ABDM4044 PEOPLE & ORGANISATION May 24, 2010

Lecture 2: Organization Design, Effectiveness and Innovation.

Organizational Structure:
v An organization structure is:
Ø A collection of people
Ø Working together
Ø For some common objective.
Why do people form organization?
v Enable people to accomplish things individuals alone would find it difficult/ impossible to
achieve. Help overcome our limitation ad individuals.
v Provide continuity of knowledge.
Ø Store and protect the knowledge civilization has gathered and recorded.
Ø Provide a foundation of knowledge on which we can build on and acquire and
achieve greater results.
v As a sources of career.
Ø Provide their employee with a source of livelihood and perhaps even personal
satisfaction and self-fulfillment.
v Gains in productivity, because they make possible specialization and exchange.
v Synergy occurs.
Before organizing an office, must know the purpose of a particular office only the task are being
performed its product.
Organization Chart:
v Business divided into areas where employees have responsibilities.
v State relationship between staffs. E.g. Superior, Subordinates, Peers.
v Number of people working in the organization.
v Name of staff and position of each staff.
v Historical record – organization change make the chart become outdated.
v As information.
Advantage:
v It’s a tool that can effectively delineate work responsibilities and reporting relationships.
v Can be particularly useful as a navigational tool when small businesses expand their
operations.
Disadvantage:
v Change very fast – become outdates – time & effort.
v Rigid outlook by staffs – placed in boxes - too conscious about boundaries can damage
work attitude. E.g. “it’s not my job”
v Sometime doesn’t show the exact relations between staffs (Do not show the informal
communication line.) – No job descriptions.
Organization Structure Term:
v Responsibility – Area of work for a person/ group is accountable for. E.g. Discipline of
staff | sales of products.
v Duties – Works/ job requirement arising from responsibility. E.g. write warring letter if
discipline not followed.
Departmentalization
v How jobs/ tasks are decided, group and coordinated.
v All departments must understand and pull together toward achieving the organization
goals.
 v All organization activities are determined; those jobs which are in same field are joined
together.
v Activities are grouped by functions. E.g. Finance, Marketing.
v Name of departments depend on the type of business the organization is in.

Ø Departmentalization by Function:
Advantage:
• Simple
• Work is done by specialists who can understand better.
• Simplifies training and recruitment.
Disadvantage:
• Coordination becomes difficult when organization grows and has product
diversity.
• Difficult to judge performance and accountability.
• Result in specializes people → self-centered.

Ø Departmentalization by Product:
§ A product unit is set up for each goods & services.
§ Multiproduct companies use this structure. E.g. General Moto → truck
division; sport car division; mini car division.
Advantage:
• Improve coordination of functional activities.
• Attention on product line.
• Responsibility for products at division level.
• Growth of products and services.
Disadvantage:
• Duplication of work
• More people to conduct work.
• Difficult to control by top management →authority is decentralized.
• Problem of coordination → become self-contained.

Ø Geography Departmentalization
§ Activities are divided into areas/ location.
§ For large companies which business is spread geographically.
Advantage:
• Convenience to customer.
• Good training for manager.
Disadvantage:
• Top manager lose control.
• Coordination problems.
• Duplication of effort.

Ø Customer departmentalization
§ Group activities according to customers. E.g. Bank; Insurance.
Advantage:
• Wide variety of need is defined.
 • Focuses on customer needs.
• Products and services tailored to specific customers.
Disadvantage:
• Duplication of resources
• Difficult to achieve coordination across departments
• Decisions that please the company but may hurt the company.

Ø Matrix Departmentalization
§ Combines the advantage of purpose and process of functions.
§ Functional departments assign duration of products/ projects. Project manager
defines what to do and divide work. Member of a project team accept authority.
Advantage:
• More control over project.
• Higher staff morale.
• Better customer relations.
Disadvantage:
• Internal operational more complexes.
• Conflict of 2 superiors.
• Neglect of work – functional / project.
• More difficult to manage.
*Must have a very good communication line in order to have a Matrix!

Chain of command
v Unbroken line of authority from the top to the bottom of the organization.
v Everyone is accountable to someone.
v Problem arise when the chain of command is too long:
Ø Complexity in communication and coordination.
Ø Message gets distorted.
Ø Depersonalized employee relations (employee think they are not a part from the
organization).
Ø Too much “red tape” (centralization/ bureaucracy).