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Businesses are often referred to as organizations. An organization is a body that is set up to meet needs. Organizations are of all types and sizes, exist everywhere and most of us belong too many of them during life. For example, hospitals, youth clubs, sports clubs, schools, colleges, libraries, charities, trade unions, and all types of businesses. *** Types of organizations in Public and private sector are already covered in Ch. 1.
A diagram showing the structure of an organization is called organizational structure.
The organizational structure is internal, formal framework of organization that shows the way in which management is linked together in terms of authority, responsibility and chain of command. Authority The right of a person to use powers to ensure that the duties given to subordinates are carried out. Delegation It means the passing down of authority to perform tasks and take decisions from higher to lower levels in the organization. Responsibility The extent to which an individual is accountable to a superior for the performance of a job is called responsibility. The duty to complete a task is called responsibility. Hierarchy The hierarchy in an organization is the order or levels of management. Orders are passed down and information is passes up in this hierarchy. Chain of Command “This is a route through which authority and powers are passed down in a hierarchy”. It defines who reports to whom. Organizations must consider the number of levels in chain of command because any extra level of management in the hierarchy will reduce the effectiveness of communication. There is no rule about the most effective numbers of levels in the chain. All depends on the need of organization. However, organizations generally try to keep chains as short as possible. Span of Control The number subordinates reporting directly to a manager. In other words if a production manager has ten subordinates, his span of control is ten. According to Henri Fayol, span of control should be between three and six. This is called narrow span of control. More then this is called wide span of control. A narrow span of control has the advantage of tight control, close supervision
and allows better coordination. A narrow span of control requires a long chain of command. A wide span of control offers greater decision making authority for subordinates which may lead to job satisfaction. This requires a short chain of command.
(A) Production Department Manager
Supervisors Skilled Workers
Semi Skilled Workers
This is a long chain of command and a narrow span of control. A production department may look like this. One manager is helped by a few assistant managers, each responsible for supervisors. These supervisors are responsible for skilled workers, who are in charge of a group of semi skilled workers. Close supervision is needed to make sure that quality is maintained. This is some times referred to as a tall organization structure. (B) Education Department Head of department
This is a short chain of command and wide span of control. A higher education department may look like this, with a head of department, a few senior staff and many lecturing staff. Staff will want a degree of independence. This is some times referred to as a flat organization structure. Centralization and Decentralization Centralization and decentralization refer to the extent to which authority is delegated in an organization. If there is complete centralization then subordinates would have no authority at all. Complete decentralization would mean
subordinates would have all the authority to take decisions. Any organization operates in either of these ways, managers has to retain the responsibility.
Types of Organizational Structure
Hierarchical or Bureaucratic Structure This is a traditional structure. Decision making is shared throughout the organization. This contains different layers of management. See Figure 16.1 on page 257 and Figure 16.2 on page 258. The Matrix structure Project based organizations used this structure. This emphasizes getting people with particular specialist skills together into a project teams. Individuals within the team have their own responsibility. This is totally a team work. See Figure 16.3 on page 259.
Factors Influencing organizational Structures
Size Leadership Style If owners wish ton retain control in the business, they will want a narrow span of control. Owners who want to motivate employees may delegate decision making. Business Objectives If business wants to expand rapidly, its span of control gets wider. External Factors In the period of recession business may be forced to reduce its chain of command to cut cost. Changes in Technology