Organization Structure and Process 7 Organization Structure and Process

Learning Objectives Describe what is organization design? Explain the main principles of organization. Describe how are organizations classified on the basis of their structure? Line organization Staff organization Committee organization Explain concepts like Work specialization Chain of command Span of control Authority and responsibility Life versus staff authority Describe the various approaches to organizational design. The classical approach The task-technology approach The environmental approach

Learning Objectives Describe the types of organizational structure. Functional organization Product/Market organization Matrix organization Explain the contemporary organizational designs. Team structures Matrix and Project structures The boundaryless organization Virtual organization Describe the various challenges to organizational design.

Chapter Outline Foundations of organization structure Concept and its key components Introduce organization design options Contingency variables Explore the concept of organization culture.

Organization Design A process in which managers develop or change their organization’s structure. Organization design decisions are typically made by senior managers. Occasionally, perhaps, they might seek input from midlevel managers, but lower-level managers and operatives rarely have an opportunity to provide input.

Principles of Organization 1. Principle of unity of objectives 2. Principle of division of work and specialization 3. Principle of span of control 4. Principle of scalar chain 5. Principle of unity of command 6. Principle of authority and responsibility 7. Principle of flexibility 8. Principle of balance 9. Principle of efficiency 10. Principle of coordination

Organization Chart Organization chart is a graphical representation of an organization. The organization chart is a diagram that illustrates various positions in the organization and the reporting lines between units and people within the organization.

Classification of Organizations Line Organization: The basis of line organization is authority and responsibility. It depicts clear line of authority. The authority and responsibility are highest at the top and go on reducing successively with each level.

Line Organization Merits Demerits Quick decision making Strict discipline can be maintained. Clear authority and responsibility Scalar chain and unity of command are followed. Demerits No scope for specialization Key persons are overloaded with work. Less efficiency due to lack of specialization

Taylor’s Functional Organization Functional organization is based on specialization. Taylor advocated foremen should possess specialization without which doing justice for the job would be impossible.

Functional Organization Merits Scope for high specialization. Tasks are handled by experts and quality of work and efficiency is high. Area of work is narrow and key persons are not overloaded. Better decisions are made. Demerits Delay in decision making. Scalar chain and unity of command are not followed. Maintaining discipline is difficult. Coordination among foremen is difficult.

Line and Staff Organization It is a combination of both line and functional organization and it provides the advantages of both.

Committee Organization Committee is a group of people who meet, discuss and decide about actions to be taken for organizational issues. Committees are used for complex issues which need expertise from people belonging to different functional areas. When an organization consists of different committees it is called committee organization.

The Elements of Structure 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. 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. Unity of command: The management principle that no person should report to more than one boss.

The Elements of Structure Span of control: The number of subordinates a manager can direct efficiently and effectively. Authority: The rights inherent in a managerial position to give orders and expect them to be obeyed. Responsibility: An obligation to perform assigned activities. Line authority: The authority that entitles a manager to direct the work of an employee. Staff authority: Positions that have some authority but that are created to support, assist and advise the holders of line authority.

Power An individual’s capacity to influence decisions.

Organizational design The decision-making process by which, managers choose an organizational structure appropriate to the strategy for the organization and the environment in which members of the organization carry out that strategy.

Various Design Approaches The Classical Approach Believed that the most efficient and effective organizations had a hierarchical structure in which members of the organization were guided in their actions by a sense of duty to the organization and by a set of rational rules and regulations. The Task-Technology Approach “Task technology” refers to the different kinds of production technology involved in making different kinds of products. Unit production Small-batch production mass production Process production

The Environmental Approach In a mechanistic system, the activities of the organization are broken down into separate, specialized tasks. Objectives for each individual and unit are precisely defined by higher-level managers following the classical. In an organic system, individuals are more likely to work in a group setting than alone. There is less emphasis on taking orders from a manager or giving orders to employees. Instead members communicate across all levels of the organization to obtain information and advice.

Types of Organizational Structures Functional organization: A form of departmentalization in which individuals engaged in one functional activity, such as marketing or finance, are grouped into one unit.

Types of Organizational Structures Product organization: The organization of a company into divisions that bring together those involved with a certain type of product. Market organization: The organization of a company into divisions that bring together those involved with a certain type of market.

Matrix structure: An organizational structure that assigns specialists from different functional departments to work on one or more projects.

Contemporary Organizational Designs

Contemporary Organizational Designs Virtual organization: An organization that consists of a small core of full-time employees and outside specialists temporarily hired as needed to work on projects. Network organization: An organization that uses its own employees to do some work activities and networks of outside suppliers to provide other needed product components or work processes.

Today’s Organizational Design Challenges Keeping employees connected Building a learning organization Managing global structural issues