4 Module

th

Organisations
 Definitions of Organisation:

-An organization is a collection of people working together in a

coordinated and structured fashion to achieve one or more goals.

- “Organizations are social entities that are goal-oriented; are

designed as deliberately structured and coordinated activity
systems, and are linked to the external environment.”
 Organisations role in society

• Organizations exist to allow accomplishment

of work that could not be achieved by people
alone.
• As long as the goals of an organization are
appropriate, society will allow them to exist
and they can contribute to society.
 6 ‘M’s of Organiastion

Machine
Men

Money
6 ‘M’ s of Materials
Organiastion

Market
Methods
• Organizations exist to allow accomplishment of work that
could not be achieved by people alone.

• As long as the goals of an organization are appropriate,

society will allow them to exist and they can contribute to
society.

• Organizations Requires Management

• Organizations use management to accomplish the work that is

required to achieve the goals.
 The Nature of the
Organizational Environment
• The external environment is everything
outside an organization that might affect it.

• The internal environment consists of

conditions and forces within the organization.
The External Environment

• The general environment is the nonspecific

dimensions and forces in its surroundings that might
affect its activities.

• The task environment consists of specific

organizations or groups that are likely to influence an
organization.
The Internal Environment

• Board of Directors
• Employees
• Culture
 1.Board of Directors

A board of directors is only required of organizations that are

incorporated; however, many other firms have them.

-The board of directors is elected by the stockholders and is

charged with overseeing the general management of the firm to
ensure that it is being run in a way that best serves the
stockholders‘ interests.
2.Employees

• When the organization's employees hold the

same values and goals as its management,
everyone wins.
• However,when managers and employees work
toward different goals everyone suffers.
• The composition of the organization's employees
is changing, and managers must learn how to
deal effectively with these changes.
3.Culture

• The culture of an organization is the set of values that helps its

members understand what the organization stands for, how it
does things, and what it considers important.

• A strong organizational culture can shape the firm's overall

effectiveness and long-term success and help employees to be
more productive.
Process of organization :

1.Process of organization

2.Determination of objectives.

3. Division of Activities.

4.Fitting Individuals.

5.Developing relationships. Co-ordination.

Advantages of organization :
1.Effective Management.

2.Co-ordination and communication.

3.Growth and diversification.

4.Optimum use of technical innovations.

5.Optimum use of human resource.

6.Balance emphasis to various activities.

Principles of organization :

-Principle of division of work.

-Principle of unity of command.

-Principle of span of control.

-Principle of objectives.

-scalar chain.

-Principle of delegation.

-Principle of absoluteness of responsibility.

 Principle Cont………

-Principle of parity of authority and responsibility.

-Principle of co-ordination.

-Principle of flexibility .

-Principle of efficiency.

- Principle of continuity.

-Principle of exception.
Organizational layers

• Organizational layers are the levels of management in an

organization.

– Flat organizations have few layers and have wide spans of

management.

– Tall organizations have many layers and have narrow spans of

management.
What is Theory?

• Theory is: “a plan or scheme existing in the mind only, but

based on principles verifiable by experiment or observation”
Three Theories of Organization
•Classical Theory or Bureaucracy

•Neoclassical Theory or Human Relations Movement

• System Theory
 3 Theories of Organizations

Classical Theory System theory

Neoclassical Theory
4 Basic components 5 parts of an
Critique of the 4
to any Organization organization
structural principles
of classical Theory
1.System of 1.Individuals
differentiated
1.Functional
activities 2.Formal org.
2.Scalar
2.People 3.Small groups
3.Line/Staff
3.Cooperation 4.Status & Roles
toward a goal
4.Span of control
5.Physical setting
4.Authority
Main teachings of the Classical Theory:

1. Basic components: A system of differentiated activities,

People, Cooperation toward a goal, Authority.

2. Structural principle: Functional, Scalar (Unity of command),

Line/staff, and Span of Control principle.

3. For eg;- F.W .Taylor emphasized on division of labour, fixing

everybody's work for the day 7 functional foremanship 7 his
theory is also called as “machine theory”

4. According to William G.Scott- Classical Organisation Theory

is built around four key pillers, namely-
a. Divison of labour
b. Scalar & functional Process
c. Structure
d. Span of control
1. Division of work: Total workload is divided into tasks that can
be performed logically and comfortably by individuals or
groups.
2. Departmentalisations: To combine tasks in a logical and
efficient manner
3. Organisational hierarchy: Reporting structure and logic
4. Co-ordination: Setting up mechanism for integrating
departmental activities into coherent whole and monitoring
the effectiveness of integration.
These Four aspects are considered as ‘building blocks’ of an
organisation.
2.Neoclassical Theory (Human Relations Approach)

This theory was carried by George Milton Mayo 7 his associates at

Hawthrone Works of Western Electric Company, Chicago during
during 1927-32.

- This theory concentrated more on applying behavioral science

over human beings in organisations.
Features of Neo- Classical Theory:

1. It is social system composed of numerous interacting parts.

2. Informal organisations exist with the formal organisations,

both are affected by & each of the other.

3. Human behavior is interdependant & his behaviour can be

predicted in terms of social factors at work.

4. Many socio-psychological factors, operate to motivate

human beings at work as motivation is a complex process.

5. There is need to reconcile the goals of individulas, with

those of organisations.

6.team work is essential for higher productivity.

Neoclassical Theorists did not agree with classical theorists in
many ways e.g.(Human Relations Approach)

• Division of labor decreases job meaning

• Value of distinction between line and staff

• Span of control is more than a number

• Not only formal authority can influence people

Improvements &modifications over Classical Structure:

1. flat Structure

2.Decentralistion

3.Informal Organisation
3.Modern organisation theory or General System Theory

-Organizational System is composed of: Individuals, Formal

Organization, Small Groups, Status and Role, Physical Setting

-All parts in the system are interactive in order to achieve

coordinated goals of the system.
ORGANISATIONAL DESIGN AND STRUCTURE:

Organisational design: The determination of the

organisational structure that is most appropriate for the
strategy, people, technology and tasks of the organisation.

Organisational structure: Way in which an organisation’s

activities are divided, organised and co-ordinated.

Organising is ongoing process. Has four fundamental steps

1.HIERARCHY:
-Span of management control: No. of people and departments
that directly report to a particular manager.
-Chain of command: Plan to specify – who reports to whom
Hierarchy is a pattern of multiple levels. Senior ranking manager is
at the top of the hierarchy responsible for the operations of the
organisation.
-Choosing appropriate hierarchy: Tall and flat hierarchy
-Changes in Hierarchy: Pursuit of quality has resulted in changes in
hierarchy.
2.DIVISION OF WORK:
-The breakdown of a complex task into components so that
individuals are responsible for a limited set of activities instead
of the task as whole.
-Division of work – fosters specialisation and in turn increase
productivity.
-People can choose positions that match their talents and
interest
Adam Smith – (‘Wealth of Nations’) – specialisation of labour in
the manufacturing process – ex: Pin
Disadvantages:
oEach person is responsible for small, discrete job
oIndividuals are responsible for only one step
oMay result in alienation – absence of self control and
boredom

3.DEPARTMENTALISATION: Group of people work together to

carryout work activities that are similar and logically
connected.
Involves grouping of jobs and people
4.CO-ORDINATION:
It is the process of integrating the activities of separate
departments in order to pursue organisational goals
effectively.
Without co-ordination, people will focus of organisation
goals and pursue their own departmental interests
Depends on nature of the tasks performed and the degree
of interdependence of people in the various units.
Non-routine and unpredictable tasks demand high degree
of co-ordination.
Approaches to achieving effective co-ordination:
-Communication is key
-Co-ordination depends on acquisition, transmission, and
processing of information
-Uncertainty of tasks require more information.

Approaches are –
1. Using Basic Management Techniques
2. Boundary spanning
3. Reducing the need for co-ordination.
5.Organizational Structure

-Organizational structure refers to the formalized arrangement of

interaction between and responsibility for the tasks, people, and
resources in an organization

-It is most often seen as a chart, often chart, with positions or

titles and roles in cascading fashion

-It
is a framework within which an Organization arranges it’s
lines of authorities and communications and allocates rights and
duties.
1. Line Organisation

-It is the most oldest and simplest method of administrative

organization. According to this type of organization, the
authority flows from top to bottom in a concern.

- The line of command is carried out from top to bottom. This is

the reason for calling this organization as scalar organization
which means scalar chain of command is a part and parcel of
this type of administrative organization.

- In this type of organization, the line of command flows on an

even basis without any gaps in communication and co-
ordination taking place.
 2. Line & staff organisation

-Line and staff organization is a modification of line

organization and it is more complex than line organization.

-According to this organization, specialized and supportive

activities are attached to the line of command by appointing
staff supervisors and staff specialists who are attached to the
line authority.

-The power of command always remains with the line

executives and staff supervisors guide, advice and council the
line executives.
iii.Simple Organizational Structure

-A simple organizational structure one where there is an

owner and a few employees and where the arrangement
of tasks, responsibilities, and communication is highly
informal and accomplished through direct supervision

-This type of structure can be very demanding on the owner-

manager Most businesses in this country and around the
world are of this type
iv.Functional Organizational Structure

-A functional organizational structure is one on which the tasks,

people, and technologies necessary to do the work of
the business are divided into separate “functional ” groups (such
as marketing, operations, and finance) with increasingly
formal procedures for coordinating and integrating their activities
to provide the business ’s products and services
v. Divisional Structure

-A divisional organizational Structure is one in which a set of

relatively autonomous units, or divisions, are governed by a
central corporate office but where each operating division has
its own functional specialists who provide products or services
different from those of other divisions

-This expedites decision making in response to varied

competitive environments

-The division usually is given profit responsibility

Divisional Structure
vi.Strategic Business Unit

-The strategic business unit(SBU) is an adaptation of the

divisional structure whereby various divisions or parts of
divisions are grouped together based on some common
strategic elements, usually linked to distinct product/market
differences

-The advantages and disadvantages of the SBU form are very

similar to those identified for divisional structures
vii. Holding Company Structure

-A final form of the divisional organization is the holding company

structure, where the corporate entity is a broad collection of often
unrelated businesses and divisions such that it (the corporate
entity) acts as financial overseer “holding ” the ownership interest
in the various parts of the company but has little direct
managerial involvement
viii.Matrix Organizational Structure

-The matrix organizational structure is one in which functional

and staff personnel are assigned to both a basic functional area
and to a project or product manager

-The matrix form is intended to make the best use of talented

people within a firm by combining specialization and product-
project specialization
Matrix Organization
ix. Product-Team Structure

-The product-team structure Seeks to simplify and amplify the

focus of resources on a narrow but strategically important product,
project, market, customer, or innovation

-The product-team structure assigns functional managers and

specialists to a new product, project, or process team that is
empowered to make major decisions about their product
Trends Affecting Organizations in the 21st Century

Globalization

 The Internet

Speed
6.Span of Management
• The number of subordinates who report to a particular
manager

– A wide span of management exists when a manager directly

supervises a very large number of employees.

– A narrow span of management exists when a manager directly

supervises only a few subordinates.
7.Power

-Power is the capacity of a person, team, or organization to

influence others.

-The potential to influence others

-People have power they don’t use and may not know they
possess

-Power requires one person’s perception of dependence on

another person
Formal Power

It is established by an individual’s position in an organization;

conveys the ability to coerce or reward, from formal authority,
or from control of information.

a. Coercive Power
A power base dependent on fear.

b. Reward Power
Compliance achieved based on the ability to distribute rewards
that others view as valuable

c. Legitimate Power
The power a person receives as a result of his or her position in
the formal hierarchy of an organization.
d. Information Power

Power that comes from access to and control

over information.
8. Authority

• The right to perform a task or give orders to someone else.

• The organization authorizes the supervisor to carry out certain
tasks.
• The supervisor has the authority to act in behalf of the
organization in matters of directing work and hiring and
disciplining employees.
• Authority of the supervisor is legitimized by the organization
• That is, the organization stands behind the supervisor in his or
her decisions.
9. Centralisation