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7/31/2019 ME Unit3 Notes
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7/31/2019 ME Unit3 Notes
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Meaning Of Organisation
Any business enterprise will have specific
goals
To achieve these goals it is essential to identify
and group activities
Organisation is a mechanism or a structure
established with group of people working
together to run the business
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Definition of Organisation
Amitai Emitzoni:
An organisation is a social unit or humangrouping deliberately structured for the purpose
of attaining specific goals Sehein:
An organisation is the rational coordination of theactivities of a no. of people for the achievementof some common explicit purpose or goal,through division of labour and functions andthrough hierarchy of authority & responsibility
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Definition of Organisation
Koontz & O Donnel:
Organisation involves the grouping of activities
necessarily to accomplish goals and plans & the
assignment of the activities to appropriatedepartments & provision for authority,delegation
& co-ordination
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Nature of Organisation
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Nature of Organisation
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Purpose of Organisation
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Types of Organisation
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Types of Organisation
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Types of Organisation
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Types of Organisation
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Principles of Organisation
Objectives:
Objectives of an enterprise should be clearly defined as
it influences the structure of the organisation.
All parts of the organisation should be geared towardsachieving these objectives
Specialisation
Activities of an organisation should be divided
according to functions
Functions should be assigned to people according to
their specialisation
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Principles of Organisation
Span of Control
Span of control i.e. the number of people that can be
supervised by one person should be kept at a minimum
E.g six subordinates for one boss
Exception
Only exceptionally complex problems should be
directed to higher level managers
This will allow higher level managers to focus more on
crucial issues
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Principles of Organisation
Scalar Principle
Also called chain of command
The line of authority from CEO to first line managers
must be clearly defined
Unity of command
Multiple subordination should be avoided
One person should have only one boss
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Principles of Organisation
Delegation
Authority should be delegated to lower levels of
organisation also
Authority delegated should be equal to resonsibility
Inadequate delegation leads to multiplication of staff
Responsibility
Superior is held responsible for subordinates tasks
Authority
Authority helps superior to get tasks done
Authority should be clearly defined
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Principles of Organisation
Efficiency
Organisation structure should facilitate efficient
functioning of the organisation
This will ensure that objectives are attained at lowestpossible cost
Simplicity
Organisational structure should be simple
Levels of organisation should be kept at a minimum
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Principles of Organisation
Flexibility
Organisation should be adaptable to changing
circumstances to maintain competitive advantage
It should permit correction of deficiencies withoutchanging basic design
Balance
A reasonable balance should exist in the following
areas
Size of departments
Various human ,technical and financial factors
Between centralisation and decentralisation
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Departmentation
Departmetation: Horizontal differentiation of
tasks or activities into discrete segments is
called departmentation
It is a very important function of organisation
The aim is to take advantage of division of
labour and specialisation
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Departmentation based on
Function
Each major function of the enterprise is
grouped in to a department
E.g production department, finance
department,vmarketing department
Organisation Structure
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Departmentation based on
Function
Advantages
It is a simple form of organisation suitable for
small organisations
It promotes excellence in performance because
people develop expertise in a narrow range of
skills
Leads to improved planning and control of keyfunctions
Ensures effective use of manpower and other
resources
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Departmentation based on
Function
Disadvantages/Drawbacks
More focus on departmental goals. It fosters sub-
goal loyalties
Manager gains expertise only in his area of
expertise. Not good for developing versatile
managers
Unsuitable for organisations that are Large in size
Complex
Innovative
No clear place to put the blame
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Departmentation based on
Products
Suited for large organisations manufacturing a
variety of products
A semi-autonomous department for each product
Within each department all needed
manufacturing, engg, manpower etc are
assembled
A good approach when rawmateials,manufacturing methods and marketing
methods are markedly different from product to
product. E.g. HLL,J&J
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Departmentation based on
Products
Advantages
Relieves top management from operations
responsibility
Enables comparison of different products and
management can increase investment in
profitable ventures and scale down non-profitable
ones
Promotes development of teamwork
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Departmentation based on
Products
Disadvantages
Duplication of staff and facilities
Extra expenditure in maintaining separate sales
force for each product
Large number of managerial personnel is required
Equipment may not be used fully
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Departmentation based on Customers
Electronics Firm
Military, Industrila and consumers
Automobile
Servicing cars, heavy vehicles & scooters
Educational Institution
Day, evening and correspondence courses
Advantage: Full attention is paid to major
customer groups Disadvantages
Underutilisation of facilities
Duplication of facilities
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Departmentation based on Region/Territory
Used when production or marketing units of an organisation
are geographically dispersed
E.g. Indian Railways
Advantages
Top management training
Motivates regional head to achieve high performance
Enables taking advantage of llocation factors
Disadvantages
Duplication of activities
Competition among themselves ,losing sight interests of
overall oraganisation
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Combined Base Organisation
Some organisations follow different base of
departmentalisation at different levels.
Fig 7.2 from Tripathi
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Matrix Organisation
Also called grid or lattice pattern
Functional and product departmentalisation
exist simultaneously
Functional depts are permanent
Product/project depts are created as need
arises
Like a task force
A temporary team is assembled till the
particular goal is achieved
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Committees
A group of people who have been formally
assigned some task or some problem for their
decision and/or implementation
Committees are set up where new kinds of
work or unfamiliar problems seem to involve
decisions, responsibilities and powers beyond
the capability of a single organisation
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Committees
Proponents of participative management say
that they would like to replace the
conventional hierarchical system with a
system of inter-locking groups.
Fig 7.6 Tripathi
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Committees
Linking Pin function:
Each unit and head and his subordinates would
work as a decision making committee.
Each unit head would be chief for the level belowhim and subordinate for the level above him
This way each unit head acts as a linking pin
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Types of Committees
Advisory Committees and Executive
Committees
Advisory Committees
Committees are vested with staff authority
Only recommendatory role
Cannot enforce implementation
E.g sales committee or finance committee
Executive Committees /Plural Executives
Vested with staff authority
Make decisions as well as execute them
E.g Board of directors
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Types of Committees
Standing committees
To deal with recurrent organisational problems
Members are chosen based on title rather than skill
E.g loan approval committee, admission committee
Ad hoc task forces
For short duration
Members are chosen for their skilll and experience
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Committees
Advantages
Provide a forum for pooling knowledge thus improving
the quality of decision
Provide an opportunity for many people to participatein decision making
An excellent means of transmitting information and
ideas
Committees are impersonal in action and henceprovide unbiased decisions
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Committees Weaknesses
More time consuming
If a wrong decision is made by committee no individual can
be held responsible
Expensive
Trade-offs are made while arriving at decisions so the
decision might not be the best decision
Difficult to maintain secrecy because of the large number of
people involved
If the chairman of committee changes frequently influenceaccumulates in the hands of permanent secretary etc
Committees tend to outlast their purpose
Members tend to focus on departmental interests rather
than organisational interests
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Committees
How to make them effective
Number of members should not be very large
Its authority should be clearly defined
Member should share equal status Members should give precedence to organisational
interests as opposed to departmental interests
The work of the committee should be periodically
reviewed The chairman should plan and conduct the meeting
with firmness and fairness
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Centralization Vs Decentralization of
authority and responsibility
Decentralisation of Authority : The decision of a
company that how much decision making authority
should be centralised in the hands of the chief
executive and how much should be distributedamong managers at lower levels
Centralised setup: Decision making authority is
concentrated in a few hands at the top
Decentralised setup: Decision making authority is
delegated to the levels where the work is performed
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Centralization Vs Decentralization of
authority and responsibility
Criteria to measure extent of decetralisation ErnestDale. Whenever extent of decentralisation is greater Greater number of decisions are made at lower levels
More important decisions are made at lower levels
More is the number of decisions that are made at lowerlevels
Fewer people to be consulted and lesser amount ofchecking is required
Henry Fayol Everything that goes to increase the importance of the
subordinates role is decentralisation and everything thatgoes to reduce it is centralisation
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Centralization Vs Decentralization of
authority and responsibility
Advantages of decentralisation
Reduces the problem of communication and redtape
Permits quicker and better decision making Allows employees to exercise more autonomy
Leads to a competitive climate within theorganisation
Ensures the development of employees
Facilitates diversification of products,activities andmarkets
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Centralization Vs Decentralization of
authority and responsibility
Advantages of centralisation
Coordination of activities of subordinates is better
achieved
There is no duplication of efforts or resources
Decisions take into account the iterest of the
entire organisation
Strong central leadership develops which may berequired in crisis
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How much decentralisation??
Decentralisation should be based on the following
criteria
Size of the organisation
History and age of organisation Philosophy of top management
Abilities of lower-level managers
Strategy and organisations environment
Nature of management function
Available controls
Costliness and significance of decision
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Span of Control
Span of control : The number of subordinates who
report directly to a manager
Why is it important to determin span of control?
It effects efficient utilisation of managers and the effectiveperformance of their subordinates
Too many subordinates?
Too few subordinates
Correlation between span of control and organisationa structure
Tall organisation Flat organisation
Example
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Factors Governing Span of Control
Span of control must be determined by thespecifics of the managers particular situation
Ability of the manager
Ability of employees Type of work
Well defined authority and responsibility
Geographic responsibility
Sophisticated information and control system Level of management
Economic considerations
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MBO
MBO Management by Objectives
MBO begins at the top of the organisation witj
establishment of organisational objectives
Then managers work with their bosses and
establish objectives for their departments.
This procedure is repeated to the lowest level
managers of the organisation
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MBO
A meeting takes place between an individual and hisboss and SMART(specific,measurable,ambitious,result-oriented andtime-bound) objectives are set.
During setting up of objectives following points arecovered
Task to be accomplished by the person
Period of time that will be allowed
The basis on which progress will be judged
Once the time is up they meet again. They review accomplishments and set new goals
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MBE(Management by Exception)
Practice whereby only the information that
indicates a significantdeviation ofactual
results from the budgeted or planned results
is brought to the management'snotice. Itsobjective is to facilitate management's focus
on really important tactical and strategictasks.
In MBE, the decision that cannot be made atone level of management is passed on to the
next higher level.
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