Theory of Organization Structures: nature and consequences

1. Theory of Organization Structures: nature and consequences Facilitator and Course Coordinator: Vinayshil Gautam PhD, FRAS(London) (Founder Director IIM K; Leader Consulting Team IIM S) A Al_Sager Chair Professor and First Head, Management Department, IIT D Chairman, DKIF

2. Objectives • identify key elements • describe various structures and their characteristics • understand vertical and horizontal specialization and control

3. Objectives • identify and understand factors favouring different structures • examine organizational structure • identify an integrated view of organizational structure

4. Need of a structure • Enhances performance through proper resource utilization • Monitors activities • Provides a system to promote accountability and co-ordination • Allows flexibility to respond to various environmental influences • Brings the social satisfaction of its members

5. Nature and origin of structure • Emerges just after the inception of an organization • Not static and may change several times • The changes may be in whole or part • It defines job responsibilities for each personnel

6. Some basic structuralconsideration Three level of hierarchy • Institutional level • Administrative level • Technical level

8. Features of different levels • Institutional level • Development of organizational goal, output • Maintain the structure of organization • Establishment of an appropriate administration climate for subordinate managers • Formulation of policies, rules and regulations • Administrative level • They are middle level managers • Here policies, rules and regulations are interpreted • Stress is given on planning, organizing and controlling

9. Features of different levels • Technical level • Lower level managers • Rules and regulations are implemented • Products are produced

10. Organizational process • Communication • Coordination • Control

11. Communication • Communication is the vehicle through which decisions taken at various levels are transmitted to other levels • It involves information flow across a structure • It has a specific direction and it involves time • Communication is successful when the fullest understanding amongst the persons communicating with each other is achieved • It is also the flow of attitudes, ideas and opinions

12. Coordination: • Coordination refers to the measurement of inter-dependencies in work situations • In small organizations, coordination is handled by its manager(s) • Coordination need not necessarily be the role of one single individual at a higher level in the organization • Large organizations need: • Personal methods of coordination • Impersonal methods of coordination

13. Personal methods of coordination • Dialogue, discussion, innovation, creativity, and learning, both within and across units • Direct contact between and among organizational members • Assignment to committees to improve coordination across departments • Use of task forces

14. Control: • Control refers to the ability of influencing the behaviour of other organizational members • A set ofmechanisms to keep actions or outputs within the specified limits • Setting standards • Measuring results against standards • Taking corrective action

15. Vertical Specialization: • A hierarchical division of labour • Distribution of formal authority • Creation of a hierarchy of authority • Work positions arranged in order of increasing authority • This depends on the organization’s: • Environment • Size • Technology • Goals

16. Horizontal specialization • A division of labour that establishes specific work units or groups • Also referred to as experimentation • Specialization leads to departmentalisation • Pure forms of departmentations are: • By function • By division • By matrix • By Legal

17. Different forms of Organization • Functional • Division of labor by function (marketing, production, finance etc.) • Division of labor on the basis of specialization knowledge • All the worker have specific skills and action • Widely used in organization

18. Divisional • It is designed around • Product • Clients • Territories • In complex organization it is a typical pattern • There may be divisions at the top of the hierarchy (marketing division may be divided into industrial sales, governmental sales and consumer sales divisions)

19. Matrix • combination of functional and product departmentalization • occurs frequently in construction (e.g., building a bridge), in aerospace (e.g., designing and launching a weather satellite), in marketing (e.g., an advertising campaign for a major new product) • this may be made more effective through: • Defining objectives of the project or task • Clarifying the roles, authority, responsibilities of the managers and team members • Selection of appropriate manager for leadership • Undertaking organization and team development

20. Matrix Structure (contd...) • Advantages: • Orientation towards end results • Maintenance of professional identification and efficient allocation of specialists • Pinpointing product-profit responsibility • Disadvantages: • Conflict in organizational authority (due to power struggles) • Possibility of disunity of command ( due to dual chain of command)

21. Matrix Structure(in a college of Business Admn.)

22. Legal • The last pure form of specialization is by legal entity • It is not new, but it has recently received considerably more attention • As organizational analysis has spread to Governmental units, legal entity has been recognizable as a pure form

23. Key elements in a proper structure • Work specialization • Chain of command • Span of control • Centralization and decentralization

24. Work specialization: • It is the division of labour • ensures efficient utilization of skills of workers • early 20th Century, Henry Ford utilized this concept in Ford company • Training is more efficient, easy and less costly

25. Chain of Command: • an unbroken line of authority extends from the top to the lowest level • clarifies who reports to whom • ensures authority, responsibility and unity of command

26. Span of Control: • determines the number of levels and managers • no. of managers to total operative level employees • wider spans reduce effectiveness due to lack of leadership and support

27. Span of Control: • Small spans ensures a close control but: • They are not cost effective • Vertical communication in the organization becomes complex • Tight supervision discourages employee autonomy

28. 1 1 4 8 16 64 64 256 512 1024 4096 4096 Span of Control Members at each level Span of 8 Span of 4 Operatives= 4096 Managers level 1 to 4 = 585 Operatives= 4096 Managers (level 1 to 6) = 1365

29. Centralisation: • A degree to which decision making is concentrated at a single point in the organization • Top management makes key decisions • Lower level managers merely carry out top management directives • Decision making responsibility is moved upward in the hierarchy

30. Decentralization • Lower level personnel can provide inputs and can act closely with the top management • advantages • Effective communication • Participatory decision making • Higher employee productivity • Higher subordinate satisfaction • Quicker response to a series of unrelated problems • Assists the subordinates for higher level positions

31. Integrated view of Organizational Structure • Mechanistic structure • Organic structure

32. Mechanistic Structure • A structure characterized by • Extensive departmentalization • High formalization • Limited Information Network • High centralization • Little participation by low level members in decision making

34. Features of Mechanistic Structure • Rigid hierarchical relationship • Fixed duties • High consistency • Specific communication channel • Centralized decision authority

35. Advantages • Emphasizes on vertical specialization and control • Well documented rules, procedures, and policies • Has well-documented control systems • Strong middle management supported by a centralized staff • Specifies techniques for decision making. • Brings in efficiency

36. Limitations • Employees dislike rigid designs, which makes work motivation problematic • Unions may further solidify rigid designs • Key employees may leave • Low organization’s capacity to adjust with environmental changes or emerging of new technologies i.e. lower flexibility

37. Organic structure • It looks a lot like boundary less organization • It is a flat type of organization • Low formalization • Increase in coordination • Possess a comprehensive information network • High participation in decision making

39. Advantages • Low hierarchical differentiation • Collaboration (both vertical and horizontal) • Adaptable duties • Procedures are minimal, and those that do exist are not highly formalized • Decentralized decision authority • Good for problem solving and serving individual customer needs • Good at detecting external changes and adjusting to new technologies

40. Limitations • Lower level of rules and regulations • Sacrifices ability to respond to central management direction • No fixed duties • Less control of higher authority to the lower authority

41. Conclusion • An organization’s internal structure: • Exercises control and ensures co-ordination • Explains and predicts employee behaviour • linked to overall productivity and profit • Reduces ambiguity and clarifies relationships • Shapes employees’ attitude and facilitates and motivates the workers

42. Conclusion (contd…) • An appropriate or integrated structure may have: • limited specialization • wide span of control • provide employees greater freedom • Ensures team spirit and coordination amongst employees

43. References: • Gautam V & S.K. Batra, Organisational Development Systems, V. P. House, 1993 • Gautam V., Background paper on Organisation Management, IITD • Stephen P. Robbins, Essentials of Organizational Behaviour, EEE, 8th Edition, Prentice Hall India Publication • http://www.cba.uri.edu/scholl/Notes/Organizational_Structure.htm dated 11.09.2005 Time 11:00 am • http://www.exsci.rutgers.edu/courses/330/330OrgStruc.S05.htm dated 11.09.2005 Time 11:10 am

44. THANK YOU