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Basic Elements of Organizing Organizations are constantly growing in size and in complexity. Well-established ways of getting things done may serve an organization for many years. However, innovative leadership will find new approaches to designing work, linking jobs and coordinating activities to keep up with the changing environments in which they work and the new demands made on organizations by employees, customers, etc. The Elements of Organizing Organizing is deciding how best to group organizational elements (resources). Organizational Structure is a set of six basic building blocks (elements) that managers may use to configure (construct) an organization. Six Basic Building Blocks for Organization Structure 1) Designing jobs 2) Grouping Jobs 3) Establishing reporting relationships between jobs 4) Distributing authority among jobs 5) Coordinating activities among jobs 6) Differentiating among positions 1. Designing Jobs Job design is the determination of an individual’s work-related responsibilities. Job specialization is the degree to which the overall task of the organization is broken down and divided into smaller component parts. Sometimes referred to as the division of labor. [assembly-line tasks, Disney characters drawn by only one animator, etc.) Designing Jobs. . . [continued] Benefits of Job Specialization: a) Workers performing small, simple tasks will become very proficient at each task. b) Transfer time between tasks decreases. [switching from one task to another] c) The more narrowly defined a job is, the easier it is to develop specialized equipment to assist with that job. d) When an employee who performs a highly specialized job is absent or resigns, the manager is able to train someone new at relatively low cost. Designing Jobs. . . [continued] Limitations of Job Specialization: a) Workers who perform highly specialized jobs may become bored and dissatisfied. b) The job may be so specialized that it offers no challenge or stimulation. c) If boredom and monotony set in, absenteeism rises and the quality of work may suffer. d) The anticipated benefits of job specialization do not always occur. Although some degree of specialization is necessary, it should not be carried to extremes because of the possible negative consequences Designing Jobs. . . [continued] Managers have developed five (5) other approaches to job design to achieve a better balance between organizational demands for efficiency and productivity and individual needs for creativity and job control. Designing Jobs. . . [continued] Alternatives to Job Specialization: Job Rotation Job Enlargement Job Enrichment Job Characteristics Approach Work Teams Designing Jobs. . . Job Rotation involves systematically moving employees from one job to another. Different part of the job is done on various days of the weeks. Used primarily as a training practice to improve workers’ skills and flexibility. [continued] Designing Jobs. . . [continued] Job enlargement involves giving the employee more tasks to perform. Designed to allow the worker to perform a variety of tasks to reduce the level of job boredom or dissatisfaction. Disadvantages may include: training costs usually increase; unions have argued that pay should increase as the worker is doing more tasks; and in many cases, the work still remains boring and routine. Designing Jobs. . . [continued] Job enrichment involves increasing both the number of tasks the worker does and the control the worker has over the job. To implement job enrichment, managers remove some controls from the job, delegate more authority to employees and structure the work in complete, natural units. Another part of job enrichment is to continually assign new and challenging tasks to allow the employee an opportunity to grow and advance. Before undertaking job enrichment, work systems should be analyzed and managers should ask for employee preferences. Designing Jobs. . . [continued] Job Characteristic Approach suggests that jobs should be diagnosed and improved along five core dimensions, taking into consideration both the work system and employee preferences. The higher a job rates on these dimensions, the more employees will experience various psychological states. Five core dimensions include: Skill variety Task identify Task significance Autonomy Feedback See Figure 11.1, page 346. Figure 11.1 Job Characteristics Approach Designing Jobs. . . Work Team allows an entire group to design the work system it will use to perform an interrelated set of tasks. The team itself decides how jobs will be allocated and assigns specific tasks to members, monitors and controls its own performance and has autonomy over work scheduling. [continued] 2. Grouping Jobs: Departmentalization Departmentalization is the process of grouping jobs according to some logical arrangement. In smaller organizations, the ownermanager/partner may be able to personally oversee everyone who works there. As an organization grows, new managerial positions are created to supervise work of others grouped according to some plan which leads to the creation of departments. 2. Grouping Jobs: Departmentalization Functional Departmentalization groups jobs involving the same or similar activities. Most common in smaller organizations; has three primary advantages: Each department can be staffed by experts in that functional area. Supervision is also facilitated because an individual manager needs to be familiar with only a relatively narrow set of skills. Coordinating activities inside each department is easier. Disadvantages emerge as an organization grows because it becomes increasingly difficult to monitor accountability and performance. [was product failure due to poor marketing or production deficiencies?] 2. Grouping Jobs: Departmentalization Product Departmentalization groups activities around products or product groups. Has three major advantages: All activities associated with one product or product group can be easily integrated and coordinated. The speed and effectiveness of decision making are enhanced. The performance of individual products or product groups can be assessed more easily and objectively, thereby improving the accountability of departments for the results of their activities. Has two major disadvantages: Managers in each department may focus on their own product or product group to the exclusion of the rest of the organization. Administrative costs may rise because each department must have its own functional specialists for areas such as market research and financial analysis. 2. Grouping Jobs: Departmentalization Customer Departmentalization occurs when the organization structures its activities to respond to and interact with specific customers or customer groups. Major advantage is that the organization is able to use skilled specialists to deal with unique customers or customer groups. [different skill sets required to read a balance sheet and approve a BD500,000 loan to a business vs evaluating an individual’s creditworthiness to receive a BD20,000 loan to buy a car] A disadvantage is that a fairly large administrative staff is required to integrate various departments’ activities to make sure the organization does not overcommit itself in any one area. 2. Grouping Jobs: Departmentalization Location Departmentalization groups jobs on the basis of defined geographic sites or areas. Primary advantage is that it enables the organization to respond easily to unique customer and/or environmental characteristics in the various regions. A disadvantage is that a larger administrative staff may be required if the organization must keep track of units in various locations. 2. Grouping Jobs: Departmentalization Other Forms of may include: Departmentalization Departmentalization by Time: grouping certain activities by time – shift system in which each shift has its own superintendent, who reports to the plant manager, and functional departments. Hospitals and airlines use time as well to departmentalize. Departmentalization by Sequence: university registration by senior, junior, etc; credit checks by employees according to customer name; insurance company claim division by policy number. 2. Grouping Jobs: Departmentalization Other Considerations for Departmentalization: In some large organization, departments may be referred to as Divisions, Units, Sections and Bureaus. Regardless of the label used, they represent groups of jobs that have been tied together according to some unifying principle. Almost all organizations are likely to use multiple bases of departmentalization, depending on level. It is quite common that organizations use a variety of bases of departmentalization for different levels and different sets of activities. See Figure 11.2, page 349. Figure 11.2: Departmentalization 3. Establishing Reporting Relationships Chain of Command is a clear and distinct line of authority among the positions in an organization that has two components: Unity of command – each person within an organization must have a clear reporting relationship to one and only one boss. Scalar principle – there must be a clear and unbroken line of authority that extends from the lowest to the highest position in the organization. Someone in the organization must ultimately be responsible for every decision. [President Harry Truman’s saying that ‘the buck stops here.’] 3. Establishing Reporting Relationships Span of Management, sometimes called the span of control, is the number of people who report to a particular manager. 3. Establishing Reporting Relationships Narrow versus Wide Span Theories: A V Graicunas developed a formula for measuring the possible number of interactions between a manager and subordinates. I = N(2N/2 + N – 1) He stated that managers must deal with three kinds of interactions with and among subordinates: Direct – one-to-one with each subordinate Cross – among the subordinate themselves Group – between groups of subordinates Ralph C Davis described an operational span for lower-level managers [maximum 30] and an executive span [maximum 3-9] for middle and top managers. Lyndall F Urwick and General Ian Hamilton believe executive span should never exceed 6 subordinates. 3. Establishing Reporting Relationships Tall versus Flat Organizations: Flat structures seem to lead to higher levels of employee morale and productivity. A wider span of management in a flat structure may result in a manager’s having more administrative and supervisory responsibilities. If these responsibilities become excessive, the flat organization may suffer. A tall structure is more expensive because of the larger number of managers. Communication in a tall structure seems to suffer due to the increased number of people through whom information must pass. See Figure 11.3, page 354. Figure 11.3 Tall Versus Flat Organizations 3. Establishing Reporting Relationships Determining the Appropriate Span: • The relative importance of each factor varies in different settings. • Managers must determine the importance of each factor or set of factors when deciding the optimal span of management for their unique situation. 4. Distributing Authority Authority is the power that has been legitimized (approved) by the organization. Organizations must determine how authority is to be distributed among positions. An employee must have the power to make some decisions on his/her own, some in consultation with coworkers and must defer some decisions to his/her boss. Two issues that managers must address when distributing authority are delegation and decentralization. 4. Distributing Authority Delegation is the process by which managers assign a portion of their total workload to others. Managers generally delegate to: enable themselves to get more work done. allow employees with more expertise than they have to handle a particular problem. develop subordinates’ managerial skills by participating in decision making and problem solving. allow subordinates to learn more about overall operations. 4. Distributing Authority Steps in the Delegation Process: Manager should assign responsibility or give the subordinate a job to do. Manager must give the subordinate the authority to do the job. Manager must establish the subordinate’s accountability – ‘willingness to accept an obligation to carry out the task assigned’. Steps in the Delegation Process 4. Distributing Authority Problems in Delegation: Some managers may be too disorganized to plan in advance and therefore cannot delegate to others. Some managers are afraid the subordinate may do a better job and pose a threat to their own advancement. Managers may not trust their subordinates to be accountable. Some subordinates may be afraid to fail at a task and be reprimanded as a result. Some subordinates may see no reward for accepting additional responsibility. However, the ultimate responsibility for the outcome of any delegated task still rests with the manager. 4. Distributing Authority Decentralization: The process of systematically delegating power and authority throughout the organization to middle and lower-level managers. 4. Distributing Authority Centralization: The process of systematically retaining power and authority in the hands of higher-level managers. 4. Distributing Authority Which Way to Go? No organization is ever completely decentralized or centralized; some firms tend toward one or the other. Usually, the greater the complexity and uncertainty of the external environment, the greater the tendency to decentralize. An organization’s history will play a role – firms tend to do what they have done in the past. The costlier and riskier the decisions, the more pressure there is to centralize. If lower-level managers are well qualified, there is a tendency to decentralize and vice versa. 5. Coordinating Activities Coordination is the process of linking the activities of the various departments of the organization. Primary reason for coordination is that departments and work groups are interdependent – they depend on each other for information and resources to perform their respective activities. The greater the interdependence between departments, the more coordination the organization requires so departments are able to perform effectively. 5. Coordinating Activities Pooled interdependence exists when units operate with little interaction; their output is simply pooled. Each unit has its own budget, staff, etc., and their profits/losses are added together at the organizational level. They do not interact on a day-to-day basis. [Debenham's, Marks & Spenser, etc.] 5. Coordinating Activities Sequential interdependence occurs when the output of one unit becomes the input for another in sequential fashion. Level of interdependence is generally one way. Nissan has one plant which assembles engines and then ships them to another plant where the cars are completed. 5. Coordinating Activities Reciprocal interdependence occurs activities flow both ways between units. when This form of interdependence is the most complex. Within any hotel, the reservations department, frontdesk check-in and housekeeping are all ‘reciprocally interdependent’. Reservations has to provide front-desk employees with information about how many guests to expect each day, and housekeeping needs to know which rooms need ‘priority cleaning’. If any of the three units does not do its job properly, all will be affected. 5. Coordinating Activities Structural Coordination Techniques These techniques were designed to achieve and maintain coordination among interdependent units. They include: The managerial hierarchy Rules and procedures Liaison roles Task forces Integrating departments 5. Coordinating Activities The Managerial Hierarchy One manager is placed in charge of interdependent departments or units. Wal-Mart’s distribution center places one manager in charge of both receiving and unloading shipments from railroad cards and loading other shipments onto trucks for distribution to retail outlets. Both departments are interdependent because they share the same loading docks. 5. Coordinating Activities Rules and Procedures Routine coordination activities may be handled by rules and standard procedures. However, complex or unusual problems may have to be handled independently. Wal-Mart has a rule that an outgoing truck has priority over an incoming rail shipment. So all forklifts and related equipment are available to loading outgoing trucks first. 5. Coordinating Activities Liaison Roles A manager acts as a common point of contact but has no formal authority over the interdependent groups. He/she simply serves as a facilitator of information flow between the units. He/she maintains familiarity with each unit and can answer questions and otherwise serve to integrate the activities. [engineering groups working on a large project may interact through a liaison] 5. Coordinating Activities Task Forces A task force may be needed when interdependence is complex and several interdependent units are involved. It is created by drawing one representative from each unit. Coordination function is then spread across several individuals, each of whom has special information about one of the units involved. When coordination of project is completed, the task force is dissolved. 5. Coordinating Activities Integrated Departments • Similar to a task force but is more permanent. • Usually has more authority than a task force and may even be given some budgetary control. • Generally has some permanent members as well as members who are assigned temporarily from units that are particularly in need of coordination. • Firms characterized by complex and dynamic environments tend to use integrated departments to maintain internal integration and coordination. 5. Coordinating Activities Electronic Coordination E-mail makes it easier for people to communicate at all levels. Electronic scheduling is used and makes it easier for individuals’ schedules to be coordinated to set meetings and know when individuals are otherwise available. Some organizations require project contractors, subcontractors and suppliers to use a common web-based communication/reporting system to make coordination easier among the units. 6. Differentiating Between Positions Line position is in the direct chain of command that is responsible for achieving an organization’s goals. Staff position is one intended to provide expertise, advice and support for line positions. 6. Differentiating Between Positions Differences between Line and Staff Line managers work toward organizational goals; staff managers advise and assist. Line managers have formal and legitimate authority; staff authority is less concrete and may take a variety of forms: Compulsory authority – line manager must listen to advice of staff manager, but can choose to take it or ignore it. [Finance Manager must listen to advice of auditor, but may take it or leave it] Functional authority – formal or legitimate authority given to staff managers over activities related to their specialties. [HR specialist who is expert in discrimination or Labor Law] 6. Differentiating Between Positions Administrative Intensity Administrative intensity is the degree to which managerial positions are concentrated in staff positions. An organization with ‘high’ administrative intensity is one with many staff positions relative to the number of line positions. Relative ‘low’ administrative intensity reflects more line positions relative to staff positions. Organizations would generally like to devote most of their HR investment to line managers because they contribute directly to the organization’s basic goals. Practice today is leading toward reducing staff positions.