Week 4; Org Structures

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Week 4

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Prepared by:

Fall 2012Introduction to Business


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Topic Covered

1. Classical Management Theory Classical Organizational Theory

Theory of Bureaucracy

2.Understanding of Organizational Concepts Organizational Chart

Authority and Responsibility

Delegation

Span of Control

3. Classification of Internal Organizational Structures

4. Centralization v. Decentralization

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Emphasized on division of labor, the need todevise the best method of working & their

view of man as rational economic animal.

Has three strands:

Classical Organization Theory;

Theory of bureaucracy;

Scientific Management

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Developed by Henri Fayol (1841-1925)

Concerned with the formal structure of organization.Focusing on technical efficiency of the organization toformulate valid principles of sound & effectivemanagement

Principles:

Division of Work; Authority & Responsibility ; Discipline ; Unity of Direction ; Subordination of Individual ; Degree of Centralization ; Scalar Chain ; Fair System of Remuneration ; Order ; Equity ; Stability of tenure ; Subordinates ; Esprit de corps

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Given by Max Weber 1864-1924

Organizations can be an instrument of efficiency

if based on certain principles; inflexible &impersonal

Characteristics:

High degree of specialization ; hierarchy of well-defined authority ; Duties are impersonal ; promotionbased on qualification & merits ; formal rules &procedures ; written records of decisions made ;authority vested in positions ;

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Organization can be defined as:

The means by which management coordinates

the efforts of employee to achieve objectives;

The formalized, intentional structure of roles orpositions;

The planned coordination of resources toachieve a goal via division of labor and ahierarchy of authority and responsibility.

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The process of organizing involves:

A structuring of activities; The allocation of roles;

The assigning of responsibility and authority;

The devising of rules and system;

The provision of means for coordinating theactivities of various grouping of people and

resources.

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Formal organizationrefers to thedeliberately planned

structure of roleswithin theorganization. It isformal in the sense

that it is official andplanned, but this doesnot means that it isnecessarily inflexible.

Informal organizationis a network ofpersonal and social

relationships. It is notplanned or official, butarises spontaneously aspeople associate with

each other. The powerof the group leader ispersonal and is givenby the group.

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A pictorial representation of the formalorganizational structure. It depicts the

relationships between personal with in formalorganization.

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Board ofDirectors

ManagingDirector

ProductionManager

Dept.A

Dept.B

Supervisor Supervisor

Engineering

HR ManagerMarketingManager

MarketResearch

SalesManager

SalesTeam A

SalesTeam B

FinanceManager

An Organizational Chart: Showing Organization by Functional Specialism

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A pictorial representation of the formalorganizational structure. It depicts the

relationships between personal with in formalorganization.

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Authority is the legitimate exercising ofpower, which, in turn, is the ability to exercise

influence over objects, people and situations.

it is vested in positions, not people;

it is accepted by subordinates;

it flow down the vertical hierarchy.

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Line Authority

Staff Authority

Functional Authority

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The subordinate must posses sufficient skills andexperience;

The objective must be defined and understood;

The subordinate should be given sufficient authority andresponsibility, but both should be clearly defined;

There should be a clear schedule for completion of thetask;

The subordinate should be given sufficient discretion toact;

The authority and responsibility of the subordinate shouldbe announced.

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the ideal span of control is therefore not fixedbut is dependent on; The nature of the task, with repetitive work

permitting the supervision of larger numbers ofsubordinates; The ability and experience of the people concerned; The effectiveness of communications; The cohesiveness of the team; The degree of delegation exercised; Physical conditions, such as the proximity of the

people concerned.

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Possessing a boarder base of skills than is requiredin tall organization

Being adaptable

Developing team skills

Cross functional teams

Self dependent teams

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1. Entrepreneurial structure organized aroundthe owner-manager;

2. Functional structure organized in terms offunctional area of management;3. Product based organized by product;4. Geographically based organized by regions;5. Market segment based organized by

customer types;6. Matrix organization

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A centralized organization is one in which mostdecisions are taken at the centre or at the upper levelsof the organization. This leaves little discretion andautonomy for the periphery or lower levels.

A decentralized organization, on the other hand, isone in which there is considerable delegation andautonomy is the periphery or at the lower levels. It is

important to realize that centralization is notnecessarily related to geographical spread of anorganization. It is quite possible for a multi-plant firmto be highly centralized, whereas a single-siteorganization can be highly decentralized.

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Advantages

Greater control

Economies in staffing

Economies ofspecialization

Easier communications

Disadvantages

Excessively bureaucratic

Rigidity

Delays in decisionmaking

Loss of initiative

Stifles personaldevelopment

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Advantages

Decisions made wherethe action is

Recognition of localconditions

Improved morale

Personal development

More responsive to theenvironment

Disadvantages

Loss of control

Loss of some economies

of scale

Development of anarrow departmentalview

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Q1: What is meant by hierarchicalorganization?

Q2: Analyze the advantages of a product-based or divisionalized structure over afunctional structure.

Q3: Assess the adverse consequences of rigidhierarchical structure.

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Documents

Week 4; Org Structures