Fundamentals of organizing (Principles of Management)


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Fundamentals of organizing (Principles of Management)

  1. 1. Definitions of ORGANIZING and ORGANIZING SKILL Organizing – is the process of establishing orderly uses for resources within the management system. Organizing Skill – is the ability to establish orderly uses for resources within the management system. Organization – refers to the result of the organizing process.
  2. 2. The Importance of Organizing  It is the primary mechanism managers use to activate plans.  It creates and maintains relationships between all organizational resources.  Helps managers minimize costly weakness.
  3. 3. Three Primary Responsibilities First: The department should periodically formulate reorganization plans that make the management system more effective and efficient. Second: The department should foster and support an advantageous organizational climate within the management system. Third: The department should develop plans to improve managerial skills to fit current management system needs.
  4. 4. FIGURE 11.1 Keys to organization: Fayol’s guidlines 1. Judiciously prepare and execute the operating plan. 2. Organize the human and material facets so that they are consistent with objectives, resources and requirements of the concern. 3. Establish a single competent, energetic guiding authority (formal management structure). 4. Coordinate all activities and efforts. 5. Formulate clear, distinct and precise decisions. 6. Arrange for efficient selection so that each departments is headed by a competent, energetic manager, and all employees are placed where they can render the greatest duties. 7. Define duties. 8. Encourage initiative and responsibility. 9. Offer fair and suitable rewards for services rendered. 10. Make use of sanctions against faults and errors. 11. Maintain discipline. 12. Ensure that individual interests are consistent with the general interests of the organization. 13. Recognize the unity of command. 14. Promote both material and human coordination. 15. Institute and effect controls. 16. Avoid regulations, red tape, and paper work.
  5. 5. The Organizing Process Step 1: Reflect on Plans and Objectives Step 2: Establish major tasks Step 3: Divide major task into subtasks Step 4: Allocate resources and directives for subtasks Step 5: Evaluate results of organizing survey feedback FIGURE 11.2
  6. 6. Classical Organizing Theory  Classical organizing theory comprises the cumulative insights of early management writers on how organizational resources can best be used to enhance goal attainment.
  7. 7. Three major components of classical organizing theory
  8. 8. Weber’s Bureaucratic Model - Max Weber’s most notable contribution to classical organizing theory Bureaucracy – to label the management system that includes three primary components:  detailed procedures and rules  A clearly outlined organizational hierarchy  Impersonal relationships among organization members Caution: a bureaucracy is not an end itself, but rather means to the end of management system goal attainment.
  9. 9. Weber’s Bureaucratic Model Main criticism: They give short shrift to the human variable within organizations. - It is recognized today that the bureaucratic approach without an appropriate emphasis on the human variable is almost certainly a formula for organizational failure. Another criticism: Bureaucracy may negatively influence organizational effectiveness.
  10. 10. Division of Labor - The assignment of various portions of a particular task among a number of organization members. Importance: Individuals specialize in doing part of a task rather than the entire task.
  11. 11. Advantage and disadvantage of Division of Labor  Advantages: When workers specialize in a particular task, their skill in performing that task will increase. Workers who have one job and one place in which to do it do not lose valuable time changing tools or locations. When workers concentrate with only one job, they naturally try to make the job easier and more efficient.
  12. 12.  Division of labor creates a situation in which workers need only to know how to perform their part of the work, task rather than the entire process for producing the end product.  Disadvantages:  Division of labor focuses solely on efficiency and economic benefit and overlooks the human variable in organizations.  Work that is extremely specialized tends to be boring and therefore will eventually cause production rates to go down as workers become resentful of being treated like machines.
  13. 13. Division of Labor and Coordination Coordination –” the orderly arrangement of group effort to provide unity of action in the pursuit of a common purpose.” Mooney - Coordination is a means for achieving any and all organizational objectives. - It involves encouraging the completion of individual portions of a task in a synchronized order that is appropriate for the overall task.
  14. 14. Follett’s guidelines on Coordination  First, Follett said that coordination can be attained with the least difficulty through direct horizontal relationships and personal communications.  Second, Follett suggested that coordination be a discussion topic throughout the planning process.  Third, maintaining coordination is a continuing process an should be treated as such. Managers cannot assume that because their management system shows coordination today, it will show coordination tomorrow.
  15. 15. Follett’s guidelines on Coordination  Follett also noted that coordination can be achieved only through purposeful management actions--It cannot be left into chance.  She stressed the importance of the human element and advised that the communication process is an essential consideration in any attempt to encourage coordination.
  16. 16. Structure Structure - refers to the designated relationships among resources of the management system. Purpose: to facilitate the use of each resource, individually and collectively, as the management system attempts to attain its objectives.  Two basic types of structure: Formal Structure – the relationships among organizational resources as outlined by management. - represented primarily by the organization chart.
  17. 17. Informal Structure – the patterns of relationships that develop because of the informal activities of organization members.  An organization’s informal structure is the system or network of interpersonal relationships that exist within , but is not usually identical to the organizations formal structure.  Organization structure is represented primarily by means of a graphic illustration called an organization chart.
  18. 18. Organization Chart  Constructed in pyramid form.  The relative positioning of individuals within boxes on the chart indicates broad working relationships, and lines between boxes designate formal lines of communication between individuals.  Also communicate to outsider the complexity of the organization.
  19. 19. Two Primary Dimensions of Structure 1. Vertical Dimensioning  Refers to the extent to which an organization uses vertical levels to separate job responsibilities.  Directly related to the concept of Scalar Relationships - the chain of command. ○ Related to unity of command – The management principle that recommends that an individual have only one boss.
  20. 20.  Span of Management (span of control, span of authority, span of supervision, and span of responsibility) - The number of individuals a manager supervises. The more individuals a manager supervises, the greater the span of management. - Has a significant effect on how well managers carry out their responsibilities. Central Concern : to determine how many individuals a manager can supervise effectively.
  21. 21. Designing Span of Management  Similarity of Functions - the degree to which activities performed by supervised individuals are similar of dissimilar.  Geographic Continuity - the degree to which subordinate are physically separated.  Complexity of Functions - the degree to which workers’ activities are difficult and involved.
  22. 22.  Coordination - the amount of time managers must spend synchronizing activities of their subordinates with the activities of other workers.  Planning – The amount of time managers must spend developing management system objective and plans and integrating them with the activities of their subordinates.
  23. 23. TABLE 11.1 Major Factors That Influence the Span of Management Factor Factor Has Tendency to Increase Span of Management When -- Factor Has Tendency to Decrease Span of Management When -- 1. Similarity of Functions 1. Subordinates have similar functions 1. Subordinates have different functions 2. Geographic contiguity 2. Subordinates are physically close 2. Subordinates are physically distant 3. Complexity of functions 3. Subordinates have simple tasks 3. Subordinates have complex tasks 4. Coordination 4. Work of subordinates needs little coordination 4. Work of subordinates needs much coordination 5. Planning 5. Manager spends little time planning 5. Manager spends much time planning
  24. 24. Graicunas and Span of Management  V.A. Graicunas – Developed formula for determining the number of possible relationships between in manager and subordinates when the number of subordinates is known.  Graicunas Formula: C = total no. of possible relationships between manager and subordinates n = is the known number of subordinates
  25. 25. Height of Organization Chart  Directly influenced by the span of management  Organization Charts with little height are usually referred to as flat, while those with much height are usually referred to as tall.
  26. 26. Top Manager 1 2 1 2 3 4 5 6 1 2 3 1 2 3 Top Manager HEIGHT HEIGHT ORGANIZATION CHART A ORGANIZATION CHART B FIGURE 11.3
  27. 27. 2. Horizontal Dimensioning - refers to the extent to which firms use lateral subdivisions or specialties within an organization. - to build organizations horizontally, organizations establish departments. Department – is a unique group of resources established by management to perform some organizational task. Departmentalizing – is the process of establishing departments within the management system.
  28. 28.  Department Based on Function  The most widely used basis for establishing departments within the formal structure is the type of work functions (activities) being performed with the system.  Functions are typically divided into the major categories of marketing, production and finance.  This structure allows for consistent marketing messages throughout the company.  This structure may implicitly impose functional standardization that may not optimize the needs of the organization’s various products and services.
  29. 29. CEO Vice President Of Finance Vice President of Research and Development (R&D) Vice President of Marketing FIGURE 11.4 Department by function at Sony
  30. 30.  Department based on Products or Service  Departmentalizes resources according to products or service being offered.  Primary advantage: the ability to focus the organizations efforts on each of the firm’s products or services  Primary Disadvantage: The different units may result in some duplication of efforts, which may lead to higher costs.
  31. 31. CEO Vice President Of Financial Services Vice President Of Entertainment Vice President Of Electronics FIGURE 11.5 Departments by product at Sony
  32. 32.  Departments based on Geography  Departmentalizes according to the places where the work is being done or the geographic markets on which the management system is focusing.  As market areas and work locations expand, the physical distances between places can make the management task extremely cumbersome. To minimize this problem, resources can be departmentalized according to the territory.  Primary Advantage: It helps the organization to focus equally on the organization’s various geographic locations.  Primary disadvantage: Lack of focus on products and services
  33. 33. CEO Vice President Of Europe Vice President Of North America Vice President Of Asia FIGURE 11.6 Departments by geography at Sony
  34. 34.  Departments based on customer  Establish departments in response to the organization’s major customers.  Assumes that major customers can be identified and divided into logical categories.  Primary advantage: The firm focuses explicitly on its customers.  Primary Disadvantage: This structure may also create redundancies and increased costs.
  35. 35. CEO Vice President Of Movie Distributors Vice President Of Music Retailers Vice President Of Electronics Retailers FIGURE 11.7 Departments by customer at Sony
  36. 36.  Departments by Matrix  One in which a project manager(s) borrows workers from various parts of the organization to complete some specific project.  Also called project organizations.  Primary advantage: It allows the organization to focus in various projects simultaneously.  Primary disadvantage: The matrix structure can be confusing, and employees may not be able to effectively cope with two bosses.
  37. 37. Vice President of Marketing Vice President of Research and Development (R&D) Vice President of Finance PlayStation III Marketing Support Staff R&D Support Staff Finance Support Staff Spiderman III Marketing Support Staff R&D Support Staff Finance Support Staff Finance Support Staff R&D Support Staff Marketing Support Staff Portable Digital Music Player CEO FIGURE 11.8 Matrix departments at Sony
  38. 38. TABLE 11.2 Advantages and Disadvantages of Departmentalization Modes Departmentalization Advantages Disadvantages Functional •Power of functional heads promotes consistency •Relatively easy to assign blame or credit to the performance of a function •May prove difficult to coordinate between various functions •Difficult to assign credit or blame when product performs well or poorly Product •Allows managers to focus on the products sold by the company •Relatively easy to assign credit or blame on the performance of the product •Focus on product may force managers to miss differences in customers or geographic regions •May be difficult to coordinate across products
  39. 39. Departmentali- zation Advantages Disadvantages Geographic •Managers can focus on the various regions (and their differences) served by the company •Allows firms to develop human resources by rotating managers across different regions •May prove difficult to coordinate between various regions •May prove difficult to assign credit or blame based on the performance of a particular product Customer •Allows manager to focus on and cater the most important customers •Relatively easy to assign blame or credit regarding customer relationships •May prove difficult to coordinate across various customers •May introduce complexities as customers span different products and geographic areas Matrix •Allows firm to pool human resources for both short-term and long-term projects •Allows firm to maintain •Difficult for employees to understand power structure within the firm •Difficult for employees to
  40. 40. Responsibility  Is the obligation to perform assigned activities.  It is the self-assumed commitment to handle a job to the best of one’s ability.  The act of accepting the job means that the person is obligated to a superior to see that job activities are successfully completed.
  41. 41. The Job Description  A list of specific activities that must be performed by whoever holds the position.  A clear job description can help employees to become successful by focusing their efforts on the issues that are important for their position.  When properly designed: ○ Job descriptions communicate job content to employees. ○ Establish performance levels that employees must maintain. ○ Act as a guide that employees should follow to help the organization reach its objectives.
  42. 42.  Job activities are delegated by management to enhance the accomplishment of management system objectives.  A sound organizing strategy delineates specific job activities for every individual in the organization.  Note: that as objectives and other conditions within the management system change, so will individual job activities.
  43. 43. Three areas related to Responsibility  Dividing Job Activities  One person cannot be responsible for performing all of the activities that takes place within an organization.  Functional Similarity Method ○ according to many management theorist, the most basic method of dividing job activities. ○ the method suggests that management should take four basic interrelated steps to divide job activities in the following sequence:
  44. 44.  Functional Similarity and Responsibility o Additional guides can be used to supplement the functional similarity method: ○ First: Overlapping responsibility should be avoided when making job activity divisions. Overlapping responsibility – refers to a situation in which more than one individual is responsible for the same activity. ○ Second: Responsibility gaps should be avoided. Responsibility gap – exist when certain tasks are not included in the responsibility area of any individual organization member.
  45. 45.  Third: management should avoid creating job activities for accomplishing tasks that do not enhance goal attainment. Organization member should be obligated to perform only those activities that lead to goal attainment.  When two (or more) employees are uncertain as to who is responsible for a task, four outcomes are possible: 1. One of the two may perform the job. The other may either forget to or choose not to do the job – and neither of these is a desirable outcome for product quality control.
  46. 46. 2. Both employees may perform the job. At the least, this situation results in duplicated effort, which dampens employee morale. At worst, one employee may diminish the value of the other employees’ work, resulting in a decrement in product quality. 3. Neither employee may perform the job because each assumed the other will do it. 4. The employees may spend valuable time negotiating each aspect and face of the job to carefully mesh their job responsibilities, thus minimizing both duplication of effort and responsibility gaps. Though time consuming, this is actually the most desirable option in terms of product quality.
  47. 47.  Clarifying Job Activities of Managers:  Is even more important than dividing the job activities of non – managers because managers affect greater portions of resources within the management system.  One process used to clarify management job activities, “Enables each manager to actively participate with his or her superiors, peers, and subordinates in systematically describing the managerial job to be done and then clarifying a role each manager place and relationship to his or her workgroup and to the organization.
  48. 48.  Management Responsibility Guide ○ A specific tool developed to implement this interaction process. ○ This guide helps management to describe the various responsibility relationships that exist in the organization and to summarize how the responsibilities of various managers relate to one another.  Responsible managers  Managers can be describe as responsible if they perform the activities they are obligated to perform.  Responsible managers are a prerequisite for management system success.
  49. 49. Authority  The right to perform or command.  It allows its holder to act in certain designated ways and to directly influence the actions of others through orders.  It also allows its holder to allocate the organization’s resources to achieve organizational objectives.  Authority on the Job
  50. 50. Acceptance of the Authority  Those positioned toward the top of the chart more authority than those position toward the bottom.  Chester Barnard writes that the exercise of authority is determined less by formal organizational decree that by acceptance among those under the authority.  Authority exacts obedience only when it’s accepted.  Authority is the character of communication by which an order is accepted by an individual as governing the actions that individual takes within the system.
  51. 51.  Barnard’s Conditions: 1. The individual can understand the order being communicated. 2. The individual believes the order is consistent with the purpose of the organization. 3. The individual sees the order as compatible with his or her personal interest. 4. The individual is mentally and physically able to comply the order. Note: The fewer of these four conditions that are present, the lower the probability that authority will be accepted and obedience be exacted.
  52. 52.  Barnard maintains that more and more of a manager’s commands will be accepted over the long term if: 1. The manager uses formal channels of communication and these are familiar to all organization members. 2. Each organization members has an assigned formal communication channel through which orders are received. 3. The line of communication between manager and subordinates is as direct as possible.
  53. 53. 4. The complete chain of commands is used to issue orders. 5. The manager possesses adequate communication skills. 6. The manager uses formal communication lines only for organizational business. 7. A command is authenticated as coming from a manager.
  54. 54. Types of Authority  Line and Staff Authority  Line authority ○ The most fundamental authority within an organization, deflects its existing superior – subordinate relationships. ○ Pertains to matters directly involving management system production, sales, and finance, and as a result the attainment of objectives.  Staff Authority ○ Consists of the right to advise or assist those who possess line authority as well as other staff personnel.
  55. 55. ○ Enables those responsible for improving the effectiveness of line personnel to perform their requires task.  To ensure that line and staff personnel do work together productively, management must make sure both groups understand the organizational mission, have specific objectives, and realize that they are partners in helping the organization reach its objectives.  Size – The most significant factor in determining whether an organization will have staff personnel. ○ The larger the organization, the greater the need and ability to employ staff personnel.
  56. 56. Roles of Staff Manager Harold Stieglitz 1. The advisory or counselling role – Staff personnel use their professional expertise to solve organizational problems. 2. The service role – Staff personnel provide services that can more efficiently and effectively be provided by a single centralized staff group than by many individuals scattered throughout the organization. 3. The control role – Staff personnel help establish a mechanism for evaluating the effectiveness of the organizational plans.
  57. 57. Conflict in Line – Staff Relationships  From the viewpoint of line personnel, conflict is created because staff personnel tend to assume line authority, do not give sound advice, steal credit for success, fail to keep line personnel informed of their activities and do not see the whole picture.  From the viewpoint of the Staff personnel, conflict is created because line personnel do not make proper use of staff personnel, resist new ideas, and refuse to give staff personnel enough authority to do their jobs.
  58. 58. • Functional Authority ―Consist of the right to give orders within a segment of organization in which this right is normally not existing. ―Usually assigned to individuals to complement the line of staff authority they already possess. ―Generally covers only specific task areas and is operational only for designated amounts of time. ―Accountability – Refers to the management philosophy whereby individuals are held liable, or accountable, for how well they use the authority and live up to their responsibility of performing predetermined activities.
  59. 59. Delegation  Is the actual process of assigning job activities and corresponding authority to specific individuals within the organization.  Steps in Delegation Process (Newman and Warren) 1. Assigning specific duties to the individual. 2. Granting appropriate authority to the subordinate. 3. Creating the obligation for the subordinate to perform the duties assigned.
  60. 60. TABLE 12.3 Guidelines for Making Delegation Effective •Give employees freedom to pursue tasks in their own way. •Establish mutually agreed-upon results and performance standards for delegated tasks, •Encourage employees to take an active role in defining, and communicating progress on tasks. •Entrust employees with completion of whole projects or tasks whenever possible. •Explain the relevance of delegated tasks to larger projects or to department or organization goals. •Give employees the authority necessary to accomplish tasks. •Allow employees access to all information, people, and departments necessary to perform delegated tasks. •Provide training and guidance necessary for employees to complete delegated tasks satisfactory. •When possible, delegate tasks on the basis of employee interests.
  61. 61.  Obstacles to the Delegation Process 1. Obstacles related to the supervisor 2. Obstacles relate to the subordinates 3. Obstacles related to the organization  Elimination of Obstacles to the Delegation Process  Importance: ○ To enhance employees’ confidence. ○ To improve subordinate involvement and interest ○ More free time for the supervisor to accomplish task ○ As the organization gets larger, assistance from subordinates in completing tasks the manager simply wouldn’t have time for.
  62. 62.  What can Managers do to eliminate obstacles to the Delegation Process? ○ They must continually strive to uncover any obstacles to delegation. ○ They should approach taking action to eliminate these obstacles with the understanding that they may be deeply ingrained and therefore require much time and effort to overcome. ○ They could build subordinate confidence in the use of delegated authority, minimizing the impact of delegated authority on established working relationship, and helping delegates cope with problem whenever necessary.
  63. 63.  Centralization and Decentralization  Used to describe the general degree to which delegation exists within an organization.  Centralization implies that a minimal number of job activities and a minimal amount of authority have been delegated to subordinates by management, whereas Decentralization implies the opposite.
  64. 64. Decentralizing an organization: a contingency viewpoint  The appropriate degree of decentralization for an organization depends on the unique situation of that organization.  Some specific questions managers can use to determine the amount of decentralization appropriate for a situation are as follows: 1. What is the present size of the organization? 2. Where are the organization’s customers located?
  65. 65. 3. How homogenous is the organization’s product line? 4. Where are the organizational suppliers? 5. Are quick decisions need in the organization? 6. Is creativity a desirable feature of the organization?
  66. 66. Decentralization at Massey – Ferguson: A classic example from the world of Management  Guidelines for Decentralization: 1. The competence to make decisions must be possessed by the person to whom authority is delegated. 2. Adequate and reliable information pertinent to the decision is required by the person making the decision. 3. If a decision affects more than one unit of the enterprise, the authority to make the decision must rest with the manager accountable for the most units affected by the decision.
  67. 67.  Delegation as a frame of mind – The company’s organization manual indicates that the delegation is not delegation in name only but a frame of mind that includes both what a supervisor says to subordinate and the way the supervisor acts toward them.  Complementing Centralization – Decentralization is complemented by centralization.
  68. 68.  Management Responsibilities 1. Responsibility for determining the overall objective of the enterprise. 2. Responsibility for formulating the policies that guide the enterprise. 3. Final responsibility for control of the business within the total range of the objectives and policies, including control over any changes in the nature of the business. 4. Responsibility for product design where a product decision affects more than one area of accountability.
  69. 69. 5. Responsibility for planning for achievement of overall objective and for measuring actual performance against those plans. 6. Final approval of corporate plans or budgets. 7. Decision’s pertaining to availability and application of general company funds. 8. Responsibility for capital investment plans.