A Report on Environment in ion Structure and Design by Sec-B(97-101 Roll)

8/14/2019 A Report on Environment in ion Structure and Design by Sec-B(97-101 Roll)

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ORGANIZATIONAL STRUCTURE AND

DESIGN

{AN ATTEMT TO PROVIDE ELABORATION ON THE

DIMENSIONS AND ENVIROMENTS IN ORGANIZATION

STRUCTURE}

Under Guidance of:

Prof. Parameshwar Nayak.

Prepared by: Sandeep Biswas(97)

Mousam Pattnaik(98)

Suman Kumar Jha(99)



Sreeji S Nair(100)

Mausam Choudhury(101)

ACKNOWLEDGEMENT

We would like to thank profusely to our dearest faculty

member, Prof. Parameshwar Nayak for his inputs on this

subject. We would also like to thank our friends and

seniors for their insight towards the subject. And at last but

not the least we would like to offer our gratitude towards

the library for providing me with the useful information

regarding this subject.



Environment in Organisation Structure and Design

Classical theorists of structure and design thought of organisations as well-oiled

machines. They sought to develop universal productive environmentswhich

would provide a comprehensive guide for management practice. An early

contributor was Henri Fayol, whose 14 principles of structure and design were

boiled down by Huczynski and Buchanan into five key points for the sake of

productive environment:

➢ Functional division of work

➢ Hierarchical relationships

➢ Bureaucratic forms of control narrow supervisory span

➢ Closely prescribed roles

A limitation of classical thinking is the emphasis on vertical reporting. A single

chain of command, which is seen as essential by classical thinkers, means that in

principle there is no reporting relationships across the organisation. This limitation

is addressed by a matrix structure, which involves two reporting lines – one to a

functional authority (e.g. marketing and sales) and one to a project authority.

The modern approach breaks with the classical ideal of finding the one best

organisational design. Instead of applying principles consistently, it seeks to adapt

the design to the contingencies of the context. The aim is to develop a good fit

between the design and the demands of the organisation’s external environment.



Two examples of the modern approach are systems thinking and contingency

theory. Whereas classical thinking assumes a closed system where no account is

taken of factors external to the organisation (such as changing consumer tastes,

economic stability) system thinking is open in that it analyses activities in terms of

inputs, processes and outputs and takes accounts of how each part is

interdependent with other parts of the system. Open system thinkers believe that

‘healthy’ organisations are those that adapt to changes in the environment.

Contingency theory is based on open systems thinking and seeks to account for

changing environmental demands and opportunities, such as changes in legislation

and in the costs of resources. There is a strong focus on the interdependencies of

system components. For example, the design of goals and objectives is seen to be

conditional on the opportunities and demands presented by the environment, as

well as their interaction with the technology, structure and human resources of the

organisation.

Both classical and modern approaches to structure and design emphasise the

formal aspects of organisations and largely exclude the informal aspects (such as

gossip and informal networks and alliances). This is a weakness since

organisations depend on both formal and informal practices to perform effectively.

Excessive formalisation often creates rigidities, in which action is dependent on a

procedure or rule that permits it.

Various techniques can be adopted by managers in an attempt to improve the

structure and design of organisations. Two influential techniques are business

process re-engineering (BPR) and total quality management(TQM).



BPR represents a ‘hard’ approach in that it pursues Taylorism’sconcern with

measurement and control. The emphasis is on a radical re-design of structure

through:

➢ Reorienting businesses around processes rather than function

➢ Placing heavy emphasis on entrepreneurialism

➢ Advocating the widespread use of technology.

In BPR, little attention is paid to how the resulting changes are likely to be

received by employees. Critics argue that this explains why BPR has failed todeliver its promised improvements in the majority of cases.

In contrast, TQM represents a ‘soft’ approach because it questions the assumption

that the application of hard methods will mechanistically improve the organisation.

It is much more focused on people and favours a process of incremental change

based on a concern with quality, which has its origins in Japanese management

practice. Compared with BPR, TQM is less likely to encounter strong resistance by

those affected by the change. Three key features of TQM are:

➢ Continuous improvement of internal processes

➢ Creation of an organisational culture with a strong customer orientation

➢ team working

Mainstream approaches to structure and design have made a number of

contributions, including

➢ A recognition of the critical importance of design, because it is assumed

that structure largely determines behaviour in organisations



➢ Open system approaches have focused attention on how the organisation

adapts to its environment

The mainstream approaches have a high level of credibility and legitimacy because

they provide rational approaches and do not challenge the established hierarchies

of power and inequality. In the mainstream, questions such as whether an

approach to structure and design is beneficial or sustainable tends to be dismissed

as an ‘ethical’ or ‘moral’ issue that is beyond the concern of managers.

Mainstream approaches have limitations in that they:➢ Reinforce a technical rationality that is unrealistic and therefore

unachievable

➢ Assume that behaviour is determined by the structure of an organisation,

which ignores the capacities of individuals to transform and/or resist

structures

➢ Assume a consensus which is unrealistic given that different interests and

power relationships exist in organisations.

Critical approaches

The key point of difference between the mainstream and critical approaches is their

assumptions regarding consensus and conflict in organisations and society. As

mentioned previously, mainstream approaches assume that consensus between, for

example, employees and owners of an organisation, is the norm. Conflict is seen

as an aberration that can generally be resolved by improving communication so

that everyone is aware of their shared goalsor by removing ‘troublemakers’.



Advocates of the mainstream point to the lack of overt conflict, such as strikes, to

support their assumptions.

In contrast, critical approaches argue that consensus is often forced, with the

absence of overt conflict more likely to represent the relatively powerless position

of employees in relation to owners, rather than a sign of underlying harmony.

Critical thinkers see the design of an organisation’s structure as being integral to

sustaining this forced consensus. When a structure is represented as being the most

rational and cost-effective solution, any challenge that questions its legitimacy is

likely to be rejected.

Critical approaches seek to show that organisational structure is a condition of, but

also has consequences for, the reproduction of power and inequality. They connect

an analysis of structure to the place of organisations within a capitalist system.

This is an issue that is largely unacknowledged by the mainstream, which takes the

presence and the value of capitalist principles of economic organisation for

granted. This form of critical analysis draws originally from Marx and more

recently from Braverman’s Labor and Monopoly Capital (1974). Braverman

argued that the structure and design of work under Taylorismhas separated thought

from action, in the name of science. Managers do the ‘thinking’, while the role of

workers is reduced to the ‘doing’ which alienates them from their labour and gives

them little control of their work.

Braverman’s ideas were largely accepted by critical organisation theorists he is

criticised for his lack of regard for the subjectivityof labour. By this, it is meant

that Bravermantended to see management as all-powerful and did not give

sufficient recognition to management’s reliance on the cooperation and



collaboration of labour. A more balanced approach is to regard organisation

structure as the result of dialectic of control, involving interdependence between

groups within the organisation. A useful example of the dialectic of control is the

structure of a university lecture (in other words, the relationship between lecturer and students). It might appear that lecturers have all the control since they

determine the content of the course, forms of assessment and so on. However, the

lecturer depends on students to attend class and cooperate during lectures.

Therefore, the existence and reproduction of the structure is as much dependent on

the behaviour of students who may appear powerless as it is upon lecturers. This

example demonstrates an important assumption of much critical work in relation to

power. Power is seen as relationship and depends on those subjected to it

consenting with its demands. The mainstream tends to see power a being held and

used by one group over another.

An influential contribution to critical approaches is Michel Foucault. In particular,

his ideas about the panopticon and disciplinary mechanisms are useful for thinking

about the operation of control in organisations. The key idea is that direct control

is replaced by other forms of surveillance and discipline that operate at a distance.

In an organisational context, this might be the replacement of direct supervision by

performance measures and targets. The significance of these measures depends on

the extent to which employees internalize their direction. The intention of the

panopticon is to produce self-disciplining individuals. Foucault’s analysis is drawn

on to suggest that it is through the institutionalisation of disciplinary power that the

structures of contemporary work organisation are determined and maintained.



In summary, the critical approaches have made important contributions to thinking

on structure and design. These include creating a greater awareness of the

relationship between these aspects and the wider politico-economic context.

Rather than seeing design as a technical process of finding the most rational,efficient solution, critical approaches recognise that it is a historical and political

process that involves struggles between groups that pursue different interests.

As with any approach, the critical approaches have their limitations. They are

accused of paying too much attention to the human dimension and therefore

neglecting broader structures of power such as global capitalism. They are also

accused of being to overly theoretical and highly idealistic. This is largely because

the audience for critical approaches tends to be students and academics, rather than

practising managers.

DIMENSIONS OF ORGANISATION STRUCTURE

Organizing means developing intentionally a structure of roles

for effective performance of the enterprise. For efficient

working of the enterprise, the structure must be clearly

understood and principles must be put into practice. As

Urwick said in his classic book, “Lack of design (in

organisation) is illogical, cruel, wasteful and inefficient.” It is

illogical because good design or planning must come first

whether one speaks of engineering or social practice. It is cruel



because “the main sufferers from a lack of design in

organisations are those individuals who work in that

undertaking.” It is wasteful because “unless jobs are clearly put

together along lines of functional specialisation it is impossible

to train new men or women to succeed to positions as the

incumbents are promoted, resign or retire.” And it is inefficient

because if management is not based on principles, it will be

based on personalities with the resultant rise of company

politics for, “a machine will not run smoothly when

fundamental engineering principles have been ignored in

construction.”

Though the principles of organization have general

application, every organization should identify its own needs

before applying them. The organisation’s structure should be

designed as per its need – say made to order.

The characteristic of an effective organisation is its capability to

meet the different needs and make changes as and when

required. One prime condition in organising is flexibility.

Another point to be kept in mind while organising is

organising around people i.e. the available personnel in the

organisation should not be thrown away and in fact the

structure should be modified to fit the person as per the

individual’s capabilities.

Need For Reorganisation



Keep in view the changes occurring in the environment – both

internal and external – one may need to reorganise. Another

reason could be the proven weakness in the existing enterprise.

Even the personality clashes between the managers also may be

solved by reorganisation.

Making The Organisation Work

The biggest problem in the organisation is the

misunderstanding of the “line” and “staff” functions. One

way of understanding them is that “line” functions are those

that have direct impact on the achievement of the goals in

contrast to the “staff” functions are those that help the line to

perform effectively. This concept is the very source of problem.

As per the above, production, sales and finance are line

functions and purchasing, HR, maintenance, quality control

and security as staff functions.

These variables have been defined differently by various theorists:

Acceptance of 3 components which are complexity,formalization and

decentralization which are core dimensions of organizational structure is quite

widespread today.

Administrative component-

the number of line supervisors,managers and staff personnel relative to the total

number of employees.



Autonomy-

the extent to which top mgmt has to refer certain typical decisions to the higher

level of authority.

Centralisation-

the proportions of jobs whose occupants participate in decision making and the

number of areas in which they participate or concentration of power arrangements

or an index reflecting the locus of decision making with respect to major and

specific policies,the degree of information sharing between levels and the degree

of participation in long range planning.

Complexity-

thenumber of occupational specialities ,the professional activity and the

professional training of employees.

Delegation of authority-

theratio of the number of specific management decisions the chief executive has

delegated to the number to the number he or she has the authority to make.

Differentiation-

the number of specialty functions represented in a firm or the difference in

cognitive and emotional orientation among managers in different departments.

Formalisation-

the extent to which an employees role is defined by formal documentation.

Integration-



the extend to which an employee’s role is defined by formal documentation.

Integration-

the quality of the state of collaboration that exists among departments that are

required to achieve unity of effort or plans or feedback used for co-ordination

between organizational units.

Professionalization-

the degree to which employees use a professional organization as a major

reference,belief in service to the public,belief in self-regulation,dedication to one’s

field, and autonomy.

Span of control-

the number of subordinates that an indivisual manager can and should supervise.

Specialization-

the number of occupational specialities and the length of training required by each

or the degree to which highly specialized requirements are spelled out in formal

job descriptions for various functions.

Standardisation-

the range of variation that is tolerated within the rules defining the job.

Vertical span-

the number of levels in authority hierarchy from the botton to the top.

Complexity-



complexity refers to the degree of differentiation that exists within an

organization.horizontal differentiation considers the degree of horizontal separation

between units.vertical differentiation refers to the depth of the organizational

hierarchy.spatialdifferentiation encompasses the degree to which the location of an

organisation’s facilities and personnel are dispersed geographically.

Formalisation-

formalisation refers to the degree to which jobs within the organization are

standardized.if a job is highly formalized the job incumbent has a minimum

amount of disretion over what is to be done and how he or she should do it.

It is good to keep in mind that these are simply a matter of

relationships. Let us look at the scalar principle in organisation:

The clearer the line of authority from the ultimate management

position in an enterprise to every subordinate position, the

clearer will be the responsibility for decision making and the

more effective will be organisation communication.

It is now clear from the above principle that line relationship is

in which a superior exercises direct control over the subordinate

where as staff relationship is advisory.

Authority and Power

You should clearly understand the difference between authority

and power. Authority is the right to decision making that can

affect others. In an organisation it stems from the position in

the structure. Power is the ability of the person to influence the

other person. A person can get power from different sources.

Legitimate power is derived from the position one holds in the



organisation. One may get power from the knowledge – such as

lawyers, doctors and teachers to name a few. Referent power is

the one acquired due to one’s personality or the influence one

has over the others – like Mahatma Gandhi or say Nelson

Mandela for example. Power also arises out the ability to grant

rewards to other; thus reward power is the power to grant or

withhold something. For example the teachers or professors

have considerable reward power since they can grant or refuse

grades. In contrast, there exist power to punish too. This type

of power is known as coercive power.

Functional Authority

It is a small piece of line authority. It is the

right delegated to an individual or a department to control

specified processes or other matters relating to activities

undertaken by persons in other departments. For example, the

Managing Director has overall authority on the enterprise and is

limited only by the superior authority as the Board of Directors

and Government regulations. The people of personnel,

accounting, purchasing or public relations have no part of this

line authority. Now if the MD delegates to these staff the right

to issue instructions directly, the right is called “functional

authority” This functional authority has to be carefully used. A

purchasing manager’s functional authority is limited to setting

the procedures for purchasing and does not include telling



departments what they can purchase or when.

The importance of staff functions should not be

underestimated. In the present environment, the line managers

cannot do without specialists’ knowledge. However the

advisory departments only forwards a plan and it is for the

others to take the decision and execute it – an ideal situation for

shifting blame for failures. Great care should be taken to avoid

such mishaps. Good managers should posses the analytical

power and identify the weaknesses and correct them at the

acceptance stage itself.

Too much of staff interference will complicate line control.

Although some multiple commands may be unavoidable due

to functional authority, managers should remain aware of these

keep it well under control.

Decentralisation

As we saw earlier, one gets authority in an organisation due to

the position in the structure and authority is the right to

decision making. Decentralisation is the process of assigning

the decision making authority in an enterprise. There could not

be absolute centralization or decentralization. In both the cases

it means there are no managers and so no organisational

structure. But this is not the case always. Hence some

decentralization exists in all business houses. But, how much

should be delegated? Without delegation even the best of



managers cannot improve the organisation’s performance

unless he can use his discretion or exploit the knowledge he

has. Studies have shown that the managers and the

organisations fail mainly due to poor delegation of authority.

The Art of Delegation

As stated above failures occur mainly due to poor delegation

and it is not due to managers are not aware about delegation

but because they are not willing to apply them. This is largely

due to personal attitudes. Therefore the following points

would help in effective delegation:

1. Nominate a person and delegate in line with the results

expected – i.e. assign enough authority to do the job

effectively and achieve the stated objective.

2. Maintain proper control and good communication. By

control, we do not mean interfering in the actions of the

subordinate but to observe and take corrective actions on

deviations, if any, from the plans.

Advantages and Limitations of Decentralisation

Advantages of Decentralisation

1. Relives top management of some burden of decision



making and forces upper-level managers to let go.

2. Encourages decision making and assumption of authority

and responsibility.

3. Gives managers more freedom and independence in decision

making.

4. Promotes establishment and use of broad controls which

may increase motivation.

5. Makes comparison of performance of different

organisational units possible.

6. Facilitates setting up of profit centers.

7. Facilitates product diversification.

8. Promotes development of general managers.

9. Aids in adaptation to fast-changing environment.

Limitations of Decentralisation

1. Makes it more difficult to have a uniform policy.

2. Increases complexity of coordination of decentralized

organisational units.

3. May result in loss of some control by upper-level managers.

4. May be limited by inadequate control techniques.

5. May be constrained by inadequate planning and control

systems.

6. Can be limited by the availability of qualified managers.

7. Involves considerable expenses for training managers.

8. May be limited by external forces (national labour unions,



governmental controls, tax policies).

Relation between centralization,complexity and formalization

Centralization and complexity.The evidence strongly supports an inverse relation

between centralization and complexity.decentralisation is associated with high

complexity.

Centralization and formalization.The centralization formalization relationship is as

ambiguous as the centralisationcomplexity relationship is clear.

There is a strong negative relation between the centralization and

formalization.organisations were both highly formalized and decentralized.

REFERENCES

1. www.ifm.eng.cam.ac.uk/mcn/pdf_files/part5_5.pdf

2. www.mang.canterbury.ac.nz/courseinfo/mgmt/mgmt206SU/MGMT206SU

SUp_ch15.pdf

3. www.personal.buseco.monash.edu.au/~moconnor/MGG9370/topics/topic6

/topic6.pdf



4. business.clayton.edu/ljourdan/mgmt3101ic/robbin10.txt

5. www.ondernemerschap.nl/pdf-ez/N200214.pdf

6. www.sdc-

consulting.com/website/public/papers/Organisation%20and%20People%2

0Capability%20(Revised%

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A Report on Environment in ion Structure and Design by Sec-B(97-101 Roll)