Parul Institute of Engineering & Technology

Management
-1

INTRODUCTION : PRINCIPLES OF
ORGANIZATION
An Organization is a purposeful arrangement of people
to accomplish some Specific Purpose. College or
University is an organization, government departments,
Restaurants, Indian Cricket Team are Formal
Organizations.
All are considered organizations because all have the 3
Common Characteristics

An Organization has a distinct purpose. This Purpose is

typically expressed through goals that the organization
hopes to accomplish.
Each Organization is composed of People. It takes people to
perform the work that is necessary for the organization to
achieve its Goals.
All organizations develop some purposeful structure within
which members do their work.

The Structure of an organization may be open and flexible,

with no specific job duties or strict adherence to explicit job
arrangements.
For instance, at Google, most big projects, of which there
are hundreds going on at the same time, are tackled by
small focused employee teams that gets set up in an instant
and complete work just as quickly. Or the structure may be
more Traditional like that of Procter & Gamble or
General Motors with clearly defined rules, regulations,
job descriptions and some members identified as Bosses
who have authority over other members.

Organizing : Arranging & Structuring work

to accomplish an Organizations Goals.

Purpose of Organizing :
1. Divides work to be done into specific jobs & departments
2. Assign tasks & responsibilities associated with individual
jobs
3. Establishes relationships among individuals , groups &
departments
4. Allocates & arranges Organizational Resources
5. Co-ordinate various Organizational Tasks

ORGANIZATIONAL STRUCTURE :
DEFINATION

The Formal arrangement of Jobs within an Organization.

It refers to the way in which an Organizations
activities are divided, grouped and co-ordinated into
relationships between Managers and Employees,.In
short, How job tasks are formally divided, grouped,
and coordinated

WORK SPECIALIZATION

Dividing work activities into separate Job tasks

Most managers today see work specialization as an

important organizing mechanism because it helps
employees more efficient

The degree to which tasks in the organization are

subdivided into separate jobs. This is also known as
Division of Labor

For Eg. McDonalds uses high work specialization to

get its products made and delivered to customers
efficiently So many times it create some problems
including, Stress, Poor Quality, Absenteeism,
Reduced Performance..

Thats why companies like Tata, Infosys uses minimal

Work Specialization & instead give Employees a broad
range of Tasks to do.

TYPES OF ORGANIZATIONAL
STRUCTURES

1. FUNCTIONAL ORGANIZATION : Organization by function

brings together in one department, everyone engaged in
one activity that is known as Functions.

Here individuals engaged in one Functional activity, such as

Marketing/ Finance ar grouped into one unit.
Eg. Sales manager is responsible for the selling of all
manufactured products by the firm.
It is used mainly by smaller firms which offer limited products.

Advantage :

It makes supervision easier, increase skills and

potentiality

Disadvantage :

creates confusions between departments and their

members

2. PRODUCT/MARKET ORGANIZATION OR ORGANIZATION

BY DIVISION : The organization of a company into divisions
that bring together those involved with certain type of
Product.
There are 3 patterns
1. Division by Product Most large, multiproduct companies following
this pattern.
2. Division by Geography Most Services, Financial firms like mining
and oil producing firms.
3. Division by Customer- Firm is divided with different ways
customers use their products.
Advantages :
1. Job can be easily coordinated & high work performance maintained
2. Enhancing Quality & speed of decision making

Disadvantages :
1. Interest of the division may be ahead of the goals

2 Administrative expenses increase because all division have

its own staff, specialists and their skills

3. MATRIX ORGANIZATION (HYBRID STRUCTURE)

It is also referred as Multiple Command System, is
a Hybrid (mixture) that attempts to combine the
benefits of both types of designs while avoiding their
drawbacks.
In this structure Specialists from different functional

areas of work club together to work on projects, but who

return to their areas when the project is completed.

Eg. Functional Area Manager --->Marketing Manager,

Project Manager ----------->who share authority

The Project Manager has authority over the functional members who
are part of his /her project team areas related to the Projects Goals.
The Functional area manager has authority to take decisions about
Promotions, Salary Recommendations and annual reviews typically
remain the Functional Managers Responsibility. To work Effectively,
both managers have to communicate regularly, co-ordinate work
demands on employees and resolve conflicts together.

Advantage :

It makes faster decision making and very flexible towards any

changes

Disadvantage :

Complex task to find and assign people for projects, employees

have to report 2 or more Superiors so chances of conflicts
may increase

DEPARTMENTALIZATION

The way by which Jobs are Grouped together is called

Departmentalization. Work Specialization creates
specialists who need Co-ordination. This Co-ordination is
facilitated by putting specialists together in departments
under the direction of Managers.
These Departments are normally based on the Work
Function performed, the product or service offered, the
target customer or client, the area covered, the processes
used to turn Inputs->Outputs.

THERE ARE 5 FORMS OF

DEPARTMENTALIZATION

FUNCTIONAL
DEPARTMENTALIZATION

Functional Departmentalization :
Groups jobs according to the functions or tasks they
perform.

Examples of functional departmentalization include;

Production department, finance department, marketing
department, human resource (HR) department, etc. Here,
all activities, which are directly or indirectly connected
with production are grouped together to make a production
department.

Advantages :
1. Efficiencies from putting together similar experts and people
with common skills
2.Co-ordination within Functional area
3. In depth specialization
Disadvantages :
1.Poor Communication across all areas
2. Limited view of companys goals

GEOGRAPHICAL
DEPARTMENTALIZATION

Geographical Departmentalization :

In geographic departmentalization, separate

departments are made based on the company's (i.e.
institution's) operations to be carried out either over
a vast area or within some restricted area through
branches or offices established at different zones or
places in that area.

First, an entire area of operation (e.g. world, country, state,

city, etc.) is decided followed by division of that area into
different zones. Secondly, a branch or an office is
established in each geographical zone to manage local
affairs of the company in that zone.

Advantages :
1.More effective & efficient handling of specific regional issues
that arise
2.Provide needs of unique geographic markets better
Disadvantages :
1.Duplication of Functions
2.Can feel isolated from other organizational areas.

PRODUCT
DEPARTMENTALIZATION
Product Departmentalization :
Every individual department is responsible for producing
and selling the type of product assigned to them. A good
example of product departmentalization is witnessed in an
automobile manufacturing company. In such a company, we
generally see departments like a two-wheeler department,
three-wheeler department, four-wheeler department, heavy
motors department, etc., which manufacture vehicles such
as bikes, auto-rickshaws, cars, buses and trucks,
respectively.

Advantages :
1.Allows specialization in particular products & services
2.Managers can become experts in their industry
3.Closer to customers
Disadvantages :
1.Duplications of Functions
2. Limited view of Organizational Goals

PROCESS
DEPARTMENTALIZATION
In process departmentalization, departments are
separated based on their role in a Production Process.
Best example of process departmentalization can be seen in
any Manufacturing firm where we may have a Milling
department, Assembling department, Inspection
department, Shipping department, etc.
Here, inside a company, all activities, which are directly or
indirectly related with assembling are grouped together to
make a Assembling department.

Advantages :
More efficient flow of work activities.
Disadvantages :
It can only be used with certain types of Products.

CUSTOMER
DEPARTMENTALIZATION

Here, departments are separated from each other based on

the types or groups of customers to be handled or deal
with. - For example, customers can be classified under
types such as, international or foreign customers, domestic
customers, bulk purchasing or wholesale customers, retail
customers, etc. - Each group of customers needs different
tactics and strategies to handle them better.

CHAIN OF COMMAND :

- The line of authority extending from the top

organizational levels to the lowest levels, which clarifies
who reports to whom..
- Unity of Command : A subordinate should have only
one superior to whom he or she is directly responsible
- Authority : The Rights natural in management position
to tell people what to do and to expect them to do it.
- Responsibility : The Obligation (Duty) or Expectation to
perform any assigned duties.

SPAN OF CONTROL

The number of Employees a manager can Efficiently and

Effectively manage..
Span of Control is important because Large degree
determines the Number of Levels and Managers in an
organizations
For Eg. Assume that 2 organizations each have approx.
4100 Employees.
In Figure, 1 organization has Span of 4, other has Span of
8, Organization having wider span will have 2 less levels ..
Organization with wider span(8) save more money
Wider spans are more Efficient in terms of cost but Wider
span may reduce Effectiveness if employees performance
worst because managers have no longer time to lead.

1. Job Complexity :
Complicated jobs require more managerial Input and
Involvement and thus the span of control tends to be
narrower.
2. Job Similarity :
If one manager a group of employees performing similar
jobs, the span of control can be considerably wider than if
the jobs of subordinates are substantially different.

3. Geographic proximity of Supervised Employees :

Because employees who work in one location are more easily
supervised than employees far away locations, physical
proximity to employees tends to allow a wider span of control.

4. Amount of Co-ordination :
A narrower span of control is advisable in firms where
management spends much time in coordinating tasks
performed by subordinates.

5. Degree of Employee Empowerment :

Because employees who are trusted and empowered to make
decisions need less supervision than employees with less
autonomy and decision making discretion, supervisors who
empower their employees can have a wider span of control.
6. Abilities of Employees :
Supervisors who managing knowledgeable and capable
employees have a wider span of control than supervisors,
managing knowledgeable and less capable employees.
- The greater the abilities of employees, the less managerial
Inputs are required, thus a wider span of control is possible.

7. Ability of Management :
More capable managers can manage more employees than
less competent mangers.
-The abilities of manager to educate employees and
effectively respond to their questions lesser the need for a
narrow span of control.
8. Technology :
Communication technology, such as Mobile phones, Fax,
Email, work sharing softwares can allow managers to
effectively supervise even distant employees having complex
and different jobs and require significant co-ordination.

CENTRALIZATION &
DECENTRALIZATION
CENTRALIZATION :

The degree to which Decision making is concentrated at upper

levels of the organization. For Eg. If Top Managers make key
decisions with little input from below, then the organization is
more centralized.

DECENTRALIZATION :

The degree to which Lower level employees provide Input or

actually make decisions. Individuals at each level in the
business may have some autonomy to make business decisions.
(Note that.. Centralization-Decentralization is Relative not
Absolute that is an Organization is never Completely
Centralized or Decentralized.)

FORMALIZATION

How standardized on organizations jobs are and the

extent to which employee behavior is guided by rules and
procedures.
- In highly formalized organizations employees have little
judgment over whats done, when its done and how its
done?
- However, where formalization is low, employees have more
judgment in how they do their work.
- For example, check this questions Has this employee
done something wrong? He did break the rule . But by
breaking the rule, he actually brought in revenue and
provided good customers to the company.
- For any organization some rules should be explained so
employees understand why its important to them.

MECHANISTIC AND ORGANIC

STRUCTURES
Mechanistic Organization :
An organizational design thats rigid and tightly controlled.
Organic Organization :
An organizational design thats highly adaptive and
flexible.

CONTINGENCY FACTORS

Top managers typically put a great deal of thought into

designing an appropriate structure.
Proper structure is depends on 4 Contingency
Variables :

1. Organizations Strategy
2. Organizations Size

3. Organizations Technology

4. Organizations Environmental Uncertainty

ORGANIZATIONAL DESIGN
Common Organizational Design

When designing structure, managers may choose one of the

Traditional organizational designs. These structures
follows the design of Mechanistic structural design.

Mainly 3 Designs are there

1. Simple Structure

2. Functional Structure
3. Divisional Structure

Common Organizational Designs

Simple Structure

--Most companies start as

entrepreneurial ventures using
a Simple Structure. --this design
with low departmentalization,
wide span of control, centralized
authority by single person

Strengths : Fast, Flexible,

Inexpensive to maintain clear
accountability Weaknesses :
Not appropriate as
organization grows, reliance
on one person is risky.

Functional

--It is an organizational design

Structure

that groups similar or related

occupational specialties
together. --This structure as
functional departmentalization
applied to an Entire
Organization.

Strengths : Cost saving

advantages from specialization
where employees are grouped
with others who have similar
tasks. Weaknesses : Pursuit of
functional goals can causes
managers to lose sight of whats
best for the overall organization.

Divisional

--It is an organizational
structure made up of separate
Business units or divisions.
--Here, each division has limited
autonomy, with a division
manager, who has authority
over his/her unit and is
responsible for performance.

Strengths : More focuses on

results. For eg. Division
managers are responsible for
what happens to their products
and services. Weaknesses :
Duplication of activities and
resources increases costs and
reduces efficiency

Structure

CONTEMPORARY ORGANIZATIONAL
DESIGN
- After using Traditional organizational designs,
now organizations need to be Future oriented,
Flexible and Innovative. These structures are
following Organic Structural Design. Mainly
3 Designs are there
- 1. Tem Structure
- 2. Matrix Structure
- 3. Boundary less Structure

Contemporary Organizational Designs

Team Structure

Matrix Structure

Boundary less
Structure

-- A structure in which the entire

organization is made up of work
groups or teams. --Here Employee
Empowerment is crucial because
there is no line of managerial
authority from top to bottom. --In
India many companies are using
Employee teams to improve
Productivity.
--A structure that assigns specialist
from different Functional
departments to work on one or more
projects.

Strengths : 1. Employees are more

--Main aspect : it creates a dual

Weaknesses : 1.Complexity of

chain of command in which

employees have two managers
1.Functional area manager
2. Product/Project Manager
-- An organization whose design is
not defined by limited to the
Horizontal, Vertical and external
boundaries by a predefined
structure.
2 types of boundaries
1. Internal Boundary
2. External Boundary

involved in and empowered.

2. Reduced barriers among
Functional areas. Weaknesses :
1.No clear chain of command
2. Pressure on teams to perform.

Strengths : 1.Flexible design that

can respond to environmental
Changes.
2. Faster decision making
assigning people to projects.
2.Task and personality conflicts.
Virtual Organization : An
organization which consists of small
core of full time employees and
outside specialists, new hired as
needed to work on projects.
Network Organization : An
organization that uses its own
employees to do some work activities
& networks of outside suppliers

TALL & FLAT STRUCTURE OF

ORGANIZATION

DIFFERENCE BETWEEN TALL AND

FLAT
STRUCTURE

LINE AND STAFF ORGANIZATION

LINE ORGANIZATION :

Line authority flows down the chain of command. For

example, line authority gives a production supervisor the
right to direct an employee to operate a particular
machine, and it gives the vice president of finance the
right to request a certain report from a department head.
Therefore, line authority gives an individual a certain degree of
power relating to the performance of an organizational task.
Two important clarifications should be considered, however, when
discussing line authority:

(1)

line authority does not ensure effective performance, and

(2)

line authority is not restricted to line personnel. The head of a

staff department has line authority over his or her employees by
virtue of authority relationships between the department head
and his or her directly-reporting employees.

STAFF ORGANIZATION

Staff authority is the right to advise or counsel those with

line authority. For example, human resource department
employees help other departments by selecting and
developing a qualified workforce.
- A quality control manager aids a production manager by
determining the acceptable quality level of products or
services at a manufacturing company, initiating quality
programs, and carrying out statistical analysis to ensure
compliance with quality standards.
- Therefore, staff authority gives staff personnel the right to
offer advice in an effort to improve line operations.

Merits

Demerits

1. In this organization line

authorities concentrate on
execution of work and are
relieved from thinking
function.
2. Line authorities are not
autocrats as they are to take
the advice from the experts or
staff position.
3. This results greater efficiency
as the line managers are to
devote much of their time on
line functions. The line
managers function more
efficiently as they get support
from staff positions.
4. This organization ensures co-

1. It creates friction between

line executive and staff
executive. The success of this
organization largely depends
on the proper understanding
of the two.
2. Staff officers may not give
proper advice, as they are not
to be responsible for the
accomplishment of the job.
3. The line authorities are to
depend on staff executive.
This results in too much
dependency. Too much
dependent on staff will lose
the creative thinking and
initiative.

ASSIGNMENT QUESTIONS
1. What is Organization? What are the types of Organization? Or List different type of
Organizational structures. Explain Functional structure. Or Short Note : Line and
Staff organization Or When a matrix structure can be used? Or Short Note - Hybrid
Structures
2. What is meant by Departmentalization? List different type of Departmentalization.
Give its advantages and disadvantages.
3. Explain SPAN OF CONTROL. State the merits and demerit of a limited span of
control.
Or Discuss the factors affecting the span of control
4. Write a note on Centralization Vs Decentralization.
5. Discuss about the Tall and Flat structure of organization Or Why are both Vertical
And Horizontal dimensions important to organization structure and design?
6. Write a note on Organizational Design.