ENGINEERING ECONOMICS AND MANAGEMENT [EEE 501]

MANAGEMENT -PART B

2.1 History

The verb manage comes from the Italian maneggiare (to handle, train, be in charge of, control

horses), which in turn derives from the Latin manus (hand). The French word mesnagement (later

ménagement) influenced the development in meaning of the English word management in the 15th

and 16th centuries.

Practice of modern management owes its origin to the 16th century enquiry into low-efficiency and

failures of certain enterprises, conducted by the English statesman Sir Thomas More (1478-1535).

2.2 Definitions and meanings of management

i As a discipline, management is defined as the interlocking functions of formulating

corporate policy and organizing, planning, controlling, and directing the firm's resources

to achieve the policy's objectives.

ii Donald J. Cough defines management as, "Management is the art and science of decision

making and leadership."

iii Louis Allen defines, "Management is what a manager does".

iv The group of individuals who make decisions about how a business is run.

v The initiation and maintenance of an investment portfolio.

vi Henri Fayol (1841–1925) considers management to consist of six functions:

forecasting, planning, organizing, commanding, coordinating and controlling. He was

one of the most influential contributors to modern concepts of management.

vii One habit of thought regards management as equivalent to "business administration".

More realistically, however, every organization must manage its work through

leading employees or people, planning, controlling and organizing processes,

technology, etc. to maximize effectiveness.

viii The organization and coordination of the activities of an enterprise in accordance with

certain policies and in achievement of defined objectives.

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1.3 What is Management?

Management is the act of getting people together to accomplish desired goals and objectives using

available resources efficiently and effectively. Management comprises planning, organizing,

staffing, leading or directing, and controlling an organization or effort for the purpose of

accomplishing a goal. Organisation is a group of one or more people or entities. Resourcing

encompasses the deployment and manipulation of human resources, financial resources,

technological resources and natural resources.

Since organizations can be viewed as systems, management can also be defined as human action,

including design, to facilitate the production of useful outcomes from a system. This view opens the

opportunity to 'manage' oneself, a pre-requisite to attempting to manage others.

According to the management guru Peter Drucker (1909-2005), the basic task of a management is

twofold: marketing and innovation. As a discipline, management consists of the interlocking

functions of formulating corporate policy and organizing, planning, controlling, and directing an

organization's resources to achieve the policy's objectives.

Directors and managers have the power and responsibility to make decisions in order to manage an

enterprise when given the authority by the shareholders. The size of management can range from

one person in a small firm to hundreds or thousands of managers in multinational companies. In

large firms, the board of directors formulates the policy which is implemented by the chief

executive officer.

Organization and coordination of the activities of an enterprise in accordance with certain policies

and in achievement of clearly defined objectives is about management. Management is often

included as a factor of production along with machines, materials and money.

Directors and managers have the power and responsibility to make decisions in order to manage an

enterprise when given the authority by the shareholders.

2.4 Some of Management Definitions and Meanings

Board of directors: This is a Governing body (called the board) of an incorporated firm. Its

members (directors) are elected normally by the subscribers (stockholders) of the firm (generally at Page 2 of 19

an annual general meeting or AGM) to govern the firm and look after the subscribers' interests. The

board has the ultimate decision-making authority and, in general, is empowered to:

i set the company's policy, objectives, and overall direction,

ii adopt bylaws,

iii name members of the advisory, executive, finance, and other committees,

iv hire , monitor, evaluate, and fire the managing director and senior executives ,

v determine and pay the dividend, and

vi issue additional shares.

Though all its members might not be engaged in the company's day-to-day operations, the

entire board is held liable (under the doctrine of collective responsibility) for the

consequences of the firm's policies, actions, and failures to act. Members of the board usually

include senior-most executives (called 'inside directors' or 'executive directors') as well as experts or

respected persons chosen from the wider community (called 'outside directors' or 'non-executive

directors').

Chief executive officer (CEO): Top executive responsible for a firm's overall operations and

performance. He or she is the leader of the firm, serves as the main link between the board of

directors (the board) and the firm's various parts or levels, and is held solely responsible for the

firm's success or failure. One of the major duties of a CEO is to maintain and implement corporate

policy, as established by the board. Also called President or managing director, he or she may also

be the chairman (or chairperson) of the board.

Corporate policy: Usually, a documented set of broad guidelines, formulated after an analysis of

all internal and external factors that can affect a firm's objectives, operations, and plans. Formulated

by the firm's board of directors, corporate policy lays down the firm's response to known and

knowable situations and circumstances. It also determines the formulation and implementation of

strategy, and directs and restricts the plans, decisions, and actions of the firm's officers in

achievement of its objectives.

Innovation: The process by which an idea or invention is translated into a good or service for

which people will pay, or something that results from this process.

To be called an innovation, an idea must be replicable at an economical cost and must satisfy a

specific need. Innovation involves deliberate application of information, imagination, and initiative

in deriving greater or different value from resources, and encompasses all processes by which new

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ideas are generated and converted into useful products. In business, innovation often results from

the application of a scientific or technical idea in decreasing the gap between the needs or

expectations of the customers and the performance of a company's products. In a social context,

innovation is equally important in devising new collaborative methods such as alliance creation,

joint venturing, flexible working hours, and in creating buyers' purchasing power through methods

such as layaway plans.

Marketing: The management process through which goods and services move from concept to the

customer. As a practice, it consists in coordination of four elements called 4P's: (1) identification,

selection, and development of a product, (2) determination of its price, (3) selection of a distribution

channel to reach the customer's place, and (4) development and implementation of a promotional

strategy.

Marketing is based on thinking about the business in terms of customer needs and their satisfaction.

Marketing differs from selling because (in the words of Harvard Business School's emeritus

professor of marketing Theodore C. Levitt) "Selling concerns itself with the tricks and techniques of

getting people to exchange their cash for your product. It is not concerned with the values that the

exchange is all about. And it does not, as marketing invariably does, view the entire business

process as consisting of a tightly integrated effort to discover, create, arouse, and satisfy customer

needs."

Function :An action performed by a device, department, or person that produces a result. Function

remains more or less fixed whereas the purpose (which indicates intention or objective) generally

changes. For example, the function of a hammer is to strike something nearby whereas its purpose

(what to strike and why) could be anything the hammer-wielder has in mind.

Policy in Management: The set of basic principles and associated guidelines, formulated and

enforced by the governing body of an organization, to direct and limit its actions in pursuit of long-

term goals..

Organization: Asocial unit of people, systematically structured and managed to meet a need or to

pursue collective goals on a continuing basis. All organizations have a management structure that

determines relationships between functions and positions, and subdivides and delegates roles,

responsibilities, and authority to carry out defined tasks. Organizations are open systems in that they

affect and are affected by the environment beyond their boundaries.

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Objective :An end that can be reasonably achieved within an expected timeframe and with

available resources. In general, an objective is broader in scope than a goal, and may consist of

several individual goals. Objectives are a basic tools that underlying all planning and strategic

activities. They serve as the basis for policy and performance appraisals.

2.5 Nature of managerial work

In for-profit work, management has as its primary function the satisfaction of a range of

stakeholders. This typically involves making a profit (for the shareholders), creating valued

products at a reasonable cost (for customers) and providing rewarding employment opportunities

(for employees). In non-profit management, add the importance of keeping the faith of donors. In

most models of management/governance, shareholders vote for the board of directors, and the board

then hires senior management.

2.5.1 Levels of management

Most organizations have three management levels: low-level, middle-level, and top-level

managers. These managers are classified in a hierarchy of authority, and perform different

tasks. In many organizations, the number of managers in every level resembles a pyramid.

Each level is explained below in specifications of their different responsibilities and likely job

titles.

2.5.1.1 Top-level managers

This consists of board of directors, president, vice-president, CEOs, etc. They are responsible

for controlling and overseeing the entire organization. They develop goals, strategic plans,

company policies, and make decisions on the direction of the business. In addition, top-level

managers play a significant role in the mobilization of outside resources and are accountable

to the shareholders and general public.

According to Lawrence S. Kleiman, at the top managerial level, broadened understanding of

how: competition, world economies, politics, and social trends effect organizational

effectiveness are necessary.

2.5.1.2 Middle-level managers

Consist of general managers, branch managers and department managers. They are

accountable to the top management for their department's function. They devote more time

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to organizational and directional functions. Their roles can be emphasized as executing

organizational plans in conformance with the company's policies and the objectives of the top

management, they define and discuss information and policies from top management to lower

management, and most importantly they inspire and provide guidance to lower level managers

towards better performance. Some of their functions include:

i Designing and implementing effective group and intergroup work and

information systems.

ii Defining and monitoring group-level performance indicators.

iii Diagnosing and resolving problems within and among work groups.

iv Designing and implementing reward systems supporting cooperative

behaviour.

2.5.1.3 Low-level managers

Consist of supervisors, section leads, foremen, etc. They focus on controlling and directing.

They usually have the responsibility of assigning employees tasks, guiding and supervising

employees on day-to-day activities, ensuring quality and quantity production, making

recommendations, suggestions, and up-channeling employee problems, etc.

2.6 Principle and Functions of Management

2.6.1 Principle of Management

Principle of management centres or focuses on the techniques, process or norm on how

management can get people together to achieve a desired aim. It aims at accomplishment of

functions of management. Some management contributors view defined principle of management as

fulfilment of main functions of management while Henri Fayol developed principle of management

to entail:

Division of Work: Work should be divided among individuals and groups to ensure that effort and

attention are focused on special portions of the task. Fayol presented work specialization as the best

way to use the human resources of the organization.

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Authority: The concepts of Authority and responsibility are closely related. Authority was defined

by Fayol as the right to give orders and the power to exact obedience. Responsibility involves being

accountable, and is therefore naturally associated with authority. Whoever assumes authority also

assumes responsibility.

Discipline: A successful organization requires the common effort of workers. Penalties should be

applied judiciously to encourage this common effort.

Unity of Command: Workers should receive orders from only one manager.

Unity of Direction: The entire organization should be moving towards a common objective in a

common direction.

Subordination of Individual Interests to The General Interests: The interests of one person

should not take priority over the interests of the organization as a whole.

Remuneration: Many variables, such as cost of living, supply of qualified personnel, general

business conditions, and success of the business, should be considered in determining a worker’s

rate of pay.

Centralization: Fayol defined centralization as lowering the importance of the subordinate role.

Decentralization is increasing the importance. The degree to which centralization or

decentralization should be adopted depends on the specific organization in which the manager is

working.

Scalar Chain: Managers in hierarchies are part of a chain like authority scale. Each manager, from

the first line supervisor to the president, possesses certain amounts of authority. The President

possesses the most authority; the first line supervisor the least. Lower level managers should always

keep upper level managers informed of their work activities. The existence of a scalar chain and

adherence to it are necessary if the organization is to be successful.

Order: For the sake of efficiency and coordination, all materials and people related to a specific

kind of work should be treated as equally as possible.

Equity: All employees should be treated as equally as possible.

Stability of Tenure of Personnel: Retaining productive employees should always be a high

priority of management. Recruitment and Selection Costs, as well as increased product-reject rates

are usually associated with hiring new workers.

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Initiative: Management should take steps to encourage worker initiative, which is defined as new

or additional work activity undertaken through self direction.

Espirit De Corps: Management should encourage harmony and general good feelings among

employees.

2.6.2 Functions of Management

Management has been described as a social process involving responsibility for economical and

effective planning and regulation of operation of an enterprise in the fulfilment of given purposes . It

is a dynamic process consisting of various elements and activities. These activities are different

from operative functions like marketing, finance, purchase etc. Rather these activities are common

to each and every manger irrespective of his level or status.

Different experts have classified functions of management. According to George & Jerry, “There

are four fundamental functions of management i.e. planning, organizing, actuating and controlling”.

According to Henry Fayol, “To manage is to forecast and plan, to organize, to command, and to

control”. Whereas Luther Gullick has given a keyword ’POSDCORB’ where P stands for Planning,

O for Organizing, S for Staffing, D for Directing, Co for Co-ordination, R for reporting and B for

Budgeting. But the most widely accepted are functions of management given by KOONTZ and

O’DONNEL that is Planning, Organizing, Staffing, Directing and Controlling.

For theoretical purposes, it may be convenient to separate the function of management but

practically these functions are overlapping in nature -they are highly inseparable. Each function

blends into the other and each affects the performance of others.

2.6.2.1 Planning

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It is the basic function of management. It deals with chalking out a future course of action

and deciding in advance the most appropriate course of actions for achievement of pre-

determined goals. According to KOONTZ, “Planning is deciding in advance - what to do,

when to do and how to do. It bridges the gap from where we are & where we want to be”. A

plan is a future course of actions. It is an exercise in problem solving and decision making.

Planning is determination of courses of action to achieve desired goals. Thus, planning is a

systematic thinking about ways & means for accomplishment of pre-determined goals.

Planning is necessary to ensure proper utilization of human & non-human resources. It is all

pervasive, it is an intellectual activity and it also helps in avoiding confusion, uncertainties,

risks, wastages etc.

2.6.2.2 Organizing

It is the process of bringing together physical, financial and human resources, and

developing productive relationship amongst them for achievement of organizational goals.

According to Henry Fayol, “To organize a business is to provide it with everything useful or

its functioning i.e. raw material, tools, capital and personnel’s”. To organize a business

involves determining and providing human and non-human resources to the organizational

structure. Organizing as a process involves:

i Identification of activities.

ii Classification of grouping of activities.

iii Assignment of duties.

iv Delegation of authority and creation of responsibility.

v Coordinating authority and responsibility relationships.

2.6.2,3 Staffing

It is the function of manning the organization structure and keeping it manned. Staffing has

assumed greater importance in the recent years due to advancement of technology, increase

in size of business, complexity of human behaviour etc. The main purpose o staffing is to

put right man on right job i.e. square pegs in square holes and round pegs in round holes.

According to Kootz and O’Donell, “Managerial function of staffing involves manning the

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organization structure through proper and effective selection; appraisal and development of

personnel to fill the roles designed in the structure”. Staffing involves: Manpower Planning -

searching, choose the person and giving the right place.

i Recruitment, selection and placement.

ii Training and development.

iii Remuneration.

iv Performance appraisal.

v Promotions and transfer.

2.6.2.4 Directing

It is that part of managerial function which actuates the organizational methods to work

efficiently for achievement of organizational purposes. It is considered life-spark of the

enterprise which sets it in motion the action of people because planning, organizing and

staffing are the mere preparations for doing the work. Direction is that inert-personnel aspect

of management which deals directly with influencing, guiding, supervising, motivating sub-

ordinate for the achievement of organizational goals. Direction has following elements:

i Supervision

ii Motivation

iii Leadership

iv Communication

i Supervision- implies overseeing the work of subordinates by their

superiors. It is the act of watching & directing work & workers.

ii Motivation- means inspiring, stimulating or encouraging the sub-

ordinates with zeal to work. Positive, negative, monetary, non- monetary

incentives may be used for this purpose.

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iii Leadership- may be defined as a process by which manager guides and

influences the work of subordinates in desired direction.

iv Communications- is the process of passing information, experience, opinion

etc from one person to another. It is a bridge of understanding.

2.6.2..5 Controlling

It implies measurement of accomplishment against the standards and correction of deviation

if any to ensure achievement of organizational goals. The purpose of controlling is to ensure

that everything occurs in conformities with the standards. An efficient system of control

helps to predict deviations before they actually occur. According to Theo Haimann,

“Controlling is the process of checking whether or not proper progress is being made

towards the objectives and goals and acting if necessary, to correct any deviation”.

According to Koontz & O’Donell “Controlling is the measurement & correction of

performance activities of subordinates in order to make sure that the enterprise objectives

and plans desired to obtain them as being accomplished”. Therefore controlling has

following steps:

i Establishment of standard performance

ii Measurement of actual performance

iii Comparison of actual performance with the standards and

finding out deviation if any and

iv Corrective action.

2.7 Leader Cont

A leader in a formal, hierarchical organization, who is appointed to a managerial position, has the

right to command and enforce obedience by virtue of the authority of his position. However, he

must possess adequate personal attributes to match his authority, because authority is only

potentially available to him. In the absence of sufficient personal competence, a manager may be

confronted by an emergent leader who can challenge his role in the organization and reduce it to

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that of a figurehead. However, only authority of position has the backing of formal sanctions. It

follows that whoever wields personal influence and power can legitimize this only by gaining a

formal position in the hierarchy, with commensurate authority.

2.7.1 Leadership Styles

Leadership style refers to a leader's behaviour. It is the result of the philosophy, personality,

and experience of the leader. Different situations call for different leadership styles. In an

emergency when there is little time to converge on an agreement and where a designated

authority has significantly more experience or expertise than the rest of the team, an

autocratic leadership style may be most effective; however, in a highly motivated and

aligned team with a homogeneous level of expertise, a more democratic or laissez-faire style

may be more effective. The style adopted should be the one that most effectively achieves

the objectives of the group while balancing the interests of its individual members.

The managerial grid model is also based on a behavioural theory and was developed by

Robert Blake and Jane Mouton in 1964 and suggests five different leadership styles, based

on the leaders' concern for people and their concern for goal achievement

2.7.1.1 Autocratic or authoritarian style

Under the autocratic leadership style, all decision-making powers are centralized in the

leader, as with dictators.

Leaders do not entertain any suggestions or initiatives from subordinates. The autocratic

management has been successful as it provides strong motivation to the manager. It

permits quick decision-making, as only one person decides for the whole group and

keeps each decision to him/herself until he/she feels it needs to be shared with the rest

of the group.

2.7.1.2 Participative or democratic style

The democratic leadership style consists of the leader sharing the decision-making

abilities with group members by promoting the interests of the group members and by

practicing social equality.

2.7.1.3 Laissez-faire or free rein style

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A person may be in a leadership position without providing leadership, leaving the

group to fend for itself. Subordinates are given a free hand in deciding their own

policies and methods.

2.7.1.4 Narcissistic leadership

Various academics such as Kets de Vries, Maccoby, and Thomas have identified

narcissistic leadership as an important and common leadership style.

2.7.1.5 Toxic leadership

A toxic leader is someone who has responsibility over a group of people or an

organization, and who abuses the leader-follower relationship by leaving the group or

organization in a worse-off condition than when he/she first found them.

2.8 Organizational structure

An organizational structure consists of activities such as task allocation, coordination and

supervision, which are directed towards the achievement of organizational aims. It can also be

considered as the viewing glass or perspective through which individuals see their organization and

its environment.

Organizational structures developed from the ancient times of hunters and collectors in tribal

organizations through highly royal and clerical power structures to industrial structures and today's

post-industrial structures.

As pointed out by Mohr (1982, pp. 102–103), the early theorists of organizational structure, Taylor,

Fayol, and Weber "saw the importance of structure for effectiveness and efficiency and assumed

without the slightest question that whatever structure was needed, people could fashion accordingly.

Organizational structure was considered a matter of choice In the 21st century, organizational

theorists such as Lim, Griffiths, and Sambrook (2010) are once again proposing that organizational

structure development is very much dependent on the expression of the strategies and behavior of

the management and the workers as constrained by the power distribution between them, and

influenced by their environment and the outcome.

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An organization can be structured in many different ways, depending on their objectives. The

structure of an organization will determine the modes in which it operates and performs.

Organizational structure allows the expressed allocation of responsibilities for different functions

and processes to different entities such as the branch, department, workgroup and individual.

Organizational structure affects organizational action in two big ways:

1. First, it provides the foundation on which standard operating procedures and

routines rest.

2. Second, it determines which individuals get to participate in which decision-

making processes, and thus to what extent their views shape the organization’s

actions.

2.8.1 Operational organizations

Organizational structure coincides with facts of evolving positive operational action. Wrong

organizational structure may hamper cooperation and thus hinder the completion of orders in

due time and within limits of resources and budgets. Organizational structures shall be

adaptive to process requirements, aiming to optimize the ratio of effort and input to output.

There exits informal organization and formal organization.

2.8.2 Types of Organizational Structure

Pre-bureaucratic structures

Pre-bureaucratic (entrepreneurial) structures lack standardization of tasks. This structure is

most common in smaller organizations and is best used to solve simple tasks. The structure

is totally centralized. The strategic leader makes all key decisions and most communication

is done by one on one conversations. It is particularly useful for new (entrepreneurial)

business as it enables the founder to control growth and development.

They are usually based on traditional domination or charismatic domination in the sense of

Max Weber's tripartite classification of authority.

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Bureaucratic structures

Precision, speed, unambiguity, strict subordination, reduction of friction and of material and

personal costs -these are raised to the optimum point in the strictly bureaucratic

administration. Bureaucratic structures have a certain degree of standardization. They are

better suited for more complex or larger scale organizations, usually adopting a tall

structure. The Weberian characteristics of bureaucracy are:

i Clear defined roles and responsibilities

ii A hierarchical structure

iii Respect for merit.

Post-bureaucratic

The term of post bureaucratic is used in two senses in the organizational literature: one

generic and one much more specific. In the generic sense the term post bureaucratic is often

used to describe a range of ideas developed since the 1980s that specifically contrast

themselves with Weber's ideal type bureaucracy. This may include total quality

management, culture management and matrix management, amongst others. None of these

however has left behind the core tenets of Bureaucracy. Hierarchies still exist, authority is

still Weber's rational, legal type, and the organization is still rule bound. Heckscher, arguing

along these lines, describes them as cleaned up bureaucracies, rather than a fundamental

shift away from bureaucracy. Gideon Kunda, in his classic study of culture management at

'Tech' argued that 'the essence of bureaucratic control -the formalisation, codification and

enforcement of rules and regulations -does not change in principle. Iit shifts focus from

organizational structure to the organization's culture'.

Another smaller group of theorists have developed the theory of the Post-Bureaucratic

Organization., provide a detailed discussion which attempts to describe an organization that

is fundamentally not bureaucratic. Charles Heckscher has developed an ideal type, the post-

bureaucratic organization, in which decisions are based on dialogue and consensus rather

than authority and command, the organization is a network rather than a hierarchy, open at

the boundaries (in direct contrast to culture management); there is an emphasis on meta-

decision making rules rather than decision making rules. This sort of horizontal decision

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making by consensus model is often used in housing cooperatives, other cooperatives and

when running a non-profit or community organization. It is used in order to encourage

participation and help to empower people who normally experience oppression in groups.

Functional structure

Employees within the functional divisions of an organization tend to perform a specialized set of

tasks, for instance the engineering department would be staffed only with software engineers. This

leads to operational efficiencies within that group. However it could also lead to a lack of

communication between the functional groups within an organization, making the organization slow

and inflexible.

As a whole, a functional organization is best suited as a producer of standardized goods and

services at large volume and low cost. Coordination and specialization of tasks are centralized in a

functional structure, which makes producing a limited amount of products or services efficient and

predictable. Moreover, efficiencies can further be realized as functional organizations integrate their

activities vertically so that products are sold and distributed quickly and at low cost. For instance, a

small business could make components used in production of its products instead of buying them.

This benefits the organization and employees faiths.

Divisional structure

Also called a "product structure", the divisional structure groups each organizational function into a

division. Each division within a divisional structure contains all the necessary resources and

functions within it. Divisions can be categorized from different points of view. One might make

distinctions on a geographical basis (a US division and an EU division, for example) or on

product/service basis (different products for different customers: households or companies). In

another example, an automobile company with a divisional structure might have one division for

compact car and another division for subcompact cars. Each division may have its own sales,

engineering and marketing departments.

Matrix structure

The matrix structure groups employees by both function and product. This structure can combine

the best of both separate structures. A matrix organization frequently uses teams of employees to

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accomplish work, in order to take advantage of the strengths, as well as make up for the

weaknesses, of functional and decentralized forms. An example would be a company that produces

two products, "product a" and "product b". Using the matrix structure, this company would organize

functions within the company as follows: "product a" sales department, "product a" customer

service department, "product a" accounting, "product b" sales department, "product b" customer

service department, "product b" accounting department. Matrix structure is amongst the purest of

organizational structures, a simple lattice emulating order and regularity demonstrated in nature.

i Weak/Functional Matrix: A project manager with only limited authority is

assigned to oversee the cross- functional aspects of the project. The functional

managers maintain control over their resources and project areas.

ii Balanced/Functional Matrix: A project manager is assigned to oversee

the project. Power is shared equally between the project manager and the functional

managers. It brings the best aspects of functional and projectized

organizations. However, this is the most difficult system to maintain as the sharing

power is delicate proposition.

iii Strong/Project Matrix: A project manager is primarily responsible for

the project. Functional managers provide technical expertise and

assign resources as needed.

Flat Structure

The flat structure is common in small companies (entrepreneurial start-ups, university spin offs). As

the company grows it becomes more complex and hierarchical, which leads to an expanded

structure, with more levels and departments.

Often, it would result in bureaucracy, the most prevalent structure in the past. It is still, however,

relevant in former Soviet Republics, China, and most governmental organizations all over the

world. Matrix is becoming popular. Starbucks is one of the numerous large organizations that

successfully developed the matrix structure supporting their focused strategy. It creats a team spirit,

the company empowers employees to make their own decisions and train them to develop both hard

and soft skills. Some experts also mention the multinational design, common in global companies,

such as Procter & Gamble, Toyota and Unilever. This structure can be seen as a complex form of

the matrix, as it maintains coordination among products, functions and geographic areas.Page 17 of 19

In general, over the last decade, it has become increasingly clear that through the forces of

globalization, competition and more demanding customers, the structure of many companies has

become flatter, less hierarchical, more fluid and even virtual.

Hierarchy Organizational Structure

In the 21st century, even though most, if not all, organizations are not of a pure hierarchical

structure, many managers are still blind-sided to the existence of the flat community structure

within their organizations.

The business firm is no longer just a place where people come to work. For most of the employees,

the firm confers on them that sense of belonging and identity -the firm has become their “village”,

their community. The business firm of the 21st century is not just a hierarchy which ensures

maximum efficiency and profit; it is also the community where people belong to and grow

together -where their affective and innovative needs are met.

Team -Newest Organisation structure

One of the newest organizational structures developed in the 20th century is team. In small

businesses, the team structure can define the entire organization. Teams can be both horizontal and

vertical. While an organization is constituted as a set of people who synergize individual

competencies to achieve newer dimensions, the quality of organizational structure revolves around

the competencies of teams in totality. For example, every one of the Whole Foods Market stores,

the largest natural-foods grocer in the US developing a focused strategy, is an autonomous profit

centre composed of an average of 10 self-managed teams, while team leaders in each store and each

region are also a team. Larger bureaucratic organizations can benefit from the flexibility of teams as

well. Xerox, Motorola, and DaimlerChrysler are all among the companies that actively use teams to

perform tasks.

Network -Organisation structure

Another modern structure is network. While business giants risk becoming too clumsy to proact

(such as), act and react efficiently, the new network organizations contract out any business

function that can be done better or more cheaply. In essence, managers in network structures spend

most of their time coordinating and controlling external relations, usually by electronic means.

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H&M is outsourcing its clothing to a network of 700 suppliers, more than two-thirds of which are

based in low-cost Asian countries. Not owning any factories, H&M can be more flexible than many

other retailers in lowering its costs, which aligns with its low-cost strategy. The potential

management opportunities offered by recent advances in complex networks theory have been

demonstrated including applications to product design and development, and innovation problem in

markets and industries.

Virtual

A special form of boundary less organization is virtual. Hedberg, Dahlgren, Hansson, and Olve

(1999) consider the virtual organization as not physically existing as such, but enabled by software

to exist. The virtual organization exists within a network of alliances, using the Internet. This means

while the core of the organization can be small but still the company can operate globally be a

market leader in its niche.

Tutorial

1 Organizations can be viewed as systems while management can also be viewed as human

action, including design, to facilitate the production of useful outcomes from a system,

discuss.

2 With a well labelled diagram, explain your company or otherwise a typical engineering

organization structure.

3 Identify operational organization limitations in question 2 above and explain its

implications.

4 Compare and contrast hierarchical and flat organizational structure, clearly state their

advantages and shortcomings.

5 With reference to question no 2 above, of what benefits are the existing organisation

structure in your establishment to you?

6 (a) Define management and extensively (b) what are the functions of

management?

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