The Role of Management in an Organization

• Management may be described as the people who design an organization's structure

and determine how different aspects of the organization will interact.

• Management entails six basic functions: planning, organizing, staffing, leading,

controlling, and motivating.

• Different levels of management will participate in different components of this design

process, with upper management creating the initial organizational architecture and
structure.

• Organizational design is largely a function based on systems thinking: identifying the

moving parts within an organization that adds value and ensuring that these parts
function together as an effective and efficient whole.

• Organizational design is less static in modern organizations; therefore, management

must actively adapt the organizational design to various challenges, opportunities, and
technological improvements to maintain competitive output.

The realm of managers is expanding. As a leader, you’ll be a role model in the organization,
setting the tone not just for what gets done but how it gets done.

Early Management Principles

Henri Fayol

● develop an “administrative science” and developed principles that he thought all

organizations should follow if they were to run properly.
Fayol’s 14 Principles of Management

1. Specialization/Division of Labor

● By specializing in a limited set of activities, workers become more efficient and

increase their output.

2. Authority/Responsibility Managers

● must have the authority to issue commands, but with that authority comes the
responsibility to ensure that the work gets done.

3. Discipline

● Workers must obey orders if the business is to run smoothly.

But good discipline is the result of effective leadership: workers must understand
the rules and management should use penalties judiciously if workers violate the
rules.

4. Unity of Command

● An employee should receive orders only from one boss to avoid conflicting
instructions.

5. Unity of Direction

● Each unit or group has only one boss and follows one plan so that work is
coordinated

6. Subordination of Individual Interest

● The interests of one person should never take precedence over what is best for
the company as a whole.

7. Remuneration

● Workers must be fairly paid for their services.

8. Centralization

● Centralization refers to decision-making: specifically, whether decisions are

centralized (made by management) or decentralized (made by employees). Fayol
 believed that whether a company should centralize or decentralize its
decision-making depended on the company’s situation and the quality of its
workers.

9. Line of Authority

● The line of authority moves from top management down to the lowest ranks. This
hierarchy is necessary for the unity of command, but communication can also
occur laterally if the bosses are kept aware of it. The line should not be
overextended or have too many levels.

10. Order

● Orderliness refers both to the environment and materials as well as to the

policies and rules. People and materials should be in the right place at the right
time.

11. Equity

Fairness (equity), dignity, and respect should pervade the organization. Bosses must
treat employees well, with a “combination of kindliness and justice.”

12. Stability of Tenure

● Organizations do best when tenure is high (i.e., turnover is low). People need
time to learn their jobs, and stability promotes loyalty. High employee turnover is
inefficient.

13. Initiative

● Allowing everyone in the organization the right to create plans and carry them out
will make them more enthusiastic and will encourage them to work harder.

14. Esprit de Corps

● Harmony and team spirit across the organization build morale and unity.

The Organizational Chart

• Organization charts are a vital tool of management and can be classified into three
broad categories: hierarchical, matrix, and flat (or horizontal).

• Organization charts illustrate the structure of an organization, the relationships and

relative ranks of its business units/divisions, and the positions or roles assigned to
 each unit/division.

• Before working with an organization, employees should procure a copy of its

organizational chart. A new employee or manager can then understand how authority
is distributed within the organization and with whom to consult about various concerns.

The Three Dimensions of Organization Structure

The organization structure can be analyzed in three ways.

1. Based on its configuration, or its size and shape as depicted on an organization

chart.

2. In terms of its operational aspects or characteristics, such as separation of

specialized tasks, rules and procedures, and decision making.

3. Finally, it can be examined based on responsibility and authority within the

organization.

The Organization Structure

● is a system of task, reporting, and authority relationships within which the work of
the organization is done.

The structure defines

● the form and function of the organization’s activities

● how the parts of an organization fit together, as in an organization chart

Characteristics of Organizational Structures

• Organizational structures

- provide basic frameworks to help operations proceed smoothly and

functionally.

• Span of control refers to

- the number of subordinates a supervisor has; it is used as a means of

ensuring proper coordination and a sense of accountability among
employees.
• Departmentalization is

- the basis by which an organization groups tasks together. There are five
common approaches: functional, divisional, matrix, team, and network.

• Centralization occurs

- when decision-making authority is located in the upper organizational

levels.

Centralization increases consistency in the processes and procedures that

employees use in performing tasks.

• Decentralization occurs

- when decision-making authority is located in the lower organizational

levels.

With decentralized authority, important decisions are made by middle-level

and supervisory-level managers, thereby increasing adaptability.

Administrative Hierarchy

- is a system of reporting relationships in the organization, from the first level up

through the highest managerial levels. It results from the need for supervisors
and managers to coordinate the activities of employees.

Departmentalization Organization

refers to work organizations that are divided into separate departments each with
specialized functions.

structures differ in terms of departmentalization, which is broadly categorized as either

functional or divisional.

Organizations using functional structures group jobs based on similarity in functions.

Such structures may have departments such as marketing, manufacturing, finance,

accounting, human resources, and information technology.
In these structures, each person serves a specialized role and handles large volumes of
transactions.

● For example, in a functional structure, an employee in the marketing department

may serve as an event planner, planning promotional events for all the products
of the company.

In organizations using divisional structures, departments represent the unique

products, services, customers, or geographic locations the company is serving.

Thus each unique product or service the company is producing will have its own
department.

Within each department, functions such as marketing, manufacturing, and other roles
are replicated.

In these structures, employees act like generalists as opposed to specialists.

Instead of performing specialized tasks, employees will be in charge of performing

many different tasks in the service of the product.

● For example, a marketing employee in a company with a divisional structure may

be in charge of planning promotions, coordinating relations with advertising
agencies, and planning and conducting marketing research, all for the particular
product line handled by his or her division.

Each type of departmentalization has its advantages.

Functional structures tend to be effective when an organization does not have a large
number of products and services requiring special attention.

When a company has a diverse product line, each product will have unique demands,
deeming divisional (or product-specific) structures more useful for promptly addressing
customer demands and anticipating market changes.

Functional structures are more effective in stable environments that are slower to
change. In contrast, organizations using product divisions are more agile and can
perform better in turbulent environments.

The type of employee who will succeed under each structure is also different.
There are two basic perspectives about who reports to whom and who has authority
and responsibility.

1. Chain of command

● refers to the hierarchical arrangement of authority and responsibility which flows

in a clear, unbroken vertical line from the highest executive to the lowest
employee. Clarity of direction is the basis for the chain.

2. Unity of command
 ● holds that no subordinate should receive direction from more than one superior.
In the session on departmentalization you will realize that the matrix structure
breaks this principle.

Two Configurations: Mechanistic and Organic Structures

The different elements making up organizational structures in the form of formalization,

centralization, number of levels in the hierarchy, and departmentalization often coexist

Mechanistic Structures

● are those that resemble a bureaucracy.

Disadvantages of Mechanic Structures

- These structures are highly formalized and centralized.

- Communication tends to follow formal channels

- employees are given specific job descriptions delineating their roles and
responsibilities.

- often rigid and resist change, making them unsuitable for innovativeness and
taking quick action.

- have the downside of inhibiting entrepreneurial action

- discourage the use of individual initiative and innovation on the part of

employees.

- they also limit individual autonomy and self-determination, which will likely lead to
lower levels of intrinsic motivation on the job.

Advantages of Mechanic Structures

- The main advantage of a mechanistic structure is its efficiency.

- Offers structure in new business ventures
Organic Structures

● are flexible and decentralized, with low levels of formalization.

Advantages of Organic Structures

- communication lines are more fluid and flexible.

- Employee job descriptions are broader

- employees are asked to perform duties based on the specific needs of the
organization at the time as well as their own expertise levels.

- Organic structures tend to be related to higher levels of job satisfaction on the

part of employees.

- These structures are conducive to entrepreneurial behavior and innovativeness.

Basic Types of Organizations

From a business perspective, the choice of organizational design has substantial

implications for strategy, authority distribution, resource allocation, and functional
approaches.

● Organizations fall into one of four basic types:

- pyramids/hierarchies
- committees/juries
- matrix organizations
- ecologies.

● A pyramid/hierarchy

- has a leader who is responsible for making all decisions that affect the
organization. This leader manages other organizational members.

● Committees/juries

- consist of groups of peers who decide collectively, sometimes by casting

votes, on the appropriate courses of action within the organization.
 ● Matrix organizations

- assign workers to more than one reporting line in an attempt to maximize

the benefits of both functional and decentralized organizational forms.

● In ecologies

- each business unit represents an individual profit center that holds

employees accountable for the unit's profitability.

Matrix Organizations

● have a design that combines a traditional functional structure with a product

structure

Employees reporting to department managers are also pooled together to form project
or product teams.

As a result, each person reports to a department manager as well as a project or

product manager.

Product managers have control and say over product-related matters, while department
managers have authority over matters related to company policy

Using the matrix structure may increase communication and cooperation among
departments because project managers will need to coordinate their actions with those
of department managers.

Matrix structure increases the frequency of informal and formal communication within
the organization.

Matrix structures also have the benefit of providing quick responses to technical
problems and customer demands.
The existence of a project manager keeps the focus on the product or service provided.
In a matrix, each employee reports to two or more managers. This situation is ripe for
conflict.

Because multiple managers are in charge of guiding the behaviors of each employee,
there may be power struggles or turf wars among managers.

As managers are more interdependent compared to a traditional or product-based

structure, they will need to spend more effort coordinating their work.

From the employee’s perspective, there is potential for interpersonal conflict with team
members as well as with leaders.
The presence of multiple leaders may create role ambiguity or, worse, role
conflict—being given instructions or objectives that cannot all be met because they are
mutually exclusive.
The necessity to work with a team consisting of employees with different functional
backgrounds increases the potential for task conflict at work.

Solving these problems requires a great level of patience and proactivity on the part of
the employee.

Boundaryless Organizations

● is a term coined by Jack Welch it refers to an organization that eliminates

traditional barriers between departments as well as barriers between the
organization and the external environment.

Types of boundaryless organizations

● Modular Organization

- An organization in which all nonessential functions are outsourced

The idea behind this format is to retain only the value-generating and
strategic functions in-house, while the rest of the operations are
outsourced to many suppliers.

● Strategic alliances

- two or more companies find an area of collaboration and combine their

efforts to create a partnership that is beneficial for both parties.

In the process, the traditional boundaries between two competitors may be

broken

Boundaryless organizations

may involve eliminating the barriers separating employees; these may be intangible
barriers, such as traditional management layers, or actual physical barriers, such as
walls between different departments.
Structures such as self-managing teams create an environment where employees
coordinate their efforts and change their own roles to suit the demands of the situation,
as opposed to insisting that something is “not my job.”

Learning Organizations

● is one whose design actively seeks to acquire knowledge and change behavior
as a result of the newly acquired knowledge.

Learning organizations:

encourage experimenting, learning new things, and reflecting on new knowledge

are the norms.

there are many procedures and systems in place that facilitate learning at all
organizational levels.

experimentation and testing which are potentially better operational methods are
encouraged.

good at learning from experience—their own or a competitor’s.

are also good at studying customer habits to generate ideas.

Planning

Without a plan, it’s hard to succeed at anything.

The reason is simple: if you don’t know where you’re going, you can’t really move
forward.

Successful managers decide where they want to be and then figure out how to get
there.

In planning, managers set goals and determine the best way to achieve them.
Planning

● is the process by which the manager determines, whether to attempt a task,

works out the most effective way of reaching desired objectives, and prepares to
overcome unexpected difficulties with adequate resources

Planning is a process comprising many steps. These steps include:

● environmental scanning
● forecasting
● setting objectives
● charting alternative courses of action to achieve objectives
● decision making
● implementation
● review of plans where necessary

Plans differ

● in format or the way they are expressed

● in the span of time they cover

● in usage

Types and Levels of Plans

Strategic Plan

● Strategic planning

- is the process of establishing an overall course of action.

To begin this process, you should ask yourself a couple of very basic questions:

- Why, for example, does the organization exist?

- What value does it create?

● Write a mission statement that tells customers, employees, and others why your
organization exists.
 ● Identify core values or beliefs that will guide the behavior of members of the
organization.

● Assess the company’s strengths, weaknesses, opportunities, and threats.

● Establish goals and objectives, or performance targets, to direct all the activities
that you’ll perform to achieve your mission.

● Develop and implement tactical and operational plans to achieve goals and
objectives.

Mission Statement

- describes the purpose of your organization—the reason for its existence.

Core Values

- the small set of guiding principles that you identify as crucial to your company

fundamental beliefs about what’s important and what is and isn’t appropriate in
conducting company activities

Conduct a SWOT Analysis

- assess your company’s fit with its environment.

matching the strengths of your business with the opportunities available to it.

A SWOT Analysis

- analyzes an organization’s Strengths, Weaknesses, Opportunities, and Threats

It begins with an examination of external factors that could influence the

company in either a positive or a negative way. These could include economic
conditions, competition, emerging technologies, laws and regulations, and
customers’ expectations. One purpose of assessing the external environment is
to identify both opportunities that could benefit the company and threats to its
success.
 The next step is to evaluate the company’s strengths and weaknesses. Strengths
might include a motivated workforce, state-of-the-art technology, impressive
managerial talent, or a desirable location. The opposite of any of these strengths
(poor workforce, obsolete technology, incompetent management, or poor
location) could signal a potential weakness.

Descriptive plans:

● state what is to be achieved and how.

Plans can be stated in financial terms and are referred to as budgets.

Plans can also be presented graphically and show what is to be achieved and how in
charts.

Develop Tactical and Operational Plans

The planning process begins at the top of the organization, where upper-level managers
create a strategic plan, but it doesn’t end there. The execution of the strategic plan
involves managers at all levels.

Tactical Plans

- Are plans that are broken down into more manageable, shorter-term components

These plans specify the activities and allocation of resources (people, equipment,
money) needed to implement the overall strategic plan over a given period.

Operational Plans

- provide detailed action steps to be taken by individuals or groups to implement

the tactical plan and, consequently, the strategic plan
Plan for Contingencies and Crisis

Successful managers anticipate and plan for the unexpected.

Dealing with uncertainty requires contingency planning and crisis management.

Contingency Planning

With contingency planning, managers identify those aspects of the business that are
most likely to be adversely affected by change. Then, they develop alternative courses
of action in case an anticipated change does occur.

Crisis Management

Organizations also face the risk of encountering crises that require immediate attention.
Rather than waiting until such a crisis occurs and then scrambling to figure out what to
do, many firms practice crisis management.
Set Goals and Objectives

Goals

- are major accomplishments that the company wants to achieve over a long
period (say, five years).

Objectives

- are shorter-term performance targets that direct the activities of the organization
toward the attainment of a goal.

Goals and Objectives

- should be clearly stated, attainable, and measurable

- should give target dates for the completion of tasks

- stipulate who’s responsible for taking necessary actions.

- should be kept as simple as possible

Goals should be SMART, that is,

● specific
● measurable
● achievable
● realistic
● Timely

Steps in goal-setting:

● review of the organization’s mission

● evaluation of available resources
● determining the goals (individually or with input from others
● listing the goals and communicating them to all who need to know
● reviewing results to see whether goals are being met

If goals are not being met, it is management’s responsibility to restart the process and
change them as needed.

The Classical and Contingency Approaches to Organizational Design

Classical Theories

The classical theories include: the ideal bureaucracy of Max Weber, the organizing
principles of Henri Fayol, and the human organization principle of Rensis Likert.

Bureaucracy

Weber’s ideal bureaucracy is characterized by a hierarchy of authority and a system

of rules and procedures designed to create an optimally effective system for large
organizations.

Management Functions

A second classic view was presented at the turn of the century by Henri Fayol. He
was the first to classify the essential elements of management – now commonly called
management functions – as planning, organizing, command, coordination, and control.
In addition, he presented a list of 14 principles of organizing that he considered an
indispensable code for managers. Fayol’s principles have served as the basis for the
development of generally accepted means of organizing - i.e., unity of command and
unity of direction. Combining these two principles with division of labor, authority and
responsibility results in a system of tasks and reporting relationships that are essential
to organizing. Fayol’s principles thus provide the framework for the organization
chart and the coordination of work.

Human Organization

Rensis Likert called his approach to organization structure the human organization.
Likert’s approach centered on the principles of supportive relationships, employee
participation, and overlapping work groups. Management’s function is to ensure
that the work groups are linked for effective coordination and communication.

• Supportive relationships suggest that in all organizational activities, individuals

should be treated in such a way that they experience feelings of support, self-
worth, and importance.
• Participation means that the work group needs to be involved in decisions that
affect it, creating the sense of supportiveness and self-worth.

• The principle of overlapping work groups advocates that work groups are linked
to managers, who serve as linking pins between groups. Each manager (except the
highest ranking) is a member of two groups: a work group that he or she supervises
and a management group composed of the manager’s peers and their supervisor.

Likert believed that work groups should be able to overlap horizontally as well as
vertically where necessary to accomplish tasks.

Contingency Theories

Contingency theories of management imply that management decision-making

is situational and as such, one must consider each situation as unique and then set
objectives, goals and strategies accordingly. The theory also rejects the notion of a
one-best approach to successful management. Consequently, several aspects of
management has a contingency relationship in the management of organizations.

Features of Contingency Theory

• Contingency Theory posits that there is no one optimum state.

• The most appropriate structure and system of management is dependent upon the
contingencies of the situation for each particular organization.

• Contingency Theory takes the view that there is no one best, universal structure.

• Two important contingencies or variables affecting organizational structure are

technology and environment. These contingency positions were advanced by
Joan Woodward (technology) and Burns and Stalker (environment). However,
other variables include size, history, strategy, purpose, power and control, and
preferences of top management.

Burns and Stalker identified two divergent systems of management practice and
structure – the ‘mechanistic’ system and the ‘organic’ system. These represented
the form which such systems could take when adapted to technical and commercial
change.