Principles of Management, 6e

P C Tripathi & P N Reddy

Chapter 7
Organization

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 Learning Objectives
 Examine the meaning, characteristics and typology of organizations

 Learn the principles and process of organizing

 Understand the meaning and significance of the span of management

and the factors governing it
 Describe the advantages and disadvantages of different bases of
departmentalization
 Analyse the advantages and disadvantages of two broad categories of
organisation structures
 Present the newly emerging organisation concepts and the
international organization structures

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 What is an Organization?
 Characteristics of an Organization - Every organization has:
 a purpose, goal or goals
 clear concept of the major duties or activities
 classification of activities into jobs
 establishment of relationships between these jobs
 Typology of Organizations
 Organizations which benefit their owners
 Organizations which benefit their members
 Organizations which benefit their clients
 Organizations which benefit the whole society

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 Process of Organizing

Managers Differentiates and Integrates the activities of organisation.

 Consideration of Objectives
 Deciding Organisational Boundaries
 Grouping of Activities into Departments
 Deciding which Departments will be Key Departments
 Determining Levels at which Various Types of Decisions are to be
Made
 Determining the Span of Management
 Setting up a Coordination Mechanism

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 Principles of Organizing
 Objectives  Delegation
 Specialization  Responsibility
 Authority
 Span of Control
 Efficiency
 Management by Exception
Principle
 Scalar Principle
 Unity of Command

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 implicity
 Flexibility
 Balance
 Unity of Direction
 Personal Ability
 Acceptability

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 Span of Management

 Meaning and Importance

Decreasing the span of management increases the number of levels

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 Span of Management

 What is an Appropriate Span?

 Direct one-to-one relationships
 Direct group relationships
 Cross-relationships

 Graicunas’ formula:
 It ignores the frequency and importance of relationships
 The actual span of management is determined by a number of
factors which have not been taken into consideration while
framing the formula

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 Span of Management
 Factors Governing the Span of Management (Contingency
Approach)
 Ability of the Manager
 Ability of the Employees
 Type of Work
 Well-defined Authority and Responsibility
 Geographic Location
 Sophisticated Information and Control System
 Level of Management
 Economic Considerations

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 Departmentalization
Process Departmentalization
 Business or Organizational Function

Fosters sub-goal loyalties

Simple form of grouping activities Not a good training ground
Promotes excellence in Unsuitable for large organizations
performance
Evoke conflicting interpretations
Promotes economies of scale
Organizational arthritis
“common pot” accounting

 Technology
Feeling less responsible
Efficient use of costly equipment
Not a good training ground
Follows the principle of
specialization Sequential technology
Suitable for organizations with many Difficult to compare
processes Devote extra attention

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 Departmentalization
Purpose Departmentalization

 Products
 Customers  Choice of a Suitable Base
 Regions, Territory or Location  Specialization
 Division  Coordination
 Time  Economy
 Combined Base  Whole Task

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 Departmentalization

President

Tractor Appliance Generator

Department Department Department

Eastern Southern Western

Plant Plant Plant

Production Sales Finance

A Combined Base Organization

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 Departmentalization

A Typical Matrix Organization

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 Departmentalization

Parallel Departmentalization

 When the organization of several retail outlets, branches and

plants doing similar work as the parent company use the same
departmental set-up as that of the parent company it is called
parallel departmentalization.

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 Organization Structure
 Organization Chart

 Organization Manuals

 Mechanistic and Organic

Structures

Tall organization

Flat Organization
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 What Type of structure is Best
(Contingency View)
 Environment  Span of Control
 Culture and history  Form
 Task  Availability of Finance and
Personnel
 Technology
 Managerial Characteristics
 Strategy
 Employee Characteristics

Collateral Organizations: This concept says that a manager should develop a

collateral mode of functioning to which he should shift, to operate in tandem
with the problem without displacing the existing classical or behavioural formal
structure.

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 Emerging Organization Structure
 Network Organizations
 Involves the blurring of boundaries
 Coordination between various firms
 Decision rights are pushed
 Control is exercised by market mechanisms

 Virtual Organizations
 Technology
 Opportunism
 No borders
 Trust
 Excellence

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 Committees
A committee is a group of people who have been formally assigned some task
or some problem for their decision and/or implementation.

Suggestions for Making Committees Effective:

 Number of members should not be very large

 Authority should be carefully spelled out
 Approximately equal formal status The linking pin

 Precedence to organizational interests

 Chairman should plan and conduct the meeting with firmness and fairness
 Periodic review

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 Types of committee

Advisory committee
• Staff Authority
• Recommendatory role
• Cannot enforce implementation
• Work committees, sales, finance.
Executive Committees
• Line Authority.
• Taking decisions and ordering its execution.
• BoD

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Standing Committees
•Permanent Committees.
•Recurrent Organizational Problems.
•Finance Committee, Loan approval committee in
bank, advisory committee in college.
•Members are chosen based on their Title not
because of their qualifications.
Ad hoc Committees.
•Have short duration.
•Dissolved after the task is completed.
•Members are chosen based on their skills.

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 Teams
A team is a small group of people with different backgrounds, skills
and knowledge, who are drawn from different functional areas of the
organisation, to work together on a specific and defined task.

Characteristics of a Team

 Skill Diversity
 A clear and sharply defined objective
 Leadership is task oriented
 As a whole is responsible for the task

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 Teams
Receptive to experimentation
Best means available for overcoming functional
insulation and parochialism
Assumes responsibility of the whole task
No communication overload on the top executives
Accomplishes more than the sum total of what members
are capable of accomplishing individually

Demands continuous attention to its management

Social loafing
Sucker effect

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 Teams
Difference between Traditional Formal Work Groups and Teams
Formal Work Group Team
Is on the basis of hierarchy of superior Is on the basis of complementarities of skill
subordinate relationship and random skills
Leadership and composition are more or less Leadership and composition change as per the
permanent situation
Management is by direction and control Management is by integration and self discipline

Communication is up and down between Communication is lateral

superior and his subordinate
Members vie for each other for power, prestige, Members collaborate with each other since
recognition and personal autonomy rewards are dependant on team effort

Decision are taken on the basis of simple Decisions are taken unanimously
majority
Purpose is same as the organization Purpose is specific

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 Teams
 Types of Teams
 Project Teams
 Problem-solving Teams
 Permanent Work Teams
 Four-corners of the superordinate goal.
 Establishes the quantity and the quality of its output.
 The team makes its own internal distribution of tasks.
 Decides its own membership.
 Makes its own decision.
 Decides how the work operations should be performed.

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 International Organizational Structures
Important factors affecting an MNE’s choice of structure:
 Strategy
 Home and host country environments
 Nature and size of its business
 Nature and size of its business
 The human resources available
Many companies, which had earlier established their footholds in the host
countries by creating subsidiaries, later on shifting to international division
structures to look after their foreign operations, international division
structures shifting to global functional structures, global functional
structures to global geographic structures, global geographic structures to
global product structures and global product structures to matrix structures.

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