Chapter 17 - Organisation
B-Com Part 2 Management Notes
http://karachiboardnotes.blogspot.com/Chapter 17 - Organisation
* Organisation
* Importance of Organisation
* Organisation Charts
* Decentralization of Authority
Q.1. Explain the term organisation. Why is it regarded as the foundation upon which the whole structure of management is built?
OR
Define organizing. Explain the nature and process.
Meaning and Definition of Organisation
We live in the age of organisations. Modern civilization requires large aggressions of people working together to produce the goods and services efficiently. Organisations are grand strategies created to bring order out of chaos when works together. The structure resulting from three things is known organisation. (i) identifying and grouping of work, (ii) defining and delegating authority and responsibility, and (iii) establishing relationships among those who are engaged in performing group activities. Without defined relationships, there will be no organisation. Peter Drucker rightly says, An institution (organisation) is like a tune it is not constituted by individual sounds but by the relating between them. Organisation is a dynamic tool for interweaning six M's, Men, Money, Machines, Materials, Methods and Markets. People work for organisation's objectives and manage its affairs for achieving them effectively and efficiently.
Some important definitions of organisation may be given as follows:
Hodge and Johnson
An organisation can be thought of as a complex relationships among human and physical resources and work, cemented together into a network of system.
James Mooney
Organisation is the form of every human association for attainment of a common purpose.
J.L. Massie
Organisation is the structure and process by which a cooperative group of human beings allocates its tasks among its members, identifies relationship and integrates its activities towards common objectives.
George Terry
Organizing is the establishing of effective Behavioural relationships among persons so that they may work together efficiency and gain personal satisfaction in doing selected tasks under given environmental conditions for the purpose of achieving some goal or objectives.
Organisation Concepts
Every scholar has defined organisation from his own perception. But in all, there are three concepts of organisation as follows:
1. Structure
2. Process
3. System
1. Organisation as a Structure
Weihrich and Koontz point out, Organisation implies a formalized intentional structure of roles or positions. Organisation structure may be defined as the established pattern of relationships among the component parts of an enterprise. In this sense, organisation structure refers to the network of relationships among individuals and positions in an enterprise. It is the network of horizontal and vertical relationships among the members of group designed to accomplish some common objectives. This network governs the activities of people in the form of a social group. The horizontal dimension shows differentiation of job into departments, divisions or sections. The vertical dimension reflects what is known as hierarchy or chain of command, of authority. The organisation structure is the skeleton framework of business enterprise. Thus, the organisation structure implies the following things.
(a). Division of labour into group activities under departments, divisions or sections and also into various positions.
(b). Assignment of tasks and activities to different persons and departments.
(c). The formal relationships with well-defined responsibilities.
(d). The hierarchical relationships with allocation of authority between superior and subordinates - delegation and decentralization of authority.
(e). Span of control with defined number of subordinates under a superior.
(f). Coordination among different departments and people.
(g). A set of policies, procedures, standards (goals) and methods of evaluation of performance, all formulated to guide the people and their activities.
However, the actual operations and behaviour of people are not always governed by the formal structure of relations. Hence, the formal structural arrangements are affected and modified by social and psychological forces combined known as informal organisation.
2. Organisation as a System
Organisation as a system implies the component parts, each of which has its unique properties, capabilities and natural relationships and thus all are interrelated and interdependent. Hence, system implies an arrangement and set of relationships among multiple parts operating as a whole, each part being called a sub-system. Every sub-system is itself a system composed of smaller interrelated parts of sub-system. The system produce synergic effect which means that the sum of all the parts is greater then the whole i.e., 2 + 2 = more than 4. Organisation as a system also implies that it is an open system, which means that it interacts with its environment for its survival, growth and development. An organisation as a socio-technological system consists of the following components or elements:
(a). Inputs
The system takes certain inputs from its environment. These inputs are human resources, physical resources and facilities, energy, supplies, technology and information.
(b). Processing or Transformation
Processing or transformation involves the utilization of the inputs through some specified technique to convert them into outputs. A number of sub-systems are created for processing or transformations purpose, such as production, finance, personnel and research and development. Interrelatedness and interdependence of all these sub-systems is kept in mind.
(c). Output
The processing or transformation technique results in output that may be intended and unintended. Intended outputs are usually called objectives or goals. For example, high productivity and efficiency we intended objectives. The output may consist of goods and services. An unintended output may be informal relation among the group members.
(d). Distribution
For distributing the output to the target market or consumers, several sub-systems may be created, such as sales, marketing, advertising, etc. Distribution may be done directly or through intermediaries known as wholesalers, semi-wholesalers and retailers.
(e). Management
The management component of the organisation system is concerned with the determination and implementation of processing and distribution activities in order to achieve system's goals. It involves planning, organizing, staffing, directing and controlling.
(f). Feedback
For effective managing, feedback of information with regard to the quality, quantity, cost and time of system outputs is necessary. It also helps in establishing and enforcing standards for desired results. It facilities corrective action wherever needed in the system.
(g). Environment
The management components helps in coping with the environment, which is complex and fast changing in the modern world. Management takes adequate steps needed for availing the opportunities and averting the threats in the environment. If the organisation system intends to survive, grow and develops, it has to interact properly and successfully with its environment.
3. Organisation as a Process
Organisation as a process is known as organizing. Weihrich and Koontz point out, Organizing is (1) the identification and classification of required activities, (2) the grouping of activities of activities necessary to attain objectives, (3) the assignment of each grouping to a manager with the authority (dilatation) necessary for coordination horizontally (on the same or a similar organizational level) and vertically (for example, corporate, headquarters, division, and department) in the organization structure.'
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Q.2. What is the importance of Organisation?
Organisation is needed in order to avert the havoc of disorganisation. It may be briefly illustrated as follows: A short sentence is disorganized like this, riirggnagesnoiztlsuse. In this form it is nonsense. If we reorganize it substantially, it will look like this: Organizinggetsresults Now it is workable, but difficult. By a slight change, it reads: Organizing gets results. Hence organization become important for management by results - for accomplishing our goals.
A sound organization contributes greatly to continuity, growth and development of an enterprise in the following ways:
1. Facilities Administration
A properly designed organization facilitates both management and operation of the enterprise by helping in its smooth functioning through various factors, such as well-defined areas of work for employees; effective delegation and decentralization of authority; clear mutual relationships; good communication network; coordination of the activities of individuals, groups and units, adequate and control.
2. Facilitates growth, expansion and diversification
A sound organization structure is flexible enough to accommodate future changes with regard to growth expansion and diversification of enterprise's activities. Besides, certain organization practices are developed which lead the business enterprise to expand and diversify.
3. Permits Optimum Utilization of Resources
Sound organisation permits optimum use of technological improvements and human resources and efforts (right persons being placed in right positions on the basis of their skills, knowledge and experience). It develops competent people through the facility of appropriate effective training and promotion opportunities.
4. Stimulates Creativity
Specialization provides individuals with well-defined duties, clear lines of authority and clearly defined responsibilities. Delegation and decentralization makes it possible for superiors to assign routine and repetitive jobs to their subordinates and to concentrate themselves on important issues in order to better exploit their own potential and encourage the creative thinking and innovative skills of the people.
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Q.3. What are Organization Charts? Discuss their advantages and limitations.
Organisation Charts
Organisation structure is represented primarily by means of a graphic illustration called an organisation chart. An organisation chart is a diagram depiciting organisation's formal positions and formal lines of authority. In fact, it is structural skeleton of an enterprise's heirarchy of management. Organisation charts are a means of avoiding conflict by clarification. With their familiar pattern of boxes and connecting lines, these charts are used as a management tool for deploying human resources.
An organization chart shows two dimensions of the structure: (a) the vertical authority structure, such as official positions, span of management, heirarchy of command, etc and (b) the horizontal differentiation of work activities such as work units or departments. It reflects the pattern of authority flow from top management to the lower levels. It also shows managers, ranks and jurisdications, types of authority relationships, line, staff or functional - communication lines throughout the organization, the number of levels in the managerial hierarchy, the span of management and the relative status of different managerial positions and departments. Organisation charts also help in reflecting as to who reports to whom - who is superior and who is subordinate, how many subordinates are accountable to a superior and what are the avenue, open for advancement of a manager holding a particular position in the chart.
The organisation structure can be diagrammed into an organization chart in three different ways:
(a). The traditional or conventional vertical chart shows the position of the chief executive at the top of a pyramid form, from where the authority flows downward. The managers towards the top of the pyramid have more authority than those who are towards the bottom.
(b). The horizontal chart originates from its left and proceeds to the right, depicting the chief executive's position at the extreme left and placing the successively lower managerial positions towards the right end.
(c). The circular or concentric chart places and shows the chief executives position at its center and other middle and lower level managerial position radiate from the center in concentric circles, the lowest managerial positions being placed on the outermost circle.
The horizontal and circular charts represents a healthy departure to the extent that they de-emphasize the hierarchical, i.e., bureaucratic nature of organisation structure. However, vertical charts are still common in practice. Normally, the greater the height of a vertical chart, the smaller the span of management and the lower the height, the greater the span of management. Organisation charts with little height are usually referred to as flat and those with much height as tall.
Advantages of Organisation Charts
They are useful in several ways as follows:
- Organisation chart is a means to indicate graphically how the managerial positions fit into the total organisation and how they relate to each other.
- It shows at a glance the lines of authority and reporting pattern.
- It provides a conceptional background to identify inconsistencies and deficiencies and thereby helps in deciding for further improving modifications to cope with future demands of the changing environment.
- It serves as a reliable blueprint for newly recruited personnel who may understood the structure of the organisation and the interrelationships among its various work units.
- It provides a framework of personnel classification and evaluation systems.
Limitations of Organisation Charts
- Organisation chart depicts only a static view of the organisation, while the organization is a dynamic concept.
- It shows only the formal relationships and fails to describe informal relationships in the organisation, though informal relationships are equally important and significantly affect the functioning of the organization.
- It does not show the quality and content of the managerial relationships that actually exist in the organization, but shows only the 'supposed relationships'. Thus, it fails to tell about the effectiveness of various elements, processes, and other structural dimensions within the organization.
- Organization charts become quickly outdated because they fail to incorporate into them the frequent changes or alternations taking place in the organization structure and in the patters of authority and activity relationships.
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Q.4. What is meant by Decentralization of Authority?
Decentralization of Authority
Decentralization of authority means dispersal of decision - making power to the lower levels of the organisation. According to Allen, decentralization refers to the systematic effort to delegate to the lowest level all authority except that which can only be exercised at central points. Thus decentralization means reservation of same authority (power to plan, organize, direct and control) at the top level and delegation of authority to make decision at points as near as possible to where action takes place.
Decentralization is not same thing as delegation. Delegation means entrustment of responsibility and authority from one individual to another. But decentralization means scattering of authority through the organization. It is the diffusion of authority with in the enterprise. Delegation can take place from one person to another and be a complete process. But decentralization is complete only when the fullest possible delegation is made to all or most of the people.
Decentralization is distinct from dispersion
Dispersion occurs when plants and offices are located at different place with physical distance between them. Performance of work in dispersed plants and offices does not necessarily lead to decentralization. A company may be highly centralized although its physical facilities and employees are widely dispersed and company may be highly decentralized even through all physical facilities and employees are located in a single building.
Distinction Between Delegation and Decentralization
The points of distinction between and decentralization are given below:
1. Delegation is a process of devolution of authority where as decentralization.
2. Delegation take place between a superior and a subordinate and is a complete process. It may consist of certain tasks alone. But decentralization involves spreading out the total decision - making power.
3. In delegation control rests entirely with the superior or delegator but in decentralization, the top management may exercise control only in a general manager and delegate the authority for control to the departmental manager.
4. Delegation is a must for management. Subordinates must be given sufficient authority to perform their assignments otherwise they will come to the superior time and again even for minor decisions. However, decentralization is optional in the sense that the top management may or may not decide to disperse authority.
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