financial terms at functional and unit levels for purposes of implementations. The detailed plans, if and when prepared, may not reflect the intents of the broad plans in a consistent manner. TYPES OF PLANS Many different types of plans are adopted by managers to conduct operations, and monitor and control organisational activities. Three such most commonly used plans are hierarchical, frequency- of-use (repetitiveness) and contingency plans. Hierarchical Plans These plans are drawn at three major hierarchical levels, namely, the institutional, the managerial and the technical core. Strategic plans generally involve planning at the top institutional level of an organisation. Strategic plans define the organisation’s long-term vision and how the organisation intends to make its vision a reality. In short, strategic planning is the determination of the basic long- term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these goals. Strategies do not attempt to outline exactly how the enterprise is to accomplish its objectives, since this is the task of countless major and minor supporting programs. But they furnish a framework for guiding thinking and action. Strategic plans are intended to design tactics in order to achieve long-term objectives. Intermediate or administrative planning This planning is done at the level of middle management. It is done to allocate organisational resources and co-ordinate internal subdivisions of the organisation. It is also a process of determining the contributions that sub-units can make with allocated resources. Operational planning It is the process of determining how specific tasks can best be accomplished on time with available resources. This is also done to cover the day-to-day operations of an organisation. As such, many operating plans are designed to govern the workings of the organisation’s technical core. Frequency-of-use Plans Plans can also be categorised according to frequency or repetitiveness of use. They are broadly classified as standing plans and single-use plans. Standing plans are drawn to cover issues that managers face repeatedly. For example, managers may be facing the problem of late-coming quite often. Managers may, therefore, design a standing plan to be implemented automatically each time an employee is late for work. Such a standing plan may be called standard operating procedure (SOP). Policies, procedures, rules are some of the most common standing plans. Policies: In most cases, policies are standing plans. These are broad-based statements of understanding or general statement of intent. Policies define an area or provide limits within which decisions are to be made and ensure that the decision will be consistent with, and contribute to, an 47 CU IDOL SELF LEARNING MATERIAL (SLM)
objective. Policies are types of plans that allow decision- makers some discretion to carry out a plan. Otherwise, there will be no difference between policies and rules. Policies must allow for some discretion. Policies allow managers use their discretion within limited areas. Policies help decide issues before they become problems, and make it unnecessary to analyse the same situation every time it comes up. It permits managers to delegate authority and still maintain control over subordinates about the matter. There are many types of policies. Instances are found in the policies of hiring only university-trained engineers, promotion from within, encouraging an employee suggestion system for improved organisational performance, setting competitive prices etc. Policies anticipate and forestall problems. They allow managers to deal with contingencies at their own discretion but within certain limits. Some policies could originate from customary and general ways of behaviour in an organisation. Some of them are put in place through verbal statements or in writing. For example, there might be a policy in an organisation that “except for token gifts of very nominal value or advertising value, no employee shall accept any gift from any supplier.” Such formal policies are usually written down in company manuals or regulations for employees. Policy is a means of encouraging discretion and initiative, but within limits. The amount of discretion usually depends on the policy and the position and authority occupied in the organisation. Policies allow managers certain flexibility in dealing with their organisational problems. But, not being well- defined, policies can sometimes give rise to confusion. Since policies are general in nature, they provide guidelines as to how the employees will carry out their jobs. While policies provide managers with some flexibility in approaching various organisational problems, this generality again makes policies rather vague. Control becomes difficult when people start interpreting policy meaning and purpose differently. Rules: Like policies, rules, too, are standing plans that guide action. Rules spell out specifically what employees are supposed to do or not to do. For example, the no-smoking campaign launched by some organisations is supported by some organisational rules. As opposed to policies, rules do not permit exercise of individual discretion. Instead, rules specify what actions will be taken (or not taken) and what behaviour is permitted or not. Policies, on the other hand, tell people how to think about decisions to be made about actions. Unlike policies, rules do not allow discretion. Procedures: Like rules, procedures are standing plans that provide guidance for action rather than speculation. They are plans that establish a required method of handling future activities. Procedures establish customary ways for handling certain activities: hiring a clerk, participating in a co-operative housing society, obtaining a loan from a bank. The major characteristic of a procedure is that it represents a chronological sequencing of events. It specifies a series of steps that must be taken to accomplish a task. Specified series of steps one required to take for admission in the PG program of Chandigarh University is an example of procedure. Single-use plans 48 CU IDOL SELF LEARNING MATERIAL (SLM)
This are prepared for single or unique situations or problems and are normally discarded or replaced after one use. Generally, three types of single-use plans are used. These are programmes, projects and budgets. Programmes: Programmes are plans of action followed in proper sequence according to objectives, policies and procedures. Thus, a programme lays down the major steps to be taken to achieve an objective and sets an approximate time frame for its fulfilment. Programmes are usually supported by budgets. A programme may be a major or a minor one or long, medium or short term one. Since it is not used in the same form once its task is over it belongs to single-use plan category. Programmes determine major steps and set time frames for achieving objectives. Projects: A project is a particular job that needs to be done in connection with a general programme. So, a single step in a programme is set up as a project. A project has a distinct object and clear-cut termination. \"Projects have the same characteristics as programs but are generally narrower in scope and less complex. Projects are frequently created to support or complement a program.\" A project is a single step in a programme A budget is a programme expressed in measurable units of money, weight, time, etc. Budgets: \"A budget is a statement of expected results expressed in numerical terms.\" It is sometimes called numerised programme and most commonly expressed in terms of money i.e. taka, dollar etc. They may also be expressed in terms of any measurable units like hours, metric tons etc. It covers a particular period of time, and once the period is over, a new budget comes into being. Contingency Plans As we already know, the process of planning is based on certain premises about what is likely to occur in the environment of an organisation. Contingency plans are made to deal with situations that might crop up if these assumptions turn out to be wrong. Thus, contingency planning is the development of alternative courses of action to be taken if events disrupt a planned course of action. A contingency plan allows management to act immediately, if such unforeseen events as strikes, boycotts, natural disasters or major economic changes render existing plans inoperable or unsuitable PLANNING PROCESS We have stated earlier that planning is a process consisting of certain steps or series of sequential activities. There is no generally accepted or standard format of the planning process. Different authors have their own ways of conceptualising the planning process. Let us discuss one of the conceptual schemes of the process of planning. 49 CU IDOL SELF LEARNING MATERIAL (SLM)
Fig.3.1 PLANNING PROCESS i) Planning to plan: Planning does not just occur on its own or with the issue of an order from the chief executive. It has to be properly and carefully decided upon. and planned. The management of the organisation has to inject a culture of planning at all the levels of management by highlighting the imperatives and virtues of planning as also the philosophies and techniques embedded in it. It has to educate the managers in various departments by arranging training programmes and conferences on the methodology of planning so as to improve their competence to plan. The required planning system has to be designed and activated. This is especially so with regard to a new organisation ii) Appraisal of internal situation: In this step, top management in collaboration with other managers, have to make an analysis of the current state of affairs with the organisation - its existing plans, processes, activities, performing level, achievements and problems. It is essential to review in detail the specific strengths and weaknesses of the organisation in its sphere of operations. For example, products and services it supplies, financial position, manpower and managerial resources, competitive position, profitability levels, market image, manufacturing and other facilities, R 8 D advantages, capital structure, and so on. Management has also to make forecasts and projections of the likely future position and trends of the organisation's activities in all the above areas. 50 CU IDOL SELF LEARNING MATERIAL (SLM)
iii) Appraisal of the external environment: Top management of the organisation is r vitally concerned with the analysis of external environmental conditions for planning. purposes. This facilitates them in understanding the elements and events in the world outside the organisation which affect its present and future functioning. Appraisal of environmental trends in economic, social, technological and other means of relevance for the organisation is to be continuous process. Not only the present but also the likely future trends have to be appraised through systematic scanning and forecasting mechanisms. This will enable the organisation to identify the present and future opportunities and threats in the various external elements with which the organisation is directly concerned. iv) Definition of key areas and issues for planning: The appraisal of internal and external environmental conditions gives to the management an idea about what tentative planning the organisation needs. Managers have to ask themselves whether, in the light of external appraisal, the existing businesses, products, markets, processes and practices are relevant, and which aspects of them have to be retained, strengthened, refined and modified. The analysis also may reveal the need for new directions to strengthen the competitive position of the organisation, and to bring about a better alignment between the organisation and the external environment. It may also unearth the possibilities of going into new businesses, new technologies, new products and new markets. An important outcome of the above appraisal is identification of possible measures necessary to cope with environmental opportunities and threats, which are likely to help or hinder, as the case may be, the performance and progress of the organisation. v) Development of alternative plans for evaluation and choice: In this stage, manager have to apply their creative and innovative skills to generate alternative plans - missions, objectives, strategies, policies and programmes - on the basis of assessment of planning needs. They are generally of corporate-wide and long range in character, ranging from 5 to 10 years ahead, depending on circumstances. Development of alternative plans calls for an intensive thinking and search on the part of managers. For example, a business enterprise has several options to increase its economic power and profitability - by increasing the sales of its existing products in the existing markets, by exploring new markets,' by going in for new products, by acquiring outside enterprises and so on. The objective of improving its economic power could be achieved by one or a combination of some of the above alternative strategies. An important part of this stage is the evaluation of alternative plans by reference to their comparative merits and demerits whereupon choices have to be made from among the alternatives on the basis of certain predetermined selection criteria. The ' choices are the decisions of managers which will chart the long-range directions of the organisation for a specified period of time. vi) Formulation of medium range and short-range plans: The long-range set of 9- organisational plans provide the basis for formulation of more specific medium range and 51 CU IDOL SELF LEARNING MATERIAL (SLM)
short-range plans, Medium-range plans have a time span of more than one year but upto three years in general. Short-range plans have a duration of one year or less. Medium- range plans and short-range plans are progressively more specific than long-range plans. Short-range plans are also called operational plans and the process of formulating them is called ‘Operational Planning'. Medium range plans and short-range plans are generally formulated in such functional management areas like manufacturing, marketing, purchase, personnel, finance, R&D and so on. They are further 'decomposed' into more detailed sectional and unit plans valid for basic units of operations in the organisation. vii) Arrangements for implementation of plans: Effective implementation of plans and decisions is the crux of the planning process. Since plans are implemented by managers and others at various levels of the organisation, it is essential for top management to enlist their co-operation, participation and commitment for the purpose. Authority and accountability. have to be pinpointed specifically among the various managers for implementation of plans, for acquiring and allocation of resources and tasks, for making day-today decisions and taking initiatives and for activating the communication system in the organisation. Example: Eastern Electric Corporation Margaret Quinn, the president of Eastern Electric Corporation, one of the large electric utilities operating in the eastern United States, had long been convinced that effective planning in the company was absolutely essential to success. For more than 10 years she had tried to get a company planning program installed without seeing much result. Over this time, she had consecutively appointed three vice presidents in charge of planning and, although each had seemed to work hard at the job, she noticed that individual department heads kept going their own ways. They made decisions on problems as they came up, and they prided themselves on doing an effective job of \"fighting fires.\" But the company seemed to be drifting, and individual decisions of department heads did not always tally with each other. The executive in charge of regulatory matters was always pressing state commissions to allow higher electric rates without having very much luck, since the commissions felt that costs, although rising, were not justified. The head of public relations was constantly appealing to the public to understand the problems of electric utilities, but electric users in the various communities felt that the utility was making enough money and that the company should solve its problems without raising rates. The vice president in charge of operations, pressed by many communities to expand electric lines, to put all lines underground to get rid of unsightly poles and lines, and to give customers better services, felt that costs were secondary to keeping customers off his back. When a consultant called in at the request of Ms. Quinn looked over the situation, he found that the company really was not planning very well. The vice president of planning and his staff were working hard, making studies and forecasts and submitting them to the president. There they stopped, since all the department heads looked on them as impractical paperwork that had no importance for their day-to-day operations. 52 CU IDOL SELF LEARNING MATERIAL (SLM)
Questions 1. If you were the consultant, what steps would you suggest to get the company to plan effectively? 2. What advice would you give the company as and how far in the future to plan? 3. How would you suggest to the president that your recommendations be put into effect? Source: Heinz Weihrich and Harold Koontz, \"Management - A Global Perspective\", Tenth Edition, p.140. SUMMARY Planning is the process of setting future objectives and deciding on the ways and means of achieving them. It means deciding in advance what is to be done in the future for a specific period and then taking the necessary steps to do the things decided upon. Planning precedes all other managerial functions. It is a sub -process of the process of management. It pervades all levels and a11 branches of management. Planning is invariably future -oriented but is backed by information relating to the past trends, current conditions and future possibilities. It is a purposeful conscious managerial function. It has both formal and informal elements. At the same lime, planning is an intellectual process and requires certain analytical and conceptual skills. Even then, it is primarily a pragmatic and action -oriented function. Planning involves problem solving and decision-making. It is based on certain assumptions and is a dynamic process. Planning may be divided into certain levels on the basis of scope, significance, and time span, e.g. corporate planning and functional planning; strategic planning and tactical planning; long -range planning and short -range planning. All types of plans may be broadly categorised into two groups. Single use plans and standing plans. The importance of planning function stems from the following benefits of planning. Planning provides a clear sense of direction to the activities of the organisation and the job behaviour of managers and others. It permits managers to examine alternative courses of action with a better understanding of their likely consequences. Planning forces managers to shake off their inertia and induces them to look beyond the immediate concerns. It minimises the incidence of impulsive and arbitrary decisions and ad hoc actions. Planning provides the basis for all other managerial functions. It is a means of judicious allocation of strategic and scarce resources of the organisation, and also brings about an over an improvement in the efficiency of resource use. Further, planning improves the ability of the organisation to adapt effectively and adjust its activities in response to changes in the external environment. It stimulates management to take bold initiatives to anticipate crises or threats and to prevent them and to perceive and seize opportunities ahead of competitors. It is also an integrative process at a point of time as well as over a period of time. The limitations of planning are out of the following element; The assumptions and forecasts which form the basis of planning may be wide off the mark. Information required may not be reliable or may not be available in time, Changes in external environment are often beyond the knowledge and control of management, particularly in the case of rapid changes. Further, planning is always in a state of flux, due to the continuous and subtle 53 CU IDOL SELF LEARNING MATERIAL (SLM)
changes taking place in the environment. Besides, planning may delay action as it involves prior thinking and deciding. Often the plans formulated introduces rigidity in the functions of managers. On the other hand, plans may be far removed from reality and thus become difficult to implement, particularly with respect to detailed plans. The process of planning involves: Planning to plan, appraisal of internal conditions and external environment, defining key areas and issues for planning, development of alternative plans for evaluation and choice, formulation of medium-range and shortrange plans and implementation of plans. Planning may be divided into four categories on the basis of degree of comprehensiveness and time span. These are: Strategic Planning, Tactical Planning, Long-range Planning and Short-range Planning. Tactical and Short-range Planning are also referred to as ‘operational Planning'. As a function of management, planning is best carried out on the basis of certain principles viz., principles of top management interest, long-range view, contribution to objectives, primacy of planning, flexibility, navigational change, commitment, and limiting factor. Planning is a course of action determined in advance by the management. Plans are of two types - single use plans and multi -use plans or standing plans. A single use plan is specific to a particular situation and made for a short-term period for example programmes, budgets, schedules, progress etc. A Standing plan is enduring and serves as standing guidelines for decision -making process for example objectives, strategies, policies, procedures etc. Objectives are goals established to guide the efforts of the company and each of its components -. They are the means for determining policies, procedures, strategies, programmes, budgets and other plans. They provide foundation for effective management. Top management sets wide range of objectives considering the nature and functions of the organisation. Strategies are unified and critical plans of action to achieve an objective or a set of objectives. They provide basic and integrated frame of reference to managers. They give direction for the achievement of organisational goals. Policies are general statements or understandings which guide or channel thinking and action on decision making. They define the area or limits within which decisions are made to achieve organisational objectives. Policies are of several types like originated policy, appealed policy, implied and externally imposed policy. In these processes of policy formulation various concerned aspects and dimensions are discussed thoroughly for the finalisation of the policy. Procedures are series of steps established to accomplish a specific project. They indicate how a policy is to be implemented and carried out. A schedule on the other hand specifies, limits within which activities are to be completed. It avoids delay and ensures continuity of operations. KEY WORDS/ABBREVIATIONS • Appealed Policies: Policies formulated at higher managerial levels in response to appeals or reference made by lower managers. • Forecasting: Estimating the future behaviour of variables affecting the business unit. • Implied Policies: Policies which evolve on the basis of precedents and conventions but 54 CU IDOL SELF LEARNING MATERIAL (SLM)
not explicitly formulated. • Imposed Policies: Policies adopted by organisation as a result of direct or indirect dictates of external agencies such as government, trade unions etc. • Multiplicity of objectives: Objectives relating to all key areas of activity of an organisation. • Objectives: Goals or purposes towards which business activities and operations are ' a directed. • Operational Planning: Planning of detailed operations at the middle and supervisory levels of management. • Planning: The process of setting future objectives and deciding on the ways and means of achieving them. • Policies: Guidelines for decision-making and action. • Strategic Planning: The process of planning which involves product, market decisions in the light of environmental changes and internal resources. • Strategy: Courses of action to gain upper-hand over competitive and other environmental forces. • Tactical Planning: The process of formulating specific, functional sub-plans to implement the strategic plan. 3.9 LEARNING ACTIVITY 1. Long-range planning is concerned with making today's decisions with a better sense of futurity. Comment. …………………………………………………………………………………………….…………… …………………………………………………………………………………………………………. 2. What is the role of top management in the planning process? ……………………………………………………………………………………………..…………… ………………………………………………………………………………………………………….. 3.10 UNIT END QUESTIONS (MCQ ANDDESCRIPTIVE) A. Descriptive Types Questions 1. Define and discuss the concept of planning. 2. Is there any need for planning a plan? Explain. 3. The limitations of planning are too, serious to make planning a credible function. Do you agree? Why? 4. Differentiate between strategic and long-range planning. 5. Discuss the process of planning 55 CU IDOL SELF LEARNING MATERIAL (SLM)
B. Multiple Choice Questions 1. Strategic and tactical planning are defined on the basis of a. Comprehensiveness b. Strategy c. Business Plan d. Planning process 2. Courses of action planned to gain upper hand over competitive and other external forces are known as a. Plan b. Strategies c. Structure d. Process 3. Tactical planning involves a more approach than strategic planning. a. Contingency b. Systems c. Structured d. Unstructured 4. Long -range planning provides a for determining critical goals. a. Plan b. Approach c. Focus d. Framework 5. Any factor which stands in the way of achieving desired goals may be; called a 56 CU IDOL SELF LEARNING MATERIAL (SLM)
a. Limiting b. External c. Internal d. Unlimiting Answers 1. a) 2. b) 3. c) 4. d) 5. (a) REFERENCES Koontz, O Donnel and Weirich. (2001). Principles of Management. New Delhi: Tata McGraw Hill Publishing Company. Chopra, R.K. (2005). Principles & Practices of Management. New Delhi: Sun India Publication. Tripathi, P.C., and Reddy, P.N. (2006). Principles & Practices of Management. New Delhi: Tata McGraw Hill Publishing Company Heinz Weihrich and Harold Koontz, \"Management: A Global Perspective\", McGraw-Hill International Editions, Tenth Edition, 1994. Griffin, \"Management\", Boston: Houghton Mifflin Company, 1984. George R. Terry, Stephen G. Franklin, \"Principles of Management\", Delhi: ALTBS. Publishers & Distributors, Eighth Edition, 1997. James A.F., R. Edward and Daniel R. Gilbert, Jr., \"Management\", PrenticeHall of India Private Limited, Sixth Edition, 1997. https://openstax.org/details/books/principles-management https://open.lib.umn.edu/principlesmanagement/chapter/1-1-introduction-to-principles-of- management/ 57 CU IDOL SELF LEARNING MATERIAL (SLM)
UNIT –4 DECISION MAKING Structure Learning Objectives Introduction Concept Types Process of decision-making. Summary Key Words/Abbreviations Learning Activity Unit End Questions (MCQ and Descriptive) References LEARNING OBJECTIVES After studying this unit, you will be able to: • Discuss the meaning and definitions of decision making • Analyse the types of decisions made in the organization • Identify and apply the process of making decisions INTRODUCTION Decision making is another critical management activity and is a mental process. Decisions are made by choosing options from a set of alternatives. Every decision-making process result in an outcome that might be an action, a recommendation, or an opinion. Decision making also involves remaining neutral or doing nothing which is usually seen as one of the options. Decisions are commonly focused on resolving a problem or challenge. Normally prior to making a choice, decision makers weigh all choices and gather all data. Such an approach is known as problem analysis. Problem analysis is important because which defines the boundaries, establishes criteria from a set of alternatives related to the issue and develops conclusions based on information. However, problem analysis may not result in a decision, but it provides all the ingredients towards making a decision. In decision making a series of activities in series is involved which provides the structure and facilitates a decision. The activities or steps involved in decision making are given below: i. Establishing objectives ii. Classifying and prioritizing objectives 58 CU IDOL SELF LEARNING MATERIAL (SLM)
iii. Developing selection criteria iv. Identifying alternatives v. Evaluating alternatives against the selection criteria vi. Choosing the alternative that best satisfies the selection criteria vii. Implementing the decision A major part of decision making involves the analysis of a defined set of alternatives against selection criteria. The selection criteria in decision making involve advantages and disadvantages, costs, benefits, along with alignment with preferences. For example, if a new business decides to choose a location, the criteria will include rental costs, availability of skilled people, easy transportation means, and closeness to customers. Based on the relative importance of these factors, the management in organizations makes a decision that best meets the criteria. In this unit the decision- making processes are examined for its important role in managing organizations. Decisions are made by humans and hence there are many processes and models to be followed. The significance of decision-making activity, the types and process involved in decisions along with understanding the environment for a decision are provided. Decision making techniques and the models used in decision making are also explained. CONCEPT OF DECISION MAKING In managerial process every organization needs to make decisions. Normally decisions are made in the best interest of the organization. For that matter, decisions made by the organization will clear the way forward. Making decisions is a complex activity, be it strategic, business activities or HR matters, or other processes. In smaller organizations managers at all levels are involved in decision making while in bigger and complex organizations a group of professionals are involved in making decisions. Decision making is independent in large organizations and a team of professionals are involved in this exercise. It is important to note that decision making is a consultative process and decisions are made in accumulation. Before arriving at a final decision, the pros and cons are weighed carefully and the consequences of the decision’s impact on the organization as a whole are evaluated. A decision made must ensure positive consequences for the organization towards its overall growths. Decisions are taken to support organizational growth. The day to day operations is rightly built on managerial decisions. Top enterprise companies, use effective communication tools along with normal consultation process to make decisions that would have large scale implications on the company’s prospects. The key tool that brings out decisions is discussions and consultations. For example, a decision taken by the strategic management team in the organization must provide direction on how to embark on the new business activity as suggested. The decision along with directions must have undergone a series of consultative process and being made available with 59 CU IDOL SELF LEARNING MATERIAL (SLM)
implementation team. The cumulative effect of decision taken at one point is a result of involvement of different people in management. Decisions made by strategic managers are to push a new and innovative business line or initiative. At this point the decision taken by strategic managers initiate discussion and consultation among members in the implementation team. In order to arrive at a final decision, there is lot to debate, research and finalize. While arriving at decisions, the management must ask questions like, Is the new proposal viable? Is the decision innovative? Can there be growth in the strategies proposed? Strategic group in the organization must have consultative meetings to find meaningful and feasible solutions to these questions. Making critical decisions is an important attribute for every manager, be it top level or middle or entry level. According to psychologists, nature a human in its existence and by virtue of instinct makes decisions for survival. Managers are also professionals and by and large make decisions in organizations which have an effect on others. Decisions also have an impact on the organization’s existence and growth and hence, managers have this human nature of being able to live and succeed. Here, it is important to note that success depends on the successes of the decisions made by the individual in the organization. In fact, the actions made by a manager are the outcome of a decision. Human beings made many decisions in day to day life, and hence, decision making can be understood as an indispensable part of life. The area of decision making is more profound in business companies, because decisions are made at every step. Managerial functions such as, planning, organizing, staffing, directing, coordinating and controlling are carried through decisions. Therefore, it can be understood that decision-making is a core managerial activity. Some important definitions related to decision making in management are provided below. The book titled “Practice of Management” written by Peter Drucker explains that, “all actions made by a manager are the result of decision making.” The main task of management is to make decisions repeatedly. This is one of the reasons why many people think that management is decision-making. The word ‘decides’ implies that some conclusion or resolution is reached as to what one is expected to do at a later time. According to Manley H. Jones, decision making is “a solution selected after examining several alternatives chosen because the decider foresees that the course of action, he selects will do more than the others to further his goals and will be accompanied by the fewest possible objectionable consequences”. George R. Terry and Stephen Franklin, defines “Decision-making is the selection based on some criteria from two or more possible alternatives.” J.L. Massie provided the definition of decisions in management, “A decision can be defined as a course of action consciously chosen from available alternatives for the purpose of desired result.” 60 CU IDOL SELF LEARNING MATERIAL (SLM)
D.E. McFarland provided the definition, “A decision is an act of choice, wherein an executive form a conclusion about what must be done in a given situation. A decision is an outcome of behaviour which is done after analysing a number of possible alternatives.” Andrew Szilagyi defines decision making as, “a process involving information, choice of alternative actions, implementation, and evaluation that is directed to the achievement of certain goals.” Many more definitions are provided by experts and most of these definitions help us to understand the true meaning of decision making which implies that decision making is an action from a set of alternatives to fulfil an objective. In most cases the objective is pre-determined. The definitions provide some important aspects for decision making. The aspects are: i. Decision-making is a selection process and is concerned with selecting the best type of alternative. ii. Decisions are made to achieve organizational goals. iii. Decision making is concerned with the detailed study of the available alternatives for finding the best possible alternative. iv. Decisions provide an outline of thoughtful consideration and hence it is a mental process. v. Decisions made in the organization influences commitment with all employees. The nature of commitment can be short-term or long-term and depends on the decision made. Decisions are usually interrelated to the organizational life of an enterprise that any change in one area of activity may change the other areas too. The manager is committed to decisions not only from the time that they are taken but up to their successful implementation. TYPES OF DECISION MAKING In this section answers are explored for the crucial question: what are different types of decisions? One part of the answer is good information, and experience in interpreting information. Consultation refers to seeking the views and expertise of other people also helps to make rational decisions. There are also standard aids for decision-making. The different techniques that help to make information clearer and better for analysis and to add numerical and objective precision to decision-making (where appropriate) will reduce the amount of subjectivity. Decisions made objectively are more rational decisions and accepted by one and all. Better decisions are made by managers. They need a supportive environment where they will not be criticized unfairly for making wrong decisions and will receive proper support from their colleagues and superiors. Managers tend to play it safe to avoid risk taking for fear of criticism which can diminish their effectiveness in responding to market changes. However, in spite of these concerns’ decision making is increasingly essential at all levels of managerial positions in organizations. For 61 CU IDOL SELF LEARNING MATERIAL (SLM)
instance, the Board of Directors may be involved in long term strategic decision making to shape the future growth of the organization. Managers at functional and operational level also make decisions while implementing organizational goals and strategies. Given below are some of the types in decision-making in organizations. i. Programmed decisions: These are standard decisions made from day to day routine. Programmed decisions can be written down to a series of steps which can be followed by all employees in the organization. Programmed decisions are concerned with the problems of repetitive nature or routine type matters. A standard procedure is followed for tackling such problems. These decisions are taken generally by lower level managers. Decisions of this type may pertain to e.g. purchase of raw material, granting leave to an employee and supply of goods and implements to the employees, etc. ii. Non-programmed decisions: Non programmed decisions are non-standard and non-routine. Here each decision is not the same as any previous decision. Non-programmed decisions relate to difficult situations for which there is no easy solution. These matters are very important for the organisation. For example, opening of a new branch of the organisation or a large number of employees absenting from the organisation or introducing new product in the market, etc., are the decisions which are normally taken at the higher level. iii. Strategic decisions: Strategic decisions are long term decisions and affect the long-term direction of the organization. These decisions usually involve huge investments or funds. These are non-repetitive in nature and are taken after careful analysis and evaluation of many alternatives. These decisions are taken at the higher level of management. Decisions pertaining to objective of the business, capital expenditure, plant layout, production etc., are examples of strategic decisions. iv. Tactical decisions Tactical decisions are those which a manager makes over and over again adhering to certain established rules, policies and procedures. They are of repetitive nature and related to general functioning. Authority for taking tactical decisions is usually delegated to lower levels in the organization. Tactical decisions are medium-term decisions which deal with how to implement strategy, etc. for example what kind of marketing approach should be used, how many sales staff are needed, etc. v. Operational decisions: Operational decisions are short term decisions and also known as administrative decisions. Operational decisions explain the tactics to implement a goal.An example may be taken to distinguish these decisions. Decisions concerning payment of bonus to employees are a policy decision. On the other hand, if bonus is to be given to the employees, calculation of bonus in respect of each employee is an operating decision. 62 CU IDOL SELF LEARNING MATERIAL (SLM)
Decision making in organizations face constraints such as availability of finance, issues due to rigid policies, existing belief, people feelings, external environmental challenges, and so on. However, some managers and businesses make better decisions than others. Good decisions are a result of good information, excellent management skills, risks and attitudes to risk, experience and natural ability in decision making. Since, businesses depend on each other, depend on suppliers and customers, and decisions cannot be taken in isolation. The effects of any decision will depend on reactions of other groups involved in the effects of the decision. These aspects must be taken into account before making decisions. PROCESS OF DECISION MAKING Baker et al, explains that decision making must start with identification of the decision maker(s), stakeholder(s) in the decision, reducing the possible disagreement about the problem definition, requirements, goals and criteria. A general decision-making process can be divided as provided by the following steps, i. Step 1: Define the problem and identifythe purpose of the decision. In step 1, analysis of the problem is done. The following questions are asked when identifying the purpose of the decision: o What exactly is the problem? o Why should the problem be solved? o What is the impact of the problem and who are affected? o Is there a specific timeline or deadline in solving this problem? ii. Step 2: Information gathering. There are many stakeholders involved in an organization. There can be many factors involved in the organization which could be affected by the problem. In the process of problem solving, the manager should gather as much information related to the factors and stakeholders involved in the problem. Managers can use certain standardized tools, check lists, etc for gathering information related to a problem. These tools can vary from one organization to another. iii. Step 3: Judging the alternatives. In this state, baseline criteria for judging alternatives must be set up. However, when defining the criteria, important aspects namely organizational goals and corporate culture must be taken into consideration. iv. Step 4: Brainstorming is done to evaluate different choices. 63 CU IDOL SELF LEARNING MATERIAL (SLM)
In this step, brainstorming is the listing down all the ideas. Before generating ideas, the causes of the problem are understood and reasons analysed. This is done by tools such as cause and effect diagrams and Pareto chart tool. Cause and effect diagram help the manager to identify all possible causes and the Pareto chart helps to prioritize the causes with highest effect. v. Step 5: The alternative solutions are evaluated. The manager must use judgment principles and decision-making criteria to evaluate each alterative. In this step, experience and effectiveness of judgment principles will come into play. The manager must compare each alternative for their positives and negatives. vi. Step 6: Selecting the best alternative. Again, going through step 1 to step 5, the selection of best alternative is an informed decision since, the manger have already followed a methodology to derive and select the best alternative. vii. Step 7: The decision is executed. The decision is finally made as a plan or activities for execution. The manager will execute the plan or with the help of subordinates. viii. Step 8: Evaluate the results. The outcome of the decision is evaluated. The manager must verify consequences and make corrections in future decisions if the decision already taken is found to have any negative effect. In this way decision making skills are improved in the management. Decision making is effective when the manager weighs the pros and cons of consequences and must favour positive results. In this manner losses to the organization is easier. Managers may stay in control by making the decision and accepting its consequences. 4.5 SUMMARY Decision-making is a core activity in every business. Every manager has a primary task of making decisions and this forms the real essence of management. The unit explains that the major part of decision making involves the analysis of a defined set of alternatives against selection of different criteria. The unit examines decision making processes for its important role in managing organizations. Decisions are made by humans and hence there are many processes and models to be followed, these are covered in the processes in decision making. The types and process involved in decisions are explained. 64 CU IDOL SELF LEARNING MATERIAL (SLM)
KEY WORDS/ABBREVIATIONS • Programmed decisions: Programmed decisions can be written down to a series of steps which can be followed by all employees in the organization. Programmed decisions are concerned with the problems of repetitive nature or routine type matters. • Non Programmed : Non programmed decisions are non-standard and non-routine • Strategic decisions: Strategic decisions are long term decisions and affect the long-term direction of the organization. These decisions usually involve huge investments or funds. These are non-repetitive in nature and are taken after careful analysis and evaluation of many alternatives. • Tactical Decisions: Tactical decisions are those which a manager makes over and over again adhering to certain established rules, policies and procedures. They are of repetitive nature and related to general functioning • Operational decision: Operational decisions are short term decisions and also known as administrative decisions. Operational decisions explain the tactics to implement a goal LEARNING ACTIVITY 1. Evaluate the steps taken by you in most frequently made decisions. Whether you find all these steps followed effective. ………………………………………………………………………………………………… ………………………………………………………………………........................................... 2. Prepare a short note on Managerial decision making done by HR managers during Performance appraisals of employee ………………………………………………………………………………………………… …………………………………………………………………………………………………. UNIT END QUESTIONS (MCQ AND DESCRIPTIVE) A. Descriptive Types Questions 1. Have you ever faced a situation when you had to take a decision, which was not your area of responsibility? What decision did you make and how? 2. You need to take an immediate decision for betterment of your organization, how do you react to this situation? What process will you follow for decision-making in such a critical situation? 3. How many alternative solutions should be considered in making decisions? How do you decide? 4. Explain the meaning of decision making and provide at least 3 definitions given by experts. 65 CU IDOL SELF LEARNING MATERIAL (SLM)
5. Identify and discuss types of decision-making. 6. Do you always take your own decisions? In which situations do you seek other's help for decision-making? B. Multiple Choice Questions 1. 1. Decision making is more important in: a. It helps in business b. Resolving problems and motivates employees c. It provides the competitive edge d. All organizations make decisions e. All of the above 2. Decision making process will consider aspects like, a. Solving the problem quickly b. Approaches to increase sales c. Defining the problem, analysing and evaluation of alternatives d. Using the right tool or technique e. All of these 3. Decision making is influenced by factors such as a. Individual values, goals and priorities b. External factors such as cultural and community values, friends and family c. Honesty, commitment and education d. Fulfilling the organizational obligations e. All of these 4. The method in which a firm analyses different scale of incurring costs and the advantages the firm may gain in terms of benefits is known as a. Risk analysis b. Experimentation 66 CU IDOL SELF LEARNING MATERIAL (SLM)
c. Marginal analysis d. Cost benefit analysis e. Specialized decision model 5. The field of decision-making deals with, 4. d) 5. e) a. Communication and consultations b. Implementing policies in the firm c. Job of a manager d. All of these e. None of these Answer Keys 1. a) 2.C) 3. b) REFERENCES Koontz, O Donnel and Weirich. (2001). Principles of Management. New Delhi: Tata McGraw Hill Publishing Company. Chopra, R.K. (2005). Principles & Practices of Management. New Delhi: Sun India Publication. Tripathi, P.C., and Reddy, P.N. (2006). Principles & Practices of Management. New Delhi: Tata McGraw Hill Publishing Company Behling, O., and Schriesheim, C. (1976), Organisational Behavioul; Theory, Research and Application. Allyn and Bacon: Boston. Drucker, Peter F. (1975), Management Tasks, Responsibilities, Practices. Allied Publishers: New Delhi. Janis, I.L. and Mann, L. (1977), Decision Making: A Psychological Analysis of Conflict, Choice and Commitment. Free Press: New York. Koontz, D. and Donnell, C. (1985), Management: A System and Contingency Analysis of Management Functions, McGraw-Hill, Kogakusha Limited: Tokyo. Simon, H.A. (1960). The New Science of Management Decision, Harper: New York. https://openstax.org/details/books/principles-management http://www.thinkingmanagers.com/business-management/decision- making.php http://www.virtualsalt.com/crebook5.htm www.the-happy-manager.com/decision-making-styles.html 67 CU IDOL SELF LEARNING MATERIAL (SLM)
UNIT–5 ORGANIZING 68 Structure Learning Objectives Introduction Meaning of Organizing Definitions Meaning Nature Characteristics of Organizing Importance Process of organizing Organization as a Structure Forms of Organisation Line Organisation Line and Staff Organisation Types of Staff Functional Organisation Formal and Informal Organization Matrix Organization Summary Key Words/Abbreviations 5.10.Learning Activity 5.11.Unit End Questions (MCQ and Descriptive) 5.12.References LEARNING OBJECTIVES After studying this unit, you will be able to: • State the meaning of organizing function • Analyse the nature & importance of organizing • Discuss the steps in the organizing process • Explain organization structure • Outline various forms of organization CU IDOL SELF LEARNING MATERIAL (SLM)
INTRODUCTION Organizing function in management normally refers to the systematic arrangement of activities and closely follows planning activity. Organizing as a process of management relates to dividing tasks among groups further into activities for each individual. Organizing is essential when two or more people are working or playing in a team. For example, players in a football team are organized and the team manager decides the role of each player, their positions, etc. in order to attain victory over the rival team. Similarly, in proprietorship firms, one man performs all activities in the company. The owner can employ person(s) to assist him however the owner has to determine he work to be done by the employee(s) and provide them with resources to perform the job. In this circumstance the function of organizing becomes necessary and important. As the company grows more people are appointed and there has to be further division and sub- division of work among them. When the organization becomes large, separate departments are created to different functions and each department can have structure and hierarchy. Each departmental head and people in managerial positions has to perform the functions of organizing within their department and integrate their structure to the overall organizational structure. The relationships between departments and smaller units and between different positions are established by the top management in the organization. Hence, the outcome of organizing process is a set of formal relationships which form the overall organizational structure. The structure of the organization determines the various positions and functions in the organization along with their responsibilities to achieve overall organizational aims. According to Chester Barnard the function of organizing is to define the role positions and jobs related to co-ordination between authority and responsibility. This implies the manager always has to organize in order to get results. A manager while organizing work among individuals follows certain general steps as below: i. Identifying the activities ii. Activities are organized for each department or individual iii. Each department is classified for authority in the organization iv. Establishing co-ordination between responsibility and authority In this unit, the focus is on understanding the process of organizing functions which is a key managerial activity. The concept, purpose and meaning of organizing in organizations are discussed in the unit. The processes involved in organizing, the structure of organizations along with principles to be followed in organizing is explained. Discussions are also provided to understand the differences between an informal and formal organization. 69 CU IDOL SELF LEARNING MATERIAL (SLM)
MEANING Definitions of Organizing According to Theo Haimann Organizing is the process of defining and grouping the activities of the enterprises and establishing the authority relationships among them. In performing the organizing function, the manager defines departments and assigns activities so that they can be most effectively executed. According to Lows A. Allen Organizing is the process of identifying and grouping the work to be performed defining and delegating responsibility and authority, and establishing relationship for the purpose of enabling people to work most effectively together in accomplishing objectives. An Organization is defined as a social structure designed to coordinate the activities of two or more people through a division of labor and hierarchy of authority for the achievement of a common purpose or goal. According to Chester Barnard “Organizing is a function by which the concern is able to define the role positions, the jobs related and the co-ordination between authority and responsibility.” According to Oliver Sheldon He defines it as “the process of so combining the work which individual or groups have to perform with facilities necessary for its execution that the duties so performed provide the best channels for official systems. It is positive & co-ordinates application of the available efforts.” Organizing can be defined as a process that initiates implementation of plans by clarifying jobs, working relationships and effectively deploying resources for attainment of identified and desired results (goals). Meaning: The function of organizing is to determine the activities to be performed. Activities in an organization include the creation of departments or units or sections and positions under each department or unit to perform activities assigned for that department. Organizing will also establish relationships between different sections in the organization and is important to maintain co- ordination and harmony. The meaning of organizing can be understood by creating a framework for performance of activities of an organization in a systematic manner. Here it is important to note that the term organizing is different from the term organization and must not be mixed or used inter- changeably. An organization refers to a group of people in an entity and organizing is an important function under management. 70 CU IDOL SELF LEARNING MATERIAL (SLM)
Organizing refers to identifying and grouping activities to be performed, defining and delegating authority, casting responsibility and establishing relationships to enable people to work together effectively to achieve objectives for the organization. NATURE OF ORGANIZING As a function of management, organising refers to the process involving the identification and grouping of activities to be performed, defining, and establishing the authority responsibility relationships. This enables people to work most effectively together in achieving the enterprise objectives. In a general sense, organising consists of determining and arranging for men, materials, machines and money required by an enterprise for the attainment of its goals. In a restricted and operational sense, the term organising means defining the duties and responsibilities of the people employed. and determining the manner in which their activities are to be interrelated. The end result organising is the creation of a structure of duties and responsibilities of people in different positions, grouped according to the similarity and interrelated nature of activities. In other word, the outcome of the organising process is an 'Organisation' consisting CE a group of people working together for the achievement of one or more common objectives. 5.3.1 Characteristics of Organizing The characteristics of an organisation are: a) Group of people: An Organisation comes into existence when a group of people combine their efforts for some common purpose and willingly contribute towards their common endeavour. b) Division of work: Setting of an organisation involves division of the total work into various activities and functions, and assigning the tasks to different persons according to their skill, ability and experience. c) Common purpose: Every organization comes into existence on the. basis of goals of the enterprise which are separate from the personal goals of the people employed. It is the common purpose of the organisation which provides the basis of cooperation among the members of the organisation. d) Vertical and horizontal relationships: An organisation creates cooperative1 relationships between different departments arid divisions as well as between superiors and subordinates. Different functions and activities like production, marketing, financing etc. are integrated for the achievement of proper coordination. The duties and responsibilities of superiors and subordinates in each department or division are also unified so as to serve the purpose of their joint efforts. e) The superior-subordinate relationships established in an organisation are based on the authority which flows from the higher levels of management to the next lower levels, thereby forming a hierarchical chain. This is known as the chain of command, which also determines the line of communication. 71 CU IDOL SELF LEARNING MATERIAL (SLM)
f) Dynamics of organisation: Besides the structural relationships among people which are based on their activities and functions, there exists an organising interaction based on sentiments, attitudes and behaviour of individuals and groups. These aspects of relationship provide a dynamic element to the organisational functioning. They are subject to change from time to time. IMPORTANCE OF ORGANIZING Sound organisation contributes greatly to the continuity and success of the enterprise. Its importance can be discussed below: i) Facilitates administration: Sound organisation facilitates management to relate resource flows continually to overall objectives. It provides an appropriate platform from where management perform the functions of planning, direction coordination, motivation and control. ii) Facilitates growth and diversification: It helps in organisational elaboration. Growth and diversification of activities is facilitated by clear division of work, proper delegation of authority etc. As the organisation expands to a reasonable proportion, the functional type can be replaced by a more flexible decentralised organisation. iii) Permits optimum use of resources: Sound organisation permits optimum use of technical and human resources. The organisation can incorporate the latest technological improvements like computers, electronic data processing machines etc. It permits optimum use of human efforts through specialisation. It also develops people by creating appropriate training and promotion opportunities. Thus, organisation gives a company the greatest possible strength for meeting predicted needs- changing conditions. iv) Stimulated creativity: Specialisation provides individuals whose well-defined duties, clear lines of authority and responsibility. Sound organization 'structure enables managers to turn over routine and repetitive jobs to supporting positions and concentrate on important issues where they can exploit their potential better. Thus, it encourages the creativity of the people. v) Encourages humanistic approach: People can work in team and not like robots or machines. Organisation provides job rotation, job enlargement and enrichment. Jobs are designed to suit human needs and are made meaningful and interesting. Organisation adopts efficient methods of selection, training, remuneration and promotion of employees. Proper delegation and decentralisation, conducive working environment and democratic and participative leadership provide higher, job satisfaction to the employees. It enhances the inter -action among different levels of the management. Although we have discussed the importance of the organisation, a sound organisation structure by itself does not guarantee success. According to Prof. Drucker good organisation structure does not by itself produce good performance - just as a good constitution does not guarantee great presidents, or good laws or a moral society. But a poor organisation structure makes good performance impossible no matter how good the individuals may be. 72 CU IDOL SELF LEARNING MATERIAL (SLM)
PROCESS OF ORGANIZING. In general, the process of organizing follows the processes provide below: i. Determining activities to be performed: This step is important because determining activities will help to organize people to achieve those activities in the organization. Determining activities is more important in business organizations because they undertake economic activities with a view to earn profit. A business organization can be anything such as manufacturing, product development, service provider, etc. Likewise, in a trading organization, purchase, sales and support are the major activities. In carrying out activities like these the business units have to perform a number of activities such as producing, financing, marketing, accounting, staffing, etc. The activities for different organizations are different, but they have to be organized correctly to align with the organizational objectives. Therefore, it is necessary to determine the activities of each organization separately. ii. Major functions are identified to determine activities: This is the next major step. For example, in a manufacturing firm production, selling, finance and personnel are major functions. If the amount of work done with each of these functions is large, separate departments for each of these activities are created to easily supervise each activity within the department. When the major functions are identified a list of activities relating to each function is developed. iii. Grouping and dividing work within each function: In this stage the manager decides how the activities can be grouped based on similarities and relatedness. For example, the activities of a production department can have many workshops where production actually takes place. Further, separate sections may be created for such production related activities as quality control and repairs. Activities can be subdivided in other departments. Divisions and subdivisions are created for performing all types of jobs in the organization. The reasons of dividing and sub-dividing functions and activities are as follows: • The total work may be so large that it cannot be done by a single individual or by a few persons • If the work is divided into smaller units, it becomes easy to assign work to individuals who have the necessary skill and knowledge to perform the work efficiently. iv. Establishing relationship among individuals and groups: Managers divide activities to increase efficiency and to ensure that work is properly done. Relations must be established for activities performed by persons holding different positions within the organization. Each employee in the organization must be clearly and uniquely defined for his/her responsibility, authority and accountability. Conflicts and confusion can be easily eliminated when each individuals and groups in the organization are defined for their roles and responsibilities. Hence, it is important to establish relationships among individuals and groups, therefore, this 73 CU IDOL SELF LEARNING MATERIAL (SLM)
aspect is important for the process of organizing. It would be useful at this stage to explain the meaning of responsibility, authority, and accountability. • Responsibility: Responsibility is the obligation of an employee to perform the assigned duties. When an employee accepts duties, he has to perform those duties in the manner desired by the superior. A manager assigns tasks to subordinates when work has to be shared between them. • Authority: Authority means a person is given certain duties to perform along with the liberty to make decisions to perform the work correctly. A person may not work correctly in the absence of authority. For example, a transactions clerk may not perform his duty, if he is not provided a table, chair, computer, etc. Making right decisions, providing orders and taking corrective actions and so on also falls under the area of authority. For example, to complete a project, an engineer has the authority to procure material, command his/her subordinates and seek assistance from architects, involve experts, etc for completing the project. Authority should always follow responsibility. • Accountability: Accountability implies answerability. When duties and authority are granted to an individual, accountability is established. In this stage the manager will organize the positions in ways that each person has to report to his superior how the work is done and how authority has been used. Accountability is always upwards in the organization. In this way, accountability ensures the work is done as planned and authority is properly used. In ideal conditions a single employee is always accountable for one supervisor. From the above points, the meaning of organizing function can be understood. ORGANIZATION AS A STRUCTURE Organization structure is a result of organizing process, where work is arranged and distributed among the members of a group. The end result of organizing is a framework of formal relationships among different departments and positions. This framework is known as an organization structure. Here the term structure refers to the arrangement of parts and interrelationships among activities and people. For example, an organization structure of a business unit consists of the following elements: i. The number of departments ii. Number of sections, units and positions in each department iii. The function of each department, section and position iv. Number of levels of management v. Responsibility, authority and accountability relationships vi. Channels of communication, or the paths through which information travels from one position to another 74 CU IDOL SELF LEARNING MATERIAL (SLM)
Organizational structure is created by top management and is also referred to as a formal structure. The purpose of such a structure is to perform the activities in a planned and systematic manner. An example of organization structure showing departments is illustrated in figure 9-1. Figure 5. 1: an example of organizational structure In most organizations the structure is created on the basis of functions. The organization structure sets the routine for operations in the organization and lays the foundations for its operation. To understand how decisions are applied in all positions is determined by the organizational structure. Structure helps to understand how the company delegates tasks and responsibilities. Organizational structure can be of different types and available in many models. Some common examples are: flat organizational structure, functional organizational structure, product organizational structure, and geographical organizational structure. Every organization needs a structure in order to operate systematically. The structure developed by an organization is based on its nature of operations and maturity of the organization. 5.7 FORMS OF ORGANISATION Organisation requires the creation of structural relationship among different departments and the individuals working there for the accomplishment of desired goals. Organisation structure is primarily concerned with the allocation of tasks and delegation of authority. The establishment of formal relationships among the individuals working in the organisation is very important to make clear the lines of authority in the organisation and to coordinate the efforts of different individuals in an efficient manner. According to the different practices of distributing authority and responsibility 75 CU IDOL SELF LEARNING MATERIAL (SLM)
among the members of the enterprise, several types of organisation structure have been evolved. They are: 1. Line organisation 2. Line and staff organisation 3. Functional organisation 4. Matrix organisation Line Organisation This is the simplest and the earliest form of organisation. It is also known as \"Military\", \"traditional\", \"Scalar\" or \"Hierarchical\" form of organisation. The line organisation represents the structure in a direct vertical relationship through which authority flows. Under this, the line of authority flows vertically downward from top to bottom throughout the organisation. The quantum of authority is highest at the top and reduces at each successive level down the hierarchy. All major decisions and orders are made by the executives at the top and are handed down to their immediate subordinates who in turn break up the orders into specific instructions for the purpose of their execution by another set of subordinates. A direct relationship of authority and responsibility is thus established between the superior and subordinate. The superior exercises a direct authority over his subordinates who become entirely responsible for their performance to their commanding superior. Thus, in the line organisation, the line of authority consists of an uninterrupted series of authority steps and forms a hierarchical arrangement. The line of authority not only becomes the avenue of command to operating personnel, but also provides the channel of communication, coordination and accountability in the organisation. Prof. Florence enunciates three principles which are necessary to realise the advantages of this system and the non-observance of which would involve inefficiency. • Commands should be given to subordinates through the immediate superior; there should be no skipping of links in the chain of command. • There should be only one chain. That is, command should be received from only one immediate superior. • The number of subordinates whose work is directly commanded by the superior should be limited. The following Figure 5.2 depicts the line organisation: 76 CU IDOL SELF LEARNING MATERIAL (SLM)
Sales Manager Sales Man 1 Sales Man 2 Sales Man 3 Line and Staff Organisation In line and staff organisation, the line authority remains the same as it does in the line organisation. Authority flows from top to bottom. The main difference is that specialists are attached to line managers to advise them on important matters. These specialists stand ready with their speciality to serve line mangers as and when their services are called for, to collect information and to give help which will enable the line officials to carry out their activities better. The staff officers do not have any power of command in the organisation as they are employed to provide expert advice to the line officers. The combination of line organisation with this expert staff constitutes the type of organisation known as line and staff organisation. The 'line' maintains discipline and stability; the 'staff' provides expert information. The line gets out the production, the staffs carries on the research, planning, scheduling, establishing of standards and recording of performance. The authority by which the staff performs these functions is delegated by the line and the performance must be acceptable to the line before action is taken. The following Figure 5.3 depicts the line and staff organisation: Types of Staff The staff position established as a measure of support for the line managers may take the following forms: 77 CU IDOL SELF LEARNING MATERIAL (SLM)
• Personal Staff: Here the staff official is attached as a personal assistant or adviser to the line manager. For example, Assistant to managing director. • Specialised Staff: Such staff acts as the fountainhead of expertise in specialised areas like R&D, personnel, accounting etc. For example, R&D Staff. • General Staff: This category of staff consists of a set of experts in different areas who are meant to advise and assist the top management on matters called for expertise. For example: Financial advisor, technical advisor etc. 5.7.4 Functional Organisation When activities are created in the organization within units and subunits based on functions, it is known as functional structure. In industrial organization, functions such as manufacturing, marketing, finance and personnel constitute as separate units of the organization. The activities connected with each function are placed in the same department/unit. As the volume of activity increases, sub-units are created at lower levels in each unit and the number of persons under each manager at various levels is increased. A simple functional organization structure is shown in figure 5.3 Fig.5.3 Functional organization structure Functional structures in organizations offer the advantage of functional specialization in each unit. This advantage leads to efficiency in operations, efficiency of people, and the organization as a whole derives the benefit of specialized operations. The heads of the functional units are in direct touch with the chief executive who can sort out inter-functional problems, if any, and also coordinate the interrelated functions. The chief executive is also able to be in direct touch with lower level subordinates and thereby have full knowledge of the state of affairs in the organization. However, while the functional arrangement may be well suited to small and medium size organizations, it is incapable of handling the problems of an organization as it grows in size and complexity. 78 CU IDOL SELF LEARNING MATERIAL (SLM)
Formal and Informal Organization Relationships determine the classifications of organizations. There are two types of classifications namely formal organization and informal organization. They are explained below: i. Formal Organization: Formal organizations have well defined jobs, structure and measure of authority and responsibility. It is a conscious determination by which people accomplish goals by adhering to the norms laid down by the structure. Formal organization is an absolute setup in which each individual is responsible for his/her performance. ii. Informal organization: Informal organization refers to the network of personal and social relationships which spontaneously originates within the formal set up. In informal organizations, relationships are developed based on likes, dislikes, feelings and emotions. An example of informal organization is a social network of friends. There is no conscious effort made to have informal organization. In informal setup there are no rules or regulations as in the case of formal organizations. Both these classes of organizations have their own set of characteristics. Formal organization is a result of well-defined organizational structure but, an informal organization has origins to the formal organization. It is important to note that both, formal and informal organizations are required for efficiency and they are two phases of a same concern. Formal organizations are more stable but informal organizations emerge and are dissolved quickly. Therefore, informal organization can be understood as emergent from formal organization. Some of the main differences between formal and informal organization is shown in table 5-1. Table 5-1: The main differences between formal and informal organizations Formal Organization Informal Organization It is created by the top management. Top management has no role in creation of the organization. The organization arises by itself and associates like-minded people together. Formal organization is created to perform jobs in Informal organizations are developed to fulfil a planned and systematic manner. needs of members which cannot be satisfied by formal organization. It is managed by officially appointed managers. Members of the informal group select someone as their leader to take care of the interests of the group members. Managers of formal organization have formal The authority of the leader of informal group 79 CU IDOL SELF LEARNING MATERIAL (SLM)
authority. depends upon the combined support of group Formal organization is permanent and stable. members. This organization is temporary in nature. The size and membership can change from time to time. Matrix Organization Matrix organization structure is another type of structure which is adaptive and aims to combine the advantages of autonomous project organization and functional specialization. In the matrix organization structure, there are functional departments with specialized personnel who are deputed to work full time in different projects sometimes in more than one project under the overall guidance and direction of project managers. When a project work is completed, the individuals attached to it go back to their respective functional department to be assigned again to some other project. Matrix structure is most suited in areas when the organization is engaged in project activities that involve contracts. In this structure there can be many project managers like in a large construction company or engineering firm. Matrix organization is a flexible structure and is an ideal structure in projects that require changing conditions. It facilitates pooling of specialized and technical personnel from functional departments who can be deputed to a number of projects. They acquire valuable experience of handling varied and complex problems in project work. Information exchange is quick and decision making is rapid because the personnel work under the coordinating authority of project managers. The major drawback of matrix organization is that the personnel drawn from specialized functional departments are subjected to dual authority, that of the functional heads and the project managers. The principles of unity of command are thereby sacrificed. Such rapid changes also develop stress and strain in an individual in project management, because of continuous engagement simultaneously between many projects. 5.8 SUMMARY In this unit the process of organizing function is explained. Organizing is an important managerial function because it identifies activities for each department and person, classifies authority in the organization and coordinates the operations between authority and responsibility. The unit focuses on understanding the process of organizing functions which is a key managerial activity. The concepts, purpose and importance of organizing function is explained in the perspective of the management in an organization in general. The processes involved in organizing functions are provided with a view for a manager to understand and follow a sequence of important steps in order to perform organizing effectively. 80 CU IDOL SELF LEARNING MATERIAL (SLM)
KEY WORDS/ABBREVIATIONS • Chain of Command: The line of authority running from the top to the bottom of the organisation. • Departmentation: Grouping of various activities on some well-defined basis. • Formal Organisation: The formal organisation refers to the formal relationships of authority and subordination within a company. • Functional Organisation: A functional structure is one that organisesemployees around skills or other resources. • Informal Organisation: The informal organisation refers to the network of personal and social relations that develop spontaneously between people associated with each other. • Manual: A document that carries instructions. • Organisation: An organisation is a social arrangement which pursues collective goals, which controls its own performance, and which has a boundary separating it from its environment. LEARNING ACTIVITY 1. State characteristics of Organizing ……………………………………………………………………………………………………… ………………………………………………………………………………………………………. 2. Organizing is an important management function. Comment ………………………………………………………………………………………………………… ……………………………………………………………………………………………................... 5.11 UNIT END QUESTIONS (MCQ AND DESCRIPTIVE) A. Descriptive Types Questions 1. State the meaning of organizing function. 2. Explain the importance of organizing with examples. 3. List down the steps in the process of organizing. 4. Describe the nature of organizing. 5. \"Organizing is the backbone of management\". Comment. 6. When it is your responsibility to organise and plan a project what steps do you take? B.Multiple Choice Questions 81 1. The first step in organizing is CU IDOL SELF LEARNING MATERIAL (SLM)
a. Identify activities b. Develop organizational structure c. Understand the top management d. Follow instructions from senior management e. All of the above 2. The meaning of organizing function emphasizes on a. Developing a framework b. Perform activities in the firm in systematic manner c. Establish relationships between units and individuals in the firm d. Develop a purpose for organizing e. All of the above 3. Clarity in organizational structure provides a. Good team work b. Makes manager’s job easier c. Good co-ordination d. Sense of security e. None of the above 4. Work in an organization can be done efficiently and effectively when a. Work is determined before assigning them to employees b. Work is divided into smaller units c. There is good relationship between managers and employees d. Employees understand their responsibility e. All of the above 5. In an organization if jobs are well defined, each carrying a measure of authority and responsibility, such an organization is called a. Informal organization b. Governmental organization c. Bureaucratic organization d. Formal organization e. None of the above Answer 1. a) 2. e) 3. c) 4. b) 5. d) 82 CU IDOL SELF LEARNING MATERIAL (SLM)
REFERENCES Koontz, O Donnel and Weirich. (2001). Principles of Management. New Delhi: Tata McGraw Hill Publishing Company. Chopra, R.K. (2005). Principles & Practices of Management. New Delhi: Sun India Publication. Tripathi, P.C., and Reddy, P.N. (2006). Principles & Practices of Management. New Delhi: Tata McGraw Hill Publishing Company Ferrell, M.Z., Dimensions of Organisations: Environment, Context, Structure, Process, and Performance, Santa Monica: Goodyear Publishing Company, Inc., 1979. Gibson, Ivancevich, Donnelly, & Konopaske, (2003), Organisations: Behaviour, Structure, Processes, 11th Ed., Boston: McGraw Hill, 2003. Louis A. Allen, Management and Organisation, McGraw-Hill, New York, 1978. Melcher, A.J., Structure and Process of Organisations: A Systems Approach, New Jersey: Prentice-Hall, Organisational Design, 1976. PG Aquinas, Organisational Behaviour, Excel Books, New Delhi. www.about-knowledge.com www.managementstudyguide.com www.noweco.com www.rohan.sdsu.edu 83 CU IDOL SELF LEARNING MATERIAL (SLM)
UNIT–6 ORGANIZATIONAL STRUCTURE Structure Learning Objectives Introduction Definition and meanings Line organization structure Advantages of Line Organization Disadvantages of Line Organization Staff Organizational Structure Line and Staff Organizational Structure Conflict between Line and Staff and their resolution Functional Organizational Structure Committee Form Modern Organization structure Project Organization structure 6.10.Matrix organization Free Form Structure Formal vs. Informal Organizations 6.13.Summary 6.14.Key Words/Abbreviations 6.15.Learning Activity 6.16.Unit End Questions (MCQ and Descriptive) 6.17.References 6.0 LEARNING OBJECTIVES After studying this unit, you will be able to: • State the meaning of organizational structure • Analyse the objectives of organizational design and understand the factors affecting organizational design • Identify and analyse different types of organizational structures • Discuss the need of modern organization structure 84 CU IDOL SELF LEARNING MATERIAL (SLM)
INTRODUCTION The concept of organization structure and design was formulated by management writers such as Henry Fayol and Max Weber in 1900s. Organization design decisions are typically made by senior managers and this applies to any type of organization. The principles followed in design of organization structure provide valuable insights into designing effective and efficient organizations. In organizations many different activities are performed and they need to be coordinated. Organization structure is designed for division of tasks, grouping of activities, co-ordination and control of tasks in the organization. In order to have a stable structure all components and dimensions of organization structure is required for its creation. Also, well designed organization structures facilitate smooth functioning of the organization. The structure of the organization describes functions, tasks and authority of each department, divisions and individual employees along with showing the relationships between them. A well- designed organization structure also shows the line of command, communication and procedures along with describing the number of employees in each division and unit. Structure divides departments, divisions and individuals on the basis of tasks, functions and authorities. It is important to note that different processes in the organization are facilitated by organizational structure. A general rule of thumb is that the organization structure should enhance the progress of processes. It is not recommended to breakdown processes unnecessarily because of the structure of the organization. The structure has to provide co-ordination mechanism if the process is divided over more units. In addition to structure, the concept of responsibility is central to a theory of collective agency and organizations. Responsibility issues arise any time a group of subordinates act collectively in order to achieve certain objectives. Plans are made for the collective action of the group and specific people are stated to be ‘‘responsible’’ for certain tasks. If something goes wrong certain people or employees might be found ‘‘responsible’’ for what happened, they might be held ‘‘accountable’’ and be ‘‘blamed’’. The notion of responsibility displays differences related with particular aspects of collective departments, obligation and knowledge. The way obligations and knowledge within groups of employees are illustrated is in turn related with organizational structure those groups display. The possibility to delegate tasks to subordinated agents, or to successfully inform other groups about the actual state of the organization are some of the aspects that influence the assessment of responsibilities within the firm. Further, responsibilities will also include the possibility to put effective monitoring and recovery mechanisms in place. Hence, in companies, hierarchy levels, relationships between groups or individuals in the structure and responsibilities play a role in the development of organization structures. In this unit the organizational structure and design are explained for their types and differences as applied in organizations. Discussions on modern organizational structure are also provided in the unit. 85 CU IDOL SELF LEARNING MATERIAL (SLM)
• Understand and analyse project, matrix and free form organization structures DEFINITION &MEANING Organizational structure can be understood as an established pattern to show relationships among the different components in the organization. Organization structure represents the network of relationships between individuals and positions within the organization. Given below are a few definitions, Jennifer and Gareth defined organization structure as, “Organizational structure is the formal system of task and reporting relationships that controls, coordinates, and motivates employees so that they cooperate and work together to achieve an organization's goals. The basic building blocks of organizational structure are differentiation and integration.” Pascale and Anthony stated that, “Organizational structure provides the skeletal representation of the organization. Muscle and vital organs are obtained from other sources. Organization structures help the organization to make decisions, implement changes wherever required and is a powerful tool for expressing how the organization wants to work and what needs to be accomplished.” The organizational framework is described in the organization structure. Just as human beings have a skeletal structure organization have structures that define their structure and hierarchy. It is like the architectural plan of a building. When developing an organizational structure, managers look into factors such as specialization, communication, skills and problems in creating authority levels etc. Peter Drucker explained organizational structure, \"In discussing organization structure, we have to ask both what kind of structure is needed and how it should be built. When such questions are answered systematically the organization can arrive at a sound, effective and durable structure”. The first task is to identify the kind of structure the enterprise needs. Organizations are developed to achieve goals or business results and hence the structure is not an end in itself. It is a means which is indispensable and a wrongly developed structure can seriously damage business performance and may even destroy it. The starting point of structure is to analyse the business and develop a structure as required by business operations. The basic question while discussing organization structure must be: what is our business and what should it be? Organization structure must be designed so as to make possible the attainment of the objectives of the business. In order to develop a specific organizational structure three specific analyses namely, activities; decisions; and relation analysis is done based on business operations to arrive at a final structure. In organizational structures the work activities are determined by the manager. The manager also develops job descriptions, and organizes people into groups and assigns them to superiors. The manager assigns goals and determines deadlines and establishes standards of performance. Reporting 86 CU IDOL SELF LEARNING MATERIAL (SLM)
systems establish the controls for business operations. A structural organization implies the following things: i. The formal relationships with well-defined duties and responsibilities ii. The hierarchical relationships between superior and subordinates within the organization iii. The tasks or activities assigned to different persons and the departments iv. Co-ordination of the various tasks and activities A set of policies, procedures, standards and methods of evaluation of performance are formulated to guide the people and their activities. The arrangement which is deliberately planned is the formal structure of organization. However, the actual operations and behaviour of people are not always governed by the formal structure of relations. Thus, the basis for the organization is provided by the social and psychological forces and the operating structure. Organizational structure types are created and classified on the basis of arrangement of activities. There are three broad types of structures: Functional, Divisional, and Adaptive Structures. These three types are briefly explained below: i. Functional Structure: In this structure, the organization is divided into segments based on the functions when managing. In functional structure the efficiency of the functional groups is enhanced. For example, the structure followed in a software company is functional because software engineers will only staff the entire software development department. This way, management of this functional group becomes easy and effective. ii. Divisional Structure: In the divisional structure the organization divides the functional areas into divisions. Each division is equipped with its own resources in order to function independently. There can be many bases to define divisions. Divisions can be defined based on the geographical basis, products/services basis, or any other measurement. For example, if we consider the company named General Electric, it has a microwave division, turbine division, etc. Each division in this organization have teams separately for marketing, finance, etc. Divisional structure in the company can be considered as a micro-company with the main organization. iii. Adaptive organization structure: Adaptive organization structures are new designs based on many assumptions. This structure is made to overcome bureaucracy, because bureaucracy leads to mechanical rules and regulations with limited values for motivating the modern worker. Adaptive organizations are designed to operate in a dynamic environment. Further, personnel, task and environment are related to each other and fit together properly for the best structure and output. In addition to the three broad types of organizational structures, the following structures are also examined. 87 CU IDOL SELF LEARNING MATERIAL (SLM)
LINE ORGANIZATIONAL STRUCTURE Line organization contains only one position. The structure contains line positions and job positions are established to make decisions in order to achieve specific goals. This is the simplest and the earliest form of organization. It is also known as \"Military\", \"traditional\", \"Scalar\" or \"Hierarchical\" form of organization. The line organization represents the structure in a direct vertical relationship through which authority flows. Under this, the line of authority flows vertically downward from top to bottom throughout the organization. The quantum of authority is highest at the top and reduces at each successive level down the hierarchy. All major decisions and orders are made by the executives at the top and are handed down to their immediate subordinates who in turn break up the orders into specific instructions for the purpose of their execution by another set of subordinates. A direct relationship of authority and responsibility is thus established between the superior and subordinate. The superior exercises a direct authority over his subordinates who become entirely responsible for their performance to their commanding superior. Thus, in the line organization, the line of authority consists of an uninterrupted series of authority steps and forms a hierarchical arrangement. The line of authority not only becomes the avenue of command to operating personnel, but also provides the channel of communication, coordination and accountability in the organization. Prof. Florence enunciates three principles which are necessary to realize the advantages of this system and the non-observance of which would involve inefficiency. 1. Commands should be given to subordinates through the immediate superior; there should be no skipping of links in the chain of command. 2. There should be only one chain. That is, command should be received from only one immediate superior. 3. The number of subordinates whose work is directly commanded by the superior should be limited. The following Figure 6.1 depicts the line organization: 88 CU IDOL SELF LEARNING MATERIAL (SLM)
Figure 6.1 Line Organization Advantages of Line Organization ▪ It is the easiest to establish and simplest to explain to the employers. ▪ It fixes responsibility for the performance of tasks in a definite manner upon certain individuals. ▪ There is clear-cut identification of authority and responsibility relationship. Employees are fully aware of the boundaries of their job. ▪ It is most economical and effective. ▪ It makes for unity of control thus conforming to the scalar principle of organization. ▪ It ensures excellent discipline in the enterprise because every individual knows to whom he is responsible. The subordinates are also aware of the necessity of satisfying their superior in their own interests. ▪ It facilitates prompt decision-making because there is definite authority at every level. ▪ As all the activities relating to one department or division are managed by one executive, there can be effective coordination of activities. ▪ 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 organization to changing conditions. ▪ Under this system, responsibility and authority are clearly defined. Every member of the organization 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. Disadvantages of Line Organization ▪ With growth, the line organization makes the superiors too overloaded with work. Since all work is done according to the wishes of one person alone, the efficiency of the whole department will come to depend upon the qualities of management displayed by the head of that department. If therefore, something happens to an efficient manager, the future of the department and of the concern as a whole would be in jeopardy. ▪ Being an autocratic system, it may be operated on an arbitrary, opinionated and dictatorial basis. ▪ Under this system, the subordinates should follow the orders of their superior without expression their opinion on the orders. That means there is limited communication. 89 CU IDOL SELF LEARNING MATERIAL (SLM)
▪ There may be a good deal of nepotism and favoritism. This may result in efficient people being left behind and inefficient people getting the higher and better posts. ▪ The line organization suffers from lack of specialized skill of experts. Modern business is so complex that it is extremely difficult for one person to carry in his head all the necessary details about his work in this department. ▪ Line organization is not suitable to big organizations because it does not provide specialists in the structure. Many jobs require specialized knowledge to perform them. ▪ If superiors take a wrong decision, it would be carried out without anybody having the courage to point out its deficiencies. ▪ The organization is rigid and inflexible. ▪ There is concentration of authority at the top. If the top executives are not capable, the enterprise will not be successful. Prof. Florence, sums up the inefficiencies of the line organization system under three heads: (i) Failure to get correct information and to act upon it; (ii) red-tape and bureaucracy; (iii) Lack of specialized skill or experts… while commands go down the line under the hierarchical system information is supposed to be coming up the line.\" In spite of these drawbacks, the line organization structure is very popular particularly in small organizations where there are less number of levels of authority and a small number of people. STAFF ORGANIZATIONAL STRUCTURE In staff organization structure the line position and staff position is represented in the organization. The line position in the direct chain of command is responsible for the achievement of an organizational goals and the staff position is intended to provide expertise, advice and support for line positions. Here direct authority is allowed for line officers or managers, also known as line authority. This line authority is exercised by them to achieve the organizational goals. Staff authority provides a manager with authority to advice the line managers. This is also known as functional authority. An organization where staff’s departments have authority over line personnel in narrow areas of specialization is known as functional authority organization. LINE AND STAFF ORGANIZATIONAL STRUCTURE Large enterprises fall into this category of line and staff organizational structure. These organizations have direct, vertical relationships between different levels and also specialists responsible for advising and assisting line managers. Such organizations have both line and staff departments. Managers in staff departments provide and support line officer with advice and assistance in certain 90 CU IDOL SELF LEARNING MATERIAL (SLM)
specialized areas such as quality control advising production department. Figure 6.2 provides an illustration for line and staff organization. Figure 6.2: Line and staff organization structure Advantages of Line and Staff Organisation ▪ It brings expert knowledge to bear upon management and operating problems. Thus, the line managers get the benefit of specialised knowledge of staff specialists at various levels. ▪ The expert advice and guidance given by the staff officers to the line officers benefit the entire organisation. ▪ As the staff officers look after the detailed analysis of each important managerial activity, it relieves the line managers of the botheration of concentrating on specialised functions. ▪ Staff specialists help the line managers in taking better decisions by providing expert advice. Therefore, there will be sound managerial decisions under this system. ▪ It makes possible the principle of undivided responsibility and authority, and at the same time permits staff specialisation. Thus, the organisation takes advantage of functional organisation while maintaining the unity of command. ▪ It is based upon planned specialisation. ▪ Line and staff organisation has greater flexibility, in the sense that new specialised activities can be added to the line activities without disturbing the line procedure. Disadvantages of Line and Staff Organisation ▪ Unless the duties and responsibilities of the staff members are clearly indicated by charts and manuals, there may be considerable confusion throughout the organisation as to the functions and positions of staff members with relation to the line supervisors. 91 CU IDOL SELF LEARNING MATERIAL (SLM)
▪ There is generally a conflict between the line and staff executives. The line managers feel that staff specialists do not always give right type of advice, and staff officials generally complain that their advice is not properly attended to. ▪ Line managers sometimes may resent the activities of staff members, feeling that prestige and influence of line managers suffer from the presence of the specialists. ▪ The staff experts may be ineffective because they do not get the authority to implement their recommendations. ▪ This type of organisation requires the appointment of large number of staff officers or experts in addition to the line officers. As a result, this system becomes quite expensive. ▪ Although expert information and advice are available, they reach the workers through the officers and thus run the risk of misunderstanding and misinterpretation. ▪ Since staff managers are not accountable for the results, they may not be performing their duties well. ▪ Line mangers deal with problems in a more practical manner. But staff officials who are specialists in their fields tend to be more theoretical. This may hamper coordination in the organisation. Conflict between Line and Staff and their resolution Line and staff relationship are based on the assumption that both support each other harmoniously to achieve organizational objectives. However, there are frequent instances of conflict between line and staff in the organization. This results in loss of time and consequently diminished organizational effectiveness. Therefore, there is a need for analyzing the sources of line and staff conflict and then to take actions to overcome the problem of conflict. Given below are some of the common challenges faced by managers with staff: i. Dilution of authority ii. Stealing show iii. Lacks of practical knowledge iv. Lacks human skills v. Domination of manager vi. Easy access to top management vii. Stress on paper work The claims made by staff executives against line include, i. Resistance to new plans and ideas ii. Inadequate support from line executive 92 CU IDOL SELF LEARNING MATERIAL (SLM)
iii. Inadequate scope for use of authority iv. Lack of support from to management v. Limited co-operation from line executive vi. Supply of inadequate information vii. Absence of authority The above reasons cause conflict and friction between the line executives and staff personnel. In order to have competition between staff a certain amount of conflict is desirable, and conflicts are also unavoidable in organizations. However, extreme and prolonged line-staff conflict can be very dangerous to the organization. Relationships can be improved significantly between line managers and employees by observing the following steps: i. Clarify relationships: Authority provided for staff and line must be defined clearly and precisely. ii. Educate line staff: Line managers must provide consideration to staff advice and must be willing to follow recommendations if they are in the best interests of the organization. iii. Staff advice: Line executives must consult and seek staff advice as a matter of habit. iv. Inform staff: Line manager should not take action directly affecting staff without informing the staff. v. Sell advice: The problems faced by line executives must be understood by staff and their work must also be appreciated. vi. Encourage line: Staff should encourage and educate line managers by letting them know what they can do for line. vii. Overcome resistance: Staff must support changes on the part of line managers. Resistance to change must be overcome. viii. Completed staff work: Staff experts should fully consider their suggestions before putting them before line executives. In cases where employees are not able to overcome differences or resolve conflicts, the organization can consider programs such as employee assistance programmes. Depending on scope of programme, they can provide mediation for employees or other effective strategies to resolve work-related conflict. 93 CU IDOL SELF LEARNING MATERIAL (SLM)
FUNCTIONAL ORGANIZATIONAL STRUCTURE When activities are created in the organization within units and subunits based on functions, it is known as functional structure. In industrial organization, functions such as manufacturing, marketing, finance and personnel constitute as separate units of the organization. The activities connected with each function are placed in the same department/unit. As the volume of activity increases, sub-units are created at lower levels in each unit and the number of persons under each manager at various levels is increased. A simple functional organization structure is shown in figure 6.3 Figure 6.3: An illustration of functional organization Structure Functional structures in organizations offer the advantage of functional specialization in each unit. This advantage leads to efficiency in operations, efficiency of people, and the organization as a whole derives the benefit of specialized operations. The heads of the functional units are in direct touch with the chief executive who can sort out inter-functional problems, if any, and also coordinate the interrelated functions. The chief executive is also able to be in direct touch with lower level subordinates and thereby have full knowledge of the state of affairs in the organization. However, while the functional arrangement may be well suited to small and medium size organizations, it is incapable of handling the problems of an organization as it grows in size and complexity. Advantages of Functional Organization • Functional organization is based on expert knowledge. Every functionary in charge is an expert in his area and can help the subordinates in better performance in his area. • Division of labour is planned not incidental. • As there is not scope for one-man control in this form of organization, this system ensures co- operation and teamwork among the workers. • This system ensures the separation of mental functions from manual functions. • It helps mass production by standardization and specialization. • This system ensures maximum use of the principle of specialisation at every work point. 94 CU IDOL SELF LEARNING MATERIAL (SLM)
• As there is joint supervision in the organisation, functional organisation reduces the burden on the top executives. • Functional organization offers a greater scope for expansion as compared to line organization. It does not face the problem of limited capabilities of a few line managers. • The expert knowledge of the functional mangers facilitates better control and supervision in the organization. Disadvantages or Demerits of Functional Organization ▪ It is unstable because it weakens the disciplinary controls, by making the workers work under several different bosses. Thus, functional organisation violates the principle of unity of command. ▪ Under this type of organisation, there are many foremen of equal rank. This may lead to conflicts among them. ▪ The co-ordinating influence needed to ensure a smoothly functioning organisation may involve heavy overhead expenses. ▪ The inability to locate and fix responsibility may seriously affect the discipline and morale of the workers through apparent or actual contradiction of the orders. ▪ This system is very costly as a large number of specialists are required to be appointed. ▪ A functional manager tends to create boundaries around himself and think only in term of his own department rather than of the whole enterprise. This results in loss of overall perspective in dealing with business problems. ▪ It is difficult for the management to fix responsibility for unsatisfactory results. COMMITTEE FORM A committee refers to a body of persons entrusted with discharging some assigned functions collectively as a group. Committees may be permanent (standing) or temporary (ad hoc) bodies. Committees are found to exist in different areas and levels of an organizational structure, in both business and non-business institutions. The committees due to its advantages, is very often preferred by different organizations. However, a committee organization is rarely found in its pure form, it is usually found in addition to a line and staff organization. The committee itself may be organized with line authority. It is usually vested with powers of decision making and its execution. Command of authority is assumed by the committee in the organization and the committee functions as one single unit named executive. Where it is organized on staff authority it has merely an advisory function. The example of a group executive is the board of a business company where the various committees of directors (both standing and ad hoc) as well as other committees at lower levels of organization are staff or advisory committees. The example committees at lower levels of organization are staff or advisory committees. The example of a group executive of 'plural executive' where it is organized on staff authority, it has merely an advisory function. 95 CU IDOL SELF LEARNING MATERIAL (SLM)
Types of Committees ❖ Line committee: If a committee is vested with the authority and responsibility to decide and whose decisions are implemented, it is known as line committee. ❖ Staff committee: If a committee is appointed merely to counsel and advise, it is known as a staff committee. ❖ Formal committee: When a committee is constituted as a part of the organisation structure and has clear-cut jurisdiction, it is a formal committee. ❖ Informal committee: An informal committee is formed to advice on certain complicated matters. It does not form part of the organisation structure. ❖ Coordinating committee: It is constituted to coordinate the functioning of different departments. ❖ Executive committee: It is a committee which has power to administer the affairs of the business. ❖ Standing committee: are formal committees that are of permanent character. ❖ Ad hoc committee: They are temporary bodies. It is appointed to deal with some special problem and stops functioning after its job are over. Advantages of Committee ▪ A committee is an effective method of bringing the collective knowledge and experience of a number of persons. Therefore, many multi-dimensional and complex problems of modern enterprises, which cannot be solved satisfactorily by individual managers, can be solved by committees. ▪ Committees offer scope for group deliberations and group judgment. Results obtained by group deliberation and group judgment are likely to be better than those obtained by individual judgment. ▪ When it is necessary to integrate varying points of view, which cannot conveniently be coordinated by individuals, the committee may be used to bring about coordination. ▪ The management can give representation to the employees in various committees. This will motivate the employees for better performance as they feel that they have a say in the affairs of the organisation. ▪ A committee form of organisation facilitates pooling of authority of individual managers for making some type of decisions of an inter-departmental nature. ▪ A committee form of organisation tends to promote organisational cohesiveness. Group endeavour, team spirit and collective responsibility are control to the philosophy ofcommittees. Disadvantages of Committee ▪ If a manager has an opportunity to carry a problem to a committee, he may take it as a means of avoiding decision-making or to escape the consequences of an unpopular decision. 96 CU IDOL SELF LEARNING MATERIAL (SLM)
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