Business organizing


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Business organizing

  1. 1. BUSINESS ORGANIZING1 vikas vadakara
  2. 2. Syllabus  Organizing: Organizing as managerial function – organization structure, formal and informal organization.  Traditional Organization Structures – Functional, Divisional and Matrix Structure  Directions in organizational Structures– Team structure, network structure , boundary less structure  Organizing Trends and Practices – Chain of command, unity of command, span of control  delegation and empowerment, decentralization and use of staff2  organizational design and organizational vikas vadakara configuration
  3. 3. Organizing - Meaning  The process of defining and grouping the activities of the enterprise and establishing authority relationship amongst them.  Process of determining the activities to be performed, arranging these activities to administrative units, as well as assigning managerial authority and responsibilities to people employed in the organization.  Deciding how best to group organizational activities and resources3 vikas vadakara
  4. 4. Organizing involves:  The identification and classification of required activities  The Grouping of activities necessary to attain objectives  The assignment of each group to a manager with the authority necessary to supervise it  The provision for coordination horizontally [on the same or a similar organizational level] and vertically [ between various departments which are not on a similar organizational level] in the organization structure4 vikas vadakara
  5. 5. Definition  Heney, “ Organization is a harmonious adjustment of specialized parts for the accomplishment of some common purpose or purposes”  Mc Farland, “ An identified group of people contributing their efforts towards the attainment of goals is called an organization”  George Terry, “ Organizing is the establishing of effective behavioural relationships among persons so that they may work together effectively and gain personal satisfaction in doing selected tasks under given environmental conditions for the purpose of achieving some goal5 or objective” vikas vadakara
  6. 6. Nature/ Characteristics of organizing  exists to achieve some common objectives  Involves division of labour to facilitate specialization which improves organizational efficiency  People constitute a critical, dynamic element of an organization  Involves authority or chain of command6 vikas vadakara
  7. 7. Importance of organizing  Focus on and facilitate the attaining of objectives.  Arrangement of positions and jobs within the hierarchy.  Define responsibilities and line of authority of all levels.  Creating relationships that will minimize friction.7 vikas vadakara
  8. 8. Organization Structure  Set of elements that can be used to configure or construct an organization. Six building blocks that managers can use in constructing an organization;  Designing jobs-job specialization  Grouping jobs- Departmentalization  Establishing reporting relationships between jobs- chain of command  Distributing authority among jobs-delegation  Coordinating activities among jobs  Differentiating among positions-line and staff8 vikas vadakara
  9. 9. Formal Organization According to Bernard, “Formal Organization is a system of consciously coordinated activities of two or more persons towards a common objective” Nature of Formal Organization  Deliberately created by top management  Based on division of labour or specialization  Defines clearly authority and responsibility of every individual  Has written rules and regulations  Specifies communication channels  Depicted on the organization chart of the company9 vikas vadakara  Focuses on the jobs and not the individuals who
  10. 10. Formal Organization Structure CEO VP VP VP HR VP Maktg Production Finance Productio HR Marketing Finance n Manager Manager Manager Manager Quality Training Sales Cost Manager Manager Manager Manager10 vikas vadakara
  11. 11. Demerit Merits s  As definite boundaries  May reduce spirit of of each worker are initiative clearly defined, it reduces the conflict  Does not consider among the employees sentiments and values  Overlapping of responsibility is avoided of social groups  Motivates employees as  Does not consider standards of individual goals performance are well established  May create  Sense of job coordination problem satisfaction, security arises from the classification of the task  Favouritism in11 evaluation and vikas vadakara appraisal is avoided
  12. 12. Informal Organization A network of personal and social relationships that arise spontaneously as people associate in a work environment. Consists of all the informal groupings of people within a formal organization Nature of informal organization:  Unplanned and arises spontaneously  Reflects human and social relationships among people  Based on common taste, language, religion, culture etc  The membership of informal organization is12 vikas vadakara voluntary
  13. 13. Informal Organization Structure CEO VP VP VP HR VP Maktg Production Finance Productio HR Marketing Finance n Manager Manager Manager Manager Quality Training Sales Cost Manager Manager Manager Manager Quality Manager, HR Manager, Sales Manager and Cost Manager form a group13 for vikas vadakara Cricket as they have common interest in Cricket
  14. 14. Demerit Merits s  Helps to satisfy  Resistance to social and change psychological needs of  Rumor- grapevine employees to inspire them to work efficiently and effectively  Improves sense of belongingness, security and loyalty among14 employees vikas vadakara
  15. 15. Characteristics Formal Organization Structure Informal Organization Structure Emerges spontaneously as a result Deliberately formed, planned Formation of social interaction among and created by Top Management organizational members To achieve planned goals of To provide social satisfaction to Purpose organization0 members Well defined tasks and No clear cut structure, complex Structure relationships network of relations Flexible, unstable and Flexibility Rigid, stable and predictable unpredictable Standards of behaviour and Standards of behaviour and Standards of performance are prescribed by performance are evolved by behaviour management mutual consent among members Managers act as leaders as they Members voluntarily select their Leadership have authority leader Formally established line of Communicate according to Communication communication, official convenience communication Organization Official structure can be shown in Can not be shown Chart the form of chart Rules and vikas vadakara Written and fixed15 regulations Oral norms
  16. 16. Traditional Organization Structures Functional Structure Divisional Structure Matrix Structure16 vikas vadakara
  17. 17. Functional Structure  Also known as U Form- U means UNITARY  Grouping resources, organizational activities & individuals by skills, knowledge & action  An organizational structure composed of all the departments that an organization requires to produce its goods or services  Grouping of activities according to the functions of an organization  Whole task of the organization is divided into specialized functions and each function is performed by a specialist in charge  Example: organizing around function like17 Manufacturing, Marketing, Finance, HR, R&D etc vikas vadakara
  18. 18. Functional Structure18 vikas vadakara
  19. 19. Merits Demerits  Promotes  Reduces coordination between functions specialization  Responsibility for profit  Work load reduction is at the top only  Better control  Expensive  Delay in decision  Higher efficiency making  Encourages learning  Slow adaptation to from others doing environmental charges  Specialists become similar job rigid and can not  Easy monitoring and understand what other units do evaluating  Difficult for performance departments to vikas vadakara communicate with19 others
  20. 20. Divisional Structure  Also known as M Form- M means Multidivisional  It’s a structure made up of separate, semi autonomous units or multiple divisions in related industry  Ex: 1] HP: computers, scanners, printers, electronic medical equipments. Ex 2] Walt Disney: Theme parks, Movies  A structure composed of separate business units within which are the functions that work together to produce a specific product for a specific customer  Create smaller, manageable teams  Develop a business unit level strategy to compete  Divisions have marketing, finance, HR and other functions  Functional managers report to divisional managers who report to corporate heads20 vikas vadakara
  21. 21. Divisional Structure21 vikas vadakara
  22. 22. Merits Demerits  Focuses on results;  Duplication of divisional managers activities and are responsible for resources which what happens to increases costs and their products and reduces efficiency services22 vikas vadakara
  23. 23. Conglomerate Structure or H Form  H stands for HOLDING  It’s a structure made up of multiple divisions in unrelated businesses/industry  Ex: Samsung Electrics Co uses H Form or conglomerate structure. – Semiconductors, Telecommunications, Appliances, Media  Ex: General Electric- aircraft engines, appliances, broadcasting, financial services, lighting products, plastics, etc]  It is essentially a holding company that results from unrelated diversification  This design which results from a strategy of unrelated diversification, is a complex to manage  Managers find that comparing & integrating activities among the dissimilar operations are difficlut23 vikas vadakara
  24. 24. Matrix or Grid Structure  Combines two organization structures; functional and project structures [based on projects organizational activities are grouped]  Functional departments create vertical chain of command  Project or product types form horizontal chain  This type used to efficiently execute multiple project operations of enterprise  Project managers coordinate teams of employees drawn from different functional departments  Matrix organization relies on multiple command structure24  Ex: General Motors, Prudential, American vikas vadakara Cyanamid, NCR
  25. 25. Matrix or Grid Structure25 vikas vadakara
  26. 26. Merits Demerits  Where large number  Violates principle of of small projects unity of command have to be executed  Costly and or completed, matrix expensive organization works  Delay in decision out better making  Suitable to industries like building and construction, highly technology oriented industries etc26 vikas vadakara
  27. 27.  Some organizations like Philips and Citibank adopted matrix structure but later dropped it.  Matrix structure is not always appropriate to organizations.  When matrix structure is appropriate to companies?  When there is an environmental pressure  When huge information processing is existing  When sharing scarce resources is necessary27 vikas vadakara
  28. 28. Directions in Organizational Structure  Team Structure  Network Structure  Boundary Less Structure28 vikas vadakara
  29. 29. Team Structure  When management uses teams as its coordination device, you have a team structure  Members are assigned to a team for a specific task/project  Once the task is done, members disburse and join another team  It breaks down departmental barriers and decentralizes decision making to the level of work teams  It requires employees to be specialists and also generalists  In small companies team structure can define entire organization.29  In large companies one can see team structure vikas vadakara integrated with project structure
  30. 30. Team Structure CEO Project Project Project Project Manager Manager Manager 1 Manager 2 3 4 Development Marketing Testing Team HR Team Team Team Junior Senior Software Software Engineer Engineer30 vikas vadakara
  31. 31. Merits Demerits  Flexibility  Loss of productive  Employee participation time in team in decision making meeting which leads to high  Work specialization morale, efficiency wont workout  Quick decision making  Interpersonal  Easy communication relations issues  Barriers between functional departments are broken  Synergy effect  Employees31 empowerment vikas vadakara
  32. 32. Network Structure  Company keeps core business and through contacts with external agencies runs business [outsourcing]  Also known as modular organization- especially in manufacturing firms  Companies like NIKE & REEBOK, concentrate on their core strengths in product development and marketing and contracted all their footwear manufacturing to outside suppliers  Swedens Ericsson contracts its manufacturing and even some of its R&D to more cost effective contractors in New Delhi, Singapore, California and other global locations32 vikas vadakara
  33. 33. Network Structure Manpower Distribution Consultancy Agency Accounting Firm Core Business : Manufact uring Supplier Agency shoes Promotion/ Ad Firm Marketing Firm33 vikas vadakara
  34. 34. Merits Demerits  Focus on core  No control over business external agencies  Cost saving  Failure in one network may affect entire network34 vikas vadakara
  35. 35. Boundary Less Structure  Boundaries that divide employees such as hierarchy, job function and geography as well as those that distance companies from suppliers and customers broken down  Seeks to remove vertical, horizontal and external barriers so that employees, managers, customers and suppliers can work together, share ideas and identify best ideas for organization.  Works without any chain of command  Instead of having many hierarchical levels, it is made up of less layers, flattened or horizontal.  Uses technology/intranet for better communication process  It replaces functional departments with cross functional teams and organization around processes; uses lateral transfers, rotate people into and out of35 different functional areas vikas vadakara  Replaces departments with empowered teams
  36. 36. What are boundaries?  Vertical Boundaries: Boundaries between layers within the organization. VP Marketing ->Marketing manager - > Marketing executive. Problem: Lower layer employee has ideas, but thinks in terms of chain of command, and does not inform to boss  Horizontal: boundaries that exist between organizational functional units. Each unit has a singular function. Problem: each unit maximizes its own goals, but not overall goals of the organization.  External: barriers between organization and outside world like customers, suppliers, government agencies, public etc. Problem: lack of awareness of customers needs and suppliers requirements  Geographical: Barriers among organization units Refer:, -Vs-Matrix-structure different countries. Problem: no vikas vadakara in located
  37. 37. Boundary Less Structure suppliers Prodn HR society Top Mgt Mktg R&D customers Fin Governm ent Agencies37 vikas vadakara
  38. 38. Virtual organizations  Essential feature of this organization is connectivity  Ability to network a large number of service providers, contractors whom it outsources its burden of getting infrastructural support, retaining for itself only a few areas of core competence.  Organization has no office as such because its executives will work with mobile phones and laptops at any place and at any time.  Key attributes; technology, opportunism- companies often work temporarily to meet specific demands of the customers and fall apart once need is over, no borders, trust, excellence  Examples of companies who have virtual teams:38 IBM, vadakara vikas Motorola, Oracle, Honey well, HP, GE
  39. 39. Organization Structure elements  Organizing means how best to group organizational activities and resources  Organization Structure means set of elements that can be used to configure or construct an organization  Organization Design means overall set of structural elements and the relationships among those elements used to manage the total organization.  There are 6 elements that can be used to construct an organization;39 vikas vadakara
  40. 40. 6 elements:  Work specialization  Departmentalization  Chain of command  Span of control  Centralization and decentralization  Formalization40 vikas vadakara
  41. 41. 1. Work specialization  Involves designing the jobs/ job design  Job design means determination of an individual’s work related responsibilities.  First step in designing jobs is determining level of the desired job specialization.  Job specialization is the degree to which overall task of the organization is broken down and divided into smaller component parts.  The concept of job specialization is evolved from the concept of division of labour.41 vikas vadakara
  42. 42. Work specialization contd…  Adam Smith, 18th Century economist, described how a Pin manufacturing Factory used division of labour concept to improve productivity.  One worker will drew the wire, another straightened it, a third cut it, fourth grounded the point and so on.  Ten men were able to produce 48000 pins in a day, whereas each man working alone could produce 20 pins per day.  Henry Ford implemented this concept in automobile assembly line  Work specialization is the extension of the growth, as growth continues, specialization too42 continues. vikas vadakara  When Walt Disney started his company, he
  43. 43. 2. Departmentalization  Process of grouping jobs according to some logical arrangement.  Organization can create departments on the basis of its  Functions  Products  Geographical areas  Process  Customers43 vikas vadakara
  44. 44. Departmentalization contd..Functional Departmentalization CEO HR Maktg FIN ProdnProduct Based Departmentalization CEO Hair Body Care care44 vikas vadakara
  45. 45. Departmentalization contd..Geographical Departmentalization CEO North South Region West Region RegionBased on Process Departmentalization CEO Developmen Testing Marketing tBased on Customer Departmentalization CEO45 Government vikas vadakara Institutional Consumer
  46. 46. 3. Chain of command/ Scalar Chain  Clear and distinct line of authority among the positions in an organization  The line of authority extending from the upper organizational levels to lowest levels, which clarifies who reports to whom  Helps employees answer questions as “who do I go, if I have a problem?” or “to whom am I responsible?”  Scalar principle suggests that there should be a clear line of authority from top to bottom linking managers at all levels46 vikas vadakara
  47. 47. Gangplank principle  In certain special situations the scalar chain/ chain of command should be avoided [ Fayol]  To facilitate speed and efficiency in administrative matters, communication through the formal chain can be avoided and lateral communication permitted A If D has to communicate B E with G, the message has to travel through formal C F chain CBAEFG. This involves delay and hence, D G D may be permitted to communicate directly to G [which forms lateral communication] on important matters.47 vikas vadakara
  48. 48. 3 concepts in Chain of Command/ scalar chain:  Authority: right to tell people what to do and to expect them to do it  Responsibility: obligation or expectation to perform any assigned duty  Unity of Command: a management principle that each person should report to only one manager48 vikas vadakara
  49. 49. 4. Span of Control  Determining how many people will report to each manager  The no of employees a manager can efficiently and effectively manage  A manager must deal with 3 kinds of interactions with and among subordinates;  Direct: manager’s one to one relationship with each subordinate  Cross: among subordinates  Group: between groups of subordinates49 vikas vadakara
  50. 50. Span of Control contd..  No of possible interactions of all types between manager and subordinates can be determined as follow: ( 2 N / 2 N 1) I N  I= total no of possible interactions  N= no of subordinates  Ex: if N [ no of subordinates] = 2, the no of possible interactions are 6.  If N= 5, I or no of possible interactions are 100.  Manager has to determine optimal span of control. This is nothing but deciding whether it50 vikas vadakara be narrow or wide span of management/ should control
  51. 51. Narrow Span of Control  Few subordinates per manager  More managers are required in this type.  This results in Tall structure of the Organization Merits Demerits Personal contact Expensive as larger between managers no of managers are and subordinates involved Effective control and Creates close supervision communication problems; because of Develops good increased no of people51 human relations in vikas vadakara through whom organization
  52. 52. Wide Span Of Control  Many subordinates per manager  Less supervisors are required  Results in Flat organization structure  This is preferable if workers are well trained and competitive Merits Demerits Reduces cost of More administration and supervision as few supervisory responsibility managers are required of managers Effective control can not Easy communication be assured process Requires talented Better coordination managers52 between manager and vikas vadakara Managers won’t have
  53. 53. 53 vikas vadakara
  54. 54. Factors influencing span of control  Width of span is affected by:  Skills and abilities of the manager  Employee characteristics or abilities  Nature of work performed  Availability of time for supervision for managers54 vikas vadakara
  55. 55. Delegation  Process by which manager assigns a portion of his or her total workload to others  The downward pushing of authority to make decisions is known as delegation of authority  Reason for delegation: to enable manager to get more work done  Steps in delegation process:55 vikas vadakara
  56. 56. Merits of Delegation Guidelines for effective Delegation Reduces managers  Provide incentives for heavy workload accepting responsibility Development of  Train subordinates subordinates  Having mutual trust and By participating in confidence decision making and  Make clear with nature problem solving, and scope of task subordinates learn about operations and  Provide necessary improve their facilities or resources managerial skills and information to perform the task56 vikas vadakara
  57. 57. Barriers to effective Delegation From managers’ side From subordinates  “I can do it better side myself” fantasy  Fear of criticism  Not trusting  Lack of confidence, subordinates adequate resources  Fear of loosing and information power, fear of  May think that no subordinates reward for accepting overtaking them additional  Briefing difficulty or responsibility lack of  Prefer to avoid risk communication57 vikas vadakara power
  58. 58. Empowerment  It is the term used to express ways in which employees can make decisions without consulting a manager  It is self management, employees manage their Points to remember while empowering employees:monitor quality of goods and services. own work,  Sharing vision, goals or objectives with employees.  Trusting people  Providing necessary information for decision making  Delegate work as well as authority vikas vadakara58  Provide feedback
  59. 59. 5.Centralization & Decentralization CENTRALIZATION  Centralization of power to make decision at the higher levels of management  Hence employees can’t act independently  This results in Tall Structure Merits Demerits  Taking emergency or  No individual initiative quick decisions  Top management will without any delay be over burdened  Standardized policy  Widens gap between or procedures managers and employees59 vikas vadakara
  60. 60. Decentralization  Dispersal of decision making authority  Delegating power or authority to middle and lower level managers  Degree to which lower level employees provide input increases or actually they make decisions  Results in Flat Structure Merits Demerits  Reduces burden  Increases  Increases flexibility administrative cost and involvement from  Difficult in controlling employees60 vikas vadakara
  61. 61. Staffing  Process of planning, employing and developing human resources at different levels of an organization for carrying out the various functions in the organization  Includes activities as human resource planning, recruitment, selection, placement, T&D, remuneration, performance appraisal, promotion, transfer etc.  Koontz & ODonnell, “the managerial function of staffing involves managing the organization structure through proper and effective selection, appraisal and development of personnel to fill the roles designed in to the structure”61 vikas vadakara
  62. 62. Line organizations  All positions in the organization are in the direct line of authority from top to bottom. GM Work Manager Foreman Workers62 vikas vadakara
  63. 63. Staff Organization  Act as advisory function to line organization  Their main task is to provide advice, guidance, suggestions to line people. GM Business Cost Industrial Legal Economi Work Accounta Relations Advisor nt st Manager Foreman Industrial R&D Engineer Workers s Represents staff vikas vadakara63 Represents line function authority
  64. 64. Use of Staff function in Decentralization  In decentralization, decision making power will be dispersed  Line authority can utilize staff people who can give better advice, guidance and suggestions. This will help line authority to take good and effective decisions.64 vikas vadakara
  65. 65. 6. Formalization  The degree to which jobs within the organization are standardized and the extent to which employee behavior is guided by rules and procedures.  Highly formalized jobs offer little discretion over what is to be done.  Low formalization means fewer constraints on how employees do their work.65 vikas vadakara
  66. 66. Organization Design  Following factors influence organization designing task;  Environment: external or internal  Business strategy – focused, differentiated or low cost  Technology – complexity of the technology used  Internal contingency factors: *goals *organization size *employees66 vikas vadakara
  67. 67. Organization Configuration  This is nothing but creating departments in the organization based on some logic arrangement; based on functions, products, processes, geography and customers. [refer slide 43, departmentalization, 2nd element of organization structure]67 vikas vadakara
  68. 68. 68 vikas vadakara