MG University BSc Psychology OB 5th semester

1. ORGANIZATIONAL THEORY
AND DESIGN
As per Mahatma Gandhi University BSc Psychology syllabus 5th semester
OB

2. Bureaucratic Model

3. Max Weber’s Bureaucratic Theory
Bureaucratic Theory was developed by a German
Sociologist and political economist Max
Weber(1864-1920).
According to him, bureaucracy is the most efficient
form of organization. The organization has a well-
defined line of authority. It has clear rules and
regulations which are strictly followed.

4. Bureaucracy
Bureaucracy refers to a specialized system and process of
maintaining uniformity or authority within an organization.
Bureaucratic processes are most common in
Large organizations Government

5. Principles of Bureaucratic
theory
• Job specialization
•Authority hierarchy Formal selections
•Formal rules and regulations Impersonality
• • career orientation

6. Features of Bureaucracy
• (a) Hierarchy of authority exists in the organization, which involves superior subordinate relationship and
chain of command.
• (b) Division of work based on competence and functional foremanship.
• (c) System of policy, rules, and regulations is necessary to regulate subordinate
• behaviour and to ensure rationality, objectivity, discipline and control.
• (d) In bureaucratic model, rule of law exists that leads to impersonal behaviour of
• employees. Relations are based on position in the hierarchy.
• (e) Weber suggests standardization of methods, systems, processes, job contents and
• tools for smooth operation.
• (f) Selection and promotion of employees should be based on competence.
• (g) Bureaucracy recognizes legal power derived from the official position held by an
• individual.

8. Job specialization
Jobs are divided into simple, routine and fixed category based on
competence and functional specialization.

9. Authority Hierarchy
• Officers are organized in hierarchy in which higher officer
controls lower position holders i.e. superior controls
subordinates and their performance of subordinates and lower
staff could be controlled.

10. Formal selection
• All organizational members are to be selected on the basis of
technical qualifications and competence demonstrated by
training, education or formal examination.

11. Formal rules and Regulations
• To ensure uniformity and to regulate actions of employees,
managers must depend heavily upon formal organizational
rules and regulations. Thus, rules of law lead to
impersonality in interpersonal relations.

12. Impersonality
• Rules and controls are applied uniformly, avoiding
involvement with personalities and preferences of employees.
Biasness and favoritism are not preferred.

13. Career orientation
• Career building opportunity is offered. Promotions and salary
hikes are strictly based on technical competence. They work
for a fixed salaries and pursue their career within the
organization.

14. Criticism of Bureaucratic Organization
Bureaucratic organization is criticized because of the following
reasons :-
• Bureaucratic organization is a very rigid type of organization.
It does not give importance to human relations. It is suitable
for government organizations. It is also suitable for
organizations where change is very slow.
• Too much emphasis on rules and regulations. The rules and
regulations are rigid and inflexible.

15. • There will be unnecessary delay in decision-making due to
formalities and rules.
• Bureaucracy involves a lot of paper work. This results in lot
of wastage of time, effort and money.

16. What is Centralization
& Decentralization
• Centralized organization: the authority to
make important decisions is retained by top
level managers
• Decentralized organization: the authority to
make important decisions is delegated to
managers at all levels in the hierarchy

17. Delegation of Authority
Reasons to Decentralize Authority:-
 It encourages the development of professional
managers.
 Managers are able to exercise more autonomy
but it can lead to a competitive climate.

18. Delegation of Authority cont..
Reasons to Centralize Authority:-
1. When the managers are not skilled enough
and would need further training which can
be expensive.
2. When there are new administrative costs
because new divisions need to be formed.
3. Decentralization can mean duplication of
functions.

19. Arguments for Centralization
• Centralization can facilitate coordination.
• Centralization can help ensure that decisions are
consistent with organizational objectives.
• Centralization can avoid duplication of activities
by various subunits within the organization.
• By concentrating power and authority in one
individual or a management team, centralization
can give top-level managers the means to bring
about needed major organizational changes.

20. Arguments for Decentralization
• Top management can become overburdened
when decision-making authority is centralized.
• Motivational research favors decentralization.
• Decentralization permits greater flexibility—more
rapid response to environmental changes.
• Decentralization can result in better decisions.
• Decentralization can increase control.

21. Limitations of Centralization
• Development of low level managers are
hampered . Opportunity given to exercise
initiative and judgment is negligible .
• It is a costly affair and delays decision making .
• It creates problems of effective
communication
• No scope of specialization as a person may
have to look into many things

22. Limitations of Decentralization
• It creates problems in coordination between
different units of the organization.
• May result in higher administrative expenses
as qualified managers a needed for different
divisions
• Due to different policies and procedures of
each unit in a decentralized organization
inconsistencies may arise in organizational
activities

23. Examples of Centralized organisations
• Dictatorship: Dictatorships are usually ruled by a
single powerful figure, the easy-to-spot sign of a
centralized organization. If you can stop the
leader, you can destroy the entire group.
• Military: Traditionally, the military has been the
classic example of top-down or hierarchical
management. The General orders the Captain
who orders the Lieutenant who orders the…

24. Cntd.
• Government: Governments are classic top-down
structures lead by the President or Prime Minister,
followed by Senators or Ministers who each have a team
below them. Right at the bottom are the voters who get
to have their say with a single vote every couple of years.
• Television: TV shows are created by centralized
organizations that decide what we watch and when we
watch it. And, if think literally about it, one message is
sent down the airwaves for us to watch at the other end.

25. Examples of Decentralized
Organisations
• Open Source Software: There are two decentralized
organization examples in the computing world. The first
is Open Source Software. Think Linux. It’s freely available,
thousands of volunteers update it and nobody owns it.
• Peer to Peer Software: Peer to Peer software is uses bits
of information contributed by many people. For example,
Bit Torrent downloads a part of the overall file from
numerous computers spread across the globe.

26. Cntd.
• Terrorist Cells: Terrorist cells represent the best military
decentralized organization example. And, this explains the
difficulty the west has had in coming to terms with Al Qaeda,
finding Osama Bin Laden and the war in Afghanistan. It’s the
centralized versus the decentralized.
• The Internet: This is the classic decentralized
organization example of our time. It was deliberately
created to overcome the limits of a centralized military
command and the threat of missile attack. This
decentralized structure is built upon the humble
hyperlink that connects all the separate pages, websites
and networks.

27. The Decentralization of Coca-Cola
• Coca-Cola decentralized its
organisational structure by
cutting half of the staff at its
Atlanta headquarters and
moving the regional
chieftains closer to their local
markets. In India, decision
making has been moved
further down to different
areas of that diverse country.

28. Equating a Ideal Organisation
Balancing Centralization and Decentralization :
• Ideal balance entails:
– Enabling middle and lower managers who are at
the scene of the action to make important
decisions
– Allowing top managers to focus on long-term
strategy making

29. Examples of Fusion Organisation
• Wikipedia: Comprised of thousands of volunteers,
Wikipedia is based on a wiki or open platform for editing
the encyclopedia entries. A skeleton staff of employees
oversee the venture.
• Facebook: Whilst the organization provide the
platform for listings, users are free to post what they
like within the guidelines set out by the platform
owners.

30. Cntd.
• Supermarkets: The owners employee people to set up
and stock the store. Users are free to wander and select
the items of their choice.
• Ebay: Just like the supermarket, Ebay the company set up
the infrastructure and users are free to list items, view
items and bid for items.
• Toyota: Toyota employs over 300,000 people. And, they
all belong to independent business units controlled by an
overall corporation.

32. All Organizations have a management structure that
determines the relationships b/w functions and
positions and subdivides and delegates roles,
responsibilities and authority to carry out defined
tasks.

33. It is a framework within which an Organization
arranges it’s lines of authorities and
communications and allocates rights and duties.

34. The continuous line of
authority that extends from upper level of
organization to lowest level of organization
and clarifies who reports to whom.
The rights inherent in a managerial
position to tell people what to do and expect
them to do it.

35. The obligation or expectation
to perform. Responsibility brings with it
accountability.
The concept that a person
should have one boss and should report only
to him.
The assignment of authority to
another person to carry out specific duties.

36. 1. Tall Organizational Structure
2. Flat Organizational Structure

37. • Large, complex organizations often require a
taller hierarchy.
• In its simplest form, a tall structure results in one
long chain of command similar to the military.
• As an organization grows, the number of
management levels increases and the structure
grows taller. In a tall structure, managers form
many ranks and each has a small area of control.

39. • Flat structures have fewer management
levels, with each level controlling a broad area or
group.
• Flat organizations focus on empowering
employees rather than adhering to the chain of
command.
• By encouraging autonomy and self-direction, flat
structures attempt to tap into employees’ creative
talents and to solve problems by collaboration.

41. • Determines the manner and extent to which
roles, power and responsibilities are
delegated.
• Depends on objectives and strategies.
• Acts as a perspective through which
individuals can see their organization and it’s
environment.

42.  It enables members to know what their
responsibilities
 It frees the manager and the individual workers to
concentrate on their respective roles and responsibilities
 It coordinates all organization activities so thereis
minimal duplication of effort or conflict.
 Avoids overlapping of function because it pinpoints
responsibilities.
 Shows to whom and for whom they are responsible

43. • Divides work to be done in specific jobs & dept.
• Assigns tasks and responsibilities associated with
individual jobs.
• Coordinates diverse organizational tasks.
• Establishes relationship b/w individuals, groups
and departments.
• Establishes formal lines of authority.
• Allocates organizational resources.
• Clusters jobs into units.

46. Line/staff Organization

47. Line organization
o Line organization is the simple and oldest type of organization followed in
an organization. Under line organization, each department is generally a
complete self-contained unit.
o Also called a military organization or a scalar-type organization.
o A separate person will look after the activities of the department and
she/he has full control over the department.
o top management has complete control, and the chain of command is
clear and simple.

49. • This type of organization is followed in the army on the same pattern.
So, it is called military organization. Under type of organization, the
line of authority flows from the top to bottom vertically. So it is called
line organization.
• The line-and-staff organization combines the line organization with
staff departments that support and advise line departments.

50. Characteristics of line organization
o It consists of direct vertical relationships.
o Authority flows from top-level to level to bottom level.
o Departmental heads are given full freedom to control their
departments.
o Each member knows from whom he would get orders and to
whom he should give his orders.

51. o Operation of this system is very easy.
o Existence of direct relationship between superiors and
subordinates.
o The superior takes decisions within the scope of his authority

52. Advantages of line organization Disadvantages of line organization
1. Simplicity 1. Lack of specification
2. Division of authority and responsibility 2. Over loading
3. Unity of control 3. Lack of initiative
4. Speedy action 4. Scope for favoritism
5. Discipline 5. Dictatorial
6. Economical 6. Limited communication
7. Co-ordination 7. United administration
8. Direct communication 8. Subjective approach
9. Flexibility 9. Instability
10. Lack of co-ordination

53. The Information Processing
View

54. The greater the task uncertainty, the greater the amount
of information that must be processed among decision
makers during task execution in order to achieve a given
level of performance.

55. • A basic proposition is that the greater the uncertainty of the task, the
greater the amount of information that has to be processed between
decision makers during the execution of the task.
• If the task is well understood prior to performing it, much of the
activity can be preplanned.
• If it is not understood, then during the actual task execution more
knowledge is acquired which leads to changes in resource allocations,
schedules, and priorities.
• All these changes require information processing during task
performance.

56. • The observed variations in organizational forms are variations in the
strategies of organizations to
• 1) increase their ability to preplan,
• 2) increase their flexibility to adapt to their inability to preplan,
• 3) to decrease the level of performance required for continued
viability.

57. Modern Organizational
Designs

58. Evolution of Organizational
Theories

59. Bureaucratic Model ( Classical Theory)
Open system
Information Processing View
the organization as a system made up of
interacting parts
Contingency Approach
analysis of organizations in terms of their ability to
process information in order to reduce the uncertainty
in managerial decision making
there is no single best way to organize. The
organizational design must be fitted to the existing
environmental conditions
Ecological Approach
ecology theory challenges the contingency approach.
ecological approach says that it is more a process of
the “survival of the fittest”; there is a process of
organizational selection and replacement

60. Project Organizational structure

61. Project organizational structure
• Facilitates the coordination and implementation of project
activities and takes inputs from different areas
• Also called the team or task force type
• Members from different departments and functional areas
constitute a team, in which every member provides expertise in
their area of specialization.
• This structure breaks down department barriers and decentralizes
decision making to the level of the team

62. • Used to coordinate across departments for temporary, specific and
complex problems which cannot be handled by a single department
• Form of organizational structure that will be used for the
project.
• Creates an environment that fosters interactions among the
team members with a minimum amount of disruptions,
overlaps and conflict.

64. Matrix Organizational structure

65. Matrix Organizational structure
• The matrix design blends two different types of designs, namely
project and functional organizational designs
• Matrix design balances both technical and project goals and allocates
specific responsibilities to both
• The matrix structure is highly flexible and can be modified according
to organizational needs.

67. Flow of information in matrix

68. Features
• Two Bosses: In a matrix organizational structure, the subordinates have to
report to two superiors, one is the functional manager, and the other is the
project manager.
• Resource Allocation: The aim of opting for a matrix structure is to ensure
the highest possible utilization of human resource.
• Multi-project Suitability: When a company has limited personnel and
various projects to handle at once, it can go for a matrix organizational
structure to simplify the task.
• Task Specialization: When the managers concentrate more on their part of
operations, they tend to specialize in particular areas. When the project
manager takes care of the administrative functions, the functional manager
looks after the technical elements.
• Hybrid Structure: It is the combination of the two organizational
structures, i.e., the functional and the project.

71. Horizontal Organizations

72. Horizontal Organizations
“The horizontal organization advocates the dispensing of internal
boundaries that are an impediment to effective business performance.
If the traditional structure can be likened to a pyramid, the metaphor
that best applies to the horizontal organization is a pizza—flat, but
packed with all the necessary ingredients.”
N. Anand and Richard L. Daft, “What Is the Right Organization Design?” Organizational Dynamics,Vol. 36, No. 4, 2007, p. 331.

73. principles that define horizontal organization design
Organization revolves around the process, not the task:
Instead of creating a structure around the traditional functions,
the organization is built around its three to five core processes. Each
process has an “owner” and specific performance goals.
The hierarchy is flattened:
To reduce levels of supervision, fragmented tasks are combined,
work that fails to add value is eliminated, and activities within each
process are cut to the minimum.

74. Teams are used to manage everything:
Self-managed teams are the building blocks of the organization.
The teams have a common purpose and are held accountable for
measuring performance goals.
Customers drive performance:
Customer satisfaction, not profits or stock appreciation, is the
primary driver and measure of performance.
Team performance is rewarded:
The reward systems are geared toward team results, not just
individual performance. Employees are rewarded for multiple skill
development rather than just specialized expertise.

75. Supplier and customer contact is maximized:
Employees are brought into direct, regular contact with
suppliers and customers. Where relevant, supplier and customer
representatives may be brought in as full working members of in-house
teams.
All employees need to be fully informed and trained:
Employees should be provided all data, not just sanitized
information on a “need to know” basis. However, they also need to be
trained how to analyze and use the data to make effective decisions.

76. • These horizontal designs are more relevant to today’s environmental
needs for flexibility, speed, and cooperation.
• Potential problems include feelings of neglect and “turf battles” for
those individuals and departments not included in the horizontal
process flow and the advantages of technical expertise gained under
the functional specializations may be diluted or sacrificed.

77. example

78. Network organization

79. Network organization
• Network organizational structure helps visualize both internal and
external relationships between managers and top-level management.
• Managers coordinate and control relations that are both internal and
external to the firm.
• They are not only less hierarchical but are also more decentralized
and more flexible than other structures.

80. • The idea behind the network structure is based on social networks. Its
structure relies on open communication and reliable partners; both
internal and external.
• Has few tires, more control and bottom flow of decision making.
• Network organizational structure is sometimes a disadvantage
because of its complexity.

83. Advantages of a Network Structure
• Network structure is more agile compared to other structures (such as
functional areas, divisions, or even some teams).
• Communication is less siloed and flows freely, possibly opening up more
opportunities for innovation.
• Network structure is decentralized, it has fewer tiers in its organizational
makeup, a wider span of control, and a bottom-up flow of decision making
and ideas.

84. Disadvantages of a Network Structure
• This more fluid structure can lead to a more complex set of
relationships in the organization.
• Lines of accountability may be less clear, and reliance on external
vendors can be quite high.
• These potentially unpredictable variables essentially reduce the core
company’s control over its operational success.