organizational basics
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1
Organizational Basics
Krishantha Jayasundara
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What is an organization?
• An organization is a social entity (an institution or an association)
3
What is an organization?
• It has a collective goal linked to an external environment.
4
What is an organization?
• The word is derived from the Greek word organon, which means "organ" .
5
Types of Organizations
• Corporations
6
Types of Organizations
• Governments
7
Types of Organizations• Non-Governmental Organizations
8
Types of Organizations
• International Organizations
9
Types of Organizations
• Armed Forces
10
Types of Organizations
• Charities
11
Types of Organizations
• Not-For-Profit Corporations
12
Types of Organizations
• Partnerships
13
Types of Organizations
• Cooperatives
14
Types of Organizations
• Universities
15
Hybrid Organization
• An organization operates in both public sector and the private sector simultaneously.
16
Hybrid Organization
• It fulfills public duties and develops commercial market activities.
17
Voluntary Association
• It is an organization consisting of volunteers. • They are able to operate without legal
formalities.• But, they depending on jurisdiction of the
country.
18
Illegal or Secret Organizations
Secret Societies Criminal Organizations
Resistance Movements.
19
Organizing
The process
of sourcing, allocating, and arranging of resources
and assigning the authority
to achieve the organizational objectives
effectively and efficiently
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Process
• A set of inner related activities
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Sourcing
• Searching for and obtaining necessary instruments and information.
22
Allocating
• Assigning a specific area
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Resources
• Essential items in production or service
Scare-limited supply
Effective allocation
Optimum use
Cost effective manner
24
Activities
• Areas of work, activities, job tasks to be done to achieve organizational objectives.
• All the activities should be productive.
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Authority
• Right or power to give orders.• Power to make decisions.
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Organizational Structure
Arrangement of people and tasks
Designed to accomplish the goals of the organization.
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Organizational Structure
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Organizational Structure
• Positions within the organization • Their hierarchy • Levels of authority
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Organizational Structure
• Relationship among those positions
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Organizational Structure
• Formal lines of communication
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Organizational Chart
• Presenting the organizational structure in a diagram showing the positions and relationships among them.
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Organizational Chart
• Shows hierarchy and chain of command
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Organizational Chart
• Shows Formal lines of communication
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Organizational Chart
• Shows Levels of authority
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Organizational Chart
• Shows Span of control (number of subordinates directly under a superior)
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Organizational Chart
• It shows how work is divided.
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Methods of Preparing Organizational Charts
• Vertical method Managing Director
Sales Team (Reps)
Account Clerk Admin Clerk
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Vertical Method
Managing Director
Sales Team (Reps) Account Clerk/Cashier Admin Clerk
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Horizontal Method
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Circular Method
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Determinants of Organizational Structure
• Goals and objectives of the organization
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Determinants of Organizational Structure
• Size of the organization.
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Determinants of Organizational Structure
• Financial strength of the organization.
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Determinants of Organizational Structure
• Geological location of the organization
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Determinants of Organizational Structure
• Vision of the top management
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What can a manager learn from an organizational chart?
• reporting arrangements
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What can a manager learn from an organizational chart?
• Base of the organization (function-wise/customer-wise/department-wise)
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What can a manager learn from an organizational chart?
• Hierarchy in decision making.
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What can a manager learn from an organizational chart?
• Authority relationships.
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What can a manager learn from an organizational chart?
• Line and staff relationship.
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What can a manager learn from an organizational chart?
• Formal line of communication
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What can a manager learn from an organizational chart?
• Pay structure.
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Limitations in Use of Organizational Charts
• Organizational charts can use relationships only in a formal organization.
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Limitations in Use of Organizational Charts
• It shows what should the structure be but not the actual structure.
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Limitations in Use of Organizational Charts
• The chart can easily be outdated in a less effectively managed organization.
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Limitations in Use of Organizational Charts
• Authority, responsibilities, and activities of people in an organization may not be adequately represented.
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Limitations in Use of Organizational Charts
• Informal channel of communication is not visible.
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Different Types of Organizational Structure
• Departmentalization• Matrix Organization
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Different Types of Organizational Structure
Departmentalization
The work is divided into
departments.
Managers manage/coordinate
the activities of each department.
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Key Principles of Departmentalization
Unity of Command
Span of Control
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Key Principles of Departmentalization
Unity of Command
Subordinate should have only one superior
Orders should be given by the immediate supervisor
Words of the top management should be communicated through immediate supervisor
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Key Principles of Departmentalization
Span of Control
Number of subordinates directly under a superior
Narrow span of control
Wide span of control
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Benefits of Departmentalization
• Clarity in activities.• Easy distribution of authority.• Easy communication and coordination.• Independency in each area of activity.• Clear and demarcated area of responsibility for
managers.
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Complications of Departmentalization
Sub-Optimiz
ation
Conflicts among
departments due to departmental goals
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Complications of Departmentalization
Sub-Optimiz
ation
Budgetary control by the finance department
affects adverting of marketing department
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Types of Departmentalization
Departmentalization by
Functions.
Departmentalization by
Customers.
Departmentalization by Product.
Geographical or Territorial
Departmentalization.
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Functional Departmentalization
• Departments are based on the functions
Chairman
CEO
Human Resource
Department
Finance Department
Marketing Department
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Functional Departmentalization
Advantage
Avoid duplication of work
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Functional Departmentalization
Advantage
Efficiency due
to specialization
70
Functional Departmentalization
Advantage
Easy control
and coordin
ation
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Functional Departmentalization
Advantage
Benefits of
Specialization
72
Functional Departmentalization
Advantage
Recruitment of
specialist to lead
departments
73
Functional Departmentalization
Advantage
Top managers can easily
control
74
Functional Departmentalization
Disadvantage
Priority for department
al objectives
(Sub-optimizatio
n)
75
Functional Departmentalization
Disadvantage
Lack of cooperati
on between departme
nts
76
Functional Departmentalization
Disadvantage
Difficultly in
demarcating the
responsibilities
77
Functional Departmentalization
Disadvantage
Not suitable
for flexible
situations
78
Functional Departmentalization
Disadvantage
Lack of personal
development due to
limited scope
79
Functional Departmentalization
Disadvantage
Lack of opportunity
for managers to improve
general management
skills
80
Functional Departmentalization
Disadvantage
Lack of chances
for innovativ
e thinking
81
Departmentalization by Customers
• Departments are based on specific needs of the customers
Hospital Service
Maternity
Accident Service
ENT
82
Departmentalization by Customers
Advantages
Marketing Strategies
could easily be implemen
ted
83
Departmentalization by Customers
Advantages
Can be adopted to
environmental changes
and customer
needs
84
Departmentalization by Customers
Advantages
Can be used to
train and specialize employee
s
85
Departmentalization by Customers
Disadvantages
Difficult to attain
the benefits of centralizati
on
86
Departmentalization by Customers
Disadvantages
Difficulty in
coordination between department
s
87
Departmentalization by Customers
Disadvantages
Waste of resources due to repetitive work
88
Departmentalization by Customers
Disadvantages
Need to have
specialized
employees
89
Departmentalization by Products
• Suitable for organizations which need specific resources for manufacturing.
• Suitable for organizations which need separate distributional channels. Marketing
Costumes perfumes Agro Chemicals
90
Departmentalization by Products
Advantages
High level of attention to the products
91
Departmentalization by Products
Advantages
Specialization
92
Departmentalization by Products
Advantages
Better service to the
customers
93
Departmentalization by Products
Advantages
Good for
volatile markets
94
Departmentalization by Products
Advantages
Suitable to train employ
ees
95
Departmentalization by Products
Advantages
Clear responsibilities to
each departme
nts
96
Departmentalization by Products
Disadvantages
Conflict between
organizational goals
and department
al goals
97
Departmentalization by Products
Disadvantages
Not suitable
for all the organizat
ions
98
Departmentalization by Products
Disadvantages
Difficulty in
coordination of
activities
99
Departmentalization by Location
• Consideration is on transport cost• Requirement to be close to customers• Looking for cheap labour• Access to resources
100
Departmentalization by Location
Marketing Manager
Regional Manager Western Province
Regional Manager Southern Province
Regional Manager Central Province
101
Departmentalization by Location
Advantages
More focused
on customer
s in territory
102
Departmentalization by Location
Advantages
Economical
advantage
103
Departmentalization by Location
Advantages
Close relations with custom
ers
104
Departmentalization by Location
Advantages
Close relations with custom
ers
105
Departmentalization by Location
Advantages
Quick response
to customer behaviou
r
106
Departmentalization by Location
Advantages
Ideal training
for manage
rs
107
Departmentalization by Location
Disadvantages
Difficulty in control
and coordinat
ion
108
Departmentalization by Location
Disadvantages
High cost
109
Departmentalization by Location
Disadvantages
Difficult for top management to control
110
Departmentalization by Location
Disadvantages
Wastage of
resources due to
repetitive work
111
Departmentalization by Location
Disadvantages
Wastage of
resources due to
repetitive work
112
Departmentalization by Location
Disadvantages
Can not be
applied to every organizat
ion
113
Matrix Organization
Temporary organizational
structures.
For specific projects.
To be completed in a specific
time.
Structure gets cancelled once the
goals are accomplished.
114
Matrix Organization
Example• Construction of a housing complex• Doing a research project to develop a new
product
115
Features of Matrix Organizations
• SMART goals and projects
116
Features of Matrix Organizations
• The project must be a separate one. It should not disturb the usual activities of the organization.
117
Features of Matrix Organizations
• Project Manager should coordinate with specialists
118
Features of Matrix Organizations
• Staff members attached to the project should report the project manager.
119
Features of Matrix Organizations
• They should report to their immediate supervisor for general matters.
120
Features of Matrix Organizations
• Transfers within projects are possible.
121
Matrix Structure
122
Advantages of Matrix Organizational Structure
• Flexibility• Cooperation between individuals and teams• Cost effectiveness• Proper utilization of skills • Ability to face environmental changes
123
Disadvantages of Matrix Organizational Structure
• Employees assigned to projects have two superiors (Project Manager/Immediate Supervisor)
• Too many instructions-violation of unity of command.
• More time in discussions than implementation.• Issue due to lack of skilled labour.
124
Advantages of a Tall Structure
• Controlling the subordinates is easy.• Managers can plan well.• Less mistakes by the employees due to more
advices from superiors.• Authority is more centralized.
125
Advantages of a tall structure are the disadvantages of a flat structure
126
Advantages of a Flat Structure
• Faster decision making.• Less administrative cost due to few
management layers.• Quick communication.• Less coordination problems.• More empowered decision making and
decentralized authority.
127
Principles of Organization
1. Span of Control – number of subordinates directly under a supervisor.
“Only six employees can be efficiently managed by a manager” -Graicunas-
128
Narrow Span of Control
129
Wide Span of Control
130
Unity of Command
• One superior to give orders to one employee• Clear instructions.• Higher efficiency.• Matrix organizations – No unity of command.
131
Unity of Command
• One superior to give orders to one employee• Clear instructions.• Higher efficiency.• Matrix organizations – No unity of command.
132
Chain of Command(Scalar Chain/Scalar Principle)
• Flow of information, orders and instructions from the highest level of the employee to the lowest level of employees
133
Unity of Objectives
• The activities of the organization must be in line with the goals of the organization.
134
Unity of Objectives
• The activities of the organization must be in line with the goals of the organization.
135
Management by Expectations
• Policy by which management devotes its time to investigate only those situations in which actual results differ significantly from planned results.
136
Management by Objectives (MBO)
• Policy by which management devotes its time to investigate only those situations in which actual results differ significantly from planned results.
137
Responsibility
• A subordinate should be made responsible to the superior only for the level of authority given to the subordinate
138
Accountability
• The subordinates are answerable to their superiors for the work they carry out.
• Accountability flows upwards• Authority flows downward.
139
Authority
Line Authority Authority of the managers who are directly involved in attaining the
primary goals of the organizations
140
Authority
Staff Authority Managers in supporting services to the managers are called staff managers
141
Authority
Functional Authority
Authority given to functional managers to give orders to another functional manager who is not under him
142
Authority
Charismatic Authority
Authority possessed by a person for his personality and leadership qualities
143
Authority
Delegation of Authority
A superior may delegate his work with the necessary authority to a subordinate. This authority transferred is called delegated authority.
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