Organization MRK 151 Chapter 3

1. Organization MRK 151 Chapter 3

2. Organization Formal grouping of people and activities to facilitate achievement of the firm's objectives.

3. Relationship of Objectives and Organizational Levels

4. Organization Theory Is the study of structure , functioning and performance of organizations and the behavior of groups and individuals within them.

5. Approaches There are two approaches to understanding organization : 1- organization is understood as a dynamic process and a managerial activity which is necessary for brining people together and unifying them in the pursuit of common objectives. 2- organization refers to the structure of relationship among positions and jobs through which goals are sought to be attained.

6. Common Features 1- division of labour 2-coordination 3-accomplishment 4-authority-responsibility structure.

7. Process of Organization 1- determination of objectives 2-enumeration of activities 3- classification of activities 4-fitting individuals to functions 5- assignment of authority for action

8. Activity Analysis Recommended by Peter Drucker , is to discover the primary activity of the proposed organization , for it is around this only that other activities will be built.

9. Decision Analysis Recommended by Peter Drucker , is particularly important for deciding upon the number of levels or layers in the organization structure.

10. Formal and Informal Organization _Formal organization : refer to the structure of jobs and positions with clearly defined functions and relationship as prescribed by the top management and bound by rules , systems and procedures. _informal organization: refer to the relationship between people in an organization based not on procedures and regulations but on personal attitude. Importance of organization: It is the foundation of management as well as its chief tool.

11. Principles of Organization The basic principles: 1-unity of objectives 2-efficiency 3-span of management 4-division of work 5- functional definitions 6- scalar principle (chain of command) 7- exception principle

12. Principles of Organization 8- unity of command 9- unity of direction 10- responsibility 11- authority and responsibility 12- balance 13- flexibility 14- continuity 15- facilitation of leadership

13. Types of Organizations 1- military of line system 2- functional system 3- line and staff system 4- matrix system 5- hybrid design

14. Types of Organizations Military of Line System authority flows from the top to the lowest

15. Types of Organizations Military of Line System The merits : 1- simplicity 2- unified control 3- strong discipline 4- fixed responsibility 5- prompt decision 6- flexibility

16. Types of OrganizationsMilitary of Line System The demerits: 1- overloading 2- lack of specialization 3- inadequacy of communication 4- scope for favoritism 5- suitability

17. Types of OrganizationsFunctional System Most of the business have separate departments , each one of these departments would serve the rest of the organization.

18. Types of OrganizationsFunctional System The merits: 1- take advantage of specialization of functions. 2- higher efficiency : limited number of operations. 3- separation of mental and manual functions. 4- facilitates mass production through : specialization and standards.

19. Types of OrganizationsFunctional System The demerits: 1- unstable : making the worker wok under several different bosses. 2- it is complicated in operation. 3- difficult for the management to fix responsibility. 4- conflict among foremen of equal rank.

20. Types of OrganizationsLine and Staff System the departments performing former group of activities are in line ones , and those performing latter group of activities are staff ones.

21. Types of OrganizationsLine and Staff System

22. Types of OrganizationsLine and Staff System The merits: 1- planned specialization 2- quality decisions 3- prospect for personnel growth 4- training ground for personal

23. Types of OrganizationsLine and Staff System The demerits: 1- lack of well-defined authority 2- line and staff conflicts 3- suitability : not suitable for small organizations.

24. Types of OrganizationsMatrix Organization Matrix design features a multiple command structure in which an individual may have any number of superiors , including one functional superior and one or more project manager. It is has been found to be successful under three major situations: 1-strong environment pressure 2-share and integrate information with the company 3-limited resources to be shared

25. Types of OrganizationsMatrix Organization

26. Types of OrganizationsMatrix Organization The merits: 1- involves and challenges matrix team members. 2- provides enlarged tasks for people. 3- develops employee skills 4- encourages people to identify with end products. 5- foster flexibility throughout the organization.

27. Types of OrganizationsMatrix Organization • The merits: • 6-motivates cooperation between the different specializations. • 7-provides for integration of organizational information. • 8- fosters the development of managerial skills • 9- frees top management for effective planning.

28. Types of OrganizationsMatrix Organization The demerits: 1- demands high level of interpersonal skills. 2- negative impact on morale when personnel are reshuffled. 3- foster confusion from multiple-command structure. 4- lead to power struggles between functional and project managers. 5-causes to lose sight of broader organizational goals 6- causes duplication of efforts by project groups. 7- costly to implement and maintain.

29. Types of OrganizationsHybrid Organization It is utilizes both functional and divisional departments: Next example : Functional department Geographic department Products department

30. Types of OrganizationsHybrid Organization • Bank president • Executive VP • Bank operation • Executive VP • Branch operation • Executive VP • Loans and investment • VP • Accounts • processing • VP • personnel • Branch manager • City center • branch manager • North side mall • VP • Personal leans • VP • Commercial loan • Branch manager • Parkview mall

31. Types of OrganizationsHybrid Organization • The advantages: • 1-The whole organization enjoy benefits of both functional and divisional structures. • 2-Flexibility in the division and efficiency in the functional department. • the disadvantage: • Create conflict between headquarter and divisional functions.

32. Departmentation Departmentation is two types: functional and divisional. 1- functional departmentation: involves grouping of people on the basis of their overall function. Advantages: _ provides specialization _ allows task assignments consistent with technical training _ allows economic of scale _ allows excellent coordination within functions _ suited to suitable environment _ facilitates top management in direction and control

33. Departmentation

34. Departmentation _ Disadvantages: _ poor communication across functional departments _ slow response times to external changes _ concentration of decisions at the top causing delay _ difficulty in pinpointing responsibility _narrow perspectives within functions _fails to encourage creativity

35. Departmentation 2- divisional departmentation: Can further be divided on the basis of : product , customer , and location. (A) Product departmentation : it is the technique of creating a division or department for each product or product line .

36. Departmentation Advantages: _provide high product visibility. _suited for rapid change. _allows parallel processing of multiple tasks. _clearly defines responsibility. _permits full time concentration on tasks. _fosters the training of general managers.

37. Departmentation Disadvantages: _promotes neglect of long-term priorities. _causes conflict between divisional tasks and corporate priorities. _fails to encourage the coordination of activities. _allows in-depth competencies to decline.

38. Departmentation (B) Customer departmentation: creating a division or department for each of its customer groups. advantages: _ fosters an intense focus on the unique needs of the customers. _ promotes strong public image. _ adaptive to environmental changes. _ facilitates parallel processing of multiple tasks. _ facilitates a strong marketing philosophy. _ provide a clear placement of responsibilities.

39. Departmentation Disadvantages: _ create conflict between divisional tasks and corporate priorities. _ does not promote coordination. _ wastes resources through duplication of effort. _ tends to lessen top management control.

40. Departmentation (C) geographical departmentation: require the creation of divisions and/ or departments of fulfill the territorial needs of an organization. Advantages: _ promotes concern for regional customer needs. _ fast response to the environment. _ promotes flexibility , focus on regional goals. _ fosters coordination across functional departments. _ aids in the development of general management.

41. Departmentation Disadvantages: _ fails to produce specialization. _ encourages competition for resources. _ tends to lessen top management control.

42. Centralization and Decentralization Centralization : wherein much of the decision-making authority is retained at the top of the managerial hierarchy. Decentralization : wherein much of the decision-making authority is pushed downward to the lower management level.

43. Centralization and Decentralization Advantages of centralization: _ broad overview of business is easier to achieve. _ strategic direction setting is easier. _ gives absolute and clear control. _ makes administration easier. _ common standards can be fixed. _ provides certain expert functions cost effectively. _ conflicting decisions are easier to avoid. _ economies of scale can be achieved.

44. Centralization and Decentralization Advantages of decentralization: _ business can act quickly. _ decision-making is quicker , clearer , and understanding of local conditions. _ greater likelihood of innovation and creativity. _ local responsibility and authority result in effective development of managerial skills. _lead to greater productivity and profitability. _burden of administration and paper work are reduce. Functional departments will be learner and easier to control.

45. Authority and responsibility Authority is : legal , or rightful power that gives a right to command or to act. Responsibility : the obligation of a subordinate to whom a duty has been assigned, to perform the duty. Source of authority: There are two theories : _ the formal authority theory _ the acceptance theory

46. Responsibility responsibly arises from the superior- subordinate relationship. The informal relationship may have the effect of reducing the influence and power of the manager . Responsibility and delegation : Responsibility can not be delegated . “accountability” indicate liability for the proper discharge of duties by the subordinate.

47. Principles of Delegation 1- principle of functional definition 2- scalar principle 3- authority-level principle 4- principle of unity of command 5- principle of parity

48. Mistakes in Organization 1- failure to plan properly 2- failure to clarify relationship 3- failure to delegate authority 4- failure to balance delegation 5- confusion of lines of authority and of information 6- authority without responsibility

49. Mistakes in Organization 7- responsibility without authority 8- careless application of staff device 9- misuse of functional authority 10- multiple subordination 11-misuse of service departments 12- overorganizing