me unit3 notes

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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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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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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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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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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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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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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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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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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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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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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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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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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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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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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