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Organizational Structure and Design Upul Abeyrathne Dept. of Economics, University of Ruhuna Matara Think About ICBT Campus • It is composed of various groupings and Departments to serve special functions. • There are individuals and groups dedicated to various functions such as teaching, providing financial services etc. • Even within you can distinguish between jobs people perform. • It is however, not a collection of individuals. They work purposefully to achieve goals of ICBT. Organizational Structure • It refers to the formal configuration between individuals and groups with respect to the allocation of tasks, responsibilities and authority within organization. • In the strict sense of the term, one cannot see the structure of an organization. It is an abstract concept. • However, various clusters of functions of which an organization is composed can be represented in the form of diagram known as organization chart. In other words, organization chart can be considered as organization’s internal structure. Organizational Chart • It is a useful tool for avoiding confusion within organization regarding how various task or functions are interrelated. What organizational chart reveals? • There are five basic dimensions of organizational structure. • 1. It provides information about various task performed within an organization and the formal interconnections between them. (It reveals who answer to whom) 2. It provides information about who reports to whom (It is known as the hierarchy of authority) What organizational chart reveals? • 3. Standard organizational charts make clear that the many task to be performed within an organization are divided into specialized jobs. (It is a process known as the division of labour) • 4. Span of Control: The number of subordinates in an organization who are supervised by an individual. What organizational chart reveals? • 5. Line versus staff positions Line positions: Positions in organizations in which people can make decisions related to doing its basic work. Staff Positions: Positions in organizations in which people make recommendations to others but who are not themselves in making decisions concerning the organization’s dayto- day operations. Decentralization • It refers to the extent to which authority and decision making are spread throughout all levels of an organization rather than being reserved exclusively for top management. • It is said that it would improve managerial efficiency and employees’ satisfaction. • Decentralization is not always an ideal step for an organization to take. Departmentalization: Ways of Structuring Organizations • Departmentalization is the process of breaking up organizations into coherent units. There are different ways of departmentalization 1. Functional Organization 2. Product Organization 3. Matrix Organization Functional Organization: Departmentalization by task • Type of departmentalization based on the activities or functions performed (e.g. sales or finance). • They organized individuals according to the functions they performed. • Debarments may be created or deleted as need arises. • It allows individuals to specialize • It allows economies of scale(by allowing employee Limitations • Functional organizational structures promote separate units to develop their own narrow perspectives at the cost of overall organizational goals. • It discourage innovation because they channel individual efforts toward narrow functional areas and do not encourage coordination and cross-fertilization of ideas between areas. • They are slow to responds to opportunities and challenges in and from environment. Product Organization • It is the Departmentalization by type of output. • Organizations do not stand still. They constantly change in scope and size. • This type of departmentalization create self contain divisions, each of which is responsible for everything to do with a certain product. Limitations • Loss of economies of scale stemming from duplication of various departments within operating units. • Problem of coordination Matrix Organization • It is the departmentalization by both Function and product. • Employees in matrix organization have two bosses (They are under dual authority). • In matrix organization there are three major roles Three Major Roles 1.Top Leader: He has authority over both lines (one based on function and the other based on product or goal).His duty is to keep a balance of power between functional and product managers 2. There are matrix bosses. It is because neither functional nor product manager has full control over subordinates. They must work together. 3. There are two boss managers These form of organizations achieve economies of scale. Key advantages • They provide for efficient use of human resources. • It offers mechanism to respond to change quickly. • It enhance communication among managers Disadvantages • Stress for employees because they have to report to two bosses. Organizational Design • It is the coordinating the structural elements of an organization in the most appropriate manner. • Organizational design needs changes • Organizations that are poorly designed and inflexible cannot survive. Classical and Neo-Classical Approaches • Classical theorists have sought to establish the ideal form for all organizations under all conditions- Universal Design. • They believed that effective organizations were ones that had a formal hierarchy, a clear set of rules, specialization of labour, highly routine task and highly impersonal working environment. Classical Theory is disfavoured • 1. It is insensitive to human needs • 2. not suited to changing environment Apparently what is ideal is not realistic. Neo-classical approach • With the inspiration of hawthorne studies, bureaucratic model of organization has given way to a human relation orientation. • The theorist lik Mcgregor, Argyris iand Likert have attempted to improve on Classical Model. • They have argued that not only economic effectiveness but also the employee satisfaction should be goals of an organization. Neo-classical approach • Macgregor opposed the rigid hierarchy imposed by Webber because it is based on negative assumptions about people. Classical Bureaucratic theory assumes that workers would not work unless coerced and lack ambitions. • He argued that the workers seek satisfaction by working responsibly. Contingency Approach to Organization Design • The best design for an organization depends on the nature of environment in which it is operating. External Environment and its Connection with Organization Design • It is widely assumed that most appropriate organizational design depends on external environment. n Mechanistic and Organic Organization Design Mechanistic Change unlikely Many Specialist Rigid Centralized Organic Change likely Many Generalists Flexible Decentralized Mintzberg’s Framework • Operating Core: employees who perform the basic works related to the organization’s product or service • Strategic Apex: Top level executives responsible for running the entire organization • Middle line: Managers who transfer information between strategic apex and the operating core • The techno-structure: Those specialists responsible for standardizing various aspects of organization activities. • Support staff: Individuals who provide indirect support services to the organization.