2 Chapter 3 will cover: 3.1 Organization Theory 3.3 Types of Organizations3.5 Centralization & Decentralization3.6 Authority and Responsibility
3 Organizing Definition: The formal grouping of people and activities. To: facilitate achievement of the firm’s objectives.
4 Relationship of Objectives and Organizational Levels 1.Socio-EconomicPurposeOrganization HierarchyBoard of directors2. MissionTop-level Managers3. Overall Objectives of theOrganization (long range strategic)Middle Managers4. More specific Overall Objectives(e.g. In key result area )Lower-Level Managerssome5. Division Objectivessome6. Department and Unit Objectives7. Individual Objectives:PerformancePersonal development objectivesHierarchy of Objectives
5 3.1 Organization Theory Study of of the structure. Functioning. Performanceorganization&behavior of groups and individuals.of the
6 3.3 Types of Organizations 3.3.1 Military or Line System3.3.2 Functional System3.3.3 Line and Staff System3.3.4 Matrix System3.3.5 Hybrid design
7 3.3.1 Military or Line System…(1) Authority flows from the person at the top to the lowest person, VERTICALLY.The General Manager may be put in charge of the whole organization.Business unit is divided into departments headed by Department Head .Department Head receives orders from the General Manager.
8 Military or Line System…(2) The employees at the same line do not receive orders from each other.The workers do not have the authority to approach higher officers except through their immediate poss.
9 Simplicity: Simple to establish & simple to explain to employees. MeritsSimplicity: Simple to establish & simple to explain to employees.Unified control: Unity of Control.Strong discipline: Because of unified control.Fixed responsibility: Everyone knows whom he is responsible.Prompt decision: Because of unification of authority and responsibility ensures quick & prompt decisions.Flexibility: Since executive has the full authority he can change.
10 Overloading: Too much is expected from the person in authority. DemeritsOverloading: Too much is expected from the person in authority.Lack of specialization: Foreman cannot give guidance in all matters below him.Inadequacy of communication: No communications from the lower ranks.Scope for favoritism: May judge people according to his notion.Suitability: Restricted suitability.Good only for:Small UnitsRoutine works.
11 3.3.2 Functional Organization Entire work is divided into various departments.No duplication.The work allotted to one department consists of interrelated jobs.Similar work in one department
12 Ensure greater division of labour get advantage of specialization. MeritsEnsure greater division of labour get advantage of specialization.High efficiency Because :Workers do limited.Number of operations.Ensure the separation of mental and manual functions.Facilitates mass production through:Specialization.Standardization.
13 Too complicated: Divided functions to more & more sub functions. DemeritsUnstable: weakens disciplinary controls because of making workers work under several bosses.Too complicated: Divided functions to more & more sub functions.Difficult: For managers for fix responsibility for unsatisfactory results.Conflict: Among foreman & equal ranks.
14 3.3.3 Line & Staff Organization Staff specialists advice: Line managers in performing their duties.Purely Advisory.Have right to recommend BUT no authority to enforce their preferences.
15 Specialization: Experts to provide advice. MeritsSpecialization: Experts to provide advice.Quality Decisions: Good decisions due to careful study and thought.Prospect for personal growth: Opportunity for concentrating in a particular area thereby increasing personal efficiency.Training ground for personnel:Training needs can be easily identified.Staff provides knowledge & expertise to line managers.
16 Lack of well-defined authority. Line & staff conflicts. DemeritsLack of well-defined authority.Line & staff conflicts.Suitability: Generally good in large organization where specialization of activities is required.
17 Imposing a set of project structure on top of a functional structure. 3.3.4 Matrix OrganizationImposing a set of project structure on top of a functional structure.Members of project team are selected from the functional department.
18 Challenge for team members. Enlarges tasks for people. MeritsChallenge for team members.Enlarges tasks for people.Develops employees skills.Encourages people to identify with end products.
19 Require high level of interpersonal skills. DemeritsRequire high level of interpersonal skills.Negative morale when there is pressure.Leads to power struggles between functional & project manager.Costly to implement and maintain.
20 3.5 Centralization & Decentralization 3.5.1 Advantages of Centralization3.5.2 Advantages of Decentralization
21 3.5 Centralization & Decentralization Centralization: Much of decision-making authority is retained at the top management.Decentralization: Much of decision-making authority is pushed downward lower management.
22 3.5.1 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.
23 3.5.2 Advantages of Decentralization Local management can react to changing local conditions so that business can act quickly.Decision-making is quicker, clearer and based on more precise understanding of local conditions.Greater likelihood of innovation and creativity will make for a healthier business.Local responsibility and authority result in effective development of managerial skills.Burden of administration and paper work are reduced.Functional department will be leaner and easier to control.
24 3.6 Authority & Responsibility 3.6.1 Source of Authority3.6.3 Responsibility & Delegation3.6.4 Principle of Delegation
25 3.6 Authority and Responsibility Authority: Legal or power that gives a right to command.Responsibility: The obligation of a subordinate to whom a duty has been assigned to perform the duty.
26 The Formal Authority Theory: 3.6.1 Source of AuthorityThe Formal Authority Theory:Power is given or pass because of position.The Acceptance Authority Theory:Subordinates acceptance of power.
27 3.6.3 Responsibility & Delegation Responsibility cannot be delegated.Accountability: indicates liability for the proper discharge of duties by subordinates.
28 3.6.4 Principles of Delegation Principle of functional definition:Needs: patience, intelligence and clarity of objectives & plans.Scalar principle:The chain of direct authority relationships from superior to subordinates.Authority level principle:Decision to be taken based on authority.Principle of unity of command:Each subordinates should report to only one superior.