Understanding and managing organization system

Concept of organization
Organization is a cooperative social system involving the coordinated efforts of two or more people sharing a common purpose Peter F. Drucker An organization is a body that manages, organizes and coordinates human and technological resources to perform a particular objective. For example: 1. 2. A firm produces goods and services to sell to its customers. Police is there to keep peace between mutually hostile groups of people.

There are three pillars of resources of all organizations: People Career Education Training Attitude Participation Monitoring Environment Organization Strategy Policy Mission statement Culture Management Bureaucracy Competition Environment Technology Hardware Software Telecommunications Information Systems

Common characteristics of Organization:

Edgar Schein, a famous organizational psychologist believes that all organizations have four characteristics which include *coordination of efforts *Common goal *Division of labour *Hierarchy of authority 1 .Coordination of efforts If individuals in different departments, having different orientations, time horizons etc. and individual specialists perform their tasks independently, without having any regard for each other, it may lead to chaos. 2. Common goal Common goal or purpose gives the organization focus and its members a rallying point. 3. Divison of labour The early proponents of this characteristic of organization were Adam Smith, Frederick Taylor and Henri Fayol. Division of labour refers to systematically dividing complex tasks into specialized jobs. 4. Hierarchy of Authority When work is divided among different levels of an organization, superior-subordinate relationships are created. This results in a hierarchical ladder or chain of command. Jay R. Galbraith and Edward E. Lawler criticized the idea of hierarchy.
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Concept of organizational structure

Organizational structure is comprised of functions, relationships, responsibilities, authorities and communication between individuals within each department. Organizational structure refers to the formal configuration between individuals and groups with respect to the allocation of tasks, responsibilities and authority within the organization. The organizational structure:1. 2. 3. 4. 5. 6. Defines every employees job, duty and objective. Establishes authority-responsibility relationships for co-ordinated efforts. Creates a network of communication for the purpose of achieving the enterprise objectives. Provides a framework within which an enterprise functions and also helps in meetin challenges and finding opportunities for growth. Stimulates creative thinking and initiative among organized members. Provides framework of decision making.

Form/Types of Organizational Structure

1. Line organization
The line structure is defined by its clear chain of command, with final approval of decision affecting the operations of the company from top to down to the operative level of the workers. Advantages Simple, uncomplicated and easily understandable. Clear cut authority and responsibility. Control is easier and effective Facilitate quick decision and quick action Rapid communication is made possible. President

Plant manager

Foreman A

Foreman B

Foreman C

Worker

Worker

Worker

Disadvantages: Require talented and capable person who may be difficult to find.
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Exit of a few top executives might cripple the enterprise. The spirit of teamwork may be lacking.

Suitability: Where business is carried on a small scale and few subordinates are employed. Where the work is largely of routine nature and the methods of operation are simple. Automatic machines are used so that there is less demand of managerial personnel.

Line and staff organization

In this form of organization, functional specialists are added to the line, giving the line the advantage of specialization. Board of directors

Executive committee

Managing Director

Controller of Finance Assistant to Managing Director

Manager Division A Advantages of line and staff organization: 1.

Manager Division B

Manager Division C

2. 3.

4. 5.

Better decisions: Staff specialists help the line executives in taking better decisions by providing them with adequate information of the right type at the right moment and also give them their expert opinion. Specialized knowledge: Line managers get the benefit of specialized knowledge of staff specialized at various levels. Reduction of burden: Staffs carry out detailed investigation and supply information to line executives. Therefore, one burden of line executive is reduced. Flexibility General staff can be employed to help line managers at various levels. Proper weightage Many problems that are ignored or poorly handled in the line organization can be properly covered in line and staff organization by the use of staff specialists.

Disadvantages: 1. Conflict The line usually complains that if things go right then the staff takes the credit and if things go wrong then the line gets the blame for it. Duties are not clear This may hamper coordination in the organization. Staff not accountable Staff members are not accountable for the results even though they may not be performing well. Ideas are not practical Staff is generally younger and more educated and did not go through the run of mill and hence their ideas may be more theoretical and academic rather than practical.

2. 3. 4.

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Functional organization
Concept propounded by F.W. Taylor The functional organization allows specialist to enforce his directives within the clearly defined scope of his authority. Therefore, a functional manager can make decisions and issue orders to persons in divisions other than his own, with a right to enforce his advice. Functional Organization

Director Marketing

Director HR

Director Production

Director Finance

GM Division X Advantages: 1. 2. 3. 4. 5.

GM Division X

GM Division X

Decision can be easily implemented and controlled. Decision making becomes easier and quicker. It enables the organization to make full use of expert knowledge. It facilitates specialization. It permits economic flexibility and leads to economy of operations.

Disadvantages: 1. 2. 3. 4. 5. 6. It violates the principles of unity of command. It often results in overburdening of operating subordinates. It tends to weaken the position of and influence of line supervisor. It tends towards centralization of authority in organization. The task of coordination becomes difficult. It makes the organization authoritative and autocratic.

Committees: 1. Formal and informal committees When a committee is constituted by the management of organization and it is a part of the organizational structure, it is called a formal committee. It has a definite jurisdiction. Its authority and scope of operations are well defined. Informal committees do not form the part of the organization. Standing and ad-hoc committees Formal committees which are permanent in nature are known as standing committee. Ad-hoc committees are constituted to deal with some special problems. When the problem is resolved, these are dissolved by the management. Executive committees This is a very powerful committee which has executive and administrative powers to control the affairs of business. Coordinating committees They consist of members of different departments who meet periodically to discuss their general and common problems.

2.

3. 4.

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