Introduction to organization

Organization can be defined as the

planned coordination of the activities of a
number of people for the achievement of
some common, explicit purpose or goal,
through division of labour and function
and through a hierarchy of authority and
responsibility.
 Nature
 Common purpose
 Division of labour
 Authority Structure
 People
 Communication
 Coordination
 Environment
 Rules and Regulation
 Organization Design
 Manner in which a management
achieves the right combination of
differentiation and integration of
organization’s operations in response to
the level of uncertainty in its external
environment.
Approaches to organizational
design

Classical Approach
 Task-technology Approach

 Environmental Approach
 Factors Affecting Organization
Design
1. Strategies
i. Porter’s Competitive Strategies
ii. Miles & Snow’s Strategy Typology
 Defender
 Prospector
 Analyzer
 Reactor
Factors Affecting Organization
Design

2. Environment
3. Technology
4. Size of the Organization
5. Culture
 Models of Organizational Design
1. Mechanistic Model

a. Specialized differentiation of functional tasks.

b. Precise definition of rights and obligations and technical methods
attached to each financial position.
c. Translation of rights and obligations and methods into the
responsibilities of a functional position.
d. Hierarchical structure of control, authority and communication.
e. A tendency for interaction between the members of the concern to be
vertical i.e., between superior and subordinate.
f. A tendency for operations and working behaviour to be governed by
the instructions and decisions issued by superiors.
g. Insistence on loyalty to the concern and obedience to superiors as a
condition of membership
 Contd..
2. Organic Model
a. Contributive nature of special knbowledge and experience to the
common task of concern.
b. Continual re-definition of individual task through interaction with
others.
c. Spread of commitment to the concern beyond any technical
definition.
d. Network structure of control, authority and communication.
e. A lateral rather than a vertical direction of communication through
the organization.
f. A content of communication which consists of information and advice
rather than instructions and decisions.
g. Commitment to the organization's tasks and expansion is more
valued than loyalty and obedience.
 Organization Structure

The framework within which an

organization arranges its line of authority
and responsibilities and how information
flows between levels of management.
 Need and Significance of
Organization Structure
 Facilitating management action
 Encouraging Efficiency
 Communication
 Optimum use of organizational resources
 Stimulating creativity
 Job Satisfaction
 Principles of organization
1. Unity of objectives
2. Division of work and specialization
3. Definition of job
4. Separation of line and staff functions
5. Chain of Command and Scalar Principle
6. Parity of Authority and Responsibility or Principle of
Correspondence
7. Unity of command
8. Unity of Direction
9. Exception principle
 Contd..
10. Span of supervision
11. Principle of Balance
12. Communication
13. Flexibility
14. Continuity
 Factors Affecting Organization Structure

1. Environment
• An organization works within a broader framework of
environment.
• Environment consists of all those factors that lie outside
the organization but affects its working.
• In stable environment, mechanistic system is suitable
while in dynamic environment, organic system is suitable.
2. Strategy
• Strategy may be defined as the course of actions through
which the organization relates itself with its environment
so as to achieve its objectives.
 Contd…
• The relationship between strategy and structure should
be viewed as a two way traffic. On the one hand, the
structure should be according to the need of the strategy
so that it is implemented effectively. On the other hand,
structure of the organization may play a crucial role in
influencing its choice of strategy.
•Chandler proposed that evolution of the organizations
followed the following pattern:
1. Initial expansion and accumulation of resources.
2. Rationalization of the use of resources.
3. Expansion into new products and business lines.
4. Development of a new organization structure to enable
effective mobilization and utilization of resources.
 Contd..
 These four phases have produced three types of
organization structure :
 Type I : Characterized by centralized decision making, a
single product line with emphasis on production
function.
 Type II : Vertically integrated structure with emphasis
on efficiency. Characterized by a chief executive and
departmental heads entrusted with the responsibility of
managing particular departments.
 Type III : Highly decentralized and divisionlised. The
accumulation of resources by successful firms with Type
II structure led to diversification in different product
lines. So the functional structure is replaced by divisional
structure by establishing two or more product divisions.
3. Technology
 With increase in technological complexity number of
managerial and supervisory personnel increases resulting
into tall structure.
 The span of management for first level managers increases
as an organization moves from unit to mass production but
it decreases when it moves from mass to process
production.
 As technological complexity increases, its clerical and
administrative staffs become larger because managers
need gelp with paperwork and non-production work so that
they can concentrate on their specialized tasks.
4. Size of the Organization
 The size of the organization influences its coordination,
direction, control and reporting systems and hence, the
organization structure. The complexity of organization
structure increases with the increase in size.
 The size of the organization affects the degree of
formalization of various processes like communication,
authority and responsibility delegation etc. In large
organization, degree of formalization is high while in small
organization, all these processes are conducted informally.
5. People
 Organization structure is the result of conscious actions on
the part of the people who are engaged in the
organization.
 To arrive at an appropriate structure, features of both
the framers and the participants are considered.
 Top Management philosophy about the degree of
freedom and autonomy required for people in the
organization affects its structure i.e. centralized or
decentralized as it lacks the clarity which they want.
 Participants : Skilled and professional personnel have
need for greater autonomy and participation in decision
making, so a flexible structure suits them.
 On the other hand, unskilled and non-professional
people feel uneasiness while working in a flexible
structure
 Process of designing organization
structure
1. Identification of activities
 In designing the structure, managers must identify the
necessary activities that must be performed in order to
achieve the organizational objectives.
 The deductive method of identifying activities is
generally followed.
 The approach suggests that to achieve a particular
goal, what steps and functions should be undertaken.
The major activities are further classified into a number
of sub-activities.
2. Grouping of activities
 Closely related and similar activities are grouped into
departments or divisions.
 Grouping may be done on several bases, such as
functions, geographical regions, types of customers etc.

3. Assignment of duties
 Grouped activities are assigned to various positions.
These positions are occupied by various individuals
 The assignment of activities creates responsibility and
ensures certainty of work performance.
4. Delegation of authority
 The assignment of job to an individual creates
responsibility on his part so he should be given
corresponding authority to discharge his obligations.
 Through the process of delegation, authority structure in
the organization is created i.e. who will interact with
whom in an official way.
 Decisions in organization structure
1. Departmentation
 Departmentation is the process of dividing work of
organization into various units or departments.
Bases of Departmentation
a. Function : Henry Fayol has divided all the operations of
business organization into six functions : technical,
commercial, financial, security, accounting and
management function.
Secondary functions are created on the basis of major
functions, and a manager feels that his span of
management is too large to manage effectively.
b. Product : Different types of products or services become
the basis for creating departments.
c. Territory : All the activities in a given area of operations
is divided into zones, divisions, sections and branches.
Useful to large scale enterprises or those whose
activities are geographically spread.
d. Customer : Division and sub-division of activities of
marketing to give attention to various types of
customers.
For example, if an organization has wholesale, retail,
installment and export business, the marketing function
will be divided into these.
e. Process : Various manufacturing processes are taken for
dividing the activities. Generally done in production
department and at lower levels of organization.
Textile, oil and other similar industries.
f. Time : Where the work is performed throughout day and
night, the work is divided into shifts. Thus, if an
organization operates in three shifts, three different
departments may exist.
g. Alpha-numerical : The departments are created on the
basis of persons or on alphabets. A certain number of
persons are kept under supervision of one person.
Frequently used in military organizations.
2. Span of Management
 Span of management refers to the number of
subordinates who can be managed effectively by a
superior.

Factors determining span of management

1. Capacity of superior : Ability and capacity in respect of
leadership, communication, decision making and control.
2. Capacity of subordinates : Efficient and traines
subordinates would only need broad guidelines to
perform their functions. So the span may be larger.
3. Nature of work : Superior’s task is much simpler when
his subordinates do similar and identical work, so the
span may be larger
4. Degree of decentralization : Higher the degree of
decentralization, wider is the span of management.
5. Planning : If the jobs are well defined in the planning
process, the subordinates will be able to perform their
task better without consulting the superior.
6. Communication Techniques : Various electronic devices
which process the information quickly help in increasing
the span.

Narrow span
 Tall or vertical structure

 Communication becomes problems

 Problems in coordination and control

 Levels are very expensive.

3. Delegation of authority
 Delegation of authority is the process through which a
manager gives authority to others in order to accomplish
certain assignments.
Principles of delegation
1. Functional Definition

2. Delegation of results expected

3. Parity of Authority and Responsibility

4. Unity of Command

5. Absoluteness of responsibility

Inadequate delegation = Degree of felt need for authority

– Degree of delegation of authority
4. Division of Labour

Dimensions to Organization Structure

• Centralization
• Formalization
• Complexity