Management Science

1. UNIT-II
Designing
Organizational
Structures

2. Organization
 Organization refers to the institution where in
the management functions are performed
 Organizing: is one of the functions of
management, which means to achieve the
plans.

3. Process of Organization
 Determination of objectives, strategies, plans
and policies
 Determination of activities
 Separation and grouping of activities
 Delegation of authority
 Delegation of responsibility
 Establish inter-relationships
 Providing physical facilities and proper
environment

4. Principles of Organization
 Unity of objectives
 Co-ordination
 Organizational efficiency
 Span of management
 Scalar principle
 Delegation of authority and responsibility
 Unity of command
 Balance
 Flexibility
 Leadership facilitation

5. Design of Organization structure
The main objective of an organization
structure is to ensure that efforts of all
the people working in various sections
are co-ordinated and integrated for
achieving the task in the most efficient
and effective way with minimum
consumption of resources i.e.
economical ways

6. Design of Organization structure
Formal organization structure: According to classical
theorists the formal organization is built an four
pillars
1) Division of labour
2) Scalar functional processes
3) Structure
4) Span of control
Definition: An organization is formal when the
activities of two or more persons are consciously
coordinated towards common objectives.

7. Design of Organization structure
 Informal organization: Informal organization arises
spontaneously based on friendship or some common
interest and not based on rules, regulation and
procedures. It is developed by the employees
themselves and not by the formal authority.
Definition: Informal organization brings cohesiveness
to a formal organization. It brings to the members of
formal organization a feeling of belonging of status,
self-respect and social satisfaction.

8. Basics concepts related to the
organization
 Organizational Hierarchy
 Authority and Responsibility
Authority is the power to give
commands and to use discretion vested in
that particular position or Job.
Responsibility is the obligation on the
part of the subordinate to complete the
given job.

9. Basics concepts related to the
organization
 Delegation of Authority
The process of transferring authority from top to the
lower levels in the organization is called delegation.
Two types of Delegation
1. Centralized
2. De-centralized
 Span of Management
Number of all kinds of relationships (N)=n(2n-1+n-1)
Where n=number of subordinates reporting to a manager

10. Factors determining the degree of
decentralization
 How significant and costly is the decision?
 How big is the organization?
 Does the department have enough economic resource
and managerial talent?
 How was the business built?
 What is the philosophy of the management?
 What is the competency of managers?
 Is there adequate number of managers?
 How sophisticated are the control techniques?
 What is the extent of geographical area over which the
activities are dispersed?

11. Basics concepts related to the
organization
 Departmentation: For the sake of efficient supervision
and control, the factory/enterprise is divided into
different departments. Each department is entrusted
with a particular function for carrying out particular
activity each departmental head is expected to control
and supervise the work in his department.
Definition: The process of dividing the work and then
grouping them into units and subunits or departments
for the purpose of administration.

12. Basics concepts related to the
organization
Method of Departmentation
 By function: It is divided into primary function to be performed
such as, finance, marketing, production, personnel etc.
 By product: All activities related to a particular product line may
be grouped together.
 By process: In this method, the manufacturing activity are sub
divided on the basis of their process of production, such as lathe
department, milling department, drilling department, etc
 By geographical region: This method may be adopted when
the enterprise produces and sells in the wide market, often in
international markets.

13. Basics concepts related to the
organization
 Flat and Tall organizations
Flat organization:-Which have relatively few or even
one level of management.
Flat is also known as wider span of control
Flat organization
Managing Director
Manager
(sales)
Manager
(production)
Manager
(personnel)

14. Basics concepts related to the
organization
Wide Span - Advantages
 Fewer levels of management and decision making
 Lower supervision costs
 Subordinates feel more satisfied with greater decision
making authority
Wide Span - Disadvantages
 Makes it difficult to supervise the subordinates directly
 Flat structures may not work as the business expands

15. Basics concepts related to the
organization
Tall organization:- have many levels of management
-involves narrow span of management
Narrow Span - Advantages
 Allows for tight control and supervision
 Communication with subordinates is easier
Narrow Span - Disadvantages
 Costs related to mgt and administration tend to increase
 Coordination becomes difficult
 Too much supervision may hinder initiation and
motivation

16. Types of Organizations
1.Line organizations:- is also called military or scalar
organization. is said to be the oldest and most traditional type of
organizations. Managers in this organizations have direct
responsibility for the results.
Merits Demerits
Simplicity Undue reliance
Discipline Personal limitations
Co-ordination Overload of work
Effective Communication Dictorial way
Economical Unsuitable for large concerns
Unity of command Scope of Favoritism
Prompt Decision General interest may be overlooked

17. 2.Line and Staff Organization:-
 Drawn from earlier civilization and armies.
 Staff managers support the functions of the line
managers.
 Line and staff organization is a service organization.
 Line and staff organization in a manufacturing unit.
 Line and staff in the armed forces.

18. 2.Line and Staff Organization:-
Merits Demerits
Planned specialization Chances of
misinterpretation
Quality decisions Chances of friction
Prospect for personal
growth
Ineffective staff in the
absence of authority
Less wastage Expensive
Training ground for
personnel
Loss of initiative by line
executives

19. 3.Functional organization:-
 F.W.Taylor suggested functional organization
in his theory of Scientific management in
support of his ‘one best way’ of doing things.
 The planning and implementation tasks are
divided to ensure the division of labour.
 The foremen involved in the planning task.

20. 3. Functional Organization:-
Merits Demerits
Separation of work Indiscipline
Specialization Shifting of responsibility
Narrow range with high
depth
Kills the initiative of workers
Ease in selection and
training
Overlapping of authority
Reduction in prime cost Lack of coordination between
functions
Scope of growth and
development of business

21. 4.Committee Organization:-
 A committee is formed when two or more
persons are appointed to work as a team to
arrive at a decision on the matters referred to it.

22. Merits:-
 Pools up the organization resources in terms of
knowledge, skills and experience.
 Represents groups, facilitates group decisions
 It yields good results
 It reduces the fear of two much authority
 It motivates all the concerned

23. Demerits:-
 Responsibility for decisions cannot be fixed
on a particular person.
 It calls for high degree of coordination.
 It involves high cost in terms of time and
money.

24. 5.Matrix organization:-
 Also called Project organization.
 It is a combination of all relationships in the
organization vertical, horizontal and diagonal.
 It is mostly used in complex projects.
 It provides a high degree of operational
freedom.

25. Merits:-
 Offers operational freedom and flexibility.
 Seeks to optimize the utilization of resources.
 It focus on end results.
 It maintains professional identity.
 It holds an employee responsible for
management of resources.

26. Demerits:-
 Very complex to manage.
 Violates unity of command.
 Employee may find it frustrating to work with
two bosses.
 Requires too much time for meeting and
collaboration.

27. 6.Virtual Organization:-
 Virtual organization structure does not physically
exist, but its effect is felt.
Merits:-
 Enable for doing business with less capital, less HR
and other inputs.
 Provide flexibility of operations.
 React to the environment demands most efficiently.

28. Demerits:-
 Companies do not have strong foundations
or strengths in their operations.
 Organizations have to heavily depend on out
sourcing.
 Failure in network results in the failure of the
entire organization.

29. 7.Cellular Organization Structure
 Organizations structured around the units/cells that
complete the entire assembly process are called
cellular organizations.
 In cellular organizations, workers manufacture total
product or sub-assemblies in teams (cells).
 Every team (cell) of workers has the responsibility to
improve or maintain the quality and quantity of its
products.
 These cells comprise self-managed teams. They
monitor themselves and also correct where
necessary on their own.

30. Merits
 Organizational structures are highly adaptable to the work
which needs to be performed and supportive of innovation.
 A minimal amount of structure is required as a condition of
enabling productive work.
 By nature, adapts to the complexity and unpredictability of
its environment as needed.
 Entrepreneurial energy and activity, both internal to and
external to the organization, are each nurtured in this
environment.
 Interdependent relationships and self-organizing practices
are each enabled and supported.

31. Demerits
 The relative newness of this emergent model means
that there is no significant literature regarding its
effectiveness.
 The model is based on some naive assumptions about
human nature and the capacity for changeability and
negotiated roles.
 Significant negotiation may be required to address
differences in relative power among the participants.
 Certain people may be excluded from full participation in
this organizational model because of the dynamics and
expectations of participation.

32. 8.Team Organization Structure:-
 A structure in which the entire organization is made up of
work groups or teams is known as team structure.
 Team structures are both permanent and temporary in
nature as situation demands.
 ‘We report to each other’ is the main feature of team
structure.
 A cross functional team comprises members from
different functional departments such as marketing,
finance, HR, production etc.
 Project teams are convened for a particular task or
project and these get dissolved once task is completed.

33. Merits
 Team-based organizations filter decision making down
to all levels of management, while traditionally
structured organizations rely on top management to
make decisions.
 Team-based organizations require that all employees
participate in the decision-making process.
 Employees feel they are part of the total organization,
rather than members of an individual department.
 Consequently, team-based organizations run more
efficiently and effectively, giving them a competitive
edge in today's global market.

34. Demerits
 Team-based organizations value team performance
over individual performance. Thus, motivating
individuals in a team-based organization can be
more challenging.
 In addition, team-based organizations are
decentralized rather than hierarchical. This lack of
centralization is another disadvantage of team-based
organizations, because decentralization can lead to
coordination and control problems for management.

35. 9.Boundaryless Organization Structure
An organization has external boundaries that separate it
from its suppliers and customers, and internal
boundaries that provide demarcation to departments.
This rigidity is removed in boundary less organizations,
where the goal is to develop greater flexibility and
responsiveness to change and to facilitate the free
exchange of information and ideas.
It is made up of self-managing and cross-functional
teams that are organized around core business
processes. The teams include employees from different
functional areas as well as customers and suppliers.

36. Merits and Demerits
Merits
 Boundary less organization is able to achieve greater
integration and coordination.
 They are able to adapt to environmental changes.
Demerits
 However, it can be difficult to overcome political and
authority boundaries.
 It can be time consuming to manage the democratic
process to coordinate the efforts of many
stakeholders.

37. 10.Inverted pyramid Organization
Structure
 This is a structure, which is wide at the top and
norrow at the base.
 It includes a few levels of management. For
instance, sales people and sales support staff sit
on the top as the key decision makers for all the
issues related to sales and dealing with the
customers.
 Since the sales staffs are in touch with the
customer and aware of the requirements of the
customers, they are given all the freedom to follow
their own best judgment at all levels.

38. Inverted Pyramid figure

39. Merits
1. In this structure the customers are given the first preference.
This way it becomes very simple to know their preferences
and plan the strategies of the organization accordingly.
2. Front line employees are given more responsibility and
authority in the organization than the top management
because they are closest to the customers.
3. Decentralization of authority and responsibility place a very
important role in prompt and timely decisions.
4. The inverted pyramid structure motivates the employees as
they are placed in a better position than the top
management.

40. Demerits
1. This structure may be dangerous because the role of top
management is shifted to supporting one from that of
commanding one which ultimately leads to the direction less-organization.
2. In this structure there is absence of clear authority and
responsibility levels as a result of which people become
confused and business veers out of control.
3. Frontline supervisor cannot make strategies regarding
organizations even though they have proper
understanding of the customers because they are not
equipped to do so.

41. Organic vs Mechanistic Structures
Organic Mechanistic
Joint Specialization:
Employees work together and
coordinate tasks
Individual specialization:
Employees work separately
and specialize in one task
Complex integrating mechanisms:
task forces and teams are primary
integrating mechanisms
Simple integrating mechanisms:
Hierarchy of authority well-defined
Decentralization:
Authority to control tasks is delegated.
Most communication lateral
Centralization:
Decision-making kept as high as possible.
Most communication is vertical.
Mutual Adjustment:
Face-to-face contact for coordination.
Work process tends to be unpredictable
Standardization:
Extensive use made of rules & Standard
Operating Procedures
Much verbal communication Much written communication
Informal status based on perceived
brilliance
Informal status in org based on size of
empire
Organization is network of persons or
teams. People work in different capacities
simultaneously and over time
Organization is a network of positions,
corresponding to tasks. Typically each
person corresponds to one task