fundamentals of organizing (departmentalization, centralization/decentralization etc) and...
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Fundamentals of Organizing
Presented by:SHIVENDU RANJAN NANDITA DASGUPTA
Vellore Institute Of TechnologyVellore, Tamil Nadu, India
Organizing
The deployment of organizational resources to achieve strategic goals.
The deployment of resources is reflected in the division of labor.
Formal lines of authority and mechanisms for coordinating diverse organization tasks.
Fundamental Concepts of Organizing
• Differentiation means that the organization is composed of
units that work on specialized tasks using different work
methods and requiring employees with unique competencies.
• Integration means that the various units must be put back
together so that work is coordinated.
Organizing Process
• Differentiation
• Specialization
• Delegation of Authority
• Integration
Purposes of Organizing
• Divides work to be done into specific jobs and departments.
• Assigns tasks and responsibilities associated with individual jobs.
• Coordinates diverse organizational tasks.
• Clusters jobs into units.
• Establishes relationships among individuals, groups, and departments.
• Establishes formal lines of authority.
• Allocates and deploys organizational resources.
Organizational Structure (Basic Need)
• 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.
• Unity of Command
– The concept that a person should have one boss and should report only to that person.
What is Organization Structure?
• It defines how job tasks are formally divided, grouped, and coordinated
• Key elements to be addressed:– Work specialization– Departmentalization – Chain of command– Span of control– Centralization– Decentralization– Formalization
Element 1: Work Specialization
• Also known as division of labor• Describes the degree to which activities in
the organization are subdivided into separate jobs
• Benefits:– Greater efficiency and lower costs
• Costs:– Human costs when carried too far– Job enlargement as a solution
Work Specialization (Cont.)The degree to which tasks in the
organization are divided into separate
jobs with each step completed by a
different person.
Overspecialization can result in human
diseconomies from boredom, fatigue,
stress, poor quality, increased
absenteeism, and higher turnover.
Element 2: Departmentalization
• Basis by which jobs are grouped together so that common tasks can be coordinated
• Common bases:– Function– Product– Geography– Process– Customer
Departmentalization by Type
A) Functional
– Grouping jobs by functions performed
B) Product
– Grouping jobs by product line
C) Geographical
– Grouping jobs on the basis of territory or geography
D) Process
– Grouping jobs on the
basis of product or
customer flow
E) Customer
– Grouping jobs by type
of customer and
needs
A) Functional Departmentalization – Groups Job According To Functions
B) Geographical Departmentalization
C) Product Departmentalization
D) Process Departmentalization
+ More efficient flow of work activities
– Can only be used with certain types of products
E) Customer Departmentalization
+ Customers’ needs and problems can be met by specialists
- Duplication of functions
- Limited view of organizational goals
Element 3: Chain of Command
Unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom
•Authority: positional rights•Unity of Command principle: one boss•Fewer organizations find this is relevant
Element 4: Span of Control
• The number of employees a manager is expected to effectively and efficiently direct
• Determines the number of levels and managers an organization has – Trend is toward wider spans of control
– Wider span depends on knowledgeable employees
– Affects speed of communication and decision making
Width of span is affected by:Skills and abilities of the managerEmployee characteristicsCharacteristics of the work being doneSimilarity of tasksComplexity of tasksPhysical proximity of subordinatesStandardization of tasksSophistication of the organization’s
information systemStrength of the organization’s culturePreferred style of the manager
Span of Control (Cont.)
Element 5: Centralization and Decentralization
Centralization - degree to which decision making is concentrated at a single point in the organization
– Only includes formal authority: positional rights– Highly centralized when top managers make all the
decisions– Decentralized when front line employees and
supervisors make decisions– Trend is toward increased decentralization
Organizations in which decision making is pushed down to the managers who are closest to the action.
Decentralization
Factors that Influence the Amount of Centralization and Decentralization
More Centralization Environment is stable. Lower-level managers are not as capable or
experienced at making decisions as upper-level managers.
Lower-level managers do not want to have a say in decisions.
Decisions are relatively minor. Organization is facing a crisis or the risk of
company failure. Company is large. Effective implementation of company strategies
depends on managers retaining say over what happens.
Factors that Influence the Amount of Centralization and Decentralization
More Decentralization
Environment is complex, uncertain.
Lower-level managers are capable and experienced at making decisions.
Lower-level managers want a voice in decisions.
Decisions are significant.
Corporate culture is open to allowing managers to have a say in what happens.
Company is geographically dispersed.
Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions.
Element 6: Formalization
Degree to which jobs within the organization are
standardized
– Formal = minimum discretion over what is to be done, when it is done, and how
– Informal = freedom to act is necessary & fewer constraints on how employees do their work.
Common Organizational Designs (Traditional Designs)
1) Simple structure
• Low departmentalization, wide spans of control, centralized authority, little formalization
2) Functional structure
• Departmentalization by function– Operations, finance, marketing, human resources,
and product research and development
3) Divisional structure
• Composed of separate business units or divisions with limited autonomy under the coordination and control the parent corporation.
Strengths and Weaknesses of Traditional Organizational Designs
Common Organizational Designs
1) Simple structure
2) Bureaucracy
3) Matrix structure
1.Simple Structure
• Low degree of departmentalization• Wide spans of control• Authority centralized in a single person• Little formalization• Difficult to maintain in anything other than
small organizations
2.Bureaucracy
• Highly routine operating tasks achieved through specialization
– Formal rules and regulations
– Centralized authority
– Narrow spans of control
– Tasks grouped by functional departments
– Decision making follows the chain of command
Matrix Structure
• Combines two forms of departmentalization– Functional– Product
• Dual chain of command• Advantages:
– Facilitates coordination and efficient allocation of specialists
• Disadvantages: – Possible confusion, fosters power struggles, stress
Matrix Structure for a Collegeof Business Administration
New Design Options
• The Virtual Organization – A small core organization that
outsources major business functions– Also known as a network or modular
organization
• The Boundaryless Organization – Eliminates vertical and horizontal
boundaries– Removes exterior barriers– Relies heavily on technology
CustomersWorkers
Suppliers
Removing External Boundaries
• Virtual Organization– An organization that consists of a small core of
full-time employees and that temporarily hires specialists to work on opportunities that arise.
• Network Organization– A small core organization that outsources its
major business functions (e.g., manufacturing) in order to concentrate on what it does best.
• Modular Organization– A manufacturing organization that uses
outside suppliers to provide product components for its final assembly operations.
Models of Organizational Design
Mechanistic Versus Organic Organization
• High specialization
• Rigid departmentalization
• Clear chain of command
• Narrow spans of control
• Centralization
• High formalization
• Cross-functional teams
• Cross-hierarchical teams
• Free flow of information
• Wide spans of control
• Decentralization
• Low formalization
The Four Forces that Influence Structure
1. Strategy – Innovation – introduce new offerings - organic– Cost-Minimization – cost control - mechanistic– Imitation – minimal risk and maximum profit - both
2. Organization Size – Bigger becomes mechanistic– Firms change from organic to mechanistic
organizations as they grow in size.
3. Technology– Routine equals mechanistic, non routine is organic.– Firms adapt their structure to the technology they use.
4. Environment– Dynamic environments require organic structures;
mechanistic structures need stable environments.
Thank You...
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