Organization MRK 151 Chapter 3 Organization Formal grouping

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 Socioeconomic 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.

Approaches There 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: South India Division Manager: District 1 Manager: South India Division Manager : District 2 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 Organizations Military of Line System The demerits: 1 - overloading 2 - lack of specialization 3 - inadequacy of communication 4 - scope for favoritism 5 - suitability

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

Types of Organizations Functional System 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.

Types of Organizations Functional System 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 Organizations Line and Staff System the departments performing former group of activities are in line ones , and those performing latter group of activities are staff ones.

Types of Organizations Line and Staff System

Types of Organizations Line and Staff System The merits: 1 - planned specialization 2 - quality decisions 3 - prospect for personnel growth 4 - training ground for personal

Types of Organizations Line and Staff System The demerits: 1 - lack of well-defined authority 2 - line and staff conflicts 3 - suitability : not suitable for small organizations.

Types of Organizations Matrix 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

Types of Organizations Matrix Organization

Types of Organizations Matrix Organization 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.

Types of Organizations Matrix 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.

Types of Organizations Matrix Organization 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 Organizations Hybrid Organization It is utilizes both functional and divisional departments: Next example : Functional department Geographic department Products department

Types of Organizations Hybrid Organization Bank president Executive VP Bank operation Branch operation Loans and investment VP Accounts processing VP personnel Branch manager City center Branch manager Parkview mall branch manager North side mall VP VP Personal leans Commercial loan

Types of Organizations Hybrid Organization 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 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

Departmentation 2 - 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.

Departmentation Advantages: _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.

Departmentation Disadvantages: _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.

Departmentation Disadvantages: _ 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.

Departmentation Disadvantages: _ fails to produce specialization. _ encourages competition for resources. _ tends to lessen top management control.

Centralization and Decentralization Centralization : 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 Decentralization Advantages 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 Decentralization Advantages 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 Delegation 1 - 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