ENGINEERING ECONOMICS AND MANAGEMENT [EEE 501]

MANAGEMENT -PART B
2.1

History

The verb manage comes from the Italian maneggiare (to handle, train, be in charge of, control
horses), which in turn derives from the Latin manus (hand). The French word mesnagement (later
mnagement) influenced the development in meaning of the English word management in the 15th
and 16th centuries.
Practice of modern management owes its origin to the 16th century enquiry into low-efficiency and
failures of certain enterprises, conducted by the English statesman Sir Thomas More (1478-1535).
2.2

Definitions and meanings of management

As a discipline, management is defined as the interlocking functions of formulating

corporate policy and organizing, planning, controlling, and directing the firm's

resources

to achieve the policy's objectives.

ii

Donald J. Cough defines management as, "Management is the art and science of decision
making and leadership."

iii

Louis Allen defines, "Management is what a manager does".

iv

The group of individuals who make decisions about how a business is run.

The initiation and maintenance of an investment portfolio.

vi

Henri Fayol (18411925) considers management to consist of six functions:

forecasting, planning, organizing, commanding, coordinating and controlling.
one of the most influential contributors to modern concepts of

vii

management.

One habit of thought regards management as equivalent to "business

More realistically, however, every organization must

He was

administration".

manage its work through

leading employees or people, planning, controlling and organizing processes,

technology, etc. to maximize effectiveness.
viii

The organization and coordination of the activities of an enterprise in

certain policies and in achievement of defined

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objectives.

accordance with

1.3

What is Management?

Management is the act of getting people together to accomplish desired goals and objectives using
available resources efficiently and effectively. Management comprises planning, organizing,
staffing, leading or directing, and controlling an organization or effort for the purpose of
accomplishing a goal. Organisation is a group of one or more people or entities. Resourcing
encompasses the deployment and manipulation of human resources, financial resources,
technological resources and natural resources.
Since organizations can be viewed as systems, management can also be defined as human action,
including design, to facilitate the production of useful outcomes from a system. This view opens the
opportunity to 'manage' oneself, a pre-requisite to attempting to manage others.
According to the management guru Peter Drucker (1909-2005), the basic task of a management is
twofold: marketing and innovation. As a discipline, management consists of the interlocking
functions of formulating corporate policy and organizing, planning, controlling, and directing an
organization's resources to achieve the policy's objectives.
Directors and managers have the power and responsibility to make decisions in order to manage an
enterprise when given the authority by the shareholders. The size of management can range from
one person in a small firm to hundreds or thousands of managers in multinational companies. In
large firms, the board of directors formulates the policy which is implemented by the chief
executive officer.
Organization and coordination of the activities of an enterprise in accordance with certain policies
and in achievement of clearly defined objectives is about management. Management is often
included as a factor of production along with machines, materials and money.
Directors and managers have the power and responsibility to make decisions in order to manage an
enterprise when given the authority by the shareholders.

2.4

Some of Management Definitions and Meanings

Board of directors: This is a Governing body (called the board) of an incorporated firm. Its
members (directors) are elected normally by the subscribers (stockholders) of the firm (generally at
an annual general meeting or AGM) to govern the firm and look after the subscribers' interests. The
board has the ultimate decision-making authority and, in general, is empowered to:
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i
set the company's policy, objectives, and overall direction,
ii
adopt bylaws,
iii
name members of the advisory, executive, finance, and other committees,
iv
hire, monitor, evaluate, and fire the managing director and senior executives,
v
determine and pay the dividend, and
vi
issue additional shares.
Though all its members might not be engaged
in the company's day-to-day operations, the
entire board is held liable

(under the

doctrine

of

collective

responsibility)

for

the

consequences of the firm's policies, actions, and failures to act. Members of the board usually
include senior-most executives (called 'inside directors' or 'executive directors') as well as experts or
respected persons chosen from the wider community (called 'outside directors' or 'non-executive
directors').

Chief executive officer (CEO): Top executive responsible for a firm's overall operations and
performance. He or she is the leader of the firm, serves as the main link between the board of
directors (the board) and the firm's various parts or levels, and is held solely responsible for the
firm's success or failure. One of the major duties of a CEO is to maintain and implement corporate
policy, as established by the board. Also called President or managing director, he or she may also
be the chairman (or chairperson) of the board.
Corporate policy: Usually, a documented set of broad guidelines, formulated after an analysis of
all internal and external factors that can affect a firm's objectives, operations, and plans. Formulated
by the firm's board of directors, corporate policy lays down the firm's response to known and
knowable situations and circumstances. It also determines the formulation and implementation of
strategy, and directs and restricts the plans, decisions, and actions of the firm's officers in
achievement of its objectives.
Innovation: The process by which an idea or invention is translated into a good or service for
which people will pay, or something that results from this process.
To be called an innovation, an idea must be replicable at an economical cost and must satisfy a
specific need. Innovation involves deliberate application of information, imagination, and initiative
in deriving greater or different value from resources, and encompasses all processes by which new
ideas are generated and converted into useful products. In business, innovation often results from
the application of a scientific or technical idea in decreasing the gap between the needs or
expectations of the customers and the performance of a company's products. In a social context,
innovation is equally important in devising new collaborative methods such as alliance creation,
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joint venturing, flexible working hours, and in creating buyers' purchasing power through methods
such as layaway plans.
Marketing: The management process through which goods and services move from concept to the
customer. As a practice, it consists in coordination of four elements called 4P's: (1) identification,
selection, and development of a product, (2) determination of its price, (3) selection of a distribution
channel to reach the customer's place, and (4) development and implementation of a promotional
strategy.
Marketing is based on thinking about the business in terms of customer needs and their satisfaction.
Marketing differs from selling because (in the words of Harvard Business School's emeritus
professor of marketing Theodore C. Levitt) "Selling concerns itself with the tricks and techniques of
getting people to exchange their cash for your product. It is not concerned with the values that the
exchange is all about. And it does not, as marketing invariably does, view the entire business
process as consisting of a tightly integrated effort to discover, create, arouse, and satisfy customer
needs."
Function :An action performed by a device, department, or person that produces a result. Function
remains more or less fixed whereas the purpose (which indicates intention or objective) generally
changes. For example, the function of a hammer is to strike something nearby whereas its purpose
(what to strike and why) could be anything the hammer-wielder has in mind.
Policy in Management: The set of basic principles and associated guidelines, formulated and
enforced by the governing body of an organization, to direct and limit its actions in pursuit of longterm goals..
Organization: Asocial unit of people, systematically structured and managed to meet a need or to
pursue collective goals on a continuing basis. All organizations have a management structure that
determines relationships between functions and positions, and subdivides and delegates roles,
responsibilities, and authority to carry out defined tasks. Organizations are open systems in that they
affect and are affected by the environment beyond their boundaries.
Objective :An end that can be reasonably achieved within an expected timeframe and with
available resources. In general, an objective is broader in scope than a goal, and may consist of
several individual goals. Objectives are a basic tools that underlying all planning and strategic
activities. They serve as the basis for policy and performance appraisals.

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2.5

Nature of managerial work

In for-profit work, management has as its primary function the satisfaction of a range of
stakeholders. This typically involves making a profit (for the shareholders), creating valued
products at a reasonable cost (for customers) and providing rewarding employment opportunities
(for employees). In non-profit management, add the importance of keeping the faith of donors. In
most models of management/governance, shareholders vote for the board of directors, and the board
then hires senior management.
2.5.1

Levels of management

Most organizations have three management levels: low-level, middle-level, and top-level
managers. These managers are classified in a hierarchy of authority, and perform different
tasks. In many organizations, the number of managers in every level resembles a pyramid.
Each level is explained below in specifications of their different responsibilities and likely job
titles.
2.5.1.1 Top-level managers
This consists of board of directors, president, vice-president, CEOs, etc. They are responsible
for controlling and overseeing the entire organization. They develop goals, strategic plans,
company policies, and make decisions on the direction of the business. In addition, top-level
managers play a significant role in the mobilization of outside resources and are accountable
to the shareholders and general public.
According to Lawrence S. Kleiman, at the top managerial level, broadened understanding of
how: competition, world economies, politics, and social trends effect organizational
effectiveness are necessary.
2.5.1.2 Middle-level managers
Consist of general managers, branch managers and department managers. They are
accountable to the top management for their department's function. They devote more time
to organizational and directional functions. Their roles can be emphasized as executing
organizational plans in conformance with the company's policies and the objectives of the top
management, they define and discuss information and policies from top management to lower
management, and most importantly they inspire and provide guidance to lower level managers
towards better performance. Some of their functions include:

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Designing and implementing effective group and intergroup work and

ii
iii
iv

information systems.
Defining and monitoring group-level performance indicators.
Diagnosing and resolving problems within and among work groups.
Designing and implementing reward systems supporting cooperative
behaviour.

2.5.1.3 Low-level managers

Consist of supervisors, section leads, foremen, etc. They focus on controlling and directing.
They usually have the responsibility of assigning employees tasks, guiding and supervising
employees on day-to-day activities, ensuring quality and quantity production, making
recommendations, suggestions, and up-channeling employee problems, etc.

2.6

Principle and Functions of Management

2.6.1

Principle of Management

Principle of management centres or focuses on the techniques, process or norm on how

management can get people together to achieve a desired aim. It aims at accomplishment of
functions of management. Some management contributors view defined principle of management as
fulfilment of main functions of management while Henri Fayol developed principle of management
to entail:
Division of Work: Work should be divided among individuals and groups to ensure that effort and
attention are focused on special portions of the task. Fayol presented work specialization as the best
way to use the human resources of the organization.
Authority: The concepts of Authority and responsibility are closely related. Authority was defined
by Fayol as the right to give orders and the power to exact obedience. Responsibility involves being
accountable, and is therefore naturally associated with authority. Whoever assumes authority also
assumes responsibility.
Discipline: A successful organization requires the common effort of workers. Penalties should be
applied judiciously to encourage this common effort.
Unity of Command: Workers should receive orders from only one manager.
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Unity of Direction: The entire organization should be moving towards a common objective in a
common direction.
Subordination of Individual Interests to The General Interests: The interests of one person
should not take priority over the interests of the organization as a whole.
Remuneration: Many variables, such as cost of living, supply of qualified personnel, general
business conditions, and success of the business, should be considered in determining a workers
rate of pay.
Centralization: Fayol defined centralization as lowering the importance of the subordinate role.
Decentralization is increasing the importance. The degree to which centralization or
decentralization should be adopted depends on the specific organization in which the manager is
working.
Scalar Chain: Managers in hierarchies are part of a chain like authority scale. Each manager, from
the first line supervisor to the president, possesses certain amounts of authority. The President
possesses the most authority; the first line supervisor the least. Lower level managers should always
keep upper level managers informed of their work activities. The existence of a scalar chain and
adherence to it are necessary if the organization is to be successful.
Order: For the sake of efficiency and coordination, all materials and people related to a specific
kind of work should be treated as equally as possible.
Equity: All employees should be treated as equally as possible.
Stability of Tenure of Personnel: Retaining productive employees should always be a high priority
of management. Recruitment and Selection Costs, as well as increased product-reject rates are
usually associated with hiring new workers.
Initiative: Management should take steps to encourage worker initiative, which is defined as new
or additional work activity undertaken through self direction.
Espirit De Corps: Management should encourage harmony and general good feelings among
employees.
2.6.2

Functions of Management

Management has been described as a social process involving responsibility for economical and
effective planning and regulation of operation of an enterprise in the fulfilment of given purposes. It
is a dynamic process consisting of various elements and activities. These activities are different
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from operative functions like marketing, finance, purchase etc. Rather these activities are common
to each and every manger irrespective of his level or status.
Different experts have classified functions of management. According to George & Jerry, There
are four fundamental functions of management i.e. planning, organizing, actuating and controlling.
According to Henry Fayol, To manage is to forecast and plan, to organize, to command, and to
control. Whereas Luther Gullick has given a keyword POSDCORB where P stands for Planning,
O for Organizing, S for Staffing, D for Directing, Co for Co-ordination, R for reporting and B for
Budgeting. But the most widely accepted are functions of management given by KOONTZ and
ODONNEL that is Planning, Organizing, Staffing, Directing and Controlling.
For theoretical purposes, it may be convenient to separate the function of management but
practically these functions are overlapping in nature -they are highly inseparable. Each function
blends into the other and each affects the performance of others.

2.6.2.1 Planning
It is the basic function of management. It deals with chalking out a future course of action
and deciding in advance the most appropriate course of actions for achievement of predetermined goals. According to KOONTZ, Planning is deciding in advance - what to do,
when to do and how to do. It bridges the gap from where we are & where we want to be. A
plan is a future course of actions. It is an exercise in problem solving and decision making.
Planning is determination of courses of action to achieve desired goals. Thus, planning is a
systematic thinking about ways & means for accomplishment of pre-determined goals.
Planning is necessary to ensure proper utilization of human & non-human resources. It is all
pervasive, it is an intellectual activity and it also helps in avoiding confusion, uncertainties,
risks, wastages etc.
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2.6.2.2

Organizing

It is the process of bringing together physical, financial and human resources, and
developing productive relationship amongst them for achievement of organizational goals.
According to Henry Fayol, To organize a business is to provide it with everything useful or
its functioning i.e. raw material, tools, capital and personnels. To organize a business
involves determining and providing human and non-human resources to the organizational
structure. Organizing as a process involves:
i

Identification of activities.

ii

Classification of grouping of activities.

iii

Assignment of duties.

iv

Delegation of authority and creation of responsibility.

Coordinating authority and responsibility relationships.

2.6.2,3 Staffing
It is the function of manning the organization structure and keeping it manned. Staffing has
assumed greater importance in the recent years due to advancement of technology, increase
in size of business, complexity of human behaviour etc. The main purpose o staffing is to
put right man on right job i.e. square pegs in square holes and round pegs in round holes.
According to Kootz and ODonell, Managerial function of staffing involves manning the
organization structure through proper and effective selection; appraisal and development of
personnel to fill the roles designed in the structure. Staffing involves: Manpower Planning
-searching, choose the person and giving the right place.
i

Recruitment, selection and placement.

ii

Training and development.

iii

Remuneration.

iv

Performance appraisal.

Promotions and transfer.

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2.6.2.4 Directing
It is that part of managerial function which actuates the organizational methods to work
efficiently for achievement of organizational purposes. It is considered life-spark of the
enterprise which sets it in motion the action of people because planning, organizing and
staffing are the mere preparations for doing the work. Direction is that inert-personnel aspect
of management which deals directly with influencing, guiding, supervising, motivating subordinate for the achievement of organizational goals. Direction has following elements:
i

Supervision

ii

Motivation

iii

Leadership

iv

Communication

Supervision- implies overseeing the work of subordinates by their

superiors. It is the act of watching & directing work & workers.

ii

Motivation- means inspiring, stimulating or encouraging the sub-

ordinates with zeal to work. Positive, negative, monetary, non-

monetary

incentives may be used for this purpose.

iii

Leadership- may be defined as a process by which manager guides

and

influences the work of subordinates in desired direction.

iv

Communications- is the process of passing information, experience,

opinion

etc from one person to another. It is a bridge of understanding.

2.6.2..5

Controlling

It implies measurement of accomplishment against the standards and correction of deviation

if any to ensure achievement of organizational goals. The purpose of controlling is to ensure
that everything occurs in conformities with the standards. An efficient system of control
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helps to predict deviations before they actually occur. According to Theo Haimann,
Controlling is the process of checking whether or not proper progress is being made
towards the objectives and goals and acting if necessary, to correct any deviation.
According to Koontz & ODonell Controlling is the measurement & correction of
performance activities of subordinates in order to make sure that the enterprise objectives
and plans desired to obtain them as being accomplished. Therefore controlling has
following steps:
i

Establishment of standard performance

ii

Measurement of actual performance

iii

Comparison of actual performance with the standards and

finding out deviation if any and

iv

2.7

Corrective action.

Leader Cont

A leader in a formal, hierarchical organization, who is appointed to a managerial position, has the
right to command and enforce obedience by virtue of the authority of his position. However, he
must possess adequate personal attributes to match his authority, because authority is only
potentially available to him. In the absence of sufficient personal competence, a manager may be
confronted by an emergent leader who can challenge his role in the organization and reduce it to
that of a figurehead. However, only authority of position has the backing of formal sanctions. It
follows that whoever wields personal influence and power can legitimize this only by gaining a
formal position in the hierarchy, with commensurate authority.
2.7.1

Leadership Styles

Leadership style refers to a leader's behaviour. It is the result of the philosophy, personality,
and experience of the leader. Different situations call for different leadership styles. In an
emergency when there is little time to converge on an agreement and where a designated
authority has significantly more experience or expertise than the rest of the team, an
autocratic leadership style may be most effective; however, in a highly motivated and
aligned team with a homogeneous level of expertise, a more democratic or laissez-faire style
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may be more effective. The style adopted should be the one that most effectively achieves
the objectives of the group while balancing the interests of its individual members.
The managerial grid model is also based on a behavioural theory and was developed by
Robert Blake and Jane Mouton in 1964 and suggests five different leadership styles, based
on the leaders' concern for people and their concern for goal achievement

2.7.1.1

Autocratic or authoritarian style

Under the autocratic leadership style, all decision-making powers are centralized in the
leader, as with dictators.
Leaders do not entertain any suggestions or initiatives from subordinates. The autocratic
management has been successful as it provides strong motivation to the manager. It
permits quick decision-making, as only one person decides for the whole group and
keeps each decision to him/herself until he/she feels it needs to be shared with the rest
of the group.
2.7.1.2

Participative or democratic style

The democratic leadership style consists of the leader sharing the decision-making
abilities with group members by promoting the interests of the group members and by
practicing social equality.
2.7.1.3

Laissez-faire or free rein style

A person may be in a leadership position without providing leadership, leaving the

group to fend for itself. Subordinates are given a free hand in deciding their own
policies and methods.
2.7.1.4

Narcissistic leadership

Various academics such as Kets de Vries, Maccoby, and Thomas have identified
narcissistic leadership as an important and common leadership style.
2.7.1.5

Toxic leadership

A toxic leader is someone who has responsibility over a group of people or an

organization, and who abuses the leader-follower relationship by leaving the group or
organization in a worse-off condition than when he/she first found them.
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2.8

Organizational structure

An organizational structure consists of activities such as task allocation, coordination and

supervision, which are directed towards the achievement of organizational aims. It can also be
considered as the viewing glass or perspective through which individuals see their organization and
its environment.
Organizational structures developed from the ancient times of hunters and collectors in tribal
organizations through highly royal and clerical power structures to industrial structures and today's
post-industrial structures.
As pointed out by Mohr (1982, pp. 102103), the early theorists of organizational structure, Taylor,
Fayol, and Weber "saw the importance of structure for effectiveness and efficiency and assumed
without the slightest question that whatever structure was needed, people could fashion accordingly.
Organizational structure was considered a matter of choice In the 21st century, organizational
theorists such as Lim, Griffiths, and Sambrook (2010) are once again proposing that organizational
structure development is very much dependent on the expression of the strategies and behavior of
the management and the workers as constrained by the power distribution between them, and
influenced by their environment and the outcome.
An organization can be structured in many different ways, depending on their objectives. The
structure of an organization will determine the modes in which it operates and performs.
Organizational structure allows the expressed allocation of responsibilities for different functions
and processes to different entities such as the branch, department, workgroup and individual.
Organizational structure affects organizational action in two big ways:
1.

First, it provides the foundation on which standard operating

procedures and

routines rest.
2.

Second, it determines which individuals get to participate in which decisionmaking processes, and thus to what extent their views
actions.
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shape the organizations

2.8.1

Operational organizations

Organizational structure coincides with facts of evolving positive operational action. Wrong
organizational structure may hamper cooperation and thus hinder the completion of orders in
due time and within limits of resources and budgets. Organizational structures shall be
adaptive to process requirements, aiming to optimize the ratio of effort and input to output.
There exits informal organization and formal organization.
2.8.2

Types of Organizational Structure

Pre-bureaucratic structures
Pre-bureaucratic (entrepreneurial) structures lack standardization of tasks. This structure is
most common in smaller organizations and is best used to solve simple tasks. The structure
is totally centralized. The strategic leader makes all key decisions and most communication
is done by one on one conversations. It is particularly useful for new (entrepreneurial)
business as it enables the founder to control growth and development.
They are usually based on traditional domination or charismatic domination in the sense of
Max Weber's tripartite classification of authority.
Bureaucratic structures
Precision, speed, unambiguity, strict subordination, reduction of friction and of material and
personal costs -these are raised to the optimum point in the strictly bureaucratic
administration. Bureaucratic structures have a certain degree of standardization. They are
better suited for more complex or larger scale organizations, usually adopting a tall structure.
The Weberian characteristics of bureaucracy are:
i

Clear defined roles and responsibilities

ii

A hierarchical structure

iii

Respect for merit.

Post-bureaucratic
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The term of post bureaucratic is used in two senses in the organizational literature: one
generic and one much more specific. In the generic sense the term post bureaucratic is often
used to describe a range of ideas developed since the 1980s that specifically contrast
themselves with Weber's ideal type bureaucracy. This may include total quality
management, culture management and matrix management, amongst others. None of these
however has left behind the core tenets of Bureaucracy. Hierarchies still exist, authority is
still Weber's rational, legal type, and the organization is still rule bound. Heckscher, arguing
along these lines, describes them as cleaned up bureaucracies, rather than a fundamental
shift away from bureaucracy. Gideon Kunda, in his classic study of culture management at
'Tech' argued that 'the essence of bureaucratic control -the formalisation, codification and
enforcement of rules and regulations -does not change in principle. Iit shifts focus from
organizational structure to the organization's culture'.
Another smaller group of theorists have developed the theory of the Post-Bureaucratic
Organization., provide a detailed discussion which attempts to describe an organization that
is fundamentally not bureaucratic. Charles Heckscher has developed an ideal type, the postbureaucratic organization, in which decisions are based on dialogue and consensus rather
than authority and command, the organization is a network rather than a hierarchy, open at
the boundaries (in direct contrast to culture management); there is an emphasis on metadecision making rules rather than decision making rules. This sort of horizontal decision
making by consensus model is often used in housing cooperatives, other cooperatives and
when running a non-profit or community organization. It is used in order to encourage
participation and help to empower people who normally experience oppression in groups.
Functional structure
Employees within the functional divisions of an organization tend to perform a specialized set of
tasks, for instance the engineering department would be staffed only with software engineers. This
leads to operational efficiencies within that group. However it could also lead to a lack of
communication between the functional groups within an organization, making the organization slow
and inflexible.
As a whole, a functional organization is best suited as a producer of standardized goods and
services at large volume and low cost. Coordination and specialization of tasks are centralized in a
functional structure, which makes producing a limited amount of products or services efficient and
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predictable. Moreover, efficiencies can further be realized as functional organizations integrate their
activities vertically so that products are sold and distributed quickly and at low cost. For instance, a
small business could make components used in production of its products instead of buying them.
This benefits the organization and employees faiths.
Divisional structure
Also called a "product structure", the divisional structure groups each organizational function into a
division. Each division within a divisional structure contains all the necessary resources and
functions within it. Divisions can be categorized from different points of view. One might make
distinctions on a geographical basis (a US division and an EU division, for example) or on
product/service basis (different products for different customers: households or companies). In
another example, an automobile company with a divisional structure might have one division for
compact car and another division for subcompact cars. Each division may have its own sales,
engineering and marketing departments.
Matrix structure
The matrix structure groups employees by both function and product. This structure can combine
the best of both separate structures. A matrix organization frequently uses teams of employees to
accomplish work, in order to take advantage of the strengths, as well as make up for the
weaknesses, of functional and decentralized forms. An example would be a company that produces
two products, "product a" and "product b". Using the matrix structure, this company would organize
functions within the company as follows: "product a" sales department, "product a" customer
service department, "product a" accounting, "product b" sales department, "product b" customer
service department, "product b" accounting department. Matrix structure is amongst the purest of
organizational structures, a simple lattice emulating order and regularity demonstrated in nature.
i

Weak/Functional Matrix: A project manager with only limited

authority

assigned to oversee the cross- functional aspects of the project.

The

managers maintain control over their

areas.

ii

resources

and project

Balanced/Functional Matrix: A project manager is assigned to

the project. Power is shared equally between the project manager

managers. It brings the best aspects of

functional and

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and

is

functional
oversee

the functional

projectized

organizations. However, this is the most difficult system to

maintain as the sharing

power is delicate proposition.

iii

assign

Strong/Project Matrix: A project manager is primarily

responsible for

the project. Functional managers provide

expertise

technical

and

resources as needed.

Flat Structure
The flat structure is common in small companies (entrepreneurial start-ups, university spin offs). As
the company grows it becomes more complex and hierarchical, which leads to an expanded
structure, with more levels and departments.
Often, it would result in bureaucracy, the most prevalent structure in the past. It is still, however,
relevant in former Soviet Republics, China, and most governmental organizations all over the
world. Matrix is becoming popular. Starbucks is one of the numerous large organizations that
successfully developed the matrix structure supporting their focused strategy. It creats a team spirit,
the company empowers employees to make their own decisions and train them to develop both hard
and soft skills. Some experts also mention the multinational design, common in global companies,
such as Procter & Gamble, Toyota and Unilever. This structure can be seen as a complex form of
the matrix, as it maintains coordination among products, functions and geographic areas.
In general, over the last decade, it has become increasingly clear that through the forces of
globalization, competition and more demanding customers, the structure of many companies has
become flatter, less hierarchical, more fluid and even virtual.
Hierarchy Organizational Structure
In the 21st century, even though most, if not all, organizations are not of a pure hierarchical
structure, many managers are still blind-sided to the existence of the flat community structure
within their organizations.
The business firm is no longer just a place where people come to work. For most of the employees,
the firm confers on them that sense of belonging and identity -the firm has become their village,
their community. The business firm of the 21st century is not just a hierarchy which ensures

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maximum efficiency and profit; it is also the community where people belong to and grow
together -where their affective and innovative needs are met.
Team -Newest Organisation structure
One of the newest organizational structures developed in the 20th century is team. In small
businesses, the team structure can define the entire organization. Teams can be both horizontal and
vertical. While an organization is constituted as a set of people who synergize individual
competencies to achieve newer dimensions, the quality of organizational structure revolves around
the competencies of teams in totality. For example, every one of the Whole Foods Market stores,
the largest natural-foods grocer in the US developing a focused strategy, is an autonomous profit
centre composed of an average of 10 self-managed teams, while team leaders in each store and each
region are also a team. Larger bureaucratic organizations can benefit from the flexibility of teams as
well. Xerox, Motorola, and DaimlerChrysler are all among the companies that actively use teams to
perform tasks.
Network -Organisation structure
Another modern structure is network. While business giants risk becoming too clumsy to proact
(such as), act and react efficiently, the new network organizations contract out any business
function that can be done better or more cheaply. In essence, managers in network structures spend
most of their time coordinating and controlling external relations, usually by electronic means.
H&M is outsourcing its clothing to a network of 700 suppliers, more than two-thirds of which are
based in low-cost Asian countries. Not owning any factories, H&M can be more flexible than many
other retailers in lowering its costs, which aligns with its low-cost strategy. The potential
management opportunities offered by recent advances in complex networks theory have been
demonstrated including applications to product design and development, and innovation problem in
markets and industries.
Virtual
A special form of boundary less organization is virtual. Hedberg, Dahlgren, Hansson, and Olve
(1999) consider the virtual organization as not physically existing as such, but enabled by software
to exist. The virtual organization exists within a network of alliances, using the Internet. This means

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while the core of the organization can be small but still the company can operate globally be a
market leader in its niche.
Tutorial
1

Organizations can be viewed as systems while management can also be viewed

as human

action, including design, to facilitate the production of useful outcomes from a system,
discuss.
2

With a well labelled diagram, explain your company or otherwise a typical engineering
organization structure.

Identify operational organization limitations in question 2 above and explain its

implications.

Compare and contrast hierarchical and flat organizational structure, clearly state their
advantages and shortcomings.

With reference to question no 2 above, of what benefits are the existing organisation
structure in your establishment to you?

(a)

Define management and extensively (b) what are the functions of

management?

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