Chapter 6 Organization and Planning for Manufacturing Fundamentals of Organizing: Organizing is an important managerial function.

If managerial planning focuses on deciding what to do, organizing focuses on how to do it. Thus, after a manager has set goals and developed a workable plan, the next managerial task is to organize people and groups to carry out the plan. Organizing is the process of identifying and grouping the work to be performed, defining and delegating authority, and establishing relationships to enable people to work together to achieve the organization's objectives. In essence, organizing involves the grouping of activities and resources in a logical fashion. The various approaches to the division and coordination of work activities and resource allocation fall under two broad categories: the classical closed systems and the open systems. Closed systems involve sets of interacting elements operating without any exchange with the environment in which they exist. Open systems consists of sets of elements that interact with each other and with the environment, and whose structure evolves over time as a result of these interactions. The span of management refers to the number of subordinates who report directly to a specific manager. According to Graicunas, what counts is the number of relationships among those who report to a manager, not the number of people who report to him. Spans of management have a direct affect on the number of hierarchical levels in an organization. A tall structure consists of many hierarchical levels with narrow spans of control, whereas a flat structure contains fewer hierarchical levels. The process of organizing consists of six steps - defining the firm's objectives, framing supporting objectives and policies, identifying and classifying the required activities, grouping the activities according to the available human and material resources, delegating authority, and horizontal and vertical coordination of the various groups in the organization. Effective organizing has many benefits. It helps individuals clearly visualize the tasks they are expected to accomplish. It supports planning and control activities. Organizing also creates channels of communication and helps in maintaining the logical flow of work activities. The process of organizing ensures efficient use of resources and helps avoid conflicts and duplication of effort. It coordinates diverse activities and builds harmonious relationships among members of the organization. The process of organizing helps managers to focus on tasks that are logically related to a common goal. Strategic Organization Design

Every organization has some goals and objectives and one of the important factors that affect these goals is the organizational structure. The efficiency with which an organization accomplishes its goals and objectives depends on the structure it adopts. Departmentation is the process of grouping activities to achieve organizational goals and objectives, and delegating authority to a manager to supervise the division and guide the staff, making him responsible for its results. The process of developing a structure is also referred to as organization design. There are four major structural alternatives - functional structure, divisional structure, hybrid structure, and matrix structure. The functional structure is a type of organization structure which groups positions on the basis of main functional or specialized areas. The divisional structure is a type of departmentation based on similarity of products, services or markets. It has three major forms - product division, geographic division, and customer division. The form of divisional structure chosen depends on the rationale for divisionalization. A divisional structure can be adopted by organizations that are fairly large and have different products or services, operate in different geographic areas or cater to different customer segments. Many organizations, especially large organizations, adopt hybrid structures in order to incorporate the advantages of both functional and divisional structures. Organizations requiring functional expertise and/or efficiency, and which operate in uncertain environments can adopt a hybrid structure. A matrix structure is a type of departmentalization that superimposes a horizontal set of divisional reporting relationships onto a hierarchical functional structure. The essence of a matrix organization is the combination of functional and product or project patterns of departmentation in the same organization structure. In addition to the major structural alternatives, other bases for departmentation include - departmentation by simple numbers, departmentation by time, and departmentation by process or equipment. SBUs are distinct businesses set up as units in a larger company to ensure that a certain product or product line is promoted and handled as though it were an independent business. The basic purpose of SBU is to give all the products equal attention and care. There is no universal basis for departmentation that is applicable to all organizations and all situations. Every pattern of departmentation has its own advantages and disadvantages. So, an organization has to select the basis of departmentation that is best suited to its needs.

Line and Staff Authority and Decentralization

Although the term authority has various connotations, in the organizational context, authority is defined as the power to make decisions which guide the actions of others. Power, on the other hand, is the ability of individuals to influence the beliefs and actions of others. Power can be legitimate, expert, referent, reward, or coercive. Various authority relationships exist in an organization, many of which are related to line and staff functions. Line functions are those which are directly responsible for accomplishing the objectives of the enterprise, while staff functions are advisory in nature. The main staff functions are investigation, research and giving advice to line managers on how to accomplish tasks. Functional authority involves conferring rights upon individuals or departments to control the processes and practices pertaining to personnel in other departments. Instead of making recommendations to the line managers or superiors, functional authority allows staff personnel to issue instructions to line managers directly. Although line managers and staff personnel are expected to work together for accomplishment of organizational goals, there are many factors which contribute to the conflicts between line and staff personnel. The line managers have clashes with the staff personnel as they feel that staff personnel are not accountable for their actions. Moreover, line managers feel that staff personnel invade their territory and dilute their powers. Since staff personnel may not have experience of the operational activities, their recommendations and ideas may lack applicability. Staff managers feel that line managers do not make the right use of talents of the staff personnel and are not open to new ideas. Further, since staff personnel lack authority, they may not be able to implement their solutions for problems. The difference in the nature of line and staff functions is also a prime reason for conflicts between line and staff managers. The line and staff conflicts can be avoided by having clearly defined authority relationships between line and staff functions and by ensuring proper use of staff talent. The staff personnel should also be made accountable for the outcome of their actions and present line managers the solutions for problems in as complete a form as possible, leaving only its acceptance or rejection to the line manager. Organizations differ from each other in the amount of authority given to the lowerlevel employees regarding decision-making. Centralization is the retention of decision-making authority with the top management, whereas decentralization is granting of decision-making powers to the lower-level employees. It is not possible for an organization to be either completely centralized or completely decentralized.

An organization can either follow a centralized or decentralized approach depending upon the manner in which it has grown over time, its size, the technical complexity of its tasks and the geographical dispersion of its business operations. Apart from these, other factors like time frame of decisions, importance of a decision to the organization, the planning and control procedures used and influence of various environmental factors determine the level of decentralization in an organization. Moreover, decentralization is facilitated if competent and experienced managers are present in the organization and subordinates are willing to take on additional responsibilities. Depending on whether the organization follows a centralized or decentralized approach, authority is either retained with the top management or is delegated to the lower-level managers. Delegation of authority refers to a manager granting the right to a subordinate to make decisions or use his discretion in judging certain issues. The amount of authority delegated depends on the delegator and the delegant, as well as organizational factors. The delegation of authority may not be effective if a superior does not like to delegate, if he is afraid of his subordinates' advancement, if he fears that his shortcomings may be exposed or if he has a negative attitude towards his subordinates. Also, if the delegant is afraid of criticism, lacks information and resources, lacks self-confidence and if the rewards and incentives are not attractive enough, the delegant may not be willing to take on additional responsibility. Organizational factors such as its decentralization policy, control procedures, availability of managers and management philosophy also affect the delegation of authority. It is always important to strike a balance between centralized and decentralized functions in an organization. Major policy areas like finance, new product programs, marketing strategies, etc. should be centralized, whereas routine and monotonous tasks which do not need much guidance from superiors, can be decentralized. Since the costs of decentralization are high, the potential benefits must be high enough to justify the costs involved. Effective Organizing and Organizational Culture: Organizing aims at developing a definite structure of roles to achieve efficient organizational performance. Planning helps managers avoid mistakes in organizing by identifying future personnel needs and by developing the required lines of communication. It also helps managers identify outdated ways of doing things and thus helps organizations stay innovative. An effective organization remains flexible and adapts to changes in the environment. By reorganizing, an organization can stay flexible and be responsive to the environment. A firm can use organization charts and position descriptions to

avoid conflict. The efficiency of organizations increases when all members are taught the importance of informal organization and how it works. One form of informal communication is the grapevine. Managers must sometimes make use of the "grapevine" for effective communication and for improving the morale of employees. Effective enterprises develop and nurture an organizational culture. The term organizational culture refers to a set of values, beliefs, and norms which influence the behavior of its members. The organizational socialization process is the process by which new employees assimilate to the culture of the organization. The organizational socialization process involves many steps from careful selection of entry-level personnel to providing them with on-the-job training, measuring and rewarding their performance and promoting employees who have performed well and using them as role models for the new employees. Tools of Coordination : Coordination is of prime importance in an organization, for without proper coordination the efforts and the purposes of the people employed by a company are not unified. To achieve coordination, companies make use of certain tools. One of these is the organization chart, which has already been discussed in some details. Two others are the organization manual and the standard practice instructions. Organization Manual: The organization chart is usually an outline or skeleton of a companys organization showing only job titles and their relationship to each other. It is the organization manual that provides substance for the chart. The manual will normally outline in detail all the duties and responsibilities that go with each job the chart shows. In addition, some manuals include for each job an outline of relationships with other jobs, the public, other companies and the government. Such written information about the positions in an organization helps work to progress much more smoothly. First of all, all personnel know exactly what they are to do and what the scope of their authority is. Second, overlap of duties and responsibilities can be avoided, thereby making for a more efficient organization. Thirdly, such a manual, assists in training, for new staff members taking over a job can be told exactly what is required of them; they dont depend on their predecessors to remember all the various aspects of their jobs. An organization manual can be useful only if it is kept up to date: and it is this burden of keeping it up to date that causes many companies not to use them or to discard them once they are started. The same can be said of the organization chart. This tendency can be minimized by refraining from making the chart and manual too elaborate to start with and by designing both so that they will be easy to change. Manuals in loose-leaf form can be changed readily. Charts made using some of the special tapes developed for this purpose are equally flexible. The use of such time-saving devices will give the maximum

incentive to keep the chart and manual up to date and thereby ensure their usefulness. Standard Practice Instructions: Although the organization manual outlines who has what responsibilities, it does not say how these various operations are to be carried out. This is the purpose of the standard practice instructions. Such instructions cover a great variety of procedures. Examples include requisitioning supplies, issuing employee passes, computing vacation pay, and receiving material from a vendor. Standard practice instructions may also include material on how to perform the manufacturing processes, although these instructions are more likely to be in another booklet sometimes called manufacturing standards. Of course, it is assumed that the method of performing a job as outlined in the standard practice instructions is the best one available. Even more important, perhaps, is that he SPI will ensure the use of the same method throughout the company. In other words, consistency in performing tasks is achieved. Certainly, it would be undesirable, for example, if various departments were computing vacation pay using different formulas. The possibility of such an occurrence is minimized with use of up-to-date standard practice instructions. The remarks made earlier about keeping the organization manual up to date also apply to the standard practice instructions. Nothing can be more exasperating than to be following a procedure outline in the SPI and then be told that the procedure is out of date. Unless the booklet can be kept current, it is probably better to have none at all. When the organization chart, the organization manual, and the standard practice instructions have been prepared, they become tools to facilitate coordination in the enterprise. The organization chart tells who is to perform a function and how that function is geared into the organization. The organization manual explains what the persons responsibilities and duties are. Finally, the standard practice instructions describe how the various tasks are to be performed.