ORGANIZATION

A group of people united by a common purpose A process by which employees, facilities and tasks are related to each other, with a view to achieve specific goal.

Nature of Organization

1) Division of Labor 2) Coordination 3) Social System 4) Objectives 5) Co-operative Relationship 6) Well Defined Hierarchy 7) Communication

PURPOSES OF ORGANIZING

Divide work to be done into specific jobs & departments Assign tasks and responsibilities associated with individual jobs Coordinate diverse organizational tasks Clusters jobs into units Establish relationships among individuals , groups and departments Establish formal lines of authority Allocate and deploys organizational resources.

Formal Organization

A formal organization is deliberately designed to achieve some particular activity. It refers to the structure of well defined-jobs, each bearing a definite measure of authority, responsibility and accountability. It is designed by Top Management It is based on the principle of division of labor Coordination among members and their controls are well specified through processes, procedures, rules, etc.

Advantages of Formal Organization

1)Facilitating Management Action : When a large number of people work together, some sort of formal structuring is required to place them according to the needs of organization. 2)Encouraging Efficiency : Organizational members try to maximize the output of goods from a given amount of input. 3) Communication 4) Optimum use of Organizational Resources 5) Stimulating Creativity 6) Job Satisfaction

Limitation of Formal Organization

Doesnt allow flexibility Doesnt allow long term planning Limit the scope of creativity

Informal Organization

Informal organization refers to the relationship between people in the organization based on personal attitudes, emotions, prejudices, likes, dislikes etc. It arises from Social Interaction Based on informal Authority Develop from Customs, Contacts and Habits Valuable Impact

Advantages of Informal Organization

Influence productivity and Job Satisfaction Easy Flow of Communication It achieves what Formal Organization cannot achieve Minimizes the work load of Management Serve as Safety Valves Check on Managers Performance

Limitation

Resistance to Change Role Conflict Rumor Clash of Objectives Imposes Self Regulation

Organization Chart

An organizational chart is a diagram that shows the structure of an organization and the relationships and relative ranks of its parts and positions. It is a graphic illustration of the organization's management hierarchy and departments and their working relationships.

Advantages of Organization Chart

It is the tools that can effectively delineate work responsibilities and reporting relationship. It helps to clarify relationship between different organizational units and sub units. The process of charting is good test of its soundness, because any relationship that cannot be charted is likely to be unsound. It can be used as a navigational tool when small businesses expand their operation

Disadvantages of Organization Charts

It shows only formal authority relationships and omits many significant, informal and informational relationships. It excludes such factors as leaders behavior, the impact of the environment, informal relations, power distribution, etc.

ORGANIZATION STRUCTURE

A framework of an organization expressed by its degree of complexity, formalization and centralization

FORMALIZATION
The

degree to which an organization relies on rules and procedures to direct the behavior of its employees Range of formalization degree to which it varies from lower level to higher level Why formalization is important

formalization

McDonald has operating manual of 385 pages No cigarettes, candy or pin ball machines are allowed hamburger patty to be of 1.6 ounces of beef with no more than 19 % of fat content Hamburger bun to have 13.3 % sugar in it French fries to be kept in warming light for not more than 7 minutes

CENTERALIZATION
The concentration of decision making authority in upper management Advantages : Specialized skills, talent and technology are some time neither affordable nor practical in multiple locations Improvement in communication technology facilitate the movement of money credit information, transportation and data processing from central location

DECENTERALIZATION
The handing down of decision making authority to lower levels in an organization Advantages : unburdening of top managers, decisions are made closer to the scene of action, better training, Morales and initiative at lower levels, more flexibility and faster decision making

ORGANIZATION DESIGN
The development or changing of an organization structure

ORGANIZATION DIMENTIONS

Vertical differentiation Horizontal spatial

ASPECTS OF VERTICAL DIMENTION

It refers to depth in structure

Unity of command Authority & responsibility

UNITY OF COMMAND

The principle that subordinate should have one and only one superior to whom he (or she) is directly responsible.

CHAIN OF COMMAND

The flow of authority from the top to the bottom of an organization

ASPECTS OF HORIZONTAL DIMENSION

It refers to the degree of differentiation between units based on orientation of members, the nature of tasks they perform, education & training

Departmentalization Specialization ( functional & social)

Specialization
Functional: The break down of jobs in narrow, repetitive tasks. High substitutability & easy replacement of employees social specialization: Individuals are specialized

spatial
It refers to degree to which the location of the organizations office, plants, and personnel are dispersed geographically.

DEPARTMENTALIZATION
The process of grouping individuals into separate units or departments to accomplish organizational objectives. It can be based on numbers, function, product or service, clients, geography, or process.

DEPARTMENT
Department designates a distinct area, division or branch of an organization over which a manager has authority for the performance of specified activities

DEPARTMENTATION

By time By function By territory By product By process of manufacturing By customers interest

Departmentation by Time
Grouping activities on the basis of time, generally at lower levels.

Continuous round the clock Shifts

Advantages

Service available 24 / 7 Processes work uninterrupted Utilization of equipment Helping people utilize available time

Disadvantages

Lack of supervision especially at night Problem of coordination & communication Cost of overtime Fatigue factor

DEPARTMENTATION BY FUNCTION
MD
MARKETING ENGINEERRING

PRODUCTION

FINANCE

MARKETING`

ADMIN

PLANNING

PLANNING

PLANNING

DESIGN

PURCHASING

BUDGETING

SALES

QULITY CONTROL

GEN

PRODUCTION

ACCOUNTING

Advantages

Is Logical reflection of functions Maintains power and prestige of major functions Follows principle of occupational specialization Simplifies training Furnishes means of tight control at top De-emphasis of overall company objective Overspecializes and narrows viewpoint of key personnel Reduces coordination between functions Responsibility for profits is at the top only Slow adaptation to changes in environment Limits development of general managers

Disadvantages

DEPARTMENTATION BY TERRITORY
MD

WESTERN REIGON

NORTHERN

CENTERAL

SOUTHERN

ESTERN REGION

(HQ)

Advantages

Places responsibility at a lower level Places emphasis on local markets and problems Improves coordination in a region Takes advantage of economies of local operations Better face-to-face communication with local interests Furnishes measurable training ground for general managers

Disadvantages

Requires more persons with general manager abilities Tend to make maintenance of economical central services difficult and may require services such as personnel or purchasing at the regional level Increases problem of top management control

DEPARTMENTATION BY PRODUCT
MD

HEAVY ELECTRICAL

RADIO/TV/VCR

TELEPHONE /MOBILE

KITCHEN APPLIANCE

Advantages

Places attention and effort on product line Facilitates use of specialized capital, facilities, skills, and knowledge Permits growth and diversity of products and services Improves coordination of functional activities Places responsibility for profits at the division level Furnishes measurable training ground for general managers

Disadvantages

Requires more persons with general managers abilities Tends to make maintenance of economical central services difficult Presents increased problem of top management control

DEPARTMENTATION BY MANUFACTURING PROCESS

MD

FOUNDRY

CASTING/ FORGING

NICKLE PLATING

PAINTING

Advantages

Achieves economic advantage Uses specialized technology Utilizes special skills Simplifies training

Disadvantages

Coordination of departments is difficult Responsibility for profit is at the top Is unsuitable for developing general managers

DEPARTMENTATION BY CUSTOMERS
MD

HIRE-PERCHASE

BUDGET ITEM

HIGH END PRODUCTS

BOUTIQUE

Advantages

Encourages concentration on customer needs Gives customers feeling that they have an understanding supplier Develops expertness in customer area

Disadvantages

May be difficult to coordinate operations between competing customer demands Requires managers and staff expert in customers problems Customer groups may not always be clearly defined (For Example, large corporate firms vs. other corporate businesses)

SPAN OF MANAGEMENT
The number of subordinates a manager can supervise effectively and efficiently Narrow (or vertical) Wide (or horizontal)

NARROW SPAN

No of subordinates four or less than four

NARROW SPAN
Advantages

Close supervision Close control Fast communication

Many level of management Excessive distance between the top &lowest level Superior tend to get too involved in subordinates work High cost due to many levels

Disadvantages

WIDE SPAN

No of subordinate six or more than six

WIDE SPAN
Advantages

Superiors are obliged to delegate Clear policies are made Subordinates are carefully selected
Overloaded superiors become decision bottlenecks Superiors may lose control Require exceptional quality of managers

Disadvantages

FACTORS AFFECTING SPAN

Training of subordinates Clarity of delegation of authority Clarity of plans Use of objective standards Rate of change Communication techniques Amount of personal contact needed

Basic elements of organization

5 main elements are
Strategic Apex

Middle line

Operating core

TYPES OF ORGANIZATIONS

Mechanistic ( or bureaucratic ) Organic ( or adhocracy) Team-based Boundary-less Matrix

MECHANISTIC ORGANIZATION (Bureaucracy)

A structure that is high in complexity, formalization and centralization Permanent Shared responsibility Work by the book Bank, postal department, railway booking office

ORGANIC ORGANIZATION
(Adhocracy)
A structure that is low in complexity , formalization and centralization . Transient High horizontal differentiation Low vertical differentiation Low formalization decentralization Adhocism creative

TEAM-BASED ORGANIZATION
An organization made of work groups or teams that perform organizations work

BOUNDARY LESS ORGANIZATION

An organization whose design is not defined or limited to the boundaries imposed by a predefined structure [ Also knows as Network org, modular ,or virtual corporation]

MECHANISTIC Vrs ORGANIC ORGANIZATION

MECHANISTIC
Organic

Rigid hierarchical relationship Fixed duties High formalization Formalized communication channels centralized

Collaborative/flexible (both vertical horizontal) Adaptable duties low formalization Informal communication decentralized

MATRIX ORGANIZATION
An organization that assigns specialists from different functional departments to work on one or more projects that are led by a project manager

MATRIX ORGANIZATION WORKING

Define objectives of the project or task Clarify roles , authority and responsibility of managers and team members based on knowledge &experience rather than rank Balance power of functional and project managers Install appropriate cost , time and quality control

When to use Matrix

Environmental pressure from two or more critical sectors Interdependence between department Economy in scale in the use of internal resources Two types of matrix organizations permanent & temporary

Strength & weakness

STRATEGIC BUSINESS UNIT

(SBU)
A single business that is independent of main organization and formulates its own strategy. It will have its own: Unique mission Competitors Plans Organization/setup recourses

Line & Staff authority

Line Authority : The authority of those managers who are directly responsible, through out the organizations chain of command, for achieving organizational goals. Staff authority : The authority of those groups of individuals who provide line managers with advice and services

Delegation

The act of assigning formal authority and responsibility for completion of specific activities to a subordinate. Advantage & disadvantage

Human resource management

The management function that deals with recruitment, placement, training and development of organization

Recruitment

Job description : A written description of a management position, covering title, duties, and responsibilities and including location on organization chart Hiring specifications : A written description of education experience and skill needed to perform a job or a fill a position effectively

Selection

Completed job application Initial screening interview Testing Background investigation In-depth selection interview Physical examination Job offer

Orientation

General information about daily work routine Review of organization history, purpose, operations, products or services as well as a sense of how employees job contributes to organization need Detail presentation of organization policies, work rules employee benefits

Training & Development

How to determine the need Performance appraisal Analysis of job requirement Organizational analysis Employee survey

MDP

On job methods : Coaching, Job rotation, training position & planned worked activities Off the job methods : University sponsored programs