Organization MRK 151 Chapter 3

Organization

Formal grouping of people and activities to facilitate achievement of the firm's objectives.

Relationship of Objectives and Organizational Levels

Socio-economic purpose

mission

Overall objectives of the organization

More specific overall objectives

Division objectives

Department and unit objectives

Individual objectives: performance- personal development objectives

Organization Theory

Is the study of structure , functioning and performance of organizations and the behavior of groups and individuals within them.

ApproachesThere are two approaches to understanding organization :

1 -organization is understood as a dynamic process and a managerial activity which is necessary for brining people together and unifying them in the pursuit of common objectives.

2 -organization refers to the structure of relationship among positions and jobs through which goals are sought to be attained.

Common Features

1 -division of labour

2-coordination

3-accomplishment

4-authority-responsibility structure.

Process of Organization 1 -determination of objectives

2-enumeration of activities

3 -classification of activities

4-fitting individuals to functions

5 -assignment of authority for action

Activity Analysis

Recommended by Peter Drucker , is to discover the primary activity of the proposed organization , for it is around this only that other activities will be built.

Decision Analysis

Recommended by Peter Drucker , is particularly important for deciding upon the number of levels or layers in the organization structure.

Formal and Informal Organization _Formal organization : refer to the structure of jobs and

positions with clearly defined functions and relationship as prescribed by the top management and bound by rules , systems and procedures.

_informal organization: refer to the relationship between people in an organization based not on procedures and regulations but on personal attitude.

Importance of organization :

It is the foundation of management as well as its chief tool.

Principles of Organization The basic principles:

1-unity of objectives

2-efficiency

3-span of management

4-division of work

5 -functional definitions

6 -scalar principle (chain of command)

7 -exception principle

Principles of Organization 8 -unity of command

9 -unity of direction

10 -responsibility

11 -authority and responsibility

12 -balance

13 -flexibility

14 -continuity

15 -facilitation of leadership

Types of Organizations 1 -military of line system

2 -functional system

3 -line and staff system

4 -matrix system

5 -hybrid design

Types of Organizations Military of Line System

authority flows from the top to the lowest

General Manager

Manager:

South India

Division

Manager:

District 1

Manager:

District 2

Manager:

South India

Division

Manager:

District 3

Manager:

District 4

Types of Organizations Military of Line System

The merits:

1 -simplicity

2 -unified control

3 -strong discipline

4 -fixed responsibility

5 -prompt decision

6 -flexibility

Types of OrganizationsMilitary of Line System

The demerits:

1 -overloading

2 -lack of specialization

3 -inadequacy of communication

4 -scope for favoritism

5 -suitability

Types of OrganizationsFunctional System

Most of the business have separate departments , each one of these departments would serve the rest of the organization.


The merits:

1 -take advantage of specialization of functions.

2 -higher efficiency : limited number of operations.

3 -separation of mental and manual functions.

4 -facilitates mass production through : specialization and standards.


The demerits:

1 -unstable : making the worker wok under several different bosses.

2 -it is complicated in operation.

3 -difficult for the management to fix responsibility.

4 -conflict among foremen of equal rank.

Types of OrganizationsLine and Staff System

the departments performing former group of activities are in line ones , and those performing latter group of activities are staff ones.


The merits:

1 -planned specialization

2 -quality decisions

3 -prospect for personnel growth

4 -training ground for personal


The demerits:

1 -lack of well-defined authority

2 -line and staff conflicts

3 -suitability : not suitable for small organizations.

Types of OrganizationsMatrix Organization

Matrix design features a multiple command structure in which an individual may have any number of superiors , including one functional superior and one or more project manager.

It is has been found to be successful under three major situations :

1-strong environment pressure

2-share and integrate information with the company

3-limited resources to be shared


The merits:

1 -involves and challenges matrix team members.

2 -provides enlarged tasks for people.

3 -develops employee skills

4 -encourages people to identify with end products.

5 -foster flexibility throughout the organization.


The merits:

6-motivates cooperation between the different specializations.

7-provides for integration of organizational information.

8 -fosters the development of managerial skills

9 -frees top management for effective planning.


The demerits:

1 -demands high level of interpersonal skills.

2 -negative impact on morale when personnel are reshuffled.

3 -foster confusion from multiple-command structure.

4 -lead to power struggles between functional and project managers.

5-causes to lose sight of broader organizational goals

6 -causes duplication of efforts by project groups.

7 -costly to implement and maintain.

Types of OrganizationsHybrid Organization

It is utilizes both functional and divisional departments:

Next example:

Functional department

Geographic department

Products department


Bank president

Executive VP

Bank operation

VP

Accounts

processing

VP

personnel

Executive VP

Branch operation

Branch manager

City center

branch manager

North side mall

Branch manager

Parkview mall

Executive VP

Loans and investment

VP

Personal leans

VP

Commercial loan


The advantages:

1-The whole organization enjoy benefits of both functional and divisional structures.

2-Flexibility in the division and efficiency in the functional department.

the disadvantage :

Create conflict between headquarter and divisional functions.

Departmentation

Departmentation is two types: functional and divisional .

1 -functional departmentation: involves grouping of people on the basis of their overall function.

Advantages:

_provides specialization

_allows task assignments consistent with technical training

_allows economic of scale

_allows excellent coordination within functions

_suited to suitable environment

_facilitates top management in direction and control

Departmentation

Departmentation

_Disadvantages:

_poor communication across functional departments

_slow response times to external changes

_concentration of decisions at the top causing delay

_difficulty in pinpointing responsibility

_narrow perspectives within functions

_fails to encourage creativity

Departmentation2 -divisional departmentation:

Can further be divided on the basis of : product , customer , and location.

)A (Product departmentation : it is the technique of creating a division or department for each product or product line.

DepartmentationAdvantages:

_provide high product visibility.

_suited for rapid change.

_allows parallel processing of multiple tasks.

_clearly defines responsibility.

_permits full time concentration on tasks.

_fosters the training of general managers.

DepartmentationDisadvantages:

_promotes neglect of long-term priorities.

_causes conflict between divisional tasks and corporate priorities.

_fails to encourage the coordination of activities.

_allows in-depth competencies to decline.

Departmentation)B (Customer departmentation: creating a division or

department for each of its customer groups.

advantages:

_fosters an intense focus on the unique needs of the customers.

_promotes strong public image.

_adaptive to environmental changes.

_facilitates parallel processing of multiple tasks.

_facilitates a strong marketing philosophy.

_provide a clear placement of responsibilities.

DepartmentationDisadvantages :

_create conflict between divisional tasks and corporate priorities.

_does not promote coordination.

_wastes resources through duplication of effort.

_tends to lessen top management control.

Departmentation) C (geographical departmentation: require the creation of

divisions and/ or departments of fulfill the territorial needs of an organization.

Advantages:

_promotes concern for regional customer needs.

_fast response to the environment.

_promotes flexibility , focus on regional goals.

_fosters coordination across functional departments.

_aids in the development of general management.

DepartmentationDisadvantages:

_fails to produce specialization.

_encourages competition for resources.

_tends to lessen top management control.

Centralization and DecentralizationCentralization : wherein much of the decision-making authority is retained at the top of the managerial hierarchy.

Decentralization : wherein much of the decision-making authority is pushed downward to the lower management level.

Centralization and DecentralizationAdvantages of centralization:

_broad overview of business is easier to achieve.

_strategic direction setting is easier.

_gives absolute and clear control.

_makes administration easier.

_common standards can be fixed.

_provides certain expert functions cost effectively.

_conflicting decisions are easier to avoid.

_economies of scale can be achieved.

Centralization and DecentralizationAdvantages of decentralization:

_business can act quickly .

_decision-making is quicker , clearer , and understanding of local conditions.

_greater likelihood of innovation and creativity.

_local responsibility and authority result in effective development of managerial skills.

_lead to greater productivity and profitability.

_burden of administration and paper work are reduce.

Functional departments will be learner and easier to control.

Authority and responsibility Authority is : legal , or rightful power that gives a right to command or to act.

Responsibility : the obligation of a subordinate to whom a duty has been assigned, to perform the duty.

Source of authority:

There are two theories :

_the formal authority theory

_the acceptance theory

Responsibility responsibly arises from the superior- subordinate

relationship.

The informal relationship may have the effect of reducing the influence and power of the manager.

Responsibility and delegation:

Responsibility can not be delegated . “accountability” indicate liability for the proper discharge of duties by the subordinate.

Principles of Delegation1 -principle of functional definition

2 -scalar principle

3 -authority-level principle

4 -principle of unity of command

5 -principle of parity

Mistakes in Organization 1 -failure to plan properly

2 -failure to clarify relationship

3 -failure to delegate authority

4 -failure to balance delegation

5 -confusion of lines of authority and of information

6 -authority without responsibility

Mistakes in Organization 7 -responsibility without authority

8 -careless application of staff device

9 -misuse of functional authority

10 -multiple subordination

11-misuse of service departments

12 -overorganizing

Organization MRK 151 Chapter 3

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