Concepts in Organisation Theory

and Design

The course outline suggests that this course is the first exposure to
the study of management for students in the Faculty of Technology.
However, each student would have been exposed to management in
some form or the other before, be it home management, family
management, school, class, clubs etc.
For us to examine CONCEPTS IN ORGANISATION THEORY AND
DESIGN, we must define the terms, MANAGERS AND
ORGANISATIONS, since :Managers work in organisations.
 Managers
Managers get things done through other
people. They make decisions, allocate
resources, and direct the activities of others to
attain goals. Managers also do their work in
organisations. (Robbins 1996)
 Organisations
Organisations are consciously coordinated social units
composed of two or more people, that function on a
relatively continuous basis to achieve a common goal
or set of goals. (Robbins 1996)
The people who oversee the activities of others and
who are responsible for attaining goals in these
organisations are their managers (also called lead
hand, foreman, supervisor etc)
Organisations are social entities that are goal directed
and are designed as deliberately structured and
coordinated activity systems and are linked to the
internal environment.
 Social entities- coming together as people
Goal directed- exists for a purpose
Why organisations- for structural orders, for
getting greater efficiency.
 What is organisational structure?
An organisational structure defines how job
tasks are formally divided grouped, and
coordinated. (Robbins 1996)
Managers need to address six key elements
when they design their organisationss
structure.
The key questions The answer is provided by
1. To what degree are tasks subdivided Work specialization
into separate jobs?
2. On what basis will jobs be grouped Departmentalization
together?
3. To whom do individuals and groups Chain of command
report?

4. How many individuals can a manager Span of control

effectively and ineffectively direct?
5. Where does decision-making Centralization and decentralization
authority lie?
6. To what degree will there be rules and Formalization
regulations to direct employees and
managers.?
 WORK SPECIALIZATION
By the late 1940s most manufacturing jobs in
industrialized countries were being done with
high work specialization.
Henry Ford became rich and famous by
building automobiles in an assembly line.
Work specialization (or division of labour) is
the degree to which tasks in the organization
are subdivided into separate jobs.
 Advantages of work specialization
Employees allowed to specialize thus allowing
efficiency
Specialist/technical (highly skilled) employees only do
tasks accordingly
Training cost reduced
Labour cost reduced (pay based on skill required)
High skilled employees not working below skill level.
Employee skills at performing a task successfully
increased through repetition
Less time is spent in changing tasks
 By the 1960s increased evidence showed some
disadvantages of specialization- boredom, fatigue,
stress, low productivity, poor quality, increased
absenteeism and turnovers.
To counter this, it was discovered that JOB
ENRICHMENT rather than JOB ENLARGEMENT was
best.

JOB ENRICHMENT- is the vertical expansion of jobs.

JOB ENLARGEMENT- is the horizontal expansion of
jobs.
Job enrichment involves but is not limited to job
involvement and job rotation.
Job involvement is the degree to which a
person identifies with his or her job, actively
participates in it, and considers his or her
performance important to self-worth.
Job rotation is the periodic shifting of a worker
from one task to another.
Managers today should not see work
specialization as obsolete nor an unending
source of increased productivity, but rather
recognize the economics it provides in certain
types of jobs and the problems it creates
when its carried too far.
 DEPARTMENTALIZATION

Jobs divided up through work specialization

should then be grouped together so common
tasks can be coordinated. The basis by which
jobs are grouped together is called
DEPARTMENTALIZATION.
 Methods of Departmentalization
FUNCTIONS PERFORMED
Departmentalization by function can be used in all
types of organizations. Only the functions change to
reflect the organizations objectives and activities e.g.
engineering, manufacturing, personnel and purchasing
specialist can be placed into common departments in a
manufacturing plant.
Advantage- obtaining efficiencies and effectiveness by
putting like specialists together
Efficiency- the ratio of effective output to the input
required to achieve it
Effectiveness- achievement of goals
DEPARTMENTALIZATION BY PRODUCT
In very large organizations (manufacturing/service)
departmentalization types of product is common. A
petroleum manufacturing firm may choose to have
fuels, lubricants and waxes, and chemicals under the
authority of vice president who is a specialist in and
responsible for, everything having to do with his or her
product line. Each of these departments would have its
own manufacturing and marketing group.
Advantage- increased accountability for product
performance
DEPARTMENTALIZATION BY GEOGRAPHY
Often times very large global and high mass of
volume product/service organizations choose
to departmentalize by geography or territory.
Advantage- easy access to supply or service
- control of viability
DEPARTMENTALIZATION BY PROCESS
Process departmentalization can be used for
processing customers as well as products. By
product, Reynolds Metals aluminum tubing plant
is organized into five departments : casting;
press; tubing; finishing; and inspect, pack and
ship. By customers we can have validation,
appreciation, and documentation, process-
checking, payment-finance.
Advantage- use of specific skills
DEPARTMENTALIZATION BY CUSTOMER
This category of departmentalization is driven by
the particular type of customer the organization
seeks to reach or the type that seeks the
company products or services e.g. in office
supply- retail, wholesale etc
Advantage- customers have common sets of
problems in the department.
Finally, every large organization may have more
than one or all of the methods of
departmentalization.
 Chain of command
Three decades ago, the chain of command concept was a
basic cornerstone in the design of organizations. Today with
multitasking, more effective communication and flexibility
in authority and responsibility far less importance is placed
in chain of command.
The chain formed by managers from the highest to the lowest
that clarifies who reports to whom.
It answers two questions:
1. Who do I go to if I have a problem? And
2. Whom am I responsible for?
 In discussing chain of command, Authority,
Responsibility and Unity of Command must be
examined.
Authority- refers to the rights inherent in a
managerial position to give orders and expect the
orders to be obeyed. To facilitate coordination,
each managerial position is given a place in the
chain of command and each manager is given a
degree in order to meet his or her responsibility.
The unity of command principles helps preserve
the concept of an unbroken line of authority. It
states that a person should have one and only
one superior to whom he or she is directly
responsible.
If the unity of command is broken, a subordinate
might have to cope with conflicting demands
or priorities from several superiors.
However, times have changed and so has the
basic tenents of organization designs. Today
with the trend towards empowering
employees and advancements in computer
technology, chain of command and its
supporting systems have substantially less
relevance.
 Span of control
The span of control is the number of
subordinates a manager can efficiently and
effectively direct. This issue is important
because, to a large degree, it determines the
number of levels and managers an
organization has. All things being equal, the
wider or larger the span, the more efficient
the organization.
 Wider Span vs Small Span
1. Obviously wider spans are more efficiently in
terms of cost.
2. However at some point wider spans reduce
effectiveness.
3. When the span becomes too large, employee
performance suffers because supervisors no
longer have the time to provide the
necessary leadership and support.
4. By keeping the span of control small (five or
six employees) a manager can maintain close
control.
5. Small spans are expensive because they add
levels of management.
6. Vertical communication in the organization is
made more complex by small span.
7. Additional levels of hierarchy slows down
decision making and tend to isolate upper
management.
8. Small span of control often times encourage
overly tight supervision and discourage
employee autonomy.
The recent trend is towards longer spans of
control accompanied by employee training
which leads to greater competence and less
dependence on supervisors which result in
reduced costs, cut overheads, speed up
decision making, increase flexibility, get closer
to customers, and empower employees.
Centralization and Decentralization
The best possible understanding of the
centralization and decentralization is the
invention of the Regional system in Guyana.
Centralization- is the degree to which decision
making is concentrated to a single point in the
organization.
Decentralization- is where decision discretion is
pushed down to lower-level employees or
groups
 An organization characterized by centralization is
an inherently different structural animal from one
that is decentralized.
Action can be taken more quickly to solve
problems
More people provide input into decisions
Employees are less likely to feel alienated from
those who make the decisions that affect their
work lives.
Consistent with recent management efforts to
make organizations more flexible and
responsive, there has been a marked trend
toward decentralizing decision making.
We used to manage from the top, like an army,
now were trying to create entities that drive
themselves- Renato Riverso former IBM
Europes chairman
 Formalization
Formalization refers to the degree to which jobs within
the organization are standardized.Standardisation is
the condition in which a level of quality or attainment
has been successfully established.
Standardization not only eliminates the possibility of
employees engaging in alternative behaviours, but it
even removes the need for employees to consider
alternatives. If a job is highly formalized, then the job
incumbent has a minimum amount of discretion over
what is to be done, when it is to be done, and how he
or she should do it.
Employees
handle the same input in exactly the same way
produce consistent and uniform output
receive explicit job descriptions
receive lots of organizational rules
receive clearly defined procedures

When formalization is low, job behaviours are relatively non

programmed and employees have a great deal of freedom
to exercise discretion in their work. The degree of
formalization can vary widely between organization and
within organization.
Organization Design- is a process in which managers develop
or change their organizations structure.
Three of the more common designs found in use are: the
simple structure, the bureaucracy and the matrix structure.
Excellent organizations are characterized by five (5) design
attributes:
Simple form and less staff
Empowerment to increase entrepreneurship
Horizontal structure and collaboration
A balance between financial and non financial measures of
performance
The use of electronic technology and e-commerce
Dimensions of organization design

To understand further we need to look at the

dimensions that describe specific
organizational traits. These two dimensions
describe organizations much the same way
that personality and physical traits describe
people.
Structural dimensions- this provides labels to
describe the internal characteristics of an
organization and create a basis for measuring and
comparing organizations.
1. Formalization- reflected by the number of ?
Documentation within the organization e.g. Miss
Kim lessons vs ABC nursery vs UG.
Documentation includes procedure, job
description, regulations, policy manuals-
generally describing behaviour and activities
(see also previous notes).
2. Specialization- (see previous notes)
3. Hierarchy or authority- describes who reports to whom
and the span of control for each manager. The
number of subordinates any manager can efficiently
control depends primarily on the duties and abilities
of the subordinates.
4. Centralization- organizational decisions that might be
centralized or decentralized include purchasing
equipment, establishing goals, choosing suppliers,
setting prices, hiring employees and deciding
marketing territories (see previous notes).
5. Professionalism- is the level of formal
education and training of employees. ? When
employees require long period of training to
hold jobs in organizations.
6. Personnel ratios- refers to the deployment of
people to various functions and departments
e.g. admin to ?, clerical to ?
Contextual dimensions- characterize the whole
organization i.e its goals and strategy etc
which describe the organizational setting that
influences and shapes the structural
dimensions. Contextual dimension represents
both the organization and the environment. It
can be envisioned as a set of overlapping
elements that underline an organizations
structure and work processes and include :
1. Size- which is the organizations magnitude as reflected in the
number of people in the organization. Other measures such as
total sales or total assets also reflects magnitude ??? Give no
indication of human (social system) e.g. an aircraft ? Company.
Size can be measured.
2. Organizational technology- refers to the tools, techniques, and
actions used to transform inputs into outputs. It concerns how the
organization actually produces the products and services it
provides for customers- computer aided, manufacturing,
advanced information systems, internet etc
3. The environment- includes all elements outside the boundary of
the organization. Key elements include the industry ,government,
customers, suppliers and the financial community. Other
organizations are often the environmental element that affects
the organization the most.
4. The organizations goals and strategy define the
purpose and competitive techniques that set it apart
from other organizations. A companys intents are
written down as goals-enduring statement. Goals and
strategies define the scope of operations and the
relationships with employees, customers and
competitors. A strategy is the plan of action that
describes resource allocation and activities for dealing
with the environment and for reaching organizations
goals. The scope of operations is defined by its goals
and strategies which shows the relationship with
employees, customers and competitors.
5. An organizations culture is the underlying set
of key values, beliefs, understanding, and
norms shared by employees. The provide the
glue to hold organizations members together
and may include ethical behaviour,
commitment to employees, efficiency, or
customer service. It is unwritten but can be
observed in its stories, slogans, pride,
ceremonies, dress and office layout.
 To understand and evaluate organizations, one must examine both
structural and contextual dimensions. These dimensions of
organizational design interact with one another and can be adjusted
to accomplish the purpose/importance of organizations (which are)
to :
1. Bring together resources to achieve desired goals and outcomes
(effectiveness)
2. Produce goods and services efficiently
3. Facilitate innovation
4. Use modern manufacturing and computer based technology
5. Adapt to and influence a changing environment
6. Create value for owners, customers and employees
7. Accommodate ongoing challenges of diversity, ethics and the
motivation and coordination of employees.
 The organization

Goals and
Environment Strategy Size

Theee
Structure
1. formalization
2. specialization
Culture Technology
3. hierarchy of
authority
4. centralization
5. professionalism
6. personnel ratios
 Management- Science or Art
A reasonable question is- whether management is a science or an art.
The complexity inherent in the managers job dictates that effective
managers must blend both science and art.
Management as science-
Management problems and issues can be approached in ways that
are rational, logical, objective and systematic
Managers can gather and use data, facts and objective information
Use of quantitative models and decision- making techniques to
arrive at correct decisions
Technical, diagnostic and decision making skills are especially
important when practicing the science of management.
Management as Art
Despite the fact that managers make decisions and
solve problems based on science, they often times use
INTUITION, EXPERIENCE, INSTINCT and personal
insights.
objective facts (scientific) may prove to be wrong.
Use of CONCEPTUAL, COMMUNICATION,
INTERPERSONAL and TIME-MANAGEMENT skills to
decide between multiple course of action that look
equally attractive.
Thus, managers must blend an element of intuition and
personal insight with hard data and objective facts.
What is management?
Management is a set of functions directed at efficient and effective
utilization of resources in the pursuit of organizational goals. (Griffin
2000)
By EFFICIENT, we mean using resources and successfully
implementing them.
Successful organizations are both efficient and effective
Managers face a variety of interesting and challenging situations
The average executive works upwards of sixty hours a week
Managers face increased complexities thanks to globalization,
domestic completion, government regulation, shareholder
pressure, rapid change, unexpected disruptions, and both minor
and major crises
Managers have opportunities to make differences
Kinds of managers
The different kinds of managers in
organizations can be differentiated by level
and by area. Managers can be differentiated
by levels or areas.
Level of Management
There are three (3) distinct levels of management- top, middle and first
line.
Top managers are the relatively small set of senior executives who
manage the overall organization- e.g. titles found in the group
include president, vice president and chief executive officer (CEO).
Top managers:
Create the organizations GOALS, OVERALL STRATEGY and
OPERATING POLICIES
Officially represent the organization to the external environment
e.g. government officials and executives of other organizations
make decisions about activities such as acquiring other companies,
investing in research and development, entering or abandoning
markets, and building new plants and office facilities.
 Middle managers is the relatively large set of
managers responsible for implementing the
policies and plans developed by top managers
and for supervising and coordinating the
activities of first line managers.
Middle management titles include plant manager,
operations manager, and division head.
Middle managers such as plant managers tasks
may include inventory management, quality
control, equipment failures, and minor union
problems.
 First line managers are managers who supervise
and coordinate the activities of operating
employees.
Common titles for first line managers are
coordinator and office manager
Often the first step for employees who enter
management from the ranks of operating
personnel
They oversee the day-to-day operations
They spend a large portion of their time
supervising the work of subordinates
Areas of management
Regardless of their levels, managers may work in various areas
within an organization.
Marketing managers works in areas related to marketing
function by getting consumers and clients to buy the
organizations products of services. Tasks include new product
development, promotion and distribution.
Financial managers deal primarily with an organizations financial
resources, cost management and investments.
Operations managers are concerned with creating and managing
the systems that create an organizations products and services.
Typical responsibilities include production control, inventory
control, quality control, plant layout and site selection.
.
 Human resources managers are responsible for hiring
and developing employees. They are typically involved
in planning, recruiting and selecting employees,
training and development, designing compensation
benefit system, appraisals and discipline.

General managers are not associated with any specialty,

but tend to be generalists. They often serve as
administrative managers and covers all function areas of
management