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WEEK 06: ORGANIZING: DESIGN THEORY: ORGANIZATION & JOB Sections: Introduction | Classification | Orgn. Design | Principles | Chart Definition of Terms. Staffing is the worker-oriented focus of the people in the jobs allocated for the achievement of common objectives. Organization is the structure and process by which a cooperative group of human beings allocates its tasks among its members (organizing the structure of tasks); identification of relationships and placement of human beings in the structure (staffing) and integration of its human system of activities toward common goals. Sections: Introduction | Classification | Orgn. Design | Principles | Chart Classification of Organization. Classification of Organization. Dimensions are based on complexity, formalization and centralization with the 7-S Framework considered. A. Vertical Differentiation concerns with division of authority A1. Line Organization the simplest, most direct type, in which each position has general authority over lower positions in the hierarchy in the accomplishment of the main operations of the firm. The number of levels is based on strategy and functional tasks or the allocation of authority and responsibility must match the needs of corporate strategy.
Line Organizations is advantageous because it maintains simplicity, there is division of authority, and speedy action, but its disadvantages are it neglects specialists in training, overworks key people and retention of key people. A2. Staff Organization purely advisory (generalist/specialists) without authority to place recommendations into action. Advantages: a) Specialists can give expert advice, b) Free line executives from detailed analysis and c) Affords young specialists in training. Disadvantages: a) Confusion, if unclear functions exists. b) Reduces pure experts to recommend, and c) Centralization tendency A3. Functional Organization permits a specialist in a given area to enforce his directives within a limited and clearly defined scope of authority. Advantages: a) Relieves line of routine and specialists decisions b) provides framework for expert knowledge and application, and c) Relieves pressure of need for large number of well-rounded executives. Disadvantages: a) Relationships are more complex. b) Limited Authority, and c) Centralization Tendency. B. Horizontal Differentiation focuses on division and grouping of tasks to meet objectives. B1. Simple Organization small, entrepreneurial involved in producing one or few related products for a specific market segment. The entrepreneur takes most of management tasks. No formal organizational arrangement exists. Low horizontal differentiation. Employees perform multiple duties. B2. Functional Organization range of tasks are expanded. Services of managers are specialized. People are group together on the basis of their common expertise and experience or they use the same resources. Advantages: a) On-the-job specialization, through interaction of same task. b) More complex tasks, and c. More control of organization's activities. Disadvantages: a) Communication problems due to different times and goal orientation. b) Location problems, and c) Strategic problems. B3. Product / Geographical grouped by product lines or geographical location where specialized support functions are centralized. B4. Multidivisional Organization consist of self-contained units or divisions with all support functions per distinct product line or business unit. Some organization, however, have corporate support function centralized for economic purposes. Operating responsibility is often done on divisional levels, while strategic responsibility rest on the corporate headquarters staff. Advantages: a) Enhanced corporate financial control due to own profit centers. b) Enhanced strategic control where specialized staff deal on environmental changes. c) Growth because of reduction in information overload, and d) Internal efficiency, one cannot be assessed in isolation for performance. Disadvantages: a) Communication problems mainly due to distortion of information. b) Competition for limited resources. c) Cumbersome Transfer charges, and d) Huge operations costs, especially in research and development. B4a. Conglomerate usually functions as a holding company where no commonalties among divisions or there is unrelated diversification. Each division is evaluated as a totally autonomous profit center. Staff perform portfolio analyses. Advantages: a0 Minimum control and communication problems. b) Economical to manage and c) Divisions as players, parent company as referee. B5. Matrix Organization based on two horizontal differentiation such as function or product structures. Some organization of this type, uses both differentiations, i.e., vertical, e.g, grouped by function, and horizontal, e.g., based on product or project. Others employ the two-bosses per project, such as functional and project bosses. This type is used for project management, task force for problem solving and venture teams for new and innovation projects. Advantages: a) Employees are very highly qualified. b) Flexible working conditions and c) New product development. Disadvantages: a) Expensive to operate, b) Delayed start of spin-off, c) Conflict of project and function over resources and d) Very complex task/role relationship. Sections: Introduction | Classification | Orgn. Design | Principles | Chart Design Factors. Design must be anchored on competitive response, market response and internal functioning. Type of Organization Design. Stages of Organization. C. Contingency Approach Sections: Introduction | Classification | Orgn. Design | Principles | Chart 1. Unity of Command. No member of an organization should report to more than one superior on any single function. 2. Exception Principle. Recurring decisions should be handled in a routine manner by lower-level managers; problems involving unusual manners referred to higher level. Programmed decisions on repetitive and routine situations should be delegated and handled by a definite procedure. While non-programmed decisions, like new, one-shot and unstructured elements are done by higher level. 3. Span of Control. A limit to a number of subordinated that one supervises. This is a consideration of the limitations of a human being: 4. Scalar Principle. The chain of command. Authority and responsibility should flow in a clear and unbroken line from highest to lowest. There should be a job-task relationship. 5. Departmentalization. Activities should be divided and formed into specialized groups. The purpose of which is to specialize activities, simplify tasks of management and maintain control. 6. Decentralization. Process of pushing decision-making to lower levels of the organization is a matter of the degree of delegation. Delegation is the art of involving significant costs and risks. Sections: Introduction | Classification | Orgn. Design | Principles | Chart Definition. An organizational chart is the written version of the abstractions of structure, units and heads, authority, reporting relationships and echelon levels. Purpose. Ambiguities. continued next page . . . Job Design |
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