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FUNDAMENTALS OF ORGANISING (KEY ORGANISING CONCEPTS/CHARACTERISTICS OF…
FUNDAMENTALS OF ORGANISING
DEFINITION
Deployment of organisational resources to achieve strategic goals
KEY ORGANISING CONCEPTS/CHARACTERISTICS OF ORGANISATION STRUCTURE
Work Specialisation
Degree to which
organisational tasks are subdivided into separate jobs
Employees within each department
perform tasks
that are
relevant to their specialised function
When work specialisation is extensive, employees specialise in a single task
Small jobs => More efficient
Work specialisation is visible on an automobile assembly line
Disadvantages
Too much specialisation causes
isolation of employees
Creates
separation & hinders coordination
Chain of Command
Illustrates the authority structure of organisation
Unbroken line of authority that links all employees in organisation
Shows who reports to whom
Unity of Command
Each employee is held accountable to only one supervisor
Scalar Principle
A clearly defined line of authority in organisation that includes all employees
Authority
is the
formal & legitimate
right of manager
to make decisions/issue orders & allocate resources to achieve desired outcomes
Authority is vested in organisational positions, flows down the vertical hierarchy & accepted by subordinates
Responsibility
is the duty to perform tasks as assigned
Accountability
is the mechanism through which
authority & responsibility are brought into alignment
People with authority & responsibility are subject to reporting & justifying task outcomes to those above them
Delegation
is the process managers use to
transfer authority & responsibility to positions below them in the hierarchy
This is to
provide maximum flexibility
to meet customer's needs & adapt to shifts in the environment
Delegating decision-making to lower-level managers can be
highly motivating & improve speed/flexibility & creativity
Centralisation & Decentralisation
Pertain to
hierarchical level
at which decisions are made
Centralisation means
decision authority
is
located near the top
of organisation
With decentralisation, decision authority is
pushed downwards
to lower organisational levels
Managers should diagnose organisational situation & select decision-making level that will best meet organisation's needs
Factors that influence centralisation
VERSUS
decentralisation
Greater change & uncertainty in environment
are
associated with decentralisation
(Natural disaster)
Amount of centralisation & decentralisation should fit the firm's strategy
(Walt Disney adopts decentralisation approach when buying small companies)
In times of crisis/risk of company failure, authority may be centralised at the top
(Honda could not get agreement among divisions about new car models and the President made the decision himself)
Line & Staff Authority
Line
departments perform task that
reflect organisation's primary goal & mission
Staff
departments have an
advisory relationship with line departments
, typically include marketing, labour relations, research, accounting & human resources
Line Authority
means people in management positions have
formal authority to direct & control immediate subordinates
Staff Authority
is
narrower
& includes
right to advise, recommend & counsel
in staff specialists' area of expertise
Span of Management
Number of employees reporting to a supervisor
Determines how closely a supervisor can monitor subordinates
Factors associated with less supervisor involvement, thus larger span of control
Work performed
by subordinates is
stable & routine
They perform
similar work tasks
Concentrated in a
single location
Highly trained
Rules & procedures defining task activities
are available
Support systems & personnel
are available
for manager
Little time required in nonsupervisory activities
Manager's personal preferences & styles favour a large span
Average span of control used determines whether structure is tall/flat
Tall structure
has overall
narrow span
&
more hierarchical levels
Flat structure
has a
wide span
,
horizontally dispersed
&
fewer hierarchical levels
Disadvantages
Too many hierarchical levels & narrow spans of control will result in
routine decisions are made too high in organisation
Pulls higher-level executives away
from important & long range strategic issues
Limits creativity, innovativeness & accountability of lower-level managers
Formalisation
Extent to which
rules & procedures are followed
in an organisation
Degree to which organisations
standardise behaviour
through rules/procedures/formal training
Advantages
Makes process of succession routine
Increase rationality of organisation
Make explicit & visible structure of relationship among organisational members
Disadvantages
Employees are not allowed to exercise their own judgement
Discrimination of work load between employees
Formal structures are the norms & behaviours that exist regardless of individuals involvement
THE ORGANISING PROCESS
Step 1: Consider Organisational objectives
Organising should be directed at arranging people & allocating resources in the best way possible to support organisation's objectives
Step 2: Determine Types of Work Activities
In a manufacturing company, raw materials must be purchased & product made & sold
Each phase involves hiring & supervising, processing paper work & others
Activities must be distinguished from one another before organising process continues
Step 3: Departmentalisation
Purpose is to contribute to more effective & efficient use of resources
Step 4: Design Hierarchy of Relationship
Requires determination of both vertical & horizontal operating relationship of organisation as a whole
Result in creation of complete organisation structure
Step 5: Set up Mechanism for Coordination
For integrating departmental activities into a coherent whole
DEPARTMENTALISATION
Basis for
grouping positions
into departments & departments into the
total organisation
Managers make choices about hot to use chain of command to group people together to perform their work
TRADITIONAL APPROACHES
Rely on the
chain of command
Define departmental groupings & reporting relationships along the hierarchy
Functional Approach/Unitary structure
Activities are grouped together by
common function
from bottom to top of the organisation
They position into departments
based on similar skills, expertise, work activities & resource use
Can be thought of as
departmentalisation by organisational resources
Advantages
Efficient use of resources (EOS)
In-depth skill specialisation & development
Top manager direction & control
Disadvantages
Poor communication
across
functional departments
Slow response to external changes (lagging innovation)
Decisions concentrated at top of hierarchy, creating delay
Divisional Approach/Multi-divisional
Departments are grouped together
based on similar organisational outputs
Separate divisions can be organised with responsibility for individual products/services/product groups/major projects,businesses/divisions
Advantages
Fast response/flexibility in unstable environment
Fosters concern for customer needs
Excellent coordination across functional departments
Disadvantages
Duplication of resources
across divisions
Less technical depth & specialisation
Poor coordination
across divisions
Division by Product/Services
Concerned with organising according to the
type of products being produced/sold by firms
(refer to chart)
Division by Geographical Region
Used by organisations with
physically dispersed or non-interdependent operations/markets
All functions in specific region
report to the same division manager
Useful when a factory must be located as close as possible to sources of raw materials/major markets (refer to chart)
Division by Customer
Provide
different services to different types of customers
EXAMPLE
: Diversified manufacturing company which has industrial & consumer divisions (refer to chart)
Matrix Approach
Combines
both functional & divisional structures
, in the same part of the organisation
A way to
improve horizontal coordination & info sharing
Unique feature =>
Dual lines of authority
EXAMPLE
: US operation of Starbucks uses geographic divisions for Western/Pacific, Northwest/Mountain, Southeast/Plains, Northeast/Atlantic
Supports a formal chain of command for both functional & divisional relationships
Advantages
Efficient use of resources
Flexibility/adaptibility to changing environment
Interdisciplinary cooperation, expertise available to all divisions
Disadvantages
Frustration & confusion from dual chain of command
High conflict between 2 sides of matrix
Many meetings, more discussion than action
INNOVATIVE APPROACHES
Engaged to
meet changing organisational needs
in a turbulent
global environment
Team Approach
Most widespread trend in departmentalisation
Gives managers a
way to delegate authority
,
push responsibility to lower levels & be more flexible & responsive
in a complex & competitive global environment
An approach is through
cross-functional teams
which consist of employees from various functional departments who are responsible to meet as a team & resolve problems
Advantages
Reduced barriers & increased compromise among departments
Shorter response time & Quick decisions
Better morale & enthusiasm from employees
Disadvantages
Dual loyalties & conflict
Time & resources spent on meetings
Unplanned decentralisation
Network Approach
Extends the idea of
horizontal coordination & collaboration beyond boundaries of the organisation
Some industries (vertically integrated with hierarchical organisations) are giving way to loosely interconnected groups of companies with permeable boundaries
EXAMPLE
:
Outsourcing
(farming out certain activities like manufacturing/credit processing)
Advantages
Can draw on expertise worldwide
Highly flexible & responsive
Reduced overhead costs
Disadvantages
Lack of control & weak boundaries
Greater demands on managers
Weaker employee loyalty
ORGANISATION CHART
Depicts major positions & departments
in the organisation
Depicts chain of command
between managers & subordinates
Number of
subordinates for each manager
Official channels for communication
The way
work is grouped
Type of work
being performed