Lecture note-12-organizational-structure-and-design

1. ORGANIZATIONAL STRUCTURE and DESIGN WHAT

IS AN ORGANIZATION'S STRUCTURE?

An organizational structure is the formal framework by which job tasks are divided, grouped, and
coordinated. The challenge for managers is to design an organizational structure that allows
employees to effectively and efficiently do their work.

ORGANIZATIONAL DESIGN
Developing or changing an organizational structure is called engaging in organizational design. This
process involves decisions about six key elements.

• Work Specialization
• Departmentalization
• Chain of Command
• Span of Control
• Centralization/Decentralization
• Formalization

Work Specialization
Work specialization to describe the degree to which tasks in an organization are divided into
separate jobs. An entire job is not done by one individual but instead is broken down into steps,
and each step is completed by a different person. Individual employees specialize in doing part of
an activity rather than the entire activity.

Departmentalization
Departmentalization is the process of grouping activities into departments. Every Organization
has its own way of classifying and grouping work activities. There are five common types of
departmentalization.

• Functional departmentalization – In functional departmentalization ,departments are

separated on basis of tasks they perform. Employees are placed in these departments with shared
skills and knowledge into for example, human resources, IT, accounting, manufacturing,
marketing, and engineering. Functional departmentalization can be used in all types of
organizations.

• Product departmentalization – Departments are separated based on a type of product

produced by the company. Here, every individual department is responsible for producing and
selling the type of products assigned to them. For example, a car manufacturing company, may
have departments based on motorcycles, cars and trucks.
 • Customer departmentalization - 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. It is thought that customers in each department have a common set of problems and
needs that can best be met by specialists. For example: The sales activities in an office supply
firm can be broken down into three departments that are retail customers, wholesale customers
and government customers.

• Geographic departmentalization - Grouping activities on the basis of territory. If an

organization's customers are geographically spread, it can group jobs based on geography. For
example, the organization structure of Coca-Cola is based on two broad geographic areas – the
North American sector and the international sector, which includes rest of the world.

• Process departmentalization – In process departmentalization, departments are separated

based on their role in a production process. Because each process requires different skills, process
departmentalization allows similar activities to be categorized. For example, in a textile mill there is a
spinning department, weaving department, color dyeing department and printing department.

Chain of Command
The chain of command is the continuous line of authority that extends from upper organizational
levels to the lowest levels and clarifies, who reports to whom. It can also be defined as: A system
in which authority passes down from the top through a series of executive positions or ranks in
which each is accountable to the direct superior. It helps employees answer questions such as
"Who do I go to if I have a problem?" or "To whom am I responsible?"

Authority :
Authority means the rights contained in a manager’s position to tell people what to do and to
expect them to do.

Responsibility:
The obligation or expectation to perform. Unity of Command : This concept means to report to
only one manager. It is important to have unity of command to avoid conflicting demands from
multiple bosses.

Span of Control
Span of control means the number of subordinates a manager has control over Span of control
also tells the number of levels and managers of an organization. If the span is wider and larger,
then organization is considered as more efficient because less managers control more number of
employees.

Centralization and Decentralization Centralization

The degree to which decision-making is concentrated at a single point in the organizations.
Organizations in which top managers make all the decisions and lower-level employees simply
carry out those orders. Decentralization Organizations in which decision-making is pushed down
to the managers who are closest to the activities. It is considered that decentralization provides
opportunity for employee empowerment.

Formalization
 The degree to which jobs within the organization are standardized and the extent to which
employee behaviour is guided by rules and procedures. Highly formalized jobs offer little power
over what is to be done. Low formalization means fewer restriction on how employees do their
work.

Job Analysis
Job Analysis can be understood as the process of gathering information related to the specific
job. The information encompasses knowledge, skill, and ability, possessed by the incumbent, to
perform the job effectively. It is helpful in the preparation of job description and job
specification.

• Job description: is a document indicating what a job covers, i.e. tasks, responsibilities,
duties, powers and authorities, attached to a job.
• job specification: is concerned with the listing of the incumbent’s qualification, skills, and
abilities, that are needed to discharge the job efficiently.
Job Design
"Job design" refers to the way that a set of tasks, or an entire job, is organized. Job design helps to
determine:

• What tasks are done.

• How the tasks are done.
• How many tasks are done.
• In what order the tasks are done.

It takes into account all factors which affect the work, and organizes the content and tasks so that the
whole job is less likely to be a risk to the employee. Job design involves administrative areas such as:

• Job rotation: Job rotation moves employees from one task to another. It distributes the group
tasks among a number of employees.
• Job enlargement: Job enlargement changes the jobs to include more and/or different tasks.
• Job enlargement: should add interest and give more authority and power to the work and
employees but may or may not give employees more responsibility.

A well designed job will encourage a variety of 'good' body positions, have reasonable strength
requirements, require a reasonable amount of mental activity, and help foster feelings of
achievement and self-esteem.