Post on 04-Aug-2020
IntroductiontoEngineeringManagement
Lecture 4: Organizing
Dr. Mohamed Mourad
Organizing
• Is the process of assigning tasks, allocating resources, and coordinating the activities of individuals and groups to implement plans.
• Through organizing, managers turn plans into actions by defining jobs, assigning personnel, and supporting them with technology and other resources.
2
PART ONE: INTRODUCTION
Meaning of Organization
Process of Organization
Principles of Organization
2
DEFINITION OF ORGANIZING
3
Activities:
Identification of
activities
Grouping of Activities
Assignment of jobs to
formal groups
Establishing a network
of authority and
responsibility
Providing framework for
measurement, evaluati
on and control
Resources:
Determining the
specific need of
resources
Allocation of
resources into
specific groups
Evaluation and
control of use of
the resources
ORGANIZING
5
Organizing
arranging
is the process of
allocatingand
work, authority, and resources
among
members
an organization’s
so that they can
achieve organizational goal.Stoner, Freeman and Gilbert
PROCESS OF ORGANIZING
6
Division of Work
Grouping of Work
Delegation of Authority
Coordination of Work
process OF ORGANIZING SIMPLIFIED
7
Organizing to Produce Goods and Services
• Essential functions:
1. Marketing – generates demand
2. Production/operations – creates the product
3. Finance/accounting – tracks how well the organization is doing, pays bills, collects the money
Organizational Charts
Operations
Teller Scheduling
Check Clearing
Collection
Transaction processing
Facilities design/layout
Vault operations
Maintenance
Security
Finance
Investments
Security
Real estate
Accounting
Auditing
Marketing
Loans
Commercial
Industrial
Financial
Personal
Mortgage
Trust Department
Commercial Bank
Organizational Charts
Operations
Ground supportequipment
Maintenance
Ground Operations
Facilitymaintenance
Catering
Flight Operations
Crew schedulingFlyingCommunicationsDispatching
Management science
Finance/ accounting
Accounting
PayablesReceivablesGeneral Ledger
Finance
Cash controlInternational
exchange
Airline
Marketing
Traffic administration
ReservationsSchedulesTariffs (pricing)
Sales
Advertising
MarketingSales
promotion
Advertising
Sales
Market research
Organizational Charts
OperationsFacilities
Construction; maintenance
Production and inventory controlScheduling; materials control
Quality assurance and control
Supply-chain management
ManufacturingTooling; fabrication; assembly
DesignProduct development and designDetailed product specifications
Industrial engineeringEfficient use of machines, space,
and personnel
Process analysisDevelopment and installation of
production tools and equipment
Finance/ accountingDisbursements/
credits
ReceivablesPayablesGeneral ledger
Funds Management
Money marketInternational
exchange
Capital requirements
Stock issueBond issue
and recall
Manufacturing
PRINCIPLES OF ORGANIZING
12
1. Unity of Objective
2. Specialization
3. Coordination
4. Authority and
Responsibility
5. Unity of Command
6. Scalar Chain
7. Span of Control
8. Exception
9. Efficiency
10.Balance
11.Homogeneity
12.Continuity
13.Simplicity
Managerial Skills
• A skill is the ability to translate knowledge into action that results in desired performance.
• Essential managerial skills:
– Technical skill is the ability to use a special proficiency or expertise to perform particular tasks.
– Human skill is the ability to work well in cooperation with other persons.
– Conceptual skill is the ability to think critically and analytically to solve problems.
13
Levels of Managers
• Top managers
• Middle managers
• Team leaders or supervisors
14
Top Managers
• They are responsible for the performance of an organization as a whole or for one of its larger parts.
• They work at the highest levels of organizations
• Examples:
– Chief Executive Officer (CEO)
– President
– Vice President
• They deal with long-term problems and opportunities.
15
Middle Managers• They are in charge of relatively large departments or
divisions consisting of several smaller work units.
• Examples:
– Clinic directors in hospitals
– Deans in universities
– Plant managers in businesses
• They work with top managers and coordinate with peers to develop and implement action plans to accomplish organizational objectives.
• They must be team oriented and able to work well with people from all parts of an organization.
16
Team Leaders / Supervisors
• They report to middle managers and directly supervise non-managerial workers.
• Examples:
– Department head
– Group leader
– Unit manager
• Also called first line managers.
• They ensure that their work teams or units meet performance objectives that are consistent with higher-level organizational goals.
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Types of Managers• Line managers – line responsibilities
– are responsible for work activities that make a direct contribution to the organization’s output
• Staff managers – staff responsibilities– use special technical expertise to advise and
support the efforts of line workers• Functional managers
– have responsibility for a single area of activity such as finance, marketing, production, personnel, accounting, or sales
• General managers– are responsible for more complex units that include
many functional areas18
Organizational Structure
• Is the formal system of task and authority relationships that control how people coordinate their actions and use resources to achieve organizational goals.
• It defines how job tasks are formally divided, grouped and coordinated.
19
Key Design Questions and Answers for Designing the Proper Organizational Structure
The Key Question The Answer Is Provided By
1. To what degree are activities subdivided into separate jobs?
Work specialization
2. On what basis will jobs be grouped together? Departmentalization
3. To whom do individuals and groups report? Chain of command
4. How many individuals can a manager efficiently and effectively direct?
Span of control
5. Where does decision-making authority lie? Centralization and decentralization
6. To what degree will there be rules and regulations to direct employees and managers?
Formalization
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Organizational Structure: Six Key Elements
• Work specialization: the degree to which activities in an organization subdivided into separate jobs.
• Departmentalization: the basis by which jobs in an organization are grouped together.
• Chain of command: is an unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom.
21
Organizational Structure: Six Key Elements
• Span of control: the number of subordinates a manager efficiently and effectively direct.
• Centralization and decentralization: the degree to which decision making is concentrated at a single point in the organization.
• Formalization: the degree to which jobs within the organization are standardized.
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Common Organizational Designs• The simple structure: a structure characterized by a low
degree of departmentalization, wide spans of control, authority centralized in a single person, and little formalization.
• The bureaucracy: a structure with highly routine operating tasks achieved through specialization, very formalized rules and regulations, tasks that are grouped into functional departments, centralized authority, narrow spans of control, and decision making that follows the chain of command.
• The matrix structure: a structure that creates dual lines of authority and combines functional and product departmentalization.
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New Design Options
• The virtual organization: a small, core organization that outsources major business functions.
• The boundaryless organization: an organization that seeks to eliminate the chain of command, have limitless spans of control, and replace departments with empowered teams.
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Why Do Structures Differ?• Strategy
– Organizational structure is a means to help management achieve its objectives.
– Objectives are derived from the organization’s overall strategy.
– Logically, strategy and structure should be closely linked.
• Organization size– An organization’s size significantly affects its
structure.– The structure of a small organization that employs
10 people differs from a large organization that employs 2,000 people.
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Why Do Structures Differ?• Technology
– The term technology refers to how an organization transfers its inputs into outputs.
– Every organization has at least one technology for converting financial, human, and physical resources into products or services.
– Organizational structures adapt to their technology (e.g. assembly line).
• Environment– An organization’s environment is composed of institutions or
forces outside the organization that potentially affect the organization’s performance through uncertainty (e.g. suppliers, customers, competitors, government).
– To reduce environmental uncertainty, management adjust the structure.
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PART TWO: ORGANIZATIONAL ARCHITECTURE
27
Vertical differentiation
Tall versus Flat Structure
Horizontal differentiation
Functional Structure
Multidivisional Structure
Geographic Structure
Matrix Structure
TALL VERSUS FLAT ORGANIZATIONSPresident
President
Tall Organization
Flat Organization
6–9
ORGANIZATIONAL ARCHITECTURE -
VERTICAL INTEGRATION
10
Flat organization:
This type of
organizational
architecture
has few layers
and wide span
of control.
Tall Organization:
This type of
organizational
architecture has
many layers and
narrow span of
control.
ESTABLISHING REPORTING RELATIONSHIPS:
TALL VERSUS FLAT ORGANIZATIONS
Flat Organizations
Lead to higher levels of
employee morale and
productivity.
Create more administrative responsibility for the relatively few managers.
Create more supervisory responsibility for managers due to wider spans of control.
Tall Organizations
Are more expensive
because of the number
of managers involved.
Foster more
communication
problems because of
the number of people
through whom
information must pass.
1. FUNCTIONAL STRUCTURE:
31
Structure is created based on the
various functions of an organization.
ORGANIZATIONAL ARCHITECTURE – HORIZONTAL
DIFFERENTIATION
General Manager
Production Dept.
Finance Dept.
Marketing Dept.
HR Dept.
2. MULTI-DIVISION STRUCTURE
32
Multiple divisions are created in a
related industry.
ORGANIZATIONAL ARCHITECTURE – HORIZONTAL
DIFFERENTIATION
General Manager
Division IDivision
IIDivision
III
Divisional or M-form (Multidivisional) Design
An organizational arrangement based on multiple
businesses in related areas operating within a larger
organizational framework; following a strategy of related
diversification.
Activities are decentralized down to the divisional
level; others are centralized at the corporate level.
The largest advantages of the M-form design are the
opportunities for coordination and sharing of resources.
ORGANIZATIONAL ARCHITECTURE – HORIZONTAL
DIFFERENTIATION
Early Expansion of Industry
• Companies like DuPont, General Motors, and General Electric experimented with different organizational forms
• Eventually adopted the M form (multidivisional)
AT&T
• 1980s AT&T
– slow moving regulated environment
– Adopted huge formal bureaucracy
– Important decision made from top down
• 1990s new AT&T
– Deregulation, increased competition, technological change
– Adopted large number of profit centers
– Run autonomously
– Pay-for-performance plans tied to units
Eastman Kodak
• Prior to 1980s
– monopoly in film production
– Centralized, top down bureaucracy
• 1980s
– Increased competition from Fuji and generics
– Technological explosion: communications, design, robotics
– Kodak lost market share and stock market value
Unilever• One of world’s oldest multinational corporations
• Organized on a decentralized basis
• Annual conferences on company strategy and executive education sessions, establish connections between managers
• Duplication of facilities and high cost structure a problem in new competitive environment
• 1996: introduced structure based on regional business groups
• “Lever Europe” established to consolidate the company’s detergent operation in order to reduce costs and speed up new product information
3. GEOGRAPHIC STRUCTURE:
Departments are
created based on
geographic regions.
All the activities in one
geographic region is
categorized into one
unit.
15
ORGANIZATIONAL ARCHITECTURE – HORIZONTAL
DIFFERENTIATION
General Manager
Eastern Region
Central Region
Western Region
6–16
4. MATRIX ORGANIZATION
Employees
CEO
Project manager B
Project manager C
Vice president,engineering
Vice president,production
Vice president,finance
Vice president,marketing
Project managerA
ORGANIZATIONAL ARCHITECTURE – HORIZONTAL
DIFFERENTIATION
MATRIX STRUCTURE:
17
Advantages: Disadvantages:
Enhances organizational
flexibility.
Team members have the
opportunity to learn new
skills.
Provides an efficient way for
the organization to use its
human resources.
Team members serve as
bridges to their departments
for the team.
Employees are uncertain
about reporting
relationships.
The dynamics of group
behavior may lead to
slower decision
making, one-person
domination, compromise
decisions, or a loss of
focus.
More time may be required
for coordinating task-
related activities.
PART THREE: RESPONSIBILITY
41
Meaning of Responsibility
Establishing Task and Reporting
Relationships
Creating Accountability
RESPONSIBILITY:
42
Responsibility is the
obligation to perform
or
duty to carryout certain
activities
ESTABLISHING TASK AND REPORTINGRELATIONSHIP:
20
Task Relationship:
How activities related to each other in an
organization.
How the basic units of an organization are
formed.
Establishment of job description and job
specification
Job Specification: Prerequisitesof job. Various skills and
experiences needed to perform certain job.
Job Description:The activities that have to be carried out at
certain position in a job. It describes the job.
ESTABLISHING TASK AND
REPORTING RELATIONSHIP:
44
Establishing Reporting Relationship:
It is finding out
Chain of command
Span of control or span of management
1.Who reports to whom?
2.How many subordinates will a supervisor have?
(Relate it to tall vs flat organizational architecture.)
CREATING ACCOUNTABILITY
45
Accountability:
Requirement to report —reports back on accepted responsibility
Employees are accountable to perform their best to:Each otherBossesCustomers Investors
PERSONAL ACCOUNTABILITY
• Each employee must take personal responsibility for his or her performance
– Be on time
– Do not take sick leave when well
– Do what is expected
– During work hours, work
• Not being accountable to your coworkers leads to poor workplace relationships
PART FOUR: AUTHORITY
47
Line and Staff Authority
Delegation of Authority
AUTHORITY:
Right to take decisions that arises due to positionin organizational structure.
Authority is the right to perform or command. Itallows its holder to act in certain designatedways and to directly influence the actions ofothers through orders.
Types of Authority: Line Authority
Staff Authority 24
LINE AUTHORITY
The chain of command in the
organizational structure that flows major
decision making power.
The officially
authorized ability to issue orders t o
subordinate employees within an
organization.
25
STAFF AUTHORITYStaff authority consists of the right to
advise or assist those who possess
line authority as well as other staff
personnel.
The Advisory or Counseling Role :
The Service Role
The Control Role26
DELEGATION OF AUTHORITY
51
Assigning work to subordinates
and giving them necessary
authority to do the assigned work
effectively.
Simple terms,GRANTING AUTHORITY TO SUBORDINATES
FEATURES OF DELEGATION OFAUTHORITY:
No delegation of total authority
Delegation of only that authority a
manager has
Representation of the superior
Delegation for organizational purpose
Restoration of delegated authority
Balance of authority and responsibility
No delegation of responsibility
52
CONFLICT BETWEEN LINE – STAFF EMPLOYEES
Assume Line Authority
Do not give Sound Advice
Steal Credit for Success
Fail to Keep line personnel
informed of their activities
Do not see the whole picture.
29
PART FIVE:
CENTRALIZATION AND DECENTRALIZATION
54
Meaning : Centralization and Decentralization
Reasons: In which case which is needed
Advantages and Disadvantages: of both
Productivity Challenge
Productivity is the ratio of outputs (goods and services) divided by the inputs (resources such
as labor and capital)
The objective is to improve productivity!
Important Note!Production is a measure of output
only and not a measure of efficiency
EMERGING ISSUES IN ORGANIZATION DESIGN
Feedback loop
Outputs
Goods and
services
Transformation
The U.S. economic system transforms inputs to outputs at
about an annual 2.5% increase in productivity per year. The
productivity increase is the result of a mix of capital (38% of 2.5%),
labor (10% of 2.5%), and management (52% of 2.5%).
The Economic System
Inputs
Labor,capital,
management
Improving Productivity at Starbucks
A team of 10 analysts continually look for ways to shave time. Some improvements:
Stop requiring signatures on credit card purchases under $25
Saved 8 seconds per transaction
Change the size of the ice scoop
Saved 14 seconds per drink
New espresso machines Saved 12 seconds per shot
Improving Productivity at Starbucks
A team of 10 analysts continually look for ways to shave time. Some improvements:
Stop requiring signatures on credit card purchases under $25
Saved 8 seconds per transaction
Change the size of the ice scoop
Saved 14 seconds per drink
New espresso machines Saved 12 seconds per shot
Operations improvements have helped Starbucks increase yearly revenue per outlet by $200,000 to $940,000 in six years.
Productivity has improved by 27%, or about 4.5% per year.
Measure of process improvement
Represents output relative to input
Only through productivity increases can our standard of living improve
Productivity
Productivity =Units produced
Input used
Productivity Calculations
Productivity =Units produced
Labor-hours used
= = 4 units/labor-hour1,000
250
Labor Productivity
One resource input single-factor productivity
Multi-Factor Productivity
Output
Labor + Material + Energy + Capital + Miscellaneous
Productivity =
Also known as total factor productivity
Output and inputs are often expressed in dollars
Multiple resource inputs multi-factor productivity
Example
• Collins Title Company has a staff of 4, each working 8 hours per day (for a payroll cost of $640/day) and overhead expenses of $400 per day. Collins processes and closes on 8 titles each day. The company recently purchased a computerized title-search system that will allow the processing of 14 titles per day. Although the staff, their work hours, and pay are the same, the overhead expenses are now $800 per day.
Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
=Old labor
productivity8 titles/day
32 labor-hrs
Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
8 titles/day
32 labor-hrs=
Old labor productivity = .25 titles/labor-hr
Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
14 titles/day Overhead = $800/day
New System:
8 titles/day
32 labor-hrs=
Old labor productivity
=New labor
productivity
= .25 titles/labor-hr
14 titles/day
32 labor-hrs
Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
14 titles/day Overhead = $800/day
New System:
8 titles/day
32 labor-hrs=
Old labor productivity = .25 titles/labor-hr
14 titles/day
32 labor-hrs=
New labor productivity = .4375 titles/labor-hr
75% increase
Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
14 titles/day Overhead = $800/day
New System:
=Old multifactor
productivity8 titles/day
$640 + 400
Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
14 titles/day Overhead = $800/day
New System:
8 titles/day
$640 + 400=
Old multifactor productivity = .0077 titles/dollar
Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
14 titles/day Overhead = $800/day
New System:
8 titles/day
$640 + 400=
Old multifactor productivity
=New multifactor
productivity
= .0077 titles/dollar
14 titles/day
$640 + 800
Collins Title Productivity
Staff of 4 works 8 hrs/day 8 titles/day
Payroll cost = $640/day Overhead = $400/day
Old System:
14 titles/day Overhead = $800/day
New System:
8 titles/day
$640 + 400
14 titles/day
$640 + 800
=Old multifactor
productivity
=New multifactor
productivity
= .0077 titles/dollar
= .0097 titles/dollar
26% increase
Measurement Problems
1. Quality may change while the quantity of inputs and outputs remains constant
2. External elements may cause an increase or decrease in productivity
Precise units of measure may be lacking
Productivity Variables
1. Labor - contributes about 10% of the annual increase
2. Capital - contributes about 38% of the annual increase
3. Management -contributes about 52% of the annual increase
Key Variables for Improved Labor Productivity
1. Basic education appropriate for the labor force
2. Diet of the labor force
3. Social overhead that makes labor available
Challenge is in maintaining and enhancing skills in the midst of rapidly changing technology and knowledge
Exercise
• Company X manufactures automobile jacks,
hubcaps, and a variety of fittings. These
products are sold as replacement parts
through the chain auto-supply stores. The
business of the company is growing, with
production facilities located in rented buildings
over various parts of the city. The production
staff is expanding constantly. Now the
president of the company wants to expand into
the brass-fitting business.
Exercise (cont.)
• However, the president realizes that, after this
newest expansion is accomplished, the company
should consolidate to make its production
operations more efficient.
• Which organizational structure should the
company adopt now, so that it can best
accommodate its current needs of business
expansion and also lay the foundation for
anticipated consolidation thereafter?
Exercise (cont.)
• What information is needed to set forth such
an organizational structure?
• What are the crucial variables that should be
considered in the design of such an
organization?
References
• John R. Schermerhorn, “Management”, 8th Edition,Wiley.
• Stephen P. Robbims and Timothy A. Judge,“Organizational Behaviour”, 13th Edition, Pearson.
• Gareth R. Jones, “Organizational Theory, Design,and Change”, 7th Edition, 2013, Pearson.
• Jay Heizer and Barry Render, “Operations Management”, 12th Edition, Pearson.
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Course Info
Books• C. M. Chang, “Engineering Management: Challenges in the New
Millennium”, Prentice Hall.
• L.C. Morse, and D. L. Babcock, “Managing Engineering and Technology’, Pearson.
• Contact :mmourad@aast.edu
• Website : https://cloudecampus.org/
Thank You!