PPM group B

Organizational Structure of a Business : 

Organizational Structure of a Business

Why Do Businesses Need to be Organised? : 

Why Do Businesses Need to be Organised? Small businesses (particularly sole traders) have an informal organisational structure As a business gets bigger then it starts to form some kind of organisation An organisation structure is required as soon as there are several people working in the business The structure determines: Who is responsible for what job and Who is responsible to whom.

Elements of Organizational Structure : 

Elements of Organizational Structure Work Specialization Departmentalization Chain Of Command Span Of Control Centralization and Decentralization Formalization

Work Specialization : 

Work Specialization The degree to which activities in the organization are subdivided into separate jobs.

Work Specialization(contd..) : 

Work Specialization(contd..) By the late 1940s, most of the manufacturing companies have identified the essence of work specialization Employee skills at performing a task successfully increase through repetition Till the first half of twentieth century, managers viewed work specialization as an unending source of increased productivity.

Disadvantages of Work Specialization : 

Disadvantages of Work Specialization By the 1960s, work specialization lead to human diseconomies such as boredom, fatigue, stress, low productivity etc. Later, the companies started giving variety of tasks to the employees and involving them in various jobs This was to increase the customer satisfaction which will increase the productivity

Economies & Diseconomies of work specialization : 

Economies & Diseconomies of work specialization

Departmentalization : 

Departmentalization The basis by which jobs are grouped together Functional - Groups jobs by functions performed Product - Groups jobs by product line Geographical - Groups jobs on the basis of territory or geography Process - Groups jobs on the basis of product or customer flow Customer - Groups jobs on the basis of common customers

Chain of Command : 

Chain of Command Line on which orders and decisions are passed down From top of hierarchy to bottom Example: Managing Director Production Director Production Manager Factory Supervisor Machine Operators

Span of Control : 

Span of Control What is the Span of Control? The number of people who report to one manager in a hierarchy The more people under the control of one manager - the wider the span of control Less means a narrower span of control Marketing Manager Marketing Assistant Market Researcher Telesales Supervisor Customer Care Assistant

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Org Span Lvl of 4 1 1 2 4 3 16 4 64 5 256 6 1024 7 4096 Org Span Lvl of 8 1 1 2 8 3 64 4 512 5 4096

Advantage of a Narrow Span of Control : 

Advantage of a Narrow Span of Control Allows a manager to: Communicate quickly with employees under them Control employees more easily Feedback of ideas from workers more effective Requires a higher level of management skill

Advantage of a Wide Span of Control : 

Advantage of a Wide Span of Control 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

Centralised Organisations : 

Centralised Organisations What are they? Organisations where important decisions are taken at the centre and then passed out to the various departments / locations Advantages Tight control of decisions Decisions made by senior management Helps decisions to be consistent across the business Avoids repetition of functions (e.g. only one purchasing department) Disadvantages Lack of motivation for managers Central management may be “out of touch” May be slow to make decisions that need to taken quickly

De-Centralised Organisations : 

De-Centralised Organisations What are they? Organisations where important decisions are delegated to managers in other departments / locations Advantages Increased motivation of managers Encourages local initiatives Decisions based on more up-to-date information Decisions made quicker Disadvantages Managers may lack experience Local decisions may be inconsistent with the overall business aims and objectives Duplication of functions and costs

Formalization : 

Formalization The degree to which jobs within the organization are standardized standardization - removes the need for employees to consider alternatives Extent to which employee behavior is guided by rules and procedures Employee allowed minimal discretion in highly formalized jobs Explicit job descriptions Clearly defined procedures

Types of organization structures : 

Types of organization structures Formal & Informal organizations Line & Staff organizations Matrix organization

Formal organization : 

Formal organization is a fixed set of rules of intra-organization procedures and structures Formal organization

Features of formal organisations : 

Features of formal organisations To facilitate the accomplishment of the goals of the organization To facilitate the co-ordination of various activities To aid the establishment of logical authority relationship Permit the application of specialization and division of Labour, division of work Create more group cohesiveness

Reasons for informal organization : 

Informal standards Informal communication Informal group Informal leaders Different interests and preferences of coworkers. Different status of coworkers. Difficult work requirements. Unpleasant conditions of work. Reasons for informal organization

Line and Staff Organization : 

Modification of line organization and it is more complex than line organization. specialized and supportive activities are attached to the line of command by appointing staff supervisors and staff specialists who are attached to the line authority. Line and Staff Organization

Features of Line and Staff Organization : 

There are two types of staff : Staff Assistants- P.A. to Managing Director, Secretary to Marketing Manager. Staff Supervisor- Operation Control Manager, Quality Controller, PRO Division of work and specialization takes place The whole organization is divided into different functional areas to which staff specialists are attached. There are two lines of authority which flow at one time in a concern : Line Authority Staff Authority Features of Line and Staff Organization

Merits of Line and Staff Organization : 

Relief to line of executives Expert advice Benefit of Specialization Better co-ordination Benefits of Research and Development Training Balanced decisions Unity of action Merits of Line and Staff Organization

Demerits of Line and Staff Organization : 

Lack of understanding Lack of sound advice Line and staff conflicts Costly Assumption of authority Staff steals the show Demerits of Line and Staff Organization

Matrix organization : 

Matrix organization Matrix Management is a type of organizational management in which people with similar skills are pooled for work assignments. Some organizations fall somewhere between the fully functional and pure matrix. Opponents to matrix management believe that it is an outdated method to organize a company.

Advantages of Matrix organization : 

Advantages of Matrix organization The advantages of a matrix include: Individuals can be chosen according to the needs of the project. The use of a project team which is dynamic and able to view problems in a different way as specialists have been brought together in a new environment. Project managers are directly responsible for completing the project within a specific deadline and budget.

Disadvantages of Matrix organization : 

Disadvantages of Matrix organization The disadvantages include: A conflict of loyalty between line managers and project managers over the allocation of resources. Projects can be difficult to monitor if teams have a lot of independence. Costs can be increased if more managers (ie project managers) are created through the use of project teams.

References : 

References Organizational Behavior by Stephen P.Robbins Organization Structure by Lois E. Tetrick The Organization Structure by Henrietta Simmons The Importance of Structure in an Organization   by Robbi Erickson

Slide 29: 

Thank YOU!!