3. organizational structure - e-learning fse ujep · organizational structure •necessary to make...
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3. ORGANIZATIONAL STRUCTURELEVELS AND PRINCIPLES OF ORGANIZATION, DIMENSIONS OF STRUCTURE
ORGANIZATIONAL STRUCTURE
• Necessary to make possible the effective performance of key activities
• To support the efforts of staff
• Provides the framework of an organisation and its pattern of management
• Division of labour creates specialists who need coordination
• Coordination is facilitated by grouping specialists together in departments
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Popular Types of Departmentalization
• Functional departmentalization
• Product departmentalization
• Customer departmentalization
• Geographic departmentalization
• Process departmentalization
• Divisional departmentalization
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Dimensions of Organisation Structure
• The purpose of structure is the division of work among members of the organisation, and the coordination of their activities
• Structure makes possible the application of the process of management and creates a framework of order and command
• Activities of the organisation can be planned, organised, directed and controlled
• The structure defines tasks and responsibilities, work roles and relationships, and channels of communication
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Dimensions of Organisation Structure
In smaller organisations:
• Fewer problems of structure
• The distribution of tasks, the definition of authority and responsibility, and the relationship between members of the organisation can be established on a more personal and informal basis
With increasing size:
• Greater need for a carefully designed and purposeful form of organisation
• Need for a formal organisational structure.
• Need for a continual review of structure to ensure that it is the most appropriate form for the particular organisation, and in keeping with its growth and development
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Objectives of Structure
• The economic and efficient performance of the organisation and the level of resource utilisation
• Monitoring the activities of the organisation
• Accountability for areas of work undertaken by groups and individual members of the organisation
• Co-ordination of different parts of the organisation and different areas of work
• flexibility in order to respond to future demands and developments, and to adapt to changing environmental influences
• The social satisfaction of members working in the organisation 6
Organisation Structure and Culture
• The organisation does not exist independently
• Continual interaction with the broader external environment of which it is part
• A major determinant of an organisation’s structure is its culture
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Levels of Organisation
Interrelated levels in the hierarchical structure:
• The technical level
• The managerial level
• The community level
• Organisations are layered
• Different people at varying levels of seniority throughout the organisation structure
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Levels of Organisation
The technical level
• Specific operations and discrete tasks
• The actual job or tasks to be done
• Performance of the technical function
The managerial level
• Resources necessary for performance of the technical function, and to the beneficiaries of the products or services provided
The community level
• Development of the organisation in relation to external agencies and the wider social environment
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Interrelationship of Levels
• Decisions taken at the institutional level determine objectives for the managerial level, and decisions at the managerial level set objectives for the technical level.
Traditionally:
• Senior managers concerned with setting the strategic direction and objectives for the organisation
• Middle managers making it happen – resourcing and managing the changes
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Task and Element Functions
• The good or service must be developed.
• Something of value must be created.
• The product or services must be marketed. They must be distributed or made available to those who are to use them.
• Finance is needed in order to make available the resources used in the development, creation and distribution of the products or services provided.
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Division of Work
• Work has to be divided among its members and different jobs related to each other
• Organised by reference to some common characteristic which forms a logical link between the activities involved
• Work can be divided, and activities linked together, in a variety of ways
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Major Purpose or Function
Grouping activities according to
• Specialisation
• The use of the same set of resources
• The shared expertise of members of staff
• Work may be departmentalised and based on differentiation between task and element functions.
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Division
• PRODUCT OR SERVICE
• LOCATION
• NATURE OF THE WORK PERFORMED
• COMMON TIME SCALES
• STAFF EMPLOYED
• CUSTOMERS OR CLIENTS TO BE SERVED
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Division
Product or service
• Separate, semi-autonomous units with collective responsibility for a major part of the business process or for a complete cycle of work
• Common in the larger diversified organisations, used as a means of sub-dividing departments into sections
• Bringing together of all activities concerned with a particular production line, product or service
• Divisions may attempt to become too autonomous, presenting management with a problem of co-ordination and control
Location
• Different services are provided by area or geographical boundaries according to particular needs or demands
• Provision of services for people living in a particular locality
• Organisations with multi-site working and the grouping of a range of similar activities or functions located together on one site
• Improvement in communications tends to reduce the importance of location
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Division
Nature of the work performed
• Special common feature of the work such as the need for speedy decisions, accuracy, confidentiality/security, or where local conditions require first-hand knowledge not immediately available elsewhere
• Grouping of equipment or machinery which is noisy or which produces dust, fumes or unpleasant odours
• Decision as to whether to establish a centralised resource centre for all departments of the organisation or to allow each department to have its own service
Common time scales
• Shift working and the extent to which different tasks should be undertaken by different shifts
• Separate departments or groupings to deal with the different needs of full-time day students and part-time evening students
• Hotel: activities in the kitchen tend to be short-term, especially when guests in the restaurant are waiting to be served, and a range of different tasks have to be co-ordinated very quickly
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Division
Staff employed
• Experience or where a particular technical skill or special qualification is required
• Division of work between surgeons, doctors and nurses, or between barristers, solicitors and legal executives
• Allocation of work may be on an ad hoc, personal basis according to the knowledge and skills contributed by individuals
• Work may also be planned deliberately to give a variety of tasks and responsibilities to provide improved job satisfaction or to assist in the training of staff
Customers or clients to be served
• Separate groups may be established to deal with different consumer requirements
• In large clothes shops there may be separate departments for men’s, women’s and children’s clothing
• Government departments are often grouped by this method and work is divided according to for whom the services are provided – for example, the unemployed, low-pay families, students, young people or senior citizens.
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Combination of Groupings
• Combined in various forms
• Some activities might be grouped according to one method and other activities according to a different method.
Decisions on the methods of grouping will include considerations of:
• The culture of the organisation
• The need for co-ordination
• The identification of clearly defined divisions of work
• Economy
• The process of managing the activities
• Avoiding conflict
• The design of work organisation which takes account of the nature of staff employed, their interests and job satisfaction
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Centralisation and Decentralisation
Centralization
• The process by which the activities of an organization, particularly those regarding planning and decision-making, become concentrated within a particular location or group, keeping all of the important decision-making powers within the head office or the center of the organization.
Decentralization
• The process of redistributing or dispersing functions, powers, people or things away from a central location or authority.
Most organisations necessarily involve a degree of decentralisation arising from such features as:
• An increase in size
• The geographical separation of different parts of the organisation
• The need to extend activities or services to remote areas
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Centralisation and Decentralisation
EXTENT OF DECENTRALISATION
The advisability of decentralisation must be considered in terms of:
• the nature of the product or service provided
• policy-making
• the day-to-day management of the organisation
• the need for standardisation of procedures
• conditions or terms of employment of staff
• flatter organisation structures, managements may claim a greater degree of decentralisation
• The extent and nature of decentralisation will vary from organisation to organisation
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Principles of Organisation
Definition of structure in terms of division of work, chain of command, span of control and reporting relationships.
1. The principle of the objective
2. The principle of specialisation
3. The principle of co-ordination
4. The principle of authority
5. The principle of responsibility
6. The principle of definition
7. The principle of correspondence
8. The principle of span of control
9. The principle of balance
10. The principle of continuity 22
Span of Control
Refers to the number of subordinates who report directly to a given manager or supervisor
Too wide
• It becomes difficult to supervise subordinates effectively and this places more stress on the manager.
• With larger groupings, informal leaders and sub-groups or cliques are more likely to develop and these may operate contrary to the policy of management.
• There may be lack of time to carry out all activities properly.
Too narrow
• This may present a problem of co-ordination and consistency in decision-making and hinder effective communications across the organisation structure.
• Morale and initiative of subordinates may suffer as a result of too close a level of supervision.
• Narrow spans of control increase administrative costs and can prevent the best use being made of the limited resource of managerial talent. 23
Formal Organisational Relationships
Formal relationships between individual members will arise from the defined pattern of responsibilities
These individual relationships may be identified as:
• Line
• Functional
• Staff
• Lateral
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LINE RELATIONSHIPS
• Authority flows vertically down through the structure – the chain of command – for example, from the managing director to managers, section leaders, supervisors and other staff.
• There is a direct relationship between superior and subordinate, with each subordinate responsible to only one person.
• Line relationships are associated with functional or departmental division of work and organisational control.
• Line managers have authority and responsibility for all matters and activities within their own department.
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LINE RELATIONSHIPS
Advantages:
• Tends to simplify and clarify authority, responsibility and accountability relationships
• Promotes fast decision making
• Simple to understand
Disadvantages:
• Neglects specialists in planning
• Overloads key persons in a way that the managers may have to become experts in too many fields and the structure is dependent on the few key people.
• As the firm grows larger, line organization becomes more ineffective
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FUNCTIONAL RELATIONSHIPS
• Relationship between people in specialist or advisory positions, and line managers and their subordinates
• The specialist offers a common service throughout all departments of the organisation, but has no direct authority over those who make use of the service
• Specialists in a functional relationship with other managers still have a line relationship with both their own superior and their own departmental subordinate staff
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STAFF RELATIONSHIPS
• Arise from the appointment of personal assistants to senior members of staff
• Persons in a staff position normally have little or no direct authority in their own right but act as an extension of their superior and exercise only ‘representative’ authority
• They often act in a ‘gatekeeper’ role. There is no formal relationship between the personal assistant and other staff except where delegated authority and responsibilityhave been given for some specific activity.
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LATERAL RELATIONSHIPS
• Lateral relationships exist between individuals in different departments or sections, especially individuals on the same level.
• These lateral relationships are based on contact and consultation and are necessary to maintain co-ordination and effective organisational performance.
• Lateral relationships may be specified formally but in practice they depend upon the cooperation of staff and in effect are a type of informal relationship.
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Formal Organisational Structures
• Line and staff (functional) organisation
• Divisional organisational structure
• Project teams
• Matrix organisation
• Hybrid organizational structure
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LINE AND STAFF (FUNCTIONAL) ORGANISATION
• Most large organisations belong to this type of organisational structure.
• These organisations have direct, vertical relationships between different levels and also specialists responsible for advising and assisting line managers.
• Such organisations have both line and staff departments. Staff departments provide line people with advice and assistance in specialized areas (for example, quality control advising production department).
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LINE AND STAFF (FUNCTIONAL) ORGANISATION
Difficulties with line and staff relations
• Even through a line and staff structure allows higher flexibility and specialization it may create conflict between line and staff personnel.
• Line managers may not like staff personnel telling them what to do and how to do it even though they recognize the specialists’ knowledge and expertise.
• Some staff people have difficulty adjusting to the role, especially when line managers are reluctant to accept advice.
• Staff people may resent their lack of authority and this may cause line and staff conflict.
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DIVISIONAL ORGANISATIONAL STRUCTURE
The organisation can have different basis on which departments are formed. They are:
• Function
• Product
• Geographic territory
• Project
• Combination approach
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DIVISIONAL ORGANISATIONAL STRUCTURE
The organisation can have different basis on which departments are formed. They are:
• Function
• Product
• Geographic territory
• Project
• Combination approach
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PROJECT TEAMS
• A project team may be set up as a separate unit on a temporary basis for the attainment of a particular task.
• When this task is completed the project team is disbanded or members of the unit are reassigned to a new task.
Project organisational structure is most valuable when:
• Work is defined by a specific goal and target date for completion.
• Work is unique and unfamiliar to the organisation.
• Work is complex having independent activities and specialized skills are necessary for accomplishment.
• Work is critical in terms of possible gains or losses.
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PROJECT TEAMSCharacteristics of project organization:
1. Personnel are assigned to a project from the existing permanent organization and are under the direction and control of the project manager.
2. The project manager specifies what effort is needed and when work will be performed whereas the concerned department manager executes the work using his resources.
3. The project manager gets the needed support from production, quality control, engineering etc. for completion of the project.
4. The authority over the project team members is shared by project manager and the respective functional managers in the permanent organization.
5. The services of the specialists (project team members) are temporarily loaned to the project manager till the completion of the project.
6. There may be conflict between the project manager and the departmental manager on the issue of exercising authority over team members.
7. Since authority relationships are overlapping with possibilities of conflicts, informal relationships between project manager and departmental managers (functional managers) become more important than formal prescription of authority.
8. Full and free communication is essential among those working on the project.
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MATRIX ORGANISATION
The matrix organisation is a combination of:
• Functional departments which provide a stable base for specialised activities and a permanent location for members of staff
• Units that integrate various activities of different functional departments on a project team, product, programme, geographical or systems basis
• Establishes a grid, or matrix, with a two-way flow of authority and responsibility.
• Within the functional departments authority and responsibility flow vertically down the line, but the authority and responsibility of the ‘project’ manager (or course programme manager) flow horizontallyacross the organisation structure.
• It is a permanent organisation designed to achieve specific results by using teams of specialists from different functional areas in the organisation.
• Developing an effective matrix organisation, however, takes time and a willingness to learn new roles and behaviour; this means that matrix structures are often difficult for management to implement effectively.
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MATRIX ORGANISATION
Advantages:
• Decentralized decision making.
• Strong product/project co-ordination.
• Improved environmental monitoring.
• Fast response to change.
• Flexible use of resources.
• Efficient use of support systems.
Disadvantages:
• High administration cost.
• Potential confusion over authority and responsibility.
• High prospects of conflict.
• Overemphasis on group decision making.
• Excessive focus on internal relations.38
HYBRID ORGANISATIONAL STRUCTURE
• Multinational companies operating in the global environment
• Depends on factors such as degree of international orientation and commitment
• Multinational corporations may have their corporate offices in the country of origin and their international divisions established in various countries reporting to the CEO or president at the headquarters.
• The international divisions or foreign subsidiaries may be grouped into regions such as North America, Asia, Europe etc. and again each region may be subdivided into countries within each region.
• While the focus is on international geographic structures, companies may also choose functional or process or product departmentation in addition to geographic pattern while at the head quarter’s the departmentation may be based on function.
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PROCESS STRUCTURE
• Horizontal approach where instead of organizing along the product or function, the organization is structured along the key processes
• Typically, a process refers to a set of related tasks and activities that work together in a predetermined sequence to transform inputs into user consumable outputs
• The main challenge is to identify the core business processes which produce product or service that is directly consumed by the customers
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PROCESS STRUCTURE
Strengths of process structure
• Strong Customer Orientation:
• Rapid Response:
• Encourages Teamwork:
Weakness of process structure
• Identification of core processes
• Threatens middle management
• Limited career growth
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NETWORK STRUCTURE
• Extension of the process structure
• Each major process or its teams are distributed physically, geographically or into separate organizations
• The function of process ownership acts as a central controlling hub that manages the independent and distributed tasks in the network
• The central hub defines the handshake mechanism between each network node and itself, it clearly states what result is expected from each of the specialized node
Key characteristics:
• Autonomous units
• Highly specialized units
• Central hub 42
Effects of a Deficient Organization Structure
• Illogical
• Cruel
• Wasteful
• Inefficient
• Low motivation and morale
• Late and inappropriate decisions
• Conflict and lack of co-ordination
• A generally poor response to new opportunities and external change
• Rising costs
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TYPES OF BUSINESS ENTITY
• AN ENTERPRISE, AGENCY OR A FIRM
• Is an entity involved in the provision of goods and/or services to consumers
• Businesses are prevalent in capitalist economies, where most of them are privately owned and provide goods and services to customers in exchange for other goods, services, or money
• Businesses may also be social non-profit enterprises or state-owned public enterprises targeted for specific social and economic objectives
• A business owned by multiple individuals may be formed as an incorporated company or jointly organised as a partnership
• Countries have different laws that may ascribe different rights to the various business entities
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TYPES OF BUSINESS ENTITY
• Some of these types are listed below, by country:
Https://en.Wikipedia.Org/wiki/types_of_business_entity
Corporate titles or business titles are given to company and organization officials to show:
• What duties and responsibilities they have in the organization
Incorporation:
• Forming of a new corporation (a corporation being a legal entity that is effectively recognized as a person under the law)
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The Certificate of Incorporation (Requirements)
• Common information that are asked by almost all the states
• Must be included in the certificate of incorporation
• Business purpose
• Corporate name
• Registered agent
• Incorporator
• Share par value
• Number of authorized shares of stock
• Directors
• Preferred shares
• Officers
• Legal address of the company/corporation
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Types of Businesses
• A Sole Proprietorship
• A Partnership
• A Corporation
• A Co-operative
• Private Limited Company
• A Conglomerate
• A Joint-stock Company
• A Holding Company
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A SOLE PROPRIETORSHIP
• Sole trader or simply a proprietorship
• Owned and run by one natural person
• There is no legal distinction between the owner and the business
• The owner is in direct control of all elements and is legally accountable for the finances
• The owner receives all profits, has unlimited responsibility
• Every asset is owned by the proprietor and all debts of the business are the proprietor's
• A trade name or business name other than his, her, or its legal name48
A PARTNERSHIP
• Parties, known as partners, agree to cooperate to advance their mutual interests.
• The partners in a partnership may be: individuals, businesses, interest-based organizations, schools, governments, combinations
• Work on a project (e.g. industrial or research project) which would be too heavy or too risky for a single entity
• Join forces to have a stronger position on the market
• Comply with specific regulation
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A CORPORATION
• A company or group of people authorized to act as a single entity (legally a person) and recognized as such in law.
• Many different types, usually divided by the law of the jurisdiction:
• By whether or not they can issue stock
• By whether or not they are for profit
• Stock corporations: ownership of the corporation is through stock, and owners of stock are referred to as "stockholders."
• Shareholders/members do not typically actively manage a corporation
• Shareholders instead elect or appoint a board of directors to control the corporation in a fiduciary capacity.
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A CO-OPERATIVE
• Co-op, cooperative or coop
• Autonomous association of people united voluntarily to meet their commoneconomic, social and cultural needs and aspirations through a jointly owned and democratically controlled business.
• Owned and managed:
• By the people who use their services (a consumer cooperative)
• By the people who work there (a worker cooperative)
• By the people who live there (a housing cooperative)
• Hybrids such as worker cooperatives that are also consumer cooperatives or credit unions
• Multi-stakeholder cooperatives such as those that bring together civil society and local actors to deliver community needs
• Second and third tier cooperatives whose members are other cooperatives
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PRIVATE LIMITED COMPANY
• It is a hybrid type of business entity used in many jurisdictions, with some differences from country to country.
• Generally meaning: the shareholders are only liable for the company's debts to the value of the money they invested in the company.
• Examples include LLC in the US, private company limited by shares in the UK, GmbH in Germany or společnost s ručením omezeným in the Czech Republic.
• https://en.wikipedia.org/wiki/Private_limited_company
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A CONGLOMERATE
• It is the combination of two or more corporations engaged in entirely different businesses that fall under one corporate group, usually involving a parent company and many subsidiaries.
• Often, a conglomerate is a multi-industry company.
• Conglomerates are often large and multinational.
• https://en.wikipedia.org/wiki/Conglomerate_(company)
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A JOINT-STOCK COMPANY
• Different stocks can be bought and owned by shareholders
• Each shareholder owns company stock in proportion, evidenced by his or her shares (certificates of ownership).
• Shareholders are able to transfer their shares to others without any effects to the continued existence of the company.
• Joint-stock company is often synonymous with incorporation (i.E. Possession of legal personality separate from shareholders) and limited liability (meaning that the shareholders are only liable for the company's debts to the value of the money they invested in the company).
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A HOLDING COMPANY
• It is a parent corporation, limited liability company or limited partnership that owns enough voting stock in another company to control its policies and management.
• The term usually refers to a company that does not produce goods or services itself; rather, its purpose is to own shares of other companies to form a corporate group.
• Holding companies:
• allow the reduction of risk for the owners
• can allow the ownership and control of a number of different companies
• https://en.wikipedia.org/wiki/List_of_holding_companies 55
