Organisation Structure and Design – Types, Authority, Responsibility, Centralisation, Decentralisation and Span of Control

Paper -2 Management (Code:17)

Unit-1

Topic:

Organization Structure and Design – Types, Authority, Responsibility, Centralization, Decentralization and Span of Control

An organization is a social unit or human grouping deliberately structured for the purpose of attaining goals. An organizational process is the collection of activities that transform inputs into outputs that customer’s value. Organisation Design is the process of constructing and adjusting the organization’s structure to achieve its goals.

                       Goals---Tasks---Jobs---Departments---Structure

Organisation Chart is the most visible representation of the organization structure and underlying components such as the formal lines of authority and responsibility and the formal systems of communication, coordination and integration.

Organisation Basic Design Dimensions:

✮Formalization: The degree to which an employees’ role is defined by formal documentation (procedures, job descriptions, manuals, and regulations).

✮Centralization: The extent to which decision making authority has been delegated to lower levels of an organization.

✮Specialization: The degree to which organizational tasks are subdivided into separate jobs.

✮Standardization: The extent to which work activities are described and performed routinely in the same way.

✮Complexity: The number of activities within the organization and the amount of differentiation needed within the organization.

     ✮Hierarchy of authority: The degree of vertical differentiation across levels of management. 

One way is to establish a desired level of each structural dimension on a high to low continuum and then develop a structure that meets the desired configuration. An organization that is high on formalization, specialization, standardization, and complexity and has a tall hierarchy of authority is said to be highly bureaucratic.

Organizational Design Processes:
 

✮✮Differentiation: It is the design process of breaking the organizational goals into tasks. Lawrence and Lorsch found four dimensions of differentiation as follows:

✮Manager’s goal orientation

✮Time orientation

✮Interpersonal orientation

✮Formality of structure

      Forms of Differentiation:

    ✮Horizontal Differentiation is the degree of differentiation between organizational subunits and is based on employees’ specialized knowledge, education or training. This type increases with specialization and departmentalization.

   ✮Vertical Differentiation is the difference in authority and responsibility in the organizational hierarchy. Tall, narrow organizations have greater vertical differentiation and flat, wide organizations have less vertical differentiation.

      ✮Spatial Differentiation is the geographic dispersion of an organization’s offices, plants, and personnel.

The more structurally differentiated an organization is, the more complex it is.

✮✮Integration: It is the design process of linking the tasks together to form a structure that supports goal accomplishment.

           ✮Vertical integration mechanisms are used to integrate activities up and down the organizational chain of command. Vertical linkages include hierarchical referral, rules and procedures, plans and schedules, positions added to the structure of the organization, and management information systems.

        ✮Horizontal integration mechanisms provide the communication and coordination that are necessary for links across jobs and departments in the organization. The horizontal linkages are built into the design of the organization by including liaison roles, task forces, integrator positions and teams.

   

   ✮✮Departmentalization: It is a method of subdividing work and workers into separate organizational units that take responsibility for completing particular tasks. It can be subdivided into

• Functional – based on business functions or areas of expertise
• Product – based on production of particular products or services
• Customer- based on customer needs
• Geographic – based on particular geographic areas
• Matrix – two or more forms of departmentalization are combined

 Organisation structure – Classification: 

Organizational structure is the vertical and horizontal configuration of departments, authority, and jobs within a company.

Structural Organisation	Prime Coordinating Mechanism	Key Part of Organization	Type of Decentralization	Example
Simple Structure	Direct Supervision	Upper echelon	Centralization	Small Independent Landscape practice
Machine bureaucracy	Standardization of work process	Technical staff	Limited horizontal decentralization	Automobile assembly plant
Professional bureaucracy	Standardization of skills	Operating level	Vertical and horizontal decentralization	Hospitals and universities
Divisionalized form	Standardization of outputs	Middle level	Limited vertical decentralization	Organisation with Different divisions
Adhocracy	Mutual adjustment	Support staff	Selective decentralization	Project works

✮ Mechanistic Structure: An organizational design that emphasizes structured activities, specialized tasks and centralized decision making

✮ Organic Structure: An organizational design that emphasizes teamwork open communication and decentralized decision making

Emerging Organizational Structures:

✮Network Organization: Web-like structures that contract some or all of their operating functions to other organizations and then coordinate their activities through managers and other employees and other employees at their headquarters

✮Virtual Organization: Temporary network organizations consisting of independent enterprises.

✮Circle Organization: Structure that drive to achieve teamwork without teams

✮Modular Organization: Outsources noncore business activities to outside companies, suppliers, specialists or consultants

✮Team organization: Relies almost exclusively on project-type teams, with little or no underlying functional hierarchy

✮Learning organization: Works to facilitate the lifelong learning and personal development of all its employees while continually transforming itself to respond to changing demands and needs

Authority: 

Authority is the right to give commands, take action, and make decisions to achieve organizational objectives.

Dimensions of authority:

    ✮Chain of command: The vertical line of authority that clarifies who reports to whom throughout the organization

    ✮Unity of command:  A management principle that workers should report to just one boss

    ✮Line authority: The right to command immediate subordinates in the chain of command 

    ✮Staff authority: The right to advise, but not command, others who are not subordinates in the chain of command

   ✮Delegation of authority: The assignment of direct authority and responsibility to a subordinate to complete tasks for which the manager is normally responsible

Responsibility:

Responsibility is the obligation of a subordinate to obey the commands of his superior.

Dimensions of responsibility:

      ✮Responsibility for is the obligation of a person to perform certain duties written in his job description or otherwise accepted by him

    ✮Responsibility to is his accountability to his superiors, which is inevitably associated with check-up, supervision, control and punishment

Decentralization is the process of systematically delegating power and authority throughout the organization to middle- and lower-level managers.

Centralization is the process of systematically retaining power and authority in the hands of higher-level managers.

Span of Control: The number of subordinates who report directly to a manager

V.A. Graicunas – classified based span of control based on number of relationships as follows:

1. Direct one-to-one relationships  : 2

2. Direct group relationships           : n [(2ⁿ/2)-1]

3. Cross relationships                       : n [(2ⁿ/2) + n - 1]