fundamentals of organizing (departmentalization, centralization/decentralization etc) and...

7/29/2019 Fundamentals Of Organizing (Departmentalization, Centralization/Decentralization etc) and Organizational Structure (Organic and Mechanical Model).

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Fundamentals of Organizing

Presented by:SHIVENDU RANJAN

NANDITA DASGUPTA

Vellore Institute Of TechnologyVellore, Tamil Nadu, India


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Organizing

The deployment of organizational resourcesto achieve strategic goals.

The deployment of resources is reflected inthe division of labor.

Formal lines of authority and mechanisms forcoordinating diverse organization tasks.


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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.

Integrationmeans that the various units must be put back

together so that work is coordinated.


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Organizing Process

Differentiation

Specialization

Delegation of Authority

Integration


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Purposes of Organizing

Divides work to be done into specific jobsand 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.


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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.


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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


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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


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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, increasedabsenteeism, and higher turnover.


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Element 2: Departmentalization

Basis by which jobs are grouped together so

that common tasks can be coordinated

Common bases:

Function

Product

Geography

Process

Customer


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Departmentalization by Type

A) Functional

Grouping jobs by

functions performed

B) Product Grouping jobs by

product line

C) Geographical

Grouping jobs on thebasis 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


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A) Functional Departmentalization Groups Job According To Functions


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B) Geographical Departmentalization


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C) Product Departmentalization


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D) Process Departmentalization

+ More efficient flow of work activities

Can only be used with certain types of products


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E) Customer Departmentalization

+ Customers needs and problems can be met by specialists

- Duplication of functions

- Limited view of organizational goals


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Element 3: Chain of Command

Unbroken line of authority that extends from thetop 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


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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 decisionmaking


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Width of span is affected by:

Skills and abilities of the manager

Employee characteristics

Characteristics of the work being doneSimilarity of tasks

Complexity of tasks

Physical proximity of subordinates

Standardization of tasksSophistication of the organizationsinformation system

Strength of the organizations culture

Preferred style of the manager

Span of Control (Cont.)


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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


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Organizations in which decision

making is pushed down to the

managers who are closest to the

action.

Decentralization


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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.


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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.


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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 & fewerconstraints on how

employees do their work.

Common Organizational


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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 andcontrol the parent corporation.


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Strengths and Weaknesses of Traditional

Organizational Designs


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Common Organizational Designs

1) Simple structure

2) Bureaucracy

3) Matrix structure

1 Si l S


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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 thansmall organizations


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2.Bureaucracy

Highly routine operating tasks achievedthrough specialization

Formal rules and regulations

Centralized authority

Narrow spans of control

Tasks grouped by functional departments

Decision making follows the chain of

command

M t i St t


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Matrix Structure

Combines two forms of departmentalization Functional

Product

Dual chain of command

Advantages:

Facilitates coordination and efficient allocation ofspecialists

Disadvantages: Possible confusion, fosters power struggles, stress

Matrix Structure for a College


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Matrix Structure for a College

of Business Administration

N D i O ti


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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 horizontalboundaries

Removes exterior barriers

Relies heavily on technology

CustomersWorkers

Suppliers


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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.


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Models of Organizational Design


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Mechanistic Versus Organic Organization

High specialization

Rigiddepartmentalization

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


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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.


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