ORGANISATIONAL DESIGN

It is the overall set of structural elements and the relationships among those elements used to manage the total organization as a whole. It involves designing the organization structure by developing, changing etc.

Organization design is concerned with making decisions about the forms of coordination, control and motivation that best fit the enterprise. In making these decisions, it is necessary to consider external factors like the market and internal factors like the needs and aspirations of the member of the enterprise.

ORGANISATIONAL STRUCTURE
It is the formal network by which jobs/tasks are divided, grouped and coordinated. It reflects formal relationships among groups and individuals. It provides guide lines for effective employee performance and overall organization success. Structure is a means for attaining the objectives and goals of an institution. Any work on structure must therefore start with objectives and strategy.

Components of Organization Design

1) DEVELOPING A STRUCTURE 2)DELINEATING PROCESS 3)CREATING STRUCTURE

Dynamic Balance
A sound organization should seek to establish balance between various subsets of the organization. Work system, technology, structure, process, people, organization and Environment

Individual-Organization II) Individual-Work III) Work-Organization

I)
I) II)

III)

Classical Theory Process Design High-Performance Work Systems

IV) Organization-Environment

Organization Structure Dimension

There are following dimensions of organization structure

Division of labour/Work Specialization Functional specialization Role specialization Complexity Horizontal differentiation/ Departmentalization Vertical differentiation /Hierarchical Span of Control Narrow span of control/Tall organisation wide span of control/Flat organisation Formalizations Centralisation/Decentralization Flexibility

I)-Division of Labor/Work Specialization

The degree to which tasks in an organization

are sub-divided into separate jobs. Work specialization in other words is division of labor.
It is the specialization of cooperative labor in

specific, circumscribed tasks and roles.

The specialization can be of two different types: a) Functional Specialization b) Role Specialization

a) Functional Specialization: An activity is specialized if it

is performed by individuals in an organization who have been assigned responsibility for that function. A particular specialization can be performed by one or more persons depending on the type and volume of an activity.

b) Role Specialization: It refers to the extent to which

specialist roles exist within the organization i.e. to what extent roles are specialized. Degree of specialization of role will differ from one organization to another.

Advantages of Division of Labor

Increases production.

Saves time.
Allows workman better knowledge of his business. Practice makes the worker perfect.

High efficiency
Low skill requirement. Less time and cost in training in simplified skills.

Disadvantages of Division of Labor

Work becomes dull and monotonous.

Greater degree of interdependence.

Decreases job satisfaction thereby decreasing

productivity. High cost of supervision. Full potential not utilized. No learning/challenges

II)-Complexity
Complexity refers to the degree of differentiation that exists within the organization. (Robins 1987) .
It focuses on the number of specific jobs, roles, hierarchical levels, work centers, etc, in the organization. The greater the differentiation in the organization, the more complex would be the organization.

Organizations can be complex in three ways:

a) Horizontally (the degree of differences in the nature of jobs in the organization.) b) Vertically (the number of hierarchical levels, or the depth in the structure.) c) Spatially (the degree of the geographical separation among the work units.)

Horizontal differentiation/ Departmentalization

It refers to the degree of departmentalization and specialization within a work system on the basis of similarity of work, functions, sub-functions etc. Horizontal complexity refers to the degree of differentiation between the organizations units/subunits in terms of the nature of work, requirements of skills and knowledge and employee orientations. Departmentalization can be divided into 5 types: 1)Departmentalization by Function 2)Departmentalization by Products 3)Departmentalization by Geographic dispersion 3)Departmentalization by Customer or service 3)Departmentalization by Process or Activity

Advantages of Departmentalization/ Horizontal Differentiation

1. 2. 3. 4. 5. 6. 7. Increases efficiency Fixation of Responsibility Fixation of Responsibility Facility in Appraisal Feeling of Autonomy Increases Efficiency Better Control

Disadvantages of Departmentalization/Horizontal Differentiation

Lack of communication across departments: The greatest

disadvantage of departmentalization is that it isolates the department from the other parts of the process. The department may become excessively concerned with its own function instead of acting in ways that will benefit the overall production process and firm.
Slow response to external demands Narrow specialization

Vertical differentiation
Vertical complexity refers to the hierarchical levels that

exist between the top management and the lowest level operations in the organization. response to increase in the horizontal complexity.

Increase in vertical complexity is often the organizations

If the number of hierarchical levels is more, the problems

involved in managing the organization also increase, there is greater potential for distortion of communication across hierarchies, there is greater demand for coordinating the managerial decisions taken at different levels, and the senior levels of management become more distant from the operating core

Spatial Complexity
Spatial complexity refers to the degree to which the subunits and personnel of an organization are geographically separated. Many organizations cope with the spatial complexity by having their own corporate service, wireless system or hotlines. The advent of more efficient telecommunication systems and computer technology has also helped the organizations to overcome the problems of communication and coordination.

III)-Span of Control
It refers to the number of subordinates which report directly to a superior to facilitate vertical coordination and effective supervision of sub ordinates. The concept of span of control is important because it defines the number of levels in the management.

FACTORS INFLUENCING/ (DETERMINING SPAN OF CONTROL)

Skills and abilities of the managers and employees. 2. Characteristics of the work being done/nature of jobs.
1.
Simplicity of employees tasks. Complexity of employees tasks.

3. Degree to which standardized procedures are in place. 4. Strength of organizations culture. 5. Preferred style of the manager. 6. Rate of change of activities and personnel. 7. Clarity of instruction and delegation.

ADVANTAGES OF SPAN OF CONTROL

Significant reduction in administrative costs. More effective and efficient organization communication.

Faster decisions and closer interaction.

Better leadership at all levels.

DISADVANTAGES OF SPAN OF CONTROL

Cost of additional layers of management Increased complexity of vertical communication Encouragement of overly tight supervision and

discouragement of employee autonomy

Narrow and Wide Span of Management/Tall and Flat Organization

A narrow span throughout an organization causes tall or vertical structure, and a wide span causes a flat or horizontal structure. The following factors have also made it possible to adopt wider span of management in modern-day organizations:

Trends towards decentralization; Improved communication technology; Increasing size of organizations; and The new pattern of leadership with more emphasis on democratic styles.

An organization can not extend its span of management beyond certain level. Therefore, what is more important in this context is to maintain a precise balance between wide and narrow span of management.

Advantages of Narrow Span

A close supervision is possible because of limited number of subordinates

to be supervised by a manager. Promotion opportunities for managers are greater due to many levels in the organization. Better personal relations between supervisors and subordinates may be developed because the superiors have sufficient time to develop such relations.

Disadvantages of Narrow Span

Expensive

Delays in decision-making
Increase in misunderstanding Difficulty in co-ordination

Advantages of Wide Span In a flat structure, supervisory levels are few and communication chain can be shorter. Communication can reach the lowest level in short time directly and clearly apparent to the individuals. It reduces the cost of supervision as there are minimum positions in the organization. Control and co-ordination becomes more difficult if the work is more of interlocking nature. Disadvantages of Wide Span Supervision and control may be unsatisfactory if the span of control is too large. Co-ordination may be poor or difficult. Extensive staff help may be essential. Cost of training high-calibere managers may be high. Flat structure is not suitable or it is impractical in large manufacturing concerns or when the business has been developed vertically.

Comparison of Tall and Flat Organizational Structures

Tall Organization Structure (Narrow span of control) Flat Organizational Structure (Wide span of control) Needed when: #Closer control and monitoring is required. #Mistakes are likely to be costly. #Tasks/roles are clear; require specialization. roles; specialization #Routine technology. #Inexperienced subordinates. #Placid, stable environment. #Dysfunctional consequences: # Discourages initiative, encourages centralization. #Bottlenecks, distortion of communication. #Slow promotion. vertical #More autonomy and self control is required. #Flexibility and innovation is required. #Ambiguous tasks and doesnt work. #Non-routine technology. #Experienced subordinates. #Unstable, turbulent environment. #Lack of proper control; encourages laissezfaire. #Too much demand on the manager for coordinating. #Reduced promotional opportunities.

IV)CENTRALISATION

One of the important building block of

organizational design is the level of centralization (or decentralization) in decision making.

Centralization refers to systematic reservation of

authority at central points within the organization. It implies that a majority of the decisions regarding the work are made not by those doing the work but a point higher up in the organization.

A few salient features

Centralization/Decentralization refers to the distribution of formal

authority within the organization.

Centralization of decision making may be with a single person, unit

or level. This single point, however, should be placed at a higher level in the organization.

If decision making is delegated down the line, but there are elaborate

formalized policies, systems and rules which constrain the discretion of the employees, this cannot be understood as decentralization. On the other hand, many organizations provide discretionary powers to the lower levels, but also develop information-systems to keep the top management aware of the decisions that are taken. If the information-system only helps the top management to monitoring without hindering with the decision making authority of lower levels, it cannot be understood as centralization. Thus, the centralization-decentralization issue needs to be understood in terms of the amount of discretion available with the decisionmaker rather than the point at which the decision is being taken.

Factors Affecting the Degree of Centralization

Achieving Uniformity of Action

Facilitating Integration
Promoting Personal Leadership Handling Emergencies

Advantages of Centralization
Standardization of Procedures and Systems Facilitates Evaluation

Co-Ordination of Activities

Disadvantage of Centralization
Destroys Individual initiative Over Burden a Few

Slows Down the Operations

No Scope for Specialization: Centralization does not
offer any scope for specialization. All decisions are taken by one person and he may not be a specialist in all the areas. In the present competitive world there is a need for employing the services of specialists.

RELATIVE ADVANTAGES AND DISADVANTAGES OF CENTRALIZATION AND DECENTRALIZATION:

Centralization
Advantages: >Uniformity of policies, standards and actions.

Decentralization
Advantages: >Greater flexibility and appropriateness in responding to local situations.
>Allows top management to focus on policy issues.

>Enables closer control and coordination. >Eliminates duplication. <Reduces risk-factor in decision making by less skilled subordinates. Disadvantages: Causes alienation and lack of initiative. among units.

> Increases

morale

Disadvantages: Causes conflicts of goals and interests

V)Formalization
Formalization is the extent to which rules and

procedures are written-out and enforced.

Formalization refers to the degree to which jobs

within the organization are standardized ie. formalization is a measure of standardization

ADVANTAGES OF FORMALIZATION
Formalization of jobs reduces the availability of outputs. Formalization is one way of dealing with the complexity

of management problems.

Formalization reduces the need for direct supervision

and control.

Formalization also reduces the chance of mistakes

occurring in the execution of the job.

DISADVANTAGES OF FORMALIZATION:
High formalization leads to an over concern with strict

adherence to regulations which induces timidity(fear of making decisions), conservatism(opposing radical changes).
forms of behavior found amongst bureaucratic persons. Bureaucratic behavior results when a person values the rules more than the goals of the organization.

High Formalization leads us to the primary dysfunctional

And in organizations where formalization is low, their

members enjoy high degree of autonomy in using their own judgment in meeting the demands of their work.

VI)FLEXIBILITY:
Flexibility entails the ability to adapt rapidly when

needed, to adjust and deal with the unpredictable situations.

The design of the organization should be flexible enough

to allow for adaptation to changing demands of the environment by realigning various subsystems or components of the organization.

No organization exists in a truly static and homogenous

environment. Therefore all organizations need to be flexible and adaptive.

Features
Flexibility is a state pertaining to mind and body, process and structure. An

organization can be flexible in structure but rigid in process. It may be creative in developing new products, but seldom looks at new ways to organize work or production. to new ideas and new concepts. It is willing to take the risk of trying new adventures and new ways of doing things. It is not an organization where people advance or are listened to only on the basis of seniority or status in the organization. imbued with knowledge and talents from a wide array of disciplines.

Flexibility is related to creativity and innovation. A flexible organization is open

A flexible organization has people who can do a wide variety of tasks and are

Flexibility is related to diversity. A diverse workforce, with people who have widely

differing views and ways of looking at the world, is much more likely to help the organization survive than one where everybody thinks alike.

Flexibility means balancing the concept of consistency

with the need for inconsistency.