ORGANIZATION & PRINCIPLES

“It’s all about

working together”
Objectives:
At the end of this presentation ,the
student should be able to:
1.Discuss the definition of organization
2.Discuss and define the need for
organizational Structure
3.Discuss various types of organization
structures their advantages and
disadvantages
Definition : Organization

 According to Keith Davis, "Organisation

may be defined as a group of individuals,
large of small, that is cooperating under
the direction of executive leadership in
accomplishment of certain common
object.“

 According to Chester I. Barnard,

"Organisation is a system of co-operative
activities of two or more persons."
Perspectives of Organization

 Organization as a
Process
 Organization as a
Framework of
Relationships
 Organization as
group of persons
 Organization as a
system
IMPORTANCE OF ORGANIZATIONAL
STRUCTURE

 It enables members to know what their

responsibilities
 It frees the manager and the individual
workers to concentrate on their respective
roles and responsibilities
 It coordinates all organization activities so
there is minimal duplication of effort or
conflict.
 Avoids overlapping of function because it
pinpoints responsibilities.
 Shows to whom and for whom they are
responsible
ORGANIZATION STRUCTURES

 Structure
 system of tasks, reporting relationships, and communication that links
people and positions within an organization.
 Organization Charts
 describe the formal structure, how an organization should ideally work.
The Organization Chart

The chart is an illustration in box

and-lines informing about the
formal lines of authority and the
division of labor.
The Vertical Hierarchy of
Authority: A glance up and a
glance down shows the chain of
command
The Horizontal Specialization:
A glance to the left and right on
the line of an organization chart
shows the different jobs or work
specialization

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Key elements in org.structure

 Work specialization: To what degree are tasks subdivided

into separate jobs?
 Departmentalization: On what basis will jobs be grouped
together? By product, customer, By territory…
 Chain of command: To whom individuals and groups
report?
 Span of control: How many individuals can a manager
direct? Important factors: Required Contact. Degree of
Specialization. Ability to Communicate…
 Centralization and decentralization: Where does
decision-making authority lie? Centralized Authority:
important decisions are made by higher-level managers.
Decentralized Authority: important decisions are made by middle-
level and supervisory-level managers
 Formalization: To what degree will there be rules to
direct employees and managers. Refers to the extent to
which expectations regarding the means and ends of
work are specified and written

9
Key elements in Organizational
Structure
 Line function
 Staff functions
 Authority: in context of a business organization
authority can be defined as the power and right of
the person to use and allocate the resources
efficiently, to take decisions and to give orders so
as to achieve the organizational objectives
 Responsibility: obligation to act
 Delegation: assignment of any responsibility or
authority to another person (normally from a
manager to a subordinate ) to carry out specific
activities
 Accountability : accept responsibility for tasks
Types of Organizational Structures

1. Simple Structure
2. Functional Structure
3. Divisional Organization Structure
4. Matrix Organization Struct
5. Virtual Organization

11
Simple Structure

 A structure characterized by a low degree

of specialization, wide spans of control,
authority centralized in a single person,
and little formalization

EEXXHHIIBBIITT15-4
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Copyright © 2012 Dorling Kindersley (India) Pvt. Ltd
Authorized adaptation from the United States edition of Organizational Behavior, 14e
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Functional Structure

 Functional Structure
 An organizational form in which the major
functions of the firm, such as production,
marketing, R&D, and accounting, are
grouped internally.

10-13
Functional Structure

 A functional structure is a design that

groups people on the basis of their
common skills, expertise, or resources
they use
 Functional structure is the bedrock of
horizontal differentiation
 An organization groups tasks into
functions to increase the effectiveness
with which it achieves its goals
 Organizations develop not only more
functions but also more specialization
within functions
14
Fig: Functional Structure

15
Functional Structure

Structure for
President
a business

Vice
Vice Vice Vice
President,
President, President, President,
Human
Marketing Finance Production
Resources

Chief
Structure for Administrator
a hospital

Chief of Director of Director of Director of

Medical Administrative Outpatient Nutrition &
Services Services Services Food Services
16
Functional Structure

10-17
Functional structure

Advantages Disadvantages
 Enhanced  Could be
coordination and differences in
control values and
 Centralized Decision orientations
making  May lead to short
 Enhanced term thinking
organizational level  Difficult to set
perspective uniform
 Efficient use of performance
manpower standards
Moving to a
Divisional Structure
 Organizations most commonly adopt
the divisional structure to solve
control problems that arise with too
many products, regions, or customers
 The type of divisional structure
depends on the problem to be solved
 Divisional structure creates smaller,
more manageable subunits and takes
the form
Product structure
Geographic structure
Customer structure
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Product Structure

 Product structure: a divisional

structure in which products (goods
or services) are grouped into
separate divisions according to
their similarities or differences
 Organizations need to decide how
to coordinate its product activities
with support functions

20
 Product Divisional Structure

OBM Company

Small Large
Large Building
Building Lawn
Lawn and
Commercial
Commercial Automotive
Automotive
Household Household
Household Materials
Materials and
and Garden
Garden
Appliances
Appliances Products
Appliances
Appliances Appliances Products
Products Products
Products
Divisional Structure :Geographic
Structure
 When the control problems that
companies experience are a
function of geography, a geographic
divisional structure is appropriate
 Allows the organization to adjust its
structure to align its core
competences with the needs of
customers in different geographic
regions
 Allows some functions to be
centralized and others
decentralized
22
Figure: Geographic Structure

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Divisional Structure :Customer

 A market structure aligns

functional skills and activities with
the needs of different customer
groups
 Each customer group has a
different marketing focus, and the
job of each group is to develop
products to suit the needs of its
specific customers
 Each customer group makes use of
centralized support function
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 Divisional Structure
Product Divisional President
Structure

Motion Magazine & Internet

Music
Pictures & TV Book Products
Division
Division Division Division

Customer Divisional President

Structure

Consumer Mortgage Business Agriculture

Loans Loans Loans Loans

Geographic Divisional President

Structure

Western Northern Southern Eastern

Region Region Region 25 Region
ORGANIZATION STRUCTURES

Divisional Structures
 Hybrid Structures

Product
Divisional
President
Structure

President President President President

Cadillac Buick Pontiac Chevrolet

Vice-
Vice- Vice- Vice- Functional
President,
President, President, President, divisional
Human
Production Marketing Finance structure
Resources

Manager Manager Manager Manager Geographical

Region I Region II Region III Region IV divisional structure

A Hypothetical example of what GM might use

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Matrix Structure
 Matrix structure: an organizational
design that groups people and
resources in two ways simultaneously,
by function and product
 A matrix is a rectangular grid that
shows a vertical flow of functional
responsibility and a horizontal flow of
product responsibility
 The members of the team report to
two superiors: the product team
manager and the functional manager
 The team is the building block and
principal coordination and integration
mechanism
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 Matrix Structure President
Functional
Structure
Project
structure
Vice Vice Vice Vice
President, President, President, President.
Engineering Finance Production Marketing
Project
Manager,
Taurus

Project
Manager,
Mustang
Subordinate
Project reports to
Manager, both Vice
Explorer President of
marketing &
Project
Manager, to project
Expedition
Manager for
Mustang
Example of Ford Motor Company 29
ORGANIZATION STRUCTURES

Matrix Structures

Potential Advantages of Matrix Structures

 Performance accountability rests with program, product, or project
managers.
 Teams enable better communication and cooperation across functions.
 Teams make more decisions and solve more problems at their levels.
 Top managers spend more time on strategic issues.
 A cross-functional team brings together members from different
functional departments.
Matrix Organizations

Advantages Disadvantages
 Decentralized  High administration
decision making costs
 Strong product  Potential confusion
coordination over authority and
 Fast response to responsibility
change  High prospects of
 Flexible use of conflict
resources'  Excessive focus on
internal relations
 Virtual Organizations

 Virtual organization – a collection

of geographically distributed,
functionally and/or culturally
diverse aggregations of
individuals that is linked by
electronic forms of communication

 Assembled and disassembled

according to needs
Virtual Organizations:
Design Implications


Contractual
Contractual relationships
relationships

Constant
Constant change
change and
and reconfiguration
reconfiguration

No
No rigid
rigid boundaries
boundaries

Flexible
Flexible

Little
Little or
or personal
personal and
and social
social contact
contact
Virtual Organizations:
Design Implications


Contractual
Contractual relationships
relationships

Constant
Constant change
change and
and reconfiguration
reconfiguration

No
No rigid
rigid boundaries
boundaries

Flexible
Flexible

Little
Little or
or personal
personal and
and social
social contact
contact
Virtual Organizations:
Consequences

 Increase in overall communication and

messages
 Relationships are tenuous
 Caution needed in managing feedback,
discussion, performance review, and reward
systems
Organizational Structure and Employee
Behavior
 Impossible to generalize due to individual
differences in the employees
 Research findings
 Work specialization contributes to higher employee
productivity, but it reduces job satisfaction
 The benefits of specialization have decreased rapidly as
employees seek more intrinsically rewarding jobs
 The effect of span of control on employee performance is
contingent upon individual differences and abilities, task
structures, and other organizational factors
 Participative decision making in decentralized organizations is
positively related to job satisfaction
 People seek and stay at organizations that match
their needs.

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Future

 People to have less defined jobs

they will move laterally from
project to project
 Organizations to be network of
teams or completely flat and
leaderless organizations
 “Amoeba like” groups of teams
to adapt to business
needs(Deloitte survey 2016)
OST Report

 History of the Organization

 Profile of Product/Service
 Mission objectives and strategies of the
organization
 Detailed study of the organization
structure
 Advantages and disadvantages of the structure
 Modifications recommended to the structure on the basis of
the views of the managers and other employees in the
organization
Contd…

 Functions of the various departments

 HR departments: man power planning, career
planning, promotions HRD measures, performance
appraisal
 Finance : method of accounting , financial highlights
for the past three years
 All other departments
 SWOT analysis highlighting the success
factors
 Future plans for the growth of the
organization
 Major learnings
Handout

 Definition, Meaning and Characteristics of organization

 Steps in the Process of Organization
 Division of work
 Grouping of job and Departmentation
 Assigning duties
 Granting responsibilities
 Delegation of authority
 Effective communication
 Coordination of activities for common purposes
 Structure of the organization
 Types of organization structures and their advantages and
disadvantages