organizational basics

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Organizational Basics

Krishantha Jayasundara

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What is an organization?

• An organization is a social entity (an institution or an association)

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• It has a collective goal linked to an external environment.

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• The word is derived from the Greek word organon, which means "organ" .

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Types of Organizations

• Corporations

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• Governments

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Types of Organizations• Non-Governmental Organizations

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• International Organizations

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• Armed Forces

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• Charities

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• Not-For-Profit Corporations

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• Partnerships

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• Cooperatives

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• Universities

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Hybrid Organization

• An organization operates in both public sector and the private sector simultaneously.

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Hybrid Organization

• It fulfills public duties and develops commercial market activities.

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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.

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Illegal or Secret Organizations

Secret Societies Criminal Organizations

Resistance Movements.

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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.

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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

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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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• Positions within the organization • Their hierarchy • Levels of authority

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• Relationship among those positions

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• 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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• Shows hierarchy and chain of command

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• Shows Formal lines of communication

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• Shows Levels of authority

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• Shows Span of control (number of subordinates directly under a superior)

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• 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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• Size of the organization.

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• Financial strength of the organization.

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• Geological location of the organization

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• Vision of the top management

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What can a manager learn from an organizational chart?

• reporting arrangements

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• Base of the organization (function-wise/customer-wise/department-wise)

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• Hierarchy in decision making.

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• Authority relationships.

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• Line and staff relationship.

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• Formal line of communication

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• 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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• It shows what should the structure be but not the actual structure.

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• The chart can easily be outdated in a less effectively managed organization.

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• Authority, responsibilities, and activities of people in an organization may not be adequately represented.

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• 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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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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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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Advantage

Avoid duplication of work

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Advantage

Efficiency due

to specialization

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Advantage

Easy control

and coordin

ation

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Advantage

Benefits of

Specialization

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Advantage

Recruitment of

specialist to lead

departments

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Advantage

Top managers can easily

control

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Disadvantage

Priority for department

al objectives

(Sub-optimizatio

n)

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Disadvantage

Lack of cooperati

on between departme

nts

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Disadvantage

Difficultly in

demarcating the

responsibilities

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Disadvantage

Not suitable

for flexible

situations

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Disadvantage

Lack of personal

development due to

limited scope

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Disadvantage

Lack of opportunity

for managers to improve

general management

skills

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Disadvantage

Lack of chances

for innovativ

e thinking

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Departmentalization by Customers

• Departments are based on specific needs of the customers

Hospital Service

Maternity

Accident Service

ENT

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Advantages

Marketing Strategies

could easily be implemen

ted

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Advantages

Can be adopted to

environmental changes

and customer

needs

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Advantages

Can be used to

train and specialize employee

s

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Disadvantages

Difficult to attain

the benefits of centralizati

on

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Disadvantages

Difficulty in

coordination between department

s

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Disadvantages

Waste of resources due to repetitive work

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Disadvantages

Need to have

specialized

employees

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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

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Advantages

High level of attention to the products

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Advantages

Specialization

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Advantages

Better service to the

customers

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Advantages

Good for

volatile markets

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Advantages

Suitable to train employ

ees

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Advantages

Clear responsibilities to

each departme

nts

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Disadvantages

Conflict between

organizational goals

and department

al goals

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Disadvantages

Not suitable

for all the organizat

ions

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Disadvantages

Difficulty in

coordination of

activities

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Departmentalization by Location

• Consideration is on transport cost• Requirement to be close to customers• Looking for cheap labour• Access to resources

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Marketing Manager

Regional Manager Western Province

Regional Manager Southern Province

Regional Manager Central Province

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Advantages

More focused

on customer

s in territory

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Advantages

Economical

advantage

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Advantages

Close relations with custom

ers

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Advantages

Close relations with custom

ers

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Advantages

Quick response

to customer behaviou

r

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Advantages

Ideal training

for manage

rs

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Disadvantages

Difficulty in control

and coordinat

ion

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Disadvantages

High cost

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Disadvantages

Difficult for top management to control

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Disadvantages

Wastage of

resources due to

repetitive work

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Disadvantages

Wastage of

resources due to

repetitive work

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Disadvantages

Can not be

applied to every organizat

ion

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Matrix Organization

Temporary organizational

structures.

For specific projects.

To be completed in a specific

time.

Structure gets cancelled once the

goals are accomplished.

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Matrix Organization

Example• Construction of a housing complex• Doing a research project to develop a new

product

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Features of Matrix Organizations

• SMART goals and projects

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• The project must be a separate one. It should not disturb the usual activities of the organization.

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• Project Manager should coordinate with specialists

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• Staff members attached to the project should report the project manager.

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• They should report to their immediate supervisor for general matters.

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• Transfers within projects are possible.

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Matrix Structure

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Advantages of Matrix Organizational Structure

• Flexibility• Cooperation between individuals and teams• Cost effectiveness• Proper utilization of skills • Ability to face environmental changes

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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.

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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.

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Advantages of a tall structure are the disadvantages of a flat structure

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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.

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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-

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Narrow Span of Control

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Wide Span of Control

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Unity of Command

• One superior to give orders to one employee• Clear instructions.• Higher efficiency.• Matrix organizations – No unity of command.

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Unity of Command

• One superior to give orders to one employee• Clear instructions.• Higher efficiency.• Matrix organizations – No unity of command.

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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

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Unity of Objectives

• The activities of the organization must be in line with the goals of the organization.

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Unity of Objectives

• The activities of the organization must be in line with the goals of the organization.

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Management by Expectations

• Policy by which management devotes its time to investigate only those situations in which actual results differ significantly from planned results.

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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.

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Responsibility

• A subordinate should be made responsible to the superior only for the level of authority given to the subordinate

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Accountability

• The subordinates are answerable to their superiors for the work they carry out.

• Accountability flows upwards• Authority flows downward.

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Authority

Line Authority Authority of the managers who are directly involved in attaining the

primary goals of the organizations

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Authority

Staff Authority Managers in supporting services to the managers are called staff managers

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Authority

Functional Authority

Authority given to functional managers to give orders to another functional manager who is not under him

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Authority

Charismatic Authority

Authority possessed by a person for his personality and leadership qualities

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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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