Organizational

Behaviour
Dr. Sujata Banerjee
Techno India University
Organizational structure:
• What exactly do we mean by organizational structure?

• Which elements of a company’s structure make a difference

in how we behave and how work is coordinated?

We will review four aspects of structure that have been

frequently studied in the literature.
Centralization:
• Centralization is the degree to which decision making authority is concentrated at higher levels in an
organization. In centralized companies, many important decisions are made at higher levels of the hierarchy,
whereas in decentralized companies, decisions are made and problems are solved at lower levels by
employees who are closer to the problem in question.

• Decentralized companies give more authority to lower level employees, resulting in a sense of
empowerment. Decisions are often faster, and employees believe that decentralized companies provide
greater levels of procedural fairness to employees.
Advantages of Centralization:
• A clear chain of command
A centralized organization benefits from a clear chain of command because every person within the organization knows who to report to. Junior
employees know who to approach whenever they have concerns about the organization. On the other hand, senior executives follow a clear
plan of delegating authority to employees who excel in specific functions. The executives also gain the confidence that when they delegate
responsibilities to mid-level managers and other employees, there will be no overlap. A clear chain of command is beneficial when the
organization needs to execute decisions quickly and in a unified manner.
• Focused vision
When an organization follows a centralized management structure, it can focus on the fulfillment of its vision with ease. There are clear lines of
communication and the senior executive can communicate the organization’s vision to employees and guide them toward the achievement of
the vision. In the absence of centralized management, there will be inconsistencies in relaying the message to employees because there are no
clear lines of authority. Directing the organization’s vision from the top allows for a smooth implementation of its visions and strategies. The
organization’s stakeholders such as customers, suppliers, and communities also receive a uniform message.

• Reduced costs
A centralized organization adheres to standard procedures and methods that guide the organization, which helps reduce
office and administrative costs. The main decision-makers are housed at the company’s head office or headquarters, and therefore, there is no
need for deploying more departments and equipment to other branches. Also, the organization does not need to incur extra costs to hire
specialists for its branches since critical decisions are made at the head office and then communicated to the branches. The clear chain of
command reduces duplication of responsibilities that may result in additional costs to the organization.

• Quick implementation of decisions

In a centralized organization, decisions are made by a small group of people and then communicated to the lower-level managers. The
involvement of only a few people makes the decision-making process more efficient since they can discuss the details of each decision in one
meeting. The decisions are then communicated to the lower levels of the organization for implementation. If lower-level managers are involved
in the decision-making process, the process will take longer and conflicts will arise. That will make the implementation process lengthy and
complicated because some managers may object to the decisions if their input is ignored.
Disadvantages of Centralization:
• Bureaucratic leadership
Centralized management resembles a dictatorial form of leadership where employees are only expected to deliver results according to
what the top executives assign them. Employees are unable to contribute to the decision-making process of the organization, and they
are merely implementers of decisions made at a higher level. When the employees face difficulties in implementing some of the
decisions, the executives will not understand because they are only decision-makers and not implementers of the decisions. The result of
such actions is a decline in performance because the employees lack the motivation to implement decisions taken by top-level managers
without the input of lower-level employees.

• Remote control
The organization’s executives are under tremendous pressure to formulate decisions for the organization, and they lack control over the
implementation process. The failure of executives to decentralize the decision-making process adds a lot of work to their desks. The
executives suffer from a lack of time to supervise the implementation of the decisions. This leads to reluctance on the part of employees.
Therefore, the executives may end up making too many decisions that are either poorly implemented or ignored by the employees.

• Delays in work
Centralization results in delays in work as records are sent to and from the head office. Employees rely on the information communicated
to them from the top, and there will be a loss in man-hours if there are delays in relaying the records. This means that the employees will
be less productive if they need to wait long periods to get guidance on their next projects.

• Lack of employee loyalty

Employees become loyal to an organization when they are allowed personal initiatives in the work they do. They can introduce their
creativity and suggest ways of performing certain tasks. However, in centralization, there is no initiative in work because employees
perform tasks conceptualized by top executives. This limits their creativity and loyalty to the organization due to the rigidity of the work.
Formalization:
• Centralization is the degree to which decision making authority is concentrated at higher levels in an
organization. In centralized companies, many important decisions are made at higher levels of the hierarchy,
whereas in decentralized companies, decisions are made and problems are solved at lower levels by
employees who are closer to the problem in question.

• Decentralized companies give more authority to lower level employees, resulting in a sense of
empowerment. Decisions are often faster, and employees believe that decentralized companies provide
greater levels of procedural fairness to employees.
 Common characteristics of an
organization
• Co-ordination

• Common goals

• Division of labour and

• Integration
Co-ordination

First of all, it is important to recognize that the idea of organizing stems from the fact that, an individual alone
is unable to fulfil all of his needs and wishes. Individuals, particularly in modem society, find that they are
lacking either in ability, strength, time or endurance to fulfil their basic needs for food, shelter and safety. As
several people coordinate their efforts, how ever they find that together they can do more than any of them
could have individually. The largest organization society, makes it possible through the coordination of the
activities of many individuals, for all of its members fulfil their needs. One basic idea underlying the concept of
organization, therefore is the idea of coordination of effort in the service of mutual help.
Common goals

In order to coordinate effectively, there must exist some goals to be achieved and some agreement concerning
these goals. The goals keep organizational members together and make them work as a team. A second
important element underlying the concept of organization then is the idea achieving a common goal through
coordination of activities.
Division of Labour

• Division of labour refers to divide work into operations that are narrow in scope in order to increase
efficiency with which each operation can be performed. Having divided the work into operation, each
operation is assigned to one individual or group of individuals who are more fit in terms of education skills
and exprience to do the job. This is the third idea of forming the organization.

• A close look at any industrial enterprise will reveal that it comprises of several departments-marketing,
production, finance and accounting, personnel, research and development, management information
systems etc.
Integration

The fourth and final concept needed to understand organization is closely related to the idea of labour. If
different people are discharging different function, some integrative function is needed to ensure that all are
working towards the commonly agreed upon goals. Integration is mainly achieved through hierarchy of
authority (Hierarchy determines the formal, position-based reporting lines and expresses who reports to
whom.). to ensure that there is coordination among all through guiding, controlling, informing and in other
managing the activities of people.
Organizational Typology

We often hear statement like “our organization is a unique organization. We can’t really be compared to any
other set up”.

How to account for the uniqueness of an organization?

The common sense approach to this question is to create a typology.

Ordering a neat classification scheme in an organization is known as organizational typology.

 Talcott Parsons Scheme
According to Talcott Parson (1958), organization can be classified primarily into four
categories based on functions:

a)Economic organizations : Economic organizations are primarily concerned with

producing something of value to the society. They are wedded to a philosophy of
generating surplus/profit.

b) Political organizations : Political organization serve on the basis of service to society.

They help in achieving the basic values cherished by the society. They collect resources
from the society, employ them judiciously and help in maintaining peace and stability
in the society. All governmental agencies are included in this category.
Talcott Parsons Scheme
• Integrative organizations : Integrative organizations are concerned with society control and
maintenance. Police departments and other protective organization (courts etc.) are included in
this category.

• Pattern maintenance organization: Pattern maintenance organization like educational,

institutional, research institutions, religious organization, club's etc. are primarily concerned with
long term interests of society ( culture, knowledge, values etc.).
Peter M. Blau And Richard Scotts Scheme

Blau and Scott (1963) have suggested a cuibana (who benefits) criterion for
classifying organizations. According to this scheme an organization, survives on the
basis of the services rendered to the society. Its success depends on how best it is
able to serve the interests of its members, owners or managers, clients and the
public at large. Each of them must obtain something beneficial from the
organization otherwise they will with draw their support and the organization may
collapse.
Peter M. Blau And Richard Scotts Scheme

• Mutual benefit associations : Mutual benefit associations like trade unions, political parties,
professional bodies etc., crop up to serve the interests of members. It is always not possible
for these associations to achieve the seemingly easy objective because of two problems,
membership apathy and oligarchic control. Membership in mutual benefit associations may
be exciting initially but after some time it becomes a monotonous feature. Members loose
interest and develop apathy towards the associations activities. Consequently control passes
into the hands of a selected few oligarchic control replaces the internal democratic character
of the association.

• Business organizations : Owners are the primary beneficiaries in business organizations.

They are mainly concerned with maintaining operational efficiency, achieving maximum gain
at minimum cost. It is true that other groups like employees, customer, society etc., receive
benefits simultaneously from business organizations but in the final analysis the survival
depends upon how effectively the owners are rewarded for the risks undertaken.
 Peter M. Blau And Richard Scotts Scheme

• Service organizations : In service organizations like hospitals, educational institutions, social welfare
agencies etc. clients are the primary beneficiaries. In order to render effective service to the clients the
professionals looking after these organizations must emphasize two things, service is more important
than observing procedures and the nature of service is to be decided by them not by the clients. Thus
the professionals should neither lose sight of the clients nor become captive of their clients while
rendering the service.

• Commonwealth organizations: Commonwealth organizations like the army, police departments, post
offices etc. are mainly concerned with serving the interests of the public at large. They perform most of
he protective services.
 Peter M. Blau And Richard Scotts Scheme

• Service organizations : In service organizations like hospitals, educational institutions, social welfare
agencies etc. clients are the primary beneficiaries. In order to render effective service to the clients the
professionals looking after these organizations must emphasize two things, service is more important
than observing procedures and the nature of service is to be decided by them not by the clients. Thus
the professionals should neither lose sight of the clients nor become captive of their clients while
rendering the service.

• Commonwealth organizations: Commonwealth organizations like the army, police departments, post
offices etc. are mainly concerned with serving the interests of the public at large. They perform most of
he protective services.
Samuel Deep's Classification Scheme

According to Samuel Deep (1971) organizations can be classified according to their objectives
they satisfy for the society in the following ways:

• Profit organizations : These organizations provide goods and services at a profit. for Companies
partnership firms, sole proprietorship are organised along these lines and they generate profit for
survival and continuance in the market.
• Government organizations : These organizations satisfy the public need for order and provide a means
for people to exercise some measure of control over their environment for example central state
government undertakings, township organizations etc.
• Protective organizations : They shield citizens from danger for example police, military services etc.
• Service organizations : They act in the interest of the general public without always receiving payment
in full for services rendered. For example voluntary organizations, consumer bureaus etc.
 Samuel Deep's Classification
Scheme

• Political organizations : They seek to influence legislation by electing a member of their group to public
office as political parties, groups and associations.

• Religious organizations : They provide for the spiritual needs of members and tiy to enlist non-believers into
their fold( for example Churches,Sects, orders etc.

• Social organization : They satisfy the needs of persons to make friendship and to have contact with other
who have compatible interests as clubs, teams, fraternities etc.
Organizational key players/stakeholders
In business, a stakeholder is any individual, group, or party that has an interest in an organization
and the outcomes of its actions. Common examples of stakeholders include employees,
customers, shareholders, suppliers, communities, and governments. Different stakeholders have
different interests, and companies often face trade-offs in trying to please all of them.
Organizational key
players/stakeholders

Customers
Stake: Product/service quality and value
Many would argue that businesses exist to serve their customers. Customers are actually
stakeholders of a business, in that they are impacted by the quality of service/products and their
value. For example, passengers traveling on an airplane literally have their lives in the company’s
hands when flying with the airline.

Employees
Stake: Employment income and safety
Employees have a direct stake in the company in that they earn an income to support themselves,
along with other benefits (both monetary and non-monetary). Depending on the nature of the
business, employees may also have a health and safety interest (for example, in the industries of
transportation, mining, oil and gas, construction, etc.).
Organizational key
players/stakeholders
Investors
Stake: Financial returns
Investors include both shareholders and debtholders. Shareholders invest capital in the business
and expect to earn a certain rate of return on that invested capital. Investors are commonly
concerned with the concept of shareholder value. Lumped in with this group are all other
providers of capital, such as lenders and potential acquirers. All shareholders are inherently
stakeholders, but stakeholders are not inherently shareholders.

Suppliers and Vendors

Stake: Revenues and safety
Suppliers and vendors sell goods and/or services to a business and rely on it for revenue
generation and on-going income. In many industries, suppliers also have their health and safety
on the line, as they may be directly involved in the company’s operations.
Organizational key
players/stakeholders
Communities
Stake: Health, safety, economic development
Communities are major stakeholders in large businesses located in them. They are impacted by a
wide range of things, including job creation, economic development, health, and safety. When a
big company enters or exits a small community, there is an immediate and significant impact on
employment, incomes, and spending in the area. With some industries, there is a potential health
impact, too, as companies may alter the environment.

Governments
Stake: Taxes and GDP
Governments can also be considered a major stakeholder in a business, as they collect taxes from
the company (corporate income taxes), as well as from all the people it employs (payroll taxes)
and from other spending the company incurs (sales taxes). Governments benefit from the overall
Gross Domestic Product (GDP) that companies contribute to.