Chapter: Three

Management
&
Organization

1–1
Introduction to Management
&
Organizations
 Who Are Managers?
Someone who coordinates and oversees the work of other
people so that organizational goals can be
accomplished.

A business manager drives the work of others in order to

run a major firm/venture efficiently and make a
profit/margin. They should have working knowledge of
marketing, finance, and public relation and/or specialist
in one or more of these mentioned.

1–3
  First-line Managers
 Individuals who manage the work of non-managerial employees.
 Managers who manage the work of non-managerial employees and
who typically are involved with producing the organization’s
products or servicing the organization’s customers.
 First line manager are often called supervisors but may also be
Types Managers

called shift managers, district managers, department

managers, or office managers.
 Middle Managers
 Are those found between the lowest and top levels of the
organization. These managers manage the work of first-line
managers and may have titles such as regional manager, project
leaders, store manager, or division manager.
 Individuals who manage the work of first-line managers.
 Top Managers
 Individuals who are responsible for making organization-wide
decisions and establishing plans and goals that affect the entire
organization. Ex. President, Chairman, CEO.

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Exhibit 1–1 Managerial Levels

1–5
 What Is Management?
• According to Henri Fayol, "to manage is to forecast and to
plan, to organize, to command, to co-ordinate and to
control

• Management involves coordinating and over seeing the work

activities of others so that their activities are completed
efficiently and effectively.
– Efficiency
• “Doing things right”
– Getting the most output for the least inputs
– Effectiveness
• “Doing the right things”
– Doing those work activities that will help the organization reach its
goals.

1–6
  Functional Approach (POSDCORB): according to the functions approach, managers
perform certain activities or functions as they efficiently and effectively coordinate the work
Functions of Management/ tasks of Managers
of others. Those functions are:
 01. Planning
 Defining goals, establishing strategies to achieve goals, developing plans to
integrate and coordinate activities.
 02. Organizing
 Arranging and structuring work to accomplish organizational goals.
 When managers organize, they determine what tasks are to be done, who is to do
them, how the tasks are to be grouped, who reports to whom, and where decisions
are to be made.
 Staffing
 Process of determining human resource need and recruiting, selecting, training and
developing human resources.
 Leading
 Working with and through people to accomplish goals.
 When managers motivate subordinates, help resolve work group conflicts,
influence individuals or teams as they work, select the most effective
communication channel, or deal in any way with employee behavior issues, they
are leading.
 Controlling
 Monitoring, comparing, and correcting work.
1–7
  Management Roles Approach (Mintzberg): it refers to
specific actions or behaviors expected of a manager.
Interpersonal roles
Figurehead, leader, liaison
What Do Managers Do?

Are ones that involve people subordinates and persons

outside the organization and other duties that are symbolic in
nature.
Informational roles
Involve collecting, receiving and disseminating information.
The three informational roles are Monitor, disseminator, and
spokesperson
Decisional roles
Entail making decisions or choices.
The four decisional roles are entrepreneur, disturbance
handler, resource allocator, and negotiator.
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 What Managers Actually Do (Mintzberg)

• Interaction
What Do Managers Do?

– with others
– with the organization
– with the external context of the organization
• Reflection
– thoughtful thinking
• Action
– practical doing

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  Skills Approach
 Technical skills
It includes Knowledge of and proficiency in a certain
specialized field like engineering, computers, accounting, or
manufacturing. Thus it involves working with tools and
What Do Managers Do?

specific techniques.
 Human skills
Human skill is the ability to work with the people, it is
cooperative effort, it is teamwork, it is the creation of
environment in which people feel secured and free to express
their opinions.
 Conceptual skills
The ability to think and conceptualize about abstract and
complex situations concerning the organization
 Design Skill
Design skill is the ability to solve problem in ways that will
benefit the enterprise. 1–10
Exhibit 1–5 Skills Needed at Different Management Levels

1–11
 Organization?
 An Organization Defined
A formal structure of position to achieve a particular
objective.
A systematic arrangement of people to accomplish some
specific purpose (that individuals independently could not
accomplish alone).
A group of conscious people working together within a
established relationship to achieve some specific
objectives.
 Common Characteristics of Organizations
Have a distinct purpose (goal)
Composed of people
Have a planned structure
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 Functions of Organization
• Functions

– Identifying activities relevant with the task and goal.

– Assembling of resources, man, materials, money.
– Identifying objectives and grouping activities
necessary to attain objectives.
– Assigning tasks & responsibilities associated with
individual jobs.
– Making provision for coordination.

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 Types of Organization
Formal Organization:
 Is the one put together by management, created by those
who have authority, responsibility, and accountability.
 Contains a structured communication and command system
that helps people to pool their time and energy to achieve
the objectives.
 Characteristics:
Well defined rules and regulation
Formal structure
Determined objectives and policies
Status symbol
Limitation on the activities of the individual
Strict observance of the principle of co-ordination
Messages are communicated through scalar chain.
1–14
Informal Organization
 Is the network of personal and social relationship that emerges
when people work together.

 Characteristics
Informal relations are unplanned. They arise
spontaneously.
Formation of informal organization is a natural process.
Informal organization reflects human relationships.
Informal organizations are based on common taste,
problems, language, religion, culture etc.
The relationship of informal organizations is voluntary.

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Organizational Structure
&
Design
 Defining Organizational Structure
• Organizational Structure
– The formal arrangement of jobs within an organization.
– A graphic blueprint, or map of positions, people, and
formal authority relationships in the organization.
• Principles of organizing/Elements of Org. structure:
• Work specialization
• Departmentalization
• Chain of command
• Span of control
• Centralization and decentralization
• Formalization

10–17
 Organizational Structure
Six key questions that managers need to answer in designing proper
organizational structure

1. To what degree are tasks sub devised into separate jobs? Job Specialization

2. On what basis are jobs grouped together? Departmentalization

3. To whom do individuals and groups report? Chain of Command

4. How many individual can a manager effectively & Span of Control

efficiently direct?

5. Where does decision-making authority lies? Centralization &

decentralization

6. To what degree will there be rules & regulations to direct Formalization

managers & employees?
1–18
 Elements of Organizational Structure
• 01. Work/Job Specialization
– The degree to which tasks in the organization are
divided into separate jobs with each step
completed by a different person, i.e. task is broken
down and divided into smaller component parts.
– Job specialization evolved from the concept of
“division of labor”.
– It increase the productivity of the organization.
– Overspecialization can result in human
diseconomies from fatigue, stress, poor quality,
increased absenteeism, and higher turnover.
10–19
 Elements of Organizational Structure

02. Departmentalization
On what basis jobs are grouped together. It may
be various types:

 Functional  Process
 Grouping jobs on the basis
 Grouping jobs by functions
of product or customer flow
performed
 Product  Customer
 Grouping jobs by type of
 Grouping jobs by product
customer and needs
line
 Geographical
 Grouping jobs on the basis
of territory or geography

10–20
 Functional Departmentalization
Functional Departmentalization/ Structure: grouping jobs
involving same or similar activities.
It refers to grouping jobs according to organization’s functions
such as marketing, finance, production etc.

• Advantages
• Efficiencies from putting together similar specialties and people with common skills,
knowledge, and orientations
• Coordination within functional area
• In-depth specialization
• Disadvantages
• Poor communication across functional areas
• Limited view of organizational goals
10–21
 Geographical Departmentalization
Geographical Departmentalization/ Structure: Grouping jobs on the basis territory or geographical areas.

• Advantages
• More effective and efficient handling of specific
regional issues that arise
• Serve needs of unique geographic markets better
• Disadvantages
• Duplication of functions
• Can feel isolated from other organizational areas

10–22
 Product Departmentalization

Product Departmentalization/Structure: Grouping and arranging activities

around products or products groups. In this approach, each major product area is
placed under the authority of a manager who is responsible for everything.

General
Manager

Manager Manager Manager Manager

Textile Automobile Electronics Real Estate

Advantages:
-Allows specialization in particular products and services
-Managers can become experts in their industry
-Closer to customers
Disadvantages:
– Duplication of functions
– Limited view of organizational goals
10–23
 Process Departmentalization

Process Departmentalization/ Structure: Grouping jobs on the basis of

production process or customer flow.

Factory
Manager

Advantages:
-More efficient flow of work activities
Disadvantages:
-Can only be used with certain types of products

10–24
 Customer Departmentalization
Customer Departmentalization/structure: Grouping jobs on the basis of
common customers. It is simply grouping activities to respond to and
interacts with specific customers.

Advantages:
-Customers’ needs and problems can be met by specialists
Disadvantages:
-Duplication of functions
-Limited view of organizational goals

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 Organization Structure (cont’d)

• 03. Chain of Command

– The continuous line of authority that extends from
upper levels of an organization to the lowest levels
of the organization and clarifies who reports to
who.
– It helps employees answer questions such as: “who
do I go, if I have a problem?”
– “To whom am I responsible?”

10–26
 Organization Structure (cont’d)

• Components of chain of Command:

i. Authority
– The rights inherent in a managerial position to tell
people what to do and to expect them to do it.
ii. Responsibility
– The obligation or expectation to perform.
iii. Unity of Command
– The concept that a person should have one boss
and should report only to that person.

10–27
 Organization Structure (cont’d)
 04. Span of Control:
 The number of employees who can be effectively and efficiently
supervised by a manager.
 There is no ideal or optimal span of management.
 Two types of span: wide and narrow.
 Width of span is affected by:
 Skills and abilities of the manager
 Employee characteristics
 Characteristics of the work being done
 Similarity of tasks
 Complexity of tasks
 Standardization of tasks

10–28
Contrasting Spans of Control

10–29
 Organization Structure (cont’d)
• 05. Centralization and Decentralization:
• Centralization
– The degree to which decision-making is concentrated
at a single point in the organizations.
• Organizations in which top managers make all the decisions
and lower-level employees simply carry out those orders.
• Decentralization
– Organizations in which decision-making is pushed
down to the managers who are closest to the action.
– Increasing the decision-making authority (power) of
employees.

10–30
 Organization Structure (cont’d)
• 06. Formalization:
– The degree to which jobs within the organization
are standardized and the extent to which employee
behavior is guided by rules and procedures.
• Highly formalized jobs offer little discretion over what
is to be done.
• Low formalization means fewer constraints on how
employees do their work.

10–31
 Common Organizational Designs
• 01. Traditional Designs
– A. Simple structure
• Low departmentalization, wide spans of control, centralized
authority, little formalization
– B. Functional structure
• Departmentalization by function
– Operations, finance, human resources, and product research and
development
– C. Divisional structure
• Composed of separate business units or divisions with
limited autonomy under the coordination and control the
parent corporation.

10–32
 Organizational Designs (cont’d)
• 02. Contemporary (Modern) Organizational
Designs
– A. Team structures
• The entire organization is made up of work groups or
self-managed teams of empowered employees.
– B. Matrix and project structures
• Specialists from different functional departments are
assigned to work on projects led by project managers.
• Matrix and project participants have two managers.
• In project structures, employees work continuously on
projects; moving on to another project as each project is
completed. 10–33
An Example of a Matrix Organization

10–34
 Contemporary Organizational Designs

Team Structure
• What it is: A structure in which the entire organization is made up of
work groups or teams.
• Advantages: Employees are more involved and empowered. Reduced
barriers among functional areas.
• Disadvantages: No clear chain of command. Pressure on teams to perform.

Matrix-Project Structure
What it is: A structure that assigns specialists from different functional
areas to work on projects but who return to their areas when
the project is completed. Project is a structure in which
employees continuously work on projects. As one project is
completed, employees move on to the next project.
• Advantages: Flexible design that can respond to environmental changes.
Faster decision making.
• Disadvantages: Complexity of assigning people to projects. Task and
personality conflicts.

10–35
 Organizational Designs (cont’d)
• Contemporary Organizational Designs (cont’d)
– C. Boundary less Organization
• A flexible and unstructured organizational design that is
intended to break down external barriers between the
organization and its customers and suppliers.
• Removes internal (horizontal) boundaries:
– Eliminates the chain of command
– Has limitless spans of control
– Uses empowered teams rather than departments
• Eliminates external boundaries:
– Uses virtual, network, and modular organizational structures to
get closer to stakeholders.

10–36
 Removing External Boundaries
 Virtual Organization
 An organization that consists of a small core of full-time employees
and that temporarily hires specialists to work on opportunities that
arise.
 Network Organization
 A small core organization that outsources its major business
functions (e.g., manufacturing) in order to concentrate what it does
best.
 Modular Organization
 A manufacturing organization that uses outside suppliers to
provide product components for its final assembly operations.

10–37
 Organizational Designs (cont’d)
• The Learning Organization
– An organization that has developed the capacity to
continuously learn, adapt, and change through the
practice of knowledge management by employees.
– Characteristics of a learning organization:
• An open team-based organization design that empowers
employees
• Extensive and open information sharing
• Leadership provides a shared vision of the organization’s
future, support and encouragement
• A strong culture of shared values, trust, openness, and a
sense of community.

10–38
Social Responsibility and Managerial
Ethics
 Social Responsibility
– The awareness that business activities have an
impact on society and the consideration of that
impact by firms in decision making.

– Social responsibility is a business’s intention

beyond its legal and economic obligations, to do
the right and act in ways that are good for society.

1–40
 What Is Social Responsibility?
• The Classical View of SR
– Management’s only social responsibility is to
maximize profits (create a financial return) by
operating the business in the best interests of the
stockholders (owners of the corporation).
– Expending the firm’s resources on doing “social
good” unjustifiably increases costs that lower
profits to the owners and raises prices to
consumers.
5–41
 What Is Social Responsibility? (cont’d)
• The Socioeconomic View of SR
– Management’s social responsibility goes beyond
making profits to include protecting and improving
society’s welfare.
– Corporations are not independent entities
responsible only to stockholders.
– Firms have a moral responsibility to larger society
to become involved in social, legal, and political
issues.
– “To do the right thing”
5–42
 Arguments for and against social responsibility
 Arguments for Social Responsibility:
 Public expectations: public opinion now supports business pursuing economic
and social goals.
 Long-run profits: Socially responsible companies tend to have more secure
long-run profits.
 Ethical obligation: Businesses should be socially responsible because
responsible actions are the right thing to do.
 Public image: Businesses can create a favorable public image by pursuing social
goals.
 Better environment: Business involvement can help solve difficult social
problems.
 Discouragement of further governmental regulation: by becoming socially
responsible, businesses can expect less government regulations.
 Stockholder interest: Social responsibility will improve a business’s stock
price in the long run.
 Possession of resources: Businesses have the resources to support public and
charitable projects that need assistance.
 Superiority of prevention over cures: Businesses should address social
problems before they become serious and costly to correct. 1–43
• Arguments against Social Responsibility:
– Violation of profit maximization: Business is being socially
responsible only when it pursues its economic interest.
– Dilution of purpose: Pursuing social goals dilutes business’s primary
purpose- economic productivity.
– Costs: Many socially responsible actions do not cover their costs and
someone must pay those costs.
– Too much power: businesses have a lot of power already and if they
pursue social goals they will have even more.
– Lack of skills: Business leaders lack the necessary skills to address
social issues.
– Lack of accountability: There are no direct lines of accountability
for social actions.

1–44
 Responsibility to Different Stakeholder
 A. Responsibility to Consumers:
 Consumerism: Activities of individuals, groups, and organizations
aimed at protecting consumer rights.
 Right to Safety: the most basic consumer right is the right to products
that are safe to possess and use. To ensure safety of goods,
manufacturers should test them and provide buyers with explicit
directions for use.
 Right to be informed: Consumers have the right to receive
information available about a product before they purchase it.
 Right to choose: consumers have the right to choose and make
purchases from a variety of products at competitive prices. They also
have the right to expect quality service at a fair price.
 Right to be heard: Consumers also have the right to have their
opinions considered in the formation of government policies and in
business firms decisions that affect them.

1–45
 B.Responsibility to employees:
 Safety in the workplace: Charged with the primary purpose of
ensuring safe working condition.
 Equality in the workplace: purpose is to increase job opportunities
for women and minorities.
 C. Responsibility to the Environment
 Water Pollution: water pollution is caused by the dumping of toxic
chemicals, sewage, and garbage into rivers and streams.
 Air Pollution: Air pollution is caused by carbon monoxide and
hydrocarbons that come from motor vehicles and by smoke and other
pollutants from manufacturing plants.
 Land Pollution: Land pollution results from strip mining of coal and
minerals, forest fires, garbage disposal, and dumping of industrial
wasted, including chemicals and medical supplies such and used
hypodermic wastes drain into water supplies.

1–46
• Responsibility to Investors:
– Management of funds: firms have a responsibility
to manage funds properly so as to return a fair
profit to investors.
– Access to information: Insider trading occurs
when individuals buy and sell stock on the basis
of information gained through their positions or
contacts with others that is not available to other
investors or the general public.
– Executive Compensation: Executives who run
firms carry tremendous responsibility and deserve
to be compensated accordingly.
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 Managerial Ethics
Ethics Defined
– The Principles, values, and beliefs that define what
is right and wrong behavior.

Business Ethics
– The evaluation of business activities and behavior
as right or wrong.

5–48
Factors That Affect Ethical behavior

Business Organization
Environment Factors

Behavior

Personal
moral
philosophy

1–49
 Factors That Affect Ethical behavior
 1.Business Environment:
Almost daily, business managers face ethical dilemmas
resulting from the pressures of the business environment.
They are challenged to meet quotas, cut costs, increase
efficiency or overtake competitors. Managers and
employees may sometimes think the only way to survive in
the competitive world of business is by deception or
cheating.
 2. Organization:
The organization itself also influences behavior,
individuals often learn ethical or unethical behaviors by
interacting with others in the organization. An employee
who sees a superior or co-worker behaving unethically may
follow suit.
5–50
• 3. Individual:
– A person’s own moral philosophy also influences
his or her ethical behavior. A moral philosophy is
the set of principles that dictate acceptable
behavior. These principles are learned from family,
friends, co-workers and other social groups and
through formal education.

1–51
 Sources of Business Ethics
• Religion : One of the oldest sources of ethical inspirations is
religion. There are abort 1,00,000 different religions in the
world. But despite doctrinal differences almost all the religions
converge on the belief that ethics is an expression of divine will
that reveals the nature of right & wrong in business & other
areas of life.
• Culture : Culture refers to a set a values, rules and standards
transmitted among generations and guide behavior that falls
within acceptable limit. These rules & standards always play an
important role in determining individual value & values in
business customs.
• Legal : Laws are rules of conduct approved by legislature that
guide human behavior & actions,

1–52
How Managers Can Improve Ethical Behavior in An Organization?

1. Hire individuals with high ethical standards.

2. Establish codes of ethics and decision rules.
3. Lead by example.
4. Set realistic job goals and include ethics in performance
appraisals.
5. Provide ethics training.
6. Conduct independent social audits.
7. Provide support for individuals facing ethical dilemmas.

5–53
The End ?
1–54