Organizing the Business Enterprise : Organizing the Business Enterprise Slide 2: Organizational Structure
How is an organization’s structure determined???
Building blocks of organizational structure
Form of Authority
Forms of organizational Structure Organizational Structure((who reports to whom??)) : Organizational Structure((who reports to whom??)) “Series of jobs to be done within a business and the ways in which they relate to one another”
All businesses have structural and operational components
These components vary from business to business
Each component in a business must perform its own function while working together with others
Structure of one organization will not work for the other How is an Org.’s Structure determined? : How is an Org.’s Structure determined? Elements that determine an org’s structure are:
Organizations change their structure on a continuous basis
Managers have to assess factors as they plan & create structure Organizational Chart : Organizational Chart Depicts a company’s structure
Shows employees where they fit into firm’s operations
Orgs prepare these charts to clarify structure & to show employees at different levels Chain of Command : Chain of Command Each box in the chart represents a job.
The lines define, COC.
COC- “reporting relationships within a comp.”
For exp, managers report to the President or CEO.
Chain of command is the line on which orders and decisions are passed down from top to bottom of the hierarchy.
In a hierarchy the chain of command means that a production manager may be higher up the hierarchy, but will not be able to tell a marketing person what to do. Building Blocks of Organizational Structure : Building Blocks of Organizational Structure Developing the structure of any business (large or small) involves two activities:
Departmentalization Specialization : Specialization who will do what?
Identifying specific jobs that need to be done
Designating people who will perform these jobs
Managers break down the overall job of organization
Workers can develop real expertise in their jobs
Employees can co-ordinate their work with that done by others
In small org, owner may himself perform every job
As firms grow, theres great need for job specialization
JS is a natural process of organizational growth
Specialized jobs can be performed more efficiently Departmentalization : Departmentalization Grouping together people performing certain tasks
After jobs are specialized, they are grouped into logical units called departments.
Managers can see more effectively how various units (departments) are performing
Job departmentalization is not done randomly
Departments are grouped logically
According to some common purpose
Departmentalization can be done according to: Slide 14: Customer Departmentalization-
according to types of customers. Each department targets a specific customer category (men’s,women’s,children’s dept. etc)
according to specific products being created. (Wateen, wireless communication deptt dealing with cellular services &broadband networking dept focus on other internet technologies)
according to production processes used to create G/S.
Each process requires different equipment & skilled workers. Exp, Shezan Foods has separate depts. to prepare jams, packing in jars. Juices & Pickles are prepared by different workers & under different process Slide 15: Geographic Departmentalization-according to areas served by a business. Divided according to areas of country or world, where an org serves. Eg, Nokia has different divisions for different continents.
Functional Departmentalization-departments according to functions or activities. Usually service providing companies develop such depts. Production, Marketing, Sales, HR, Accounting/Finance depts. Decision-making Hierarchy : Decision-making Hierarchy After jobs have been specialized and grouped into departments, the next step is establishing a decision-making hierarchy
How to structure the organizational framework so that everyone works together to achieve common goals
Define responsibilities for various decisions and operations
Developing hierarchy is a three-step process
Assigning tasks (who can make decisions? how they should be made? Who is supposed to do what?)
Performing tasks (implementing decisions made)
Distributing authority (centralized/decentralized organization?) Slide 17: Centralized organization
Decision-making authority held by upper level management.
Tall organizational structure
Centralized organization with multiple layers of management and narrow spans of control. Decentralized organization
Decision-making authority held by management below the upper level mgmt.
Flat organizational structure
Decentralized organization with few layers of mgmt and wide spans of control. Slide 18: The more people under the control of one manager - the wider the span of control. Less means a narrower span of control. Slide 20: The advantages of a narrow span of control are:
A narrow span of control allows a manager to communicate quickly with the employees under them and control them more easily
Feedback of ideas from the workers will be more effective
It requires a higher level of management skill to control a greater number of employees, so there is less management skill required Slide 22: The advantages of wide span of control are:
There are less layers of management to pass a message through, so the message reaches more employees faster
It costs less money to run a wider span of control because a business does not need to employ as many managers Forms of Authority : Forms of Authority Authority is power to make decisions necessary to complete a task.
Each org, according to its structure has to decide that who has authority over whom?
Three forms of authority that can b found in a comp are:
Team Authority Line Authority : Line Authority Authority flows in a direct chain on command.
From top of the comp. to bottom.
Each line dept. is important for org,s. success.
Line employees are the workers/producers in comp.
If any line dept. fails to complete its task, comp. cannot sell products.
Managers are directly involved in producing products.
Authority is important here.
One wrong decision by manager in any one dept. can hold entire production. Staff Authority : Staff Authority Based on special expertise.
Counseling & advising line managers.
Staff members includes specialists in law, accounting, advertising, HRM.
Staff members help line dept. in decision making.
Generally provide services to mgmt, where as line managers are directly involved in production. Team Authority : Team Authority Authority granted to work teams.
Groups of employees.
These groups/teams plan & organize their own work.
These teams play important role in firm’s daily operations.
A team, may consist of top managers from several areas. Forms of Organizational Structure : Forms of Organizational Structure Org’s can structure themselves in many ways.
Basic forms of org. structure are:
Boundary less Organization
Learning Organization Functional Org. : Functional Org. Used by firms having small-medium size.
Usually structured around basic function of business, like marketing, sales, finance.
Within the comp. theres mkt dept., operations dept., & finance dept.
This gives effective coordination among the depts.
Also helps in centralization.
Experts can b hired to work in specific depts.
Coordination across depts. Becomes complicated in large firms.
As org. grows they leave this structure & move to any other structure. Divisional Org. : Divisional Org. Relies on product departmentalization.
Firm is structured around several divisions or depts.
Each dept. resembles separate business.
Produce & market their own products.
Each division operates as an autonomous business under the larger corporate umbrella.
Firm creates product based divisions.
Each division may b managed as a separate enterprise.
Head of each division can b a VP.
Each division has its own identity.
Such divisionalized comp. Create healthy competition among themselves.
Example, Nestle has divisions like: infant foods, dairy products, frozen foods, mineral water etc.
HBL: engineering & maintenance cell, mkt dept. consumer banking dept. Matrix Org. : Matrix Org. Teams are formed.
Team members report to managers.
Highly flexible form.
Adaptable to changing circumstances.
Matrix structure depend on team authority.
Matrix can b temporary.
Used to finish a specific project.
With the end of the project, matrix also ends.
This structure was first adopted by NASA (national aeronautics & space administration).
They used it in developing specific programs.
Automobile industries also use matrix to design new models. International Org. : International Org. Firms that manufacture, purchase, & sell in global market, use this approach.
Competition on global scale has become more complex. Boundary less Org. : Boundary less Org. Traditional boundaries or structures are minimized or eliminated.
Employees, ideas & information flow freely between org.
For example as firm partners with its supplier, the external boundaries disappear. Team Org. : Team Org. Relies on project-type teams.
People move from project to project as required by their skills & demand of the project.
Helps each unit to change direction, explore new ideas, & try new methods. Virtual Org. : Virtual Org. Little or no formal structure.
Exists only in response to its own needs.
Has few permanent employees, small staff, & administrative facility.
According to the org. change, managers bring in temporary workers, or lease facilities, outsource services to meet the demands of the particular situation.
Example, contractors & builders, outsource several independent consultants, architects, or laborers according to the project requirement.
As the project changes, so does the org. Learning Org. : Learning Org. The idea is that continuous improvement occurs through employee learning.
Works for improvement through employee learning & development.
Helps in learning & personal development of its employees.
Also the org. transforms itself to respond to changing needs & demands.
The goal is to improve quality & measure performance.
This can b achieved by constantly upgrading employee’s talent, skill, & knowledge.
Example, training programs, seminars, & related activities for employees.