Organization Structures and Emerging Concepts

Copyright © 2017 by McGraw Hill Education (India) Private Limited
Principles of Management, 6e
P C Tripathi & P N Reddy
Chapter 7
Organization
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Learning Objectives
 Examine the meaning, characteristics and typology of organizations
 Learn the principles and process of organizing
 Understand the meaning and significance of the span of management
and the factors governing it
 Describe the advantages and disadvantages of different bases of
departmentalization
 Analyse the advantages and disadvantages of two broad categories of
organisation structures
 Present the newly emerging organisation concepts and the
international organization structures

What is an Organization?
 Characteristics of an Organization - Every organization has:
 a purpose, goal or goals
 clear concept of the major duties or activities
 classification of activities into jobs
 establishment of relationships between these jobs
 Typology of Organizations
 Organizations which benefit their owners
 Organizations which benefit their members
 Organizations which benefit their clients
 Organizations which benefit the whole society
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Process of Organizing
 Consideration of Objectives
 Deciding Organisational Boundaries
 Grouping of Activities into Departments
 Deciding which Departments will be Key Departments
 Determining Levels at which Various Types of Decisions are to be
Made
 Determining the Span of Management
 Setting up a Coordination Mechanism
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Principals of Organizing
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 Objectives
 Specialization
 Span of Control
 Management by Exception
Principle
 Scalar Principle
 Unity of Command
 Delegation
 Responsibility
 Authority
 Efficiency
 Simplicity
 Flexibility
 Balance
 Unity of Direction
 Personal Ability
 Acceptability

Span of Management
 Meaning and Importance
Decreasing the span of management increases the number of levels
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Span of Management
 What is an Appropriate Span?
 Direct one-to-one relationships
 Direct group relationships
 Cross-relationships
 Graicunas’ formula:
 It ignores the frequency and importance of relationships
 The actual span of management is determined by a number of
factors which have not been taken into consideration while
framing the formula
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Span of Management
 Factors Governing the Span of Management (Contingency
Approach)
 Ability of the Manager
 Ability of the Employees
 Type of Work
 Well-defined Authority and Responsibility
 Geographic Location
 Sophisticated Information and Control System
 Level of Management
 Economic Considerations
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Departmentalization
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Process Departmentalization
Simple form of grouping activities
Promotes excellence in
performance
Promotes economies of scale
Fosters sub-goal loyalties
Not a good training ground
Unsuitable for large organizations
Evoke conflicting interpretations
Organizational arthritis
“common pot” accounting
Efficient use of costly equipment
Follows the principle of
specialization
Suitable for organizations with many
processes
Feeling less responsible
Not a good training ground
Sequential technology
Difficult to compare
Devote extra attention
 Business or Organizational Function
 Technology

Departmentalization
Purpose Departmentalization
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 Products
 Customers
 Regions, Territory or Location
 Division
 Time
 Combined Base
 Choice of a Suitable Base
 Specialization
 Coordination
 Economy
 Whole Task

Departmentalization
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President
Tractor
Department
Appliance
Department
Eastern
Plant
Southern
Plant
Western
Plant
Generator
Department
Finance
Production Sales
A Combined Base Organization

Departmentalization
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A Typical Matrix Organization

Departmentalization
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Parallel Departmentalization
 When the organization of several retail outlets, branches and
plants doing similar work as the parent company use the same
departmental set-up as that of the parent company it is called
parallel departmentalization.

Organization Structure
 Organization Chart
 Organization Manuals
 Mechanistic and Organic
Structures
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Tall organization
Flat Organization

What Type of structure is Best
(Contingency View)
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Collateral Organizations: This concept says that a manager should develop a
collateral mode of functioning to which he should shift, to operate in tandem
with the problem without displacing the existing classical or behavioural formal
structure.
 Environment
 Culture and history
 Task
 Technology
 Strategy
 Span of Control
 Form
 Availability of Finance and
Personnel
 Managerial Characteristics
 Employee Characteristics

Emerging Organization Structure
 Network Organizations
 Involves the blurring of boundaries
 Coordination between various firms
 Decision rights are pushed
 Control is exercised by market mechanisms
 Virtual Organizations
 Technology
 Opportunism
 No borders
 Trust
 Excellence
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Committees
A committee is a group of people who have been formally assigned some task
or some problem for their decision and/or implementation.
Suggestions for Making Committees Effective:
 Number of members should not be very large
 Authority should be carefully spelled out
 Approximately equal formal status The linking pin
 Precedence to organizational interests
 Chairman should plan and conduct the meeting with firmness and fairness
 Periodic review
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Teams
A team is a small group of people with different backgrounds, skills
and knowledge, who are drawn from different functional areas of the
organisation, to work together on a specific and defined task.
Characteristics of a Team
 Skill Diversity
 A clear and sharply defined objective
 Leadership is task oriented
 As a whole is responsible for the task
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Teams
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Receptive to experimentation
Best means available for overcoming functional
insulation and parochialism
Assumes responsibility of the whole task
No communication overload on the top executives
Accomplishes more than the sum total of what members
are capable of accomplishing individually
Demands continuous attention to its management
Social loafing
Sucker effect

Teams
Difference between Traditional Formal Work Groups and Teams
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Formal Work Group Team
Is on the basis of hierarchy of superior
subordinate relationship and random skills
Is on the basis of complementarities of skill
Leadership and composition are more or less
permanent
Leadership and composition change as per the
situation
Management is by direction and control Management is by integration and self discipline
Communication is up and down between
superior and his subordinate
Communication is lateral
Members vie for each other for power,
prestige, recognition and personal autonomy
Members collaborate with each other since
rewards are dependant on team effort
Decision are taken on the basis of simple
majority
Decisions are taken unanimously
Purpose is same as the organization Purpose is specific

Teams
 Types of Teams
 Project Teams
 Problem-solving Teams
 Permanent Work Teams
 Four-corners of the superordinate goal.
 Establishes the quantity and the quality of its output.
 The team makes its own internal distribution of tasks.
 Decides its own membership.
 Makes its own decision.
 Decides how the work operations should be performed.
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International Organizational Structures
Important factors affecting an MNE’s choice of structure:
 Strategy
 Home and host country environments
 Nature and size of its business
 Nature and size of its business
 The human resources available
Many companies, which had earlier established their footholds in the host
countries by creating subsidiaries, later on shifting to international division
structures to look after their foreign operations, international division
structures shifting to global functional structures, global functional
structures to global geographic structures, global geographic structures to
global product structures and global product structures to matrix structures.
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Organization Structures and Emerging Concepts

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