Unit - 3
Organizing and Staffing
The working connections vertical and flat relationship among people and gatherings that exist inside an association influence how its exercises are refined and facilitated. Compelling getting sorted out relies upon the dominance of a few significant ideas: work specialization, levels of leadership, authority, assignment, length of control, and centralization versus decentralization. A large number of these ideas depend on the standards created by Henri Fayol. Representatives inside every division perform just the undertakings identified with their particular capacity.
Organization Structures
The parts that are held together as a single whole on the basis of some relationship stands for structure. In the context of strategic management, the term “structure” signifies a design that helps him to formulate and implement the strategies in an effective way.
Structure is very closely related to strategy and the environment, it is because the structure is a sub-mechanism or frame-work of relations or a sub-system that works under a supra system namely environment.
“Corporate Structure” or an “Organizational Structure” stands for the formal configuration between individuals and the group with regard to the allocation of tasks, responsibilities, and authority well within the organization. The way the tasks and sub- tasks needed to implement a strategy are arranged is known as organizational structure.
The network of horizontal and vertical dimensions designed to accomplish the common objectives is regarded as Organization as a ‘Structure’. It is the mechanism or the frame-work whereby people function and facilities are integrated to achieve preset goals. It is a group of people working together towards attaining the given goals.
Definition of Formal Organization
A structure that comes into existence when two or more people come together for a common purpose, and there is a legal & formal relationship between them. The formation of such an organization is deliberate by the top level management. The organization has its own set of rules, regulations, and policies expressed in writing is known as formal organization.
The basic objective of the establishment of an organization is the attainment of the organization’s goal. For this purpose, work is assigned, and authorities are delegated to each member and the concept of division of labor and specialization of workers are applied and so the work is assigned on the basis of their capabilities. The job of each is fixed, and roles, responsibilities, authority and accountability associated with the job is clearly defined.
In addition to this, there exists a hierarchical structure, which determines a logical authority relationship and follows a chain of command. The communication between two members is only through planned channels.
Types of formal organization structure
- Line Organization
- Line and Staff Organization
- Functional Organization
- Project Management Organization
- Matrix Organization
Definition of Informal Organization
An informal organization is formed within the formal organization; that is a system of interpersonal relationships between individuals working in an enterprise, that forms as a result of people meet, interact and associate with one another. The organization is created by the members spontaneously, i.e., created out of socio-psychological needs and urge of people to talk. The organization is featured by mutual aid, cooperation, and companionship among members.
There are no defined channels of communication, and so members can interact with other members freely is known as informal organization. They work together in their individual capacities and not professional.
There is no defined set of rules and regulations that govern the relationship between members. Instead, it is a set of social norms, connections, and interaction. The organization is personal i.e., no rules and regulations are imposed on them, their opinions, feelings, and views are given respect. However, it is temporary in nature, and it does not last long.
Differences Between Formal and Informal Organization
The difference between formal and informal organization can be drawn clearly on the following grounds:
- Formal Organization is an organisation in which job of each member is clearly defined, whose authority, responsibility and accountability are fixed. Informal Organization is formed within the formal organisation as a network of interpersonal relationship when people interact with each other.
- Formal organisation is created deliberately by top management. Conversely, informal organisation is formed spontaneously by members.
- Formal organisation is aimed at fulfilling organisation’s objectives. As opposed to an informal organisation is created to satisfy their social and psychological needs.
- Formal organisation is permanent in nature; it continues for a long time. On the other hand, informal organisation is temporary in nature.
- The formal organisation follows official communication, i.e., the channels of communication are pre-defined. Unlike informal organisation, the communication flows in any direction.
- In the formal organisation, the rules and regulations are supposed to be followed by every member. In contrast to informal communication, there are norms, values, and beliefs, that work as a control mechanism.
- In the formal organisation, the focus is on the performance of work while in the case of an informal organisation, interpersonal communication is given more emphasis.
- The size of a formal organisation keeps on increasing, whereas the size of the informal organisation is small.
- In a formal organisation, all the members are bound by the hierarchical structure, but all the members of an informal organisation are equal.
Conclusion
An informal organisation is just opposite of a formal organisation. All the members of a formal organisation follow a chain of command, which is not in the case of an informal organization is the principle difference between the formal and informal organization. Moreover, there exists a superior-subordinate relationship (status relationship) in the former, whereas such relationship is absent in the latter because all the members are equal (role relationship).
Key Takeaways:
- Organizing is a process undertaken to accomplish objectives.
- A structure stands for the parts that are held together as a single whole on the basis of some relationship. In the context of strategic management, the term “structure” signifies a design that helps him to formulate and implement the strategies in an effective way.
A modification of line organization and it is more complex than line organization is line and staff organization. According to this administrative organization, specialized and supportive activities are attached to the line of command by appointing staff supervisors and staff specialists who are attached to the line authority. The power of command always remains with the line executives and staff supervisors guide, advice and council the line executives. Personal Secretary to the Managing Director is a staff official.
MANAGING DIRECTOR
↓ ↓ ↓
Production Manager Marketing Manager Finance Manager
↓ ↓ ↓
Plant Supervisor Market Supervisor Chief Assistant
↓ ↓ ↓
Foreman Salesman Accountant
Features of Line and Staff Organization
- There are two types of staff:
- Staff Assistants- P.A. To Managing Director, Secretary to Marketing Manager.
- Staff Supervisor- Operation Control Manager, Quality Controller, PRO
2. Line and Staff Organization is a compromise of line organization. It is more complex than line concern.
3. Division of work and specialization takes place in line and staff organization.
4. The whole organization is divided into different functional areas to which staff specialists are attached.
5. Efficiency can be achieved through the features of specialization.
6. There are two lines of authority which flow at one time in a concern:
- Line Authority
- Staff Authority
7. Power of command remains with the line executive and staff serves only as counselors.
Advantages of Line and Staff Organization
- Relief to line of executives- In a line and staff organization, the advice and counseling which is provided to the line executives divides the work between the two. The line executive can concentrate on the execution of plans and they get relieved of dividing their attention to many areas.
- Expert advice- The line and staff organization facilitate expert advice to the line executive at the time of need. The planning and investigation which is related to different matters can be done by the staff specialist and line officers can concentrate on execution of plans.
- Benefit of Specialization- Line and staff through division of whole concern into two types of authority divides the enterprise into parts and functional areas. This way every officer or official can concentrate in its own area.
- Better co-ordination- Line and staff organization through specialization is able to provide better decision making and concentration remains in few hands. This feature helps in bringing co-ordination in work as every official is concentrating in their own area.
- Benefits of Research and Development- Through the advice of specialized staff, the line executives, the line executives get time to execute plans by taking productive decisions which are helpful for a concern. This gives a wide scope to the line executive to bring innovations and go for research work in those areas. This is possible due to the presence of staff specialists.
- Training- Due to the presence of staff specialists and their expert advice serves as ground for training to line officials. Line executives can give due concentration to their decision making. This in itself is a training ground for them.
- Balanced decisions- The factor of specialization which is achieved by line staff helps in bringing co-ordination. This relationship automatically ends up the line official to take better and balanced decision.
- Unity of action- A result of unified control is Unity of action. Control and its effect take place when co-ordination is present in the concern. In the line and staff authority all the officials have got independence to make decisions. This serves as effective control in the whole enterprise.
Disadvantages of Line and Staff Organization
- Lack of understanding- In a line and staff organization, there are two authorities flowing at one time. This results in the confusion between the two. As a result, the workers are not able to understand as to who is their commanding authority. Hence the problem of understanding can be a hurdle in effective running.
- Lack of sound advice- The line official gets used to the expertise advice of the staff. At times the staff specialist also provides wrong decisions which the line executive have to consider. This can affect the efficient running of the enterprise.
- Line and staff conflicts- Line and staff are two authorities which are flowing at the same time. The factors of designations, status influence sentiments which are related to their relation, can pose a distress on the minds of the employees. This leads to minimizing of co-ordination which hampers a concern’s working.
- Costly- In line and staff concern, the concerns have to maintain the high remuneration of staff specialist. This proves to be costly for a concern with limited finance.
- Assumption of authority- The power of concern is with the line official but the staff dislikes it as they are the one more in mental work.
- Staff steals the show- In a line and staff concern, the higher returns are considered to be a product of staff advice and counseling. The line officials feel dissatisfied and a feeling of distress enters a concern. The satisfaction of line officials is very important for effective results.
A process where the concentration of decision making is in a few hands. All the important decision and actions at the lower level, all subjects and actions at the lower level are subject to the approval of top management is known as Centralization. According to Allen, “Centralization” is the systematic and consistent reservation of authority at central points in the organization. The implication of centralization can be:
- Reservation of decision-making power at top level.
- Reservation of operating authority with the middle level managers.
- Reservation of operation at lower level at the directions of the top level.
Under centralization, the important and key decisions are taken by the top management and the other levels are into implementations as per the directions of top level. For example, in a business concern, the father & son being the owners decide about the important matters and all the rest of functions like product, finance, marketing, personnel, are carried out by the department heads and they have to act as per instruction and orders of the two people. Therefore, in this case, decision making power remain in the hands of father & son.
On the other hand, a systematic delegation of authority at all levels of management and in all of the organization. In a decentralization concern, authority in retained by the top management for taking major decisions and framing policies concerning the whole concern is Decentralization. Rest of the authority may be delegated to the middle level and lower level of management.
The degree of centralization and decentralization will depend upon the amount of authority delegated to the lowest level. According to Allen, “Decentralization refers to the systematic effort to delegate to the lowest level of authority except that which can be controlled and exercised at central points.
Decentralization is not the same as delegation. In fact, decentralization is all extension of delegation. Decentralization pattern is wider is scope and the authorities are diffused to the lowest most level of management.
A complete process and takes place from one person to another is Delegation of authority. While decentralization is complete only when fullest possible delegation has taken place. For example, the general manager of a company is responsible for receiving the leave application for the whole of the concern. The general manager delegates this work to the personnel manager who is now responsible for receiving the leave applicants. In this situation delegation of authority has taken place. On the other hand, on the request of the personnel manager, if the general manager delegates this power to all the departmental heads at all level, in this situation decentralization has taken place.
There is a saying that “Everything that increasing the role of subordinates is decentralization and that decreases the role is centralization”. Decentralization is wider in scope and the subordinate’s responsibility increase in this case. On the other hand, in delegation the managers remain answerable even for the acts of subordinates to their superiors.
CENTRALIZATION:
The concentration of decision-making power at the top level of management refers Centralization of authority. All important decisions are taken at the top level. Everything which goes to reduce the importance of subordinate is called centralization.
‘Centralization is the systematic and consistent reservation of authority at central points within the organization.’ – Louis A. Allen
Advantages of Centralization
Top management may prefer to reserve maximum authority with itself because of the following advantages:
1. It facilitates greater uniformity of action throughout the organization
2. It provides better opportunities for development of personal leadership
3. It facilitates integration of efforts and unites total operations of an enterprise
4. It helps in quick decision making which in turn facilitates effective handling of emergency situations
5. It reduces wastages of efforts by avoiding duplication of work
6. It makes control easier
7. It allows flexibility and rapidity of adjustments to changing conditions
Disadvantages of Centralization:
(a) It increases the burden of the top executives with routine functions and hamper their development
(b) It affects the initiative of the lower level management people
(c) It does not provide scope for employee participation in decision making
(d) There is no scope for specialization because an individual will have to look after many functions at a time.
DECENTRALIZATION:
Decentralization refers to the dispersal of decision making power to the lower level of the organization.
‘Decentralization refers to the systematic effort to delegate to the lowest levels all authority except that which can only be exercised at central points’. – Louis A. Allen
‘When authority is dispersed decentralization is present.’ – George Terry.
In large organizations it is not always possible for all activities to be organized from the centre. Hence, a certain amount of decentralization becomes necessary.
Merits of Decentralization:
1. It is a good philosophy to motivate the mangers so that it results in better job satisfaction.
2. It increases the morale of lower level managers by satisfying their need for participation and independence.
3. It helps to meet the challenges and complexities of big enterprises and provides scope for growth and development.
4. It promotes quick decision making and avoids confusion
5. It provides training for future managers by giving them an opportunity to develop their skills.
6. It facilitates effective communication, because in decentralization set up span is wider with a few levels of organization.
7. It ensures effective control and supervision. As all activities are coordinated at the lower level, any sort of adjustment can be made at lower level itself. Thus, it gives complete freedom of action.
8. It gives a relief to the top management from concentrating on day-to-day affairs and permits them to concentrate on developmental activities.
Demerits of Decentralization:
a. It is costly because it requires competent people to be employed to accept authority. The success of a unit depends on the ability and capability of the head.
b. It may lead to inconsistencies, when every department or division does not adopt procedures uniformly.
c. A problem of among various units or departments is created by decentralization.
d. Differences of opinions of top management and unit head often lead to conflicts.
e. Among the department’s hostility may be developed due to severe competition. This will hamper the sharing of knowledge and resources.
f. Economies of scale may not be realized as each unit becomes small and independent.
By and large, decentralization is suitable for large scale organizations operating in different geographical areas or dealing with multiple products.
Key Takeaways:
- Centralization is said to be a process where the concentration of decision making is in a few hands.
- Decentralization refers to the systematic effort to delegate to the lowest levels all authority except that which can only be exercised at central points.
Creating a great business of any kind is a daunting task, one that can be fraught with challenges and problems with organization. The five most common problems we have experienced in our work with client organizations over the past 35 years are outlined below.
1. Absence of clear direction.
Lack of direction is one of the most common organizational problems and it stems from two root causes:
The leader or leaders rarely discuss or chart a deliberate direction or strategy for the future, or they fail to communicate a coherent message about the strategy to all members of the organization.
There are many activities to execute and the organization lacks the alignment needed to gain the traction necessary to help the organization transform, adapt, and shape the future—activities that would ensure the organization’s long-term, sustained growth. In short, too many functions and individuals lack an understanding of how they fit or why they matter. As a result, people become complacent, content to just show up, take care of today’s business, and hope that someone is in the wheelhouse steering the ship.
2. Difficulty blending multiple personalities into a cohesive and unified team.
This can be an enormous challenge, regardless of whether the team is part of the executive suite, a special project team in an R&D lab, or an operating team in a production facility. People’s personalities vary widely, and the diversity of backgrounds, opinions, views, and experiences can cause challenges for teams. This creates a unique set of potential issues and opportunities.
If you can get people to come into alignment and support common objectives, a diverse team of leaders can produce amazing results, take on the demands of customers, and meet the threat of competitors. However, if leaders stay in their silos, protect their own “turf,” fail to share information, refuse to collaborate on shared problems, or lack the ability to think with an entrepreneurial mindset, the organization will under-produce.
3. Failure to develop key competencies and behaviors.
In our work with organizations, we commonly encounter a lot of hardworking people who have good intentions. However, despite their experience in the industry, their technical talent, and the subject-matter expertise that many leaders bring to the table, creating a high-performance organization is often still out of reach.
Nearly everyone we meet, including senior leaders, has at least one (and in some cases, multiple) leadership weaknesses. Sometimes leaders are aware of their behavioral shortcomings; in other cases, they are blind to their leadership deficits. People inside the organization are often afraid to candidly say what they think, and helping enormously successful leaders with their Achilles heels can be tricky.
Leading and managing an organization is a complex task that requires a unique mix of skills. Leaders have to utilize their natural strengths, but they also have to search relentlessly for ways to close their own performance gaps and improve their behavior.
Without continuous improvement, an organization’s capabilities will be severely limited. In short, if leaders don’t constantly raise their game, they will suck all the energy and employee engagement out of an organization. Leaders need to be constantly aware of and working on their personal opportunities for improvement.
4. Poor communication and feedback.
There seem to be two extremes in this area: Either people do everything in their power to avoid confronting others and holding them accountable or they relish any opportunity to chew people out, belittle them, and crush their spirits.
(“absence of clear direction”), this is the most frequent lament we encounter. In fact, this issue is so predictable, common, and destructive that we prepare material on this topic prior to any work we do with individual leaders or leadership teams.
Many teams try to muddle through this somehow, enduring the bully or trying to guess what others want and need from them.
People often tell us that they fear reprisal or retaliation if they open up—but the reality is that leaders can’t execute on their strategies, lower costs, or effectively launch new processes or services when people fail to communicate with constructive candor, so this is an issue that must be overcome.
5. Lack of awareness.
Building a solid organization takes hard work and a keen awareness of the culture and environment that exists in a business. Most executives are very busy people; a lot of things vie for their attention. Market conditions can change fast in a VUCA (velocity, uncertainty, complexity, and ambiguity) world and demand huge portions of a leader’s time. We affectionately call this the “task magnet.”
Unfortunately, while they’re busy focusing on their many necessary operational distractions, many managers take their eye off the teamwork ball. This means that communication suffers and leaders get preoccupied and fail to recognize people, celebrate progress, build the talent pipeline, or invest time reviewing processes, practices, and better ways of working across functions. People then become disengaged, feel marginalized, and lose focus and commitment.
Managers to break down complex tasks into smaller more specific tasks that the workers or employees can complete is referred as Work specialization. Every worker is trained specifically on how to perform a small, particular task in the best way. Gradually, that worker becomes extremely effective and proficient at doing that task. Thus, every worker in the company becomes an expert to some extent.
Work specialization is especially useful in manufacturing. Suppose an assembly process where every worker performs a repetitive task in the process of product development.
For instance, A assembles the frames, B fixes the sides, C paints the products, D assures that the products are complete, and E prepares the products for shipment. The whole development process is quite complex and is combined with different specialized steps. But this process becomes less complex when all the steps are divided among different employees. The products are completed and ready for sale after every employee finishes her/his respective task in the process of product development. If only one employee or worker were responsible for this whole process of product development, the outcomes would be much time consuming and less efficient.
An organizational structure that documents how each member of a company reports to one another is known as chain of command. At the top of the chart would be the founder, owner or CEO, and the people who report to them would appear directly below. This pattern continues until every person or level of employment at the organization is accounted for. This hierarchy changes over time as employees join and leave.
A chain of command exists to distribute power and responsibilities, keep employees aware of company news and create a system for sharing knowledge. It also ensures each employee is responsible for their own work but also has a more senior leader to offer support, encouragement and motivation.
Traditional chain of command structure
A very traditional way of structuring a company's authority levels is traditional chain of command. It's common to see the same chain of command structure at various organizations, from customer-based businesses to government entities.
A business owner or CEO holds the position at the top of a chain of command because they hold the top position at the company. The next level down usually includes senior executives or individuals who are in vice president roles over a part of the organization. These individuals report directly to the owner or CEO.
Under the upper management level, you may find individual managers or supervisors who are responsible for an entire department or group of employees. These employees would appear under the middle-management level and at the bottom of the chain of command to represent that their authority figure is their direct supervisor. It's also common to find several ways to break down the hierarchy even further, depending on how large a company is, how many departments it has and more. There may be more management levels or fewer, depending on business needs.
The important thing to remember is that the further at the bottom of the hierarchy your position is, the less authority you may have. Those at the top of the hierarchy possess more control over organizational developments and are in the position to make important decisions. They also carry more accountability and responsibility for the company's success and all the individuals who fall under them in the chain of command.
While there is a traditional structure to a chain of command, you may find the language used in a company's hierarchy to differ from one business to another. Some companies use traditional terms like "superior" and "subordinate" to describe members of a company's hierarchy, while others use "team members," "employees" or actual job titles.
Advantages and disadvantages to a chain of command
As with most things at a company, there are certain advantages and disadvantages to having a chain in command in place. Consider these pros and cons when deciding on building a chain of command or following your current one:
Advantages of chain of command
- Increased efficiency
When an employee has just one person to report to, they will likely work together closely, resulting in faster communication and the ability to solve problems quickly. For instance, imagine a team member who is working on solving a customer issue. Their direct supervisor probably has a better understanding of their department's operations and how best to solve the issue. Rather than an employee going to the next higher manager, their supervisor can provide them with valuable guidance quickly. The supervisor can escalate the problem to upper management if they need to.
- Clear direction
When there isn't a chain of command in place, an employee may receive conflicting directions and instructions from various members of management is clear direction. A chain of command helps eliminate confusion or having to decide which manager to listen to when proceeding on a task or project.
- Stability
It is natural for employees to have questions throughout the day or need some guidance on their work. It is also important that they have work goals and someone who is there to support them. Having a chain of command provides stability so they can experience these things. An employee will know exactly who they should approach for feedback or help, and therefore, feel more in control of their role and more stable in the workplace. With a chain of command, an employee also comes to understand what their manager's expectations are and which situations require a manager to get involved.
- Accountability
With a chain of command in place, supervisors and managers have a close working relationship with their direct reports and are more aware of their responsibilities and what projects they are working on at any given time refer as Accountability. This can lead to more accountability and increased productivity, as employees have someone guiding them to success.
- Structured responsibility
Each employee that appears in a chain of command has their own set of responsibilities is called Structured responsibility. With a chain of command in place, everyone is aware of what their job entails and what they have to do to meet goals and help the company succeed.
- Outside understanding
Outside understanding means certain titles carry a certain weight with individuals outside of the organization. For example, an upset customer may want to speak with a senior manager because they understand that this person has more ability to solve their problems.
Disadvantages of Chain of command
- Less collaboration
An organization with a chain of command can have less collaboration in the workplace because those at the top of the hierarchy set the rules and standards and they expect everyone else to comply. While middle managers and employees may have some say in decisions or have some autonomy in their work, it's the authority figures who approve everything and choose how the company operates. Also, if the chain of command is respected, an employee may never have the chance to get to know those above their direct superior.
- Slow communication
If a question, concern or idea has to go up several steps of the chain of command so that upper management can address or approve it, it can take some time, it means slow communication. This can affect how quickly employees can do things like complete their project or resolve a customer issue.
- Decreased employee empowerment
Without a chain of command, it's likely that an organization values employee empowerment and giving its staff the ability to make decisions related to their work or a particular situation. A chain of command can decrease this employee authority.
- More competition
With a chain of command, decision-making managers could feel in competition with their fellow managers because they may feel protective over their employees and want to exert control over their team. This could lead to a culture of distrust among peer managers.
What is a flat chain of command?
When a manager has a lot of control within an organization means flat chain of command. They may have a lot of individuals and teams reporting to them, and so the chain of command of that organization looks more flat or horizontal. Usually, with these types of hierarchies, some fewer middle managers and employees hold a lot of power and control themselves, particularly over their own work and environments.
You can find a flat chain of command in any kind or size of organization, but it's common for smaller businesses to have this type of hierarchy because there are fewer employees at the organization. There may be the business owner or founder, followed by a middle manager and then the group of employees.
What is a vertical chain of command?
A vertical chain of command has more steps and levels to its hierarchy than a flat chain of command. Each manager is typically only responsible for managing a few associates, so their level of control is narrower and usually confined to their department.
With a vertical chain of command, you may notice that the company's rules, processes and procedures are more fixed, and they come from the top leaders of the organization who then give other managers the responsibility of disseminating information.
Process
Delegation means manager alone cannot perform all the tasks assigned to him. In order to meet the targets, the manager should delegate authority. Delegation of Authority means division of authority and powers downwards to the subordinate. Delegation is about entrusting someone else to do parts of your job. Delegation of authority can be defined as subdivision and sub-allocation of powers to the subordinates in order to achieve effective results.
Elements of Delegation
- Authority – In the context of business organization, the power and right of a person to use and allocate the resources efficiently is defined as authority, to take decisions and to give orders so as to achieve the organizational objectives. Authority must be well- defined. All people who have the authority should know what is the scope of their authority is and they shouldn’t misutilize it. Authority is the right to give commands, orders and get the things done. The top level management has greatest authority.
Authority always flows from top to bottom. It explains how a superior gets work done from his subordinate by clearly explaining what is expected of him and how he should go about it. Authority should be accompanied with an equal amount of responsibility. Delegating the authority to someone else doesn’t imply escaping from accountability. Accountability still rest with the person having the utmost authority.
2. Responsibility - The duty of the person to complete the task assigned to him is called responsibility. A person who is given the responsibility should ensure that he accomplishes the tasks assigned to him. If the tasks for which he was held responsible are not completed, then he should not give explanations or excuses. Responsibility without adequate authority leads to discontent and dissatisfaction among the person. Responsibility flows from bottom to top. The middle level and lower level management holds more responsibility. The person held responsible for a job is answerable for it. If he performs the tasks assigned as expected, he is bound for praises. While if he doesn’t accomplish tasks assigned as expected, then also he is answerable for that.
3. Accountability - Giving explanations for any variance in the actual performance from the expectations set is explained as accountability. Accountability can not be delegated. For example, if ’A’ is given a task with sufficient authority, and ’A’ delegates this task to B and asks him to ensure that task is done well, responsibility rest with ’B’, but accountability still rest with ’A’. The top level management is most accountable. Being accountable means being innovative as the person will think beyond his scope of job. Accountability, in short, means being answerable for the end result. Accountability can’t be escaped. It arises from responsibility.
For achieving delegation, a manager has to work in a system and has to perform following steps:
- Assignment of tasks and duties
- Granting of authority
- Creating responsibility and accountability
Delegation of authority is the base of superior-subordinate relationship, the following are the steps, a manager has to follow:
- Assignment of Duties - The delegator first tries to define the task and duties to the subordinate. He also has to define the result expected from the subordinates. Clarity of duty as well as result expected has to be the first step in delegation.
2. Granting of authority - Subdivision of authority takes place when a superior divides and shares his authority with the subordinate. It is for this reason, every subordinate should be given enough independence to carry the task given to him by his superiors. The managers at all levels delegate authority and power which is attached to their job positions. The subdivision of powers is very important to get effective results.
3. Creating Responsibility and Accountability - The delegation process does not end once powers are granted to the subordinates. They at the same time have to be obligatory towards the duties assigned to them. Responsibility is said to be the factor or obligation of an individual to carry out his duties in best of his ability as per the directions of superior. Responsibility is very important. Therefore, it is that which gives effectiveness to authority. At the same time, responsibility is absolute and cannot be shifted. Accountability, on the others hand, is the obligation of the individual to carry out his duties as per the standards of performance. Therefore, it is said that authority is delegated, responsibility is created and accountability is imposed. Accountability arises out of responsibility and responsibility arises out of authority. Therefore, it becomes important that with every authority position an equal and opposite responsibility should be attached.
Therefore, every manager, i.e., the delegator has to follow a system to finish up the delegation process. Equally important is the delegatee’s role which means his responsibility and accountability is attached with the authority over to here.
Barriers to delegation
Though delegation enhances efficiency of the organisation by dividing work amongst organisational members (according to their capabilities), it is not free from obstacles.
The various barriers to delegation are divided into three main headings.
These are:
I. Barriers related to superiors or delegator,
II. Barriers related to subordinates or delegate, and
III. Barriers related to organisation.
I. Barriers related to Superiors:
Despite knowing how important it is to delegate, superiors sometimes do not delegate work to subordinates.
This is because of the following reasons:
1. Wanting to do things personally:
Some managers do not delegate because they feel they can do the work better than others. Since ultimate responsibility is that of the delegator, they prefer doing the work themselves rather than getting it done through others. This also helps in maintaining control over the activities assigned to subordinates. The delegator enjoys doing the work and makes his importance felt in the organisation by showing his busyness in the office.
2.Insecurity:
When managers feel that subordinates perform better than them, they avoid delegation is referred as insecurity. The exposure of their inabilities to take good decisions creates a feeling of insecurity and, therefore, they fear to delegate. This happens in organisations where work procedures and methods are not sound. A weak operating system usually stops the managers from revealing their shortcomings to the subordinates.
3. Retention of power:
Some managers like to take responsibility, make their importance felt by everyone in the organisation and want the subordinates to come to them to get their problems solved means retention of power. Their desire to retain power and dominate is a hindrance to the effective delegation process. Such managers are usually autocratic in nature. They abstain from delegation and prefer to direct people personally.
4. Lack of confidence in subordinates:
The reward for risk is return. Unless managers assume the risk of subordinates not performing well, they cannot contribute to the development of skilled managers in future. A manager who does not take risk in subordinates and lacks confidence in them will not be able to delegate effectively. Delegation is based on trust between superior and subordinates. Negative attitude towards subordinates obstructs delegation as superior lacks confidence in the ability of subordinates.
5. Unwillingness to set standards of control:
Having delegated the duties, managers remain accountable for overall performance of the work. They supervise the activities of subordinates to ensure that actual performance is in conformity with planned performance. A manager who fails to establish standards of control will not be able to effectively delegate to subordinates.
6. Personal factors:
Autocratic managers usually do not delegate to keep tight control over the activities of subordinates is personal factors. Democratic leaders prefer to delegate as they believe in participation of employees in the decision-making process.
Managers usually follow past precedents in creating an environment friendly to delegation. If their managers delegate to them, they also trust their subordinates in making delegation effective. If their managers did not trust them in delegating the tasks, they also do not delegate the tasks further.
II. Barriers Related to Subordinates:
Subordinates present the following barriers to effective delegation:
1. Lack of confidence:
Some subordinates do not want to take responsibility for the fear of not being able to perform well is lack of confidence. They lack confidence and do not want to take any risk. They prefer to depend on their bosses to make decisions.
2. Fear of making mistakes:
Some subordinates fear that if they make mistakes in carrying out the delegated responsibilities, their superiors will criticize them for unfavourable outcomes. This fear dissuades them from taking added responsibility.
3. Lack of incentives:
Motivation (through financial and non-financial incentives) makes delegation effective. Subordinates are reluctant to accept delegation in the absence of incentives.
4. Absence of access to resources:
If subordinates do not have access to resources (financial and non-financial) to carry out their work, they will not accept delegation of responsibilities. This happens when there is delegation of responsibility without commensurate authority.
5. Convenience:
Sometimes subordinates prefer the work is done by superiors rather than assuming responsibility for the same, for the sake of convenience. They simply want their bosses to make the decisions.
III. Barriers Related to Organisation:
The barriers related to organisation structure are as follows:
1. Size of the organisation:
A small-sized organisation will not have too many jobs to delegate to subordinates. It is, thus, not responsive to delegation of tasks.
2. No precedent of delegation:
Merely because organisations have not earlier been following the practice of delegation sometimes makes them continue with the practice of not delegating the jobs is no precedent of delegation.
3. Degree of centralisation or decentralisation:
Efficient delegation is affected by the degree to which organisation distributes the decision-making power to various organisational units. A highly centralised organisation is obstructive to the process of effective delegation.
WAYS TO OVERCOME BARRIERS TO DELEGATION:
Barriers to delegation can be overcome through the following measures:
1. Accept the need for delegation:
When superiors are reluctant to delegate because they want to do everything themselves rather than allowing subordinates to do, they should realise the need for delegation. In fact, more the delegation, more successful will be an organisation.
The capacity of managers is multiplied by delegation. What can be delegated must be delegated. Managers should do things which subordinates cannot do. This develops their core competence and also the organization.
2. Develop confidence in subordinates:
Rather than feeling that subordinates are not capable of accepting responsibilities so that delegator does not take the risk of delegation, the delegator should understand that a man learns through mistakes and if he commits mistakes, he shall try to find out solutions to the problem also. If subordinates make mistakes, superiors should guide them rather than not delegate at all.
Trust towards subordinates develops their commitment towards superiors. Committed subordinates develop loyalty, dedication and positive contribution towards organisational growth. Delegation should be a continuous process.
Managers should appreciate the work of subordinates when they perform well. They should delegate them more tasks and express trust and confidence in them. This will boost their morale to perform better in future. Delegation will be effective in the system of rewards, not penalties.
3. Communication:
Where delegation becomes ineffective because subordinates do not have the information for making decisions, an effective system of communication should be developed so that information flows freely from superiors to subordinates means communication. Well informed subordinates are an asset for the organisation. They can contribute to effective organizational decisions.
4. Motivation:
Subordinates should be motivated to accept the responsibilities by providing rewards (financial and non-financial) like recognition, status etc. Assigning the whole job to one person can be motivating as it reflects confidence in the subordinate. It also gives a sense of pride and satisfaction to the subordinate who works to earn the credit for successful completion of that task. Non-commitment towards work has to be converted into commitment through motivation — creating zeal, enthusiasm, ability and willingness to work.
5. Effective system of control:
Since ultimate responsibility for the work assigned is that of the delegator, he must ensure that subordinates perform well by setting achievable standards of performance against which actual performance shall be measured. Delegator should keep check on the activities of delegates rather than not delegate at all.
Though control helps in monitoring the activities of subordinates, it should not be strict in nature. Moderately lenient control system helps to achieve standards by control through exceptions. Major deviations should be spotted by managers and minor deviations should be corrected by the subordinates themselves. Control helps in avoiding misuse of delegated authority.
6. Choose the right person for the right job:
Lack of confidence in subordinates should be overcome by dividing the workload into sub-units and assigning each sub-unit to persons most suitable for performing them. The person selected should be able to perform the task assigned. If required, training facilities can be provided to increase their understanding of the work. Wrong selection of delegates can put the organizational operations to halt.
7. Freedom to subordinates:
When managers accept the need for delegation, they must also give freedom to make decisions with respect to the delegated tasks is freedom to subordinates. Rather than not delegating at all or delegating less responsibility, for the fear of subordinates making mistakes, managers should give them authority to find solutions to their problems and learn not to make mistakes in future.
8. Clarity of tasks:
The responsibilities or the tasks delegated must be clearly defined in terms of results expected out of those tasks is clarity of task. Knowing what is exactly expected of them will enable the subordinates perform the delegated tasks better. Delegation is not done without purpose. It has to be properly planned to the objectives desired to be achieved through delegation. Delegation should be done to achieve specific results.
9. Match job with the abilities of subordinates:
‘Round pegs in the round holes’ makes delegation effective as the right job will be given to the right person. The task assigned should match the ability and the capacity of subordinates.
10. Open communication:
Though delegatees are given the authority to solve problems related to the assigned tasks, yet, they should be allowed to freely discuss the problems with their delegators. Open communication promotes delegation as both delegator and delegatees can trust each other, explain their reservations, develop confidence and security and make the need for delegation felt important for both. Work is delegated and also performed well — to the best of subordinate’s ability.
11. Monitor the critical deviations:
Subordinates may make mistakes, however efficient they are at work. The superiors should overlook minor deviations and monitor only major deviations in the tasks assigned. This promotes a sense of responsibility amongst the employees.
Principles of Effective Delegation
The principles of delegation are as follows: -
- Principle of result excepted- suggests that every manager before delegating the powers to the subordinate should be able to clearly define the goals as well as results expected from them. The goals and targets should be completely and clearly defined and the standards of performance should also be notified clearly. For example, a marketing manager explains the salesmen regarding the units of sale to take place in a particular day, say ten units a day have to be the target sales. While a marketing manger provides these guidelines of sales, mentioning the target sales is very important so that the salesman can perform his duty efficiently with a clear set of mind.
2. Principle of Parity of Authority and Responsibility- According to this principle, the manager should keep a balance between authority and responsibility. Both of them should go hand in hand is Principle of Parity of Authority and Responsibility.
According to this principle, if a subordinate is given a responsibility to perform a task, then at the same time he should be given enough independence and power to carry out that task effectively. This principle also does not provide excessive authority to the subordinate which at times can be misused by him. The authority should be given in such a way which matches the task given to him. Therefore, there should be no degree of disparity between the two.
3. Principle of absolute responsibility- This says that the authority can be delegated but responsibility cannot be delegated by managers to his subordinates which means responsibility is fixed. The manager at every level, no matter what is his authority, is always responsible to his superior for carrying out his task by delegating the powers. It does not mean that he can escape from his responsibility. He will always remain responsible till the completion of task.
Every superior is responsible for the acts of their subordinates and are accountable to their superior therefore the superiors cannot pass the blame to the subordinates even if he has delegated certain powers to subordinates example if the production manager has been given a work and the machine breaks down. If repairmen is not able to get repair work done, production manager will be responsible to CEO if their production is not completed.
4. Principle of Authority level- This principle suggests that a manager should exercise his authority within the jurisdiction/framework given. The manager should be forced to consult their superiors with those matters of which the authority is not given that means before a manager takes any important decision, he should make sure that he has the authority to do that on the other hand, subordinate should also not frequently go with regards to their complaints as well as suggestions to their superior if they are not asked to do. This principle emphasizes on the degree of authority and the level upto which it has to be maintained is Principle of Authority level.
Key Takeaways:
- Delegation of Authority means division of authority and powers downwards to the subordinate. Delegation is about entrusting someone else to do parts of your job.
- Delegation of authority can be defined as subdivision and sub-allocation of powers to the subordinates in order to achieve effective results.
The span of management principle is variously called as- the span of control or the span of supervision. However, the phrase ‘span of management’ is that the widest; including also the notions of span of control and span of supervision.
There is a limit to the number of subordinates; whose work might be effectively managed (controlled or supervised) by a superior implies the span of management principle
The number of subordinates who can be managed efficiently by a superior is the Span of Management refers. Simply, the manager having the group of subordinates who report him directly is called as the span of management.
The Span of Management has two implications:
- Influences the complexities of the individual manager’s job
- Determine the shape or configuration of the Organization
The span of management is related to the horizontal levels of the organization structure. There is a wide and a narrow span of management. With the wider span, there will be less hierarchical levels, and thus, the organizational structure would be flatter. Whereas, with the narrow span, the hierarchical levels increases, hence the organizational structure would be tall.
Both these organizational structures have their advantages and the disadvantages. But however the tall organizational structure imposes more challenges:
- Since the span is narrow, which means less number of subordinates under one superior, requires more managers to be employed in the organization. Thus, it would be very expensive in terms of the salaries to be paid to each senior.
- With more levels in the hierarchy, the communication suffers drastically. It takes a lot of time to reach the appropriate points, and hence the actions get delayed.
- Lack of coordination and control because the operating staff is far away from the top management.
The major advantage of using this structure is that the cross communication gets facilitated, i.e., operative staff communicating with the top management. Also, the chance of promotion increases with the availability of several job positions.
In the case of a flatter organizational structure, where the span is wide leads to a more complex supervisory relationship between the manager and the subordinate. It will be very difficult for a superior to manage a large number of subordinates at a time and also may not listen to all efficiently.
However, the benefit of using the wider span of management is that the number of managers gets reduced in the hierarchy, and thus, the expense in terms of remuneration is saved. Also, the subordinates feel relaxed and develop their independent spirits in a free work environment, where the strict supervision is absent.
Factors influencing Span of Management
The span of management is defined on the basis of a number of relationships that a manager can manage. These are:
Factors
- Capacity of Superior: Here the capacity means the ability of a superior to comprehend the problems quickly and gel up with the staff such that he gets respect from all. Also, the communication skills, decision-making ability, controlling power, leadership skills are important determinants of supervisory capacity. Thus, a superior possessing such capacity can manage more subordinates as compared to an individual who lack these abilities.
2. Capacity of Subordinate: If the subordinate is trained and efficient in discharging his functions without much help from the superior, the organization can have a wide span. This means a superior can manage a large number of subordinates as he will be required just to give the broad guidelines and devote less time on each.
3. Nature of Work: If the subordinates are required to do a routine job, with which they are well versed, then the manager can have a wider span. But, if the work is complex and the manager is required to give directions, then the span has to be narrower. Also, the change in the policies affects the span of management. If the policies change frequently, then the manager needs to devote more time and hence the span would be narrow whereas if the policies remain stable, then a manager can focus on a large number of subordinates. Likewise, policies technology also plays a crucial role in determining the span.
4. Degree of Decentralization: If the manager delegates authority to the subordinates, then he is required to give less attention to them. Thus, higher the degree of decentralization, the wider is the span of management. But in case, subordinates do not have enough authority, then the manager is frequently consulted for the clarifications, and as a result superior spends a lot of time in this.
5. Planning: If the subordinates are well informed about their job roles, then they will do their work without consulting the manager again and again. This is possible only because of the standing plans that they follow in their repetitive decisions. Through a proper plan, the burden of a manager reduces manifold and can have a wider span of management.
6. Staff Assistance: The use of staff assistance can help the manager in reducing his workload by performing certain managerial tasks such as collecting information, processing communications and issuing orders, on his behalf. By doing so, the managers can save their time and the degree of span can be increased
7. Supervision from Others: The classical approach to the span of management, i.e., each person should have a single supervisor is changing these days. Now the subordinates are being supervised by other managers in the organization such as staff personnel. This has helped the manager to have a large number of subordinates under him.
8. Communication Techniques: The mode of communication also determines the span of management. If in the manager is required to do a face to face communication with each subordinate, then more time will be consumed. As a result, the manager cannot have a wider span. But in case, the communication is in writing and is collected through a staff personnel; the manager can save a lot of time and can have many subordinates under him.
The span of management is also called as the span of supervision or span of control, which influences the complexity of the individual manager’s job and determine the shape or configuration of the organization.
Principles of organization, for sake of clarity of discussion and a far better comprehension of those, are classified in the following manner:
(I) Overall Principles:
(i) Principle of unity of objective
(ii)Principle of simplicity
(iii)Principle of flexibility
(II) Structural Principles:
(iv)Principle of division of work
(v)Principle of functional definition
(vi)Principle of optimum departmentation
(vii) Principle of unity of direction
(viii) Span of management principle
(III) Operational Principles:
(ix) Principle of adequate delegation
(x) Scalar chain principle
(xi) Principle of unity of comment
(xii) Authority-level principle
A brief discuss of each of the above-stated principles of organisation under appropriate categories:
(I) Overall Principles:
Under this classification, a number of the very fundamental principles of organization are included i.e., principles which are absolutely essential for an efficient and logical functioning of the organization is overall principles.
A brief explanation of the principles under this category is as follows:
(i) Principle of unity of objective:
Very simply stated, this principle requires that individual and departmental objectives throughout the enterprise must be perfectly harmonized; which all objectives must be mutually supportive and collectively contributing to overall common objectives.
(ii) Principle of simplicity:
The observance of this principle requires that the management must, as far as possible, design a simple organizational structure. a straightforward structure facilitates a far better understanding of superior- subordinate relationships; and provides background for better co-operation among people.
(iii) Principle of flexibility:
While designing the organizational structure, the management must provide for in-built devices within the structure itself; which might facilitate changes within the organizational structure to be effected as and when environmental factors-internal and/or external- so demand.
(II) Structural Principles:
Organization relates to those aspects of the organization, which have an impact on the structuring (or the development) of the organization; its fundamental design and shape is Structural principles.
Some of the important principles, during this context, could be the subsequent ones:
(iv) Principle of division of work:
Since the total work of the enterprise can't be performed by just one person; it's imperative that such work must be suitably divided among variety of persons. In fact, the total managerial work needs to be divided among variety of managers; and the total operational work being divided among variety of operating personnel.
(v) Principles of functional definition:
The above stated principle implies that the role (or job) of each individual and of every department of the enterprise must be suitably defined, in terms of the-work content, the authority and facilities required for job performance and the relationship of the job with those of others, within the enterprise.
(vi) Principle of optimum departmentation:
There are some ways and bases for creating departments within an organization. Consistent with the principle of optimum departmentation, departments in an organization must be so created and maintained-as to facilitate the simplest attainment of the common objectives of the enterprise.
(vii) Principle of unity of direction:
The principle implies that every group of activities having the same objective must have just one overall head and just one overall or master plan is Principle of unity of direction.
As a principle of organization, this concept of unity of direction must be so embedded in designing the organizational structure that for every group of similar activities, there's a provision for only one overall head-having authority over all personnel performing a similar function, anywhere, in the organization.
(viii) Span of management principle:
The span of management principle is variously called as- the span of control or the span of supervision. However, the phrase ‘span of management’ is that the widest; including also the notions of span of control and span of supervision.
The span of management principle implies that there's a limit to the number of subordinates; whose work might be effectively managed (controlled or supervised) by a superior.
(III) Operational Principles:
Operational principles of organization can be suggested to be those which have a bearing on the running or functioning of the organization.
Some important principles, under this category, are as follows:
(ix) Principle of adequate delegation:
By the principle of adequate delegation, we mean that every managerial position be given adequate (or necessary or requisite) authority-to enable the holder of the position i.e., the manager to cope successfully with the wants of his job.
(x) Scalar chain principle:
Scalar chain implies a chain of superiors-ranging from the highest rank to the lowest rank-in a corporation. The scalar chain forms the base of authority-responsibility relationships among managers and subordinates, within the organisation; thus promoting mutual understanding among superiors and subordinates at different levels of the organization.
As a principle of organization, scalar chain principle requires its incorporation into the design of the organisation, for ensuring smooth running of the enterprise life.
(xi) Principle of unity of command:
The above-sated principle implies that an employee must receive orders and instructions, only from one superior, at a time. The observance of this principle is desirable for reasons of removing doubts and confusions from the mind of the employees; and for facilitating exact fixation of responsibility on individuals for the results expected of them is principle of unity of command.
(xii) Authority-level principle:
The authority-level principle implies that managers at particular levels within the management hierarchy must decide only those matters which fall within the purview of the authority vested in their managerial positions.
A natural extension of this principle is that if a manager at any level of the management hierarchy comes across a matter not covered by his authority; the matter must either be referred upwards within the hierarchy or pushed down the hierarchy at the acceptable level for decision.
Koontz and O’Donnell define a department as designating – “a distinct area, division, or branch of an enterprise over which a manager has authority for the performance of specified activities”. Most enterprises are involved in producing a product or a service for the benefit of others. The latter aspect requires marketing or distribution so that the persons for whom the product or service is intended will accept it if it satisfies his needs. These activities require money or sufficient capital or finance.
The grouping of similar activities and employees of organisation into various departments for the purpose of facilitating administration is called departmentation. It implies the division of total work of an organisation into individual functions and sub functions. Departmentation is the process of division of organisation into different parts known as departments.
As per views of Koontz and O’Donnell, “departmentation is a process of dividing the large monolithic functional organisation into smell and flexible administrative units.” The process of departmentation takes place at all levels in the organisation. The chief executive groups activities into major departments such as production, finance, marketing, and personnel.
These departments operate under the control of a manager known as departmental head who report directly to the chief executive. The departmental head has adequate authority over the activities and employees working there. He is ultimately responsible for the smooth functioning of the department.
He further assigns duties to their juniors, for example, the marketing manager may divide his activities on the basis of activities like advertising, marketing research, customer service and so on. At the lower level, there may be sales assistants and sales representatives etc.
Dividing and grouping of activities to be done in an enterprise involves in organization. The identification of activities which are to be done for the achievement of organizational goals is division of work. After identifying various activities, these are grouped together on some logical basis.
Departmentation is the process of grouping various activities into separate units of departments. A department is a distinct section of the business establishment concerned with a particular group of business activities of like nature. The actual number of departments in which a business house can be divided depends upon the size of establishment and its nature.
A big business enterprise will, usually, have more departments as compared to a small one. In the words of Allen, “Departmentation is a means of dividing a large and monolithic functional organisation into smaller, flexible, administrative units.”
A department is a work group combined together for performing certain functions of similar nature. The process of division of the enterprise into different parts is broadly called departmentalization. Departmentation leads to grouping of both functions and personnel who are assigned to carry out allocated functions.
Departmentalization describes the manner in which divided tasks are combined and allocated to work groups. The impact of departmentation is a delineation of executive responsibilities and a grouping of operating activities. Grouping of activities into manageable units is necessary at all levels in the enterprise. Their work must be so coordinated as to ensure contribution to the welfare of the organisation.
The job functions of employees need to be divided among them and combined in a logical way. Workers with related functions usually share a common work area and constitute a work unit. The process of dividing the work of the organisation into various units or departments is departmentation.
An essential step for the efficient functioning of the organization is grouping of activities. It involves the combining of jobs into effective work groups and combining of groups into identifiable units.
Efficiency of work flow depends on the successful integration of various units within the organisation. Division of work and logical combination of tasks should lead to departmentalisation. A department is a work group combined together for performing certain functions of similar nature.
The process of division of the enterprise into different parts is called departmentation. Departmentation leads to grouping of both functions and personnel who are assigned to carryout allocated functions. Grouping of activities into manageable units is necessary at all levels in the enterprise.
Organizational Structure – Top 3 Forms: Functional and Multidivisional, Geographical and Matrix Structure (With Advantages and Disadvantages)
1. Functional and Multidivisional Structure:
A functional structure consists of a CEO who is supported by functional managers belonging to production, marketing, purchase, finance, personnel, R&D, etc. This structure enables the achievement of functional excellence, efficiency and specialisation, but suffers from problems, such as, lack of product focus, long channels of communication, coordination problems, lack of importance given to overall corporate missions and objectives, and excessive involvement of the CEO in integrating decisions and actions across various functions.
As against this, the multidivisional structure (also called M – Form) consists of more than one operating division, each of which is a distinct business area. Here, the CEO delegates responsibilities for formulation and implementation of business-level strategies and managing day-to-day affairs to the respective divisional heads, thereby making the corporate office responsible for the development and implementation of the corporate-level strategy and for exercising strategic and financial controls.
Strategic control, as exercised by the corporate office, is defined as the process of target-setting and monitoring in relation to the key operating areas pertaining to each business division, which are otherwise autonomous. To do an effective job in this regard, the corporate office must have a proper understanding of the environment, strategy and operational issues relating to each distinct business area.
The financial controls, exercised by the corporate office ensure that each division achieves the target profit, cash-flows and ROI. Interdependence between the operating divisions (a normal feature in a company which has grown through a related diversification strategy) makes it difficult to exercise financial control, since attributing financial performance correctly to one or the other divisions may involve subjective discretion. This implies that there is a possibility of dilution of internal control when a firm pursues extensive product diversification using the resources of various divisions.
Of all the options available in the organisational structure, an M-Form is the one most used. Chandler identified this form of structure as an innovative response to problems of coordination and control which are normally faced in a functional structure. Other advantages include ease in evaluating business performance, less complexity in allocating financial resources, improved coordination, and availability of more time to the top management for concentrating on long-term strategic issues.
For diversified businesses (both related and unrelated), the M-Form structure is more useful vis-a-vis the functional structure, which works well when the firm is implementing single or dominant business strategies. Once an M-Form structure is put in place, a firm’s potential to enter a large number of diversified businesses (related/unrelated) increases.
Johnson and Scholes have listed the following advantages and disadvantages of functional and multidivisional structures:
FUNCTIONAL STRUCTURE:
Advantages:
a. The CEO in touch with entire operations,
b. Reduction/Simplification of control mechanisms,
c. Clarity of roles and responsibilities,
d. Specialists at senior and middle management levels, and
e. Efficiency and specialization.
Disadvantages:
i. Senior management overburdened with operational matters,
Ii. Lack of attention to strategic issues,
Iii. Difficulty in coping with diversity,
Iv. Coordination between different departments and functions become difficult, and
v. Inability to adapt to changes.
MULTIDIVISIONAL STRUCTURE:
Advantages:
a. Focus on each business area (product-market),
b. Ease of evaluation of unit performance,
c. Facilitates acquisition/divestment of units,
d. Helps in drawing attention of the senior management to strategic issues, and
e. Facilitates development of general management competencies.
Disadvantages:
i. Possible confusion with regard to the extent of centralisation and decentralization.
Ii. Inter-divisional conflict and resulting sub-optimisation.
Iii. Problems of setting transfer prices for inter-unit trading.
Iv. Duplication of resources.
v. Difficulty in coordination if there are too many divisions.
GEOGRAPHICAL STRUCTURE:
A firm’s overall geographical spread is divided into a certain number of homogeneous regions or territories, each headed by a regional or territorial head responding to the CEO. Each region, which deals with all the products of the company, is made by and large independent with the required resource support and is expected to pursue region specific strategies is geographical structure. Sometimes, a geographical structure is built-in within a functional or M-Form structure. For example, in cases where there are one or two centralised manufacturing facilities, the firm can have a functional structure below the CEO, but within the overall sales function, it can have a geographical structure.
MATRIX STRUCTURE:
A combination of the structural options covered in (1) and (2) above. Such structures are chosen when there is a need for more than one consideration for designing the organisational structure (for example, there is no clear-cut preference for either functional specialisation or product-market focus or geographical thrust) is matrix structure. Normally a matrix structure reflects the need to recognise the simultaneous importance of at least two dimensions, such as, (i) product focus as well as geographical thrust, or (ii) product focus as well as functional specialisation.
While there are certain advantages of a matrix structure, there are also certain disadvantages, as can be seen from the following:
Advantages:
a. Better quality of decision making since multiple perspectives are allowed to be built-in.
b. Face-To-Face contact helps in reducing the impact of bureaucracy.
c. Improved managerial motivation and development.
Disadvantages:
i. Dilution of priority, lack of ownership.
Ii. Confused/unclear job and task responsibilities.
Iii. Lack of focus in cost and profit responsibilities.
Iv. Potential for conflict within the teams.
If managed well, by clearly spelling out which arm of the matrix should lead, and duly supported by the right managerial mind set and competencies (for example, the managers should be capable of collaborating across the matrix and they should be comfortable to work under ambiguity), a matrix structure can deliver the desired results. It can improve the quality of decision making in situations where exclusive emphasis on one dimension (be it product, function or geographical) is likely to undermine the overall interest of the organization.
Combination of Structural Forms:
Very few companies adopt one or the other of the above alternatives in their pure form. Further, no organization comply strictly to one particular type of structure for all times to come.
A host of factors, such as:
(i) The strategy the company wishes to follow,
(ii) Its history, tradition and culture,
(iii) The profile of people and their skill level,
(iv) Managerial competencies and motivation,
(v) Requirements of planning, evaluation and control,
(vi) The need for collaboration/liaison between various functional/product/geographical groups for optimum decision making, etc., determine what kind of structure will be appropriate for the firm.
Experience shows that in most cases, the organisation structure chosen after taking into account the just mentioned factors tends to be a mixed one, reflecting the features of more than one of the three types of structure described before.
References:
- Principles & Practices of Management: L. M. Prasad
- Principles of Management: P. C. Tripathy & P.N. Reddy
