Management Principles and Application Notes
Principles of Management Notes
B.Com Notes (CBCS Pattern/Non-CBCS Pattern)
Unit 3: Organisation and Organising
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In this post I
have given a brief explanation of Organisation and Organising.
These notes are useful B.Com 3rd Semester Students under CBCS
Pattern. Some of the topics are not yet included in these notes which will be
added very soon.
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Table of
Contents |
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1.
Introduction of Organisation and Organising 2.
Nature or Characteristics of Organisation 3.
Principles of Sound Organisation 4.
Importance of Organising 5. Steps
or Process of Organising 6. Span
of Management 7.
Departmentation – Meaning, Bases and Determinants 8. Forms
or Types of Organisation a)
Formal Organisation – Meaning, Advantages and Disadvantages b)
Informal Organisation – Meaning, Advantages and Disadvantages 9. TYPES
OF INTERNAL OR INFORMAL ORGANISATION a) Line, military or scalar organisation. b) Functional Organisation. c) Line and staff organisation. d) Committee form of organisation. 10.
Difference between Various Types of Organisation 11.
Centralisation and Decentralisation – Meaning, Advantages, Disadvantages and
Difference |
Introduction of Organisation and organising
The
term 'Organisation' can be used in different senses. It can be used as a group
of person working together to as a structure of relationships or as a process
of management. When it is used to refer
to a group of person working together, it means a concern, an undertaking or as
enterprise.
When
it is used to refer to a structure of relationships, it means the structural
relationships among the positions and jobs and person (i.e., the framework of
responsibility and authority) through which the enterprise functions, and it is
called organisation structure.
On the other hand, Organising or Organizing in management refers
to the relationship between people, work and resources used to achieve the
common objectives (goals).
Definitions
In
the words of
Allen – “An organisation is the process of identifying and
grouping the work to be performed, defining and delegating responsibility and
authority and establishing relationships for the purpose of enabling people to
work most effectively together in accomplishing objectives.”
Mooney and Reily – “Organisation is the form of every human
association for the attainment of a common purpose.”
Koontz & O’Donnel – Organising involves the establishment of
an intentional structure of roles through determination and enumeration of the
activities required to achieve the goals of an enterprise and each part f it,
the grouping of these activities, the assignment of such groups of activities
to manager, the delegation of authority to carry them out and provision for
co-ordination of authority and informational relationships, horizontally and
vertically in the organisation structure.
Nature or characteristics of organisation
From
the study of the various definitions given by different management experts we
get the following information about the characteristics or nature of
organization:
1) Division
of Labour: Every organisation is characterized by the division of work. The total efforts of the group are divided
into different functions and each function is assigned the function for which
he is observed to be suited best.
2) Co-ordination:
As different persona are assigned different functions and all these functions
aim at achieving organisational goals, hence necessary relationships are
established between them so as to co-ordinate all the activities of all the
people of the organisation.
3) Objectives:
Organisations exist to achieve objectives. Without objectives organisations
cannot exist for a long period.
4) Authority
and Responsibility structure: In an organisation the positions are so ranked
that each of them is subordinate to the one above it and is superior to the one
below it. Each position is delegated
necessary authority and responsibility so as to enable it functions
effectively.
5) Communication:
Every organisation has its own channels or methods of communication. Effective communication is vital for success
of management.
6) Organisation is a Machine of Management: Organisation is considered to be a
machine of management because the efficiency of all the functions depends on an
effective organisation. In the absence of organisation no function can be
performed in a planned manner.
7) Organisation is a Universal Process: Organisation is needed both in
business and non business organisations. Not only this, organisation will be
needed where two or mom than two people work jointly. Therefore, organisation
has the quality of universality.
8) Organisation
is a Dynamic Process: Organisation is related to people and the knowledge and
experience of the people undergo a change. The impact of this change affects
the various functions of the organisations.
********************************Also Read:
Unit 4:********************************Also Read:********************************
Principles of Sound Organisation
There
are many principle of organisation. The main principles are:
1.
Principle
of Objectives: The principle of Objectives stresses the need for setting the
objectives of the enterprise. The setting of the objectives of the enterprise
is necessary, because the formulation of the organisation structure s very much
influence by objectives of the enterprises
2.
Principle
of Unity 'of Objectives: The Principle of unity of objectives implies
that / every part of the organisation and the organisation as a whole should be
geared to the basic objectives of the enterprise, in other words the main
objectives of the enterprise.
3.
Principle
of division of work and specialization: Specialization has become the / order
of the day. So, sound and effective organisation must be built on the principle
of specialization
4.
Principle
of Functional definition: The principle of functional definition
implies that / the functions, duties and responsibilities of the different
departments and position in the organisation their authorities and their
relationships with other departments and position must be clearly defined.
5.
Principle
of balance of various factors: The principle of balance of various
factors suggests that there should be popper balance in the formal structure of
the organisation in regard to various factors; For instance, there should be
proper balance among the; different segments or departments' of the
undertaking. That ism, the work- load should be properly distributed among the
various departments to maintain balance and harmony the working of the
organisation. There should be balance in authority allocation to different
departments.
6.
Principle
of simplicity: The principle of simplicity means that the organisation structure
should be simple with a minimum number of managerial levels. If there are a
large number of managerial levels in the organisation structure, there may
raise the problem of effective co-ordination and communication
7.
Principle
of Span of Control or Span of Management: Span of control or span of management
refers 10 'numbers of subordinates a superior can direct, guide and control
effectively. The span of control should be minimum, because there is a limit to
the number of subordinates that can be effectively supervise by a superior.
8.
The Scalar
Principle, the scalar chain, the chain of the command or line of authority: Scalar
chain is the chain of superiors. the line of command or the line of authority
form the highest rank to the lowest rank in the organisation established for
the purpose of communication in both the directions, it establishes the channel
through" which communications should pass, and also states the superior-
subordinate relationships in the organisation.
9.
Principle
of responsibility: Responsibility is the obligation of
performing the duties assigned. Responsibility is fixed with different
positions in the organisation. Responsibility cannot be shifted to others. The
Principles of responsibility implies that the superior cannot avoid
responsibility by delegating authority to his subordinates. He (i.e., the
superior) must be held responsibi1ity for the acts of his subordinates to whom
he has delegate authority.
10.
Principles
of delegation of authority: With the allocation of duties and
responsibilities, u'1ere must logically go the grant of necessary authority to
the subordinates so as to enable him to perform his duties efficiently. The
Principle of delegation of authority emphasizes that the organisation structure
should provide for the delegation of authority to the subordinates.
11.
Principle
of unity of command: The principle of unity of command suggests
that each subordinate should have only one superior. In other words there
should not be dual subordination. Dual subordination results in undermining of
authority, delay, confusion, disorder and indiscipline of subordinates.
Importance of Organising
Organising is the fundamental activity of management. It is necessary for management to mobilize
men machinery money and materials or resources for achieving organisational
objectives. Organising provides basis
for other functions of management, hence scientifically designed organisation
helps manager to function efficiently and effectively. The importance of organisation may be
explained as follows –
a)
Efficiency
of Management: A Good organisation helps in making optimum use of available
resources for achieving organisational objectives, increasing efficiency of
management.
b)
Facilities
Administration: A properly designed and balanced organisation facilitates both
management and operation of the enterprise.
c)
Facilitates
growth and diversification: On account of sound organisational
structure growth and diversification can be successfully achieved for improving
competitive strength of the organisation.
d)
Facilitates
Technological progress: Sound organisational structure is
useful for coping with technological changes which have become inevitable under
modern conditions.
e)
Encourages
healthy human relations: Scientific and balanced
organisational structure when manned by right type of people tends to motivate
people through job satisfaction that promotes healthy human relations in the
organisation. It helps maintaining
morale at a higher level.
f)
Stimulates
initiative and creativity: Sound organisation stimulates
creative thinking and initiative by providing opportunities to experiment with
new ideas for developing new ways of doing things.
g)
Reduction
in work load of top management: Sound organisation stimulates
creative thinking and initiative by providing opportunities to experiment with
new ideas for developing new ways of doing things.
h)
Smooth
direction: In sound organisation right men are placed at right place hence
direction tends to become smooth and effective.
i)
Easy
communication: Every organisation has its own channels or methods of
communication. Effective communication
helps in effective management..
j)
Integration
of individual efforts to achieve organisational goals: The
functions, duties and responsibilities of the different departments are clearly
defined which helps in achieving organisational goals.
k)
Effective
control over employees: Each subordinate should have only
one superior. There should not be dual subordination. It helps in effective
control over the employees.
Steps or Process of Organising
Organization
is the process of establishing relationship among the members of the
enterprise. The relationships are created in terms of authority and
responsibility. To organize is to harmonize, coordinate or arrange in a logical
and orderly manner. Each member in the organization is assigned a specific
responsibility or duty to perform and is granted the corresponding authority to
perform his duty. The managerial function of organising consists in making a
rational division of work into groups of activities and tying together the
positions representing grouping of activities so as to achieve a rational, well
coordinated and orderly structure for the accomplishment of work. The various
steps involved in this process are:
a)
Determination of Objectives: It is the first step in building up an
organization. Organization is always related to certain objectives. Therefore,
it is essential for the management to identify the objectives before starting
any activity. Organization structure is built on the basis of the objectives of
the enterprise. That means, the structure of the organization can be determined
by the management only after knowing the objectives to be accomplished through
the organization. This step helps the management not only in framing the
organization structure but also in achieving the enterprise objectives with
minimum cost and efforts.
b)
Enumeration of Objectives: If the members of the group are to pool their
efforts effectively, there must be proper division of the major activities. The
first step in organising group effort is the division of the total job into
essential activities. Each job should be properly classified and grouped. This
will enable the people to know what is expected of them as members of the group
and will help in avoiding duplication of efforts. For example, the work of an
industrial concern may be divided into the following major functions –
production, financing, personnel, sales, purchase, etc.
c)
Classification of Activities: The next step will be to classify activities
according to similarities and common purposes and functions and taking the
human and material resources into account. Then, closely related and similar
activities are grouped into divisions and departments and the departmental
activities are further divided into sections.
d)
Assignment of Duties: Here, specific job assignments are made to different
subordinates for ensuring a certainty of work performance. Each individual
should be given a specific job to do according to his ability and made
responsible for that. He should also be given the adequate authority to do the
job assigned to him.
e)
Delegation of Authority: Since so many individuals work in the same
organization, it is the responsibility of management to lay down structure of
relationship in the organization. Authority without responsibility is a
dangerous thing and similarly responsibility without authority is an empty
vessel. Everybody should clearly know to whom he is accountable; corresponding
to the responsibility authority is delegated to the subordinates for enabling
them to show work performance. This will help in the smooth working of the
enterprise by facilitating delegation of responsibility and authority.
SPAN OF MANAGEMENT
In
the words of Spriegal, "Span of control means the number of people
reporting directly to an authority. The principle of span of control implies
that no single executive should have more people looking to him for guidance
and leadership than he can reasonably be expected to serve. The span of
supervision is also known as span of control, span of management, span of
responsibility, span of authority and span of direction.
Factors influencing the span of
Management
There are number of factors that
influence or determine the span of Management in a particular organisation, the
most important of these are as follows:
1.
The
capacity and ability of the executive: The characteristics and abilities
such as leadership, administrative capabilities; ability to communicate, to
judge, to listen, to guide and inspire, physical vigour, etc. differ from
person to person. A person having better abilities can manage effectively a
large number of subordinates as compared to the one who has lesser
capabilities.
2.
Competence
and training of subordinates: Subordinates who are skilled, efficient,
knowledgeable, trained and competent require less supervision, and therefore,
the supervisor may have a wider span in such cases as compared to inexperienced
and untrained subordinates who requires greater supervision.
3.
Nature of
Work: Nature and importance of work to be supervised is another factor
that influences the span of supervision. The work involving routine,
repetitive, unskilled and standardized operations will not call much attention
and time on the part of the supervisor.
4.
Time
available for supervision: The capacity of a person to supervise and
control a large number of persons is also limited on account of time available
at his disposal to supervise them. The span of control would be generally
narrow at the higher level of management because top manager have to spend
their major time on planning, organising, directing and controlling and the
time available at their disposal for supervision will be less.
5.
Degree of
Decentralization and Extent of Delegation: If a manager clearly delegates
authority to undertake a well-defined task, a well trained subordinate can do
it with a minimum of supervisor's time and attention.
6.
Effectiveness
of communication system: Faulty communication puts a heavy burden on
manager's time and reduces the span of control.
7.
Quality of
Planning: Effective planning helps to reduce frequent calls on the superior
for explanation, instructions and guidance and thereby saves in time available
at the disposal of the superior enabling him to have a wider span.
8.
Degree of
Physical Dispersion: If all persons to be supervised are located
at the same place and within the direct supervision of the manager, he can
supervise relatively more people as compared to the one who has to supervise
people located at different places.
9.
Assistance
of Experts: the span of supervision may be wide where the services of experts
are available to the subordinate on various aspects of work. In case such
services are not provided in the organisation, the supervisor has to spend a
lot of time in providing assistance to the workers himself and a such the span
of control would be narrow.
Type of span of supervision: Broadly
speaking there are two types, of span of supervision:
(a)
Wider Span
of Supervision: In this type of span, the supervisor controls and guides the
activities of subordinates directly under his control. Wider span or
supervision is favoured where workers are competent and trained.
(b)
Narrow Span of Supervision: under this type of
supervision, there are many levels and more supervisors are required to perform
the job of guidance and control for different activities. It increases the
efficiency of supervision but the cost of supervision is very high as compared
to wider span of supervision. This type of supervision is favored at higher
levels of management where all the other activities of planning, organising,
directing, and controlling are also to be performed. But more the levels of
supervision, more difficult are the task of coordinating the activities of
various groups of people.
Departmentation - Introduction
The process of dividing activities into units
and subunits is referred to as departmentation. The term departmentation is
used in a generic sense n is not only confined to the creation of such units as
are called departments, but it includes divisions, sections and jobs also.
Dividing up work calls or identification of
total activities and classification of such activities into units and subunits.
There are three bases for primary grouping of activities at the second level of
the organisation just below the top level. Units at the second level are
commonly called departments when business functions are adopted as the pattern
of grouping activities. Such units go by the name of divisions when either
products manufactured or territories are adopted as the means of classifying
activities.
There are, however, two approaches to
departmentation- top down and bottom-up approaches. In the top-down approach,
activities are divided step by step downward form the chief executive's job to
the operating jobs. In the bottom-up approach, the division of activities is
carried on in a reverse order. Starting form operating jobs, there arise
sections form combining some correlated jobs, departments from combining some
sections and finally the chief executive position form putting departments
together. While the top-down approach gives emphasis on co-ordination and
managerial action, the bottom-up approach gives emphasis on co-ordination and
managerial action, the bottom-up approach focuses attention on employee
performance. Although the top-down approach is easy for understanding the
departmentation process, both the approaches are utilized in actual practice
Bases or
Methods of departmentation
Departmentation
provides motivation by developing feeling of autonomy to the extent possible.
There are several bases of departmentation. The more commonly used bases are
function, product, territory, process, customer, time etc. Some of these bases
are internal-operation – oriented like function, process, time while others
like product, territory and customer are output-oriented.
a.
Functional Departmentation: The grouping of common or homogeneous
activities to form an organisation unit is known as functional departmentation.
Functional departmentation is the most widely used basis for organising
activities and is present almost in every large organisation at some level.
Functional departmentation is most commonly used because it offers
certain advantages which include advantages of specialization, ensuring
performance of activities necessary for the achievement of organisational
objectives, elimination of un-necessary activities, easier control over
functions, easier way for pinpointing training need of the managers and
maintaining the relative importance of functions in the organisation.
b. Product wise
departmentation: Product departmentation involves the grouping
together of all activities necessary to manufacture a product or product line.
Product departmentation is preferred for product expansion and diversification
when manufacturing and marketing characteristics of each product are of primary
concern. Product departmentation offers several advantages places attention to
product lines, reduces problems of coordination for different products,
provides opportunities for further diversification and expansion of
organisation and provides product specialization necessary for managers
specially when each product is different from other.
c.
Territory – wise Departmentation:
Territorial
or geographical departmentation is specially useful to large-sized
organisations having activities which are physically or geographically spread such as banking,
insurance, transportation etc., Territorial departmentation provides certain
efficiency in operation. Local factors such as customers, culture, styles,
preferences etc., always affect organisational functioning.
d.
Production processes – wise departmentation: In
process departmentation, processes involved in production or various
types of equipments used are taken as basis for departmentation. When the
production activities involve the use of several distinctive processes, these
can be used as the base for grouping of activities. Such activities may be
textiles, oil production etc., The process are set in such a way that a series
of operations is feasible making operations economic. It provides advantages of
specialization required at each level of total processes, maintenance of plant
can be done in better way, and manpower can be utilized effectively.
e.
Customer – wise departmentation:
Customer
based departmentation is basically
market – oriented in which departments are created around the markets served or
around marketing channels. The basic idea of this departmentation is to provide
services to clearly identified groups of customers. Each group of customers has
different purchase behavior, payment schedule, demand pattern etc., Therefore
they can be attracted to the organisation’s business by satisfying them by
providing services, payment schedule demand pattern etc.
********************************Also Read:
Unit 4:********************************Also Read:********************************
Choice of bases for departmentation Or DETERMINANTS OF DEPARTMENTATION
The
selection of bases for departmentation involves a consideration of the relative
advantages of each base for the organisation. Ideally speaking, a suitable
basis of departmentation is one which facilitates the performance of
organisational functions efficiently and effectively so that its objective are
achieved.
1) Specialization:
While assigning activities into departments, care must be taken to ensure that
the benefits of specialization are achieved.
2) Control:
One of the primary aims of departmentation is to facilitate control.
Departments should be so created as to fix clear responsibilities so as to
enable effective control.
3) Coordination:
Coordination involves that all the related activities are performed in a way
that their performance is synchronized so that each activity contributes to
others.
4) Economy: A
balance should be maintained between the cost of creating a department and its
contribution. The existence of a department is desirable only when it
contributes more than its cost.
5) Focus on
Result: Those activities which contribute to the achievement to these results
should be given proper attention.
6) Human
Considerations: Departments should be created on the basis of availability of
personnel, their aspirations and value systems, informal work groups and
attitudes of people towards various forms of organisation structure.
7) Emphasis
on Local Conditions: while assigning activities proper emphasis should be given
to local conditions at the places concerned, viz. the personality of the
individuals who may be given the responsibilities, the nature of informal
relationship among the people, the attitude of the people, etc.
8) Economy:
Another important factor to be considered while creating separate departments
is the expense involved and economy in its operations.
9) Key
Activities: there are certain activities which are very crucial. Such
activities should be placed in separate divisions.
Forms or Types of Organisation
Organising function is basically concerned with the allocation of
tasks and delegation of authority. On
account of different practices of distributing authority and responsibility
among the members of the enterprise several types of organisational structures
have been evolved. Along with formal organisations, non formal organisations
also emerge spontaneously and naturally.
Such non-formal arrangement is psychologically and socially
oriented. When all the needs of the
employees are not satisfied by the formal organisation, non-formal
organisations tend to develop in the organisation. Organisation are mainly
classified into two categories:
a)
Formal and
b)
Informal.
Formal organisations are further classified
into the following categories
1)
Line Organisation
2)
Functional Organisation
3)
Line and staff organisation
4)
Committee Organisation
MEANING OF FORMAL ORAGANISATION: The formal
organization refers to the structure of jobs and positions with clearly defined
functions and relationships as prescribed by the top management. This type of
organization is built by the management to realize objectives of an enterprise
and is bound by rules, systems and procedures. Everybody is assigned a certain
responsibility for the performance of the given task and given the required
amount of authority for carrying it out.
In
the words of Chester Barnard, "An organisation is formal when the
activities of two or more persons are consciously co-ordinated towards a common
objective".
Features of Formal Organisation: The main
features of formal organisation are:
(a)
In a formal organisation, the position,
authority, responsibilities, accountability of each level are clearly defined.
(b)
It prescribes the relationships amongst the
people working in the organisation.
(c)
The formal relations in the organisation arise
from the pattern of responsibilities that are created by the management.
(d)
The structure is consciously designed to
enable the people of the organisation to work together for accomplishing the
common objectives of the enterprise.
(e)
A formal organisation is bound by rules)
regulation and procedures.
(f)
It is deliberately impersonal.
Advantages of
Formal Organisation
1)
As definite duties and responsibilities of each employee are
clearly fixed, it tends to reduce conflicts among employees.
2)
Over lapping of authority and responsibility
is avoided.
3)
Entire organisation is systematically
controlled.
4)
Standards of performance are specified for all
the workers which tend to motivate the employees.
5)
On account of classification of tasks, right
person in place at a right place, hence job satisfaction and security is
experienced by the employees.
6)
For the purpose of evaluation and placement
there are no chances for bias, nepotism, favoritism etc.
7)
It makes organisation less dependent on one
man.
Disadvantages of
Formal Organisation
1)
In certain cases, formal organisation may
reduce the spirit of initiative, and dependence on superiors tends to increase.
2)
Authority may be used, sometimes for sake of
convenience of the employees without considering the need for using the
authority.
3)
As size and activities of formal organisation
increases, problems of co-ordination and control become difficult.
4)
It tends to neglect sentiments and values of
the employees in the organisation.
5)
It may reduce speed of informal communication.
MEANING OF INFORMAL ORAGANISATION: Man is a
social being and wants social interaction.
Formal organisations are jointed by people to satisfy their needs but
these organisations cannot satisfy all the needs of people because of their
nature. Hence informal organisation
emerges in all the formal organisations.
Informal
organisation is natural or spontaneous network of personal and social
relationships between individuals formed on the basis of personal attitudes
values emotions, friendships prejudices, interest’s likes and dislikes,
regional affinity, common work place etc.
Informal organisation is all pervasive and is found at all levels of
management. It consists of small
informal groups with their own behavioral patterns, status systems, beliefs and
goals.
According
to Davis informal organisations is” that network of personal and social
relations which is not established or required by formal organisation. It is a shadow organisation”.
Causes of Emergence of informal
Groups:
1)
To satisfy social needs which are not
satisfied by formal organisations.
2)
To enjoy sense of belongingness and
identification.
3)
To get knowledge of approved behaviour
determined by the informal organisation.
4)
To get outlet of employees’ frustration.
5)
To achieve objectives which is not possible in
formal organisations.
6)
To get opportunities for influence and
creativity.
7)
To perpetuate cultural values.
8)
To
promote communication and obtain information.
Features of Informal Organisation: The chief
features of informal organisation are:
1)
Informal Organisation is not established by
any formal authority. It arises from the personal and social relations amongst
the people working in the organisation.
2)
Informal Organisation arises spontaneously,
and not by deliberate or conscious efforts.
3)
It is influenced by the personal attitudes,
emotions, whims, likes and dislikes, etc. of the people in the organisation.
4)
It is based on rules, regulations and
procedures.
5)
The inter-relations amongst the people in an
informal organisation cannot be charted (i.e., cannot be shown in an
organisation chart).
Advantages of
Informal Organisations:
1)
Informal group gives social satisfaction to
the employees.
2)
It promotes sense of belongingness.
3)
It provides safety valve for emotional
problems of the employees
4)
It provides social control.
5)
It helps developing communication channels in
the organisation
6)
It provides help on the job to the employees
during illness, accidents etc.
7)
It serves as a check on authority of a
manager.
8)
It
provides fertile ground for future leaders
9)
it supports in achieving organisational goals
10)
It reduces supervision.
11)
It may help manager to overcome their natural
limitations of ability.
Disadvantages of
Informal Organisations:
1)
Informal groups generally resist change.
2)
Interest of formal and informal groups may
clash with each other.
3)
As informal groups set their own norms about
quote of work to be done hence productivity remain below optimum (maximum)
level.
4)
Members of informal organisation may adopt
group think philosophy by way of assuming that group decision is the only right
decision.
5)
Informal group ends to promote rumors,
grapevine which spreads at a much faster rate and hence harmful to the
organisation.
6)
Mangers should not resist formation of in
formal groups but try to convince it to contribute to organisational goals.
Difference
between formal and Informal organisation:
|
|
FORMAL |
INFORMAL |
|
1.Structure |
It is official,
so it has prescribed structure of roles and relationships. It is planned and deliberately created by
management |
It is in
unofficial or natural having no specific structure. It arises spontaneously without official
sanction by management |
|
2.Base |
It is
based on delegation of authority & may grow to very big size. It is mechanistic and brings order in the
organisations. |
It
arises through social interactions between employees. It usually remains small is size. It is humanistic and gives satisfaction to
employees. |
|
3.Nature |
It is
deliberately created impersonal with emphasis on authority, functions, status
differentials and down ward communications |
It is personal with emphasis on people and their intricate
relationships, informal rankings and multidimensional communications. |
|
4.Shape |
It is
hierarchical and pyramid shaped. |
It has no definite shape, and no division of work. It is structural less and ill defined. It is psychosocial system. |
|
5.Orientation |
Its
tasks, goals and values are economic oriented towards efficiency,
productivity profitability and growth. |
Its tasks, goals and values are socio- psychological centering
on individual and group satisfaction affiliation co-friendship esteem etc. |
|
6. Charts and Manuals |
It can
be shown in the form of charts and manuals of the organisation. |
It finds no place on organisation charts and manuals. |
|
7. Role and Relationships |
It has
written roles and procedures, authority and responsibility are clearly
defined. There are well defined roles
and relationships. |
It has
unwritten conventions and norms there are no written rules or procedures. |
|
8. Authority |
Formal
authority is institutional, it attaches to a position and a person exercises
it by virtue of his position. Formal authority flows downwards as it is
delegated. |
Informal
authority attaches to a person and it flows upwards or horizontally as it has
to be earned there is informal leader and has strong influence. |
|
9. Behaviour |
It has
prescribed system of behaviour .Rewards and punishments are given on the
basis of desired behaviour rewards can be both monetary and non monetary. |
It is
unwritten norms of behaviour, enforced through mutual consent rewards include
social esteem, satisfaction group leadership while punishments are censure
isolation, boycott etc. |
|
10.Stability |
It is
rational and created to meet organisational goals. It is stable, permanent and predictable. |
It arises to satisfy man’s quest for social satisfaction It is
relatively fickle and unpredictable. |
|
11.Membership |
Group
membership is rigidly defined, every employee belongs to one workgroup only. |
One person can be member of several informal groups of his
choice. He may be a leader in one
group and a follower in the other. |
********************************Also Read:
Unit 4:********************************Also Read:********************************
TYPES OF INTERNAL OR INFORMAL ORGANISATION
The
main types of integral organisation are:
1.
Line, military or scalar organisation.
2.
Functional Organisation.
3.
Line and staff organisation.
4.
Committee form of organisation.
1. LINE
ORGANISATION, SCALAR ORGANISATION OR HIERARCHICAL ORGANISA TION: Line
organisation or military organsiation is a direct type of internal
organisation. It is the oldest and the simplest form of integral organisation.
Line organisation is a type of internal organisation in which there are direct
vertical authority relationships (i.e., superior-subordinate relationships),
connecting the positions at each level with those above and those below in the
hierarchy. In other word, it is a form of organisation in which the
relationships between the various levels of management form a hierarchy of
authority or chain of command.
Features
of Line Organisation
The chief features of line organisation are:
1)
The line organisation forms a vertical line
relationship from the top to the bottom of the organisation.
2)
There is authority relationship or
superior-subordinate relationship in the line organisation. Each position in
the organisation structure has authority over its subordinate, and is
accountable to his superior.
3)
Under this system, authority flows from the
top of the structure to its bottom level step by step through downward
delegation of authority, while responsibility flows upward from the bottom of
the structure to the top step by step.
4)
There is no provision for staff officers
(i.e., experts or specialists) to offer advice to the line officers under this
system.
Advantages
of Line Organisation:
Line
organisation has certain advantages. They are:
1.
This system is simple to establish and
operate.
2.
Under this system, responsibility and
authority are clearly defined. Every member of the organisation knows his exact
position, to whom he is responsible and who are responsible to him. Because of
the clear fixation of responsibility, no person can escape from his liability.
3.
There is unity of command and control under
this system. That is, a subordinate receives orders from only one superior and
is responsible only to one superior.
4.
The unified authority and control implicit in
this system ensures better discipline among the employees.
5.
The unification of authority and
responsibility present in this system facilitates quick and prompt decisions.
6.
As all the activities relating to one
department or division are managed by one executive, there can be effective
co-ordination of activities.
7.
Under this system, communication is easy and
quick.
8.
This system is flexible or elastic, in -the
sense that, as each executive has sole responsibility in his own position and
sphere of work, he can easily adjust the organisation to changing conditions.
9.
This system is less expensive, as there are no
staff specialist to advise the line authorities
Disadvantages
of Line Organisation:
Line organisation is not free from defects. It suffers from
several drawbacks. The main drawbacks are:
1.
Under
this system, as only one executive manages all the activities in his
department, there is no scope for specialization.
2.
As only one executive is required to manage
all the activities in his department, he is over-burdened, As a result, he may
not be able to direct and control the efforts of his subordinates, properly.
3.
As all the decisions relating to a department
are taken by only one executive, there is unitary administration. Consequently,
the successful functioning of the department depends on the abilities of the departmental
head.
4.
Under this system, only one executive controls
all the activities of department and gets undue importance. The importance of
the other people in the department is not recognised. As a result, there may be
lack of co-operation and team-spirit.
5.
Since only one executive controls all the
activities in his department, there is much scope for nepotism and favouritism.
6.
Under this system, the subordinates should
follow the orders of their superior without expressing their opinion on the
orders. That means, there" is limited communication.
7.
Under this system, the lower level managers
lose their initiatives and interest, as they have to merely carry out the
orders and instructions of their superiors.
8.
When there are too many levels of management,
the process of communication may become difficult under this system.
9.
There is the danger that the line authorities
may become autocratic or dictatorial.
10.
Line organisation is rigid and inflexible.
Suitability
of Line Organisation:
It is true that line organisation suffers from many limitations.
But its importance has not been reduced. It is considered suitable for:
(a)
Small concerns, i.e., concern which carry on
their operations on a small scale.
(b)
Concerns which have a small number of
subordinates.
(c)
Concerns which are engaged in operations which
ate mainly of routine type.
(d)
Concerns which has straight and simple methods
of machines.
(e)
Concerns where activities are performed by
automatic machines.
(f)
Industries where continuous processes are
followed.
A Line organisation can be successful only when the following conditions are satisfied
1. Hierarchical arrangement of giving commands: There should be a hierarchical arrangement of giving commands. The subordinates should get commands only through their immediate superiors. The links in the chain of command should not be skipped. This type of organization helps in co-ordination and control.
2. Presence of Unity of Command: There should be a single line of command. One person should get orders from one supervisor only.
3. Independent subordinates: All persons at the same level of authority should be independent of one another.
4. Proper supervision: The number of subordinates should be such that they are properly supervised.
5. Flexibility: There should be flexibility in organisation regarding the chain in giving command.
6. No too many levels of management: There should be no too many
levels of management because the process of communication can be difficult.
2.
FUNCTIONAL ORGANISATION: Functional organisation is a type of
organisation in which the work of the whole enterprise is divided into a number
of specialized functions like production, purchasing, marketing, office
management, personnel relations, etc. and each of these spcci~11ised functions
is entrusted to a functional expert or specialist.
Features
of Functional Organisation: Functional organisation has certain
characteristic features. The main features of functional organisation are:
1)
Functional organisation is a complex type of
organisation when compared to line organisation and line and staffing
organisation.
2)
There is specialization in functional
organisation, as the work of the concern as a whole is divided into different
specialized functions like production, purchasing, marketing, finance,
personnel relations, etc. and each specialized function is entrusted to a
functional expert or specialist.
3)
In this type of organisation, the line
executive receives instructions not only from his line boss but also from one
or more specialists.
4)
Under this system, the principle of unity of
command is not observed, as a single worker has to get instructions from more
than one specialist.
3. LINE AND STAFF ORGANISATION: In line
organisation, there is unity of command, hut there is no specialization. In
functional organisation, there is extreme specialisation, hut there is no unity
of command. To overcome the defects and to take advantage of the merits of both
line organisation and functional organisation, line and staff organisation has
been evolved. Line and staff organisation is the Usual form of organisation
found in modern enterprise.
Line
and staff organisation is a combination of line organisation and functional
organisation. It is a type of organisation in which there arc two sets of
officers for administration, viz., (1) line officers who have the authority and
command over the subordinates and are responsible for the accomplishment of the
results, and-(2) staff officers or specialists who render experts advice to the
line officers to help them to discharge their functions efficiently.
COMPARATIVE
STUDY OF LINE ORGANISATION, FUNCTIONAL ORGANISATION AND LINE AND STAFF
ORGANSIATION
a)
Line organisation is a simple form of
organisation. But functional organisation and line and staff organisation are
complicated.
b)
In the case of the line organisation, there is
clear-cut line of authority .m the case of functional organisation, there is no
clear-cut line of authority .In the case of line and staff organisation, there
is clear-cut division of authority for the line officers, but staff officers do
not have any authority.
c)
In the case of line organisation, there is
clear-cut responsibility .In the case of functional organisation and line and
staff organisation, there is clear-cut responsibility for the line officers,
but staff officers do not have any responsibility.
d)
Because of clear-cut line authority, there is
unity of command in the case of line organisation. There is no unity of command
in the case of functional organisation, as a worker has to take instructions
from several authorities. There is unity of command in the case of line and
staff organisation because of the existence of the line officers.
e)
In the case of line organisation, there is
flexibility in the sense that quick decisions and prompt actions can be taken
to adjust to changing situations because of the existence of full authority.
Functional organisation is rigid and inflexible. In the case of line and staff
organisation, flexibility is difficult.
f)
Strict discipline is enforced in the case of
line organisation. In the case of functional organisation, enforcement of
discipline is difficult because of lack of unity of command. In the case of
line and staff organisation, there is discipline enforced by line officers.
g)
In the case of line organisation, there can be
prompt and quick decisions. In the case of functional organisation, there
cannot be quick decisions. In the case' of line and staff organisation, there
can be better decisions by the line officers with the help of staff advice.
h)
There is no specialisation in the case of line
organisation. There is maximum specialisation in the case of functional
organisation. There is certain amount of specialisation in the case of line and
staff organisational because of the presence of staff officers.
i)
In the case of line organisation, there is
heavy work load on the executive or managers. There is less work load in the
case of functional organisation. The work load is not heavy in the case of line
and staff organisation.
j)
There is a good communication system in the
case of line organisation. There is overlapping of communication in the case of
functional organisation. There is a good communication system in the case of
line and staff organisation.
k)
In the case of line organisation, there can be
better co-ordination within the department, but inter- department co-ordination
becomes difficult. In the case of functional organisation, there is lack of
effective co-ordination because of extreme specialisation. In the case of line
and staff organisation, there can be co-ordination through staff officers.
l)
Efficiency is lacking in the case of line
organisation, as one executive is entrusted with many activities in which he is
not efficient. In the case of functional organisation, there is greater
efficiency, as each executive is entrusted with limited duties. There is
maximum efficiency in the case of line and staff organisation because of the
clear-cut duties of the line officers and the availability of expert advice
from the staff officers.
m)
Line organisation is suitable for small
enterprises, trading as well as industrial. Functional organisation is suitable
for large industrial enterprises. Line and staff organisation is suitable for
medium- sized industrial enterprises.
4. Committee Form of Organisation: A number
of persons may come together to take decision, decide a course of action,
advise line officers on some matters, it is a committee form of organisation.
It is a method of collective thinking, corporate judgment and common decision.
A committee may be assigned some managerial functions or some advisory or
exploratory service may be expected from it.
Need for Committee: The main
reason for committee is to secure common judgment on administrative matters.
The committees are set up for the following reasons.
1)
The committees provide a forum for exchanging
ideas among organisational members.
2)
The exchange of ideas among members may
generate some suggestions and recommendations which may be useful for the
organisation.
3)
There can be proper discussion on present
problems and efforts are made to find the solutions.
4)
The committees may also be needed in
establishing and developing organisational policies.
Centralization and Decentralization
Centralization:
Centralization refers to the situation in which a minimum number of job
activities and a minimum amount of authority are delegated to subordinates.
Thus, Centralization refers to the concentration of authority at one point or
at different levels. Centralization reduces the importance of subordinates and
makes them mechanical, as the subordinates are only to execute whatever is
ordered. The two definitions of centralization given by Louis Allen and Henry
Fayol are:
In
the words of Louis Allen, “Centralization is
the systematic and consistent reservation of authority at central points within
the organisation.”
In the words of Henry Fayol “Everything that goes to increase the
importance of the subordinates role is decentralization, everything which goes
to reduce it is centralization”.
Decentralisation: It refers to the situation in which a
significant number of job activity and a maximum amount of authority are
delegated to subordinates. It signifies the necessity of dividing the
managerial task to the lowest level of managers, with an intention to grant all
the authority to make the particular division or department autonomous. Each department has the full authority
to decide on all matters concerning the department except those matters which
need to be left to the top management to decide.
Centralization
and decentralization should not be confused with location of work. An
organisation having branches in different places may be centralized. Similarly,
an enterprise may be decentralized even though all its offices are located in
one building. Here we will discuss the definitions of decentralization.
According
to Koontz and Weihrich,” Decentralization is the tendency to disperse
decision-making authority in an organized structure”.
According to Newman, Summer & Warren “Decentralization is
simply a matter of dividing up the managerial work and assigning specific duties to the various executive skills.”
ADVANTAGES OF CENTRALIZATION
a) Specialization
management: The higher the specialization of jobs, the greater the need for
centralization. Tall hierarchical organizations with functional departments are
best managed through centralization.
b) Complexity
management: Specialization of jobs creates complexity. Narrow spans of
management also create complexity. Centralization provides advantage to manage
complexity. Uniform policies and practices are fostered. Specialists can be
used.
c) Significant
decision making: Non-programmed significant decisions require centralized decision
making by top management. Decentralization is not suitable for making such
decisions. Moreover, management philosophy may also favor centralization in
such decision.
d) Environmental
stability: Centralization is the most suitable model for making decisions in
stable environment.
e) Improved
capacity at lower levels: Subordinates may lack capacity or be unwilling and
inexperienced to exercise decentralized authority. Such situations give
advantage to centralization.
f) Crisis
management: When organizations face crisis or risk of failure, centralized
decision making by top management has advantage.
g) Cost
effective: High cost of decentralization makes centralization advantageous.
Duplication of efforts is minimized.
DISADVANTAGES OF CENTRALIZATION
a) Poor environmental
adaptation: Organizational environment tends to be dynamic, complex and
uncertain. Centralization cannot quickly adapt to the changing environment.
b) Poor
diversification management: Modern organizations tend to be highly diversified.
They are also geographically dispersed. Centralization is not suitable to
manage diversified and dispersed organizations.
c) Unsuitable
for programmed decisions: Programmed decisions are routine-type decisions. They
are relatively minor decisions. Such decisions are not suitable for
centralization. They burden top managers.
d) Poor
management development: Centralization blocks the management development of
subordinates. Their skills and talents remain unutilized because of lack of
participation and involvement in decision making.
e) Delayed
decisions: Centralization creates multiple layers for decision making purposes.
The files move through the hierarchy from subordinates to bosses. This delays
decision making.
ADVANTAGES OF DECENTRALIZATION
a) Quicker
and better decisions: it disperses decision making authority close to unit
managers who execute decisions. It reduces problems of communication and red
tape. This leads to quicker and better decision making
b) Diversification:
decentralization facilitates diversification of products, activities and
markets. Profit centers can be established with independence in decision
making.
c) Competitive
organizational climate: Decentralization promotes competitive climate for
improving performance among divisions and profit centers.
d) Management
development: decentralization encourages managers to exercise freedom and
independence in decision making. They learn to make decisions and exercise
judgment. This develops managerial competency.
e) Environmental
adaptation: Decentralization helps organizations to adapt to fast-changing
environment.
f) Relieves
burden of top management: Top managers are relieved from making routine
decisions. They can concentrate on important issues of strategic relevance.
g) Higher
motivation and morale: Decentralization provides power, prestige and status to
subordinates. This increases motivation and morale of subordinates.
DISADVANTAGES OF DECENTRALIZATION
a) Problem of
coordination and control: Decentralization provides freedom and independence in
decision making. This can lead to inconsistencies in policies, programs and
procedures. This can create the problem of poor coordination and control.
b) High cost:
Decentralization can result in duplication of efforts and waste of resources.
Human resources need to be trained. This results in increased costs. It is also
time consuming.
c) Unsuitable
for specialized services: Decentralization is not suitable in tackling
emergency situations. Adjustment to fast changing situation may be difficult.
d) Handicap
in emergency: Decentralization can become a handicap in tackling emergency
situations. Adjustment to fast changing situation may be difficult.
e) Lack of
managerial capacity: Decentralization requires competent and skilled
subordinates. It may be difficult to find them.
Difference between Centralization and Decentralization are given below:
|
Point of
difference |
Centralization
|
Decentralization
|
|
1. Meaning |
It refers to concentration of power or
authority at higher level only. |
It refers to evenly distribution of powers
and authority at every level of management. |
|
2. Authority at different levels |
Top management retains maximum authority.
The authority with middle and lower management is very low. |
The authority is systematically divided at
every level. |
|
3. Suitable |
It is suitable for small scale and small
size organizations. |
It is suitable for large scale organization.
|
|
4. Freedom of Actions |
Managers have less freedom of actions. |
Managers have more freedom at actions. |