

Objectives:•Availability of experts•Efficient use of skills•Specialization in training•Specialized use of equipment and infrastructure

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•Systematic way of grouping the jobs under a specific head / function which were indentified during work specialization process•It is the basis for grouping the jobs

•Systematic way of grouping the jobs under a specific head / function which were indentified during work specialization process•It is the basis for grouping the jobs

2 – Departmentalization

Basis for departmentalization:•Function •Product•Process•Customer

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Chain of Command

The continuous line of authority that extends from the highest levels in an organization to the lowest levels and clarifies who reports to whom

•Authority : The rights inherent in a managerial position to give orders and expect them to be obeyed

•Responsibility: An obligation to perform assigned activities

Chain of Command

The continuous line of authority that extends from the highest levels in an organization to the lowest levels and clarifies who reports to whom

•Authority : The rights inherent in a managerial position to give orders and expect them to be obeyed

•Responsibility: An obligation to perform assigned activities

3- What is Chain of Command ?

Unity of Commend

The management principle that no person should report to more than one boss

Unity of Commend

The management principle that no person should report to more than one boss

4- Unity of command

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What are the Elements of Organizational Structure ?

The number of subordinates a manger can direct efficiently and effectivelyThe number of subordinates a manger can direct efficiently and effectively

5-What is the span of control ?

Factors affecting span of control:•Managerial capability•Nature of employees group•Nature of work•Task complexity•Standardisation of work

Wide span of control:•Reduces cost•Speedup decision making•Gives flexibility•Empowers manager

Narrow span of control:•Expensive as add more levels of management•Lead to difficulty in communication•Slow decision making•Long vertical structure that might lead to bureaucratic behaviour

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Centralization A function when decision-making authority is placed higher level DecentralizationThe pushing down of decision-making authority to the lowest levels of an organization

Centralization A function when decision-making authority is placed higher level DecentralizationThe pushing down of decision-making authority to the lowest levels of an organization

6- Centralization and Decentralization


Situations of centralisation :•Normality in environment•Incapable lower managers•Non willingness of lower management to participate•Importance of decision•Risky situation•Keeping uniformity•Large company•Uniform implementation of strategy

Situations of decentralisation :•Complex environment•Capable lower managers•Willingness to participate•Minor decision•Geographical dislocation•Required for effective implementation of strategy

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6- Centralization and Decentralization


Merits of centralisation :•Better coordination•Overall solution•Balanced allocation of resources•Better and reliable decision as they made at top by experienced managers•Low cost as less managers are engaged•Quick and centralized decision in crises•Standardised polices

Situations of decentralisation :•Less load at top management•Motivates lower management•Speedy decision are made locally•Decision in view of local context•Develops lower management

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The degree to which jobs within organization are standardized and extent to which employees is guided by rules and proceduresThe degree to which jobs within organization are standardized and extent to which employees is guided by rules and procedures

7- Formalization


Situations of centralisation :•Normality in environment•Incapable lower managers•Non willingness of lower management to participate•Importance of decision•Risky situation•Keeping uniformity•Large company•Uniform implementation of strategy

Situations of decentralisation :•Complex environment•Capable lower managers•Willingness to participate•Minor decision•Geographical dislocation•Required for effective implementation of strategy

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8- Flat or tall


CEO

Divisional head

Departmental head

Section head

Supervisor

Team leader

Assistant manager

Worker

Tall structure

An organization with large number of management levels and low span of control

Tall structure

An organization with large number of management levels and low span of control

Merits :•Narrow span of control•Small groups with more participation from each team member•Better career planning•Quick promotion

Demerits :•Low delegation•Control over innovation•Long channel•High costs•Slow decision making

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8- Flat or tall What are the Elements of Organizational Structure ?

CEO

Departmental head

Supervisor

Worker

Flat structure

An organization with small number of management levels and high span of control

Flat structure

An organization with small number of management levels and high span of control

Merits :•High delegation•Low cost•Speedy communication•Small channel

Demerits :•Overworked managers•Non specialised managers•Low morale •Low coordination•Less time for planning and more involvement in supervision

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Two basic Categories of Organizational Structures Mechanistic Organization

The bureaucracy; a structure that is high in specialization, formulization, and centralization

Organic Organization

A structure that is low in specialization, formulization, and centralization

Mechanistic Organization

The bureaucracy; a structure that is high in specialization, formulization, and centralization

Organic Organization

A structure that is low in specialization, formulization, and centralization

Various types of organizational structures

Mechanistic organization:•High work specialization•Rigid departmentalization•Narrow span of control due to tall structure•High formulization•Centralization

Organic organization :•Low work specialization•flexible departmentalization•Low direct supervision •Less formulization•Decentralization

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Types of organizational structure ?

•An organization that is low in specialization and formulization but high in centralization

•This Organization reflects the owner as president with all employees directly reporting to him

•An organization that is low in specialization and formulization but high in centralization

•This Organization reflects the owner as president with all employees directly reporting to him

Simple Structure

Employee2 Employee2 President President Employee 3 Employee 3

Employee 4Employee 4 Employee 5Employee 5

Employee 1Employee 1

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ADVANTAGES DISADVANTAGES•Allows the division of labor / work specialization

•Avoids duplication of tasks•Suitable for centralized or one activity •Helps top management in coordinating and controlling the entire organization

•Clarifies the roles/responsibilities of departments and employees

•Provides clear accountability at both the departmental and individual level

•Creates a rigid and slow moving organization

•Leads to a loss of innovation and innovation thinking as employee focus on following correct procedures and protocol

•Does not allow for sharing of information / ideas across departmental lines (which is viewed as being especially important in today’s knowledge economy)

•Focus on internal rather external side of the department

Plant ManagerPlant Manager

ManagerEngineering

ManagerEngineering

ManagerAccounting Manager

AccountingManager

MISManager

MISManager

Human ResourcesManager

Human ResourcesManager

PurchasingManager

Purchasing

•An organization in which similar and related occupational specialties are grouped together•Process of grouping the activities by functions •An organization in which similar and related occupational specialties are grouped together•Process of grouping the activities by functions

Functional Structure


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ADVANTAGES DISADVANTAGES•Clear distinction of technical and support divisions

•Clear distinction of specialized functions and common functions

•Help in better hr managements based on specific departmental need

•Economies from processes are possible

•Coordination due to various process is difficult

•Conflict may arise•Use is possible in only process oriented organizations

Plant manager Plant manager

Milling Milling AssemblingAssembling Sanding Sanding Finising Finising Inspection Inspection


•An organization in which activities reflect a process and so departmentalized in form of a process•An organization in which activities reflect a process and so departmentalized in form of a process

Process based Structure

MarketingMarketing PersonnelPersonnel PurchasingPurchasing FinanceFinance

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ManufacturingManufacturing

Supply and DistributionSupply and Distribution

Planning and EconomicsPlanning and Economics

MarketingMarketing

Vice President Lubricants And Waxes

Vice President Lubricants And Waxes

Vice PresidentFuels

Vice PresidentFuels

Vice President Chemicals

Vice President Chemicals

PresidentPresident




MarketingMarketing




MarketingMarketing

•An organization made up of self-contained units on the basis of products with With each has its own departments to perform the related tasks•An organization made up of self-contained units on the basis of products with With each has its own departments to perform the related tasks

Product based or Divisional StructureTypes of organizational structure ?

ADVANTAGES DISADVANTAGES•Product based specialization is possible •Specialized HR can be developed•Coordination and integration between

various functional units of different products is possible

•Economies based on mass scale production of each product is possible

•Economies by better coordination are possible

•Increases in costs•Increase in complexity•Failure to share resources sometimes due to

complex nature

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ADVANTAGES DISADVANTAGES•Places responsibility at a lower level •Places emphasis on local markets,

customers, stakeholders and problems•Improves coordination in a region•Takes advantage of economies of local

operations•Better face-to-face communication with

local interests•Furnishes measurable training ground for

general managers

•Requires more persons with general manager abilities

•Tends to make maintenance of economical central services difficult and may require services such as personnel or purchasing at the regional level

•Increases problem of top management control

•Inconsistency in standard

EngineeringEngineering

Western RegionWestern RegionSouthwest RegionSouthwest Region

ProductionProduction AccountingAccounting SalesSalesPersonnelPersonnel

Central RegionCentral RegionSoutheast RegionSoutheast RegionEastern RegionEastern Region

MarketingMarketing PersonnelPersonnel PurchasingPurchasing FinanceFinance

PresidentPresident

Types of organizational structure ?-------------------

•An organization in which activities in a given area or territory be grouped and assigned to a manager•An organization in which activities in a given area or territory be grouped and assigned to a manager

Geographical Structure

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ADVANTAGES DISADVANTAGES•Enables an organization to be more aligned with the needs of its customers

•Promotes innovation and innovative thinking as the organizational culture becomes more focused on problem solving / meeting customer needs than following processes and protocol

•Customer based work specialization is possible

•Individual departments can become too autonomous which makes setting and coordinating a single strategic direction to be followed difficult

•It limits the sharing of information / ideas across the organization lines (which is viewed as being especially important in today’s knowledge economy)

•Under utilisation of resources•Duplication of activities and cost

PresidentPresident

Community-CityBanking

Community-CityBanking

Real Estate &Mortgage loansReal Estate &

Mortgage loansCorporateBanking

CorporateBanking

Agricultural Banking

Agricultural Banking

InstitutionalBanking

InstitutionalBanking


An organization in which activities reflect a primary interest in customersAn organization in which activities reflect a primary interest in customersCustomer based Product Structure

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Strategic Business Units (SBUs)Team structures Project StructureMatrix Structure

Modular structure Virtual Structure

Learning organization

Strategic Business Units (SBUs)Team structures Project StructureMatrix Structure

Modular structure Virtual Structure


Modern Organization DesignsTypes of organizational structure ?

Trend •Flat structures with the view to decentralize and increase delegation•Increase in responsibilities•Multidisciplinary teams i.e. matrix structures •Flexible structures•Hybrid structures in terms of combination and communication•Multi-tasking employees

Emerging trends in modern Organization Designs

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Modern Organization Designs

Chief StrategyOfficer (CSO)

Chief StrategyOfficer (CSO)

Chief Executive OfficerChief Executive Officer

Chief FinanceOfficer (CFO)Chief FinanceOfficer (CFO)

Chief OperatingOfficer (COO)

Chief OperatingOfficer (COO)

Chief InformationOfficer (CIO)

Chief InformationOfficer (CIO)

VP of HumanResources

VP of HumanResources

VP of Marketing

VP of Marketing

AdhesivePackagingDivision

AdhesivePackagingDivision

Industrial Products SBUIndustrial Products SBU Consumer Products SBUConsumer Products SBU

Tubes /Cores

Division

Tubes /Cores

Division

Paper DivisionPaper

DivisionReels

DivisionReels

Division

FlexiblePackagingDivision

FlexiblePackagingDivision

HighDensity Film

Division

HighDensity Film

Division

MetalEnds

Division

MetalEnds

Division

Rigid DivisionRigid

Division

The SBU structure groups similar division into business units and delegates authority and responsibility for each unit to a senior executive who reports

directly to CEO

The SBU structure groups similar division into business units and delegates authority and responsibility for each unit to a senior executive who reports

directly to CEO

Strategic Business Units (SBUs) / Divisional structure

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SBU / Divisional structure


ADVANTAGES DISADVANTAGES•Building block structure -- accommodates growth

•Better coordination in diverse markets

•Duplication, inefficient use of resources•Specializations are dispersed, creating silos of knowledge

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Teams is a situation when two or more people who interact dynamically, interdependently, and adaptively toward a common and valued goal, have specific roles or functions, and have a time-limited membership. Teams based structure consist of self-directed work teams organized around workProcesses with flat hierarchy, few management levels, Very little formalizationUsually found within divisional structure

Teams is a situation when two or more people who interact dynamically, interdependently, and adaptively toward a common and valued goal, have specific roles or functions, and have a time-limited membership. Teams based structure consist of self-directed work teams organized around workProcesses with flat hierarchy, few management levels, Very little formalizationUsually found within divisional structure

Team structure


Multi-Team System (MTS) for Patient Care

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Team structure


ADVANTAGES DISADVANTAGES•Responsive, flexible•Lower admin costs•More informed decisions

•Interpersonal training costs•Slower during team development•Stress due to ambiguous roles•Problems with supervisor role changes•Duplication of resources

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Quality ControlQuality Control

ManufacturingManufacturingPurchasingPurchasing

R & DR & D ContractAdministration

ContractAdministrationSchedulingScheduling

Project AProject A


Quality ControlQuality Control

ManufacturingManufacturingPurchasingPurchasing

R & DR & D ContractAdministration

ContractAdministrationSchedulingScheduling

Project BProject B

GeneralManagerGeneralManager

An organization in which activities require a great deal of planning, research and coordination

An organization in which activities require a great deal of planning, research and coordination

Project Structure


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Project structure


ADVANTAGES DISADVANTAGES•Simple•Fast•Cohesive•Cross-Functional Integration

•Expensive•Internal Strife•Limited Technological Expertise•Difficult Post-Project Transition

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An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager. Employees are temporarily assigned to a specific project team and have a permanent functional unit

An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager. Employees are temporarily assigned to a specific project team and have a permanent functional unit

Matrix Structure

Project CProject CManagerManager

Project BProject BManagerManager

Project AProject AManagerManager

EngineeringEngineering MarketingMarketing DesignDesign

CEOCEO

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Matrix structure


ADVANTAGES DISADVANTAGES•Uses resources and expertise effectively

•Improves communication, flexibility, innovation

•Focuses specialists on clients and products

•Supports knowledge sharing within specialty across groups

•Solution when two divisions have equal importance

•Increases goal conflict and ambiguity•Two bosses dilutes accountability•More conflict, organizational politics, and stress

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Logistics CompanyLogistics Company Core CompanyCore Company Manufacturing CompanyManufacturing Company

Sales and Marketing CompanySales and Marketing Company Finance CompanyFinance Company

Design CompanyDesign Company

•An organization in which a very few activities are carried out and as much as possible work is carried out by other organizations•continually evolving network of independent companies that are linked together to share skills, costs, and access to one another’s markets.

•An organization in which a very few activities are carried out and as much as possible work is carried out by other organizations•continually evolving network of independent companies that are linked together to share skills, costs, and access to one another’s markets.

Virtual StructureModern Organization Designs

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Virtual structure


ADVANTAGESADVANTAGES DISADVANTAGESDISADVANTAGES

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An organization in which non-vital functions are outsourced, which uses the knowledge and expertise of outside suppliers while retaining strategic control.

An organization in which non-vital functions are outsourced, which uses the knowledge and expertise of outside suppliers while retaining strategic control.

Modular StructureModern Organization Designs

ADVANTAGESADVANTAGES DISADVANTAGESDISADVANTAGES

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Organizational culture•Strong mutual relationships

•Sense of community•Caring•Trust

Organizational culture•Strong mutual relationships

•Sense of community•Caring•Trust

Learning organizationLearning organizationInformation sharing

•Open •timely

•Accurate

Information sharing•Open •timely

•Accurate

Leadership•Shared vision•Collaboration

Leadership•Shared vision•Collaboration

Organizational design•Boundary-less

•Teams•empowerment

Organizational design•Boundary-less

•Teams•empowerment

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•Change in structure on the basis of new knowledge•Awareness of vision at all levels•Open communication at all levels•High priority to organizational goals

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Emerging trends in modern organization designsTrend

•Flat structures with the view to decentralize and increase delegation•Increase in responsibilities•Multidisciplinary teams i.e. matrix structures •Flexible structures•Hybrid structures in terms of combination and communication•Multi-tasking employees

Emerging issues in modern organization designsIssue / problem

•Low motivation and morale•Delays and inappropriate decisions•Conflicts •Lack of coordination•High costs•Non alignment with environment•Non alignment with business model

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Assignment: read chapter 17 from pbp in relation with these slides. There

will be small test. We will also work on paper

questions next time.

1 Organizational structure and design ? An organization is a collection of people working together in a coordinated and structured fashion to achieve one.

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