Organization Fundamentals

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ORGANIZATION FUNDAMENTALS

WHAT IS AN ORGANIZATION
 Organizations are social systems that are created to
fulfill certain well-defined goals;
 They have a formal structure to facilitate efficient
internal coordination and to be able to respond to the
external environment.
ORGANIZATIONAL SYSTEM
 System: Organizational system consists of various
interacting components (people/resources) that acquire inputs
(goals) from the external environments, processes them
(structure & processes) and produces an output
(product/service) to be consumed back by the external
environment (consumers).
 Closed system organization is self-sufficient and its operations are not
influenced by external influences like competition, economy, suppliers or
external resources.
 Open systems are tightly coupled with the external environment; their
survival depends upon how quickly they anticipate external changes and
how impeccably they adapt to them. Just like biological species become
extinct if they are unable to adapt and process the external changes, so
are the modern organizations.
GOALS
 An organization exists to satisfy certain goals or
vision of its establishing leaders.

 The organization can either be established for


purpose of making profit, like most of the business
organizations. Or it can be a non-profit organization that
is motivated to create a social impact instead of profit, like
non-government organizations (NGOs).

 In general the organizations are established to


facilitate innovation and to produce goods or services more
efficiently.
PEOPLE
 Organizations are made up of people and the
interactions or communication between them is the key to
organization’s effectiveness.

 Thus organizations are most significant social


systems in people’s lives if measured in terms of
amount of time spent in individual’s life.
STRUCTURE
 The organization structure designates the hierarchy
and formal reporting relationships between managers
and subordinates.

 Organizations are often subdivided into smaller


departments or functional units, depending upon the
size and maturity levels.

 The structure of the organization governs how all its


components interact with one another and is
designed to effectively and efficiently meet its
objectives.
PROCESSES
 The organization’s rules and policies, performance
evaluations, recruitment and retention are some
formalized processes that help to manage the
organization in predictable manner.
CULTURE
 In organizational system, the goals, resources and
people are structured and then managed through
some processes and leadership. This gives birth to the
culture of an organization, which are the unwritten
values, rules and beliefs that are shared between all
the members of the organization.

 The leadership has a direct influence upon the culture of


an organization, leaders use their authority to
change its structure, their charisma to boost the
motivation, their vision to establish the goals and
their skills orchestrate its smooth operations.
EXTERNAL ENVIRONMENT
 It’s the collection of all the elements that have
potential to influence whole or some part of the
organization, the organization must be sensitive to
external environments demands and must be able to
respond them in order to survive.

 The customers, suppliers, competitors, labor market


and federal laws, finance, recession, technology,
acquisitions etc. are all examples of the external
environment.

 The organizational leaders do not have direct control


over the external environment, but can influence or
respond to it by developing various strategies.
TRADITIONAL FORMS OF ORGANIZATIONAL STRUCTURE
 Organizational structure
 Refers to formalized patterns of interactions that link a firm’s
tasks, technologies, and people
TRADITIONAL FORMS OF ORGANIZATIONAL STRUCTURE
 Structure provides a means of balancing two
conflicting forces
 Need for the division of tasks into meaningful
groupings
 Need to integrate the groupings for efficiency and
effectiveness
SIMPLE STRUCTURE
 Simple Structure
 An organizational form in which the owner-manager makes
most of the decisions and controls activities, and the staff serve
as an extension of the top executive.

 Advantages § Disadvantages
 Highly informal § Employees may not und
erstand their respon
 Centralized decision
sibilities
making
§ May take advantage of l
 Little specialization ack of regulation
FUNCTIONAL STRUCTURE
 Functional Structure
 An organizational form in which the major functions of the
firm, such as production, marketing, R&D, and accounting, are
grouped internally.
FUNCTIONAL STRUCTURE
FUNCTIONAL STRUCTURE
 Advantages
 Enhanced coordination and control
 Centralized decision making
 Enhanced organizational-level perspective
 More efficient use of managerial and technical talent
 Facilitated career paths and development in
specialized areas

 Disadvantages
 Functional manager have to report to central headquarters; it can be
difficult to get quick decisions.
 Harder to determine accountability and establish uniform performance
standards.
 If a new product fails, who is to blame?
 Members of each department feel isolated.
 Cost effective and delivery date is ok but quality is not maintained.
DIVISIONAL STRUCTURE
 Divisional organizational structure
 An organizational form in which products, projects, or product markets
are grouped internally.
 Also called multidivisional structure or M-Form.
DIVISIONAL STRUCTURE
 Advantages
 Coordination easier because all skills, activities and
expertise are grouped in one place under a single head.
 Quality and decision making enhanced.
 Burden on central management is released
 Quick response to important changes in external
environment
 Minimal problems of sharing resources across
functional departments
 Development of general management talent is
enhanced
DIVISIONAL STRUCTURE
 Disadvantages
 Can be very expensive
 Can be dysfunctional competition among divisions
 Differences in image and quality may occur across divisions
 Can focus on short-term performance
 The interest of the division may be placed ahead of the goals
for the total organization.
MATRIX STRUCTURE
MATRIX STRUCTURE
 Matrix organizational structure
 an organizational form in which there are multiple
lines of authority and some individuals report to at
least two managers.
MATRIX STRUCTURE
 Advantages
 Achieves coordination necessary to meet dual
demands from customers.
 Flexible sharing of human resources across
products.
 Suited to complex decisions and frequent changes
in unstable environment.
 Provides opportunity for both functional and product skill
development.
 Best in medium size organizations with multiple
products.
MATRIX STRUCTURE
 Disadvantages
 Can cause uncertainty and lead to intense power
struggles
 Working relationships become more complicated
 Decisions may take longer
 Causes participation to experience dual authority, which can
be frustrating and confusing.
 Means participants need good interpersonal skills
and extensive training.
 Require great effort to maintain power balance.
 Will not work unless participants understand it and
adopt collegial rather than vertical type relationships.
THANK YOU…………

Special Courtesy
Dr. Md. Helal-An-Nahiyan
Professor
Department of Mechanical Engineering
Khulna University of Engineering & Technology, Khulna-9203

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