CHAPTER 3

STRUCTURE AND DESIGN OF AN

ORGANIZATION
 THE ORGANIZATIONAL STRUCTURE
Organizational Structure – is the skeleton of an
organization that captures the relationships among
different roles in the organization. (Neale, 1990)
Organizational Structure – is the formal pattern
of interactions and coordination designed by
management to link the tasks of individuals and
groups in achieving organizational goals.
 TWO TYPES OF STRUCTURE WITHIN AN
ORGANIZATION

1) Formal Structure
• consists of the structures sanctioned by the
organization.
• it is designed to achieve organizational
objectives.
2) Informal Structure
• Whatever structure that exist that has not been
prescribed by the formal organization.
 PRINCIPLES OF GOOD ORGANIZATION
1) Departmentation or Division of Work
Departmentation – refers to the particular grouping or
functions or activities in an organization, showing their
relationships and the people doing them.
2) Unity of Command
• A worker should have only one direct boss or supervisor.
• A worker who receives conflicting orders from more than
one superiors is likely to be confused, irresponsible, and
inefficient.
3) Delegation of Responsibility and Authority
Delegation – means conferring a certain amount
of authority and responsibility from the superior to
his subordinates.
It is the process of decentralizing or distributing
responsibility and authority, thus, preventing
bottlenecks and overwork for the administrator at
the top of the hierarchy.
Authority – is the right to act or to direct others
to act.
The person possessing authority has the right to
do it or to require someone else to do it for him.
4) Span of Control of Span of Supervision
• This principle refers to the number of subordinates who
report directly to a higher executive.
5) Homogenous Assignment
• This means that workers must be assigned similar or
related functions.
• The practice of assigning variety of unrelated jobs as
secondary duties of an employee is a common fault of
management.
• This confuses the employee and makes him inefficient.
 BASIC REQUIREMENTS FOR GOOD
ORGANIZATION
For an organization to be effective, an organizational
set-up must conform to certain basic requirements:

1) Define the objectives of the organization;

2) There must be division of labor;
3) There is a direct authority to plan, coordinate, and
control the functions and activities; and
4) Establish the relationships among the members of
the organization.
 NINE (9) FEATURES OF A GOOD ORGANIZATION
STRUCTURE
1) Simplicity
• An organization structure should have the simplest possible
framework which will serve the purpose with emphasis on
economical and effective means of accomplishing the
objectives of the enterprise.
• Every person in the organization should be clear about with
whom he has to consult in a particular matter.
• This will ensure economy of effort, minimize overhead costs,
and reduce all possible difficulties that may arise out of poor
communication due to complexity of structure.
2) Flexibility and Continuity
• The structure should be build not for today or tomorrow,
but for the distant future;
• Continuity must be maintained in the organization
structure over a period of time.;
• Since organization structure is not fixed but change over
a period of time, there is a need for incorporating the
changes in the organization’s structure.
• Hence, the structure should be adaptable enough so that
it provides the opportunity to accommodate the changes
when these are needed.
3) Clear Line of Authority
• There should be clear lines of authority from top to
bottom or in horizontal directions.
• An employee should be very clear about what he is
expected to achieve or contribute and what relationships
should be maintained by him at his level;
• Failure to clarify the lines of authority results in frictions
and inefficiencies.
4) Application of Ultimate Authority
• Although a manager assigns some work to his
subordinates, he is ultimately responsible for the
accomplishment of the total work, thus he is responsible
for his own work, as well as for the work performed by his
subordinates.
• As a whole, a manager is responsible for the total work
assigned to him by his superior.
5) Proper Delegation of Authority
• The concept of ultimate authority will be effective only
when there is proper delegation of authority at various
levels of the organization;
• Delegation of authority refers to authorization of a
manager to make certain decisions.
• Common problem in the organization’s life is the failure of
the manager to delegate adequate authority and suffer
from various problems like delay in the implementation of
decision, decision bottlenecks, etc.
6) Unity of Command and Direction
• Unity of Command suggests that one person should
receive orders and instructions from one superior only.
• Unity of direction refers to the concept of “one plan, one
man”. Every work in an organization having the same
objective must be assigned to a single person.
• Activities and functions of the same type can be grouped
together.
7) Minimum Possible Managerial Levels
• Greater the number of managerial levels, longer is the line of
communication in the chain of command – creating problems
of delay and distortion.
• More managerial levels increase cost in the organization.

8) Proper Emphasis on Staff

• Line functions should be separated from staff functions and
adequate emphasis should be placed on important staff
activities.
• Line activity - is that which serves the organizational
objectives directly.
• Staff activities – help in carrying out the line activities so as
to realise the organizational goals.
9) Provision for Top Management
• A link should be provided between the regular
management team and members of the board
and shareholders.
• The organization structure should clearly specify
how these top management groups will
participate in management of the company and
exercise control over its functioning.
 GOALS AND GOAL SETTING
Setting Goals and Objectives
Goal - an objective or target that someone is trying to
reach or achieve.
Setting Goals – defines the working relationship between
superior and subordinates.
• Goals are the results the managers seek to attain.
• They are the commitments to values of the organization and the
perception of the people who control or influence the organizational
development.
• Defining goals and setting objectives reduced problems of
coordination in the organization.
• By knowing and agreeing on a common objective, the people will
have knowledge on what will happen in the organization.
• By insuring that the goals are properly
communicated to the subordinates, managers are
encouraged to work hard not only for the good of
their departments, but also of the entire
organization.
Ex. of Statement of Goal:
“The firm shall continue to provide above-average
returns to the shareholders.”
Objectives - are statements about desired
accomplishments expressed in more speciric and
measurable terms.
Ex. of Statement of Objective
“Earnings per share will grow at a compounded
rate of 20% per annum in the next five years.”
HOW DO COMPANIES FORMULATE OBJECTIVES?
Formulation of company objectives maybe done
in different ways. Some company’s formulate
objectives in three stages:
1) The statement of purpose
- the reason for being for the organization
2) The statement of mission
- the scope of activities it will undertake to
achieve the purpose.
 3) The statement of objectives
- This clarifies the level of performance to be
achieved in these activities.
Ex. Department Store’s Objectives Formulation
Purpose : Be a highly profitable company for
the investors
Mission : Retail the widest range of consumer
produicts to all income groups
Objective: Maintain leadership in sales in the
retail trade industry
 ELEMENTS OF GOAL SETTING
1) Goal Acceptance
• Effective goals need to be not only understood but also
accepted.
• Simply assigning goals to employees may jit result in their
commitment to those goals, especially if the goal is difficult
to accomplish.
• Supervisors need to explain the purpose behind goals and
the necessity for them.
• A more powerful method of obtaining acceptance is to allow
the employees to participate in the goal-setting process.
2) Specificity
• Goals need to be specific, clear, and measurable as
possible so that employees will know when a goal is
reached.
• Specific goals let them know what to reach for and
allow them to measure their own progress.
3) Challenge
• Most employees work harder when thehy have
difficult goals to accomplish rather than easy ones.
Hard goals present a challenge that appeal to thee
achievement drive within many employees.
• These goals must, however, still be achievable,
given the experience of the individual and the
resources available.
 LEVELS OF GOALS
1) Strategic Goals
- These are broadly defined targets or future end
results set by top management.
2) Tactical Goals
- These are targets or future end-results set by
middle management for specific departments or units.
- Goals at this level spell out what must be done
by various departments to achieve the results outline
in the strategic goals.
3) Operational Goals
- These are targets or future end-results set by
lower management that address specific, measurable
outomes required from the lower levels.
 FIVE MAJOR CHARACTERISTICS OF GOALS
1) Challenging
- Challenging difficult goals lead to higher performance.
- When individuals are asked to do their best, they
typically do not perform nearly as well when they have
specific, challenging goals.
2) Attainable
- Goals usually work best when they are attainable.
- Goals that are almost impossible to achieve may
discouruage rather than energize workers and may make
them feel inadequate.
3) Specific and Measurable
- To be effective, goals need to be specific and
measurable so that it is clear what is expected and when
the goal has been achieved.
4) Time-Limited
- There should be a defined period of time within
which the goals must be accomplished.
5) Relevant
- Goals are more likely to engender support when
they are clearly relevant to the major work of the
organization and the particular department/unit.