PERSPECTIVE MANAGEMENT

August 2010, N L Dalmia Institute

of Management
Full Time- 1st. Sem
 Definition
• Accomplishment of objectives through the
efforts of people performing certain
functions.
• Analyze definition (1) Accomplishment of
results thru the efforts of other people.
(2)Art of getting things done – organized
groups. (3) Mgmt is a process of Planning,
Organizing, Actuating and Controlling to
determine and accomplish the objectives.
 Management as a process
• Series of interrelated functions- Planning,
organizing, staffing, leading, & controlling.
• Social process – provides an environment,
provides incentives for good performance.
• Management as a discipline – specialized
branch of knowledge.
• Management as an activity performed by
managers; planning, organizing, staffing,
directing & controlling.
 Scope of Management
• Three distinct areas.(1) Economic resource, (2)
System of Authority, (3) A class or elite.
• Economic resource along with land, labor and
capital. Effective use of the 5 M’s (Manpower,
materials, money, machinery, methods)
• System of Authority- Herbison & Myers declares
Mgmt is rule enforcing body bound together by
relationships between superior & subordinates
• Mgmt as a class or elite – a distinct class in
society having own value system
 Functions of Management
• Five functions: 1. Planning 2. Organizing
3. Staffing. 4. Leading 5. Controlling.
• Management applies to any kind of
organizations.
• Applies to managers at all levels
• Aim of all managers is to create surplus
• Management is concerned with
productivity, effectiveness & efficiency
 Functions of Management
• Managers must operate in external
environment that effect operation.
• Must be responsive to economic, social,
ecological, political & ethical factors.
• Time spent for each function may differ.
 Why management principals?
• 1. To increase efficiency: Principles aid
thinking & action. Need for guess work,
haphazard activities reduced. Rapid
changes in the environment can be solved
• To crystallize the nature of
Management: Principals crystallize
knowledge without which not possible to
impart knowledge & provide training to
managers.
 Why management principals?
• To improve research in management:
Management deals with highly
unpredictable human beings. Principals
help in testing human behavior
understanding & predicting the outcome.
To attain social goals: Managers quality
of life & standard of living can be improved
Managers can commit resources & employ
them in a judicious manner.
 Skills of An Effective Manager
• Must possess 5 skills as presented below
• Planning skills: Ability to forecast, ability to
think ahead, state organizational objectives
clearly and precisely, set performance standards
• Organizing skills: Ability to analyze & describe
various organizational jobs. Ability to select,
train, develop, maintain & retain people. Ability
to define working relationship & authority flow.
Ability to get along with changing situations
 Skills of An Effective Manager
• Leading skills: Ability to see big picture. Ability
to communicate ideas effectively. Ability to
inspire people to do better. Ability to inculcate a
sense of team work. Ability to assess situation &
initiate changes.
• Controlling Skills: Ability to keep the activities
on the desired path. Ability to initiate corrective
steps at right time. Ability to ensure control
without hurting the feelings of employees.
 Skills of An Effective Manager
• Decision making skills: Ability to make
good and timely decisions. Ability to
devote on key, important and strategic
issues. Ability to make right choices & take
the organization forward. Ability to commit
funds to the best advantage.
 Levels of Management
• In a large organization, 3 levels of management
are usually identified Top, Middle Lower level
management.
• TOP MANAGEMENT :
• Determines objectives and policies
• Designs the basic operating & financial structure
of an organization
• Provides guidance and direction
• Lays down standards of performance
• Maintains good public relations.
 Levels of Management
• MIDDLE MANAGEMENT
• Interprets and explains the policies framed by the top
management
• Issues detailed instructions
• Participates in operating decisions
• Trains other managers
• LOWER MANAGEMENT
• Plans day to day operations, arranges tools & eqipment
• Assign jobs to workers, provides supervision
• Maintain discipline
 Who are effective Managers?
• Have vision, think long term, set direction.
• Are good communicators & good listeners
• Understand operations
• Know where to spend time and prioritize
• Do not resist change
• Delegate well, accept responsibility & admit
mistakes
• Are motivating, curious, honest, credible &
decisive
 Emergence of Management Thought

• Federick W Taylor – Father of scientific

management. Increase productivity through
greater efficiency in production.
• Increased pay for workers – Apply scientific
knowledge
• Create group harmony and cooperation for
maximizing output & developing workers.
• Gantt: Scientific selection of workers.
Cooperation between labor & management.
Emergence of Management Thought

• Frank & Lilian: Time and motion studies.

• Henri Fayol: Introduced modern
operational theory. Divided industrial
activities in 6 groups (A) Technical (B)
Commercial (C) Financial (D) Security (E)
Accounting & (F) Managerial
• Elton Max: Famous for studies of social
attitudes & relationship of work groups.
 Fayol’s 14 Universal Principals
• 1. Division of work – specialization of labor
• 2. Authority – right to give orders.
• 3. Discipline- Obedience & respect
• 4. Unity of command- Each employee receives
orders only from one supervisor.
• 5. Unity of direction: Coordinated & focused
• 6. Subordination of individual interest
• 7. Remuneration: Should be paid fairly
 Fayol’s 14 Universal Principals
• 8. Centralization & Decentralization is a matter
of proportion.
• 9. Scaler chain: Formal chain of command
• 10. Order: Men & material in proper places
• 11. Equity: Fairness & justice lead to devoted &
loyal service.
• 12. Stability & tenure: to learn jobs
• 13. Initiative: satisfaction to carry out plan.
• 14. Esprit de corps: Team spirit for harmony.
 Environment of Management
• External environment- Operating in a
pluralistic society
• Technological environment: The
knowledge age- rethinking to balance
freedom & restriction for control purposes
• Ecological Environment- relation of people
with land, water air. Example: (a) Bhopal
tragedy and Union Carbide. (b) The
greening of Toshiba.
 Organizational Environment
• Intrapreneur & Entrepreneur
• Intrapreneur- person who focuses on
innovation & creativity within the
organization for profitable venture.
• Entrepreneur- person does above things
but outside the organizational settings
• They see an opportunity, obtain capital,
know-how and other inputs. Take personal
risk of success or failure.
 Management- Science or Art
• Arguments on both sides: start - science
• Systemized body of knowledge
• Management is a social science
• Management is an inexact science: not
like physics or chemistry. No absolute
principals as business conditions flexible
• Manager Vs Scientist: Scientist can wait
but managers cannot.
 Management- Science or Art
• Start : Art – Use of Knowledge
• Creative art – Combines human & non
human resources to achieve results.
• Personalized: Every manager has his own
way of managing people. Managers learn
over years by trial & error method.
• Constant practice: Learn from mistakes.
Gains knowledge over a period of time
10 Managerial roles - Mintzberg
Interpersonal Roles
Figure head role
Leader role
Liaison role
Informational role
Recipient role
Disseminator role
Spokesperson role
10 Managerial roles - Mintzberg
• Decision role
• Entrepreneurial role
• Disturbance handler role
• Resource allocator role
• Negotiator role
 Environment in Management
• Managers, in business, govt, university etc
takes account of external environment.
• In Pluralistic society many groups exercise
power. Manager’s must integrate aims.
• Manager’s identify, evaluate & react to the
forces outside the enterprise
• Society has influence on organizations
which can affect their operations.
Manager’s Social Responsibility
• Corporate Social Responsibility & Social
Responsiveness
• Public needs have changed. Discourages
govt. intervention. More freedom/flexibility.
• Benefits to society & neighborhood.
• Reaction or proaction?
• The role of government.
 Ethics in Managing
• Definition: Defined as the discipline dealing with
what is good and bad and with moral duty and
obligation.
• Personal Ethics: Rules by which an individual
lives own personal life
• Accounting Ethics: Codes that guide the
professional conduct of accountants.
• Business Ethics: Concerned with truth and
justice (for society, competition, public relation,
advertising, corporate behavior etc. in home
country & abroad.
 Ethics in Managing
• Managers compete for information, influence &
resources – 3 theories.
• Utilitarian theory- plans & actions should be
evaluated by their consequences, greatest good
for greatest number of people.
• Theory based on their rights – all people have
basic rights - right to freedom, free speech etc.
• Theory of Justice – Decision makers be guided
by fairness, equity & impartiality
• Ethics be institutionalized.
 Institutionalizing Ethics
• Top level managers responsible to create
organizational environment fostering
ethical decision by institutionalizing ethics
• 1. By establishing company policy or
code and publish the same
• 2. By using formally appointed ethics
committee
• 3. Teaching ethics in Management
Development Programs
 Planning
• Involves selecting missions and objectives
& actions to achieve them
• Requires decision making to choose future
course of action from alternatives.
• Various types of plans ranging from overall
purposes to detailed action.
• No plan exists until a decision – a
commitment of human or material
resources has been made
 Planning
• Practical steps in planning
• 1. Being aware of opportunity in light of the a)
Market b) Competition c) Customer’s want d)
Strength & e) Weakness
• 2. Setting objectives or goals a) where we want
to be? b) What we want to accomplish and
when?
• 3. Considering planning premises a) In what
environment? b) Internal or external. c) Will our
plans operate?
 Planning
• 4. Identifying Alternatives – what are the most
promising alternatives
• 5. Comparing alternatives – in light of goals.
Which alternatives give us the best chance at
lowest cost and highest profit
• 6. Choosing an alternative: Selecting the course
of action to be pursued.
• 7. Formulating supporting plans: such as plans
to a) buying equipment b) buy materials c) Hire
& train workers d) develop a new product.
 Planning
• 8. Numberizing plans by making budgets
Develop such budgets as
• 9. Volume & price of sales.
• 10. Operating expenses
• 11. Expenditures for capital equipment
 Planning
• Strategy & Policy
• The term “strategy” derived from the Greek word
STRATEGOS meaning general.
• Strategy refers to the determination of the
purpose or mission & long term objectives.
• Adopts courses of action and allocation of
resources to achieve aims.
• Objectives are a part of strategy formulation
 PLANNING
• Policies
• Are general statements guiding manager’s
thinking in decision making.
• Decisions must fall within certain limits.
• Intend to guide managers commitment to
the decision they ultimately make.
• Essence of policy is discretion. Strategy,
on the other hand concerns the direction in
which human & material will be applied
 Strategic Planning Process
• Industry Analysis.
• Formulation of strategy requires evaluation
of attractiveness of an industry by
analyzing the external environment.
• Focus should be on the competition.
• Possibility of new firms entering market.
• Availability of substitute products/services.
• Bargaining position of suppliers & buyers
 Major Objective & Strategic Intent
• Major objective
• Are the end points towards which the
activities of the enterprise are directed
• Strategic Intent
• It is the commitment to win in the
competitive environment
 Present & Future External
Environment
• Above must be assessed in terms of
threats and opportunities.
• Evaluation focuses on the competitive
situation, economic, social, political, legal,
demographic & geographic factors.
• Environment is scanned for technological
developments for products & services.
• For other factors, check competitive
factors.
 Internal Environment
Internal environment should be audited &
evaluated in respect to its resources.
Weakness & strength in research &
development, production, marketing, operations,
procurement & services evaluated.
Internal factors should include human & financial
resources, company image, organization
structure, planning & control system & relations
with customers.
 Development of Alternative
Strategies
• Strategic alternatives are developed on
the basis of an analysis of the external &
internal environment.
• Firm may diversify operation into new &
profitable markets.
• Another strategy is to go international.
• Under certain conditions, liquidation
strategy by terminating unprofitable line.
• Retrenchment strategy often an option.
Consistency Testing & Contingency
Planning
• This is the last aspect but essential
• Even if alternative seems profitable,
management may decide against it
because it may hurt the value system.
• Since future cannot be predicted,
contingency plans need to be prepared.
• Contingency plan may be made where the
scenario includes major recession.
 TOWS Matrix – A Modern Tool
• TOWS matrix has been introduced for analyzing
competitive situation of a company or nation.
Updated version of BCG matrix – Boston
Portfolio Matrix.
• Has a wider scope but does not replace the
earlier one.
• TOWS- conceptual frame work for systematic
analysis.
• Matches external threats & opportunities with
internal weaknesses and strengths.
 TOWS Matrix
• T- threats, O- opportunities, W- weakness,
S- strengths. TOWS starts with threats.
• Strategic planning takes place in
conditions of threat, or perceived crisis or
problem.
• 4 alternate strategies – analysis of
external & internal environment (TOWS).
 4 Alternative Strategies
• WT strategy- lower right hand corner- aims
to minimize weakness & threats (mini-mini
strategy) Form JV, retrench or liquidate.
• WO strategy- minimize weakness &
maximize opportunities. Develop areas
within organization or acquire needed
competencies. (Middle right hand, above
WT)
 4 Alternative Strategies
• ST- strategy, Organization’s strength to deal with
threats in the environment. Maximize strength
minimize threat. (Left of WT-Middle column
bottom)
• Use technological, financial, managerial or
marketing strength to cope with threats of a new
product introduced by its competitor
• Most desirable situation- can use strengths to
take advantage of opportunities – SO strategy.
Weakness have be overcome making them
strengths. Facing threats will help them cope &
focus on opportunities. Middle column middle.
TOWS Matrix- Time Dimension
• External and internal environment are
dynamic. Some factors change over time.
• Strategy designer must prepare several
TOWS matrixes at different points of time
• May start TOWS analysis of the past,
continue analysis of the present and most
importantly focus on different time period
in the future.
 The Portfolio Matrix
• Tool for allocating resources
• Business Portfolio Matrix developed by Boston
Consulting Group shows linkages between the
growth rate of the business & the relative
competitive position (market share) of the firm.
• Question mark – need cash investment.
• Star – opportunities for growth & profit- continue
cash supply for more profits
• Cash cows – provide cash to organization
• Dogs – not profitable, can be disposed of.
 Management By Objectives
• MBO- a comprehensive system integrating key
managerial activities in systematic manner. It is
directed towards firms’ organizational
achievements.
• It should be goal driven, success oriented
comprehensive management system.
• Can be used for performance appraisals,
motivating individuals & strategic planning.
• Other sub systems include HR , planning,
development, reward system, budgeting etc.
 How To Set Objectives
• Objectives to be measurable & verifiable
• Non Verifiable & Verifiable Objectives Make
reasonable profit- Achieve return on investment
of 12% at end of fiscal year.
• Improve productivity of Production Dept-
Increase production output by 5% by Dec 31,08
without extra cost & current quality level.
• Install a computer system- Install computerized
control system in production dept by 31 Dec, 08
within 500 hours operating at less than 10%
downtime during 1st. 3 months & 2% thereafter.
 Benefits Of MBO
• Considerable evidences show motivation due to
clear goals.
• Improvement of managing through result
oriented planning
• Clarity on organizational jobs, structures &
delegation of authority.
• Encouragement of personal commitment to their
own & organizational goals.
• Development of effective controls, measuring
results leading to corrective action.
 Failure of MBO
• Failure to teach the philosophy of MBO. Managers do
not explain to subordinates.
Give guidelines to goal setters. Managers must know
corporate goals, know planning basics and knowledge
of company policies
Difficulty in setting verifiable goals. Participating in MBO
programs. Excessive concern for economic results
encourage unethical behaviour.
Emphasis on short term goals at the expense of long
term goals. Danger of flexibility make managers hesitate
change objectives even if was good for the company.
Overuse of quantitative goals- using numbers where
they are not applicable. Downgrade important goal that
are difficult to state result.
 Organizing
• Good managers make any organization pattern
work. Good people and those who want to
cooperate will work together.
• For an organizational role 3 things are needed.
1) Verifiable objectives – major part of planning.
2) Clear idea of major duties and 3) An
understood area of discretion or authority so that
the person filling the role knows what he or she
can do to accomplish goals
 Organizing
• In addition, to make role work effectively,
provision should be made for supplying needed
information & performance.
• Organizing is
• 1. Identification & Classification of required
activities. 2) The grouping of activities necessary
to attain the objective. 3) Assignment of each
grouping to a manager with the authority
(delegation) necessary to supervise it & 4)
Provision to have horizontal (same org level) &
vertical (e.g. corporate head quarters, divisions
& department) in the organizational structure.
 Organization Structure
• Organization structure should be designed to
classify who is to do what tasks & who is
responsible for what results – no confusion &
uncertainty of assignment, & furnish decision
making & communications networks reflecting
enterprise objectives.
• Organizational structure is formal framework by
which tasks are divided, grouped & coordinated.
• When Managers develop or change an
organization structure, they are engaged in
organization design needing 6 key elements.
 Organizational Design
• 6 key elements
• 1.Work specialization 2.Departmentalization
• 3. Chain of command 4.Span of control
5.Centralization & decentralization
6.Formalization.
• Work Specialization
• Essence of work specialization is that an entire
job is broken down into steps & each step is
completed by different person.
• Entire job is never done by one person.
 Organizational Design
• Departmentalization : The basis by which jobs
are grouped together is called
departmentalization. Every organization has its
own way of grouping/classifying.
• 5 common forms of departmentalization
• Functional dept: Groups by job function.
• Product dept: group jobs by product line. Each
major product area under one manager who is a
specialist.
 Organizational Design
• Geographical Dept: Groups jobs on the
basis of territory or regions or by countries.
• Process Dept: Groups jobs on the basis
of product or customer flow. Work
activities follow a natural processing flow
of products or customers.
• Customer Dept: Group jobs on basis of
customers having common needs or
problems to be solved by specialists.
 Organizational Design
• Chain of Command: It is the continuous line of
authority that extends from upper organizational
levels to the lowest levels & clarifies who reports
to whom.
• Span of control: It indicates how many
employees can a manager efficiently &
effectively manage. To a large degree this
determines the number of levels and managers
an organization has. Every thing being equal,
the wider the span, the more efficient the
organization.
 Organizational Design
• Centralization & Decentralization: In some
organizations, top managers make all decisions
and lower level managers & employees carry out
their directives.
• In other extreme decision making is pushed
down to the managers who are closest to action.
Former – Centralized, Later – Decentralized.
• If top managers make key decisions with no
inputs from below, then the org is centralized. In
contrast, if lower level employees make
decisions, the more decentralization there is.
 Organizational Design.
• Formalization: Refers to the degree to which
jobs within the org are standardized & the extent
to which employee behavior are guided by rules
and procedures.
• When job highly formalized – minimum
discretion. When formalization is low – job
behavior is unstructured – more freedom
• High degree of formalization needs explicit job
description, rules & defined procedures
• Varies widely between organizations e.g.
Newspapers – high discretion. Compositors &
type setters – highly standardized.
Common Organizational Design
• Traditional Organizational Designs:
• 1.Simple, 2.Divisional & 3. Functional
structure – tend to be more mechanistic-
rigid & tightly controlled structure. High
specialization , narrow span of control, rigid
departmentalization, high formalization,
limited info network (mostly downward
communication), less participation in
decision making by lower level employees.
 Simple Structure
• An organizational design with low
departmentalization, wide spans of control,
authority centralized & little formalization.
• Most common in small businesses in
which the owner & manager are the same.
• Strengths: Fast, flexible, inexpensive,
clear accountability.
• Weakness: Not proper as org grows,
reliance on one person risky.
 Functional Structure
• It is an organizational design that groups similar
or related occupational specialist together. It’s
the functional approach to departmentalization.
• Strengths: Cost saving from specialization
(economies of scale, minimal duplication)
• Weakness: Managers loose sight what’s best for
the org because of pursuing functional goals.
• Functional specialists become insulated & have
little understanding what other units are doing.
 Divisional Structure
• It is an organizational structure made up of
separate units or divisions. Each unit has limited
autonomy with divisional manager responsible
for performance. He has strategic & operational
authority over his unit.
• Here the parent unit acts as an external
overseer to coordinate & control various
divisions. Provides legal & financial support.
• Strengths: Focuses on results. Divisional
managers responsible for their products &
services.
• Weakness: Duplication of activities & resources
increases costs & reduces efficiency.
 Delegation of Authority
• Authority is delegated when a superior gives a
subordinate discretion to make decisions.
Superiors cannot delegate authority they do not
have.
• Process of delegation involves 1. Determining
the results expected from a position 2. Assigning
tasks to the position 3. Delegating authority for
accomplishing these tasks. 4. Holding the
person in that position responsible for the
accomplishment of the tasks.
 Delegation of Authority
• Splintered authority: Splintered authority
exists wherever a problem cannot be
solved without pooling the authority of two
or more managers
• Such problems could be handled by
merely referring the decision upward until
it reaches a person with the authority to
make it unilaterally.
 Delegation of Authority
• Recovery of Delegated Authority:
Manager who delegates authority does not
permanently dispose of it – delegated
authority can always be regained.
• Reorganization inevitably involves some
recovery & redelegation of authority
• Rights are recovered by the responsible
head of a firm & then redelegated to
managers of new or modified departments
 Delegation of Authority
• Art of Delegation: Most failures in delegation
occur not because managers have not
understood it, but because they are unable or
unwilling to apply them.
• Much of the reason lies in personal attitudes
towards delegation.
• Receptiveness: The delegator is unwilling to
give others a chance, feels unsafe when
decision of junior differs with superiors. They
cannot welcome new ideas or compliment them
on their ingenuity
 Delegation of Authority
• Willingness to let go: The manager must
effectively delegate authority & relinquish
his right to make decisions.
• Small business owners who have grown
large wants to continue making decisions
• Presidents & VP’s should spend quality
time in doing more important work rather
than engaging themselves to routine
decision making work.
 Delegation of Authority
• Willingness- let others make mistakes No manager
would like to see his juniors making mistakes. However,
if continual checking is done, purpose of delegation is
defeated. Since everybody makes mistakes, juniors be
allowed to make mistakes & their cost must be
considered as investment for personal development.

• Repeated mistakes: Can be avoided by nullifying

delegation or hindering the development of subordinates.
Counseling, explaining objectives & policies can solve
problem. Should never discourage subordinates.
 Delegation of Authority
• Willingness to trust subordinates: When
delegating, superiors must trust their
subordinates. Delegation implies trustful attitude.
Superior may put off delegation with the thought
that subordinates are inexperienced.
• Provide training or select other subordinates
who are prepared to assume responsibility.
• Sometimes bosses feel threatened & do not
wish to let go their powers or do not know how to
set up controls ensuring proper use of authority
and delegate wisely.
 Delegation of Authority
• Willingness to establish broad Controls If
superiors cannot delegate responsibility for
performance & should not delegate authority
unless they are willing to find means of getting
feedback to convince themselves that they are
doing it for the good of the organization.
• More than often, reluctance to delegate & trust
comes from superiors inadequate planning &
fear of loss of control.
 Guide for Overcoming Weak
Delegation
• 1. Define assignment & delegate authority in
light of results expected.
• 2. Select person in light of job to be done.
• 3. Maintain open lines of communication –
Seniors do not delegate all the authority or
abdicate all responsibility, decentralization
should not result in insulation. There should be
free flow of information & subordinates should
receive information related to make decisions &
to interpret them properly. Delegation, therefore,
depends on situations.
 Establish Proper controls
• Because no manager can relinquish
responsibility, delegations should be
accompanied by techniques for ensuring
that the authority is properly used. But if
controls are to enhance delegation, they
must be relatively broad & be designed to
show deviations from plans, rather than
interfering with routine actions of
subordinates.
 Reward Effective Delegation &
Success
• Assumption of authority: Managers
should be watchful for means of rewarding
both effective delegation & effective
assumption of authority.
• Although, many of these rewards will be
monetary, the granting of greater
discretion & prestige – both in a given
position & by promotion to a higher
position is often even more of an incentive.
 Advantages of Decentralization
• 1.Relieves top management of some
burden of decision making & forces upper
level managers to let go.
• 2. Encourages decision making &
assumption of authority & responsibility.
• 3. Gives managers more freedom &
independence in decision making.
• 4. Promotes establishment & use of broad
controls which may increase motivation.
• 5. Makes comparison of performance of
different organizations units possible.
Advantages of Decentralization
• 6.Facilities for setting up profit centers.
• 7. Facilitates product diversification.
• 8. Promotes development of General
Managers.
• 9. Aids in adoption in fast changing
environment.
 Limitations of Decentralization
• 1. Makes it difficult to have uniform policy.
• 2. Increases complexity of coordination of
decentralized organizational units.
• 3. May result in loss of some control by
upper level managers.
• 4. May be limited by inadequate control
techniques.
• 5. May be constrained by inadequate
planning & control systems.
 Limitations of Decentralization
• 6. Can be limited by the availability of
qualified managers.
• 7.Involves considerable expenses for
training managers.
• 8. May be limited by external forces (Govt,
national labor unions, control, tax policies).
• 9. May not be favored by economies of
scale of some operations.
 Chapter

Fundamentals of Organizing

Copyright © 2002 by South-Western, a division of Thompson Learning. All rights reserved.

 Organizing

• The deployment of organizational

resources to achieve strategic goals
• Reflects deployment of resources
• Shows division of labor
• Formal lines of authority and
mechanisms is developed
 Organization Structure

 Defines how tasks are divided,

resources are deployed, and
departments are coordinated
 The set of formal tasks assigned
 Formal reporting relationships
 The design of systems to ensure
effective coordination of employees
across department
The Organization Chart

Visual representation

Set of formal tasks

Framework for vertical control

Formal reporting relationships

 Work Specialization

• Tasks are subdivided into individual

jobs
• Division of labor concept
• Employees perform only the tasks
relevant to their specialized function
• Jobs tend to be small, but they can be
performed efficiently
 Chain of Command

•• Unbroken
Unbroken line
line of
of authority
authority that
that links
links all
all
persons
persons in
in an
an organization
organization
•• Shows
Shows who
who reports
reports to
to whom
whom
•• Associated
Associated with
with two
two underlying
underlying
principles
principles
Unity
Unity of
of Command
Command
Scalar
Scalar Principle
Principle
 Authority
•• Formal
Formal and
and legitimate
legitimate right
right of
of aa manager
manager
to make
to make decisions
decisions and
and issue
issue orders
orders
•• Allocate
Allocate resources
resources toto achieve
achieve
organizationally desired
organizationally desired outcomes
outcomes
•• Authority
Authority is
is distinguished
distinguished by by three
three
characteristics
characteristics
Authority
Authority is
is vested
vested in
in organizational
organizational
positions, not
positions, not people
people
Authority
Authority is
is accepted
accepted byby subordinates
subordinates
Authority
Authority flows
flows down
down the
the vertical
vertical
hierarchy
hierarchy
 Responsibility

• The duty to perform the task or

activity an employee has been
assigned
• Managers are assigned authority
commensurate with responsibility
 Accountability

Mechanism through which authority

and responsibility are brought into
alignment
People are subject to reporting and
justifying task outcomes to those
above them in the chain of command
Can be built into the organization
structure
 Delegation

Process managers use to transfer authority and responsibility

Organization encourage managers to delegate authority to lowest possible level

 Delegation

Give thorough Maintain Evaluate and reward

instructions feedback performance

Techniques for Delegation

Delegate the whole task Ensure that authority Select the right
equals responsibility person
 Span of Control
••Number
Numberof ofemployees
employeeswho whoreport
reportto
toaa
supervisor
supervisor
••Traditional
Traditionalview,
view,about
aboutseven
seven
subordinates
subordinatesperpermanager
manager
••Many
Manylean
leanorganizations
organizationstodaytodayhave
have30,
30,
40,
40,or
oreven
evenhigher
highersubordinates
subordinates
••When
Whensupervisors
supervisorsmust
mustbe beclosely
closely
involved
involvedwith
withsubordinates,
subordinates,the thespan
span
should
shouldbebesmall
small
••Supervisors
Supervisorsneed
needlittle
littleinvolvement
involvementwithwith
subordinates,
subordinates,ititcan
canbebelarge
large
 Factors Associated With Less Supervisor Involvement

•• Work
Workis isstable
stableand
androutine
routine
•• Subordinates
Subordinatesperform
perform similar
similarwork
worktaskstasks
•• Subordinates
Subordinatesare areconcentrated
concentrated inin aa single
single
location
location
•• Subordinates
Subordinatesare arehighly
highly trained
trained
•• Rules
Rules and
andprocedure
proceduredefining
definingtask
taskactivities
activitiesare
are
available
available
•• Support
Supportsystems
systemsandandpersonnel
personnelareareavailable
availableforfor
the
themanager
manager
•• Little
Littletime
timeisisrequired
requiredin
in nonsupervisory
nonsupervisory
activities
activities
•• Managers’
Managers’ preferences
preferencesandandstyles
stylesfavor
favor aalarge
large
span
span
 Tall versus Flat Structure
• Span of Control used in an organization
determines whether the structure is tall or
flat
• Tall structure has a narrow span and more
hierarchical levels
• Flat structure has a wide span, is
horizontally dispersed and fewer
hierarchical levels
• The trend has been toward wider spans of
control
Centralization versus Decentralization

• Greater change and uncertainty in the

environment are usually associated
with decentralization
• The amount of centralization or
decentralization should fit the firm’s
strategy
• In times of crisis or risk of company
failure, authority may be centralized
at the top
 Departmentalization
The basis on which individuals are grouped into
departments
Vertical functional approach. People are grouped
together in departments by common skills.
Divisional approach. Grouped together based on a
common product, program, or geographical region.
Horizontal matrix approach. Functional and
divisional chains of command. Some employees
report to two bosses

.
Team-based approach. Created to
accomplish specific tasks
Network approach. Small, central hub
electronically connected to their other
organizations that perform vital
functions. Departments are
independent, and can be located
anywhere.
Virtual approach. Brings people together
temporarily to exploit specific
opportunities then disbands
Five Approaches to Structural
Design
Five Approaches to Structural
Design
Slide 2
Divisional Structure Advantages

• Efficient use of resources

• Skill specialization development
• Top management control
• Excellent coordination
• Quality technical problem solving
Divisional Structure Disadvantages

• Poor communications
• Slow response to external changes
• Decisions concentrated at top
• Pin pointing responsibility is difficult
• Limited view of organizational goals
by employees
 Horizontal Matrix Advantages

• More efficient use of resources than

single hierarchy
• Adaptable to changing environment
• Development of both general and
specialists management skills
• Expertise available to all divisions
• Enlarged tasks for employees
Dual Authority Structure in a
Matrix Organization
Horizontal Matrix Disadvantages
• Dual chain of command
• High conflict between two sides of
matrix
• Many meetings to coordinate
activities
• Need for human relations training
• Power domination by one side of
matrix
 Team Advantages

• Same advantages as functional

structure
• Reduced barriers among
departments
• Quicker response time
• Better morale
• Reduced administrative overhead
 Team Disadvantages

• Dual loyalties and conflict

• Time and resources spent on
meetings
• Unplanned decentralization
Network Approach Advantages

• Global competitiveness
• Work force flexibility
• Reduced administrative overhead
Network Approach Disadvantages

• No hands-on control
• Loss of part of the organization severely
impacts remainder of organization
• Employee loyalty weakened
 Horizontal Organization

• When organizations grow and evolve,

two things happen:
New positions and departments are
added
Senior managers have to find a way to tie
all of the different departments together
 Coordination

Quality of collaboration across departments

Evolution of Organization Structures

Traditional Teams and Project Reengineering to New Workplace

Vertical Managers for Horizontal Learning Organization
Structure Horizontal Processes
Coordination
 Structural Design
• Task Force...A temporary team or
committee formed to solve a specific short-
term problem
• Team…Participants from several
• Team…Participants from several departments who
departments who meet to solve ongoing
meet to solve ongoing problems
problems

• Project Manager…A person responsible

for coordinating the activities of several
departments