Sid Assignement

ORGANISATION

STRUCTURE

DEFINING ORGANIZATIONAL STRUCTURE A key issue in accomplishing the goals identified in the planning process is structuring the work of the organization. Organizations are groups of people, with ideas and resources, working toward common goals. The purpose of the organizing function is to make the best use of the organization's resources to achieve organizational goals. Organizational structure is the formal decision-making framework by which job tasks are divided, grouped, and coordinated. Formalization is an important aspect of structure. It is the extent to which the units of the organization are explicitly defined and its policies, procedures, and goals are clearly stated. It is the official organizational structure conceived and built by top management. The formal organization can be seen and represented in chart form. An organization chart displays the organizational structure and shows job titles, lines of authority, and relationships between departments. It is the framework that enables employees to work together productively. It allows adequate management to be provided for each group. Because of the organizational structure, employees know where to report and whom to ask for help. Often a company exhibits the formal organizational structure on an organizational chart. This is a diagram that traditionally shows boxes to indicate functions, with connecting lines to indicate relationships. The relationships can also be called the chain of command. This shows flow of authority, accountability, and responsibility. Authority is the power granted by the job description to make decisions, take actions, and allocate resources. Accountability is the duty to inform and update supervisors. Responsibility is the obligation to perform the job requirements and meet objectives.

Key Elements of Organizational Structure Ø - Work specialization :- It refers to the degree to which tasks in the organization are subdivided into separate jobs. •

the entire job is broken down into steps, each step completed by a separate individual

•

individual workers specialize in doing part of an activity

•

involves repetitive performance of a few skills

•

can be viewed as a means to make the most efficient use of employee's skills

•

some task requires highly developed skills

•

Others can be performed by the untrained

Ø Departmentalization:- After reviewing the plans, usually the first step in the organizing process is departmentalization. Once jobs have been classified through work specialization, they are grouped so those common tasks can be coordinated. Departmentalization is the basis on which work or individuals are grouped into manageable units. There are five traditional methods for grouping work activities. · Departmentalization by function organizes by the functions to be performed. The functions reflect the nature of the business. The advantage of this type of grouping is obtaining efficiencies from consolidating similar specialties and people with common skills, knowledge and orientations together in common units. · Departmentalization by product assembles all functions needed to make and market a particular product are placed under one executive. For instance, major department stores are structured around product groups such as home accessories, appliances, women's clothing, men's clothing, and children's clothing. · Departmentalization by geographical regions groups jobs on the basis of territory or geography. For example, Merck, a major pharmaceutical company, has its domestic sales departmentalized by regions such as Northeast, Southeast, Midwest, Southwest, and Northwest. · Departmentalization by process groups jobs on the basis of product or customer flow. Each process requires particular skills and offers a basis for

homogeneous categorizing of work activities. A patient preparing for an operation would first engage in preliminary diagnostic tests, then go through the admitting process, undergo a procedure in surgery, receive post operative care, be discharged and perhaps receive out-patient attention. These services are each administered by different departments. · Departmentalization by customer groups jobs on the basis of a common set of needs or problems of specific customers. For instance, a plumbing firm may group its work according to whether it is serving private sector, public sector, government, or not-for-profit organizations. A current departmentalization trend is to structure work according to customer, using cross-functional teams. This group is chosen from different functions to work together across various departments to interdependently create new products or services. For example, a cross-functional team consisting of managers from accounting, finance, and marketing is created to prepare a technology plan. Ø Chain of command :Chain of command is the unbroken line of authority that connects each level of management with the next level. The chain of command helps organizations function smoothly by making two things clear: who is responsible for each task, and who has the authority to make official decisions. In organizations, employees are assigned: 1. Responsibility for their jobs; they are obligated to perform those duties and to achieve goals and objectives associated with their positions. 2. Accountability for reporting their results to supervisors or team members and justifying outcomes that falls below expectations. Managers ensure tasks are accomplished by exercising authority. Authority is the power to make decisions, issue orders, carry out actions, and allocate resources. Delegation is the assignment of work and the transfer of authority and responsibility to do that work. Possible chain-of-command systems: 1. Line organization – The simplest and most common chain-of-command system. Everyone knows who is accountable to whom. Know which tasks and decisions each person is responsible for. It does have a disadvantage – the technical complexity of a firm’s activities may require

specialized knowledge that individual managers don’t have and can’t easily acquire. 2. Line and staff organization combines specialization with management control. Managers are supplemented by functional groupings of people known as staff. These staff employees provide advice and specialized services but they are not in the line organization’s chain of command

Power and Authority Organizational structure is a means of facilitating the achievement of organizational objectives. Such structures are not static, but dynamic. They reorganize in response to changing conditions that occur in the environment, new technology, or organizational growth. Organization structures are dependent upon the employees whose activities they guide. Supervisors rely upon power and authority to ensure that employees get things done. Authority The organizational structure provides the framework for the formal distribution of authority. Formalization is the degree to which tasks are standardized and rules and regulations govern employee behavior. It influences the amount of discretion an employee has over his or her job. In an organization with high degrees of formalization, job descriptions and policies provide clear direction. Where formalization is low, employees have a great deal of freedom in deciding how thy conduct their work. Within the same organization, different departments may have different degrees of formalization. For example, in a hospital, doctors have freedom in selecting treatments, drugs, and methods for treating patients. However, the hospital physical plant staff has a strict schedule for cleaning buildings, mowing lawns, and maintaining the facilities. Authority is the legitimate power of a supervisor to direct subordinates to take action within the scope of the supervisor's position. Formal authority in the organization can be traced all the way back to the U.S. constitutional right to own property. The owner of the organization has the authority to make decisions. For example, entrepreneurial firms have an informal arrangement of employees and centralization of decision-making authority, the owner. Forms of Authority Three forms of authority are line authority, staff authority, and team authority. Line

authority

is

direct

supervisory

authority

from

superior

to

subordinate. Authority flows in a direct chain of command from the top of the company to the bottom. Chain of command is an unbroken line of reporting relationships that extends through the entire organization that defines the formal decision-making structure. It helps employees know to whom they are accountable, and whom to go to with a problem. Line departments are directly linked to the production and sales of specific products. Supervisors -- in line departments, such as marketing and production -- give direct orders, evaluate performance, and reward or punish those employees who work for them. Unity of command within the chain states that each person in an organization should take orders from and reports to only one person. This helps prevent conflicting demands being placed on employees by more than one boss. However, the trend toward employee empowerment, fueled by advances in technology and changes in design from downsizing and reengineering have tempered the importance of being accountable to only one superior. Span of control refers to the number of employees that should be placed under the direction of one manager. Spans within effective organizations vary greatly. The actual number depends on the amount of complexity and the level of specialization. In general, a wide span of control is possible with better-trained, more experienced, and committed employees. Ø Span of control:- The Span of Control in an organization is defined as the

number of employees

reporting

directly

to one

supervisor.

Traditionally, the Span of Control has been defined as a number between 4 and 7 subordinates under one manager. The Span of Control is a concept which developed during the 19’th Century for the organization of large European armies into smaller and smaller subunits. I.e. one could have 7 soldiers in one Platoon with 1 leader, 7 platoons with one higher-ranking leader, etc. to form a large army which was relatively easy for one General at the top to manage under conditions of combat. Narrow Span Drawbacks · · ·

xpense of additional layers of management increased complexity of vertical communication encouragement of overly tight supervision and discouragement of employee autonomy.

Ø Centralization and Decentralization :- Centralization is the retaining of power or authority to upper-levels of management. The advantages to centralization involve a closer control of company operations-including policies and practices. By retaining power at the top, those decisions that directly affect a company will be made by the proper governing board.

Decentralization is the degree to which authority is dispersed throughout the lower levels of an organization. One of the main advantages

to

decentralization

is

that

decisions

can

be

made

considerably faster, without having to seek approval from upper levels of

authority.

Also,

the

presence

of

decentralization

acts

as

a

motivational tool for employees to work their way through the ranks. Decentralization also eases the workload for busy executives who may not have time to oversee all aspects of the company. Reasons to Move from Decentralization to Centralization

A. Considerable company growth- a company may find it advantageous to switch to a decentralization model in order to keep organized. In this manner, a company may establish new divisions or departments to keep track of its growth. B. Geographic- decentralization could involve the dispersing of power from a centralized headquarters to localized branches. This designation of power is most commonly used in the situations where a domestic company has offices in a foreign country. C.

Technological

complexity-

a

company

may

also

choose

to

decentralize its chain of command in order to better facilitate its technological

departments.

This

maneuver

may

also

indirectly

demonstrate a sense of confidence to the technology employees, as it proves a company has confidence in their actions. A positive side effect could be the creation of an environment where ideas can be freely explored and where they may flourish D. Time- decentralization is sometimes necessary as a time solution. For instance, a company might experience a time limit to finish a project, and the most feasible solution would be to appoint lower-level mangers that are more directly involved in the project to supervise. Ø Formalization :- the degree to which jobs within the organization are standardized HIGH LEVELS ü

minimum amount of discretion over what, when, and how

ü

consistent output

ü

explicit job descriptions

ü

organizational rules

ü

clearly defined procedures

LOW LEVELS ü

unprogrammed behaviors

ü

exercise discretion

ü

great deal of freedom

ü

less standardization

ü

consider alternatives

FORMS OF ORGANIZATIONAL STRUCTURE Along with assigning tasks and the responsibility for carrying them out, managers must consider how to structure their authority relationships--that is, what structure the organization itself will have, how it will appear on the organizational chart. Line Structure:- The simplest organizational structure, line structure, has direct lines of authority that extend from the top manager to employees at the lowest level of the organization. This structure has a clear chain of command, enabling managers to make decisions quickly, but requires that managers possess a wide range of knowledge. Line structures are most common in small businesses. Line-And-Staff Structure :- The line-and-staff structure has a traditional line relationship between superiors and subordinates, and specialized managers--called staff managers--are available to assist line managers. Line managers focus on their area of expertise, while staff managers provide advice and support to line departments on specialized matters. This structure may result in overstaffing and ambiguous lines of communication. Matrix Structure:- A variation of the line-and-staff organizational structureis the matrix structure. In today's workplace, employees are hired into a functional department (a department that performs a specific type of work, such as marketing, finance, accounting, and human resources) but may find themselves working on projects managed by members of another department. Organizations arranged according to project are referred to as matrix organizations. Matrix organizations combine both vertical authority relationships (where employees report to their functional manager) and horizontal, or diagonal, work relationships (where employees report to their project supervisor for the length of the project). "Workers are accountable to two supervisors—one functional manger in the department where the employee regularly works and one special project manager who uses the employee's services for a varying period of time". Since employees report to two separate managers, this type of organizational structure is difficult to manage—especially because of conflicting roles and shared authority. Employees' time is often split between departments and they can become easily frustrated if each manager requires extra efforts to complete projects on similar timelines. Because the matrix structure is often used in organizations using the line-and-staff setup, its also fairly centralized. However, the chain of command is different in that an employee can report to one or more managers, but one manager typically has more authority over the

employee than the other manager(s). Within the project or team unit, decision making can occur faster than in a line-and-staff structure, but probably not as quickly as in a line structure. Typically, the matrix structure is more informal than line-and-staff structures but not as informal as line structures. Bureaucratic structures :- Bureaucratic structures have a certain degree of standardization. They are better suited for more complex or larger scale organizations. They usually adopt a tall structure. Boundaryless structure :- The most radical concept in today's organisational design is the concept of 'boundarylessness', which seeks to overcome traditional boundaries between layers of management (vertical), functional areas (horizontal), as well as geographic boundaries. Some claim the boundaryless structure is a combination of team and network structures, with the addition of temporariness [21]. Ikea, the world's largest furniture manufacture, has been successful in implementing the boundaryless structure.The company works closely with suppliers by providing technical assistance, leasing them equipment, and giving advice. It also refined the role of the customer, putting responsibility on them to cart the furniture home and assemble it themselves. As a result, the company can offer lower prices [22], which supports its low-cost focused strategy. Virtual structure :- A special form of boundaryless organisation is virtual. It works in a network of external alliances, using the Internet. This means while the core of the organisation can be small but still the company can operate globally be a market leader in its niche. As we can see, organizations develop, modify and change their structures so that they align with their strategies. And the main trend for the last decades seems to be coming back to flatter structures. Although this structure seems suitable for small companies only, large organizations can take elements of it in harder times. Being at risk of losing profits or even going bankrupt due to the major financial downturn today, a lot of companies are moving to flatter structures. Not only are they unable to maintain multiple management levels any more, they are also in need of a more flexible structure to cope with new threats. Learning Organization :- A Learning Organization is the term given to a company that facilitates the learning of its members and continuously transforms itself. Learning Organizations develop as a result of the pressures facing modern organizations and enables them to remain competitive in the business environment. A Learning Organization has five main features; systems thinking, personal mastery, mental models,

shared vision and team learn.