2. Syllabus
ο Organizing: Organizing as managerial function β
organization structure, formal and informal
organization.
ο Traditional Organization Structures β Functional,
Divisional and Matrix Structure
ο Directions in organizational Structuresβ Team
structure, network structure , boundary less
structure
ο Organizing Trends and Practices β Chain of
command, unity of command, span of control
ο delegation and empowerment, decentralization
and use of staff
2 ο organizational design and organizational
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configuration
3. Organizing - Meaning
ο The process of defining and grouping the
activities of the enterprise and establishing
authority relationship amongst them.
ο Process of determining the activities to be
performed, arranging these activities to
administrative units, as well as assigning
managerial authority and responsibilities to
people employed in the organization.
ο Deciding how best to group organizational
activities and resources
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4. Organizing involves:
ο The identification and classification of required
activities
ο The Grouping of activities necessary to attain
objectives
ο The assignment of each group to a manager with
the authority necessary to supervise it
ο The provision for coordination horizontally [on the
same or a similar organizational level] and
vertically [ between various departments which
are not on a similar organizational level] in the
organization structure
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5. Definition
ο Heney, β Organization is a harmonious
adjustment of specialized parts for the
accomplishment of some common purpose or
purposesβ
ο Mc Farland, β An identified group of people
contributing their efforts towards the attainment of
goals is called an organizationβ
ο George Terry, β Organizing is the establishing of
effective behavioural relationships among
persons so that they may work together
effectively and gain personal satisfaction in doing
selected tasks under given environmental
conditions for the purpose of achieving some goal
5 or objectiveβ
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6. Nature/ Characteristics of
organizing
ο exists to achieve some common objectives
ο Involves division of labour to facilitate
specialization which improves organizational
efficiency
ο People constitute a critical, dynamic element of
an organization
ο Involves authority or chain of command
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7. Importance of organizing
ο Focus on and facilitate the attaining of
objectives.
ο Arrangement of positions and jobs within the
hierarchy.
ο Define responsibilities and line of authority of
all levels.
ο Creating relationships that will minimize
friction.
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8. Organization Structure
ο Set of elements that can be used to configure or
construct an organization.
Six building blocks that managers can use in
constructing an organization;
ο Designing jobs-job specialization
ο Grouping jobs- Departmentalization
ο Establishing reporting relationships between jobs-
chain of command
ο Distributing authority among jobs-delegation
ο Coordinating activities among jobs
ο Differentiating among positions-line and staff
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9. Formal Organization
According to Bernard, βFormal Organization is a
system of consciously coordinated activities of two or
more persons towards a common objectiveβ
Nature of Formal Organization
ο Deliberately created by top management
ο Based on division of labour or specialization
ο Defines clearly authority and responsibility of every
individual
ο Has written rules and regulations
ο Specifies communication channels
ο Depicted on the organization chart of the company
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ο Focuses on the jobs and not the individuals who
10. Formal Organization Structure
CEO
VP VP
VP HR VP Maktg
Production Finance
Productio HR Marketing Finance
n Manager Manager Manager
Manager
Quality Training Sales Cost
Manager Manager Manager Manager
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11. Demerit
Merits s
ο As definite boundaries ο May reduce spirit of
of each worker are initiative
clearly defined, it
reduces the conflict ο Does not consider
among the employees sentiments and values
ο Overlapping of
responsibility is avoided of social groups
ο Motivates employees as ο Does not consider
standards of individual goals
performance are well
established ο May create
ο Sense of job coordination problem
satisfaction, security
arises from the
classification of the task
ο Favouritism in
11
evaluation and
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appraisal is avoided
12. Informal Organization
A network of personal and social relationships
that arise spontaneously as people associate in a
work environment. Consists of all the informal
groupings of people within a formal organization
Nature of informal organization:
ο Unplanned and arises spontaneously
ο Reflects human and social relationships among
people
ο Based on common taste, language, religion,
culture etc
ο The membership of informal organization is
12 vikas vadakara
voluntary
13. Informal Organization Structure
CEO
VP VP
VP HR VP Maktg
Production Finance
Productio HR Marketing Finance
n Manager Manager Manager
Manager
Quality Training Sales Cost
Manager Manager Manager Manager
οQuality Manager, HR Manager, Sales Manager and Cost Manager form a group
13
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Cricket as they have common interest in Cricket
14. Demerit
Merits s
ο Helps to satisfy
ο Resistance to
social and
change
psychological
needs of ο Rumor- grapevine
employees to
inspire them to
work efficiently
and effectively
ο Improves sense of
belongingness,
security and
loyalty among
14 employees
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15. Characteristics Formal Organization Structure Informal Organization Structure
Emerges spontaneously as a result
Deliberately formed, planned
Formation of social interaction among
and created by Top Management
organizational members
To achieve planned goals of To provide social satisfaction to
Purpose
organization0 members
Well defined tasks and No clear cut structure, complex
Structure
relationships network of relations
Flexible, unstable and
Flexibility Rigid, stable and predictable
unpredictable
Standards of behaviour and Standards of behaviour and
Standards of
performance are prescribed by performance are evolved by
behaviour
management mutual consent among members
Managers act as leaders as they Members voluntarily select their
Leadership
have authority leader
Formally established line of
Communicate according to
Communication communication, official
convenience
communication
Organization Official structure can be shown in
Can not be shown
Chart the form of chart
Rules and
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15 regulations
Oral norms
17. Functional Structure
ο Also known as U Form- U means UNITARY
ο Grouping resources, organizational activities &
individuals by skills, knowledge & action
ο An organizational structure composed of all the
departments that an organization requires to produce
its goods or services
ο Grouping of activities according to the functions of an
organization
ο Whole task of the organization is divided into
specialized functions and each function is performed
by a specialist in charge
ο Example: organizing around function like
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Manufacturing, Marketing, Finance, HR, R&D etc
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19. Merits Demerits
ο Promotes ο Reduces coordination
between functions
specialization
ο Responsibility for profit
ο Work load reduction is at the top only
ο Better control ο Expensive
ο Delay in decision
ο Higher efficiency making
ο Encourages learning ο Slow adaptation to
from others doing environmental charges
ο Specialists become
similar job rigid and can not
ο Easy monitoring and understand what other
units do
evaluating
ο Difficult for
performance departments to
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communicate with
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others
20. Divisional Structure
ο Also known as M Form- M means Multidivisional
ο Itβs a structure made up of separate, semi autonomous
units or multiple divisions in related industry
ο Ex: 1] HP: computers, scanners, printers, electronic
medical equipments. Ex 2] Walt Disney: Theme parks,
Movies
ο A structure composed of separate business units within
which are the functions that work together to produce a
specific product for a specific customer
ο Create smaller, manageable teams
ο Develop a business unit level strategy to compete
ο Divisions have marketing, finance, HR and other functions
ο Functional managers report to divisional managers who
report to corporate heads
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22. Merits Demerits
ο Focuses on results; ο Duplication of
divisional managers activities and
are responsible for resources which
what happens to increases costs and
their products and reduces efficiency
services
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23. Conglomerate Structure or H
Form
ο H stands for HOLDING
ο Itβs a structure made up of multiple divisions in unrelated
businesses/industry
ο Ex: Samsung Electrics Co uses H Form or conglomerate
structure. β Semiconductors, Telecommunications,
Appliances, Media
ο Ex: General Electric- aircraft engines, appliances,
broadcasting, financial services, lighting products,
plastics, etc]
ο It is essentially a holding company that results from
unrelated diversification
ο This design which results from a strategy of unrelated
diversification, is a complex to manage
ο Managers find that comparing & integrating activities
among the dissimilar operations are difficlut
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24. Matrix or Grid Structure
ο Combines two organization structures; functional
and project structures [based on projects
organizational activities are grouped]
ο Functional departments create vertical chain of
command
ο Project or product types form horizontal chain
ο This type used to efficiently execute multiple
project operations of enterprise
ο Project managers coordinate teams of employees
drawn from different functional departments
ο Matrix organization relies on multiple command
structure
24 ο Ex: General Motors, Prudential, American
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Cyanamid, NCR
26. Merits Demerits
ο Where large number ο Violates principle of
of small projects unity of command
have to be executed ο Costly and
or completed, matrix expensive
organization works ο Delay in decision
out better making
ο Suitable to industries
like building and
construction, highly
technology oriented
industries etc
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27. ο Some organizations like Philips and Citibank
adopted matrix structure but later dropped it.
ο Matrix structure is not always appropriate to
organizations.
ο When matrix structure is appropriate to
companies?
ο When there is an environmental pressure
ο When huge information processing is existing
ο When sharing scarce resources is necessary
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28. Directions in Organizational
Structure
ο Team Structure
ο Network Structure
ο Boundary Less Structure
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29. Team Structure
ο When management uses teams as its coordination
device, you have a team structure
ο Members are assigned to a team for a specific
task/project
ο Once the task is done, members disburse and join
another team
ο It breaks down departmental barriers and
decentralizes decision making to the level of work
teams
ο It requires employees to be specialists and also
generalists
ο In small companies team structure can define entire
organization.
29 ο In large companies one can see team structure
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integrated with project structure
30. Team Structure
CEO
Project Project
Project Project
Manager Manager
Manager 1 Manager 2
3 4
Development Marketing
Testing Team HR Team
Team Team
Junior Senior
Software Software
Engineer Engineer
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31. Merits Demerits
ο Flexibility ο Loss of productive
ο Employee participation time in team
in decision making meeting
which leads to high ο Work specialization
morale, efficiency wont workout
ο Quick decision making
ο Interpersonal
ο Easy communication relations issues
ο Barriers between
functional departments
are broken
ο Synergy effect
ο Employees
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empowerment
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32. Network Structure
ο Company keeps core business and through
contacts with external agencies runs business
[outsourcing]
ο Also known as modular organization-
especially in manufacturing firms
ο Companies like NIKE & REEBOK, concentrate
on their core strengths in product development
and marketing and contracted all their
footwear manufacturing to outside suppliers
ο Sweden's Ericsson contracts its manufacturing
and even some of its R&D to more cost
effective contractors in New Delhi, Singapore,
California and other global locations
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33. Network Structure
Manpower
Distribution Consultancy
Agency
Accounting Firm
Core
Business
:
Manufact
uring
Supplier Agency shoes Promotion/ Ad
Firm
Marketing Firm
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34. Merits Demerits
ο Focus on core ο No control over
business external agencies
ο Cost saving ο Failure in one
network may affect
entire network
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35. Boundary Less Structure
ο Boundaries that divide employees such as hierarchy,
job function and geography as well as those that
distance companies from suppliers and customers
broken down
ο Seeks to remove vertical, horizontal and external
barriers so that employees, managers, customers and
suppliers can work together, share ideas and identify
best ideas for organization.
ο Works without any chain of command
ο Instead of having many hierarchical levels, it is made
up of less layers, flattened or horizontal.
ο Uses technology/intranet for better communication
process
ο It replaces functional departments with cross
functional teams and organization around processes;
uses lateral transfers, rotate people into and out of
35 different functional areas
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ο Replaces departments with empowered teams
36. What are boundaries?
ο Vertical Boundaries: Boundaries between layers
within the organization. VP Marketing ->Marketing
manager - > Marketing executive. Problem: Lower
layer employee has ideas, but thinks in terms of chain
of command, and does not inform to boss
ο Horizontal: boundaries that exist between
organizational functional units. Each unit has a
singular function. Problem: each unit maximizes its
own goals, but not overall goals of the organization.
ο External: barriers between organization and outside
world like customers, suppliers, government
agencies, public etc. Problem: lack of awareness of
customers needs and suppliers requirements
ο Geographical: Barriers among organization units
Refer: wikipedia.com, www.scribd.com/doc/23027675/semester-2-Assign-2-Bureaucra
36 -Vs-Matrix-structure different countries. Problem: no
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located
37. Boundary Less Structure
suppliers
Prodn
HR society
Top
Mgt
Mktg R&D
customers
Fin Governm
ent
Agencies
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38. Virtual organizations
ο Essential feature of this organization is connectivity
ο Ability to network a large number of service
providers, contractors whom it outsources its burden
of getting infrastructural support, retaining for itself
only a few areas of core competence.
ο Organization has no office as such because its
executives will work with mobile phones and laptops
at any place and at any time.
ο Key attributes; technology, opportunism- companies
often work temporarily to meet specific demands of
the customers and fall apart once need is over, no
borders, trust, excellence
ο Examples of companies who have virtual teams:
38 IBM, vadakara
vikas Motorola, Oracle, Honey well, HP, GE
39. Organization Structure elements
ο Organizing means how best to group
organizational activities and resources
ο Organization Structure means set of elements
that can be used to configure or construct an
organization
ο Organization Design means overall set of
structural elements and the relationships among
those elements used to manage the total
organization.
ο There are 6 elements that can be used to
construct an organization;
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40. 6 elements:
ο Work specialization
ο Departmentalization
ο Chain of command
ο Span of control
ο Centralization and decentralization
ο Formalization
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41. 1. Work specialization
ο Involves designing the jobs/ job design
ο Job design means determination of an individualβs
work related responsibilities.
ο First step in designing jobs is determining level of
the desired job specialization.
ο Job specialization is the degree to which overall
task of the organization is broken down and
divided into smaller component parts.
ο The concept of job specialization is evolved from
the concept of division of labour.
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42. Work specialization contdβ¦
ο Adam Smith, 18th Century economist, described
how a Pin manufacturing Factory used division of
labour concept to improve productivity.
ο One worker will drew the wire, another
straightened it, a third cut it, fourth grounded the
point and so on.
ο Ten men were able to produce 48000 pins in a
day, whereas each man working alone could
produce 20 pins per day.
ο Henry Ford implemented this concept in
automobile assembly line
ο Work specialization is the extension of the
growth, as growth continues, specialization too
42
continues.
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ο When Walt Disney started his company, he
43. 2. Departmentalization
ο Process of grouping jobs according to some
logical arrangement.
ο Organization can create departments on the
basis of its
ο Functions
ο Products
ο Geographical areas
ο Process
ο Customers
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45. Departmentalization contd..
Geographical Departmentalization
CEO
North
South Region West Region
Region
Based on Process Departmentalization
CEO
Developmen
Testing Marketing
t
Based on Customer Departmentalization
CEO
45 Government
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46. 3. Chain of command/ Scalar
Chain
ο Clear and distinct line of authority among the
positions in an organization
ο The line of authority extending from the upper
organizational levels to lowest levels, which
clarifies who reports to whom
ο Helps employees answer questions as βwho
do I go, if I have a problem?β or βto whom am I
responsible?β
ο Scalar principle suggests that there should be
a clear line of authority from top to bottom
linking managers at all levels
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47. Gangplank principle
ο In certain special situations the scalar chain/ chain of
command should be avoided [ Fayol]
ο To facilitate speed and efficiency in administrative matters,
communication through the formal chain can be avoided
and lateral communication permitted
A If D has to communicate
B E with G, the message has
to travel through formal
C F chain CBAEFG. This
involves delay and hence,
D
G D may be permitted to
communicate directly to G
[which forms lateral
communication] on
important matters.
47 vikas vadakara
48. 3 concepts in Chain of Command/ scalar
chain:
ο Authority: right to tell people what to do and
to expect them to do it
ο Responsibility: obligation or expectation to
perform any assigned duty
ο Unity of Command: a management principle
that each person should report to only one
manager
48 vikas vadakara
49. 4. Span of Control
ο Determining how many people will report to each
manager
ο The no of employees a manager can efficiently
and effectively manage
ο A manager must deal with 3 kinds of interactions
with and among subordinates;
ο Direct: managerβs one to one relationship with
each subordinate
ο Cross: among subordinates
ο Group: between groups of subordinates
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50. Span of Control contd..
ο No of possible interactions of all types between
manager and subordinates can be determined as
follow: ( 2 N / 2 N 1)
I N
ο I= total no of possible interactions
ο N= no of subordinates
ο Ex: if N [ no of subordinates] = 2, the no of
possible interactions are 6.
ο If N= 5, I or no of possible interactions are 100.
ο Manager has to determine optimal span of
control. This is nothing but deciding whether it
50 vikas vadakara be narrow or wide span of management/
should
control
51. Narrow Span of Control
ο Few subordinates per manager
ο More managers are required in this type.
ο This results in Tall structure of the Organization
Merits Demerits
οPersonal contact οExpensive as larger
between managers no of managers are
and subordinates involved
οEffective control and οCreates
close supervision communication
problems; because of
οDevelops good increased no of people
51 human relations in
vikas vadakara through whom
organization
52. Wide Span Of Control
ο Many subordinates per manager
ο Less supervisors are required
ο Results in Flat organization structure
ο This is preferable if workers are well trained and
competitive
Merits Demerits
οReduces cost of οMore administration and
supervision as few supervisory responsibility
managers are required of managers
οEffective control can not
οEasy communication
be assured
process
οRequires talented
οBetter coordination managers
52 between manager and
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οManagers wonβt have
54. Factors influencing span of control
ο Width of span is affected by:
ο Skills and abilities of the manager
ο Employee characteristics or abilities
ο Nature of work performed
ο Availability of time for supervision for
managers
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55. Delegation
ο Process by which manager assigns a portion of
his or her total workload to others
ο The downward pushing of authority to make
decisions is known as delegation of authority
ο Reason for delegation: to enable manager to get
more work done
ο Steps in delegation process:
55 vikas vadakara
56. Merits of
Delegation Guidelines for
effective Delegation
ο Reduces managers
ο Provide incentives for
heavy workload accepting responsibility
ο Development of
ο Train subordinates
subordinates
ο Having mutual trust and
ο By participating in
confidence
decision making and
ο Make clear with nature
problem solving,
and scope of task
subordinates learn
about operations and ο Provide necessary
improve their facilities or resources
managerial skills and information to
perform the task
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57. Barriers to effective Delegation
From managersβ side From subordinates
ο βI can do it better side
myselfβ fantasy ο Fear of criticism
ο Not trusting ο Lack of confidence,
subordinates adequate resources
ο Fear of loosing and information
power, fear of ο May think that no
subordinates reward for accepting
overtaking them additional
ο Briefing difficulty or responsibility
lack of ο Prefer to avoid risk
communication
57 vikas vadakara
power
58. Empowerment
ο It is the term used to express ways in which
employees can make decisions without
consulting a manager
ο It is self management, employees manage their
Points to remember while empowering
employees:monitor quality of goods and services.
own work,
ο Sharing vision, goals or objectives with
employees.
ο Trusting people
ο Providing necessary information for decision
making
ο Delegate work as well as authority
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58
ο Provide feedback
59. 5.Centralization & Decentralization
CENTRALIZATION
ο Centralization of power to make decision at the higher
levels of management
ο Hence employees canβt act independently
ο This results in Tall Structure
Merits Demerits
ο Taking emergency or ο No individual initiative
quick decisions ο Top management will
without any delay be over burdened
ο Standardized policy ο Widens gap between
or procedures managers and
employees
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60. Decentralization
ο Dispersal of decision making authority
ο Delegating power or authority to middle and lower
level managers
ο Degree to which lower level employees provide
input increases or actually they make decisions
ο Results in Flat Structure
Merits Demerits
ο Reduces burden ο Increases
ο Increases flexibility administrative cost
and involvement from ο Difficult in controlling
employees
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61. Staffing
ο Process of planning, employing and developing
human resources at different levels of an organization
for carrying out the various functions in the
organization
ο Includes activities as human resource planning,
recruitment, selection, placement, T&D, remuneration,
performance appraisal, promotion, transfer etc.
ο Koontz & O'Donnell, βthe managerial function of
staffing involves managing the organization structure
through proper and effective selection, appraisal and
development of personnel to fill the roles designed in
to the structureβ
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62. Line organizations
ο All positions in the organization are in the direct
line of authority from top to bottom.
GM
Work
Manager
Foreman
Workers
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63. Staff Organization
ο Act as advisory function to line organization
ο Their main task is to provide advice, guidance,
suggestions to line people.
GM
Business Cost
Industrial Legal
Economi Work Accounta
Relations Advisor nt
st Manager
Foreman
Industrial
R&D Engineer
Workers
s
Represents staff
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63 Represents line
function
authority
64. Use of Staff function in Decentralization
ο In decentralization, decision making power will be
dispersed
ο Line authority can utilize staff people who can
give better advice, guidance and suggestions.
This will help line authority to take good and
effective decisions.
64 vikas vadakara
65. 6. Formalization
ο The degree to which jobs within the organization
are standardized and the extent to which
employee behavior is guided by rules and
procedures.
ο Highly formalized jobs offer little discretion over what is
to be done.
ο Low formalization means fewer constraints on how
employees do their work.
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66. Organization Design
ο Following factors influence organization designing
task;
ο Environment: external or internal
ο Business strategy β focused, differentiated or low
cost
ο Technology β complexity of the technology used
ο Internal contingency factors:
*goals
*organization size
*employees
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67. Organization Configuration
ο This is nothing but creating departments in the
organization based on some logic arrangement;
based on functions, products, processes,
geography and customers.
[refer slide 43, departmentalization, 2nd element of
organization structure]
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