……………….

Chapter one cont’d

ORGANIZATION STRUCTURE

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 ORGANIZATIONAL
ORGANIZATIONAL STRUCTURE
STRUCTURE

 Organization structure is a graphical representation of

the people working in the enterprise showing their

lines of authority, responsibility, and coordination

 An effective organization structure facilitates

management and clarifies relationships, roles and

responsibilities, levels of authority, and supervisory or

reporting lines

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 CONT’D
CONT’D

 In order to achieve the objectives of a

business/enterprise all activities essential for it must

be carried out effectively and efficiently, which

requires an organized unit

 An organized unit is an enterprise/organization which

is established by the combination of human and non

human resources (materials, machines, money, land,

methods and system)

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 CONT’D
CONT’D

 Considering all essential activities that must be

carried out effectively and efficiently, how the

limited resources of the organization are organized?

OR

 To carry out all essential activities of a firm

effectively and efficiently how the firm should be

organized? which organization structure is most

appropriate?

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 CONT’D
CONT’D

• The stages in the setting up of an effective organizational

structure are 

a. The activities which will be necessary to achieve the

objectives of the business must be established. 

b. The various related activities should be grouped together

into departments; the most logical grouping is by

'function', that is, by type of activity: production,

marketing, finance, etc. 

c. The activities of a particular department will be further

divided, and grouped together into sections;

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 CONT’D
CONT’D

d. Then an organization chart should be produced to

depict the proposed organization

e. Based on estimates of the volume of work, which will

be performed by each section, the number of staff

required must be determined.

f. Depending on the type of work to be performed and on

other factors, the numbers of supervisors, junior and

middle managers per section and department must be

given thought
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 CONT’D
CONT’D

g. The special knowledge or talents required by

departmental and sectional managers must be laid down.

h. The equipment necessary for the proper functioning of

each section and department must be decided upon, and

provision made for its positioning when considering the

layout of the accommodation for each unit. 

i. To ensure effective coordination of all parts of the

enterprise, effective procedures and systems of

communication must be devised and installed.

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 TYPES
TYPES OF
OF ORGANIZATIONAL
ORGANIZATIONAL STRUCTURE
STRUCTURE

• There are four different types of organizational

structures, namely:
I. Line,

II. Functional,
III. Line and staff, and
IV. Matrix organization.

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 CONT’D
CONT’D

I. Line organization
• Is the simplest form of organization, and can be very

efficient, particularly in small and medium-size

enterprises  

• There is a clear 'line' of responsibility and authority

right through the management structure from the top

management to the lowest level of supervision.

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 CONT’D
CONT’D
• The 'chain of command‘ is direct and so decisions can
usually be made quickly and implemented rapidly,
• Because of the directness of the control, the
coordination of the activities of all those employed in a
department is simplified.
• The position (and status) of all the different people
working in a department can be easily seen, and the
extent of their responsibilities, authority and duties can
be clearly defined and understood.

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Line
Line organization
organization structure
structure

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 CONT’D
CONT’D

Advantages of Line organization

 It is simple and easy to understand by the members of the
enterprise
 Quick decisions can be taken

 It provides a clear cut division of authority and responsibility

 Maintenance of discipline is easy

 Direct flow of authority and responsibility which minimizes

confusions.

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 CONT’D
CONT’D

Limitations of Line organization

 Not suitable for complex and large organizations
 Executives become overloaded with too many duties
 Specialization cannot be practiced

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 CONT’D
CONT’D

II. Functional organization structure

• It is the function (the type of activity), which
determines the areas of authority and responsibility.
• An expert or specialist is placed in charge of each
function, and will have direct control of that function
wherever it is undertaken within the enterprise.
• For example, the personnel manager will have authority
over employees in whichever department they may work

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 CONT’D
CONT’D

• As the functional specialists are not involved in the day-

to-day running of the enterprise, they are free to the
concentrate on their particular functions that produce
many benefits for the enterprise.
• However, this form of organization makes control difficult
as there are no clear lines of authority and it is similarly
difficult to establish responsibility when things do not go
right.
• Furthermore, staff as well as supervisors and junior
managers become confused at being subjected to the
authority of more than one functional managers.
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Functional
Functional organization
organization structure
structure

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 CONT’D
CONT’D

Advantages of Functional organization

 It works on the basis of expert knowledge
 It relives the line executives of specialized decisions

 Quality of work is better

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 CONT’D
CONT’D

Limitations of functional organization

 Expenditure in coordinating the efforts of various
functional sections
 The inability to locate and fix responsibility may lead to
indiscipline
 Overlapping authority may create friction b/n various
executives

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 CONT’D
CONT’D

III.Line and staff organization

• In such a structure, the line managers control the

primary functions, such as marketing and production,

which are directly concerned with achieving the

objectives of the business;

• whilst the staff managers are generally involved with

secondary functions which assist the smooth and

efficient running of the primary functions.

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Line
Line and
and staff
staff organization
organization structure
structure

MANAGING DIRECTOR

L WORKS L SALES L ACCOUNTS S PERSONNEL

MANAGER MANAGER MANAGER MANAGER

L L
L SECTION SECTION MANAGERS SECTION
MANAGERS SUPERVISORS & MANAGERS
SUPERVISORS & SALESMEN SUPERVISORS &
OPERATORS CLERKS

S EMPLOYMENT S TRAINING
OFFICER OFFICER
L – Line relationship: S – staff relationship
Responsibility and authority shown by
Staff. Advisory relationship shown by ----------
SUPERVISORS SUPERVISORS
& CLERKS & CLERKS

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IV.Matrix
IV.Matrix organization(Project
organization(Project Organization)
Organization)
• These are temporary organizational structures formed for

specific projects for a specific period of time and are

dismantled, once the required goal is achieved.

• A typical example for this kind of organizational structure

can be the goal to design and build a new power plant

station.
• The specialists are selected primarily on the basis of task-

related skills and expertise rather than decision making

experience or planning ability.
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 CONT’D
CONT’D

General
Manager

Labor Research Finance Personnel Technical

Services

Project A Manager

Project B Manager

Project C Manager

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 CONT’D
CONT’D

• These structures are very useful when:

– The project is clearly defined in terms of objectives

to be achieved and the target date for completion
of the project.

– The project must be separate and unique and not be

a part of daily work routine of the organization.
– The project must be temporary in nature and not
extended into other related projects.

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 CONT’D
CONT’D

• This kind of organization occurs frequently in:

– Construction ( e.g. building a bridge, dam)

– Aerospace engineering ( i.e. designing and launching

weather satellite, airplanes)
– Marketing( e.g. advertising company for new product)
– Installation of an electronic data processing system,
etc.

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 CONT’D
CONT’D

• In matrix organization, it is possible for the individual

employee to have two managers. However, matrix
organization provides flexibility to work on critical
projects.

• Matrix organization also brings together the specialized

talent that is often necessary to complete a project.

• Resource utilization is efficient, because key resources

are shared across several important programs or
products at the same time.
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 CONT’D
CONT’D
Other advantages of matrix organization:
– Decision making is decentralized to a level where
information is processed properly and relevant knowledge
is applied.
– Extensive communication networks help to process large
amount of information.
– Employee learns the collaborative skills needed to function
through frequent meeting and more informal interactions.

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 PRODUCTIVITY

09/06/2021 27
 BASICS
BASICS OF
OF PRODUCTIVITY
PRODUCTIVITY

• Productivity is defined as the ratio of value of output to

the value of input.
• Productivity is crucial to the welfare of industrial firm as
well as for the economic progress of the country.
• Productivity is a measure of how well the input resourses
are utilized to achieve the desired objectives
• Productivity refers to the efficiency of the production
system.

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 BASICS
BASICS OF
OF PRODUCTIVITY
PRODUCTIVITY

• Productivity is the quantitative relation between what we

produce and we use as a resource to produce them,
• It is arithmetic ratio of the amount produced (output) to
the amount of resources (input). i.e.

 All values of the input and output factors are measured in

some common unit like money value

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 BASICS
BASICS OF
OF PRODUCTIVITY
PRODUCTIVITY

• Productivity is the concept that guides the management of

production system.
• Productivity is an indicator to how well the factors of
production (human, material land, capital, labor and
energy) are utilized.
• Generally , it is the relationship between goods and
services produced and the resources employed in their
production.

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 BASICS
BASICS OF
OF PRODUCTIVITY
PRODUCTIVITY

• The measure of productivity indicates the performance of

all inputs required in an enterprise
• Productivity implies development of an attitude of mind
and a constant urge to find better, cheaper, easier,
quicker and safer means of doing job, manufacturing a
product or providing service

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 Factors
Factors Influencing
Influencing Productivity
Productivity
Can be classified broadly into two categories: (A)
controllable (or internal) factors and (B) un-controllable
(or external) factors
Internal factors External factors
• Product design • Capital availability
• Input materials • Natural resources and their mobility
• Energy consumption • Taxation, interest rate etc.
• Human competence and skill • Laws and restrictions imposed by
• Technological developments and government
innovations • Competition in the market
• Plant layout and availability of • Technical and other training facilities
machineries
• Political, social and economic conditions
• Material handling techniques
• Work & method study
• Availability of water, power and other
• Inspection & quality control infrastructures (transport system &
• Production planning & control network, communication and etc.
• Management techniques

09/06/2021 32
 Reasons
Reasons for
for Low
Low Productivity
Productivity
The various factors that are responsible for low
productivity are as follows

 Poor product design  Unnecessary variety of products

 Lack of standardization (of
products, input materials etc.)
 Improper
equipment/machines/cutting
tools & non optimal machining
parameters
 Poor process planning
 Poor plant layout
 Non standardization of methods
of production
 Shortage of input materials, tools,
jigs and fixtures
 Frequent changes in product design
 Frequent break down of machines
due to poor maintenance
 Poor working conditions
 More absenteeism of workers
 Idleness of workers
 Careless and poor workmanship
 Lack of motivations among workers

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 CONT’D
CONT’D

• Reducing wastage at each stages of production improve

productivity to a greater extent. For this management plays
a significant role as it,
 Prepares a good plan of productivity improvement
 Organizes the resources
 Assigns the right person in the right organizational position
and raising the performance of personnel by training and
retraining of people to fit the needs of the organizational
position
 Directs and controls the workers
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 Measuring
Measuring productivity
productivity

• Productivity is an effective tool of judging how a system

is performing over a period of time. It is important to
measure it quantitatively. Productivity measurement
broadly classified into two:
• Total Productivity Measure (TPM):- It is based on all the
inputs. The model can be applied to any manufacturing
organization or service company.

• Partial Productivity Measures (PPM): - Depending upon the

individual input partial productivity measures are calculated.
09/06/2021 35
 Measuring
Measuring productivity
productivity
value of output
Productivi ty =
value of input

09/06/2021 36
 Measuring
Measuring productivity
productivity

• An increase in production does not necessarily by

itself indicate an increase in productivity.

• That means, if the input of resources goes up in direct

proportion to the increase in output the productivity

remains the same, therefore productivity will not

increase.

09/06/2021 37
 Measuring
Measuring productivity
productivity

• If input increases by a greater percentage than

output, higher products will be achieved at the
expense of reduction in productivity
• In short higher productivity means to produce more
with the same expenditure, or with a minimum
increase in expense, or the same amount is produced
at less cost in terms of resources.

09/06/2021 38
 Measuring
Measuring productivity
productivity

• The outputs may be products or services and the inputs or

resources may be land, materials, plant machineries, tools
and human resources.
• Partial productivity measures the performance of each
resources. The following are some widely known measure of
partial productivity
♦ Land Productivity: Better seed, fertilizer and better
method of cultivation may increase the yield from two
quintals to three quintals. Hence land productivity has
increased by 50 percent.
09/06/2021 39
 CONT’D
CONT’D

♦ Material Productivity:
 If a skillful worker is able to produce 300
formworks from 400 pieces of 2m  1m sheet metal,
 while an unskillful worker can only produce 250 out
of the same material, then with the skilful worker
the material was used with 20 percent greater
productivity

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 CONT’D
CONT’D

♦ Machine Productivity:
 If a machine tool has been producing 100 pieces per
a working day, and through the use of improved
cutting tool and/or proper maintenance procedure
its output in the same period is increased to 120
pieces, the productivity of that machine has been
increased by 20 percent.

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 CONT’D
CONT’D

♦ Productivity of Man:
 If a shoe maker has been producing 30 pieces of
leather parts per hour, and if improved methods of
work enable him to produce 40 pieces per hour the
productivity of that man has increased by 10
percent

09/06/2021 42
 CONT’D
CONT’D

• To sum up, a low level of productivity implies a low

growth of economy.
• A low growth of economy meant, low income leading to
low standard of living and a low level of savings, resulting
low productivity

09/06/2021 43
 Productivity
Productivity Improvement
Improvement Techniques
Techniques

09/06/2021 44
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09/06/2021 Productivity improvement techniques 45

 Productivity
Productivity Improvement
Improvement Techniques
Techniques

(A) TECHNOLOGY BASED

• Computer Aided Design (CAD):- refers to design of
products, processes or systems with the help of
computers.
• the advantages of CAD for productivity are:

(a) Speed of evaluation of alternative designs,

(b) Minimization of risk of functioning, and

(c) Error reduction.

09/06/2021 46
 Productivity
Productivity Improvement
Improvement Techniques
Techniques
• Computer Aided Manufacturing (CAM):- is very much
useful to design and control the manufacturing.
• It helps to achieve the effectiveness in production
system by line balancing.

(a) Production Planning and Control

(b) Materials Requirement Planning (MRP)

(c) Automated Inspection.

09/06/2021 47
 Productivity
Productivity Improvement
Improvement Techniques
Techniques

(B) EMPLOYEE BASED

1. Financial and non-financial incentives at individual
and group level.
2. Employee promotion.
3. Job design, job enlargement, job enrichment and
job rotation.

4. Worker participation in decision-making

09/06/2021 48
 Productivity
Productivity Improvement
Improvement Techniques
Techniques
(C) MATERIAL BASED
1. Material planning and control
2. Purchasing, logistics
3. Material storage and retrieval
4. Source selection and procurement of quality
material
D) PROCESS BASED
1. Methods engineering and work simplification
2. Job design evaluation, job safety
3. Human factors engineering.

09/06/2021 49
 Productivity
Productivity Improvement
Improvement Techniques
Techniques
(E) PRODUCT BASED
1. Value analysis and value engineering
2. Product diversification
3. Standardization and simplification
4. Reliability engineering
(F) TASK BASED
1. Management style
2. Communication in the organization
3. Work culture
4. Motivation
09/06/2021 50
PRODUCTIVITY
PRODUCTIVITY IMPROVEMENT
IMPROVEMENT STRATEGIES
STRATEGIES

A. Short term Strategy

• The first strategy is improving organizational planning
and control, to implement planned maintenance of
machinery and effective production system in plants
would show an increase in machine productivity and
reduction in maintenance cost.

09/06/2021 51
 PRODUCTIVITY
PRODUCTIVITY IMPROVEMENT
IMPROVEMENT STRATEGIES
STRATEGIES

• The second action is increasing manpower efficiency and

effectiveness at all levels. Effectiveness and efficiency
are the main tools of productivity.
♦ Efficiency
 “Doing things right”
– Getting the most output for the least inputs
♦ Effectiveness
 “Doing the right things”
– Attaining organizational goals

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 PRODUCTIVITY
PRODUCTIVITY IMPROVEMENT
IMPROVEMENT STRATEGIES
STRATEGIES

Efficiency (Means) Effectiveness (End)

Resource Goal
Usage Attainment

Low Waste High Attainment

Management Strives for:

Low Resource Waste (High Efficiency)
High Goal Attainment (High Effectiveness)

09/06/2021 53
 PRODUCTIVITY
PRODUCTIVITY IMPROVEMENT
IMPROVEMENT STRATEGIES
STRATEGIES

• To be able to increase manpower efficiency and

effectiveness at all levels of an organization
what is required is motivation, training and
education. This method has proved itself
successful in Japan.

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 CONT’D
CONT’D

• The third short term line of attack is

improving operation methods. The
techniques of method study involve breaking
a process into detailed components.

– The study may result in elimination of an

activity, combination of several activities,
change of sequence of activities,

09/06/2021
shortening duration of activities etc. 55
 CONT’D
CONT’D

09/06/2021 56
 CONT’D
CONT’D

B. Medium Term Strategy

• At this stage the firm may require capital to simplify

and improve the products, and reduce variety.

• The analysis consists of common sense questions to

come up with effective solutions like substitution of

alternative materials, elimination of parts where

special designs have been specified, redesign, etc.

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 CONT’D
CONT’D

C. Long Term Strategy

• Properly selected new machineries, well

organized departments and proper layout will

undoubtedly contribute to an increase in

productivity.

• Furthermore, research and development is

the backbone for productivity increment.
09/06/2021 58
 FUNCTIONS
FUNCTIONS OF
OF AN
AN INDUSTRIAL
INDUSTRIAL ENTERPRISE
ENTERPRISE

• Manufacturing functions
– Receiving, Warehousing, Transportation, Production,
Shipping
• Engineering Functions
– Product design, Process design, Plant engineering, Cost
estimation
• Control Functions
– Production control, Quality control, Cost control,
• Support Functions
– Purchasing, Sales, Maintenance, Personnel

09/06/2021 59
  Engineers are responsible to improve
Productivity in their working area, so that
they are contributing their part to economic
development of Ethiopia

End of Chapter One

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 Thank You

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