Fundamentals Of Organizing (Departmentalization, Centralization/Decentralization etc) and Organizational Structure (Organic and Mechanical Model).

Fundamentals of Organizing Presented by: SHIVENDU RANJAN NANDITA DASGUPTAVellore Institute Of TechnologyVellore, Tamil Nadu, India

OrganizingThe deployment of organizational resources to achieve strategic goals.The deployment of resources is reflected in the division of labor.Formal lines of authority and mechanisms for coordinating diverse organization tasks.

Fundamental Concepts of Organizing• Differentiation means that the organization is composed of units that work on specialized tasks using different work methods and requiring employees with unique competencies.• Integration means that the various units must be put back together so that work is coordinated.

Organizing Process• Differentiation• Specialization• Delegation of Authority• Integration

Purposes of Organizing• Divides work to be done into specific jobs and departments.• Assigns tasks and responsibilities associated with individual jobs.• Coordinates diverse organizational tasks.• Clusters jobs into units.• Establishes relationships among individuals, groups, and departments.• Establishes formal lines of authority.• Allocates and deploys organizational resources.

Organizational Structure (Basic Need) • Authority – The rights inherent in a managerial position to tell people what to do and to expect them to do it. • Responsibility – The obligation or expectation to perform. • Unity of Command – The concept that a person should have one boss and should report only to that person.

What is Organization Structure? • It defines how job tasks are formally divided, grouped, and coordinated • Key elements to be addressed: – Work specialization – Departmentalization – Chain of command – Span of control – Centralization – Decentralization – Formalization

Element 1: Work Specialization• Also known as division of labor• Describes the degree to which activities in the organization are subdivided into separate jobs• Benefits: – Greater efficiency and lower costs• Costs: – Human costs when carried too far – Job enlargement as a solution

Work Specialization (Cont.) The degree to which tasks in the organization are divided into separate jobs with each step completed by a different person. Overspecialization can result in human diseconomies from boredom, fatigue, stress, poor quality, increased absenteeism, and higher turnover.

Element 2: Departmentalization• Basis by which jobs are grouped together so that common tasks can be coordinated• Common bases: – Function – Product – Geography – Process – Customer

Departmentalization by TypeA) Functional D) Process – Grouping jobs by – Grouping jobs on the functions performed basis of product orB) Product – Grouping jobs by customer flow product line E) CustomerC) Geographical – Grouping jobs by type – Grouping jobs on the basis of territory or of customer and geography needs

A) Functional Departmentalization – Groups Job According To Functions

B) Geographical Departmentalization

C) Product Departmentalization

D) Process Departmentalization+ More efficient flow of work activities– Can only be used with certain types of products

E) Customer Departmentalization + Customers’ needs and problems can be met by specialists - Duplication of functions - Limited view of organizational goals

Element 3: Chain of CommandUnbroken line of authority that extends from thetop of the organization to the lowest echelon andclarifies who reports to whom•Authority: positional rights•Unity of Command principle: one boss•Fewer organizations find this is relevant

Element 4: Span of Control• The number of employees a manager is expected to effectively and efficiently direct• Determines the number of levels and managers an organization has – Trend is toward wider spans of control – Wider span depends on knowledgeable employees – Affects speed of communication and decision making

Span of Control (Cont.)Width of span is affected by: Skills and abilities of the manager Employee characteristics Characteristics of the work being done Similarity of tasks Complexity of tasks Physical proximity of subordinates Standardization of tasks Sophistication of the organization’s information system Strength of the organization’s culture Preferred style of the manager

Element 5: Centralization and DecentralizationCentralization - degree to which decisionmaking is concentrated at a single point in theorganization – Only includes formal authority: positional rights – Highly centralized when top managers make all the decisions – Decentralized when front line employees and supervisors make decisions – Trend is toward increased decentralization

Decentralization Organizations in which decision making is pushed down to the managers who are closest to the action.

Factors that Influence the Amount of Centralization and DecentralizationMore Centralization  Environment is stable.  Lower-level managers are not as capable or experienced at making decisions as upper-level managers.  Lower-level managers do not want to have a say in decisions.  Decisions are relatively minor.  Organization is facing a crisis or the risk of company failure.  Company is large.  Effective implementation of company strategies depends on managers retaining say over what happens.

Factors that Influence the Amount of Centralization and DecentralizationMore Decentralization  Environment is complex, uncertain.  Lower-level managers are capable and experienced at making decisions.  Lower-level managers want a voice in decisions.  Decisions are significant.  Corporate culture is open to allowing managers to have a say in what happens.  Company is geographically dispersed.  Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions.

Element 6: FormalizationDegree to which jobs within the organization are standardized – Formal = minimum discretion over what is to be done, when it is done, and how – Informal = freedom to act is necessary & fewer constraints on how employees do their work.

Common Organizational Designs (Traditional Designs)1) Simple structure • Low departmentalization, wide spans of control, centralized authority, little formalization2) Functional structure • Departmentalization by function – Operations, finance, marketing, human resources, and product research and development3) Divisional structure • Composed of separate business units or divisions with limited autonomy under the coordination and control the parent corporation.

Strengths and Weaknesses of Traditional Organizational Designs

Common Organizational Designs 1) Simple structure 2) Bureaucracy 3) Matrix structure

1.Simple Structure• Low degree of departmentalization• Wide spans of control• Authority centralized in a single person• Little formalization• Difficult to maintain in anything other than small organizations

2.Bureaucracy• Highly routine operating tasks achieved through specialization – Formal rules and regulations – Centralized authority – Narrow spans of control – Tasks grouped by functional departments – Decision making follows the chain of command

Matrix Structure• Combines two forms of departmentalization – Functional – Product• Dual chain of command• Advantages: – Facilitates coordination and efficient allocation of specialists• Disadvantages: – Possible confusion, fosters power struggles, stress

Matrix Structure for a College of Business Administration

New Design Options• The Virtual Organization – A small core organization that outsources major business functions – Also known as a network or modular organization• The Boundaryless Organization – Eliminates vertical and horizontal boundaries – Removes exterior barriers Customers Workers – Relies heavily on technology Suppliers

Removing External Boundaries• Virtual Organization – An organization that consists of a small core of full-time employees and that temporarily hires specialists to work on opportunities that arise.• Network Organization – A small core organization that outsources its major business functions (e.g., manufacturing) in order to concentrate on what it does best.• Modular Organization – A manufacturing organization that uses outside suppliers to provide product components for its final assembly operations.

Models of Organizational Design

Mechanistic Versus Organic Organization• High specialization • Cross-functional teams• Rigid • Cross-hierarchical teamsdepartmentalization • Free flow of information• Clear chain of command • Wide spans of control• Narrow spans of control • Decentralization• Centralization • Low formalization• High formalization

The Four Forces that Influence Structure1. Strategy – Innovation – introduce new offerings - organic – Cost-Minimization – cost control - mechanistic – Imitation – minimal risk and maximum profit - both2. Organization Size – Bigger becomes mechanistic – Firms change from organic to mechanistic organizations as they grow in size.3. Technology – Routine equals mechanistic, non routine is organic. – Firms adapt their structure to the technology they use.4. Environment – Dynamic environments require organic structures; mechanistic structures need stable environments.

Thank You...

Fundamentals Of Organizing (Departmentalization, Centralization/Decentralization etc) and Organizational Structure (Organic and Mechanical Model).

by Shivendu Ranjan on Jul 26, 2012

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Fundamentals Of Organizing (Departmentalization, Centralization/Decentralization etc) and Organizational Structure (Organic and Mechanical Model). Presentation Transcript