BBA Principles Management Design Organisation Structure Study material Notes
Table of Contents
BBA Principles Management Design Organisation Structure Study material Notes : Concept Organisation Structure Difference between formal and informal organization formal and informal organization Characteristics of formal organization Reasons for informal organization Difficulties due to an informal organisation working of informal organisation Managing informal organisation Need for Formal organisation structure approaches for organisational design :
Principles Practice Management Study Material Notes / BBA
Design Organization Structure
Organization structure is a basic framework within which the manager’s decision-making behaviour takes place. Structure basically deals with relationships. It is an important scientific concept. All sciences try to discover the structural relationships in the phenomena in which they are interested. For example, biologist wants to know the structure of cells: the astronomer wants to know the structure of the universe: the physicist studies the structure of the atom or molecule: the economist seeks to discover the structure of a labour market or of money-flow patterns. Similarly, in management, we need to understand how organisations are structured and how these structures are created and maintained.
Design Organisation Structure
Concept of Organisation Structure
In a simple term, structure is the pattern in which various parts or components are interrelated or interconnected. Thus, organisation structure is the pattern of relationships among various components or parts of the organisation. This prescribes the relationships among various activities and positions. Since these positions are held by various persons, the structure is the relationships among people in the organisation.
The organisation structure, being abstract, is not visible in the same way as a biological or mechanical structure, though it can be inferred from the actual operations and behaviour of the organisation. The biological or mechanical system, such as organism and machine, can be identified even when it is not working because it has both anatomy and physiology. The study of the anatomy is basically the study of the structure of the organism whereas the physiology deals with functioning of living organism. The biological and mechanical systems can be studied in both these terms-structure as well as functioning. However, this is not the case with social systems which do not have both anatomy and physiology. As such, it is very difficult to study the organisation structure separately from its functioning. For example, Katz and Kahn observe as follows in this context:
The problem of identifying structure from organisational processes does not mean that there is no difference between the two. There is a basic difference between the two and this distinction is important in understanding the concept and design of organisation structure. The structure of a system is the arrangement of its subsystems and components at a given moment of time. Process is a dynamic change in the matter, energy. or information of the system over time. Thus, the concept of structure and process can be viewed as the static and dynamic features and both of these aspects are related rather than opposite. The organisation structure can be viewed as established pattern of relationships among the components of the organisation. In large and complex organisations, structure is set forth initially by the design of the major components or subsystems and then by establishing relationships among these subsystems. It is the patterning of these relationships with some degree of permanency which is referred to as organisation structure.
Design of basic structure involves such issues as how the work of the organisation will be divided and assigned among various positions, groups, divisions, departments, etc. and how the coordination necessary to accomplish total organisational objectives will be achieved. For example, Dalton et al have defined organisation structure as follows:
Organisation structure refers to the differentiation and integration of activities and authority, role and relationships in the organisation. Differentiation is the differences in Besides the formally established organisation structure, people create relationships independent of the formal relationships known as informal relationships or organisation. Thus, organisation structure, truly speaking, is the totality of both formal and informal relationships. Operating mechanism or organisational process, on the other hand, includes such factors as control procedures, information systems, reward and punishment systems. rules and procedures, and so on. These structural variables, both basic structure and operating mechanism, can be used to identify what is required of organisational members to achieve objectives, and encourage them to take collective activities.
In designing organisation structure, managers prescribe only formal aspect which is expected to be followed. However, in actual practice, the total pattern of interactions is not governed by formally prescribed structure but some of the interactions are emergent which are known as informal organisation. Thus, in an organisation, we may have example of informal authority, informal leader, informal communication, and so on. Since these are not prescribed by the managers but are important for organisational functioning. understanding of the difference between formal and informal organisations and how it affects formal organisation is necessary.
Design Organisation Structure
FORMAL AND INFORMAL ORGANISATIONS
In order to understand the nature of difference between formal and informal organisations, we have to trace out their basic characteristics and how these are created.
Design Organisation Structure
Characteristics of Formal Organisation
The formal organisation (mostly referred to structure) is deliberately designed to achieve some particular objectives. It refers to the structure of well-defined jobs, each bearing a definite authority, responsibility, and accountability. According to classical theorists, the formal organisation is built on four pillars: (1) division of labour, (2) scalar and functional processes. (3) structure, and (4) span of control. These are also referred to as principles of organisation. From this point of view, characteristics of formal organisations are as follows:
1 Organisation structure is designed by the top management to fulfil certain requirements-performance of necessary activities thereby achieving organizational goals.
2. Organisation structure is based on the principles of division of labour and efficiency in operations.
3. Organisation concentrates more on the performance of jobs (conglomerate of activities) and not on the individuals performing the jobs.
4. The authority and responsibility assigned to each job have to be adhered to by the job holders. Based on the concept of authority and responsibility, people are placed in hierarchy, and their status is determined accordingly.
5. Coordination among members and their control are well specified through processes. procedures, rules, etc.
Design Organisation Structure
Characteristics of Informal Organisation
Informal organisation refers to the natural grouping of people on the basis of some similarity in an organisation. For example, Litterer has viewed that the informal organisation refers to people in group associations at work, but these associations are not specified in the blueprint of the formal organisation. The informal organisation means natural groupings of people in the work situation. Whenever people work together, they evolve some sort of grouping or pattern of relationships among them which is not according to what is prescribed by the formal organisation. Such relationships may be more complex than the officially prescribed ones: For example, Newstrom and Davis observe that “beneath the cloak of formal relationships in every institution, there exists a more complex system of social relationships called the informal organisation.”4 From this point of view, characteristics of informal organisation are as follows:
1 Informal organisation is a natural outcome at the workplace. It is not designed and planned
2. Informal organisation is created on the basis of some similarity among its members. The bases of similarity may be age, sex, place of origin, caste, religion, personality characteristics, likings/dislikings, etc.
3. Membership in an informal organisation is voluntary. A person may become member of several informal organisations at the same time.
4. Behaviour of members of the informal organisation is coordinated and controlled by group norms and not by the norms of the formal organisation.
Design Organisation Structure
Difference between Formal and Informal Organisations
Based on the characteristics of formal and informal organisations, we can differentiate the two as follows:
1 Origin. As discussed above, reasons and circumstances of origin of both formal and informal organisations are quite different. The formal groups are created deliberately and consciously by the framers of the organisation. On the other hand, informal organisations are created because of the operation of socio-psychological forces at the workplace, that is, people while working together develop certain liking and disliking for others and interact in a way not prescribed by the framers of the organisation.
2. Purpose. Since formal groups are deliberate creations, they are created for achieving the legitimate objectives of the organisation. Formal groups are the basic product of formal organisation structure. Informal groups are created by organisational members for their social and psychological satisfaction. Thus, they serve the purpose of organisational members which formal groups are not able to satisfy.
3. Size. Formal groups may be quite large in size. Sometimes, formal groups are constituted to give representation to various interest groups in the organisation, and their size had to be kept large. However, in other cases, efficiency is the criterion for fixing the size of the formal groups. The informal groups tend to be small in size so as to maintain the group cohesiveness which is essential for the informal groups to be attractive for the members concerned.
4. Nature of Groups. The formal groups are stable and may continue for a long period. Their membership is specified through organisational process. There may be many standing groups in the organisation. Such groups continue indefinitely, only their members may Principles and Practice of Management lange. The informal groups, on the other hand, are quite unstable in nature. Since their lorination and functioning depend upon the value systems. general liking and disliking, and other personality features of the members concerned, they may disappear very quickly because of the change in the membership or they may cease to be attractive for the members and the members may form alternative groups.
5. Number of Groups. Since the whole organisation is divided into so many groups and subgroups, their number may be many in a single organisation. In fact, the number of formal groups is decided to serve the organisational purpose. This depends upon the organising pattern. Similarly, a large number of informal groups may also be found in the organisation. Moreover, an individual may become member of several informal groups. Therefore, there is overlapping of membership.
6. Authority. The members of formal groups derive authority through the formal source. that is, through the process of delegation and redelegation. Thus, authority flows from the higher to lower levels. In the informal groups, all members are equal, however, some may command more authority by virtue of their personal qualities. Thus, authority is commanded. People give authority to those persons who are likely to meet members’ needs maximum. This is the way of emergence of informal leaders in the informal groups. Such people have maximum positive interactions in the groups.
7. Behaviour of Members. The behaviour of members in the formal groups is governed by formal rules and regulations. The rules are normally directed towards rationality and efficiency. In the informal groups, the behaviour of the members is governed by norms, beliefs, and values of the groups. The kind of behaviour that is expected of a member is specified by these factors. If any member defies these, he is disliked by other members and for the person, the group does not remain attractive and he leaves it.
8. Communication. Communication is prescribed in the formal groups. It is normally through chain of command to which people refer to as formal channel of communication. All communications in the formal groups are expected to pass through that channel. In the informal groups, the communications pass through informal channels. This informal channel may be in any form, as will be discussed in Chapter 26.
9. Abolition. The formal groups can be abolished at any time. Since these are created by organisational process, these can be abolished by organisational process also. In fact, many of the formal groups are constituted for certain specific purpose or period. When this is over, the groups also disappear. The informal groups are difficult to abolish by organisational process. In fact, any attempt by management to abolish the informal groups may be thwarted by the members and may lead to the formation of many more groups. Since the informal groups are byproducts of natural desire of human beings to interact, management does not have any control over them.
Design Organisation Structure
Reasons for Informal Organisation
Informal organisation is inevitable along with formal organisation and to obtain a total picture of an organisation structure in its true form, one must consider informal organisation also. The basic reason behind the emergence of informal organisation is the inadequacy of formal organisation structure to meet the needs of both members and organisation. Either it does not provide the most convenient way of interactions or it may produce some psychological pressure on the members of the organisation. Thus, members try to find out alternative way of interactions. Particularly in the following circumstances, people try to establish informal organisation.
1 Desire to Socialise with others. It is a natural tendency that people like to socialise in the organisation in order to satisfy their social and ego needs. Normally, such needs are not satisfied by the formal organisation but such needs are quite important for people. Informal organisation provides them opportunity to interact with people of their liking based on so many factors like personality factors, caste, religion, place, common interests other than organisational relationship, etc. Similarity on anyone or more of these aspects provides satisfaction to people through interaction which they cannot get through formal interaction. This is the natural way of need satisfaction and, therefore, becomes important reason for the emergence of informal organisation. For example, Davis observes that, along with men’s technical imperative, there is also a social imperative to work together. Man is a social being. He wants to belong, to associate with others instead to work in isolated loneliness. Out of this basic drive of man, the informal organisation arises.”
2. Psychological Fatigue of Routine Tasks. Due to increasing level of specialisation, people concentrate on single task or a few simple tasks. Simple and routine type of tasks have undesirable influence on the people. They become bored by their tasks and may feel psychological fatigue. They are unable to relate the meaning of their tasks to the whole organisation. Greater the degree of specialisation, greater is the concentration of fragmented tasks, and greater is the degree of boredom. This boredom is far from ideal condition. Therefore, people try to overcome this boredom through interactions which may provide them stimulus which is possible through informal organisation. Through informal interactions, they are able to release the tension created on the job. Informal organisation, thus, has the capability to fill up the psychological vacuum created by dull, boring, and monotonous jobs.
3. Hierarchical Control and Communication. Modern large organisations are characterised by hierarchy with formal chain of control and communication. There exists a superior-subordinate relationship with a natural tendency of exercise of control by superiors while subordinates may not like control. When a subordinate is not able to thwart such hierarchical control, he tries to find out an association where he does not face similar type of control. Thus, he joins informal group. Moreover, formal organisational process, particularly communication, may be quite lengthy and time-consuming while people may like to work through a shorter way. Thus, they develop their own way of interaction. For example, if the communication downward does not carry meaningful information from subordinates’ point of view, they will try to collect the information through informal sources rather than relying on formal sources. Greater the degree of bottleneck in hierarchical communication, greater is the chance for communication through informal organisation.
4. Various Functions of Informal Organisation. Besides the above reasons, informal organisation contributes in several ways to the interests of its members. These may be in the areas of: (0 protecting their interest, (it) working as regulatory device, (iii) protection of cultural values of members, (iv) validation of their beliefs. (U) outlet for overcoming frustration, and (v1) exploitation and development of leadership potential. Similarly, informal organisation also works for the interest of formal organisation in several ways like: (1) filling gaps in managerial abilities, (tt) restrain on manager’s area of operation, (iii) medium of communication, and (iv) source of information. It can be observed here that though an informal organisation may contribute to formal organisation, its basic objective is to contribute to the members’ interest. This is why people go for creating informal organisation within formal organisation.
Design Organisation Structure
Working of Informal Organisation
As against formal organisation where organisational processes-role, status, authority relationships, decision making, communication, etc.-are prescribed, there is no such prescription in informal organisation. These processes do take place in the informal organisations too but without any definite set of structure. These informal processes interact with formal processes and affect them but at the same time are affected by the latter. In particular, three informal processes are quite important which affect the functioning of formal organisation. These are authority structure, leadership, and communication. Let us see how these work in informal organisation.
1 Authority Structure. Informal organisation emerges because of personal and social relationships and not because of formal relationships. Therefore, there is no question of authority through delegation from up. Authority in informal organisation is personal and not positional. In fact, informal organisation works on the basis of mutual understanding and acceptance of others. Therefore, authority arises because people accept someone’s ability to control the informal organisation. From positional point of view, every member has equal right. It is possible that someone may hold some personal power in the informal organisation with his official authority; however, such power cannot be more than what other members of the informal organisation enjoy. Therefore, the influence process in the informal organisation is personalised and a person may exercise influence to mould the behaviour of members based on his capacity to satisfy the needs of members. Because members feel satisfaction through a particular person, they may agree to be influenced by the person. For example, Davis has observed that power in informal organisation is earned or given permissively D group members, rather than delegated; therefore, it does not follow official chain of command, It is more likely to come from peers than from superiors in the formal hierarchy.”
2. Leadership. Leadership is the ability to persuade others to seek defined objectives athusiastically. It is the human factor which binds a group together and motivates it towards goals. While in the case of a formal organisation, superior assumes the role of a leader, in informal organisation, there is no formal leader. The leadership role may come mom anyone in the informal organisation. Let us see the role of an Informal leadership and the type of person likely to assume the role of leadership. A leader performs vital functions that contribute to the group’s ability to survive in its environment. These functions are as follows: (9 a leader initiates action in the group: (i) he facilitates consensus; and (iii) he provides a link between the group and outside world such as managers, other groups, etc. Normally, anyone performing these functions may become leader of the group. The person who emerges as leader is perceived by others in the group as being the best able to satisfy the group’s needs. The members may not make a rational calculation to establish just who can satisfy their needs best; their feelings about who can lead them best may be based on experience and the positive statement by potential leaders about what ought to be done.
The position of an informal leader changes when he is appointed as superior of the group. This happens because of two reasons. First, with his appointment as superior, he gets formal authority which was not available to him as informal leader. This authority enables him to increase or decrease the satisfaction of his subordinates (members of the group). Second, he has obligation not only to satisfy his subordinates but also to achieve the organisational objectives. Thus, there may be conflicting roles to be performed by himmeeting of organisational objectives and satisfaction of members’ needs. Therefore, unless he maintains a proper balance between these two roles, he is likely to fail as a formal leader. There have been instances where good informal leaders have been ineffective as formal leaders because of their inability to balance the conflicting roles.
3. Communication. Informal organisation develops its own media and channels of communication. Communication is mostly oral and many carry the information which cannot be obtained through the formal channel. Informal organisation is a need fulfilment device generated from within and also from without when it is found that the existing formal communication channel is inadequate to supply the required information or information at right time. The requirement of speedier communication generates the need for informal channel which is supplemented to the formal one. Informal communication network is called grapevine which may take several shapes in terms of communicative relationships. This aspect will be taken for detailed discussion in Chapter 26.
Design Organisation Structure
Difficulties Due to Informal Organisation
The working of informal organisation produces both functional and dysfunctional effects. As discussed earlier, various functions of informal organisation serve the need of its members as well as of formal organisation. However, an informal organisation may present several dysfunctional effects specially if it is not handled properly. Many managers look at informal organisation as devil within the formal organisation because it creates lot of problems in managing. The major problems that emerge because of the operation of informal organisation may be in the following directions:
1 Resistance to Change. Informal organisation produces resistance to change in the organisation. Every group promotes certain values and norms which are considered to be desirable for it. In course of time, members guard these values and norms resulting in a Perpetuation of the status quo. Any intended change by the management facing alteration commonly shared values and norms is vehemently’resisted. Though people perceive the outcome of a change programme individually, specially if the outcome is precise and definite, often they show their reaction in group. Since informal organisation is bound by values and norms, there will be considerable amount of resistance to change. For example, if members perceive that a layoff is imminent, though in actual it is not necessary, because of rationalisation of work, they will resist it. Since the resistance comes in the form of group, it becomes quite effective. The need for modern organisations to bring continuous change is high. Thus, if informal organisation is not handled properly, there may be problems in bringing these changes.
2. Generation of Rumour. Rumour is a specific proposition for belief, passed from person to person usually by word of mouth, without securing the standards of accuracy in the communication. Rumour deals with temporary events in a way that implies that whatever is said is true though there is not much authentic information to support it. Rumour is spread through informal organisation. The basis for the circulation of rumour is ambiguous circumstances and relieving of emotional tensions felt by people because of ambiguity. If there is no official communication on any aspect of important happening in the organisation, it will be communicated through rumour which may be far from truth. This creates problems for both management and employees. It may be destructive in the sense that it affects morale of people adversely as everyone goes on adding information from his own side most suitable to him. This may create bitter feelings between management and employees specially if rumour relates to matters dealing with employees.
3. Role Conflict. An individual perceives role conflict when he has to fulfil conflicting requirements of two or more roles. It may be observed that a person may perform several roles at the same time. Due to informal organisation, a person has to perform two roles, one relates to his official position and another relates to satisfaction of members of his group. These two roles are often conflicting, that is, performance of one role may be at the cost of the other. Since people have tendency to associate with informal groups, such role conflict may come in the way of performance of official duties. Higher the degree of role conflict, higher is the dysfunctional impact on organisational functioning. Thus, generation of too many informal organisations may be detrimental to the organisation.
4. Conformity. Informal organisation exerts strong pressures for conformity. Conformity carries positive connotation in formal organisation because it involves behaviour which conforms to officially prescribed one. However, in the case of informal organisation, conformity means to act according to the general standards of informal organisation. This can make group members reluctant to act independently, creatively, or assertively, for the fear of losing group approval and membership. Pressure for conformity may result in restricted output as found by Hawthorne Experiments. Sometimes, informal leaders manipulate the group towards undesirable needs or their own selfish ends. Therefore, there is considerable chance that members of the group may use the resources of the organisation not for its own benefits but for the benefits of others. Naturally, this is detrimental to the organisation 5. Social Costs. Informal organisation is costly from social point of view also. No doubt, it is quite an effective device to overcome frustration and other malfunctioning of an individual it may result in wastage of time and resources. When informal groups are engaged i gossiping, joke telling, or idle conversation that satisfy some of the members’ social needs. they incur social costs. More the time wasted in such things, more is the operating costs to the organisation because all these things take place within the stipulated office time. 371
Design Organisation Structure
Managing Informal Organisation
Informal organisation is a natural outcome of the operation of social factors at workplace. As such, it can neither be created nor dispensed with. The only option left to management is to manage informal organisations in such a way that they do not become dysfunctional. In managing informal organisations, there is a tendency either to ignore the existence of informal organisations or to suppress them by administrative action. Both these alternatives are self-destructive because ignorance of informal organisation means acting without taking real situation into account, and suppressing informal organisations means providing more opportunities to group members for cohesion and putting greater resistance to management ideas. Therefore, what is required for managing informal organisations effectively is to develop a situation in which informal organisations do not grow beyond unmanageable proposition and they are used for positive actions. Two approaches can be adopted by management in this context. These are structural and behavioural.
1 Structural Approach. Structural approach deals with the design of formal organisation in such a way so as to foster informal organisation sympathetic to the formal organisation. Normally, this can be achieved in the following ways: (The work should be assigned in terms of ‘meaningful end-products’. Managers can identify blocks of work that have natural unity whose result can be clearly visualised. Such a block may be all activities that pertain to securing a customer’s order, or to making a particular product or part. Authority can be delegated for doing such a clear-cut, complete block of work squarely on a small group of people. This may enable the group members to see their contributions directly and they associate themselves with the work.
2. Behavioural Approach. Besides structural approach, management can adopt behavioural approach to manage informal organisation. It can adopt flexible and accommodating approach towards informal organisation rather than a strong repressive approach to solve a problem arising out of its functioning. A repressive approach may Garden the attitudes of members of informal organisation leading to generation of serious counteraction and destructive conflicts. Often loyalty to the face-to-face group of ones is much stronger than loyalty to the larger entity. Therefore, the problems arising out of informal organisaton can be solved through flexible behaviour which may include the following aspects:
Design Organisation Structure
NEED FOR FORMAL ORGANISATION STRUCTURE
Organisation structure is capable of serving many functions at the same time but cannot serve all functions equally well over unlimited time. Structure created for one purpose may not serve other purposes well. Therefore, it is important for managers to determine the outcomes desired from organisation structure, and to match the structure with changing needs. With multiple needs and roles of organisation structure, a balance will have to be struck and priorities established in the operation of the organisational mechanism. In general, there can be following roles of organisation structure: (1) facilitating management action, (t1) encouraging efficiency. (iu) communication, (tv) optimum use of organisational resources, (D) stimulating creativity, and (v0 job satisfaction.
1 Facilitating Management Action. When a large number of people work together, some sort of formal structuring is required to place them according to the needs of the organisation. All of them perform various functions which are interdependent and interrelated. As such, there must be plan for systematic completion of the work of each specialised job so that total activities accomplish common objectives. Further, these activities should be completed in a coordinated way. Organisation structure is the mechanism through which management directs, coordinates, and controls the organisational activities. It is indeed the foundation of management. A properly-designed organisation structure facilitates both management and operation of an organisation. Management actions take place with certainty and continuity only if appropriate functional groups are provided to help managers. The grouping and arrangement of activities directly affect operating results. If the important activities are overlooked or subordinated, the results would be detrimental to the organisation. Need for updated organisation structure can be gauged from the fact that many organisations create separate unit for organisational analysis which looks after the various aspects affecting the organisation structure such as delegation of authority, communication, control. coordination, etc., and tries to find ways for improving them to make suitable for organisational needs.
2. Encouraging Efficiency. Organisation structure is the framework within which an organisation functions. In this functioning, efficiency is the major criterion. Therefore, organisational members try to maximise the output of goods or services resulting from a given input of resources, or at least make a respectable showing in that direction. Since chaos or disorganisation works against the ideal of efficiency, there is pressure to develop some measure of systematic, orderly. rational and coordinated effort, and to control waste and loss. In fact, various models of organisational design try to achieve efficiency in organisational operations.
3. Communication. Organisation structure provides the pathways for communication among organisational members as well as between the organisation and its environment. In fact, when we say that organisation structure establishes relationships, we mean that it creates reporting relationships, that is, who will communicate with whom. Similarly, when the organisation interacts with its environment, a communication process is involved. Thus, structure serves the purpose of communication. Within organisational boundary communication is required in horizontal, vertical, and lateral directions, and organisation structure, if designed properly, provides lines of communication in all these directions.
4. Optimum Use of Organisational Resources. Organisation structure tries to make optimum use of organisational resources by ensuring their allocation to points where these are needed. Organisation structure gives higher place to activities which are more important to the achievement of organisational objectives. Thus, placing of activities according to their importance provides guidelines for resource allocation. While efficiency in the use of organisational resources is necessary for organisational growth and vitality, optimum allocation of resources to various organisational units is equally important.
4. Stimulating Creativity. A sound organisation structure based on specialisation stimulates creative thinking by providing well-defined area of work with provision of development of new and improved ways of working. For creativity, it is essential that one is well conversant with the problem on hand. Organisation structure tries to put people at places where they are required. When they work on a job for considerably long time, they are in a position to suggest something new. Many practitioners have contributed to the development of management thinking which shows the results of their creativity which has come because of organisation structure itself.
5. Job Satisfaction. Organisation structure is a source of satisfaction to people. Since organisation provides relatedness among tasks and responsibilities and among people who work for an organisation, sooner or later come to evaluate the nature of those relationships and of their own relationships to the organisation and their jobs. Organisation structure provides for each person a place of status which confers a certain standing among his fellows. This works as motivating factor for them. Most of the people spend a large part of their lives at work associated with organisations. They expect their jobs and work to provide a reasonable degree of job satisfaction, and the framework for this is in the structure of the organisation itself.
The above roles of organisation structure are important. All these roles can be performed by the structure only when it is properly designed. Further, organisation structure should be viewed as a means towards specific ends. As such, it can be used as a tool, not an end. Like any tool, results depend on the skill with which it is used. Managers need not go out of their way to equip themselves with out-of-date or inadequate organisational tools.
Design Organisation Structure
Features of Good Organisation Structure
The contingency approach of organisational design suggests that there is no one best way of designing an organisation structure. The good structure is one which meets the demands of various contextual variables namely environment, strategy, technology. size, and people. However, certain features of organisation structure can meet all these demands. These features can be obtained in an organisation structure if properly designed. If the following criteria are taken into account while designing an organisation structure, it is likely to meet the demands of various factors.
1 Simplicity. An organisation structure should be basically simple. The concept of simplicity Implies that various organisational relations should be kept minimum possible. Provision of various networks is essential but it should not lead to confusion and ambiguity. Every person in the organisation should be clear about to whom he has to consult in particular matter. Too many levels, too many communication channels, multiplicity of commands, or too many committees often cause more problems than solving these. Ideally speaking, their numbers and places in the organisation should be based on organisational needs rather than on personal whims or mere decorative needs.
2. Flexibility. An organisation structure should be flexible enough so that changes can be incorporated whenever needs arise. The structure is designed not only for a time period but for a distant future also. As such, continuity must be maintained in the organisation structure over the period of time. However, since organisation structure is based on circumstances and these are not fixed but change over the period of time, there is a need for incorporating changes in organisation structure also. These changes can be incorporated easily if the structure is flexible. Thus, the concept of flexible structure is that it provides opportunity to incorporate changes where these are needed without adversely affecting the other parts. However, if change in one part of the structure necessitates changes in other parts also, suitable changes should be made in those parts also.
3. Clear Line of Authority. Whatever the form of structure is adopted, there should be clear lines of authority running from top to bottom or in horizontal directions. The concept of clear line of authority implies that one should be very clear about what he is expected to achieve or contribute and what relationships should be maintained by him at his official level. The failure to clarify lines of authority results in frictions, politics, and inefficiencies. Often in bureaucratic structure followed by government organisations, the problem of jurisdiction of a department or division arises and work suffers. The problem arises because authority and responsibility for action are critical in the organisation, and lack of clarity means lack of knowledge on the part of a manager to perceive his role clearly.
4. Application of Ultimate Responsibility. The concept of ultimate responsibility suggests that although a superior manager assigns some of the work to his subordinates, he is ultimately responsible for performance of total work. Thus, he is responsible for his own work as well as for the work performed by his subordinates. In this concept, no superior can absolve himself from the responsibility of non-performance of work by his subordinates. If this concept is applied, it ensures that every body carries dual responsibility: responsibility for his work and that for his subordinates’ work. In total, a manager is responsible for the total work assigned to him by his superior,
5. Proper Delegation of Authority. The concept of ultimate responsibility can work only when there is proper delegation of authority at various levels of the organisation. Delegation of authority refers to authorisation of a manager to make certain decisions. He can discharge his responsibility properly if he has commensurate authority. A common problem in the organisational life is that managers often fail to delegate adequate authority and suffer with various problems. Such problems may be in the form of decision bottlenecks, delay in decision implementation, more pressure on higher-level managers for making decisions. and less motivation to subordinates. All these factors affect organisational efficiency adversely. These problems can be overcome by proper delegation of authority.
7. Minimum Possible Managerial Levels. As far as possible, there should be minimum managerial levels. Greater the number of managerial levels, longer is the line of communication in the chain of command and the communication has to travel along the line creating problems of delay and distortion. Further, more managerial levels mean that they increase cost in the organisation as ratio of managers to non-managers (operatives who actually work) goes in favour of managers. Though it may not be possible to suggest how many managerial levels should be kept by an organisation because the number of levels is affected by so many variables, the principle of minimum levels can be followed.
8. Principles of Unity of Direction and Command. Unless absolutely essential, principles of unity of direction and unity of command should be followed. As discussed a direction refers to the concept on one plan one man. Every work in the organisation same objective must be assigned to a single person. Thus, activities and functions of same type can be grouped together or geographical areas having same characteristics can be grouped together, and so on. This provides clarity in carrying out the activities. A combination of ill-related assignments may work only so long as a particular person holds the position. It is not a good sign of an organisation structure and often creates more confusion and role conflict leading to inemciency. Similarly, unity of command principle should be followed and should be allowed multiple command only as exception. Unity of command suggests that one person should receive orders and instructions from one superior only. Unity of command again provides clarity in role while multiple command provides opportunity to avoid responsibility.
9. Proper Emphasis on Staff. Line functions should be separated from staff functions and adequate emphasis should be placed on important staff activities. This is important particularly in large organisations. The line and staff activities are required because both serve different objectives in the organisation. A line activity is that which serves the organisational objectives directly, for example, production activities in a manufacturing organisation. On the other hand, contributions of staff activities are indirect, that is, they help in carrying out the line activities so as to achieve organisational objectives. Staff activities may be personnel, accounting, etc. Both of these activities should be clearly spelled out to make organisation work smoothly. Similarly, line and staff authority should also be made clear so that no conflict or ambiguity arises.
10. Provision for Top Management. In corporate form of organisation, it is imperative to provide some means by which shareholders and members of the board of directors participate in management process. Normally, shareholders are indifferent so far as day-to-day management affairs of the company are concerned. Similarly, board of directors also does not meet on regular basis. However, these two groups affect the organisational functioning. Therefore, a link should be provided between regular management team and members of board and shareholders. The organisation structure should clearly specify how these top management groups will participate in management of the company, how they exercise control over the functioning of the company, and so on.
Design Organisation Structure
APPROACHES FOR ORGANISATIONAL DESIGN
There are different approaches which can be adopted for designing organisation structure. Each of these approaches emphasises differently how various organisational activities should be performed to achieve objectives. Peter Drucker has preposed three types of analyses which should be undertaken to design the structure. These are activities analysis, decision analysis, and relations analysis. Another way of classifying the approaches for organisational design is process approach, result approach, and decision approach. This classification is more appropriate for organisational design.
Design Organisation Structure
Process Approach. Process approach to designing of an organisation structure is related to identification of sequences of activities involved and then deciding the various units of organisation, combining various units, and placing them at appropriate places so that activities are performed properly. The main emphasis is put on three things. First, all necessary activities for achieving objectives are performed. Second, there is no unnecessary duplication of performance of activities. Third, all necessary activities are performed in a synchronised way. Thus, various organisational units may be created based on the activities to be undertaken; their relationships will be based on the sequence of activities performed by these units: their relative position will depend on the relative importance of activities performed by them.
The process approach of organisational design has some unique advantages. It sharpens understanding of the dynamics of operating sequences and requirements of the business. In this light, various organisational processes–communication, coordination. delegation of authority, centralisation and decentralisation can be prescribed to meet the needs of the objectives. This approach helps in improving the coordination of functions that cut across several departments such as planning, budgeting, etc. However, it has one basic limitation in the form of prescribing a stable structure. This process works well in comparatively smaller organisations which concentrate on one or lesser number of related products. Result Approach. Organisational design that focuses on results is more effective in those situations where strategy innovation is a prime need. The focal point for developing the structure through a result approach involves the following steps:
Design Organisation Structure
1 Defining the business on the basis of potential area of market opportunities;
2. Establishing the objectives to be accomplished;
3. Determining the requirements for success and functional skills needed to meet them;
4. Determining the degree of authority keeping in mind the degree of centralization best suited to decision making.
However, if an organisation has several clusters of market opportunities which are not common but the organisation wants to take the advantages of these, it should be structured on the basis of strategic business units (SBU). An SBU can be thought of as a clustering of diserete product/market units based on some important common strategic elements. The idea is to group an organisation’s activities according to strategically relevant criteria rather than size of span of control. The managerial value of the concept of SBUs is that it provides diversified companies with an attractive rationale for organising what they do and for reviewing the strategic performance of diverse operating units.
Decision Approach. Decision approach of organisational design mechanism puts certain questions about the decisions and the answers of these questions become the basis for designing structure. These questions are:
1 What decisions are needed to obtain results for achieving organisational objectives?
2. What is the nature of such decisions?
3. At what levels of the organisation, should such decisions be made?
4. What are the activities involved in or affected by such decisions?
The answers of these questions would determine the degree of authority in a position, its interaction with other positions, and the placement of the position in organisational hierarchy.
These three approaches focus on different sets of importance of various activities. However, these approaches are not mutually exclusive; rather they can be integrated.
Design Organisation Structure
Departmentation
The first real task in designing an organisation structure is the identification of activities and to group them properly. The process of grouping the activities is commonly known as departmentation. The terms used to denote the departments that result from departmentation vary a great deal. In business organisations, such terms as division department, and section are used; in government, these are called branch, department bureau, and section; in military, these are referred to as battalion, group, company, etc Moreover, the terms used to designate departments may vary in different organisations of the same nature. However, the process of departmentation will remain the same. Need and Importance of Departmentation The basic need for departmentation arises because of specialisation of work and the limitation on the number of subordinates that can be directly controlled by a superior. Therefore, if there is no departmentation, there would be serious limitation on the size of the organisation. Grouping of activities and consequently of personnel into departments makes it possible to expand an organisation to any extent. However, when departments are created to overcome this basic limitation, they serve a number of other functions leading towards the organisational efficiency. The major importance of the departmentation is along following lines:
1 Advantage of Specialisation. Probably the most important single principle in an analysis of the classical approach to organisational design is specialisation of work. This principle affects everyone every day. The basic advantage of the specialisation lies in terms of efficiency with which the work is performed because a person focuses his attention on a narrow aspect of the work and he gets mastery over that aspect. Naturally, this results in performing the work more efficiently. Thus, if the managerial function is conceived as a set of activities facilitating the work of the organisation, these activities can be carried out more efficiently and effectively through the division of work leading to specialisation of managerial function.
Design Organisation Structure
2. Fixation of Responsibility. Departmentation helps in fixing the responsibility and consequently accountability for the results. Responsibility can be discharged properly when it is clear, precise, and definite. Through departmentation, the work is divided into small units where it can be defined precisely and responsibility can be fixed accurately. The manager concerned to whom responsibility is given can be delegated corresponding authority. When both responsibility and authority are clearly specified, a manager knows what exactly he has to do in the organisation. This helps the manager to become more effective.
3. Development of Managers. Departmentation helps in the development of managers. Development is possible because of two factors. First, the managers focus their attention on some specific problems which provides them effective on-the-job training. Second, managerial need for further training can be identified easily because the managers’ role is prescribed and training can provide them the opportunity to work better in their area of specialisation. Thus, need for training and its methods can be easily identified.
4. Facility in Appraisal. Managerial performance can be measured when the area of activities can be specified and standards in respect of these can be fixed. Departmentation provides help in both these areas. When a broader function is divided into small segments and a particular segment is assigned to each manager, the area to be appraised is clearly known; the factors affecting the performance can be pointed out more easily. Similarly. standards for performance can be fixed easily because factors affecting the work performance can be known clearly. Thus, performance appraisal will be more objective when departments have been created.
5. Feeling of Autonomy. Departmentation provides motivation by developing feeling of autonomy to the extent possible. Normally, departments are created in the organisation with certain degree of autonomy and freedom. The manager incharge of a department can take independent decisions within the overall framework of the organisation. Thus, he enjoys satisfaction of being important to the organisation. This feeling itself is a source of better performance among managers.
