Topic 5Topic 5

Designing the Contemporary Organization

Organizing Defined

The process of determining the tasks to be done, who will do them, and how those tasks

will be managed and coordinated.

The Process of OrganizingOrganizational Mission

Developing the foundation

- Determining tasks and defining jobs

- Defining work relationships

Developing organizational design

- Grouping organizational members

- Developing an integrating system

- Determining the locus of decision making

Goals and Objectives

Control and

Feedback

Steps in organizing• 1.Detailing of work.-Describing all the work that must be done.• 2.Division of work-Dividing the total workload.• 3.Aggregation of work-departmentalization.• 4.Coordination of work-integration and standardization• 5.Review of performance-assess managerial and organizational performance.

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Division of work

The process of dividing jobs into smaller components so that a worker performs only a small part of the total jobs.

Advantage 1.Increase productivity2.Allows people to learn skills and become

expert at their job functions.

Organizational Design Defined

The way in which the activities of an organization are arranged and coordinated so

that its mission can be fulfilled and its goals achieved.

Components of Organizational Design

Overall organizational design is defined by three primary

components:

Organizational StructureOrganizational Structure

Integrating MechanismsIntegrating Mechanisms

Locus of Decision MakingLocus of Decision Making

Organizational Structure

• Organizational Structure– Defines the primary reporting relationships that

exist within an organization.– The chain of command and hierarchy of

responsibility, authority, and accountability are established through organizational structure.

– Common forms of organizational structure:• Functional structure, division structure, matrix

structure, and network structure.

Functional Structure

• Functional Structure– Members of the organization are grouped

according to the particular function that they perform within the organization.

– Appropriate when an organization’s greatest source of complexity comes from the diverse tasks that must be performed rather than from its products, geographic markets, or consumer groups.

Functional Structure

• Advantages– Facilitates specialization.– Cohesive work groups.– Improved operational efficiency.

• Disadvantages– Focus on departmental vs. organizational issues.– Difficult to develop generalists needed for top-

level management.– Only top-level management held accountable for

profitability.

Functional Structure

PGP, Inc.

CEOCEO

MarketingMarketing FinanceFinanceSalesSalesProductionProduction HumanResources

HumanResources

Divisional Structure

• Divisional Structure– Members of the organization are grouped on the

basis of common products, geographic markets, or customers served.

• Types of Divisional Structures– Product divisional• Most appropriate for organizations with

relatively diverse product lines that require specialized efforts to achieve high product quality.

Divisional Structure

• Types of Divisional Structures– Geographic divisional• Most appropriate for organizations with limited

product lines that either have wide geographic coverage or desire to grow through geographic expansion.

– Customer divisional• Most appropriate for organizations that have

separate customer groups with very specific and distinct needs.

Divisional Structure

• Advantages– Enhanced coordination.– Better assessment of manager performance

and responsibility.– Development of generalist managers.

• Disadvantages– Managers may lack expertise to operate in

wide geographic areas.– Duplication of resources.

Product Divisional

Divisional Structure

• Advantages– Allows for focus on specific new markets.– Good structure for growth along geographic

lines.– Adaptable to local needs.

• Disadvantages– Duplication of product or product/technology

efforts.– Coordination and integration are difficult.

Geographic Divisional

Matrix Structure

• Matrix Structure– A structure in which the tasks of the organization

are grouped along two organizational dimensions simultaneously.

– Examples include product/function, product/geographic region, etc.

Matrix Structure

• Advantages– Can achieve simultaneous objectives.– Managers focus on two organizational

dimensions, resulting in more specific job skills.• Disadvantages– Complex, leading to difficulties in

implementation.– Behavioral difficulties from “two bosses.”– Time consuming from a planning/coordination

perspective.

Network Structure

• Network Structure– A contemporary organizational structure that is

founded on a set of alliances with other organizations that serve a wide variety of functions.

• Types of Network Structures– Internal network• A network structure that relies on internally

developed units to provide services to a core organizational unit.

Network Structure

• Types of Network Structures– Stable network• A network structure that utilizes external

alliances selectively as a mechanism for gaining strategic flexibility.

– Dynamic network• A network structure that makes extensive use

of outsourcing through alliances with outside organizations.

Network Structure

• Advantages– Maximizes the effectiveness of the core unit.– Do more with less resources.– Flexibility.

• Disadvantages– Fragmentation makes it difficult to develop

control systems.– Success is dependent on ability to locate

sources.– Difficult to develop employee loyalty.

Network Structure

BrokersBrokers

SuppliersSuppliers

DesignersDesigners

DistributorsDistributors

ProducersProducers

Managing Complexity Through Integration

• Interdependence– The degree to which work groups are interrelated.

• Three primary levels of work group integration:– Pooled interdependence.– Sequential interdependence.– Reciprocal interdependence.

Pooled InterdependenceOccurs when organizational units have a

common resource but no interrelationship with one another

Head-quarters

B

C

D

A

F

E

Sequential Interdependence Occurs when organizational units must coordinate the flow of information, resources, and tasks from

one unit to another

A B C

Reciprocal InterdependenceOccurs when information, resources, and tasks must

be passed back and forth between work groups

A

C

E F

D

B

Organizational Relationships

• The working relationships that exist within an organization affect how its activities are accomplished and coordinated.

• These Relationships are Defined By:– Chain of command– Span of control– Line and staff responsibilities– Delegation

Chain of Command and Unity of Command

• Chain of Command– The line of authority and responsibility that flows

throughout the organization.

• Unity of Command– A principle that each employee in the organization

is accountable to one, and only one, supervisor.

Span of management• Also known as span of control• Refers to the number of subordinates who

reports directly to a manager.• Broad span of mgt. – means a manager

supervises many subordinates ( 10 or more).• Narrow span of mgt.- means a manager

supervises only a few workers (less than 10)• Span of Control

– The number of employees reporting to a particular manager.• In theory, when tasks are very complex, span of control should be relatively

narrow.• In contrast, where jobs are highly standardized and routine (low complexity),

a manager will not need to spend as much time supporting individual subordinates, and the span of control may be larger

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Span of Control

Narrow Span of Control

Manager

Wide Span of Control

Manager

Advantages of broad/wide span of management

Advantage1.Superiors are forced to delegate2.Clear policies must be made3.Subordinates must be carefully selected

Disadvantages1.Burdening of managers2.Danger of superior’s loss of control

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Advantages of narrow span of managementAdvantage1.Close supervision2.Close control3.Rapid com between subordinates and superiorsDisadvantages1.High costs2.Excessive distance between the lowest and top levels

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The importance of span of management• 1.Affect effective utilization of managers e.g

Too broad span means a manager is burdening himself with too much workload

• Too narrow span means a manager is underutilized structure.

Situational determinants of span of management.

• 1.Similarity of work-e.g Broad span is appropriate for identical tasks.

• 2.Geographical contiguity e.g broad span is appropriate for activities located in the same area of work

• 3.Complexity of work e.g Broad span is appropriate for simple and repetitive tasks

• 4.Direction and control required by subordinates• 5.Time spent coordinating and planning.

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Influence, power and authority• Influence-Actions or examples that cause a change in behavior or attitude of

another person. E.g a hard working manager may influence his subordinates to increase their productivity

• Power - The ability to exert influence.French and Raven have identified five sources of power :

• 1.Reward power : Ability to reward another person. E.g bonus, promotion• 2.Coercive power :Ability to punish or take disciplinary action• 3.Expert power : Based on a person’s possession of special knowledge or

expertise• 4.Legitimate power-power vested in the constitution which acknowledges a

person’s right or lawfulness to exert influence• 5.Referent power-based on the credibility, attractiveness and trustworthiness of

a person that makes subordinates want to imitate the leader’s behavior • Authority- A form of legitimate power. There are two views of formal authority • 1.The classical view• 2.The acceptance view

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The classical view • Supposes that authority originates at some very high level of

society and then is passed down from level to level.

The acceptance view• Finds the basis of authority in the influencee (subordinates) and

not the influencer (manager) Subordinates acceptance is vital to ensure that instructions/ commands could be implemented

successfully.

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Line and Staff Responsibilities

• Line Personnel– Those organizational members that are directly

involved in delivering the products and services of the organization.

• Staff Personnel– Those organizational members that are not

directly involved in delivering the products and services to the organization, but provide support for line personnel.

Line and staff authority

• Line authority – refers to managers and other employees who are directly involve in the attainment of the organization goals.e.g production managers, operating workers and marketing manager.

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Staff authority• Include all employees who provide service and advice to the

line authority.e.g counselor, personal assistant and typist.• Three types of staff authority:• 1.Personal staff e.g personal assistant• 2.Specialized staff-e.g legal advisor, Vice president ( finance)• 3.Functional staff e.g The Audit dept.-staff authority which

has the right to control line activities

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Delegation• The assignment to another person of formal authority and

accountability for carrying out specific activities.However not all authority and accountability can be delegated.e.g tasks in which subordinates do not have the required qualifications and skills

The extent of delegation depends on such factors as :• The organizational culture• The nature of the tasks• Subordinates capabilities• Delegation

– The process of transforming the responsibility for a specific activity or task to another member of the organization and empowering that individual to accomplish the task effectively.

– Scalar principle • A clear line of authority must run throughout the organization

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Advantages of delegation

• Unburdening of top managers• Improve decision making• Better employees training• Faster decision making

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Barriers to effective delegation

1.Managers reluctance to delegate e.g Lack of confidence on their subordinate capabilities

2.Subordinates reluctance to accept delegation e.g do dot want the additional burden

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Delegation

• Reasons for Failing to Delegate– The “time crunch.”– Lack of confidence in the abilities of subordinates.– Managers try to avoid the potential pitfalls of dual

accountability.– Managers may be insecure about their own value

to the organization.

Delegation

• The Process of Delegation -Decide which task to delegate– Assigning responsibility

• Responsibility refers to the employee’s obligation to complete the activities that he or she has been assigned.

– Granting authority• Authority is the formal right of an employee to marshal resources

and make decisions necessary to fulfill work responsibility.

– Establishing accountability• Where there is accountability for performance, employees

understand that they must justify their decisions and actions with regard to the tasks for which they have assumed responsibility.

– Monitor

Classical guidelines to achieve effective delegation

1.Assign Responsibilities, authority and accountability

2.The scalar principle – a clear chain of command.

3.The unity of command principle –employees report to only one leader.

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Delegation: Learning to Delegate Effectively

• Principle 1:– Match the employee to the task.

• Principle 2:– Be organized and communicate clearly.

• Principle 3:– Transfer authority and accountability with the

task.

• Principle 4:– Choose the level of delegation carefully.

Principles of delegation

1.Match the employee to the task –The selected employee should possess the skills and capabilities.

2.Be organized and communicate clearly – state clearly what is to be done, specific deadlines and special skills required.

3.Transfer Authority and accountability – provide resource and power

4.Choose the level of delegation carefully.

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Steps in delegation

1.Decide which tasks can be delegated2.Decide who should get the

assignment.3.Delegate the assignment4.Establish a feedback system.

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