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Organizing Function _ Yohannes.pptx

  1. Organizing Function
  2. Organizing Function  Organizing Defined  Formal & Informal Organizations  Importance of Organizing  The Organizing Process  Organizational Concepts  Division of Labor & Specialization  Centralization & Decentralization  Delegation of Authority  Span of Management  Organizational Structure 2
  3. Organizing… 2.1 Overview Definition: Arranging and structuring work to accomplish organizational goals. Involves various sub functions  Identification of activities  Grouping of activities in to self contained jobs  Assignment of jobs to individuals/departments  Delegation of authority  Establish coordination of activities
  4. Organizing… Organizing is thus the basic process of combining and integrating Human, physical and financial resources in productive interrelationships for the achievement of enterprise objectives
  5. 2.2 The difference between formal and Informal Organization Formal Organizations: A formal organization is logical distribution of resources to achieve the company goal in a most efficient manner Characteristics  Group of people with common objective  Clear set of Objectives  Has rule and regulation  Authority is exercised-superior &subordinate  Assigned duties and responsibilities  Can be illustrated using organizational chart
  6. Importance:  Provide company structure  Clarity of chain of command  Discipline  Easier organizational development  Easier decision making  Easier coordination between departments
  7. Limitation:  Limited flexibility  Slow in processing-decision making, problem detection
  8. Informal Organizations: Exist within the formal organization Characteristics  Based on social interaction  No objectives  Has no rule and regulation  No authority- superior &subordinate  Can not be illustrated using organizational chart
  9. Importance:  Create a better total system  Lighter work load for management  Work group satisfaction  Safety valve for emotions  Cohesiveness  Fill up gap in management – eg.lubricate communication  Encourage cooperation
  10. Limitations:  Resistant to change  Role conflict-pursuit for group satisfaction VS formal organizational objectives  Rumor-bad mouthing
  11. 2.3 Importance of Organizing The stage at which we develop  Organizational Structure - formal arrangement of jobs  Organizational Chart – visual presentation of the org. structure  Organizational Design – process of creating the org. structure; make decision on  Work specialization  Departmentalization  Chain of command  Span of control  Centralization and decentralization  formalization
  12. 2.4 The organizing process There are various steps of organizing process:-  Identification of Tasks: - All the relevant activities and tasks are identified  Grouping Jobs: grouping of the related jobs. departments and divisions  Assigning Work: - appoint suitable persons for the various tasks.  Delegation of authority: -. Assigning work and delegation goes parallel to each other.  Coordination: - coordination among departments, divisions, individuals
  13. Major Organizational Concepts  This presentation covers the following topics  Division of labor and Specialization  Departmentation  Centralization and Decentralization  Delegation of Authority  Span of Management  Organization Structure 13
  14. Objectives  After this presentation you would be able to understand:  The concepts of organizing;  Briefly define the major organizational concepts;  Advantages and disadvantages of;  Division of labor and Specialization  Departmentation  Centralization and Decentralization  Delegation of Authority  Span of Management April 9,2014 14
  15. 1. Division of Labor and Specialization Division of Labor  Tasks split into component  Task of organizing broken down and divided in to smaller component  Training workers in performing specific duties. Advantages Division of Labor  It enables efficiency and productivity increases  Decreased transfer time .  Less wastage of materials.  Ease of supervision.  It decrease training cost. April 9,2014 15
  16. Division of Labor Disadvantages of Division of Labor • Boredom(monotony) and fatigue caused monotonous and repetitive tasks • Specialization would result in workers are having limited knowledge. • Creates communication barriers • It lose sight of the company's mission • Specialization leads to time oriented confusion • Different specialists often formulate rules, policies, and procedures that conflict with those of other operational units April 9,2014 16
  17. 2. Departmentation  What is Departmentation?  What are the basis for Departmentation?  Adv. And Disadv. Of different Departmentation April 9,2014 17 Department: -distinct area for the performance of specified activities. Departmentation: -means for the accomplishment of objectives. -process of grouping specialized activities in a logical manner. -group activities in to manageable unites.
  18. Types of Departmentation Functional Geographic customer based Product Combined Process April 9,2014 18 Departmentation
  19. Functional Departmentation  It is grouping based on similarity of:-  Expertise  Skill  Work activities. • It is most common in business organization. • It asks the question “what does the enterprise/organization do” what kind of activities. 19
  20. Cont`d April 9,2014 20 Figure 1. functional Departmentation President Vice president loans Vice president investment Vice president marketing Vice president operations
  21. Functional Departmentation advantage disadvantage  Avoid overlap basic business activities  Provide chance for occupational specialization  Linea clearly drawn between functional areas  Promote communication between department  Create strong team sprit in one department.  De-emphasis of over all company objectives- narrowmindness may develop  Over specialize and narrow viewpoints of key personnel  Reduce coordination and communication between functions  Decisions are concentrated at the top management, creating delay.  Limits development of General Managers April 9,2014 21
  22. Geographic Departmentation  it Groups activities on the basis of geographic or territory.  It is also known as Territorial Departmentation.  Is common in enterprise that operate over wide geographic areas.  It is attractive to large -scale firms or other enterprises whose activities are physically or geographically dispersed.  It works best when:- Different laws, Different currencies, Different languages and Different traditions exist and have a direct on the ways in which business activities must be conducted April 9,2014 22
  23. Cont. President Manager Region 1 Manager Region 2 Manager Region 3 Vice President April 9,2014 23 Figure 2 Geographic Departmentation
  24. Geographic Departmentation Advantage Disadvantage  Local employment opportunity  Customer good will, awareness of local feeling and desire.  Create conducive environment to develop general manager  Facilitate decision making  Provide high level of service  Requires more persons with general manager abilities  Duplicate staffs, services , or effort  Tends to make maintenance of economical central services difficult.  Increase problem of top management control.  It is costly to host many dispersed departments.  Create a gap to communicate with different geographic departments. April 9,2014 24
  25. Customer based Departmentation  Customer oriented  Grouping of activities around customers  reflects a primary interest in customers  helps organizations meet the special and widely varying needs of customers .  Eg. It can be used in medical institutions such as hospitals and clinics –emergency services , out patient services ,x-rays etc. April 9,2014 25
  26. Figure 3. Customer Departmentation April 9,2014 26 President Business Customers General public Vice president marketing
  27. Customer based Departmentation Advantage Disadvantage  Encourages concentration on customer needs  Gives customers the feeling that they have an understanding supplier  Develops expertness in customer area  Create team sprit of workers in a particular group  May be difficult to coordinate operation between competing customer demands  Requires managers and experts in customers` problems  Customer groups may not always be clearly defined  The possibility of underemployment of facilities and labor specialized workers in customer groups  Higher competition among employees may deter overall organization performance. April 9,2014 27
  28. Product Departmentation  Grouping and arrangement of activities based on products or product groups.  Focuses on an organization's particular products e.g. Textile products-Nylon products, woolen products , silk products, cotton products etc. April 9,2014 28
  29. Cont`d April 9,2014 29 Figure 3 . Product Departmentation President Product A Product B Product C Product D Vice president Production
  30. Product Departmentation Advantage Disadvantage  Places attention and effort on product line  Facilitates use of specialized skill, capital facilitates and knowledge  Permits growth and diversity of products and services  Places responsibility for profits at the division level  Furnishes measurable training ground for general managers  Requires more persons with general manager abilities  Tends to make maintenance of economic central services difficult  Presents increased problem of top management control April 9,2014 30
  31. Departmentation by Process • Manufacturing firms often group activities around a process or type of equipment. • This is when special skill is needed to operate different machines. e.g. involves several sequential processes :poling (removing bark from logs); April 9,2014 31
  32. Figure 4 Process Departmentation April 9,2014 32 General Manager New product Development Process Order fulfillment process Customer and account management Process
  33. Process Departmentation… Advantages Disadvantage  Achieves economic advantage  Use specialized technology  Simplifies training  Coordination of department is difficult  Responsibility for profit is at the top  Is unsuitable for developing general managers. April 9,2014 33
  34. Centralization & Decentralization  Centralization:  Power and authority are systematically retained by top manager  The participation of lower - level managers in decision-making is very low  Decentralization:  Power and authority are systematically dispersed  It tends to disperse decision making authority in an organized structure  Power is pushed downwards and lower level managers April 9,2014 34
  35. Centralization & Decentralization… More Centralization More decentralization  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 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.  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 a say in what happens.  Company is geographically dispersed.  Effective implementation of company strategies depends on managers having involvement and flexibility to make decisions. April 9,2014 35
  36. Centralization vs. Decentralization Centralization Decentralization  Authority in the hands of one or few members of Orgn.  Authority dispersed to many hands. April 9,2014 36 • less important decision made at lower level. • small the number the decision at lower level. • Less flexible to interpret policy at lower level. • High subordinate to consult the superior • More important decision made at lower level. • large the number the decision at lower level. • more flexible to interpret policy at lower level. • less subordinate to consult the superior centralization decentralization
  37. Delegation of Authority  Authority:  The right to command resources  legitimate right to give order  The right to make decisions, carry out actions  A formal right of a superior to command Another  early management writer, Chester Barnard, proposed another perspective on authority. This view, called the acceptance theory of authority, says that “Authority comes from the willingness of subordinates to accept it.” April 9,2014 37
  38. Acceptance theory of Authority April 9,2014 38
  39. Delegation of Authority … Barnard contended that subordinates will accept orders only if the following conditions are satisfied: 1. They understand the order. 2. They feel the order is consistent with the organization’s purpose. 3. The order does not conflict with their personal beliefs. 4. They are able to perform the task as directed April 9,2014 39
  40. Factors Determining Delegation  The history and culture of the organization  The nature of the decision  Availability and ability of managers(lower level managers)  Management philosophy  Size and character of the organization  Geographic dispersion of operations  Environmental uncertainty April 9,2014 40
  41. Importance of Delegation  It relieves the manager from his/her heavy workload  It leads to better decision  It speedup decision-making  It helps subordinates to retain and builds moral  It encourages the development of professional managers  It helps to create the organization structure April 9,2014 41
  42. Barriers to Delegation  Belief in the fallacy expressed in the advice “If you want it done right, do it yourself”  Lack of confidence and trust in lower-level employees  Low self-confidence  Fear of being called lazy  Vague job definition  Fear of competition from those below  Reluctance to take the risks involved in depending on others  Lack of controls that provide early warning of problems with delegated duties  Poor example set by bosses who do not delegate April 9,2014 42
  43. Overcoming the Barriers in Delegation  Managers to give their subordinates real freedom to accomplish delegated tasks.  Give training for subordinates  Improved communication b/n managers and subordinates April 9,2014 43
  44. Authority  The power or right to give orders, make decisions, and enforce obedience;  Importance :  Accountability  Guidance  Career Path  Communication April 9,2014 44
  45. Types of Authority  Line Authority: It is the relationship between superior and subordinates. It is a direct supervisory relationship It flows down ward in an organization.  Staff Authority:  Authority for managers to provide advice or technical assistance.  Does not provide direct control over subordinate and other departments.  Functional Authority:  Authority over specific activities undertaken by personal in another department. April 9,2014 45
  46. president R &D Legal Personnel Finance Marketing sales Accounting Budget Advertising April 9,2014 46 Functional Authority:
  47. Delegation:  Is the transfer of formal authority to another person.  It occur for two purpose:- A. When mangers are absent: B. When managers /organizations/need to develop their subordinates and facilitate the decision making process: April 9,2014 47
  48. Steps for Delegation Assignment of tasks: -identify the kinds of tasks to be performed by subordinates. Delegation of Authority: -to carry authority give necessary authority Acceptance of Responsibility: -make them responsible to perform the task to the maximum ability Creation of responsibility: -regard to the task assigned and authority delegated having an answer for the action taken April 9,2014 48
  49. Unity of command  States an employee should have one and only one immediate manager  It decrease dissatisfaction (for the manager)  The employee not to be puzzled to give priority April 9,2014 49
  50. Span of Management  Is the number of subordinates the manager should have to direct. General guide line that affect span of control: 1. Complexity of subordinates jobs 2. The variety of subordinates work 3. The ability and training of the subordinates. 4. The ability of the manager. April 9,2014 50
  51. Span of Management… variables degree Span of control degree Span of control Complexity of job high narrow low wide Variety of job high narrow low wide Ability and training high wide low narrow Ability of manager high wide low narrow April 9,2014 51
  52. Figure 4.11 wide and Narrow of control April 9,2014 52 president V. President mkt. V. President Prod. V. President personnel Manager manufacturing Manager quality control Supervis or I Supervis or II A B C D E Wide span of control Narrow span of control
  53. April 9,2014 53
  54. 2.5 Organizational Structure What is Organizational Structure? A system of tasks, workflow, reporting relationship and common channels that links together diverse individuals and groups. Can be differentiated as  Vertical Differentiation  Horizontal Differentiation
  55. Organizational Structure… Vertical Differentiation Tall Organization  has many layers and narrow span of control.  Are more expensive than because of the number of managers involved.  Foster more communication problems as many people are involved. Flat Organization  has few layers and wide span of control.  Lead higher levels of employee morale and productivities.  Create more administrative responsibilities for the relatively few managers.  Creat more supervisory responsibility for managers due to wider spans of control.
  56. Organizational Structure… Horizontal Differentiation Functional Structure  People with similar skills and perform similar tasks are grouped together in to formal unit.  Members work in their functional area of expertise.  Functional structure is the simplest and least expensive in organization design.  It provides facilities like communication and coordination among the line managers
  57. Organizational Structure…
  58. Organizational Structure… Functional Structure Advantages  Brings efficiency through specialization  It is simplest and less expensive.  To improve development of functional expertise.  Economic of scale.  High quality technical problem solving
  59. Organizational Structure… Functional Structure Disadvantages  Sense of cooperation and common purpose break down.  Narrow view of performance objective  It limits internal development of general managers.  Poor delegation of authority.  It involves inadequate planning for products and markets.
  60. Organizational Structure… Divisional Organizational Structure  Group together people, who work on the same product or process, serve similar customers and or are located in the same area or geographic regions.  Common in a complex organization
  61. Organizational Structure…
  62. Organizational Structure… Advantages of Divisional Structure  It focuses on coordination and necessary authority  clearly defined roles in an each division.  It places strategy development and implementation in closer proximity to the division’s unique environment.  It sharply focuses accountability for performance.
  63. Organizational Structure…  It retains functional specialization within each division.  It is good training ground for strategic managers.  It creates career development opportunities for managers.  It allows new businesses added to new products easily.
  64. Organizational Structure… Disadvantages  It fosters potentially dysfunctional competition for corporate level resources  It consists of problem with the extent of authority given to division managers.  There is potential for the policy inconsistencies between divisions.  It has problems of arriving at a method to distribute corporate overhead costs that is acceptable to different division managers with profit responsibility.
  65. Organizational structure…  It is costly due to each division requires functional specialists who must be paid high salaries because these managers are highly qualified.  Duplication of staff services, facilities and personnel in each division in an organization.  It requires an elaborate, headquarters driven control system.  Divisional structure is not suitable to small firms.
  66. Organizational Structure… Matrix Organizational Structure  In matrix structure, functional and product forms are combined simultaneously at the same level of the organization.  It is the most complex of all designs due to it depends upon both vertical and horizontal flow of authority and communication.
  67. Organizational Structure… Advantages  It accommodates a wide variety of project oriented business activity.  It provides good training ground for strategic managers.  It maximizes efficient use of functional managers.  It fosters creativity and multiple sources of diversity.  It is broader middle management exposure to strategic issues for the business.
  68. Organizational structure  Its project objectives are very clear in an organization.  It is to be effective structure for planning, training, responsibilities and clear mutual  Understanding of roles mutual trust and confidence.  It is very useful to external environment especially it’s technological and market aspects is very complex and changeable
  69. Organizational Structure… Disadvantage  It acts as dial accountability which can create confusion and contradictory policies.  Necessitates tremendous horizontal and vertical coordination.  It produce conflicts revolving around duties, authority and resource allocation.