MBP Module 3

8/8/2019 MBP Module 3

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Module 3Module 3

ORGANISINGORGANISING


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Management 8/eManagement 8/e - - Chapter 10Chapter 10 22

P lanning AheadP lanning Ahead

W hat is organizing as a management function?W hat is organizing as a management function?W hat are the major types of organizationW hat are the major types of organizationstructures?structures?W hat are the new developments inW hat are the new developments inorganization structures?organization structures?W hat organizing trends are changing theW hat organizing trends are changing theworkplace?workplace?


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OrganizingOrganizing

T he term Organization is used in many ways. ItOrganization is used in many ways. Itmeans different things to different people. Currently,means different things to different people. Currently,the following uses of the term are popular:the following uses of the term are popular:

Group of people united by a common purposeA Group of people united by a common purposeAn entity, an ongoing business unit engaged in utilisingAn entity, an ongoing business unit engaged in utilisingresources to create a result.resources to create a result.A structure of relationship between various positions in aA structure of relationship between various positions in aenterprise.enterprise.A process by which employees, facilities and task areA process by which employees, facilities and task arerelated to each other, with a view to achieve soecific goalrelated to each other, with a view to achieve soecific goal


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W hat is organizing as a managementW hat is organizing as a managementfunction?function?

Organizing is a very important managerial function.Organizing is a very important managerial function.

If planning focus on what to do, Organizing focus onIf planning focus on what to do, Organizing focus on

hos to do it. Hence ahter planning manager will starthos to do it. Hence ahter planning manager will startOrganizing.Organizing.T he deployment of organizational resources toT he deployment of organizational resources toachieve strategic goals.achieve strategic goals.T

he deployment of resources is reflected in theT

he deployment of resources is reflected in thedivision of labor.division of labor.Formal lines of authority and mechanisms for Formal lines of authority and mechanisms for coordinating diverse organization tasks.coordinating diverse organization tasks.


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Organizing and organization structureOrganizing and organization structureOrganizingOrganizing

T he process of arranging people and other resources toT he process of arranging people and other resources towork together to accomplish a goal.work together to accomplish a goal.

Organization structureOrganization structureT he system of tasks, workflows, reporting relationships,T he system of tasks, workflows, reporting relationships,and communication channels that link together diverseand communication channels that link together diverseindividuals and groups.individuals and groups.


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F igure :F igure : Organizing viewed inOrganizing viewed inrelationship with the other managementrelationship with the other management

functions.functions.


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Organisation Structure: F ormal AndOrganisation Structure: F ormal AndInformalInformal

Formal structuresFormal structures ~~Is a group of people working together cooperatively,Is a group of people working together cooperatively,

under authority, towards goals that mutuallyunder authority, towards goals that mutually benefit the partcipants and the Organization. It is benefit the partcipants and the Organization. It is

system of wellsystem of well- -defined jobs, each bearing adefined jobs, each bearing adefinite measure of authorty, responsibility anddefinite measure of authorty, responsibility andaccountibility.accountibility.

T he structure of the organization in its official state.T he structure of the organization in its official state.T he intentional structure of roles in a formallyT he intentional structure of roles in a formallyorganized enterprise.organized enterprise.An organization chart is a diagram describing reportingAn organization chart is a diagram describing reportingrelationships and the formal arrangement of work relationships and the formal arrangement of work

positions within an organization. positions within an organization.


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An organization chart identifies the followingAn organization chart identifies the followingaspects of formal structure:aspects of formal structure:

T he division of work.T he division of work.

Supervisory relationships.Supervisory relationships.Communication channels.Communication channels.Major subunits.Major subunits.Levels of management.Levels of management.


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Informal structuresInformal structures ~~

AA shadow organization made up of the unofficial, butshadow organization made up of the unofficial, butoften critical, working relationships betweenoften critical, working relationships betweenorganization members.organization members.

A network of interpersonal relationships that arise whenA network of interpersonal relationships that arise when

people associate with one another. people associate with one another.Potential advantages of informal structures:Potential advantages of informal structures:

Helping people accomplish their work.Helping people accomplish their work.

Overcoming limits of formal structure.Overcoming limits of formal structure.

Gaining access to interpersonal networks.Gaining access to interpersonal networks.

Informal learning.Informal learning.


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Informal structures (cont.)Informal structures (cont.)~~

Potential disadvantages of informal structures:Potential disadvantages of informal structures:

May work against best interests of entire organization.May work against best interests of entire organization.

Susceptibility to rumor.Susceptibility to rumor.May carry inaccurate information.May carry inaccurate information.

May breed resistance to change.May breed resistance to change.

Diversion of work efforts from important objectives.Diversion of work efforts from important objectives.


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F our P oints AboutF our P oints About

the Organization Chartthe Organization ChartVisual representation

Set of formal tasks

F ormal

reporting relationships

F ramework for vertical control


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Relatively narrowRelatively narrowspan of controlspan of control

Relatively wide spanRelatively wide spanof controlof control

Organizational Structure and Span of Organizational Structure and Span of

ControlControl


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Span of ManagementSpan of Management

T he number of employees reportingT he number of employees reportingto a supervisor.to a supervisor.T raditional view, seven or so per T raditional view, seven or so per manager.manager.Many organizations today, 30 or Many organizations today, 30 or more per manager.more per manager.

Generally if supervisors must beGenerally if supervisors must beclosely involved with employees spanclosely involved with employees spanshould be small.should be small.


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L arge Spans of Control:L arge Spans of Control:F actors:F actors:- -

W ork is stable or routine.W ork is stable or routine.Similar task is performed by everyone.Similar task is performed by everyone.A single location.A single location.Employees are highly trained.Employees are highly trained.Rules and procedures are available.Rules and procedures are available.Support systems and personnel are availableSupport systems and personnel are availablefor supervisor.for supervisor.

Little time is required in nonsupervisoryLittle time is required in nonsupervisoryactivities.activities.Personal preferences and styles of Personal preferences and styles of management favor a large span.management favor a large span.


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T all versus F lat StructureT all versus F lat Structure

Span of control used in an organizationSpan of control used in an organizationdetermines whether the structure is tall or flat.determines whether the structure is tall or flat.

T all structure has a narrow span and moreT all structure has a narrow span and morehierarchical levels.hierarchical levels.Flat structure has a wide span, is horizontallyFlat structure has a wide span, is horizontally

dispersed and fewer hierarchical levels.dispersed and fewer hierarchical levels.T he trend has been toward wider spans of T he trend has been toward wider spans of control.control.


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T all verses F lat StructureT all verses F lat Structure


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B asic F orms of B asic F orms of

Organizational StructureOrganizational Structure

DivisionalDivisionalOrganizationOrganization

InternationalInternationalOrganizationOrganization

FunctionalFunctionalOrganizationOrganization

MatrixMatrixOrganizationOrganization


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W hat are the major types of organizationW hat are the major types of organizationstructures?structures?

Functional structuresFunctional structuresPeople with similar skills and performing similar People with similar skills and performing similar tasks are grouped together into formal work units.tasks are grouped together into formal work units.Members work in their functional areas of Members work in their functional areas of expertise.expertise.Are not limited to businesses.Are not limited to businesses.W ork well for small organizations producing fewW ork well for small organizations producing few

products or services. products or services.


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F igure 2F igure 2 F unctional structures in aF unctional structures in abusiness, branch bank, and communitybusiness, branch bank, and community

hospital.hospital.


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Potential advantages of functional structures:Potential advantages of functional structures:T ask assignments consistent with expertise and training.T ask assignments consistent with expertise and training.HighHigh--quality technical problem solving,quality technical problem solving,

InIn--depth training and skill development.depth training and skill development.Clear career paths within functions.Clear career paths within functions.Economies of scale within fuctionEconomies of scale within fuctionSpecializationSpecializationCoordinationCoordinationInIn--depth skill developmentdepth skill developmentPower & prestigePower & prestige


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Potential disadvantages of functional structures:Potential disadvantages of functional structures:Difficulties in pinpointing responsibilities.Difficulties in pinpointing responsibilities.Functional chimneys problem.Functional chimneys problem.

Sense of cooperation and common purpose break down.Sense of cooperation and common purpose break down. Narrow view of performance objectives. Narrow view of performance objectives.Excessive upward referral of decisions.Excessive upward referral of decisions.Boredom & monotonyBoredom & monotonySubSub--unit conflictsunit conflicts

Not suitable for large organizations Not suitable for large organizations


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D ivisional structuresD ivisional structures

It is a type of departmentalization in which positions areIt is a type of departmentalization in which positions aregrouped according to somilarity of products, servicesgrouped according to somilarity of products, servicesor markets.or markets.

It is the process of dividing large functional pyramidsIt is the process of dividing large functional pyramidsinto smaller, more flexible, administrative units isinto smaller, more flexible, administrative units iscalled divisionalization.called divisionalization.

It creates a set of small companies in terms of products,It creates a set of small companies in terms of products,

services or markets.services or markets.Common in complex organizations.Common in complex organizations.Avoid problems associated with functional structures.Avoid problems associated with functional structures.


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F igure 3F igure 3 D ivisional structures based onD ivisional structures based onproduct, geography, customer, and process.product, geography, customer, and process.


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Potential advantages of divisional structures:Potential advantages of divisional structures:More flexibility in responding to environmentalMore flexibility in responding to environmentalchanges.changes.

Improved coordination.Improved coordination.Clear points of responsibility.Clear points of responsibility.Expertise focused on specific customers, products,Expertise focused on specific customers, products,and regions.and regions.Greater ease in restructuring.Greater ease in restructuring.


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Potential disadvantages of divisionalPotential disadvantages of divisionalstructures:structures:

Duplication of resources and efforts acrossDuplication of resources and efforts acrossdivisions.divisions.Competition and poor coordination acrossCompetition and poor coordination acrossdivisions.divisions.

Emphasis on divisional goals at expense of Emphasis on divisional goals at expense of organizational goals.organizational goals.


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T ypes of divisional structures and how they group jobT ypes of divisional structures and how they group joband activities:and activities:

Product structures focus on a single product or service.Product structures focus on a single product or service.

Geographical structuresGeographical structures focus on the same location or focus on the same location or geographical region.geographical region.

Customer structuresCustomer structures focus on the same customers or clients.focus on the same customers or clients.

Process structuresProcess structures focus on the same processes.focus on the same processes.


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Matrix structureMatrix structure

It is a type of departmentalization that superimposes a horizontal set of It is a type of departmentalization that superimposes a horizontal set of divisional reporting relationship onto a hierarchical functional structure. Itdivisional reporting relationship onto a hierarchical functional structure. Itis also called as a grid organization or project orgns.is also called as a grid organization or project orgns.

T hus it is considered as both functional and divisional at the same time to gainT hus it is considered as both functional and divisional at the same time to gain

advantages and minimize disadvantages of each.advantages and minimize disadvantages of each.

It will have two chains of commandIt will have two chains of command- -vertical and horizontal.vertical and horizontal.

Used in:Used in:ManufacturingManufacturing

Service industriesService industriesProfessional fieldsProfessional fields

Non Non--profit sector profit sector

MultiMulti--national corporationsnational corporations


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F ig 4F ig 4 Matrix structure in a smallMatrix structure in a smallmultimulti- -project business firm.project business firm.


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Potential advantages of matrix structures:Potential advantages of matrix structures:

Better cooperation across functions.Better cooperation across functions.

Improved decision making.Improved decision making.Increased flexibility in restructuring.Increased flexibility in restructuring.

Better customer service.Better customer service.

Better performance accountability.Better performance accountability.Improved strategic management.Improved strategic management.


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Potential disadvantages of matrix structures:Potential disadvantages of matrix structures:T woT wo--boss system is susceptible to power struggles. boss system is susceptible to power struggles.

T woT wo--boss system can create task confusion and boss system can create task confusion andconflict in work priorities.conflict in work priorities.

T eam meetings are time consuming.T eam meetings are time consuming.


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W hat are the new developments inW hat are the new developments inorganization structures?organization structures?

T eam structuresT eam structures

Extensively use permanent and temporaryExtensively use permanent and temporaryteams to solve problems, complete specialteams to solve problems, complete special

projects, and accomplish day projects, and accomplish day- -toto--day tasks.day tasks.

Often use crossOften use cross- -functional teams.functional teams.


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F ig 5F ig 5 How a team structure uses crossHow a team structure uses cross- -functional teams for improved lateralfunctional teams for improved lateral

relations.relations.


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Potential advantages of team structures:Potential advantages of team structures:Eliminates difficulties with communication andEliminates difficulties with communication anddecision making.decision making.

Eliminates barriers between operatingEliminates barriers between operatingdepartments.departments.Improved morale.Improved morale.Greater sense of involvement and identification.Greater sense of involvement and identification.

Increased enthusiasm for work.Increased enthusiasm for work.Improved quality and speed of decision making.Improved quality and speed of decision making.


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Potential disadvantages of team structures:Potential disadvantages of team structures:

Excessive time spent in meetings.Excessive time spent in meetings.

Effective use of time depends on quality of Effective use of time depends on quality of

interpersonal relations, group dynamics, and teaminterpersonal relations, group dynamics, and team

management.management.


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Network structures Network structures

A central core that is linked through networks of A central core that is linked through networks of

relationships with outside contractors and suppliersrelationships with outside contractors and suppliersof essential services.of essential services.

Own only core components and use strategicOwn only core components and use strategic

alliances or outsourcing to provide other alliances or outsourcing to provide other components.components.


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F igure 10.6F igure 10.6 A network structure for aA network structure for aW ebW eb--based retail business.based retail business.


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Potential advantages of network structures:Potential advantages of network structures:

Firms can operate with fewer fullFirms can operate with fewer full- -time employeestime employees

and less complex internal systems.and less complex internal systems.

Reduced overhead costs and increased operatingReduced overhead costs and increased operating

efficiency.efficiency.

Permits operations across great distances.Permits operations across great distances.


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Potential disadvantages of network structures:Potential disadvantages of network structures:Control and coordination problems may arise fromControl and coordination problems may arise fromnetwork complexity.network complexity.

Potential loss of control over outsourced activities.Potential loss of control over outsourced activities.Potential lack of loyalty among infrequently usedPotential lack of loyalty among infrequently usedcontractors.contractors.Excessively aggressive outsourcing can beExcessively aggressive outsourcing can bedangerous.dangerous.


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An International OrganizationAn International Organization

CE OCE O

RetailRetailDivision ADivision A

RetailRetailDivision BDivision B

InternationalInternationalDivisionDivision

LatinLatin America America

E uropeE urope Asia Asia


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T he F uture of T he F uture of Organizational StructureOrganizational Structure

BoundaryBoundary--less Organizationsless Organizations

T eam OrganizationsT eam Organizations

Virtual OrganizationsVirtual OrganizationsLearning OrganizationsLearning Organizations


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B oundaryless organizationsB oundaryless organizations

Eliminate internal boundaries among subsystems andEliminate internal boundaries among subsystems andexternal boundaries with the external environment.external boundaries with the external environment.A combination of team and network structures, with theA combination of team and network structures, with theaddition of temporariness.addition of temporariness.Key requirements:Key requirements:

Absence of hierarchy.Absence of hierarchy.Empowerment of team members.Empowerment of team members.T echnology utilization.T echnology utilization.

Boundaryless organizationsBoundaryless organizations

Encourage creativity, quality, timeliness, flexibility, andEncourage creativity, quality, timeliness, flexibility, andefficiency.efficiency.

Knowledge sharing is both a goal and essential componentKnowledge sharing is both a goal and essential component


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F igure 10.7F igure 10.7 T he boundary lessT he boundary lessorganization eliminates internal andorganization eliminates internal andexternal barriers.external barriers.


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Virtual organization.Virtual organization.

A special form of boundaryless organization.A special form of boundaryless organization.

Operates in a shifting network of external alliances thatOperates in a shifting network of external alliances thatare engaged as needed, using I T and the Internet.are engaged as needed, using I T and the Internet.


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T he learning organizationT he learning organization

An organisation that has developed the capacity to continuously learn,An organisation that has developed the capacity to continuously learn,adapt, and change through the practice of knowledge management byadapt, and change through the practice of knowledge management byemployees.employees.

Characteristics of a learning organisation:Characteristics of a learning organisation:

An open teamAn open team- -based organisation design that empowers based organisation design that empowersemployeesemployees

Extensive and open information sharingExtensive and open information sharingLeadership that provides a shared vision of the organisations future,Leadership that provides a shared vision of the organisations future,support and encouragementsupport and encouragement

A strong culture of shared values, trust, openness, and a sense of A strong culture of shared values, trust, openness, and a sense of community.community.



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Informal GroupsInformal GroupsT he GrapevineT he GrapevineIntrapreneuringIntrapreneuring

T he Informal OrganizationT he Informal Organization

A Powerful Dynamic orgn A Powerful Dynamic orgn


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W hat organizing trends are changing theW hat organizing trends are changing theworkplace?workplace?

Contemporary organizing trends include:Contemporary organizing trends include:Shorter Shorter chains of commandchains of command ..

LessLess unity of commandunity of command ..W ider W ider spans of controlspans of control ..

MoreMore delegation and empowermentdelegation and empowerment ..D ecentralizationD ecentralization with centralizationwith centralization ..

ReducedReduced use of staff use of staff ..


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Shorter chains of commandShorter chains of commandT he line of authority that vertically links allT he line of authority that vertically links all

persons with successively higher levels of persons with successively higher levels of management.management.Organizing trend:Organizing trend:

Organizations are being streamlined by cuttingOrganizations are being streamlined by cuttingunnecessary levels of management.unnecessary levels of management.Flatter structures are viewed as a competitive advantage.Flatter structures are viewed as a competitive advantage.


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L ess unity of commandL ess unity of commandEach person in an organization should report toEach person in an organization should report toone and only one supervisor.one and only one supervisor.

Organizing trend:Organizing trend:Organizations are using more crossOrganizations are using more cross- -functional teams,functional teams,task forces, and horizontal structures.task forces, and horizontal structures.Organizations are becoming more customer conscious.Organizations are becoming more customer conscious.

Employees often find themselves working for more thanEmployees often find themselves working for more thanone boss.one boss.


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F igF ig--88 Spans of control in flat versus tallSpans of control in flat versus tallstructures.structures.


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More delegation and empowermentMore delegation and empowermentDelegation is the process of entrusting work toDelegation is the process of entrusting work toothers by giving them the right to make decisionsothers by giving them the right to make decisionsand take action.and take action.T he manager assigns responsibility, grantsT he manager assigns responsibility, grantsauthority to act, and creates accountability.authority to act, and creates accountability.

Authority should be commensurate withAuthority should be commensurate withresponsibility.responsibility.


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Guidelines for effective delegation:Guidelines for effective delegation:Carefully choose the person to whom you delegate.Carefully choose the person to whom you delegate.Define the responsibility; make the assignment clear.Define the responsibility; make the assignment clear.Agree on performance objectives and standards.Agree on performance objectives and standards.Agree on a performance timetable.Agree on a performance timetable.Give authority; allow the other person to act independently.Give authority; allow the other person to act independently.Show trust in the other person.Show trust in the other person.Provide performance support.Provide performance support.

Give performance feedback Give performance feedback Recognize and reinforce progress.Recognize and reinforce progress.Help when things go wrong.Help when things go wrong.Dont forget your accountability for performance results.Dont forget your accountability for performance results.


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More delegation and empowerment (cont.)More delegation and empowerment (cont.)

A common management failure is unwillingness toA common management failure is unwillingness todelegate.delegate.

Delegation leads to empowerment.Delegation leads to empowerment.

Organizing trend:Organizing trend:Managers are delegating more and finding more ways toManagers are delegating more and finding more ways to

empower people at all levels.empower people at all levels.


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D ecentralization with centralizationD ecentralization with centralization

Centralization is the concentration of authority for Centralization is the concentration of authority for making most decisions at the top levels of themaking most decisions at the top levels of theorganization.organization.

Decentralization is the dispersion of authority toDecentralization is the dispersion of authority tomake decisions throughout all levels of themake decisions throughout all levels of theorganization.organization.


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D ecentralization with centralization (cont.)D ecentralization with centralization (cont.)Centralization and decentralization not anCentralization and decentralization not aneither/or choice.either/or choice.

Organizing trend:Organizing trend:Delegation, empowerment, and horizontalDelegation, empowerment, and horizontalstructures contribute to more decentralization instructures contribute to more decentralization inorganizations.organizations.Advances in information technology allow for Advances in information technology allow for the retention of centralized control.the retention of centralized control.


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Reduced use of staff Reduced use of staff

Specialized staff Specialized staff People who perform a technical service or providePeople who perform a technical service or providespecial problemspecial problem- -solving expertise to other parts of thesolving expertise to other parts of theorganization.organization.

Personal staff Personal staff

People working in assistantPeople working in assistant- -to positions that provideto positions that providespecial support to higher special support to higher- -level managers.level managers.


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Reduced use of staff (cont.)Reduced use of staff (cont.)Line and staff managers may disagree over staff authority.Line and staff managers may disagree over staff authority.

Advisory Authority.Advisory Authority.Functional authority.Functional authority.

No one best solution for dividing line No one best solution for dividing line- -staff responsibilities.staff responsibilities.Organizing trend:Organizing trend:

Organizations are reducing staff size.Organizations are reducing staff size.Organizations are seeking increased operating efficiency byOrganizations are seeking increased operating efficiency byemploying fewer staff personnel and smaller staff units.employing fewer staff personnel and smaller staff units.


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Organization design andorganizational configuration

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MBP Module 3