Transcript Lecture 4
Organizational structure and design ? Organization An organization is a collection of people working together in a coordinated and structured fashion to achieve one or more goals. A consciously coordinated social unit, composed of two or more people, that functions on a relatively continuous basis to achieve a common goal or set of goals A social arrangement for the performance of the collective goals controlled 1 Organizational structure and design ? Organization Social arrangements: Organizations are collection of peoples and machines in a structured way Collective goals: Existence of organizations depend up achievement of common goals Controlled performance: Controlled performance means deliberate allocated on resource between organization members which includes: •Resource allocation •Control function 2 Organizational structure and design ? Organization and people •Organizations are strongly influenced by the people that form part of them. •Organizations can take in part of the personality of the people within them and their attitudes, perceptions and behaviors affect how an organization will operate. Organization’s Role in Society •Organizations exist to allow accomplishment of work that could not be achieved by people alone. •As long as the goals of an organization are appropriate, society will allow them to exist and 3 they can contribute to society Organizational structure and design ? Why organizations exist? •Together they individually achieve what cannot achieve •Overcome environmental and biological limitations •Increase productively due to: •Work specialization / division of labour •Exchange •Synergy: Together we grow better •Increased knowledge enhancement •Transaction – cost organization: •Saving in time •Reduce cost development economies approach and to 4 Organizational structure and design ? Images and perception of organizations Our lives become, for better and for worse, a society of organizations. We are born in organizations and are educated in organizations that we can later work in organizations. At the same time, organizations supply us and entertain us, they govern us and harass us. Finally we are buried by organizations (Henry Mintzberg). Images/Metaphors of 0rganizations: Gereth Morgan 1. Organizations are machines 2. Organizations are biological organism 3. Organizations are human brains 4. Organizations are cultures or subcultures 5. Organizations are sub systems 6. Organizations are political systems 7. Organizations are psychic prisons 8. Organizations are systems of change and transformation 5 9. Organizations are instruments of domination Organizational structure and design ? Classification of organizations •By ownership: •By control: •Activity: •Legal structure: •Objective: •Accountability •Source of finance: •Region: Private, private Managers, trustees Retailer, manufactures, hospital Partnership, company Commercial, non commercial Debt, equity National or international 6 Organizational structure and design ? Basic Classification of organizations •Business organizations •Non business organizations Business organizations •Definition: •Legal •Capital •Profit objective •Types : •Sole - proprietorship •Partnership •Company •Activities: •Manufacturing •Mining •Energy •Retailing •Services •Services are intangible •Services are inseparable •Services are heterogeneous 7 •Intellectual production Organizational structure and design ? Basic Classification of organizations Non business organization •Public organizations •Non profit organizations Public organizations •Definition: •Run by government •Capital •Non-profit objective •Diverse nature •Characteristics •Accountable to parliament •Command resources •Base on fairness •Equality •Resource based not price based •Types : •Regulatory bodies •Health institutions •Educational institutions •Policy making bodies •Etc 8 Organizational structure and design ? Basic Classification of organizations Non business organization •Public organizations •Non profit organizations Non profit organizations •Definition: •Formed for purpose •Capital •Non-profit objective •Public service •Types : •Clubs •Trade unions •Associations •Charities •Professional association 9 What is Organizational Structure ? Bringing the functional units of an organization into a well-conceived structure Assigning authority and responsibility to individuals Organizational structure: •Divides the jobs •Group the jobs into functional units •Coordinate the jobs •Assign authority •Assign responsibility •Ensure accountability 10 Elements of Organizational Structure ? 1 - What is Work Specialization ? •A component of organization structure that involves having each discrete step of a job done by a different individual rather than having one individual do the whole job •It is division of labour Objectives: •Availability of experts •Efficient use of skills •Specialization in training •Specialized use of equipment and infrastructure 11 Elements of Organizational Structure ? 2 – Departmentalization •Systematic way of grouping the jobs under a specific head / function which were indentified during work specialization process •It is the basis for grouping the jobs Basis for departmentalization: •Function •Product •Process •Customer 12 Elements of Organizational Structure ? 3- What is Chain of Command ? Chain of Command The continuous line of authority that extends from the highest levels in an organization to the lowest levels and clarifies who reports to whom •Authority : The rights inherent in a managerial position to give orders and expect them to be obeyed •Responsibility: An obligation to perform assigned activities 4- Unity of command Unity of Commend The management principle that no person should report to more than one boss 13 What are the Elements of Organizational Structure ? 5-What is the span of control ? The number of subordinates a manger can direct efficiently and effectively Factors affecting span of control: •Managerial capability •Nature of employees group •Nature of work •Task complexity •Standardisation of work Wide span of control: •Reduces cost •Speedup decision making •Gives flexibility •Empowers manager Narrow span of control: •Expensive as add more levels of management •Lead to difficulty in communication •Slow decision making •Long vertical structure that might lead to bureaucratic behaviour 14 What are the Elements of Organizational Structure ? 6- Centralization and Decentralization Centralization A function when decision-making authority is placed higher level Decentralization The pushing down of decision-making authority to the lowest levels of an organization Situations of centralisation : •Normality in environment •Incapable lower managers •Non willingness of lower management to participate •Importance of decision •Risky situation •Keeping uniformity •Large company •Uniform implementation of strategy Situations of decentralisation : •Complex environment •Capable lower managers •Willingness to participate •Minor decision •Geographical dislocation •Required for effective implementation of strategy 15 What are the Elements of Organizational Structure ? 6- Centralization and Decentralization Merits of centralisation : •Better coordination •Overall solution •Balanced allocation of resources •Better and reliable decision as they made at top by experienced managers •Low cost as less managers are engaged •Quick and centralized decision in crises •Standardised polices Situations of decentralisation : •Less load at top management •Motivates lower management •Speedy decision are made locally •Decision in view of local context •Develops lower management 16 What are the Elements of Organizational Structure ? 7- Formalization The degree to which jobs within organization are standardized and extent to which employees is guided by rules and procedures Situations of centralisation : •Normality in environment •Incapable lower managers •Non willingness of lower management to participate •Importance of decision •Risky situation •Keeping uniformity •Large company •Uniform implementation of strategy Situations of decentralisation : •Complex environment •Capable lower managers •Willingness to participate •Minor decision •Geographical dislocation •Required for effective implementation of strategy 17 What are the Elements of Organizational Structure ? 8- Flat or tall Tall structure An organization with large number of management levels and low span of control CEO Divisional head Departmental head Section head Assistant manager Supervisor Team leader Worker Merits : •Narrow span of control •Small groups with more participation from each team member •Better career planning •Quick promotion Demerits : •Low delegation •Control over innovation •Long channel •High costs •Slow decision making 18 What are the Elements of Organizational Structure ? 8- Flat or tall Flat structure An organization with small number of management levels and high span of control CEO Departmental head Supervisor Worker Merits : •High delegation •Low cost •Speedy communication •Small channel Demerits : •Overworked managers •Non specialised managers •Low morale •Low coordination •Less time for planning and more involvement in supervision 19 Various types of organizational structures Two basic Categories of Organizational Structures Mechanistic Organization The bureaucracy; a structure that is high in specialization, formulization, and centralization Organic Organization A structure that is low in specialization, formulization, and centralization Mechanistic organization: •High work specialization •Rigid departmentalization •Narrow span of control due to tall structure •High formulization •Centralization Organic organization : •Low work specialization •flexible departmentalization •Low direct supervision •Less formulization •Decentralization 20 Types of organizational structure ? Simple Structure •An organization that is low in specialization and formulization but high in centralization •This Organization reflects the owner as president with all employees directly reporting to him Employee 1 Employee2 President Employee 4 Employee 3 Employee 5 21 Types of organizational structure ? Functional Structure •An organization in which similar and related occupational specialties are grouped together •Process of grouping the activities by functions Plant Manager Manager Engineering Manager Accounting ADVANTAGES •Allows the division of labor / work specialization •Avoids duplication of tasks •Suitable for centralized or one activity •Helps top management in coordinating and controlling the entire organization •Clarifies the roles/responsibilities of departments and employees •Provides clear accountability at both the departmental and individual level Manager MIS Manager Human Resources Manager Purchasing DISADVANTAGES •Creates a rigid and slow moving organization •Leads to a loss of innovation and innovation thinking as employee focus on following correct procedures and protocol •Does not allow for sharing of information / ideas across departmental lines (which is viewed as being especially important in today’s knowledge economy) •Focus on internal rather external side of the department 22 Types of organizational structure ? Process based Structure •An organization in which activities reflect a process and so departmentalized in form of a process Plant manager Milling Marketing Assembling Personnel ADVANTAGES Sanding Finising Purchasing Inspection Finance DISADVANTAGES •Clear distinction of technical and support •Coordination due to various process is difficult divisions •Conflict may arise •Clear distinction of specialized functions •Use is possible in only process oriented and common functions organizations •Help in better hr managements based on specific departmental need •Economies from processes are possible 23 Types of organizational structure ? Product based or Divisional Structure •An organization made up of self-contained units on the basis of products with With each has its own departments to perform the related tasks President Vice President Fuels Vice President Lubricants And Waxes Vice President Chemicals Marketing Marketing Marketing Planning and Economics Planning and Economics Planning and Economics Supply and Distribution Supply and Distribution Supply and Distribution Manufacturing Manufacturing Manufacturing ADVANTAGES DISADVANTAGES •Product based specialization is possible •Specialized HR can be developed •Coordination and integration between various functional units of different products is possible •Economies based on mass scale production of each product is possible •Economies by better coordination are possible •Increases in costs •Increase in complexity •Failure to share resources sometimes due to complex nature 24 Types of organizational structure ? ------------------Geographical Structure •An organization in which activities in a given area or territory be grouped and assigned to a manager President Marketing Western Region Personnel Personnel Southwest Region Engineering Purchasing Central Region Production Finance Southeast Region Accounting Eastern Region Sales ADVANTAGES DISADVANTAGES •Places responsibility at a lower level •Places emphasis on local markets, customers, stakeholders and problems •Improves coordination in a region •Takes advantage of economies of local operations •Better face-to-face communication with local interests •Furnishes measurable training ground for general managers •Requires more persons with general manager abilities •Tends to make maintenance of economical central services difficult and may require services such as personnel or purchasing at the regional level •Increases problem of top management control •Inconsistency in standard 25 Types of organizational structure ? Customer based Product Structure An organization in which activities reflect a primary interest in customers President Community-City Banking Real Estate & Mortgage loans ADVANTAGES Corporate Banking Agricultural Banking Institutional Banking DISADVANTAGES •Enables an organization to be more aligned •Individual departments can become too with the needs of its customers autonomous which makes setting and •Promotes innovation and innovative coordinating a single strategic direction to be thinking as the organizational culture followed difficult becomes more focused on problem solving •It limits the sharing of information / ideas across / meeting customer needs than following the organization lines (which is viewed as being processes and protocol especially important in today’s knowledge •Customer based work specialization is economy) possible •Under utilisation of resources •Duplication of activities and cost 26 Types of organizational structure ? Modern Organization Designs Strategic Business Units (SBUs) Team structures Project Structure Matrix Structure Modular structure Virtual Structure Learning organization Emerging trends in modern Organization Designs Trend •Flat structures with the view to decentralize and increase delegation •Increase in responsibilities •Multidisciplinary teams i.e. matrix structures •Flexible structures •Hybrid structures in terms of combination and communication •Multi-tasking employees 27 Modern Organization Designs Strategic Business Units (SBUs) / Divisional structure The SBU structure groups similar division into business units and delegates authority and responsibility for each unit to a senior executive who reports directly to CEO Chief Executive Officer Chief Strategy Officer (CSO) Chief Finance Officer (CFO) Chief Operating Officer (COO) Industrial Products SBU Adhesive Packaging Division Tubes / Cores Division Paper Division Chief Information Officer (CIO) VP of Human Resources VP of Marketing Consumer Products SBU Reels Division Flexible High Packaging Density Film Division Division Metal Ends Division Rigid Division 28 Modern Organization Designs SBU / Divisional structure ADVANTAGES •Building block structure -- accommodates growth •Better coordination in diverse markets DISADVANTAGES •Duplication, inefficient use of resources •Specializations are dispersed, creating silos of knowledge 29 Modern Organization Designs Team structure Teams is a situation when two or more people who interact dynamically, interdependently, and adaptively toward a common and valued goal, have specific roles or functions, and have a time-limited membership. Teams based structure consist of self-directed work teams organized around work Processes with flat hierarchy, few management levels, Very little formalization Usually found within divisional structure Multi-Team System (MTS) for Patient Care 30 Modern Organization Designs Team structure ADVANTAGES •Responsive, flexible •Lower admin costs •More informed decisions DISADVANTAGES •Interpersonal training costs •Slower during team development •Stress due to ambiguous roles •Problems with supervisor role changes •Duplication of resources 31 Modern Organization Designs Project Structure An organization in which activities require a great deal of planning, research and coordination General Manager Project A Quality Control Engineering R&D Project B Contract Scheduling Administration Manufacturing Purchasing Quality Control Engineering R&D Contract Scheduling Administration Manufacturing Purchasing 32 Modern Organization Designs Project structure ADVANTAGES •Simple •Fast •Cohesive •Cross-Functional Integration DISADVANTAGES •Expensive •Internal Strife •Limited Technological Expertise •Difficult Post-Project Transition 33 Modern Organization Designs Matrix Structure An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager. Employees are temporarily assigned to a specific project team and have a permanent functional unit CEO Engineering Marketing Design Project A Manager Project B Manager Project C Manager 34 Modern Organization Designs Matrix structure ADVANTAGES DISADVANTAGES •Uses resources and expertise effectively •Improves communication, flexibility, innovation •Focuses specialists on clients and products •Supports knowledge sharing within specialty across groups •Solution when two divisions have equal importance •Increases goal conflict and ambiguity •Two bosses dilutes accountability •More conflict, organizational politics, and stress 35 Modern Organization Designs Virtual Structure •An organization in which a very few activities are carried out and as much as possible work is carried out by other organizations •continually evolving network of independent companies that are linked together to share skills, costs, and access to one another’s markets. Design Company Logistics Company Core Company Sales and Marketing Company Manufacturing Company Finance Company 36 Modern Organization Designs Virtual structure ADVANTAGES DISADVANTAGES 37 Modern Organization Designs Modular Structure An organization in which non-vital functions are outsourced, which uses the knowledge and expertise of outside suppliers while retaining strategic control. ADVANTAGES DISADVANTAGES 38 Modern Organization Designs Learning organization Organizational design •Boundary-less •Teams •empowerment Organizational culture •Strong mutual relationships •Sense of community •Caring •Trust Learning organization Information sharing •Open •timely •Accurate Leadership •Shared vision •Collaboration 39 Modern Organization Designs Learning organization •Change in structure on the basis of new knowledge •Awareness of vision at all levels •Open communication at all levels •High priority to organizational goals 40 Emerging trends in modern organization designs Trend •Flat structures with the view to decentralize and increase delegation •Increase in responsibilities •Multidisciplinary teams i.e. matrix structures •Flexible structures •Hybrid structures in terms of combination and communication •Multi-tasking employees Emerging issues in modern organization designs Issue / problem •Low motivation and morale •Delays and inappropriate decisions •Conflicts •Lack of coordination •High costs •Non alignment with environment •Non alignment with business model 41 Assignment: read chapter 17 from pbp in relation with these slides. There will be small test. We will also work on paper questions next time. 42