ORGANIZATION

- Meaning & Definition

- Principles of Organization

- Formal & Informal Organization

- Organization Structure & their Features

- Types of Organization

- Span of Management

- Factors influencing the Span of Management

- Authority & Responsibility

ORGANIZATION

- Delegation- Principles of Delegation

- Centralization & Decentralization & their Advantages & Disadvantages

- Departmentation- Significance of Departments

- Methods / Basis of Departmentation

Who will do it?

Who will do what?What will be the relationship?

This aspect is taken up by the managers in the form of organizing. Which is basically involves analysis of activities performed for achieving organizational objectives.

Since the work is done by no of people working

together, manager has to define

Creative phase of planningWhat is to be done?

Definition

Louis Allen“Organization is the process of identifying and grouping work to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.”

Organization

Organization is the structural framework of duties and responsibilities required of personnel in performing various functions with a view to achieve business goals through organization.

To Sum-up

Organization

Organization is the establishment of authority

relationship among persons so that it helps in

the achievement of organizational objectives.

Characteristics of Organization

Division of work

Common objectives

Co-operative relationship

Well-defined authority-responsibility relationshipsWell-defined authority-responsibility relationships

Co-ordination

Principles of OrganizationTaylor and Fayol have derived certain principles on the basis of their past experiences for a sound business organization.

Objective

Specialization

Co-ordinationAuthority and Responsibility

Definition

Span of control

Balance

Continuity

Uniformity

Unity of command

Exception

Simplicity

Efficiency

Scalar Principle

Formal & Informal organization:Differen

ceFormal Informal

Meaning

Consciously coordinated relationships

Spontaneous personal relationships

Basis

Delegation of authority,

Procedures & Regulations

Personal needs, Attitudes, Like &Dislike

etc…

NatureStable &

PredictableUnstable &

Unpredictable

FormDefinite structure &

well defined jobsStructure less and full

of discretions

Source of authority

Formal positionInformal, without

position

Emphasis

Office People

Organization Structure:

Authority and Responsibility is assigned

A system of Co-ordination is established among various

activities & persons

Framework of organization

structure.

Every business sets some goals

Some activities are to performed.Classified and Grouped.

Assigned to individuals / groups.

Developing an Organization Structure:The two variables i.e.

Basic Structure & Operating Mechanism

The Basic structure involves issues such as how the work of the organization is to be divided and assigned among positions, groups, departments, divisions etc…and how to bring the required co-ordination for achieving organizational goals.

The Operating mechanism includes factors like information system, control procedures & application of organizational principles and practice.

Developing an Organization Structure:

Operating MechanismBasic Structure

How the work of the organization is to be divided

Assigned among positions, groups, departments,

divisions

How to bring the required co-ordination

Information system

Control procedures

Application of organizational principles and practice.

Role of Organization Structure

Communication

Optimum utilization of resources

Job satisfaction

Creative thinking

Facilitates management

Encourages efficiency

Features of a good organization structure

Clear Line of Authority

Less Managerial Levels

Simple and Flexible

Types of Organization

An organization structure is mainly concerned with the allocation of duties and responsibilities and delegation of authority. It represents hierarchial arrangement of various positions in the organization.

Line organization.

Staff / Functional organization.

Line and staff organization.

Line organizationThis organization is a vertical structure where one person delegates authority to his subordinate and who in turn delegates to his subordinate and so on.

Authority flows vertically from top level person to all the persons responsible for the execution of work.

Responsibility, on the other hand, flows upwards. Everybody is responsible for his work and is accountable to his boss.

Since authority and responsibility flows in an

“unbroken straight line” it is called line organization.

R M - 1

Chief Executive Officer

G.M.Finance

G.MR&D

G.M.Production

G.M.Human

Resources

G.M.Marketing

Line organization

R M - 2 R M - 3 R M - 4 R M - 5

ASM -1 ASM -2 ASM -3

Types of line organizationThe line organization is of two types

Pure line organization &

Departmental line organization

Types of line organization

Pure line organization

Production Manager

Foreman - A Foreman - B Foreman - C

Worker-1 Worker-2 Worker-3 Worker-4

Types of line organizationDepartmental line organization

General Manager

Marketing Manager

FinanceManager

ProductionManager

Supervisor-1

Worker-1 Worker-2 Worker-3

PersonnelManager

Deputy Manager -1 Deputy Manager -2

Supervisor-2 Supervisor-3 Supervisor-4

Merits of line Organization

Identification of authority and responsibility

Co-ordination

Unity of command

Effective control and supervisions

Flexibility

Simplicity

Effective communication

Economical

Quick decisions

Demerits of line organization

Lack of specialization

Lack of co-ordination

Excess work / overloading

Lack of initiative

Favoritism

Instability

Staff / functional organization

The functional organization often called functional foremanship was originated by F. W. Taylor to bring about specialization of management.

Taylor suggested the division of supervisory functions into two groups

Office specialists & Shop specialists.

Staff / Functional OrganizationOffice specialists:They are concerned with the design, scheduling recording and planning of work.The office staff consists of following persons.Route clerkInstruction card clerkTime and cost clerkDisciplinarian Shop specialists:They guide and supervise the work in the factory. The following are the shop specialists.Gang bossSpeed bossRepair bossInspector

Merits of staff Organization

Increase in efficiency

Flexibility

Scope for growth

Specialization

Relief to top executives

Economy of operations

Better supervisions

Demerits of Staff Organization

Lack of co-ordination

Difficulty in fixing responsibility

Conflict in authority

Delay in taking decisions

Expensive

Group rivalries

Line & Staff Organization

The staff which is responsible for Planning and the Line for the Actual execution of the work. The staff is attached to the line to assist the line in discharging its duties efficiently.

Both line and staff organization suffers from some drawbacks. Line organization is autocratic and Staff organization has loose control.Hence, there was need for a new system which could avoid the defects of these systems. This need has fulfilled by

 

This method clearly distinguishes the difference between two aspects of administration i.e. Planning and Execution.The staff officials prepare plans and recommend to the line officials who implement them with the help of their departmental personnel. Thus, the staff members are thinkers while the line officials are doers.

Line and Staff Organization

Merits of Line &staff Organization

Better Discipline

Sound Decisions

Specialization

Growth & Expansion

Development of employees

Quick actions

Demerits of Line & Staff Organization

More dependence on staff

Lack of Responsibility

Expensive

Demerits of Line & Staff Organization Conflicts between Line & Staff

The line view point:The line managers have the following to say about staff people.

Staff authority undermines line authority and interferes in the work of line managers.

Advice given by the staff is not always sound. Advice is only theoretical and unrealistic.

Staffs takes credit if the programme is successful & blame the line if it is not successful.

Demerits of Line & Staff Organization Conflicts between Line & Staff

The Staff view point:The staff authorities have the following complaints against line officers 

Line officers do not make proper use of advice given by

staff.

Line officers are slow to accept new ideas and they resist change.

Line officers reject the advice without giving reasons.

Improving of Line & Staff

The limit of authority of both line and staff should be prescribed clearly.

Staff authority should be restricted to a purely advisory role.

Line officers should give due consideration to staff advice. They should state reasons in case they cannot accept the advice.

The advice of staff should be realistic and practicable.

Both line staff should try to understand each other’s responsibilities and difficulties and try to co-operate with each other for achievement of enterprise objectives.

Line and Staff Organization:

Line Organization Staff Organization

Centralized authority Decentralized authority

One superior- One subordinate

Several advisors to one subordinate

Responsibility is always fixed

No fixed responsibility

Less expensive More expensive

Suitable for Small Business Suitable for Big Business

Span of ManagementSpace between two supports of a

structure

When applied to management “span” refers to the numbers of

subordinates a manager or superior can supervise / manage or

control effectively and efficiently.

Therefore, refers to the optimum number of subordinates that a manager or supervisor can manage or control effectively.

Span of Supervision

Span of Control

Span of Management

Span of Responsibility

Span of Authority

Span of Direction

Factors influencing the Span of Supervision:

The capacity and ability of the executive

Competence and training of subordinates

Nature of work

Degree of decentralization and extent of delegation

Quality of planning

Effectiveness of communication system

Degree of physical dispersion

Rate of change

Difference Between Authority and Responsibility

Difference Authority ResponsibilityDifference

Authority Responsibility

MeaningIt is the right of a superior to command the subordinate

It is the obligation of a subordinate to perform an assigned task.

Basis

It normally arises either from legal provisions & formal contract.

It arises from superior subordinate relationship.

Delegation

Can be delegated from a superior to a subordinate

It can not be delegated.

Duration

It may continue for a long period

It is over when the assigned task is completed

Delegation:

Delegation is an administrative process of getting things done by others by giving them responsibility.

Board of Directors.

Chief executive

MarketingManager

Production Manager

Finance Manager

H RManager

Every superior delegates the authority to subordinates for getting a particular work done. The process goes to the level where actual work is executed.

A manager is not judged by the work he actually performs on his own but the work he gets done through others. He assigns duties and authority to his subordinate and ensures the achievement of desired organizational goals.

Delegation

Allen “The entrustment of a part of the work or responsibility and

authority to another, and the creation of accountability for performance.”

Hiner O.S. “Delegation takes place when one person gives anther the

right to perform work on his behalf and the second person accepts corresponding duty / obligation to do what is required of him.”

Delegation

Characteristics of Delegation• Delegation takes place when a manager grants some of his powers

to subordinates.

• Delegation occurs only when the person delegating the authority himself that authority.

• Only a part of authority is delegated to subordinates.

• A manager delegating authority can reduce, enhance or take it back. He exercises full control over the activities of the subordinates even after delegation.

• It is only the authority which is delegated and not the responsibility.

Centralization & Decentralization

• They refer to the location of DECISION-MAKING authority in an organization.

• Centralization implies the

Concentration of authority at the top level

While Decentralization means

dispersal of authority

throughout the organization.

Centralization & Decentralization

Henry Fayol

“everything which goes to increase the

importance of the subordinate’s role is

decentralization; everything which goes to reduce it is

centralization.”

Advantages of Centralization:

• Effective utilization of talents of the top leader.

• Helpful in achieving uniformity of action.

• Effective in handling emergencies.

• Duplication of functions and facilities are

minimized.

Disadvantages of Centralization:

• Destroys individual initiative

• Over burden of few

• Slow down the operation

• No scope for specialization

Advantages of Decentralization:

• Reduces burden of top executives

• Quick Decisions

• Facilitates diversification

• Motivation of subordinates

Disadvantages of Decentralization:

• Lack of co-ordination

• Difficulty in control

• Expensive

• Lack of able managers

Centralization Vs DecentralizationSl No

Centralization Sl No

Decentralization

1Authority in the hands of top Management 1

Authority in the hands of subordinates

2 Minimum delegation 2 Extensive delegation

3

Span of control is narrow, management levels are many, and Organization tends to centralized.

3

Span of control is wider, Management levels are only few and organization tends to be decentralized.

4

Most of the subordinates under this system perform routine activities. They cannot perform meaningful and challenging work. Hence, they are dissatisfied.

4

Under this system, subordinates are freedom to act & freedom to make decisions. This increases their dedication, commitment, their feeling of status and loyalty towards organization. This leads to increased productivity.

5 Delay in decision-making 5 Quick decision-making

DepartmentationProcess of grouping of similar activities of a business concern into small units for the purpose of facilitating administration.

Koontz & O’Donnell  “Departmentation is a process of dividing the large monolithic functional organization into small and flexible administrative units.”

Definition

Significance of Departmentation

It increases the efficiency of the enterprise since various activities are grouped into workable units.

It renders the task of fixation of accountability for results very easy since activities are well defined and responsibilities are clearly laid.

It provides for fixation of standards for performance appraisal and thus ensures effective control.

It creates opportunities for the departmental heads to take initiative and thus develop managerial facilities.

Methods / Basis of Departmentation:

Functional Departmentation.

Product wise Departmentation.

Territorial / Geographical Departmentation.

Customer wise Departmentation.

Process / Equipment wise Departmentation.

Methods / Basis of Departmentation:

Functional Departmentation.

Managing Director

G MFinance

G MMarketing

G MProduction

G MR & D

Methods / Basis of Departmentation:

Product wise Departmentation.

Director Marketing

Mktg MgrAgro

products

Mktg MgrElectronics

products

Mktg MgrAudio

products

Mktg MgrVideo

products

Methods / Basis of Departmentation:

Geographical Departmentation.

G M ( Marketing)

Mktg MgrNorth Region

Mktg MgrSouthernRegion

Mktg MgrWesternRegion

Mktg MgrEasternRegion

Boundary less organization A boundary less organization is a contemporary approach

in organization design. It is an organization that is not

defined by, or limited to, the horizontal, vertical, or external

boundaries imposed by a predefined structure. This term was

coined by former General Electric chairman Jack

Welch because he wanted to eliminate vertical and

horizontal boundaries within the company and break down

external barriers between the company and its customers

and suppliers.

Many companies are finding that a flexible and unstructured approach are effective means to running a company

Virtual OrganizationVirtual organizations

outsource all non-essential functions

A flexible network of independent entities linked by information technology to share skills, knowledge and access to others' expertise in non-traditional ways

A form of cooperation involving companies, institutions and/or individuals delivering a product or service on the basis of a common business understanding. The units participate in the collaboration and present themselves as a unified organization.

Example: Sharing of core competencies

Thanking You