Malaviya National Institute of Technology

Jaipur

Management Principles for Engineers

(22BMT 922)

By:-Dr. Sundeep Kumar

BE(IT),MBA, Ph.D., (MNIT Jaipur)
Department of Management Studies
MNIT, Jaipur
Table Of Contents
⚫ Organizing: Organizational structure and design.
⚫ Key elements of Organizational structure.
⚫ Authority and Responsibilty.
⚫ Contingency Factors.
⚫ Organizational design challenges.
4. Organizing: Organizational
Structure and Design
 Learning Outcomes

⚫ After completion of this chapter, students

will be able to:
⚫ Describe six key elements in organization
structure,
⚫ Compare and contrast traditional and
contemporary organizational designs,
⚫ Discuss the design challenges faced by
today’s organizations.
 Introduction
Organizing
⚫ The function of management that creates the
organization’s structure

Organization Structure
⚫ The formal arrangement of jobs within an
organization

Organization design
⚫ A process in which managers develop or change
their organization’s structure
 Purposes of Organizing

• Divides work to be done into specific jobs and departments.

• Assigns tasks and responsibilities associated with individual
jobs.
• Coordinates diverse organizational tasks.
• Clusters jobs into units.
• Establishes relationships among individuals, groups, and
departments.
• Establishes formal lines of authority.
• Allocates and deploys organizational resources.
 Strategic
Apex
Mintzberg’s
Five Basic Parts Tec
of an hno Sup
stru - por f
t
c
Organization ture S ta f
Middle
Line

Operating Core
6 Key elements of Organization Structure
⚫ Work specialization
⚫ Departmentalization
⚫ Chain of command
⚫ Span of control
⚫ Centralization and
decentralization
⚫ Formalization
 1. Work Specialization
⚫ The degree to which tasks in the organization are divided into
separate jobs with each step completed by a different person; also
known as division of labor.

⚫ Overspecializatio
n can result in
human
diseconomies
from boredom,
fatigue, stress,
poor quality,
increased
absenteeism, and
higher turnover.
 2. Departmentalization
⚫ How jobs are grouped together.

⚫ Types of Departmentalization:
⚫ Functional
⚫ Product
⚫ Customer
⚫ Geographic
⚫ Matrix
⚫ Process
The Five Common Forms of Departmentalization
Geographical Departmentalization
Product Departmentalization
 Process Departmentalization

+ More efficient flow of work activities

– Can only be used with certain types of products
 Customer Departmentalization

+ Customers’ needs and problems can be met by specialists

- Duplication of functions
- Limited view of organizational goals
Matrix Departmentalization
 3. Authority and Responsibility
⚫ Authority:
⚫ The rights inherent in a managerial position to give orders and expect them
to be obeyed
⚫ Line Authority: Authority the entitles manager to direct the work of
employees
⚫ Staff Authority: Position with some authority that have been created to
support, assist and advice those holding line authority
⚫ Power
⚫ An individual’s capacity to influence decisions
⚫ Responsibility
⚫ An obligation to perform assigned activities
⚫ Unity of Command
⚫ The concept that a person should have one boss and should report only to
that person.
⚫ Chain of command
⚫ The management principle that no person should report to more than one
boss
Line and Staff Authorities
⚫ Authority versus Power
 4. Span of Control
⚫ Span of control
⚫ The number of subordinates a manager can direct
efficiently and effectively supervised by a manager
 5. Centralization & Decentralization

⚫ Centralization
⚫ The degree to which decision making is concentrated at
upper levels in the organization.
⚫ Organizations in which top managers make all the decisions and
lower-level employees simply carry out those orders.
⚫ Decentralization
⚫ Organizations in which decision making is pushed down
to the managers who are closest to the action.
⚫ Employee Empowerment
⚫ Increasing the decision-making authority (power) of
employees.
 Factors that Influence the Amount
of Centralization and Decentralization

• More Centralization
Environment is stable.
Lower-level managers are not as capable or experienced at making
decisions as upper-level managers.
Lower-level managers do not want to have a say in decisions.
Decisions are relatively minor.
Organization is facing a crisis or the risk of company failure.
Company is large.
Effective implementation of company strategies depends on managers
retaining say over what happens.
 Factors that Influence the Amount
of Centralization and Decentralization

• More Decentralization
Environment is complex, uncertain.
Lower-level managers are capable and experienced at making
decisions.
Lower-level managers want a voice in decisions.
Decisions are significant.
Corporate culture is open to allowing managers to have a say in what
happens.
Company is geographically dispersed.
Effective implementation of company strategies depends on managers
having involvement and flexibility to make decisions.
 6. Formalization
⚫ Formalization
⚫ The degree to which jobs within the organization are
standardized and the extent to which employee behavior
is guided by rules and procedures.
⚫ Highly formalized jobs offer little choice over what is to be done.
⚫ Low formalization means fewer constraints on how employees do
their work.
 Mechanistic Versus Organic Organization

• Rigid & Tightly controlled • Highly adaptive & flexible

structure structure; Allows rapid
adjustments to change
• High specialization
• Rigid departmentalization • Cross-functional teams

• Clear chain of command • Cross-hierarchical teams

• Narrow spans of control • Free flow of information

• Centralization • Wide spans of control

• Decentralization
• High formalization
• Low formalization
Contingency Factors: Affect Structural
choice
⚫ Structural decisions are influenced by:
⚫ Overall strategy of the organization
⚫ Based on work of Alfred Chandler
⚫ Innovative Vs. Cost Minimization Strategies
⚫ Size of the organization
⚫ Large Vs. Small Sized organizations
⚫ Technology used by the organization
⚫ Routine technology Vs. Non routine Technology
⚫ Degree of environmental uncertainty
⚫ Stable Vs. Dynamic environment
Woodward’s Findings on Technology,
Structure, and Effectiveness
⚫ Horizontal Diversification of Firms: It means adding parallel products or services to the
existing product/service line. The existing technical, marketing and financial expertise is
applied to new products also. The ‘related’ approach to diversification is concentric
diversification, the ‘unrelated’ approach is conglomerate diversification.
⚫ Ex: Tata industries have followed conglomerate diversification by diversifying into
unrelated areas such as automobiles, iron and steel, telecommunication, consumables
(salt) etc.
⚫ Horizontal integration is the acquisition of a related business: a fast-food restaurant
chain merging with a similar business in another country to gain a foothold in foreign
markets.
⚫ Vertical diversification is also known as vertical integration. In this growth strategy, a
company expands its business in the forward or backward direction. Firms add new
products (or services) complementary to the existing products. Vertical diversification
defines whether to perform some or all
⚫ Backward Integration: It is a form of vertical integration where firms integrate
backwards to produce the inputs or raw materials. Rather than buying inputs from
outside, firms manufacture their own inputs. If sugar mills own sugarcane farms, they are
said to have diversified through backward integration. It helps in reducing selling price
and increases turnover and profits.of these functions.
⚫ “Forward integration is a type of diversification strategy which involves the entry of a
firm into the business of finishing, distributing, or selling of some of its present outputs.”
It refers to “moves altering the nature of the distribution of the firm’s output ”
 Common Organizational Designs

A. Traditional Designs
⚫ Simple structure
⚫ Low departmentalization, wide spans of control, centralized
authority, little formalization
⚫ Functional structure
⚫ Departmentalization by function
⚫ Operations, finance, marketing, human resources, and product
research and development
⚫ Divisional structure
⚫ Composed of separate business units or divisions with limited
autonomy under the coordination and control the parent corporation.
Strengths and Weaknesses of Traditional
Organizational Designs
B. Contemporary Organizational Designs
 Removing External Boundaries
⚫ Virtual Organization
⚫ An organization that consists of a small core of full-time employees
and that temporarily hires specialists to work on opportunities that
arise.
⚫ Network Organization
⚫ A small core organization that outsources its major business
functions (e.g., manufacturing) in order to concentrate on what it
does best.
⚫ Modular Organization
⚫ A manufacturing organization that uses outside suppliers to provide
product components for its final assembly operations.
Today’s Organizational Design Challenges

⚫ Keeping Employees Connected

⚫ Widely dispersed and mobile employees
⚫ Building a Learning Organization
⚫ To design efficient and effective flexible work
arrangemets
⚫ Managing Global Structural Issues
⚫ Cultural implications of design elements
The six coordination mechanisms are:
1. Mutual adjustment : Coordination of work is made possible by a process of informal
communication between people conducting interdependent work.
2. Direct supervision : Coordination is achieved by one individual taking responsibility
for the work of others.
3. Standardisation of work processes : Coordination is made possible by specifying the
work content in rules or routines to be followed. Coordination occurs before the
activity is undertaken. Mintzberg adopted Taylorism: procedures are usually specified
by work-study analysis.
4. Standardization of output : Coordination is obtained by the communication and
clarification of expected results. The individual actions required to obtain a goal are
not prescribed. This goal setting method is closely related to Drucker's Management by
Objectives.
5. Standardization of skills and knowledge : Coordination is reached through specified
and standardised training and education. People are trained to know what to expect of
each other and coordinate in almost automatic fashion.
6. Standardisation of norms : Norms are standardized, socialization is used to establish
common values and beliefs in order for people work toward common expectations.
Mintzberg added this cultural based mechanism at a later stage.