Organizational Structure

and Design

Definition
Koontz- is the establishment of authority and

responsibility with the provision of coordination between them, both vertically and horizontally in the enterprise structure. Joseph- is a structure and process by which a cooperative group of human beings allocates its tasks among its members, identifies relationships and integrate its activities towards common objectives.

Purpose of Organizing
Divides work to be done into specific jobs and

departments Assigns tasks and responsibilities associated with individual jobs Coordinates diverse organizational tasks Establishes relationships among individuals, groups, and departments Establishes formal lines of authority Allocates organizational resources

PRINCIPLES OF ORGANISING

Unity of objectives Efficiency Span of control or span of management Division of work allocation of task Coordination Scalar Principle or Chain of command Unity of direction Delegation Responsibility Balance b/w centralization & decentralization Communication Flexibility Continuity Exception principle

Defining Organizational Structure

Organizational Structure The formal arrangement of jobs within an organization
Organizational Design A process involving decisions about six key elements:
Work specialization
Departmentalization Chain of command Span of control

Centralization and decentralization

Formalization

Designing Organizational Structure

Work Specialization
The degree to which tasks in the organization

are divided into separate jobs with each step completed by a different person

Departmentalization by Type
Functional Grouping jobs by functions performed
Product Grouping jobs by product line Geographical Grouping jobs on the basis of territory or geography

Process
Grouping jobs on the

basis of product or customer flow

Customer Grouping jobs by type of customer and needs

Organizational Structure (contd)

Chain of Command The continuous line of authority that extends from upper levels of an organization to the lowest levels of the organization and clarifies who reports to whom

Organizational Structure (contd)

Authority The rights inherent in a managerial position to tell people what

to do and to expect them to do it Responsibility The obligation or expectation to perform. Responsibility brings with it accountability (the need to report and justify work to managers superiors) Unity of Command The concept that a person should have one boss and should report only to that person Delegation The assignment of authority to another person to carry out specific duties

Blocks to effective delegation

Factors in delegating:
Love for authority Maintenance of tight control Fear of subordinates growth Fear of exposure Attitude towards subordinates

Guides for Overcoming Weak Delegation

1. 2. 3. 4. 5.

Define assignments and delegate authority in light of results expected Select the person in light of the job to be done Maintain open lines of communication Establish proper controls Reward effective delegation and successful assumption of authority

Organizational Structure (contd)

Line and Staff Authority
Line managers are responsible for the

essential activities of the organization, including production and sales. Line managers have the authority to issue orders to those in the chain of command
The president, the production manager, and the sales

manager are examples of line managers

Staff managers have advisory authority, and

cannot issue orders to those in the chain of command (except those in their own department)

Organizational Structure (contd)

Span of Control The number of employees who can be effectively and efficiently supervised by a manager Width of span is affected by:

Skills and abilities of the manager and the employees Characteristics of the work being done- routine Similarity of tasks Complexity of tasks Physical proximity of subordinates Standardization of tasks Sophistication of the organizations information system Strength of the organizations culture Preferred style of the manager

Organizational Structure (contd)

Centralization The degree to which decision making is

concentrated at a single point in the organization

Organizations in which top managers make all the

decisions and lower-level employees simply carry out those orders

Decentralization The degree to which lower-level employees

provide input or actually make decisions Employee Empowerment

Increasing the decision-making discretion of

employees

Organizational Structure (contd)

Formalization
The degree to which jobs within the

organization are standardized and the extent to which employee behavior is guided by rules and procedures
Highly formalized jobs offer little discretion over what

is to be done Low formalization means fewer constraints on how employees do their work

Differentiation
Differences

in attitudes and working styles, arising naturally among members of different departments, that can complicate coordination of an organization's activities.

Integration
The

degree to which members of various departments work together in a unified manner.

Forms of Organisation Structure

Line Organisation Structure- Also known as

scalar, military or vertical orgn. Can be of 2 types: 1)Pure Line : similar activities are performed at a particular level without assistance of other Production Manager
Foreman-A Foreman C Workers Workers Foreman B

Workers

 2)Departmental Line orgn: entire activities are

divided into different groups on the basis of similarity of activities subject to control of 1 departmental head. Production manager

Foreman Foreman Foreman Foreman (Spinning) (Weaving)(Dyeing) (Fininshing)

2)Line and staff organisation

Line authority flows down the chain of command.

Staff authority is the right to advise or counsel those with line authority. Refers to pattern in which staff specialists advise line manegers to perform their duties. Depicted as:


Manager-Finance

General Manager
ManagerPersonnel

Manager-Production

ManagerSales Sales Salesman Staff

Marketing Production-Engineer Officer Foreman Supervisor Workers Position/Department in rectangle-

3)Functional Orgn.
Headquaters
Production Marketing Finance Personal

Plant-1

Plant- 2

Plant-3

P M F

M F

Functional Organisation:The difficulty of the line organisation in securing suitable chief executive was overcome by F.W. Taylor who formulated the Functional type of organisation- , the whole task of managemen and direction of subordinates should be divided according to the type of work involved. As far as the workman

was concerned, instead of coming in contact with the management at one point only, he was to receive his
daily orders and help directly from eight different bosses; The four specialists or bosses in the planning room are: 1. Route Clerk: To lay down the sequence of operations and instruct the workers concerned about it. 2. Instruction Card Clerk: To prepare detailed instructions regarding different aspects of work.

3. Time and Cost Clerk: To send all information relating to their pay to the workers and to secure proper returns of work from them. 4. Shop Disciplinarian: To deal with cases of breach of discipline and absenteeism.

The four specialists or bosses at the shop level are:

1.Gang Boss: To assemble and set up tools and machines and to teach the workers to make all their perso motions in the quickest and best way. 3. Repair Boss: To ensure that each worker keeps his machine in good order and maintains cleanliness around him and his machines. 4. Inspector: To show to the worker how to do the work

2. Speed Boss: To ensure that machines are run at their best speeds and proper tools are used by the work

4. Project Organisation

Project A Quality control control Contract administration Contract administration R&D R&D Scheduling Scheduling Manufacturing

General manager Project B Quality

5. Matrix organisationcombination of project and functional

Organizational Designs
Mechanistic Versus Organic Organization

Mechanistic
High Specialization Rigid Departmentalization Clear Chain of Command Narrow Spans of Control Centralization High Formalization

Organic Cross-Functional Teams Cross-Hierarchical Teams Free Flow of Information Wide Spans of Control Decentralization Low Formalization

A Definition of Power
Power The ability to exert influence; that is, the ability to change the attitudes or behavior of individuals or groups . A capacity that A has to influence the behavior of B so that B acts in accordance with As wishes. Dependency

Bs relationship to A when A possesses something that B requires.

Sources of Power
Legitimate Power
The power a person receives as a result of his or her position in the formal hierarchy of an organization. Coercive Power A power base dependent on fear.

Reward Power Compliance achieved based on the ability to distribute rewards that others view as valuable

Sources of Power
Expert Power
Influence based on special skills or knowledge. Referent Power

Influence based on possession by an individual of desirable resources or personal traits.

Authority (mainly) derives from role

Authority is the right to make an ultimate decision,

and in an organisation it refers to the right to make decisions which are binding on others (Obholzer, 1994).

Line & Staff Authority

Line authority is the relationship in which a superior

exercises direct supervision over a subordinate Staff relationship is advisory

Difference between Authority & Power

Power

Authority
It is institutional right to

It is a ability to command

& influence behavior of another It rests with persons, in their individual capacities It doesn't follow any hierarchy Power, being personalized attribute, can not be delegated Emerges because of personal factors May exist between any 2 persons

command It lies in managerial position

It is hierarchical in nature It can be delegated Institutional & originates from

structural relationship Superior-subordinate relationship

Delegation
Transfering formal authority from one position to

another is known as delegation

The Delegation Process

Assign Tasks

Transfer task responsibility

Reject

Acceptanc e Condition

Accept
Creation of responsibility

Organizational Designs
Organizational Designs

Traditional

Contemporary

-Simple Structure -Functional -Divisional

-Team -Matrix-Project -Boundary less Learning Organization

Common Organizational Designs

Traditional Designs Simple Structure
Low departmentalization, wide spans of control, centralized

authority, little formalization

Functional Structure Departmentalization by function

Operations, finance, human resources, and product research and development

Divisional Structure Composed of separate business units or divisions with limited autonomy under the coordination and control of the parent corporation

Organizational Designs (contd)

Contemporary Organizational Designs
Team Structures The entire organization is made up of work groups or self-managed teams of empowered employees Matrix Structures Specialists for different functional departments are assigned to work on projects led by project managers Matrix participants have two managers Project Structures Employees work continuously on projects, moving on to another project as each project is completed

Organizational Designs (contd)

Contemporary Organizational Designs

(contd)

Boundaryless Organization A flexible and an unstructured organizational design that is intended to break down external barriers between the organization and its customers and suppliers Removes internal (horizontal and vertical) boundaries Eliminates external boundaries

A Matrix Organization in an Aerospace Firm

Design Engineering
Alpha Project Beta Project Gamma Project Omega Project

Manufacturing Design Group Design Group Design Group Design Group

Contract Administration

Purchasing Purchasing Group Purchasing Group Purchasing Group Purchasing Group

Accounting

Human Resources (HR)

HR Group HR Group HR Group HR Group

Manufacturing Group Manufacturing Group Manufacturing Group Manufacturing Group

Contract Group Contract Group Contract Group Contract Group

Accounting Group Accounting Group Accounting Group Accounting Group

Organizational Designs (contd)

Learning Organization
An organization that has developed the capacity to

continuously learn, adapt, and change through the practice of knowledge management by employees Characteristics of a learning organization:
An open team-based organization design that empowers

employees Extensive and open information sharing Leadership that provides a shared vision of the organizations future; support; and encouragement A strong culture of shared values, trust, openness, and a sense of community

Co-ordination
Linking of two or more organizational members

and/or work units so that they function well together Two main types of co-ordination are:
Vertical coordination

Horizontal Coordination

 Vertical Coordination:

Linking work units (individual, team, departments) separated by hierarchical level Horizontal Coordination: Linking work units (individual, team, departments) at the same hierarchical level

Techniques for effective coordination

Coordination by chain of command

Coordination by leadership
Coordination by committees Staff meetings Special Coordinators Self- coordination