Organizing

ORGANIZING

If two is a company and three is crowd, then how do we describe an

organization

Presented By

AmanDolly Bhateja

Pooja RathiPoojaYadav

Ranjana

Meaning of Organizing

According to Koontz and O’Donnel “The establishment of authority relationship with provision for coordination between them is both vertically and horizontally in enterprise structure.”

Nature/Characteristics

• Division of work• Coordination• Common objective• Well defined authority and responsibility• Superior subordinate relationship• Organization is dynamic

Process

• To know the objective of enterprise• Determination of the activities/division in work• Grouping of activities• Determination of key activities• Assignment of responsibilities• Delegation of authority• Defining inter-relationship• Providing the right environment

Importance

• Specialization• Role clarity• Clarifies authority and responsibility• Coordination• Source of support and security

Structure of organization

A. Functional structure- as the organization expands each function grows and according the structure is elaborated vertically and horizontally.

Functional structure

Chief Executive

manufacturing finance marketing personnel

repair &maintenance

factory manager

Purchase manager

accounting finance audit

Sales manager

advertising

recruitment & selection

training & development

Merits and Demerits of Functional Structure

• MeritsSpecializationUnity of directionControlCoordinationCompetitiveness

Cont.

• DemeritsNot suitable for large organizationProblem of coordination and control

B. Divisional structure- An organization is divided into different divisions on the basis of products or geographical area.

Area Based

Chief Executive

FinancePersonnel Legal

Marketing

R&D Chemical Product Division

Metal Product Division

Accounting Manufacturing

Marketing

Personnel

Accounting Manufacturing

Marketing

Personnel

Product Based

Chief executive

finance personnel legal manufacturing marketing R&D

Eastern region western regionNorthern region southern region

accounting marketing personnel manufacturing

• MeritsSuitable for large organizationDecentralizationHigh motivation for managerial staff

Cont.

• DemeritsNot suitable for small organizationAdverse impact on motivationCost

Formal and Informal Organization

Formal Organization• It is an organization which has a structure of

well defined jobs, each having a definite measures of authority, responsibility and accountability.

• Authority flows from top to bottom• Eg. Sale of goods

Informal Organization• In this type of organization the flow of

authority is horizontal as well as vertical.• It emerges on its own in natural manner within

the formal organization.• Eg. Sense of belongingness

self esteem

Delegation of authority

Delegation means assigning and authority is a subset of power. Thus delegation of authority means assigning the power to the subordinates by the superiors.

Elements of delegation

• Authority• Responsibility• Accountability

Importance of delegation

• Reduce workload of managers• Basis of superior subordinate relationship• Improves managerial effectiveness• Motivates subordinates• Facilitates organizational growth

Decentralization and Centralization of authority

According to Henry Fayol, “ Everything that goes to increase the importance of the subordinates role is decentralization and everything that goes to reduce, it is a centralization.”

Difference b/w Centralization and decentralization

Point of difference Centralization Decentralization

1. Meaning It refers to concentration of power or authority at higher level only.

It refers to evenly distribution of power and authority at every level of management.

2. Authority at different level

Top management retains maximum authority. The authority with middle and lower management is very low.

The authority is systematically divided at every level.

3. Suitable It is suitable for small scale and small size organizations.

Is s suitable for large scale organizations

4. Freedom of action Managers have less freedom of action.

Managers have more freedom of action.

Departmentation

• It is the process of grouping various activities into separate units of departments.

• Acc to Allen, “ Departmentation is a means of dividing a large monolithic functional organization into smaller, flexible, administrative units.”

Methods of departmentation

• Functional departmentation- It refers to the grouping the activities of an enterprise on the basis of function such as production, sales, purchase, finance ,etc.

• Product wise departmentation- the grouping of activities on the basis of products is very popular with large organizations having distinct types of products. It is also known as multi functional product departmentation.

• Geographical departmentation- all activities relating to a particular area or zone may be grouped together under one zonal manager or head.

• Customer wise departmentation- it is divided into a number of departments on the basis of customer it serves, large and small customers, industrial and ultimate buyers, government and other customers, etc.

• Process or Equipment wise departmentation- an enterprise where production is carried through different processes may adopt process wise departmentation to enable continuous flow of production.

• Combined departmentation- an enterprise may have to combined two or more of the methods of departmentation to make best use of all of them. It is also known as composite method of departmentation.

Types of organization

A. Line organization- Acc. To J.M. Lundy, “ It is characterized by direct lines of authority flowing from the top to the bottom of the organization hierarchy and lines of responsibility flowing in an opposite but equally direct manner. ”

Merits and Demerits of Line Organization

• MeritsSimplicityIdentification of authority and responsibilityCo-ordinationEffective CommunicationUnity of command

Cont.

• DemeritsLack of specializationLack of Co-ordinationExcess workImproper communicationLack of initiative

B. Staff organization- In functional organization, the task of management and direction of subordinates should be divided according to the type of work involved. All activities are grouped together according to certain functions like production, marketing, finance, etc. and are put under the charge of different persons.

Merits and Demerits of Staff Organization

• MeritsSpecializationIncreasing efficiencyFlexibilityBetter supervisionRelief to top executive

Cont.

• DemeritsConflict in authorityLack of Co-ordinationExpensiveDelay in taking decisions Poor discipline

Line vs Staff authority

Executive Director

-----------------------------------------------------------

Director of Human Resources

Assistant to the Executive Director

Director of Operations

Director of Purchasing

Other Directions

Unit 1 Manager

Unit 2 Manager

I I II I I

I I II I I

I I II I IOther Human

ResourcesOperations Purchasing Human

ResourcesOperations Purchasing Others

Line Authority-------------- Staff Authority

Contingency Variables Affecting Structure

How is a mechanistic organization different from an organic organization?

• Mechanistic OrganizationThe bureaucracy; a structure that is high in specialization ,

formalization and centralization.

• Organic OrganizationA structure that is low in specialization, formalization and

centralization.

1. Rigid Hierarchical Relationships 1. Collaboration(both vertical and horizontal)2. Fixed duties 2. Adaptable duties3. Many rules 3. Few Rules4. Formalized communication channels 4. Informal Communication5. Centralized decision authority 5. Decentralized decision authority6. Taller structures 6. Flatter structures

Organic

Mechanistic

How does strategy affect structure?

An organization’s structure is a means to help management achieve its objectives. Because objectives are derived from the organizations overall strategy, it is only logical that strategy and structure should be closely linked.

How does size affect structure?

Considerable historical evidence indicates that an organization’s size significantly affects its structure.

How does technology affect structure?

Every organization uses some form of technology to convert its inputs into outputs to attain its objectives, the organization uses equipment, materials, knowledge and experienced individuals and puts them together into certain types and patterns of activities.

How does environment affect structure?

Environment has a major effect on the organization’s structure. Essentially mechanistic organization’s are more effective in stable environments. Organic organizations are best matched with dynamic and uncertain environments.

Organization Design Applications

• What is a simple structure?

An organization that is low in specialization and formalization but high in centralization.

• What do you mean by a bureaucracy?

Many organizations do not remain simple structures. That decision is often made by choice or because structural contingency factors dictate it.

Can an organization design capture the advantages of bureaucracies while eliminating their disadvantages?

The functional structure offers the advantages that accrue from specialization. The divisional structure has a greater focus on results but suffers from duplication of activities and resources.

Matrix structure combine the advantages of functional specialization with the focus and accountability that product departmentalization provides.

Matrix structure- An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager.

Sample Matrix Structure of an Aerospace Firm

Design Engineering ManufacturingContract

AdministrationPurchasing Accounting

Human Resources

Alpha Project

Beta Project

Gamma Project

Omega Project

Manufacturing Group

Design Group

Design Group

Design Group

Design Group

Manufacturing Group

ManufacturingGroup

Manufacturing Group

Accounting Group

Accounting Group

Accounting Group

Purchasing Group

Purchasing Group

Purchasing Group

Accounting Group

Contract Group

Contract Group

Contract Group

Contract Group

Human Resource Group

Human Resource Group

Human Resource Group

Human Resource Group

Purchasing Group

• Team Based Structure

An organization that consists entirely of work groups or teams.

• Boundaryless Organization

An organization that is not defined or limited by boundaries or categories imposed by traditional structures.

Learning Organization

An organization that has developed the capacity to continuously adapt and change because all members take an active role in identifying and resolving work related issues.

What would a learning Organization look like?The important characteristics of a learning organization revolve around

organizational design, information sharing, leadership and culture.

What types of organizational design elements would be necessary for learning to take place?

Its critical for members to share information and collaborate on work activities throughout the entire organization-across different functional specialties and even at different organizational levels-through minimizing or eliminating the existing structural and physical boundaries.

THE LEARNING ORGANIZATION

Organizational Design• Boundaryless• Teams

• Empowerment

Informational Sharing• Open• Timely• Accurate

Organizational Culture• Strong Mutual Relationships

• Sense of Community• Caring• Trust

Leadership• Shared Vision• Collaboration

Contd.• In this type of boundaryless environment, employees are free to work

together and collaborate in doing the organization’s work the best way they can, and to learn from each other.

• Learning can’t take place without information.

• Leadership plays an important role as an organization moves toward becoming a learning organization.

• Finally, the organizational culture is an important aspect of being a learning organizational.

Organization Culture

A system of shared meaning within an organization that determines, to a large degree, how employee act.

How can Cultures be assessed?

Cultures can be analyzed by rating an organization on 10 characteristics. They are relatively stable and permanent over time. Just as an individual’s personality is stable and permanent .

10 Characteristics of Organization Culture

10 Characteristics of Organization Culture

1. Member identity- The degree to which employees identify with the organization as a whole rather than with their type of job or field of professional experience.

2. Group Emphasis- The degree to which work activities are organized around groups rather than individuals.

3. People Focus- The degree to which management decisions take into consideration the effect of outcomes on people within the organization.

4. Unit Integration- The degree to which units within the organization are encouraged to operate in a coordinated or independent manner.

5. Control- The degree to which rules, regulations and direct supervision are used to oversee and control employee behavior.

6. Risk Tolerance- The degree to which employees are encouraged to be aggressive, innovative, and risk seeking.

7. Reward Criteria- The degree to which rewards, such as salary increases and promotions are allocated on employee performance criteria in contrast to seniority, favoritism or other non performance factors.

8. Conflict Tolerance- The degree to which employees are encouraged to air conflicts and criticisms openly.

9. Means-end Orientation- The degree to which management focuses on results or outcomes rather than on the techniques and processes used to achieve those outcomes.

10. Open-systems Focus- The degree to which the organization monitors and responds to charges in the external environment.

Contd.Where does an Organization’s Culture Come From?

An organization’s culture usually reflects the vision or mission of the organization’s founders. The small size of most new organizations also helps the founders impose their vision on all organization members. An organization’s culture, then results from the interaction between:

(1) The founders’ biases and assumptions

(2) What the first employees learn subsequently from their own experiences.

How does culture influence structure?

An organization’s culture may have an effect on its structure, depending on how strong or weak the culture is. The stronger an organization’s culture, the less managers need to be concerned with developing formal rules and regulations.