1. 1 Organizational structure and design ? An organization is a collection of people working together in a coordinated and structured fashion to achieve one or more goals. Organization A consciously coordinated social unit, composed of two or more people, that functions on a relatively continuous basis to achieve a common goal or set of goals A social arrangement for the controlled performance of the collective goals

2. 2 Organizational structure and design ? Social arrangements: Organizations are collection of peoples and machines in a structured way Organization Collective goals: Existence of organizations depend up achievement of common goals Controlled performance: Controlled performance means deliberate allocated on resource between organization members which includes: Resource allocation Control function

3. 3 Organizational structure and design ? Organizations are strongly influenced by the people that form part of them. Organizations can take in part of the personality of the people within them and their attitudes, perceptions and behaviors affect how an organization will operate. Organization and people 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 Organization’s Role in Society

4. 4 Organizational structure and design ? Together they achieve what cannot achieve individually Overcome environmental and biological limitations Increase productively due to: Work specialization / division of labour Exchange Synergy: Together we grow better Increased knowledge development and enhancement Transaction – cost economies approach to organization: Saving in time Reduce cost Why organizations exist?

5. 5 Our lives become, for better and for worse, a society of organizations. We are born in organizations and are educated in organizations that we can later work in organizations. At the same time, organizations supply us and entertain us, they govern us and harass us. Finally we are buried by organizations (Henry Mintzberg). Images and perception of organizations Organizational structure and design ? 1.Organizations are machines 2.Organizations are biological organism 3.Organizations are human brains 4.Organizations are cultures or subcultures 5.Organizations are sub systems 6.Organizations are political systems 7.Organizations are psychic prisons 8.Organizations are systems of change and transformation 9.Organizations are instruments of domination Images/Metaphors of 0rganizations: Gereth Morgan

6. 6 Organizational structure and design ? By ownership: Private, private By control: Managers, trustees Activity: Retailer, manufactures, hospital Legal structure: Partnership, company Objective: Commercial, non commercial Accountability Source of finance: Debt, equity Region: National or international Classification of organizations

7. 7 Organizational structure and design ? Business organizations Non business organizations Basic Classification of organizations Business organizations Definition: Legal Capital Profit objective Types : Sole - proprietorship Partnership Company Activities: Manufacturing Mining Energy Retailing Services Services are intangible Services are inseparable Services are heterogeneous Intellectual production

8. 8 Organizational structure and design ? Public organizations Non profit organizations Non business organization Public organizations Definition: Run by government Capital Non-profit objective Diverse nature Types : Regulatory bodies Health institutions Educational institutions Policy making bodies Etc Characteristics Accountable to parliament Command resources Base on fairness Equality Resource based not price based Basic Classification of organizations

9. 9 Organizational structure and design ? Public organizations Non profit organizations Non business organization Non profit organizations Definition: Formed for purpose Capital Non-profit objective Public service Types : Clubs Trade unions Associations Charities Professional association Basic Classification of organizations

10. 10 What is Organizational Structure ?  Bringing the functional units of an organization into a well-conceived structure  Assigning authority and responsibility to individuals  Bringing the functional units of an organization into a well-conceived structure  Assigning authority and responsibility to individuals Organizational structure: Divides the jobs Group the jobs into functional units Coordinate the jobs Assign authority Assign responsibility Ensure accountability

11. 11 Elements of Organizational Structure ? A component of organization structure that involves having each discrete step of a job done by a different individual rather than having one individual do the whole job It is division of labour A component of organization structure that involves having each discrete step of a job done by a different individual rather than having one individual do the whole job It is division of labour 1 - What is Work Specialization ? Objectives: Availability of experts Efficient use of skills Specialization in training Specialized use of equipment and infrastructure

12. 12 Elements of Organizational Structure ? Systematic way of grouping the jobs under a specific head / function which were indentified during work specialization process It is the basis for grouping the jobs Systematic way of grouping the jobs under a specific head / function which were indentified during work specialization process It is the basis for grouping the jobs 2 – Departmentalization Basis for departmentalization: Function Product Process Customer

13. 13 Elements of Organizational Structure ? Chain of Command The continuous line of authority that extends from the highest levels in an organization to the lowest levels and clarifies who reports to whom Authority : The rights inherent in a managerial position to give orders and expect them to be obeyed Responsibility: An obligation to perform assigned activities Chain of Command The continuous line of authority that extends from the highest levels in an organization to the lowest levels and clarifies who reports to whom Authority : The rights inherent in a managerial position to give orders and expect them to be obeyed Responsibility: An obligation to perform assigned activities 3- What is Chain of Command ? Unity of Commend The management principle that no person should report to more than one boss Unity of Commend The management principle that no person should report to more than one boss 4- Unity of command

14. 14 What are the Elements of Organizational Structure ? The number of subordinates a manger can direct efficiently and effectively 5-What is the span of control ? Factors affecting span of control: Managerial capability Nature of employees group Nature of work Task complexity Standardisation of work Wide span of control: Reduces cost Speedup decision making Gives flexibility Empowers manager Narrow span of control: Expensive as add more levels of management Lead to difficulty in communication Slow decision making Long vertical structure that might lead to bureaucratic behaviour

15. 15 Centralization A function when decision-making authority is placed higher level Decentralization The pushing down of decision-making authority to the lowest levels of an organization Centralization A function when decision-making authority is placed higher level Decentralization The pushing down of decision-making authority to the lowest levels of an organization 6- Centralization and Decentralization What are the Elements of Organizational Structure ? Situations of centralisation : Normality in environment Incapable lower managers Non willingness of lower management to participate Importance of decision Risky situation Keeping uniformity Large company Uniform implementation of strategy Situations of decentralisation : Complex environment Capable lower managers Willingness to participate Minor decision Geographical dislocation Required for effective implementation of strategy

16. 16 6- Centralization and Decentralization What are the Elements of Organizational Structure ? Merits of centralisation : Better coordination Overall solution Balanced allocation of resources Better and reliable decision as they made at top by experienced managers Low cost as less managers are engaged Quick and centralized decision in crises Standardised polices Situations of decentralisation : Less load at top management Motivates lower management Speedy decision are made locally Decision in view of local context Develops lower management

17. 17 The degree to which jobs within organization are standardized and extent to which employees is guided by rules and procedures The degree to which jobs within organization are standardized and extent to which employees is guided by rules and procedures 7- Formalization What are the Elements of Organizational Structure ? Situations of centralisation : Normality in environment Incapable lower managers Non willingness of lower management to participate Importance of decision Risky situation Keeping uniformity Large company Uniform implementation of strategy Situations of decentralisation : Complex environment Capable lower managers Willingness to participate Minor decision Geographical dislocation Required for effective implementation of strategy

18. 18 8- Flat or tall What are the Elements of Organizational Structure ? CEO Divisional head Departmental head Section head Supervisor Team leader Assistant manager Worker Tall structure An organization with large number of management levels and low span of control Tall structure An organization with large number of management levels and low span of control Merits : Narrow span of control Small groups with more participation from each team member Better career planning Quick promotion Demerits : Low delegation Control over innovation Long channel High costs Slow decision making

19. 19 8- Flat or tall What are the Elements of Organizational Structure ? CEO Departmental head Supervisor Worker Flat structure An organization with small number of management levels and high span of control Flat structure An organization with small number of management levels and high span of control Merits : High delegation Low cost Speedy communication Small channel Demerits : Overworked managers Non specialised managers Low morale Low coordination Less time for planning and more involvement in supervision

20. 20 Two basic Categories of Organizational Structures Mechanistic Organization The bureaucracy; a structure that is high in specialization, formulization, and centralization Organic Organization A structure that is low in specialization, formulization, and centralization Mechanistic Organization The bureaucracy; a structure that is high in specialization, formulization, and centralization Organic Organization A structure that is low in specialization, formulization, and centralization Various types of organizational structures Mechanistic organization: High work specialization Rigid departmentalization Narrow span of control due to tall structure High formulization Centralization Organic organization : Low work specialization flexible departmentalization Low direct supervision Less formulization Decentralization

21. 21 Types of organizational structure ? An organization that is low in specialization and formulization but high in centralization This Organization reflects the owner as president with all employees directly reporting to him An organization that is low in specialization and formulization but high in centralization This Organization reflects the owner as president with all employees directly reporting to him Simple Structure Employee2 President Employee 3 Employee 4 Employee 5 Employee 1

22. 22 ADVANTAGESDISADVANTAGES Allows the division of labor / work specialization Avoids duplication of tasks Suitable for centralized or one activity Helps top management in coordinating and controlling the entire organization Clarifies the roles/responsibilities of departments and employees Provides clear accountability at both the departmental and individual level Creates a rigid and slow moving organization Leads to a loss of innovation and innovation thinking as employee focus on following correct procedures and protocol Does not allow for sharing of information / ideas across departmental lines (which is viewed as being especially important in today’s knowledge economy) Focus on internal rather external side of the department Plant Manager Manager Engineering Manager Engineering Manager Accounting Manager Accounting Manager MIS Manager MIS Manager Human Resources Manager Human Resources Manager Purchasing Manager Purchasing An organization in which similar and related occupational specialties are grouped together Process of grouping the activities by functions An organization in which similar and related occupational specialties are grouped together Process of grouping the activities by functions Functional Structure Types of organizational structure ?

23. 23 ADVANTAGESDISADVANTAGES Clear distinction of technical and support divisions Clear distinction of specialized functions and common functions Help in better hr managements based on specific departmental need Economies from processes are possible Coordination due to various process is difficult Conflict may arise Use is possible in only process oriented organizations Plant manager Milling Assembling Sanding Finising Inspection Types of organizational structure ? An organization in which activities reflect a process and so departmentalized in form of a process An organization in which activities reflect a process and so departmentalized in form of a process Process based Structure Marketing Personnel Purchasing Finance

24. 24 Manufacturing Supply and Distribution Planning and Economics Marketing Vice President Lubricants And Waxes Vice President Lubricants And Waxes Vice President Fuels Vice President Fuels Vice President Chemicals Vice President Chemicals President Manufacturing Supply and Distribution Planning and Economics Marketing Manufacturing Supply and Distribution Planning and Economics Marketing An organization made up of self-contained units on the basis of products with With each has its own departments to perform the related tasks An organization made up of self-contained units on the basis of products with With each has its own departments to perform the related tasks Product based or Divisional Structure Types of organizational structure ? ADVANTAGESDISADVANTAGES Product based specialization is possible Specialized HR can be developed Coordination and integration between various functional units of different products is possible Economies based on mass scale production of each product is possible Economies by better coordination are possible Increases in costs Increase in complexity Failure to share resources sometimes due to complex nature

25. 25 ADVANTAGESDISADVANTAGES Places responsibility at a lower level Places emphasis on local markets, customers, stakeholders and problems Improves coordination in a region Takes advantage of economies of local operations Better face-to-face communication with local interests Furnishes measurable training ground for general managers Requires more persons with general manager abilities Tends to make maintenance of economical central services difficult and may require services such as personnel or purchasing at the regional level Increases problem of top management control Inconsistency in standard Engineering Western Region Southwest Region Production Accounting Sales Personnel Central Region Southeast Region Eastern Region Marketing Personnel Purchasing Finance President Types of organizational structure ? ------------------- An organization in which activities in a given area or territory be grouped and assigned to a manager An organization in which activities in a given area or territory be grouped and assigned to a manager Geographical Structure

26. 26 ADVANTAGESDISADVANTAGES Enables an organization to be more aligned with the needs of its customers Promotes innovation and innovative thinking as the organizational culture becomes more focused on problem solving / meeting customer needs than following processes and protocol Customer based work specialization is possible Individual departments can become too autonomous which makes setting and coordinating a single strategic direction to be followed difficult It limits the sharing of information / ideas across the organization lines (which is viewed as being especially important in today’s knowledge economy) Under utilisation of resources Duplication of activities and cost President Community-City Banking Community-City Banking Real Estate & Mortgage loans Real Estate & Mortgage loans Corporate Banking Corporate Banking Agricultural Banking Agricultural Banking Institutional Banking Institutional Banking Types of organizational structure ? An organization in which activities reflect a primary interest in customers Customer based Product Structure

27. 27 Strategic Business Units (SBUs) Team structures Project Structure Matrix Structure Modular structure Virtual Structure Learning organization Strategic Business Units (SBUs) Team structures Project Structure Matrix Structure Modular structure Virtual Structure Learning organization Modern Organization Designs Types of organizational structure ? Trend Flat structures with the view to decentralize and increase delegation Increase in responsibilities Multidisciplinary teams i.e. matrix structures Flexible structures Hybrid structures in terms of combination and communication Multi-tasking employees Emerging trends in modern Organization Designs

28. 28 Modern Organization Designs Chief Strategy Officer (CSO) Chief Strategy Officer (CSO) Chief Executive Officer Chief Finance Officer (CFO) Chief Finance Officer (CFO) Chief Operating Officer (COO) Chief Operating Officer (COO) Chief Information Officer (CIO) Chief Information Officer (CIO) VP of Human Resources VP of Human Resources VP of Marketing VP of Marketing Adhesive Packaging Division Adhesive Packaging Division Industrial Products SBU Consumer Products SBU Tubes / Cores Division Tubes / Cores Division Paper Division Paper Division Reels Division Reels Division Flexible Packaging Division Flexible Packaging Division High Density Film Division High Density Film Division Metal Ends Division Metal Ends Division Rigid Division Rigid Division The SBU structure groups similar division into business units and delegates authority and responsibility for each unit to a senior executive who reports directly to CEO Strategic Business Units (SBUs) / Divisional structure

29. 29 SBU / Divisional structure Modern Organization Designs ADVANTAGESDISADVANTAGES Building block structure -- accommodates growth Better coordination in diverse markets Duplication, inefficient use of resources Specializations are dispersed, creating silos of knowledge

30. 30 Teams is a situation when two or more people who interact dynamically, interdependently, and adaptively toward a common and valued goal, have specific roles or functions, and have a time-limited membership. Teams based structure consist of self-directed work teams organized around work Processes with flat hierarchy, few management levels, Very little formalization Usually found within divisional structure Teams is a situation when two or more people who interact dynamically, interdependently, and adaptively toward a common and valued goal, have specific roles or functions, and have a time-limited membership. Teams based structure consist of self-directed work teams organized around work Processes with flat hierarchy, few management levels, Very little formalization Usually found within divisional structure Team structure Modern Organization Designs Multi-Team System (MTS) for Patient Care

31. 31 Team structure Modern Organization Designs ADVANTAGESDISADVANTAGES Responsive, flexible Lower admin costs More informed decisions Interpersonal training costs Slower during team development Stress due to ambiguous roles Problems with supervisor role changes Duplication of resources

32. 32 Engineering Quality Control Quality Control Manufacturing Purchasing R & D Contract Administration Contract Administration Scheduling Project A Engineering Quality Control Quality Control Manufacturing Purchasing R & D Contract Administration Contract Administration Scheduling Project B General Manager General Manager An organization in which activities require a great deal of planning, research and coordination An organization in which activities require a great deal of planning, research and coordination Project Structure Modern Organization Designs

33. 33 Project structure Modern Organization Designs ADVANTAGESDISADVANTAGES Simple Fast Cohesive Cross-Functional Integration Expensive Internal Strife Limited Technological Expertise Difficult Post-Project Transition

34. 34 Modern Organization Designs An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager. Employees are temporarily assigned to a specific project team and have a permanent functional unit An organization in which specialists from functional departments are assigned to work on one or more projects led by a project manager. Employees are temporarily assigned to a specific project team and have a permanent functional unit Matrix Structure Project C Manager Project B Manager Project A Manager EngineeringMarketingDesign CEO

35. 35 Matrix structure Modern Organization Designs ADVANTAGESDISADVANTAGES Uses resources and expertise effectively Improves communication, flexibility, innovation Focuses specialists on clients and products Supports knowledge sharing within specialty across groups Solution when two divisions have equal importance Increases goal conflict and ambiguity Two bosses dilutes accountability More conflict, organizational politics, and stress

36. 36 Logistics Company Core Company Manufacturing Company Sales and Marketing Company Finance Company Design Company An organization in which a very few activities are carried out and as much as possible work is carried out by other organizations continually evolving network of independent companies that are linked together to share skills, costs, and access to one another’s markets. An organization in which a very few activities are carried out and as much as possible work is carried out by other organizations continually evolving network of independent companies that are linked together to share skills, costs, and access to one another’s markets. Virtual Structure Modern Organization Designs

37. 37 Virtual structure Modern Organization Designs ADVANTAGES DISADVANTAGES

38. 38 An organization in which non-vital functions are outsourced, which uses the knowledge and expertise of outside suppliers while retaining strategic control. An organization in which non-vital functions are outsourced, which uses the knowledge and expertise of outside suppliers while retaining strategic control. Modular Structure Modern Organization Designs ADVANTAGES DISADVANTAGES

39. 39 Learning organization Modern Organization Designs Organizational culture Strong mutual relationships Sense of community Caring Trust Organizational culture Strong mutual relationships Sense of community Caring Trust Learning organization Information sharing Open timely Accurate Information sharing Open timely Accurate Leadership Shared vision Collaboration Leadership Shared vision Collaboration Organizational design Boundary-less Teams empowerment Organizational design Boundary-less Teams empowerment

40. 40 Learning organization Modern Organization Designs Change in structure on the basis of new knowledge Awareness of vision at all levels Open communication at all levels High priority to organizational goals

41. 41 Emerging trends in modern organization designs Trend Flat structures with the view to decentralize and increase delegation Increase in responsibilities Multidisciplinary teams i.e. matrix structures Flexible structures Hybrid structures in terms of combination and communication Multi-tasking employees Emerging issues in modern organization designs Issue / problem Low motivation and morale Delays and inappropriate decisions Conflicts Lack of coordination High costs Non alignment with environment Non alignment with business model

42. 42 Assignment: read chapter 17 from pbp in relation with these slides. There will be small test. We will also work on paper questions next time.