Management-I Module 1- Introduction to management and OrganizationWhat is Management ? Management is the process of designing and maintainingan environment in which individuals, working together ingroups, efficiently accomplish selected aims. It is coordination and oversight of the work activities ofothers so that their activities are completed efficiently andeffectively
Effectiveness Doing the right thing or completing activities so that organizational goals are attained or objectives are achieved.Efficiency Doing things right or getting the most output from the least amount of inputs (time, money, etc.)
Definitions Of ManagementProduction-or Efficiency orientedDecision OrientedPeople orientedFunction oriented
Production-or Efficiency oriented Definition“Management is the art of knowing what you want to do then seeing that it is done in the best and cheapest way” - According to Taylor-Emphasis on Efforts and Results
• Decision Oriented Definition “Management is simply the process of decision making and control over the action of human being for the expressed purpose of attaining pre-determined goals” -According to Stanley Vance-Indicate manager’s activity
• People oriented Definition “Management is the art of getting things done through and with people in formally organized groups.” -According to Koontz-Emphasis on relation with internal people
Function oriented Definition “Management is a process involving planning, organizing, staffing, directing and controlling human efforts to achieve stated objective in an organization”
Characteristics of Management 1. Management is intangible. 2. Management is goal-oriented. 3. Management is universal. 4. Management is a social process. 5. Management is a group activity. 6. Management is a system of authority. 7. Management is dynamic. 8. Management is a science as well as an art. 9. Management is multidisciplinary.
Importance of Management1. Optimum use of resources.2. Effective leadership and motivation.3. Establishes sound industrial relations.4. Achievement of goals.5. Improves productivity.6. Improves profitability.7. Increases efficiency.8. Enhances effectiveness.
Management as a Science• Management is a science because it has all the characteristics of a science, namely: 1. Systematized body of knowledge. 2. Management is a social science. 3. Management is an inexact science. 4. Manager vs. Scientist. (A scientist can afford to wait until all the information is available but a manager cannot.) 5. Scientific management.
Management as an art• Management is a art as it involves the use of knowhow and skills like any other art such as music, painting, etc.• Management is an art because it requires: 1. Use of knowledge. 2. Creative art. (It combines human and non-human resources in a useful way so as to achieve results.) 3. Personalized. 4. Constant practice.
Management as a Profession• Over the last few decades, factors such as growing size of business units, competition, separation of ownership from management have led to an increased demand for professionally qualified managers.• The tasks of management have become quite specialized.• Management is an emerging profession as it also carries the essential features of a profession as under:
Management V/s Administration• There could be three different approaches inferred regarding management and Administration – Administration is above management – Administration is a part of Management – Management and administration are same
Difference between administration and managementNo Basis of Difference Administration Management1 Level in Organization Top Level Middle –Lower Level2 Major Focus Policy formulation Policy execution for & objective objective determination achievement3 Scope of Function Broad and Narrow and conceptual operation4 Factor affecting Decisions External Internal5 Employer-Employee relation Entrepreneur and Employees owner6 Qualities Required Administrative Technical
Who are Managers? A Manager is someone who coordinates and oversee the work of other people so that organizational goals can be accomplished. A manger’s job is nit about personal achievement, It’s about helping others do their work.
Levels of Management: Top Managers Middle Managers First Line Managers Non managerial Employees
Non managerial employees are ground level worker, laborer who are supposed to perform actual physical activity in the organization. First Line managers The lowest level of management who manage the work of no managerial employees. Typically are directly or indirectly involve with producing the organizations products or servicing the organizations customer The time horizon at this level is short, with the emphasis on accomplishing day to day goals supervisors, shift managers, district managers, department managers office mangers
• Functions of First line manager : Plan day to day operations. Assigns job to workers. Provides supervision and control over work. Arranges materials, tools and equipments. Maintains discipline. Maintains close contact with employees involved in operations.
Middle Level Managers Managers between the lowest level and top levels of the organization who manage the work of first-line managers Middle management is a link between top management and the first level management Middle managers generally are concerned with the near future rather than with long-range planning. e.g. regional managers, project leader, store managers, division manager, manager of quality control
Functions at middle level management are: Interprets and explains the policies framed by the top management. Makes plans of intermediate range and prepares long-range plans for review by top management. Establishes departmental policies. Issues detailed instructions. Reviews daily and weekly reports on production or sales. Counsels subordinates on production. Trains other managers.
Top Level Managers Managers at or near the upper levels of the organization structure who are responsible for making organisationwide decisions and establishing the goals and plans that affect the entire organization Top level management is usually appointed, elected or designated by the organizations governing body e.g. Executive vice president, president, managing director, chief operation officer, chief executive officer
• Functions at the top level of management are: Develops and reviews long-range plans and strategies. Evaluates overall performance of various departments and ensures cooperation. Involved in selection of key personnel. Consults subordinate managers on subjects or problems of general scope. Lays down standards of performance. Maintains good public relations. Provides guidance and directions.
The Functions of Management• The five managerial functions around which managerial knowledge are organized:• Planning• Organizing• Staffing• Leading• Controlling
Definition of Planning Selecting missions and objectives and the actions to achieve them, which requires decision making.
• Planning is deciding in advance what to do, how to do it, when to do it and who is to do it.• It a management function that involves defining goals, establishing strategies for achieving those goals, and developing plans to integrate and coordinate activities.• A plan is a forecast for accomplishment.• It is a predetermined course of action.• It is to produce a scheme for future action, to bring about specified results at s specified cost, in a specified period of time.
Fig. 1-1 Time Spent in Carrying Out Managerial Functions
How the Manager’s Job is Changing?• In India, in many companies even in the government, there has been a move to link pay to performance.• Tanishq , ABB India Ltd, BPL Ltd have implemented schemes for pay to be linked to performance at all levels of the organization.• In today’s world, managers are dealing with changing workplace, security threats, ethical issues, global economic and political uncertainties and technological advancements.• Because of the need for surviving in competition, how the managers manage is changing.
Manager’s Challenges in Turbulent times• In today’s turbulent world, managing in times of crisis and confusion is becoming a critical skill for managers in all kinds of organizations.• Moreover, the frequency and intensity of crises have increased over the past couple of decades.• Managers in all organizations deal with uncertainty and unexpected events, whether it is something as small as the loss of a key employee or something as large and dramatic as a plant explosion.
• Challenges of being a manager - Being a manager is more of smart work than hard work - Must deal with a variety of personalities - Must motivate workers in the face of uncertainty• Solid management skills and actions are the key to helping any organization to overcome a crisis and remain healthy, inspired and productive.
Management Skills• A manager’s job is complex and multidimensional and requires a range of skills.• The necessary skills for managing a department or an organization can be summarized in three categories:1. Conceptual Skills.2. Human Skills.3. Technical Skills.
Conceptual Skills• Conceptual skill is the ability to see the "big picture," to recognize significant elements in a situation, and to understand the relationships among the elements.• It involves the manager’s thinking, information processing and planning abilities.• It involves knowing where one’s department fits into the total organization and how the organization fits into the industry, the community and the broader business.
• Conceptual skills are needed by all managers but are especially important for managers at the top.• It means the ability to think strategically to take the broad, long-term view and social environment.
Human Skills• Human skill is the ability to work with people.• It is cooperative effort.• It is teamwork.• It is the creation of an environment in which people feel secure and free to express their opinions.• It is the manager’s ability to work with and through other people and to work effectively as a group member.
• It includes the ability to motivate, facilitate, coordinate, lead, communicate and resolve conflicts.• A manager with human skills encourages the participation of the subordinates.• He likes other people and is liked by them.
Technical Skills• Technical skill is the understanding of and proficiency in the performance of specific tasks.• It includes mastery of the methods, techniques and equipment involved in specific functions such as engineering, manufacturing or finance.• It also includes specialized knowledge, analytical ability and the competent use of tools and techniques to solve problems in that specific discipline.• It is important at lower level management.
EntrepreneurshipEntrepreneurship is a creative process thatis centered in the notion of identifyingmarket opportunities and unmet needs. Itis building solutions that meet these needsand bring value to customers
Theory “Theory is the coherent group of assumption put forth to explain the relationship between two or more observable facts and to provide , a sound basis for predicting, future events”Why study management theory? - Theories provide a stable focus for understanding what we experience. - Theories enable us to communicate efficiently and thus move into more and more complex relationship with other people. - Theories help us to keep learning about our world.
EVOLUTION OF MANAGEMENT THOUGHT• Factors causes Severe Competition – Technological innovations and their dissemination (Spread) in business – Increase in capital investment – Freedom at national and international market – Increasing buyer’s control in market
Increase in complexity in management• Increase in size of business organisation• High degree of level of division on labor and specialization• Increase in government regulation and control to make business more socially-oriented• Organization union activities to pressures on management• Pressure of various conflicting interest groups to meet their demands from the organization MGT/M2/SS
EVOLUTION OF MANAGEMENT THOUGHT Approaches - Classical - Neo Classical - ModernManagement Thought PeriodEarly contribution Up to 19th centuryScientific management 1900-1930Administrative/Operational 1916-1940Human Relation Management 1930-1950Social system approach 1940-1950Decision theory Approach 1945-1965Management Science Approach 1950-1960Human Behavior Approach 1950-1970System Approach 1960s onwardsContingency approach MGT/M2/SS 1970s onwards
INTRODUCTION The Industrial Revolution, which began in Europe in the mid-1700s, was the starting point for the development of management concepts and theories. The rapid growth in the number of factories during this period and the need to coordinate the efforts of large number of people in the production process necessitated the development of management theories and principles. This evolved the Schools of Management
Schools of Management Thoughts There are various Management Schools:1. Classical School2. Behavioral School3. Quantitative School4. Systems School5. Contingency School6. Quality School
Classical Management Theory A theory that focused on finding Classical the “one best way” to perform Management and manage tasks Theory 54
Classical Management Theory Originated during England’s Industrial Revolution Manufacturers began mass-producing goods in factories Textile industry was among the first Allowed production of standardized goods Depended on a constant flow of labor and materials Owners needed to plan, organize, lead, control Focused on finding the “one best way” 55
Classical Management Theory Classical Focused on the manufacturing Scientific environment School Classical Emphasized the flow of information and howAdministrative organizations should operate School 56
Scientific Management Fredrick Winslow Taylor – Industrial Engineers. Acknowledged as the father of scientific management. Working at Midvale Steel Company. Taylor witnessed many inefficiencies. He sought to create a mental revolution among both workers and managers by defining clear guidelines for
His primary concern was to increase productivity through greater efficiency in production and increased pay for workers Scientific selection of workers and cooperation of labors and management A clear division of tasks and responsibilities between management and workers. Use of scientific methods to determine the best way of doing a job.
Elements and tools of scientific management • Separation of planning and doing (supervisor and workers) • Functional foremanship • Job analysis • Standardization • Scientific selection and training of workers • Financial incentives • Economy • Mental Revolution
• Separation of planning and doing (supervisor and workers)• Functional foremanship – Planning Incharge 1. Route clerk 2. Instruction card clerk 3. Time and cost clerk 4. Discipline clerk – Production Incharge 1. Speed boss 2. Inspector 3. Maintenance foreman 4. Gang boss
• Job Analysis – Time- Consumption in particular movement – Motion - way of performing activities – Fatigue- Amt of Rest required during job• Standardization – Instruments, tools, period of work, amount of work, working condition, cost of production
• Scientific selection and training of workers – Work, Experience, Aptitude, Physical Strength• Financial Incentives – Differential piece rate• Economy – Optimum utilization of resources• Mental revolution – Co-operation between management and workers
Principles of scientific Management Replacing rule of thumb (mere bases of estimates) with Science Harmony in group action Cooperate with workers to ensure that scientifically developed methods are being followed. Maximum output Development of workers Managers analyze and plan work; workers actually perform the tasks.
Consequences of Taylor’s Experiment• Management not interested, WHY?• labour is cheap• profits are good• more responsibility for management• Workers are interested because• more security• training• higher wages
CRITICAL ANALYSIS OF SCIENTIFIC MANAGEMENT• Managers often implemented only the increased output side of Taylor’s plan. – They did not allow workers to share in increased output. – Specialized jobs became very boring, dull. – Workers ended up distrusting Scientific Management.• Workers could purposely “under-perform”• Management responded with increased use of machines.• Aggressive attitude towards workers• Close strict supervision• Unions opposed differential piece rate
Henry Fayol’s Administrative Theory “An approach to management thatfocuses on describing what managersdo and what constitutes goodmanagement practice” Activities of an industrial organization ◦ Technical (relating to Production) ◦ Commercial (buying, selling and exchange) ◦ Financial (search of capital & Optimum use) ◦ Security (Protection of Property and person) ◦ Accounting (including Statistic) ◦ Managerial
There are three approach of studying Management theory by Fayol• Managerial Qualities and Training• General Principles of Management• Elements of Management
Managerial Qualities and Training• Physical (Health , Vigor)• Mental (ability to understand, judgment,)• Moral (energy, firmness, initiative, loyalty, tact, & dignity)• Educational (Knowledge of the activities)• Technical (Skill to perform effectively)• Experience (arising from the work)
Fayol’s Principles• Henri Fayol, developed a set of 14 principles: 1. Division of Labor: allows for job specialization. Fayol noted firms can have too much specialization leading to poor quality and worker involvement. 2. Authority and Responsibility: Fayol included both formal and informal authority resulting from special expertise. 3. Unity of Command: Employees should have only one boss. 4. Line of Authority: a clear chain from top to bottom of the firm.
Centralization: the degree to which authority5. rests at the very top.6. Unity of Direction: One plan of action to guide the organization.7. Equity: Treat all employees fairly in justice and respect.8. Order: Each employee is put where they have the most value.9. Initiative: Encourage innovation.10. Discipline: obedient, applied, respectful employees needed.11. Remuneration of Personnel: The payment system contributes to success.
12. Stability of Tenure: Long-term employment is important.13. General interest over individual interest: The organization takes precedence over the individual.14. Esprit de corps: “union is strength” Share enthusiasm or devotion to the organization
Elements of Management• Planning• Organization• Commanding• Coordination• Controlling
Difference between Scientific and Administrative ManagementBasis of Taylor FayolDifferencePerspective Shop Floor Level Higher Mgt levelFocus Efficiency through work By observing simplification & certain principles standardizationOrientation Production and Managerial engineering functionResults Scientific observation & Personnel Measurement Experience translated into universal truthOverall Basis for accomplishment Systematic theoryContribution onn production line of Management
BureaucracyAuthority is the power to hold people accountable for their actions.Positions in the firm should be held based on performance not social contacts.Position duties are clearly identified. People should know what is expected of them.Lines of authority should be clearly identified. Workers know who reports to who.Rules, Standard Operating Procedures (SOPs), & Norms used to determine how the firm operates. • Sometimes, these lead to “red-tape” and other problems
Max Weber• Max Weber was a German sociologist who developed the bureaucratic model.• His rational bureaucracy states that employees performing a large variety of tasks in any organisation must follow established rules and regulations in order to ensure uniformity and rationality of output.
.• He therefore identified the characteristics of an ideal bureaucracy to show how organizations should be run.• According to Weber, • “a bureaucracy is a highly structured, formalized and Impersonal organization”.
Bureaucratic Principles Written rulesSystem of task A Bureaucracy Hierarchy of relationships should have authority Fair evaluation and reward
BEHAVIORAL APPROACH• The behavioral school of management emphasized what the classical theorists ignored – the human element.• The behavioral approach to management emphasized individual attitudes and behaviors and group processes, and recognized the significance of behavioral processes in the work-place.• The behavioral management theory is also called the human relations theory as it addresses the human dimension of work.
• A theory of motivation based upon a consideration of human needs had three assumptions: – Human needs are never completely satisfied. – Human behavior is purposeful and is motivated by the need for satisfaction. – Needs can be classified according to a hierarchical structure of importance from the lowest to highest.
• Several individuals and experiments contributed to this theory. – Elton Mayo – Abraham Maslow
The Hawthorne Studies The researchers and scholars associated with the Hawthorne experiments were Elton Mayo, Fritz Roethlisberger, T. N. Whitehead and William Dickson. Study of worker efficiency at the Hawthorne Works of the General Electric Co. during 1924- 1932. ◦ Worker productivity was measured at various levels of light illumination. ◦ Researchers found that regardless of whether the light levels were raised or lowered, productivity rose. Actually, it appears that the workers enjoyed the attention they received as part of the study and were more productive.
• Illumination Experiment• Really assembly test room experiments – Incentives, rest period, changing working hours• Mass interviewing Programm – Do you like your supervisor• Bank wiring Observation Room Experiments – Fear of unemployment – Fear of raising the standards – Protection of slower workers – Satisfaction on the part of management
Relay Assembly Test Experiments 1927-1929 Group of 6 Women – (5) Assemblers and (1) Layout Operator One Observer – Explained every incremental change and recorded results Manipulated factors of production to measure effect on output: –Pay Incentives –Length of Work Day & Work Week –Use of Rest Periods
Mass Interview Program at plant – 1925-19321925-1927 – Objective Questions ◦ Work Conditions ◦ Work Relationships ◦ Yes/No Answers1928-1932 – Conversational / Non-directive ◦ Attentive Sympathetic Listening ◦ Concern for personal needs ◦ Increased in time from 30-90 minutes
Bank Wiring Observation Group – 1931- 1932• They studied a group of 14 Male Workers who were wiring and soldering bank terminals.• Few Special Conditions – Segregated work area – No Management Visits – Supervision would remain the same – Observer would record data only – no interaction with workers
Physiological Needs. These include the most basic needs that are vital to survival such as the need for water, air, food and sleep. These are the most basic and instinctive needs in the hierarchy because all needs become secondary until these physiological needs are met.
Security Needs• Once physiological needs are met, one’s attention turns to the safety and security in order to be free from threat of physical and emotional harm.• Such needs might be fulfilled by: – Living in a safe area – Medical insurance – Job security – Financial reserves
Social Needs• These include needs for belonging, love and affection.• Relationships such as friendships, romantic, attachments and families help fulfill this need for companionship and acceptance, as does involvement in social, community or religion groups.
Esteem Needs• Once a person feels a sense of belonging, the need to feel important arises.• Esteem needs may be classified as internal or external.• Some esteem needs are: – Self-respect – Achievement – Attention – Recognition – Reputation
Self-actualizing Needs• This is the highest level of Maslow’s hierarchy of needs.• Self-actualizing people are self-aware, concerned with personal growth, less concerned with the opinions of others and interested fulfilling their potential.• Self-actualized people tend to have needs such as: – Truth – Justice – wisdom
QUANTITATIVE APPROACH• The quantitative management prespective emerged during World War II. This approach focuses on achieving organizational effectiveness through the application of mathematical and statistical concepts. The three main branches of the quantitative approach are: 1. Management Science 2. Operations Management
Management Science Action can be expressed in terms of mathematical symbols, relationships and measurement data Another name commonly used is Operations Research. Management science techniques are widely used in the following areas: ◦ Capital Budgeting and cash flow management. ◦ Production scheduling. ◦ Development of product strategies. ◦ Planning for human resource development programs. ◦ Maintenance of optimal inventory levels This approach has been criticized for its
Operations Management It deals with the effective management of the production process and the timely delivery of an organizations products and services. It is concerned with:1) Inventory management2) Work scheduling3) Production planning4) Facilities location and design5) Quality assurance.
Management Information Systems • MIS focuses on designing and implementing computer based information systems for business organizations. • It converts raw data into information and provides the needed information to each manager at the right time, in the needed form. • Charles Babbage was one of the earliest contributor to information system.
SYSTEMS APPROACH• A system is a set of interdependent parts which together form a unitary whole.• The organization is a sub-system composed of four interdependent parts – task, structure, people and technology.• This means is that as managers coordinate work activities in the various parts of the organization,
System Theory Open and closed system • Closed System are not influenced by and not interact with their environment. • Open System are influenced by and do interact with their environment. Transformation INPUTS Process OUTPUTSRaw Material •Employees work •Products andHuman Resources Activities ServicesCapital •Management •Financial ResultsTechnology Activities •InformationInformation •Technology and •Human Results Operation Methods FEEDBACK
CONTINGENCY OR SITUATIONAL APPROACH“A management approach which says that organization are different , faces different situation (contingencies), and require different ways of managing.”• Assumes there is no one best way to manage.
Popular Contingency variable ◦ Organisation Size As size increases, so do the problem of coordination. For instance, the type of organization structure appropriate for an organization of 50000 employee is likely to be inefficient for an organization of 50 employee. ◦ Routineness of task technology To achieve its purpose, an organization uses technology. Routine technologies require organizational structure, leadership style, And control system that differ from those required by customized or no routine technologies.
– Environmental Uncertainty The degree of uncertainty caused by environmental changes influence the management process. What works best in a stable and predictable environment may be totally inappropriate in a rapidly changing and unpredictable environment.– Individual differences Individual differ in terms of their desire for growth, autonomy, tolerance of ambiguity, and expectation. These and other individual difference are particularly important when managers select motivation techniques, leadership style, and job designs.
IMPORTANT TERMS• Organizing:- Arranging and structuring work to accomplish organizational goals.• Organization:- An organization is a formal group of people with one or more shared goals.• Organizational Structure:- It is a formal arrangement of the job within an organization.• Organizational chart: The organization structure which can be shown visually.
Organization Structure• Organization structure is the pattern of jobs and groups of jobs in an organization.• It can be defined as the arrangement and interrelationship of the component parts and positions of a company.• An organizations structure specifies its division of work activities and shows how different functions or activities are linked.• To some extent it also shoes the level of specialization of work activities.
• It indicates the organization’s hierarchy and authority structure and shows its reporting relationships.• It provides the stability and continuity that allow the organization to survive the comings and goings of individuals and to coordinate its dealings with its environment.
Definition of Organization Structure• Organizational Structure according to George and Jones, “ is the formal system of task and reporting relationships that controls, coordinates, and motivates employees so that they cooperate and work together to achieve an organization’s goals”
Organizing involves:1.The identification and classification of required activities.2.The grouping of activities necessary to attain objectives.3.The assignment of each grouping to a manager with the authority (delegation) necessary to supervise it.4.The provision for coordination horizontally (on the same or a similar organizational level) and vertically (for example, corporate headquarters, division, and department) in the organization structure.
Purpose of organization• Divides work to be done into specific jobs and departments.• Assign tasks and responsibility associated with individual jobs.• Coordinated diverse organizational tasks.• Clusters job into units.• Establishes formal lines of authority.• Allocates and deploy organizational resources
Elements of organization structure1. Specialization of activities.2. Standardization of activities.3. Coordination of activities.4. Centralization and decentralization of decision making.5. Size of the work unit.
Types of Organization Structure• The first task in designing an organization structure is to identify all the activities of the organization and group them properly.• This process of grouping the activities is commonly known as departmentation.• The departmentation divides a large and complex organization into smaller and more flexible administrative units.• It is the process of grouping activities and delegating authority to managers.
• There are various types of organization structures: 1. Line structure 2. Line and staff structure 3. Functional structure 4. Divisional structure 5. Hybrid structure 6. Matrix structure
Line Structure• Line Structure is the simplest form of organization and is most common among small companies.• The authority is embedded in the hierarchical structure and it flows in a direct line from the top of the managerial hierarchy down to different levels of managers and subordinates and further down to the operative level of workers.• It clearly identifies authority, responsibility and accountability at each level.
• These relationship in the hierarchy connect the position and tasks at each level with those above and below it.• There is clear unity of command so that the person at each level is reasonably independent of any other person at the same level and is responsible only to the person above him.
Line Structure PRESIDENT PLANT MANAGER FOREMAN FOREMANFOREMAN B C AWORKERS WORKERS WORKERS
Advantages of Line Structure• Because of the small size of the company the line structure is simple and the authority are clear-cut, easily assignable and traceable.• Communication is fast and easy.• Feedback from the employees can be acted upon faster.• Effective Control and Discipline can be easily exercised.
Disadvantages of Line Structure• In a rigid form of organization, there is a tendency for the line authority to become dictatorial, it may be resented by the employees• Also, there is no provision for specialists and specialization which is essential for the growth and optimization and hence for growing companies, pure line type of structure becomes ineffective
Line and Staff Structure• In this type of organization, the functional specialists are added to the line, thus giving the line advantages of specialists.• This type of Organizational Structure is most common among large enterprises.• Staff is basically advisory in nature and usually does not possess and command authority over line managers.
Types of StaffTwo Types:General StaffSpecial StaffGeneral Staff: This group has general background which is usually similar to the background of executives and serves as assistant to top management in one capacity or anotherFor Example: Special assistants, assistant managers, or in a college setting as deputy chairpersons
Special Staff:• Unlike the general staff who generally assists only one line executive, the specialized staff provides expert advice and service to all on a company wide basis• This group has a specialized background in some functional area and it could serve in any of the following capacities:1. Advisory Capacity2. Service Capacity3. Control Capacity
Advisory Capacity: The primary purpose of this group is to render specialized advice and assistance to management when needed. Some typical areas covered by advisory staff are legal, public relations and economic development.Service Capacity: This groups provide a service which is useful to the organization as a whole and not to any particular division or function.Example: Personnel Department serving the organization by procuring the needed personnel for all departments. Other example is Research and Development, Purchasing and so on
• Control Capacity: This group includes quality control staff who may have the authority to control the quality and enforce standards.
Line and Staff Structure president Public relations Legal council advisor staffstaff Vice president line engineering personnelstaff staff Plant manager line Supervisor Supervisor line line Machine shop assembly workers workers
Advantages of Line and Staff• The specialized advice improves the quality of the decisions resulting in operational economies• Staff specialists are conceptually oriented towards looking ahead and have the time and training to assist in strategic planning and analyze the possible effects of expected future events• Line Managers are generally occupied with their day –to –day current operation, they do not have the time or background for future planning and policy formulation
Disadvantages of Line and Staff• Confusion and Conflict arise between line and staff.• High Cost due to the confusion and conflict.• Tendency of staff personnel to build their own image and worth.• Building Staff Self Image, at the cost of undermining the authority and responsibility of line executives.
Functional Structure• This groups positions into departments according to their main functional areas• Some of the main functions of most organizations are those of production, marketing, finance, human resources, legal, research and development and so on• The chain of command in each function leads to a functional head who in turns reports to the top manager
Functional Structure CEOVP Marketing VP Finance VP Operations VP R&D VP Legal issues Product 1 Product 2 Product 3 Country A Country B
Functional Structure Advantages Disadvantages• Clarity about career • Boredom and path Monotony• Economies of Scale • Poor Decision Making wothin function • Sub-unit conflict• Specialisation • Managerial Vaccume• Co-ordination• In depth skill development• Power & Prestige
Divisional Structure• Alternative to function structure is the divisional structure which allows an organization to coordinate intergroup relationships more effectively.• It involves grouping of people or activities with similar characteristics into a single department or unit.• Also known as “self-contained structures”, organizations operates as if they were small organizations under a large organizational umbrella.
• The decision are generally decentralized so that the departments guide their own activities• This facilitates communications, coordination, and control, thus contributing to the organizational success• Also, because the units are independent and semi-autonomous , it provides satisfaction to the managers and this in turn improves efficiency and effectiveness
Forms of Divisional Structures Basically three major forms of divisional structures that companies can choose from:1. Product Structure2. Customer Structure3. Geography Structure
Product Structure• In this type of structure, the units are formed according to the type of product.• More useful in multi-line corporations, where product expansion and diversification and manufacturing and marketing characteristics of the production are of primary concern.• While the general policies are decided upon by the top management within the philosophical guidelines of the organization, each division is autonomous and strive to improve and expand its own product line.• Each Divisional General Manager is responsible for its costs, profits, failures and successes.
Product Structure Advantages Disadvantages• Clear focus on market • Duplication of segment helps meet functions (e.g. different customers’ needs sales force for each• Positive competition division) between divisions • Negative effects of• Better control as each competition division can act as separate profit centre • Lack of central control over each separate division
Customer Structure• Customer divisions are divisions set up to service particular types of clients or customers.• These divisions cater to different needs of various segments of customers.• The importance of customer satisfaction has stimulated firms to search for creative ways to serve people better• Organizations with customer-based departments are better able to satisfy customer-identified needs than organizations that base departments on non-customer factors
Geographic Division• These are divisions designed to serve different geographic areas.• Under this method, territory or location is taken as the basis for organizing.• This is common in organizations that operate over wide geographic areas such as banking, insurance and transportation firms.• This type of organization structure is often adopted when it is important to provide products and services that are customized to the needs of different regions.
• Generally business firms resort to this structural form when similar operations are undertaken in different geographic areas as in chain retailing, wholesaling, automobile-assembling, etc.
Geographic Division Advantages Disadvantages• Serve local needs better • Conflict between local and central management• Positive competition • Duplication of resources• More effective and functions communication between firm and local customers
Hybrid Structure• Hybrid organizational structures combine two or more traditional organizational design formats based on strategy and business needs.• Hybrid structure is a form of departmentalization that adopts both functional and divisional structures at the same level of management.• Many large organizations adopt this structure so as to incorporate the advantages of both functional and divisional structures.
• The functional structure is adopted to derive the benefits of economies of scale, greater competence of managers and efficiency in resource utilization.• While the divisional structures is created to focus on products, services or markets.
Advantages of Hybrid Structure• The organization can achieve a specific competency and economies of scale in prime functional areas along with focus on products, services and markets.• It also facilitates adaptability and flexibility in handling diverse product or service lines, territories or differing needs of customers, through a partially divisional structure.• It helps to strike balance between divisional and corporate goals.
Matrix Structure• The combining of functional and project or product patterns of departmentation in the same organization structure.• Attempts to maximize the strengths and minimize the weaknesses of both the functional and product bases.• Superimpose a horizontal structure of authority, influence, and communication on the vertical structure.• Facilitates the utilization of highly specialized staff and equipment.
Example of the Matrix Organization Model FunctionsProjects, products Manufacturing Marketing Engineering FinanceProject or product AProject or product BProject or product CProject or product DProject or product E
Matrix Organization (in engineering) MGT/M3/SS
• In figure marketing, HR, R&D, Finance, Production represent the functional department that comprise the horizontal hierarchy; the mangers of Product/Project A B & C represent divisional units operates vertically.• Here, employee has to report to two matrix bosses. So it violates the rule of Unity of Command• A matrix structure is often seen in construction (building bridge, dam), aerospace(designing or launching satellite), a consultancy firm where professional experts work together on a project. MGT/M3/SS
Matrix StructureNote the duplication of core functional skills across eachproduct line.
•Matrix organizations provide clearaccountability within a specific businessfunction and allow more efficient allocationof specialized skills across the entirebusiness.
Matrix Stages• Stage 1 – Is a traditional structure, generally a functional one. This structure follows the unity-of-command principle.• Stage 2 – Here, Managerial integrator positions are established . These are developed so that individuals can take responsibility for particular projects (ex. project managers), overseas product launches (ex product manager) where coordination across functional departments is necessary.• Stage 3 – Here, the managerial integrators operate on a permanent basis (ex . Brand managers takes care of issues pertinent to a brand regularly)• Stage 4 – Is a mature matrix. Matrix Bosses have equal power. MGT/M3/SS
Evolutionary Steps to the Matrix Model Task Force (1) Teams (2) Product (3) Managers Product (4) Management Depts.
Guidelines for Making Matrix Management Effective1. Define the objectives of the project or task.2. Clarify the roles, authority, and responsibilities of managers and team members.3. Ensure that influence is based on knowledge and information, rather than on rank.4. Balance the power of functional and project managers.5. Select an experienced manager for the project who can provide leadership.6. Undertake organization and team development.7. Install appropriate cost, time, and quality controls that report deviations from standards in a timely manner.8. Reward project managers and team members fairly.
When to consider a matrix structure?• If an organization product portfolio is very wide, it may adopt product division but rapid developments in engineering & technology may necessitate it to adopt functional structure.• When the external environment of org is changing and uncertain, and they have to process large amounts of information and coordinate activities to develop newer and better products.• When org need to be flexible in using the functional resources across various products or projects. MGT/M3/SS
Advantages of Matrix Organization • Efficient use of resources • Flexibility in conditions of change and uncertainty • Technical excellence • Freeing top management for long-range planning • Improving motivation and commitment • Providing opportunities for personal development
Disadvantages of Matrix Organization• Administration costs are higher because of the additional hierarchy of project managers and their immediate support staff.• As the individuals working within the matrix structure report to two bosses, unity of command may not be there.• Due to the dual authority system and the need for greater communication, the possibility of conflicts is greater between functional managers and project managers.
• Individuals are too engrossed with maintaining good relations with their peers and tend to neglect the project goals and clients.• Though it is adaptable to change, it is sometimes extremely slow in responding to changes.
ORGANIZATIONAL DESIGN• It is defined ass the process of developing the organizational structure.• It plays a key role in determining an appropriate organizational structure• The importance of designing a structure is that is design an organization structure that is appropriate to the people, technology and tasks of the organization.• Managers take into consideration a number of factor when designing organization structure.
Organizational Design• It is a process that involve decisions about six key elements: 1. Work specialization 2. Departmentalization 3. Chain of command 4. Span of control 5. Centralization and Decentralization 6. Formalization
Work specialization• Work specialization is dividing work activities into separate job tasks. Individual employees specialize in doing part of an activity rather than the entire activity in order to increase work output.• It helps employee be more efficient.• However when it’s carried to extreme , work specialization can lead to problem including boredom, fatigue, stress, poor quality, increase absenteeism, reduced performance, and increased turnover.• Ex; Cairn , TATA steel, American Express, use minimal work specialization and instead give employee a broad range of tasks to do.
Departmentalization• Departmentalization is a process in which an organization is structurally divided by combining jobs in departments according to some shared characteristic or basis.
Chain of command The continuous line of authority that extends from upper levels of an organization to the lowest levels of the organization and clarifies who reports to who.• To understand the chain of command, you have to understand three other concepts: Authority Responsibility Unity of command
• Authority:- refers to the rights inherent in a managerial position to tell people what to do and to expect them to do it.• Responsibility :- Responsibility is one’s obligation or expectation to perform the function assigned to the best of one’s ability in accordance with directions received.• Unity of command:- the management principle that each person should report to only one manager.
Span of Management/Control• According to Kathryn M. Bartol and David C. Martin, “ the span of management or span of control is the number of subordinates who report directly to a specific manager.” The number of employees who can be effectively and efficiently supervised by a manager. • Narrow Span • Wide Span
• Wide span of control means one manager supervises many members• Narrow span of control means one manager supervises a small number of members
Factors affecting Span of control Skills and abilities of the manager Employee characteristics Characteristics of the work being done Similarity of tasks Complexity of tasks Standardization of tasks
Tall Versus Flat Structure• Tall Structure – A tall structure comprises many hierarchical levels with narrow spans of control. – As the no of level increase , the effort and expenditure involved in managing them also increases so it is an expensive affair – Communication gets unduly complicated. – Numerous departments and level make the planning and controlling tasks complicated. MGT/M3/SS
• Flat Structure – It has a wide span of cont and fewer hierarchical levels. – Here tasks are highly inter-related, as a result, control and coordination are negatively affected. MGT/M3/SS
Problems of Poor Span• Over-supervision• Delay in decision• Problem in Communication• Decreased level of initiative an morale• Less opportunity for responsibility and development• Higher Cost MGT/M3/SS
Centralization and Decentralization• Koontz and O’Donnell state, ‘the problem of centralization of authority is consequently a basic phase of the principle of delegation. To the extent the authority is not passed on, it is centralized.’• Thus decentralization takes place when authority is delegated.• According to Henri Fayol, “ Everything that goes to increase the importance of the subordinates’ role is decentralization, everything which goes to reduce it is centralization”
Centralization• Centralization is the systematic and consistent reservation of authority at the central point within the organization.• According to Henri Fayol, “ Everything that goes to increase the importance of the subordinates’ role is decentralization, everything which goes to reduce it is centralization”• Every manager should reserve certain amount of authority for those decision which are of strategic nature and which can not be taken by the managers at the lowest level objectively and prospectively.
Factors affecting Centralization• Leadership• Integration requirement• Uniform action• Emergency• Insufficiency of managerial manpower• Monetary and vital decisions
Advantages of Centralization• Fast decisions• Successful control• Safeguarding secrets• Stability of policy• Appraisal of departmental activity• Personal leadership• Market gain• Promotes Integration and coordination• To handle Emergent situation
Disadvantages of Centralization• Lack of specialization• Load on the top executive• Inappropriate and undeveloped decisions• Volatility when top executive is not available.• Ignorance of human factor• Misuse of power by top executive• Non-compliance• Dishonesty and partiality• Undesirable effect of motivation due the dictatorial and repressive attitude of top executive.
Decentralization• Decentralization refers to the systematic effort to delegate to the lowest level all authority except that which can only be exercised at central points.• It generally spreads level by level from the top to the bottom.• According to Keith Davis, ‘Dispersal of the authority and duties to the lowest unit in the organization so far as it is feasible is called decentralization.’
Factors affecting Decentralization • Load of top executives • Requirement for diversification • Hold on the market • Growth of Managers • Motivational development • Size of the organization • No of Levels in the org structure • Availability of manager with skill, knowledge and ability
Advantages of Decentralization• Reduces load on top executives• Increased motivation• Enhance morale• Simplifies division of work• Leadership growth• Efficient control and supervision• Stability and continuity• Flexibility• Develops harmony
Disadvantages of Decentralization• Difficulties of co-ordination• Waste of staff• Damaging in emergency• Problems of control• Increased administrative costs• Internal constraints
Formalization It is the degree to which jobs within the organization are standardized and the extent to which employee behavior is guided by rules and procedures.• It is the extent to which expectations regarding the means and ends of work are specified, written, and enforced.• Highly formalized jobs offer little discretion over what is to be done.• Low formalization means fewer constraints on how employees do their work.
• High formalization: Formal rules and procedures used to standardize operations – Usually associated with centralized authority• Low formalization: Coordination by mutual adjustment rather than formal rules & procedures – Usually associated with decentralized authority
Organization Design Models The Mechanistic Model The Organic Model• Emphasizes importance of • Emphasizes importance of achieving high levels of achieving high levels of production and efficiency production and efficiency through: through: – Extensive use of rules and – Limited use of rules and procedures procedures – Centralized authority – Decentralized authority – High specialization of labor – Relatively low degrees of specialization
Comparison of Mechanistic and Organic StructuresProcess Mechanistic Structure Organic Structure1. Leadership Includes no perceived Includes perceived confidence and trust confidence and trust between superiors and between superiors and subordinates. subordinates.2. Motivation Taps only physical, Taps a full range of motives security, and economic through participatory motives, through use of methods. fear and sanctions.3. Communication Information flows Information flows freely: downward and tends to be upward, downward, and distorted, inaccurate, and laterally. The information is viewed with suspicion by accurate and undistorted. subordinates.
Comparison of Mechanistic and Organic StructuresProcess Mechanistic Structure Organic Structure4. Interaction Closed and restricted. Open and extensive. Both Subordinates have little superiors and subordinates effect on departmental are able to affect goals, methods, and departmental goals, activities. methods, and activities.5. Decision Relatively centralized. Relatively decentralized. Occurs only at the top of Occurs at all levels through the organization. group processes.6. Goal setting Located at the top of the Encourages group organization, discouraging participation in setting group participation. high, realistic objectives.
Comparison of Mechanistic and Organic StructuresProcess Mechanistic Structure Organic Structure7. Control Centralized. Emphasizes Dispersed throughout the fixing blame for mistakes. organization. Emphasizes self-control and problem solving.8. Performance Low and passively sought High and actively sought bygoals by managers, who make superiors, who recognize no commitment to the need for full developing the commitment to organization’s human developing, through resources. training, the organization’s human resources.
Contemporary Organizational DesignsTeam Structure• What it is: A structure in which the entire organization is made up of work groups or teams.• Advantages: Employees are more involved and empowered. Reduced barriers among functional areas.• Disadvantages: No clear chain of command. Pressure on teams to perform.Boundaryless StructureWhat it is: A structure that is not defined by or limited to artificial horizontal, vertical, or external boundaries; includes virtual and network types of organizations.• Advantages: Highly flexible and responsive. Draws on talent wherever it’s found..• Disadvantages: Lack of control. Communication difficulties..