ORGANISATIONS

Definition of Organization

Organizations are social arrangements

for achieving controlled performance
in pursuit of collective goals.
 Organizational Dilemma

 Organizational
dilemma concerns
the question of how
to reconcile the
potential
inconsistency
between individual
needs and
aspirations on the
one hand, and the
collective purpose
of the organization
on the other.
Nature of Organising

 O  Identification and classification of

activities
 O  Grouping activities
 O  Assignment of each group
 O  Provision for coordination in the
organization structure
Elements Of Organisation
o Line & staff
o Functional authority
o Hierarchy
o Span of control
o Organisational chart
Line
 Line employees are workers who are
directly responsible for manufacturing
goods or providing a service.
 Referred to as chain of command. A
line structure deals with a company’s
core task.
Staff
Staff employees are workers who are in
advisory positions and who use
specialized expertise to support the
production efforts of line employees
Functional Authority
A functional relationship exists where a
staff department has the authority to
insist that the line manager
implement its instructions concerning
a particular issue.
Hierarchy
 Hierarchy
refers to the
number of
levels of
authority to
be found in
an
organization.
Span of Control
 Span of control is the number of
subordinates who report directly to a
single manager/supervisor.
 “One of the surest sources of delay
and confusion is to allow any superior
to be directly responsible for the
control of too many subordinates." -
Graicunas
 A Sample Organization Chart

CEO

V ic e P r e s id e n t V ic e P r e s id e n t D ir e c to r
F in a n c e M a n u fa c tu r in g H u m a n R e s o u rc e s

C h ie f B udget P la n t M a in te n a n c e T r a in in g B e n e fits
A c c o u n ta n t A n a ly s t S u p e rin te n d e n t S u p e rin te n d e n t S p e c ia lis t A d m in is tr a to r
Organisational Chart
 Organisational chart is a pictorial
record that shows the formal relations
that the company intends should
prevail with it.
 The chart shows the main
departments & senior positions within
the organisation.
 It is the usual way to examine the
structure of an organisation.
Structure - Purpose
An organization structure is designed to
clarify:
O  who is to do what tasks
O  who is responsible for what results
O  remove obstacles to performance caused
by confusion and uncertainty of assignment
O  furnish decision making and communication
networks that reflect and support
organization objectives
 Organisational Structure
 Structure is a means for
attaining the objectives and
goals of an organization –
Peter Drucker (1974)
Organisational Design
 “In designing the organization, the leader
should focus on optimizing the response
time to changes in the external
environment.”
(Stata, 1989)
 “Competitiveness does not lie in
downsizing it lies in design” (Dodds,1993)
Organisational Design-Change
 “ For managers, the dynamics of
knowledge impose one clear
imperative: every organization has to
build the management of change into
its very structure.” (Drucker,1992)
Organisational Design:
Structural perspective

 People’s attitudes are shaped as much by

the org in which they work as by their pre-
existing personality variables.
 Stresses the logical and rational elements
of org and de-emphasises peoples
preferences and feelings.

          
Organisational Design:
Behavioural perspective
 Internal (individual) factors are main
determinants of human behaviour in org
rather than external (structural) ones.
 Behavioural scientists have found that
there is an important relationship between
a unit’s or individual’s assigned activities
and the unit members’ pattern of thought
and behaviour.
 Organizational Choice
 Corporations, long have wrested with the
problem of how to structure organizations to
enable employees, particularly the specialists, to
do their jobs with maximum efficiency &
productivity.
 The perplexing issue is whether to organize
around functions or products.
Types Of Organisations
 Functional Organisation
 Divisional Organisation
 Matrix Organisation
Functional Organisation
 Job specialisation in the horizontal
dimension … is an inherent part of
every organisation, indeed every
human activity. – Mintzberg, 1979
 Functional Org Structure

Chief Executive
Officer or President

Manager Manager Manager Manager Manager Manager

Production Engineering Marketing R&D Personnel Accounting

Lower-level managers, specialists, and operating personnel

Functional Organisation(Merits)
 Logical reflection of functions
 Maintains power-prestige of functions
 Occupational specialization
 Simplifies training & enables
professional development
 Tight control
Functional Organisation
(Demerits)
 Over specialisation-narrow viewpoints
 Reduces coordination between
functions
 De-emphasis of overall objectives
 Slow adaptation to environmental
changes
 Conflicts over which products have
priority
Divisional Organisation
 This type of structure occurs when
the organisation is arranged around
the main products or services.
 Specialisation by location divides the
organisation geographically usually
according to location of customers.
 Divisional Org Structure
Chief Executive
Officer or President

Corporate Staff

Division A Division B Division C

General Manager General Manager General Manager

Manager Manager Manager Manager Manager Manager

Production Engineering Marketing R&D Personnel Accounting

Lower-level managers, specialists, and operating personnel

Organized Organized
similarly to similarly to
Division 1 Division 1
Divisional Organisation(Merits)
 Focused on product line & customer needs
 Growth & diversity of products
 Improves coordination & response to
changes in demand pattern
 Responsibility of profits at divisional level
 Training ground for general managers
 
Divisional Organisation
(Demerits)

  Requires more persons with general

management capabilities
 Maintenance of central economical
services difficult
  Lesser control by top management
 May develop a product focus at
expense of wider company interests
Matrix Organisation
 Combination of functional and
product structures. It attempts to
capture the advantages of each of
these approaches.
 On one axis is a range of products or
projects, with a manager responsible
for each. On the other are the various
functional groups.
 Matrix Org Structure

Chief Executive
Officer or President

Corporate
Staff

Manager Manager Manager Manager Manager Manager Public

Administration Projects Manufacturing Engineering Marketing Relations
and Human
Resources
Project A

Project B

Project C

Project D
Matrix Organisation(Merits)
 More than one critical orientation to
the company operations
 Oriented toward end results
 Pinpoints responsibility
 Specialised knowledge is widely
shared but developed within the
functional group
Matrix Organisation(Demerits)
 Conflict in organizational authority
 Problem of defining the extent of
Project Manager’s authority.
 Functional groups may tend to
neglect their normal duties.
 Results in a complex structure and
difficult to manage
 Choice of structure
(1) Which provides the most efficient utilization of
machinery and equipment?
(2) Which provides the best hope of obtaining the
required control and coordination?
(3) Which approach permits the maximum use of
special technical knowledge?

Analysts usually fail to recognize the complex set of

trade-offs involved in these decisions.
Informal Organisation
 Defined as “a network of personal and
social relations not established or
required by the formal organization
but arising spontaneously as people
associate with one another.” Keith
Davis.
 Within the formal structure an
informal organization will always be
present.
Decentralisation
 Decentralisation implies more than
delegation: it reflects a philosophy of
organization and management. It requires
a careful selection of which decisions to
push down into the organization structure
and which to hold near the top
 It is the tendency to disperse decision-
making authority in an organization
structure. Tends to create a climate for
more rapid growth and development of
personnel.
Centralisation
 Centralisation and decentralisation are
tendencies.
 Centralisation is the degree to which
authority is retained by higher-level
managers in an organization rather than
being delegated.
 If a limited amount of authority is
delegated, the organization is usually
characterized as being centralized.