ORGANIZATION AND MANAGEMENT

Module 8: Organization Theories and Application

Begin
There are two main classifications of theories regarding organizational design according to Robbins and Coulter (2009):
traditional and modern. Traditional pertains to the usual or old-fashioned ways, while modern refers to contemporary or new design
theories.

Target
After going through this module, you are expected to:
1. identify the organizational theories;
2. identify the different elements of delegation; and
3. differentiate formal from informal organizations.

Try This

Directions: Choose the correct word from the table being described by the statement below and write your answer in the space
provided before the number.

Simple functional matrix-project design

Delegation project design boundary-less design

___________1. Refers to an organizational design where employees continuously work on a project.

___________2. Refers to an organization design where specialists from different departments work on projects that are supervised by
a project manager
___________3. Refers to assigning a new or additional task to a subordinate; it may also refer to getting done through others by
giving them the right to make decisions and take action.
___________4. This organizational design groups together similar or related specialties.
___________5. It is another organizational design where the design is not defined or limited by vertical, horizontal, and external
boundaries.

Do This
 What is organizational design?
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Explore
 In your own opinion do informal organizations help in the achievement of the company’s set goals? Explain your answer.
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Organization Theories and Application

Organizational design the manner in which a management achieves the right combination of differentiation and integration of
the organization’s operations, in response to the level of uncertainty in its external environment.

Traditional organizational design theories include:

 Simple
- Simple structure is a basic organizational design structure with low departmentalization, little work specialization, wide
spans of control, centralized authority (typically the owner has most of the power) and little formalization or rules that
govern operation. Organizations that use a simple structure are typically flat, in that there are not many hierarchical
levels such as in what you see on the screen now.
- This organizational design has few departments, wide spans of control, or a big number of subordinates directly
reporting to a manager; a centralized authority figure and has very little formalization of work; usually used by
companies that start out as entrepreneurial ventures.
 When applied, its strengths and weaknesses are revealed. See table 4.1 below.

Simple Organizational Design

Strengths Weaknesses

 flexible  risk that overdependence with over-

dependence on a single person
 fast decision-making and results  no longer appropriate as the company
grows
 clear accountability

 Functional
- A functional organizational structure is a structure used to organize workers. They are grouped based on their specific
skills and knowledge. It vertically structures each department with roles from the president to finance and sales
departments, to customer service, to employees assigned to one product or service. Functional organizations contain
specialized units that report to a single authority, usually called top management.
- This organizational design groups similar or related specialties. It is, generally functional departmentalization utilized
and put into practice in an entire organization.

It also has strengths and weaknesses as seen in Table 4.2.

Functional Organizational Design

Strengths Weaknesses

 cost-saving advantages  managers have little knowledge of other

unit’s functions
 management is facilitated because
workers with similar tasks are grouped
together

 Divisional
- This organizational design is made up of separate business divisions or units, where the parent corporation acts as
overseer to coordinate and control the different divisions and provide financial and legal support services.

Table 4.3 shows its strengths and weaknesses

Divisional Organizational Design

Strengths Weaknesses

 focused on result  possible duplication of activities and

resources
 managers are responsible for what  increased cost and reduced efficiency
happens to their products and services

Team Design
- In team design, the entire organization is made up of work groups or teams. Its advantages include empowerment of
team members and reduced barriers among functional areas. It also has disadvantages, including a clear chain of
command and great pressure on teams to perform.

Matrix-Project Design
- Matrix design refers to an organization design where specialists from different departments work on projects that are
supervised by a project manager.
Project Design
- Refers to an organizational design where employees continuously work on a project. Advantages: flexible designs and
fast decision-making. Disadvantages: complexity of assigning people to projects and tasks and personality conflicts.
Boundary-less Design
- This is another modern organizational design where the design is not defined or limited by vertical, horizontal, and
external boundaries. In other words there are no hierarchical levels that separate employees, no departmentalization, and
no boundaries that separate the organization from customers, suppliers, and stakeholders.
Delegation
- Refers to assigning a new or additional task to a subordinate; it may also refer to getting work done through others by
giving them the right to make decisions and take action.

Steps in delegation include:

 Defining the goal clearly

 Selecting the person who will be given the task
 Assigning of responsibility
 Asking the person assigned about his or her planned approaches to accomplish the task objectives
 Granting the assigned person the authority to act
 Giving the assigned person enough time and resources to do the task, while at the same time emphasizing his or her
accountability
 Checking the task accomplishment progress
 Making sure that the task objective has been achieved
 Delegation has advantages and disadvantages as well. See Table 4.4 below

Advantages of Delegation Disadvantages of Delegation

 It prevents work overload among organization  It may cause laziness among organization managers.
managers
 It provides opportunities for employee or subordinates  It may encourage too much dependence on others.
assigned to do the task to fully utilize their talents on
the job.
 It leads to empowerment of employees or  It may cause lack of control over priority management
subordinates assigned to do the task, as it allows them problems.
freedom to contribute ideas and to perform their job
in the best possible way.
 It increases job satisfaction among the assigned  It may cause low self-confidence among managers.
employees or subordinates, that may lead to better job
performance

Formal and Informal Organizations

Formal Organization
- Organizations formed by the company owner or manager to help the firm accomplish its goals; made up of formal
groups (work groups/ project team/ committee) similarly formed by company authorities to support their activities and
achieve their objectives.
Informal Organization
- Organizations that exist because of friendship or common interest; made up of informal groups which exist for the
member’s need for social affiliation.
-  Is the interlocking social structure that governs how people work together in practice.

Formal organizations and informal both have functions and advantages that benefit the organization and its members.

Formal organizations have the following functions/ advantages:

1. Accomplish goals that require cooperation or collaboration among formal groups in the organization
2. Produce or bring about new and creative ideas and solutions to company problems
3. Coordinate interdepartmental activities
4. Implement company rules/regulations and policies
5. Orient/ train new employees

Meanwhile, informal organizations’ functions/advantages include the following:

1. Satisfy the members need for affiliation
2. Give the individual members a chance to develop their self-esteem
3. Give individual members an opportunity to share their ideas
4. Lessen individual members’ insecurities
5. Provide a mechanism to solve member’s personal and interpersonal problems.

Formal Informal
A 1. Working systematically 1.Fast communication due to the absence of standard
D operating procedures and protocols
V
A 2. Established on and for the organization’s 2.Gives importance to the psychological and social needs of
N objectives employees
T
A 3. No duplication or overlapping of work 3.Top managers can solicit feedback directly from the
G employees on new policies and plans
E
S 4. Efficient coordination among departments
5. Implementation of chain of command and
professional relationship
D
I 1. Delay in feedback and action due to the 1.more susceptible to rumor mongering
S established chain of command
A 2. Ignores psychological and social needs of 2.There is no systematic workflow in place
D employees
V 3. Emphasis on work only and overlooks the 3.Difficulty in implementing new rules and policies
A human relations, talents, and creativity of
N employees
T 4. More emphasis on the individual interest of each
A employee rather than the overall goal of the company.
G
E
S
Apply what you have learned

 Situational Analysis:
Engineer Jose Santos is a supervisor of a group of light project engineers. His unit is burdened with heavy workload because
of increase in orders of their company’s computer components. Following up customer’s orders and the availability of these
said products by himself is too much work for him. As a consultant for the company, what would you advice Engineer
Santos? Explain your answer.

Reflect:
Congratulations on finishing the supplementary learning module! You have just had an amazing learning journey and for
sure, you will also do the same in the succeeding modules.
For the last time, share to the class your final insights by completing the following sentence prompts.

I have learned that

_______________________________________________________________________________

I wish to ask my teacher about

_______________________________________________________________________________

Assess what you have learned

ACTIVITY:
Identification
Direction: Identify the following questions and write your answer on the space provided.
______________1. It is the process of aligning the structure of an organisation with its objectives, with the ultimate aim of improving
efficiency and effectiveness
______________2. Organizations that exist because of friendship or common interest.
______________3. Refers to an organizational design where employees continuously work on a project.
______________4. It refers to assigning a new or additional task to a subordinate.
______________5. This organizational design has few departments, wide spans of control, or a big number of subordinates directly
reporting to a manager.

Essay:
1. Give at least two specific examples of formal organizations and informal organization and explain how it differ from each
other.

Reference:
Cabrera, H.M , Altarejos, A. , Benjamin R. (2016). Nature and Concept of Management, Organization and Management. Vibal
Group Inc., Quezon City. pp. 44-49
Website. Types of traditional organizational design. www.https/study.com/academy/lesson/types-of-organizational-
structures-functional-divisional
Website.www.https/upcounsel.com/functional-organizational-structure
Module 1
Answer Key:
1. Business prediction
2. Organization
3. Stakeholders
4. Customers
5. Organizational culture
6. Environmental scanning
7. Investor’s or owners
8. Power distance
9. Team structure
10. Pressure groups