ORGANIZATIONAL STRUCTURE

BY: SWATI SINGH ANKITA PANDEY GUNJAN GUPTA KHUSBOO SINGH AMIT NEGI HEMANT YADAV VIJAY BAHRADWAJ

LEARNING OBJECTIVES

Understand the various ways in which organization is used.

Prescriptions of Classical Theory regarding Organization design. Various forms of organization structure. Common organization designs.

I NTRODUCTION

In general, organization is used in various ways, like:

A group of people united by a common purpose.

An entity engaged in utilizing resources to create a result. A structure of relationships between various positions in an enterprise.

A process by which employees, facilities & tasks are related to each other, with a view to achieve specific goals.

I NTERPRETATION OF O RGANIZATION

The word Organization has 3 interpretations:

Static interpretation (as a structure).

Dynamic interpretation (as a process).

As a group.

O RGANIZATION : AS A STRUCTURE

According to Koontz & ODonnell, Organization is a structural relationship by which an enterprise is bound together and the framework in which individual effort is coordinated.

It is much more than a network of formal, superiorsubordinate relationship.

Organization, as a structure, has the following features:

Two or more persons:

The human association consists of 2 or more persons.

Structure ensures the smooth achievement of goals.
members combine their efforts to achieve their goals.

Common goals:

Cooperative efforts:

Division of work:

It ensures speedy execution of work.

Communication:

Takes place in the form of issuing commands, orders, directives, etc.

Define the territorial jurisdiction of members. Each superior will have limited numbers of people reporting to him.

Rules and regulations:

Pyramidal shape:

O RGANIZATION : AS A PROCESS

As a process, organization refers to one of the important functions of management, i.e., organizing.
According to Allen , Organizing is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.

Process of organizing involves the following steps:

Identifying the work:

a. b.

To identify the total work necessary to achieve the goals. It enables managers to concentrate on important activities, avoiding unnecessary duplications, overlapping and wastage of efforts.

Grouping the work:

a.

To provide for a smooth flow of work, all closely related and similar activities must be grouped together. Establishment of formal relationships is necessary as it helps the individuals in performing better.
It provides a framework for assigning duties and responsibilities to individuals in a clear fashion.

Establishing relationships:
a.
b.

Delegating authority:
a.

While assigning duties, the manager should clearly specify authority and responsibility limits, so that the subordinate is well-aware of what kind of work is expected of him.

Providing for coordination and control:

a. b.

Activities and efforts of individuals must be coordinated. Performance must be measured, evaluated and controlled at frequent intervals. In case of any deviation, remedial steps should be taken.

c.

O RGANIZATION : AS A GROUP

In words of C. I. Barnard, Organization is a system of consciously coordinated activities or forces of two or more persons. According to W. J. Duncan, An organization is a collection of interacting and interdependent individuals who work towards a common goal whose relationships are determined according to a certain structure.

5 essential features common to all organizations:

An organization always refer to people. An organization is developed for people.

People interact with one another in some way.

These interactions are specified by some sort of structure. Interactions are ordered to achieve joint objectives.

O RGANIZATIONAL DESIGN & C LASSICAL T HEORY

ORGANIZATIONAL DESIGN: It refers to the managerial decisions that determine the structure and process, which in turn co-ordinate & control the jobs in an organization.

CLASSICAL THOERY: Given by Taylor, Fayol & Weber, it prescribes that an organization must be built around the work to be done.

Organizations must rely on some of the Universal Design Principles while structuring activities. These are as follows:

The hierarchy:

Formal structures tend to take the

pyramid form.
Top management

The pyramid is created by the unity of command concept.

Middle management

It depicts how the components of an organization are created & held together.
Supervisory management

Specialization & division of labor:

Specialization- Promises greater efficiency and productivity. Division of labor- Improves ones skill at performing a task through repetition.

The scalar principle:

According to Fayol, the scalar chain is the chain of superiors ranging from the ultimate authority to the lowest ranks.

Unity of command:

Each subordinate is accountable to only one superior. Avoids conflicting orders & frustrating demands.

Span of control:

According to this principle, there is a limit to the number of subordinates a manager can effectively supervise.

Parity of authority & responsibility:

Authority is defined as the right to give orders and the power to get obedience. Responsibility is the obligation of a subordinate to perform the duty as required by the superior.

Formalization:

Refers to how standardized an organizations jobs are and the extent to which employee behavior is guided by standard rules & procedures. Increases organizational efficiency but prevents innovation.

Departmentation:

A way of dividing the large and complex organizations into smaller, flexible and administrative units. There are various popular bases for departmentation:

By function

Advantages: Efficiencies In-depth

from putting together similar specialties and people with common skills, knowledge, and orientations. specialization

Disadvantages Poor

communication across functional areas

Example: britannia india, maruti udyog, etc.

By customer

Advantages:

Helps to satisfy the customers requirements conveniently.

Example: banking, book publishing, food industry, etc.

By territory

Advantages:
More

effective and efficient handling of specific regional issues that arise. needs of unique geographic markets better. transfer costs & helps building community goodwill.

Serve

Reduces

Disadvantages:
Can

feel isolated from other organizational areas.

By product

Advantages:

Allows specialization in particular products and services.

Prevents products from being neglected. Example: ITC, larsen & toubro, etc.

C ONTINGENCY T HEORY & O RGANIZATION S TRUCTURE

This theory supports the idea that there is no one pattern of organization style that is universally appropriate.

The design is conditional and is contingent upon many factors, internal as well as external.
The factors which establish the parameters within which management choices are made are:

Strategy & structure Size & structure

Environment & structure

Technology & structure People & structure

Strategy & structure:

Achievement of strategic goals is facilitated by changes in organizational structure that accommodate and support change.

Size & structure:

Size provides a greater opportunity to utilize the economies of specialization.

Environment & structure:

Mechanistic organizational structures tend to be most effective in stable and simple environments. The flexibility of organic organizational structures is better suited for dynamic and complex environments.

Technology & structure:

Organizations is designed with a proper mix of technology, structure & human behavior. Woodwards classification of firms based on the complexity of the technology employed in manufacturing process:

Unit production to meet specific needs of people, not highly mechanized.

Mass production of large batches of assembly line.

Process production in continuous process of outputs.

Perrow proposed knowledge based technology rather than production technology. The classification of organization according to Perrow are:

Routine: easy to analyze problems, task standardized. Craft: deals with relatively difficult problems. Engineering: involves complex tasks, handled by standard formulas and systematic procedures. Non-routine: includes difficult to analyze problems.

People & structure:

The attitudes, aspirations, experiences and roles of organization members are also related to the structure of the organization.

C OMMON O RGANIZATIONAL D ESIGNS

The Bureaucracy:

It implies an organization characterized by rules, procedures, impersonal relations, and elaborate and fairly rigid hierarchy of authority- responsibility relationships.

The Project Structure:

It is designed to achieve specific results by using teams of specialists from different functional areas in the organization.

The nature of Project Management:

Project manager: makes sure that the project doesnt get lost in the shuffle of organizational activities.
Team members: report directly to the project manager.

Project authority: cuts across the normal organization structure.

Advantages:

Allows maximum use of specialized knowledge & concentrated attention of experts on a complex project.
Reduces environmental complexity. Promotes and maintains organizational flexibility.

Disadvantages:

Creates feeling of insecurity and uncertainty among members.

Violates the principle of unity of command.

Manager has to perform a tightrope walk.

Creates an authority gap.

The Matrix Structure:

A permanent organization designed to achieve specific results by using teams of specialists from different functional areas in the organization. Most commonly used in Aerospace, Chemicals, Electronics, Banking, Insurance, etc.

Strengths:

Efficiency: permits efficient utilization of resources, especially manpower. Flexibility: direct and frequent contact between different specialities make for better communication and more fexibility. Balance: balances customers need for project completion and cost control for organization. Motivation: opportunity to participate in important decisions foster higher level of motivation and commitment.

Development: helps employees to develop and grow.

Disadvantages:

Power struggle: fosters power struggle between product and functional managers due to the same set of resources. Stress: stress due to role conflict, role ambiguity & role overload.
Balance: difficult to strike a balance between project and functional authority.

The Boundaryless Organization:

Composed of people linked by computers, faxes, video teleconferencing and who rarely see each other face-toface.