The Nature and Purpose of Organizing and Department at Ion Group P1 Final

 

The Nature and Purpose of  Departmentalization By Group – P1 (SEC - 3) Submitted to : Prof. Ramakrishna Chadaga

 

ORGANIZATION An ORGANIZA ORGANIZATIO TION N is a tool used by people people to coo coordin rdinate ate their actions to obtain obtain something they desire or value.

The purpose of an organization structure: The purpose of Organization Structure is to incorporate verifiable objectives, which are a major   part of the planning. p lanning. It also helps he lps in giving a clear idea of the major duties or activities involved. Another function of Organizational Structure I to help in understanding the areas of discretion and authority, authority, so that each and every individual individual knows what he or she can do to accomplish accomplish the goal. An organization structure should be designed to clarify who is to do what tasks and who is responsible for what results, to remove the obstacles in performance caused by confusion and uncert unc ertain ainty ty of assign assignmen ment, t, and to furnis furnish h decisi decision-m on-maki aking ng and commun communica icatio tion n networ networks ks reflecting and supporting the enterprise objective. Organization implies, “a formalized intentional structure of roles or positions”.

The concept of organizing: Organizing is the way in which most people establis Organizing establish h an “ intentional structure of roles” roles” i.e. An Organization. It involves the following steps: 1) The identific identification ation and classi classificat fication ion of required required activit activities. ies. 2) The grouping grouping of activiti activities es necess necessary ary for attai attaining ning the objectiv objectives. es. 3) The assignment assignment of each each grouping grouping to a manager with with the authorit authority y necessary necessary to supervise supervise it. 4) The provisio provision n for co-ordin co-ordinati ation on horizo horizonta ntally lly (on the same organi organizat zation ional al level) level) and vertically (division and department) in the organization structure.

Formal and Informal Organization: There are two types of Organizations: Formal Organizations and Informal Organizations. Formal Organization:

It means the intentional structure of roles in a formally organized enterprise. This does not mean that it is inherently inflexible or unduly confining, formal organization must be flexible. If a

 

manager is to organize well, the structure must furnish an environment in which individual  performance, both present and future, contributes most effectively to the group goals.

Informal Organization:

Chester Barnard Chester Barnard described described informal informal organization organization as  as   “An “Anyy joi joint nt person personal al activi activity ty withou withoutt a conscious joint purpose, even though contributing to a joint purpose.” Thus informal relationships established in a group of people may aid in the achievement of  organizational goals. As it is much easier to ask for help on an organization problem from someone you know personally, even if he or she may be from a different department, than from someone you know only as a name in the organization chart. Keith Davis of Arizona Arizona State University University described described informal organization organization as, “a network of   personal and social relations not established or required by the formal organization but b ut arising   spontaneously as people associate with one another”.

Organizational Organization al Division: The Department One aspect of organizing is the establishment of departments. The word department designates a distinct area, division, a branch of an organization over which a manager has authority for the  performance of specified activities. A department, as the term is generally used, may be the  production division, the sales department, the market research section, or the aaccounts ccounts receivable unit. In some organizations, the bureaucratic structure is replaced by an emphasis on teamwork.

Organizational Levels and the Span of Management The purpose of organizing is to make human co-operation effective. The reason for levels of  organization organi zation is the limitation limitation of the span of management. management. In other words, organizational organizational levels exist because there is a limit to the number of people a manager can supervise effectively, even though this limit may vary depending on the situation. Choosing the Span

There are two basic spans: Narrow Span and Wide Span. Though there are a various merits and demerits of narrow span & a wide span, the fact that many well managed companies have a widely varying of spans shows that no particular span is better than the other, but the choice depends on the organization in question and its environment. Narrow Spans: Organizations with narrow span exhibit close supervision, hence, close control and fast communication between subordinates and supervisors.

 

The trade-offs of this approach are that the Superiors become too involved in the work of their  subordinates, which might lead to a feeling of interference. Also, this approach leads to several levels of management, which in turn leads to higher costs and excessive distances between lowest and top levels.

Wide Spans: Under this approach the supervisors are pressurized to delegate. This leads to a need for clearer policies and careful selection of subordinates.

Some of the tradeSome trade-off offss includ includee overlo overloaded aded superv superviso isors rs who become become decisio decision n bottle bottlenec necks. ks. Another imminent danger of this approach is loss of control of the supervisor. These factors make it necessary to have exceptional quality of managers.

Problems with Organizational Levels Firstly organizational levels are expensive. As they increase, more and more effort and money are devoted to managing, because of the additional managers, the staffs to assist them, and the necessity of coordinating departmental activities, plus the cost of facilities for the personnel. These are called “overheads” in contrast to the direct costs. Secondly departmental levels complicate communication. An organization with many levels has great greater er diff diffic icul ulty ty commu communi nicat catin ing g objec objecti tives ves,, plan plans, s, and po poli lici cies es downw downwar ard d tr trou ough gh he organization structure than does a firm in which the top manager communicates directly with employees. Omissions and misinterpretations occur as information passes down the line. Finally, numerous departments and levels complicate planning and control. A plan that may be definite and complete at the level loses coordination and clarity as it is subdivided at a lower  levels. Control becomes more difficult as more levels and managers are added.

Operational – Management Positions: A Situational Approach The prin The princi cipl plee of the the sp span an of manag managem ement ent st stat ates es “t “tha hatt th ther eree is a li limi mitt to th thee nu numb mber er of  subordinates a manager can effectively supervise, but the exact number will depend on the impact of the underlying factors”. Examining what consumes the time of managers in their handling of superior – subordinate relationship, and ascertaining the devices that can be used to reduce the time pressures, will not only be a helpful approach to determine the best span in individual cases but also a powerful tool for finding what can be done don e to extend the span without destroying effective supervision.

Factors Determining an Effective Span 1. Subordi Subordinate nate Trainin Training g

 

The better the training of subordinates, the better they value the time and work of their superiors and the organization.

2. Clarity Clarity of Delega Delegation tion o off Authority Authority

The most serious symptom of poor organization affecting the span of management is inadequate or unclear authority delegation. If a manager clearly delegates authority to undertake a welldefined task, well-trained subordinate can get it done with a minimum of the superior’s time and attention. 3. Cl Clar arity ity of Plan Planss

Most of the tasks and work are planned before which is to be implemented and put into effect. If  the plans are well defined and if the subordinate understands what is expected, little of a supervisor’s time will be required. 4. Use of of Object Objective ive Stan Standard dardss

The use of Objective Standards by a manager ensures that a subordinate follows the plan. 5. Rate Rate of Change Change

The Rate of change of the enterprise is an important determinant of the degree of which policies can be formulated and the stability of policies maintained. 6. Commun Communicat ication ion Tech Techniqu niques es

The effectiveness with which communication techniques are used also influence the span of the manage man agement ment.. If the plans, plans, object objective ives, s, instru instructi ctions ons,, orders orders or direct direction ionss are commun communica icated ted effectively, the subordinates are able to understand the job much more effectively. 7. Amount Amount of Person Personal al Contact Contact Needed Needed

In many instances, face to face meetings are necessary. There are so many problems that can be handled only in face to face meetings. 8. Variati Variation on by Organi Organizati zation on level level

The size of the most effective span differs d iffers by organization level.

Organizational Environment for Entrepreneuring and  Intrapreneuring 

 

An Intrapreneur is a person who focuses on innovation and creativity and who transforms a dream or an idea into a profitable venture by operating within the organizational environment. In contrast, the Entrepreneur is a person who does similar things but outside the organizational settings. Thee mana Th manager gerss are are re resp spon onsi sibl blee for for cr crea eati ting ng an en envi viro ronm nment ent fo forr ef effe fect ctiv ivee an and d ef effi fici cien entt achievement of group goals. They must promote opportunities for entrepreneurs to utilize their   potential for innovation. Entrepreneurs need some freedom to pursue their ideas, which, in turn, requires that sufficient authority is delegated. Innovative persons often have ideas that are contrary to “conventional wisdom”. It is quite common that these individuals are not well liked by their colleagues and that their contributions are often not sufficiently appreciated. It is, therefore, not surprising that entrepreneurs leave large companies and start their own businesses.

The Structure and Process of Organizing In lookin looking g at the organizat organization ion as a proces process, s, there there are several several fundam fundament entals als that that should should be considered. Firstly, the structure must reflect the objectives and plans because activities derive from them. Secondly, it must replace the authority available to an enterprise’s management. Thirdly, an organization structure must reflect its environment. It must be designed to work, to  permit contributions by members of a group, and to help people gain objectives efficiently in a changi cha nging ng future future.. There There is no si singl nglee organi organizat zation ion str struct ucture ure that that works works best best in all kinds of  situations. An effective organization structure depends on the situation. Fourthly, Fourthl y, since since the organi organizat zation ion is staffe staffed d with with people people,, the groupi groupings ngs of act activi ivitie tiess and the authority author ity relationshi relationships ps of an organizatio organization n structure structure must take into account people’s people’s limitati limitations ons and customs.

The Logic of Organizing  There is a fundamental logic to organizing. The organizing process consists of the following six steps. 1) 2) 3) 4)

Establishm Establishment ent of enter enterprise prise objectives. objectives. Formulation Formulation of supporting supporting objecti objectives, ves, policies policies and and plans. plans. Identificat Identification ion and classificat classification ion of activities activities necessary necessary to accomplish accomplish these. these. Groupi Grouping ng of these these activit activities ies in the light light of human human and materi material al resource resourcess availa available ble and the  best way of using it.

5) Delegation Delegation to the head of each each group the authorit authority y necessary necessary to perform perform the activitie activities. s.

 

6) Tying Tying the groups groups together together horizonta horizontally lly and verti vertical cally, ly, through through authorit authority y rel relati ations onship hipss and information flows.

DEPARTMENTALIZATION Departmentalization is the grouping of related activities into manageable units to achieve the objectives of the enterprise in the most efficient and effective manner.

The need for Departmentalizatio Departmentalization n There are several reasons organizations choose to departmentalize. The basic reason is that it allows organizations to grow and work more efficiently by achieving divi divisi sion on of labou labour. r. As organ organiz izat atio ions ns grow grow in sc scop ope, e, number number or ge geogr ograph aphy, y, it becom becomes es increasingly difficult, if not impossible to manage the organization as a single undivided entity. This is where departmentalization comes into the picture. It allows us to divide the management and working of the organization into specialized groups, which can be linked at a higher level. This leads to simplification of coordination and in better control.

Traditional Approaches to Departmenta Departmentalization lization Over the years, several approaches to departmentalization have been evolved, each with its own sets of advantages, disadvantages and areas of application. While departmentalizing, it is very important to remember that different approaches work for  different organization depending on its structure, market and other factors. Therefore, it is important to study and understand the organization and its environment before choosing one or  more approaches that might fit to it. The traditional approaches to departmentalization are described below:

 

Departmentalization by Simple NUMBERS: This was one of earliest and simplest form departmentalization which was prevalent among Tribes, clans, armies etc. This is achieved by identifying people who perform the same duties and put them under a manager. The success of the undertaking depends on the number of people involved in it. The applica applicati tion on of this this approa approach ch is becomi becoming ng more more and more more limite limited d with with technol technologi ogical cal advancement and requirement of more efficient groups with specialised skills. Another factor  working against it is that it functions best only at levels where only human resource power is the important factor.

Departmentalization by TIME: This form of departmentalization is generally used in organizations where the operation or  organizational activity is required to be carried on round the clock. The shift system is an example of this approach. This method at the lower levels of the organization, including manufacturing operations at the plant level, various security and control operations. Examples of organizations to which this approach is applicable are hospitals, police department which would need to be available for emergency situations round the clock. Advantages: One of the major advantages of such a system is that it allows the organization to take advantage of the complete 24 hours. An example of this departmentalization can be seen in organizations which work with live telecom networks. Here, there has to be someone to monitor  the networks 24X7. Therefore, shift system makes a lot of sense. Disadvantages: One major drawback of this approach is the difficulty in coordination between

the people working in different teams. Another problem is the health hazard that it raises. People who work the Night Shifts undergo a  body clock reversal. This leads to problems like stress, disorientation disorientation and dissatisfaction.

Departmentalization Department alization by ENTERPRISE FUNCTION: Under this, the activities are grouped according to the various functions of the enterprise, like Product Pro duction ion,, Selli Selling, ng, Financi Financing ng etc. etc. The functi functions ons vary vary from from organi organizat zation ion to organi organizat zation ion,, therefore the terminology usually also varies. The basic terms might also vary because some of  the them might not be so important in the context of that particular organization.

 

As an example, example, churches do not have a production production department, department, but that doesn’t doesn’t mean that they never produce anything, its just because the production function is such a minor part of the church organization that its now considered in the Functional Departmentalization. This is the most widely used departmentalization approach which is used in some form or the other in almost every organization. Advantages: It’s logical as it allows the people to get specialized in one specific area. This will increase efficiency as the people working in the specific area are experts in it.

It reduces reduces the proble problem m of traini training ng and manage managemen ment. t. It also also all allows ows for better better control control and coordination.

Disadvantages: Sometimes, some other form of departmentalization might be more suitable for  the organization. In such a case, using functional departmentalization wouldn’t be the right approach to follow. As an example, in a company which is globally diversified, a geographical departmentalization would make more sense.

Another disadva Another disadvanta ntage ge could could be lesser lesser intera interacti ctions ons and greate greaterr barrie barriers rs between between differ different ent departments as the people in each department would develop a limited, department focused view about thing.

Departmentalization by GEOGRAPHY: Under this approach, activities are grouped on the basis of region/territory. With the increasing globalization the world is becoming one big market, as a result, the operations of big companies are often spread over different geographical regions, possible in different countries, or even different continents. In such a scenario, it is feasible to group activities on a regional basis. For example, the organi org anizat zation ion struct structure ure of Coca-C Coca-Cola ola has reflec reflected ted the company company's 's operati operation on in two broad broad geographic areas - the North American sector and the international sector, which includes the Pacific Rim, the European Community, Northeast Europe, Africa and Latin America groups. Another industry where this approach is applied on a widespread basis is the IT industry, where the activities are divided on a region basis in the form of regional delivery centre.

Customer Department Departmentalization alization This involves grouping activities on the basis of common customers or types of customers. Jobs may be grouped according to the type of customer served by the organization. The assumption is that customers in each department have a common set of problems and needs that can best be

 

met by specialists. The sales activities in an office supply firm can be broken down into three departments that serve retail, wholesale and government. Customers are the key to the way activities are grouped when each of the different things an enterp ent erpris risee does does is managed managed by one depart departmen mentt head. head. The indust industria riall sales sales departm department ent of  wholesaler who also sells to retailers is a case in point. Business owners frequently arrange activities on this basis to cater to the requirements of the defined customers, and educational institutions offer regular courses to serve different groups of students. There are difficult decisions to be made in separating some types of customer departments from  product departments. for example in the great central cash markets for agricultural products ,the loan officers officers of community banks frequently frequently speci specialize alize in fruit, fruit, vegetables, or grin even to the  point an individual officer will make loans only on wheat or oranges. This is an example of  customer departmentalization. Advantages: Customer departmentalization can address the special and widely varied customers for clearly defined services. The manufacturer who sells to the whole sellers and industrial  buyers frequently can meet their special need for setting up separate departments. Non-Business

groups follow groups follow simila similarr practi practices ces.. The extens extension ion servic servicee univer universit sities ies such such as night night school schoolss divisions are arranged with respect to the subject matter and sometimes instructor to appeal to an entirely different to the group of students from those who attend the university on a full time day. Disadvantages: Customer departmentalization is not without certain drawbacks. There is, for  instance the difficulty of coordination between this type of department and those organized on other bases, with constant pressure from the managers of customer departments for special treatment.

Another disadvantage is the possibility of underemployment of facilities and labor periods of  specialized workers in customer groups’ i n the periods of recession, some customer groups may all but disappear, for example, machine tool buyers, in period of expansion. In addition, another  drawback is the unequal development of customer groups and demands in characteristic.

Process or equipment departmenta departmentalization lization This involves grouping activities on the basis of product or service or customer flow. Because each process requires different skills, process departmentalization allows homogenous activities to be categorized. For example, the applicants might need to go through several departments namely validation, licensing and treasury, before receiving the driver’s license. Owing to the complexity of tasks and the competitive environment in which organizations operate, they often use a combination of the above-mentioned methods in departmentalization Such a basis of departmentalization departmentalization can be found in paint or electroplating process grouping or   by the arrangement in one o ne plant area of punch p unch press and automatic screw machines .in this kind

 

of departmen departmental taliza izatio tion n people peopless and material materialss are brought brought together together in  particular operation

order order to carry carry out

Departmentalization by product. This involves grouping activities by product line. Tasks can also be grouped according to a specific product or service, thus placing all activities related to the product or the service under  one manager. Each major product area in the corporation is under the authority of a senior  managerr who is specialis manage specialistt in, and is responsible responsible for, everything everything related to the product line. LA Gear is an example of company that uses product departmentalization. Its structure is based on its varied varied produc productt lines lines which which includ includee women’ women’ss footwe footwear, ar, childr children’ en’ss footwe footwear ar and men’s men’s footwear. Typically, companies and other enterprises adopting this form were organized by enterprise functions. With growth of the production managers, sales managers, and engineering executives, the problem encountered of size   The managerial job became complex, and the span of management limited their ability to increase the number of immediate subordinate managers. At this point, reorganization on a  product division became necessary. This structure permits top management to delegate to a division executive authority over the manufacturing ,sales, service and engineering functions that th at rela relate te to a give given n produ product ct or prod product uct line line and ex exact act a consi conside dera rabl blee de degr gree ee of pr prof ofit it responsibility from each of these managers. Advantages:

Product or product line is an important basis for departmentalization because it facilitates the use of specialized specialized capital capital (e.g. A press for molding molding car bodies). It facilitat facilitates es a certain certain type of  coordination, and permits the maximum personal skills and specialized knowledge. For example the sales effectiveness of a particular person may be most effective when confined to lubricants, conveyors, or power plants, each of which is sold by an expert thoroughly familiar with product. If production of an item or closely related item is sufficiently large to employ fully specialized facil fac iliti ities, es, strong strong pressu pressure re may come come for product product departm departmenta entaliz lizati ation on in order order to reali realize ze ec econ onom omic ic ad adva vant ntag ages es in manu manufa fact ctur urin ing, g, as asse semb mbly ly,, or ha hand ndli ling ng.. Al Also so th this is ki kind nd of  departm depa rtment entali alizat zation ion permi permits ts growth growth and divers diversity ity of product productss and servic services. es. Also Also profit profit respons res ponsibi ibilit lity y can be exacted exacted from from the produc productt depart departmen mental talizat ization ion manage managers, rs, where where they they supervise the sales, production, engineering, service and other functions they may be held responsible for certain profit goals. They have responsibility for producing a profit along with othe otherr simi simila larr grou groups ps an and d this this he help lpss the the top top mana manage gers rs to ev eval aluat uatee more more in inte tell llig igent ently ly th thee contribution of each product line to total profit, this provides a measurable training ground for  general managers Disadvantages:

 

The disadvantages includes the necessity of having more persons with managerial skills, the danger dan gerss of increa increased sed costs costs throug through h applica applicati tion on of centra centrall servic servicee and staff staff activi activiti ties, es, and maintaining top management control enterprises that operate product divisions must take care, as the general general motors motors’’ corpor corporati ations ons has to place place enough enough decisio decision n making making and contro controll at the headquarters level that the entire enterprise does not disintegrate.

Recent trends in decentralizatio decentralization n. Two po Two popul pular ar tren trends ds today today in de depa part rtme ment ntal aliz izat atio ion n ar aree th thee in incr crea easi sing ng us usee of cu cust stom omer  er  departmentalization and the use of cross-functional teams. Customer departmentalization helps manager’s better monitor customers' needs and respond to changes in those needs. For example, L.L. Bean is organized around seven customer customer groups. Many other organiza organizations tions are using this type of structure as well, as it allows them to better understand their customers and to respond faster to their needs. Secondly, managers are using cross-functional teams, which are work teams composed of individuals from various functional specialties. For instance, at Ford's material  planning and logistics division, a cross-functional team with employees from the company's finance, purchasing, engineering, and quality control areas and with representatives from the company's outside logistics suppliers has made several work improvement in accounts

MATRIX ORGANIZATIO ORGANIZATION N This kind This kind of de depar partm tmen enta tali lizat zatio ion n is matr matrix ix or gr grid id or orga gani niza zati tion, on, or pr produ oduct ct or pr proj ojec ectt management. The essence of matrix organization normally is the combining of functional and  product departmentalization in the same organization structure. This form is common in engineering, research and development and also in product marketing organization. E.g. Aerospace, in marketing, in the installation of an electronic data-processing system etc. Need of Matrix Management

In today’s world there is an increasing interest among companies and customers to reach only the end product. As such there is pressure to establish establish responsibili responsibility ty for ensuring such end results. One way to accomplish such could be through traditional product development lines. But pure project organization may not be feasible for a number of reasons. E.g. the inability of  the project to use certain specialized engineering personnel or the project may be of relatively short duration or the professionals may not be ready tolerate frequent organization change. However the reasons for existence of matrix organization in commercial or industrial product management may be somewhat different. d ifferent. Variations in Practice

 

There are many variations of the project or product manager role. One is where the project or   product manager has no authority to tell other department to do anything. Obviously there are numerous drawbacks to this methods but turnover is none the less very high. Another variation is practice is to draw a grid or matrix, showing certain managers in charge of  functi fun ctional onal depart departmen ments ts while while others others in charge charge of produc productt or projec projects. ts. This This grid grid is usuall usually y intended to send a pure case of dual command. The issues are results being difficult to assess  point of authority, buck passing, confusion and disunity of command. Solutions in Engineering, R&D and Product management

The more sophisticated companies in high-technology industries have found no alternative to the  process in which matrix management solves the problem of authority by clarification of the authorities and responsibilities of the functional and the project manager. In product management and marketing other companies have successfully implemented this theory. Problems with Matrix Management:

The following problems are seen with Matrix Management:  

Conflict between functional and project managers over limited resource.

 

Role conflict, role ambiguity and role overload

 

An imbalance of authority and power Sometimes too procedure oriented that lead to administrative cost rising

 

Time consuming

Guidelines for making Matrix Management effective

The following Guidelines need to be followed for making Matrix Management effective: 

Objective definition of project

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Role clarification as well as authorities and responsibilities. Basis of influence to be knowledge rather than rank 

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Balanced powers between all divisions

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Installation of appropriate cost, time and quality control.

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Undertake organization and team development

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Selection of experienced manager for the project

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Reward project managers and team members fairly.

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Strategic Business Unit(SBU) The theory behind this recently devised organizational device is to ensure that each product of   product line of the and hundreds offered the company got the same attention as if it was developed, produced marketed by anby independent company.

 

To be called an SBU it must satisfy certain criteria: a) It must have its own mission distinct from other SBUs.

 b) It must have definable group of competitors. c) It must prepare its own integrative plans. d) It must manage its resources in key areas. e) It must have a proper optimal size . Benefits of using SBUs: The major benefit of using SBU is to make sure that the product would not get lost among other products. In short it attracts the attention of the manager and staff whose  job is to guide and promote a product line. It is thus an organizational technique to preserve the entrepreneurial attention.

Choosing the pattern of Departmenta Departmentalization lization  No one departmentalization technique can be applied to all organizations. Managers must choose this on situational basis.-the jobs to be done, the way they should be done, persons involved etc. The Aim:  Departmentalization is simply of arranging activities to facilitate the accomplishment of objectives. As each process has its own advantages and disadvantages the process of selection involves consideration of relative advantages of the organization structure. Mixing type of Departmentalization

Another point of highlight is mixing types of departmentalization with functional area. The  purpose is to group activities in the manner which will best contribute to achieving enterprise objectives. I case of variety of bases managers should take advantage of different alternatives. However this logic is frequently ignored by those who design organization structures. This can  be so as to make the structure look pretty which is not a good practice. The main motive is to  provide efficient coordination, effective development and smooth functioning of the organization. If one of this is not carried out properly the whole purpose gets defeated.