ORGANIZATION THEORIES FOR EFFECTIVE BUSINESS MANAGEMENT

There are two main classifications of theories regarding organizational design (how management achieves the right
combination of differentiation and integration of the organization’s operations, in response to the level of uncertainty
in its external environment). According to Robbins & Coulter (2009): Traditional and Modern Traditional pertains to
the usual or old fashion ways while modern refers to contemporary or new design theories.
Traditional Theories include:
Simple
This organizational design has a few departments, wide spans of control, or a big number of subordinates directly
reporting to a manager: has a centralized authority figure and has very little formalization of work: usually used by
companies that start as entrepreneurial ventures.
Simple Organizational Design
Strengths

❖ Flexible
❖ Fast decision-making and result
Weaknesses

❖ Clear accountability
❖ The risk that overdependence with overdependence on a single person
❖ No longer appropriate as the company grows
Functional
This organizational design groups together similar or related specialties. Jobs are grouped in departments with the
specified skills and/or business functions. Example of the functional organization includes:
a. An English department for a particular school teaches all the English subject regardless of what grade level the
students are.
b. The municipal water district is responsible for all the water needs in a particular town.
c. The purchasing department of an enterprise buys all the materials, supplies, and other resources required by an
enterprise, whether these inputs are required by marketing, finance, accounting, human resources, or other
departments.
Functional Organizational Design
Strengths

❖ Cost-saving advantages
❖ Management is facilitated because workers with similar tasks are grouped.
Weaknesses

❖ Managers have little knowledge of other units’ function

Divisional
This organizational design is made up of separate business divisions or units, where the parent corporation acts as
overseer to coordinate and control the different divisions and provide financial and legal support services.
Example of the divisional organization includes
1. NORSU set up university branches located in the different towns in Negros Oriental.
2. Health Centers set up “barangay health units” to provide the health services of each barangay in the town.
Divisional Organizational Design
Strengths

❖ Focused on results
❖ Managers are responsible for what happens to their products and services
Weaknesses

❖ Possible duplication of activities and resources

❖ Increased cost and reduced efficiency
Modern Theories include:
Team Design
This organizational design is made up of workgroups or teams. They define team structures such as roles and
responsibilities, and they collaboratively identify working arrangements that allow their team to deliver on their
purpose and goals.
Team Organizational Design
Strengths

❖ Better Communication
❖ Teams Resolve Problems Quicker
❖ Flexible and Empowered Workforce
❖ Empowerment of team members and reduced barriers among functional areas
Weaknesses

❖ Potential conflict
❖ Some people are not team players
❖ Under-performing employees hide behind the team

Matrix-Project Design
This refers to an organization design where specialists from different departments work on projects that are
supervised by a project manager. This design results in a double chain of command wherein workers have two
managers - their functional area manager and their project manager-who share authority over them.
Matrix-Project Organizational Design
Strengths

❖ A specialist is involved in the project

❖ Increased communication efficiency
❖ Improved employee motivation
❖ Increased teamwork
❖ Maximize resource usage
❖ Increase professional development
Weaknesses

❖ Task and personality conflicts

❖ The potential conflict between managers and projects
❖ Authority confusion
❖ Reduced employee’s effectiveness
❖ Increased management overhead costs

Project design
It refers to an organizational design where employees continuously work on a project.
Project Organizational Design
Strengths

❖ Flexible designs
❖ Fast decision making
Weaknesses

❖ Task and personality conflict

Boundary-less Design
This refers to an organization design where the design is not defined or limited by vertical, horizontal, and external
boundaries. There are no hierarchical levels that separate employees, no departmentalization, and no boundaries
that separate the organization from customers, suppliers, and other stakeholders. The key to this design is electronic
communication, where information is shared with the member enterprise with distinct competencies.
Boundary-less Organizational Design
Strengths

❖ Highly flexible
❖ Responsive and draws on talent where it is found
Weaknesses

❖ Lack of control
❖ Presents communication difficulties

CONCEPT AND NATURE OF STAFFING

 In a new enterprise, the staffing function follows the planning and organizing function. In the case of running
an enterprise, staffing is a continuous process. So, the manager should perform this function at all times. It is obvious
that the management must ensure a constant availability of sufficient number of efficient executives in an enterprise
for the efficient functioning of the enterprise. The selected personnel should be physically, mentally and
temperamentally fit for the job. Staffing is a basic function of management. Every manager is continuously engaged
in performing the staffing function. He is actively associated with recruitment, selection, training and appraisal of his
subordinates. These activities are performed by the chief executive, departmental managers and foremen in relation
to their subordinates. Thus, staffing is a pervasive function of management and is performed by the managers at all
levels.
Meaning of Staffing:
The term ‘Staffing’ relates to the recruitment, selection, development, training and compensation of the managerial
personnel. Staffing, like all other managerial functions, is the duty which the apex management performs at all times.
In a newly created enterprise, the staffing would come as a. third step—next to planning and organizing—but in a
going enterprise the staffing process is continuous. In order to define and clarify the group of employees included in
the staffing concept, it must be stated that the staffing function is concerned with the placement, growth and
development of all of those members of the organization whose function it is to get things done through one effort of
other individuals.
This definition includes all levels of management because those who will occupy positions in the top two or three
levels of management fifteen or twenty years from now are likely to be found in the lower levels today. “The
managerial function of staffing involves manning the organizational structure through effective and proper selection,
appraisal, and development of personnel to fill the roles designed into the structure.” — Koontz and O’Donnell
Staffing is related to performing a set of activities which aim at inviting, selecting, placing and retaining individuals at
various jobs to achieve the organizational goals. It involves determining the need for people at various organizational
posts, appointing and retaining them at those posts by training and developing their abilities and skills. This is done
by performing a number of functions like manpower planning, recruitment, selection, training and development,
performance appraisal, compensation and maintenance.
Staffing, according to Dyck and Neubert (2012), is the Human Resource function of identifying, attracting, hiring, and
retaining people with the necessary qualifications to fill the responsibilities of current and future jobs in the
organization. The number of managerial personnel or non-managerial human resources needed by an organization
depends upon the size and complexity of its operations, its plans for branching out or increasing products, and
turnover rates of both types of human resources, among others. Besides considering their number, the qualifications
for the individual positions must be identified, so that the best-suited individuals for the job positions may be selected
for hiring.
Staffing – Concept
Once the organizational goals are set, the plans are prepared and organization is appropriately structured to pave the
path for achievement of the set goals. The next step is to provide appropriate personnel to fill in the various positions
created by the organizational structure. The process putting people to jobs is termed as staffing. Staffing, the
management function involves appointing appropriate personnel, developing them to meet organizational needs and
ensuring that they are a satisfied and happy workforce.
Staffing is defined as a managerial function of filling and keeping filled the positions in the organizational structure.
The personnel appointed are a combination of permanent employees, daily workers, consultants, contract employees
etc.
Staffing includes:
1. Identifying the requirement of workforce and its planning.
2. Recruitment and selection of appropriate personnel for new jobs or for positions which may arise as a result of
existing employees leaving the organization.
3. Planning adequate training for development and growth of workforce.
4. Deciding on compensation, promotion and performance appraisals for the workforce.
The following are the basic nature of staffing:
I. People-oriented – Staffing deals with efficient utilization of human resources in an organization. It promotes and
stimulates every employee to make his full contribution for achieving desired objective of the organization.
II. Development-oriented – It is concerned with developing potentialities of personnel in the organization. It develops
their personality, interests, and skills. It enables employees to get maximum satisfaction from their work. It assists
employees to realize their full potential. It provides opportunities to employees for their advancement through training,
job education, etc.
III. Pervasive function – Staffing is required in every organization. It is a major sub-system in the total management
system that can be applied to both profit making and non-profit making organizations. It is required at all levels of
organization for all types of employees.
IV. Continuous function – Staffing is a continuous and never-ending process. It requires constant alertness and
awareness of human relations and their importance in every operation.
V. Human objectives – It develops potentialities of employees so that they can derive maximum satisfaction from
their work. It creates an atmosphere where employees willingly cooperate for the attainment of desired organizational
goals.
VI. Individuals as well as group-oriented – Staffing is concerned with employees both as individuals and as group in
attaining goals. It establishes proper organizational structure to satisfy individual needs and group efforts. It
integrates individual and group goals in such a manner that the employees feel a sense of involvement towards the
organization.
VII. Developing cordial working environment – It develops a cordial environment in the enterprise where each
employee contributes his best for the achievement of organizational goals. It provides a very comfortable physical
and psychological working environment.
VIII. Interdisciplinary nature – Staffing has its roots in social sciences. It uses concepts drawn from various disciplines
such as psychology, sociology, anthropology, and management. It has also borrowed principles from behavioral
sciences. It is a science of human engineering.
IX. Integral part of general management – Staffing is an integral part of the general management. It is very much a
part of every line manager’s responsibility. Every member of the management group (from top to bottom) must be an
effective personnel administrator. It renders service to other functional areas of management.
X. Science as well as art – Staffing is a science of human engineering. It is an organized body of knowledge
consisting of principles and techniques. It is also an art as it involves skills to deal with people. It is one of the creative
arts as it handles employees and solves their problems systematically. It is a philosophy of management as it
believes in the dignity and worth of human beings.
Characteristics of Staffing as a Function of Management
The following facts clearly bring out the characteristics of staffing as a function of management:
1. Related to Human Beings
The first important characteristic of staffing is its relationship with human beings. It means that unlike planning and
organizing it is not mere paper work but involves the appointment of competent persons on various posts. Planning
lays down what, when, how and by whom work is to be done. Similarly, an organizational structure chart is prepared
under organizing.
On the contrary, under staffing, competent individuals are selected and given training keeping in view the importance
of the post and not only doing paper work alone. All the activities done to accomplish this work are connected with
human beings-they may be recruitment, selection, training, promotion, etc.
2. Separate Managerial Function
The second important characteristic of staffing is that it is a separate managerial function. Separate managerial
function means that far from being a major part of some function, it is in itself a major function. Staffing is included in
the other categories of managerial functions like planning, organizing, leading, and controlling. A little earlier, some
management experts considered it a part of organizing. But these days, on the basis of various researches, it is
accepted as an important separate managerial function.
3. Essential at All Managerial Levels
Staffing is essential at all managerial levels. The Board of Directors performs the function of staffing by appointing
General Manager. The General Manager does so by appointing departmental managers, while the departmental
managers perform this function by appointing their subordinates. It must be clarified here that the establishment of a
separate personnel department does not free the concerned managers from this allimportant function. The aim of
establishing this department is to assist the managers at every level in the performance of their function of staffing. It
is important to note that the final responsibility regarding staffing lies with the managers concerned.
4. Related to Social Responsibility
Staffing deals with human beings and man is a social animal. Since it is connected with human beings, the social
responsibility of this function is born. In order to discharge this responsibility, the managers should take care and be
impartial while going through the allied functions of recruitment, selection, promotion, etc.
5. Effect of Internal and External Environment
The performance of staffing is affected by the internal and external environment of the enterprise. The internal
environment of the enterprise includes policies connected with the employees — like the promotion policy, demotion
policy, transfer policy, etc. If as a matter of policy the vacant posts are to be filled up by promotion, the employees
already working in the enterprise will have the opportunity to reach higher posts, and the people from outside will be
appointed only on lower posts. In this way the internal policy of the organization does affect the function of staffing.
The external environment affecting the enterprise includes government policies and educational environment. It can
be the policy of the government that in a particular enterprise employee should be recruited only through employment
exchange. Educational institutions can help in the development of the employees by organizing special training
camps. In this way, external environment also affects the function of staffing.
7 Important Functions of Staffing
1. Manpower Planning
Manpower may be planned for short-term and long-term. The short-term manpower planning may achieve the
objectives of the company at present conditions. The long-term manpower planning should be concerned with the
estimation of staff members required in future.
2. Development
Development is concerned with the development of staff members through adequate and appropriate training
programs. The training is given only to the needy persons.
3. Fixing the Employment Standards
It involves the job specification and job description. These enable the management to select the personnel and train
them scientifically. Job description is a systematic and organized written statement of the duties and responsibilities
in a specific job. Job specification is a statement of personal qualities that an individual must possess if he is to
successfully perform the job.
4. Sources
It is concerned with the method by which the staff members are selected. The sources may be internal and external
sources. Internal source means that a vacancy is filled up by the company out of the staff members available within
the company. The external source means that a vacancy is filled up by the company from outside the company. The
person selected maybe unemployed or working in any other company.
5. Selection and Placement
It includes the process of selection of the staff members. The placement includes giving a job to a person on the
basis of his ability, education, experience and the like.
6. Training
The training may be arranged by the company itself. In certain cases, the staff members may be sent out by the
company to get the training. The expense is borne by the company. The training may be required not only by the new
staff members but also by the existing staff members.
7 Step Process of Staffing
Staffing starts with the estimation of manpower requirements and proceeds towards searching for talented personnel
to fill the various positions in an organization. Staffing, therefore, should follow a logical step by step process.
Following are the important steps involved in the process of staffing:
Step # 1. Estimating Manpower Requirements/Manpower Planning:
The process of manpower planning can be divided into two parts. One is an analysis for determining the quantitative
needs of the organization, i.e., how many people will be needed in the future. The other part is the qualitative
analysis to determine what qualities and characteristics are required for performing a job. The former is called the
quantitative aspect of manpower planning in which we try to ensure a fair number or personnel in each department
and at each level. It should neither be too high nor too low leading to overstaffing or under-staffing respectively. The
second aspect is known as qualitative aspect of manpower planning wherein we try to get a proper fit between the
job requirement and the requirement on the part of personnel in terms of qualification, experience and personality
orientation.
Step # 2. Recruitment and Selection:
The second step after manpower planning is recruitment and selection. These are two separate functions, which
usually go together. Recruitment aims at stimulating and attracting job applicants for positions in the organization.
Selection consists of making choice among applicants. To choose those which are most suited to the job requirement
keeping in view the job analysis information. Selection processes must begin by precisely identifying the task to be
performed and also drawing a line between successful and unsuccessful performance. Thereafter, the process of
selection tries to find out how far a job applicant fulfils those characteristics or traits needed to successfully perform
the job.
Step # 3. Placement and Orientation:
Placement refers to place the right person on the right job. Once the job offer has been accepted by the selected
candidate, he is placed on his new job. Proper placement of an employee reduces absenteeism, employee’s turnover
and accident rates. Orientation/Induction is concerned with the process of introduction or orienting a new employee
to the organization. The new employee is introduced to fellow employees, given a tour of the department and
informed about such details as hours of work, overtime, lunch period, rest rooms, etc. They are mostly informed
about the company, the job and work environment. They are encouraged to approach their supervisors with
questions and problems.
Step # 4. Training and Development:
It is more accurately considered as a process of skill formation and behavioral change. It is a continuous process of
the staffing function. Training is more effectively conducted when the actual content of jobs for which people are
being trained and developed is known. Training programs should be devised to impart knowledge, develop skills and
stimulate motives needed to perform the job. Development involves growth of an employee in all respects. It is a
wider concept. It seeks to develop competence and skills for future performance. Thus, it has a long-term
perspective.
Step # 5. Performance Appraisal:
It means evaluating a performance employee’s current and past performance as against certain predetermined
standards. This process includes defining the job, appraising performance and providing feedback.
Step # 6. Promotion and Career Planning:
Managers must encourage employees to grow and realize their full potential. Promotions are an integral p art of
people’s career. They usually mean more pay, responsibility and job satisfaction.
Step # 7. Compensation:
It refers to all forms of pay or rewards paid to employees by the employer/firm. It may be in the form of direct financial
payments (Time based or Performance based) like salaries and indirect payments like paid leaves.