Principles of Management. Lecture 5

Transcription

1 Principles of Management Lecture 5

2 What Is Organizational Structure? Organizational Structure How job tasks are formally divided, grouped, and coordinated. Key Elements: Work specialization Departmentalization Chain of command Span of control Centralization and decentralization Formalization

3 Key Design Questions and Answers for Designing the Proper Organization Structure The Key Question The Answer Is Provided By 1. To what degree are articles Work specialization subdivided into separate jobs? 2. On what basis will jobs be grouped Departmentalization together? 3. To whom do individuals and groups Chain of command report? 4. How many individuals can a manager Span of control efficiently and effectively direct? 5. Where does decision-making Centralization authority lie? and decentralization 6. To what degree will there be rules Formalization and regulations to direct employees and managers?

4 What Is Organizational Structure? Work Specialization The degree to which tasks in the organization are subdivided into separate jobs. Division of labor: Makes efficient use of employee skills Increases employee skills through repetition Less between-job downtime increases productivity Specialized training is more efficient Allows use of specialized equipment

5 Economies and Diseconomies of Work Specialization

6 What Is Organizational Structure? Departmentalization The basis by which jobs are grouped together. Grouping Activities By: Function Product Geography Process Customer

7 What Is Organizational Structure? Authority The rights inherent in a managerial position to give orders and to expect the orders to be obeyed. Chain of Command The unbroken line of authority that extends from the top of the organization to the lowest echelon and clarifies who reports to whom. Unity of Command A subordinate should have only one superior to whom he or she is directly responsible.

8 What Is Organizational Structure? Span of Control The number of subordinates a manager can efficiently and effectively direct. Concept: Wider spans of management increase organizational efficiency. Narrow Span Drawbacks: Expense of additional layers of management. Increased complexity of vertical communication. Encouragement of overly tight supervision and discouragement of employee autonomy.

9 What Is Organizational Structure? Centralization The degree to which decision making is concentrated at a single point in the organization. Decentralization The degree to which decision making is spread throughout the organization. Formalization The degree to which jobs within the organization are standardized.

10 Advantages of centralization 1. It is a means for adopting and enforcing uniform policies and it achieves coordination and conformity since all decisions are made at one central point. 2. The quality of the decisions is expected to be higher since the top management, which makes such decisions is much more experienced and knowledgeable about organizational problems and situations Also, decisions made by subordinates in decentralization may not be optimal for the entire organization since the subordinates lack the wider perspective of the needs and issues of the organization as a whole and tend to concentrate on the optimality of their own units. 3. Centralization makes it easier to achieve balance among the activities of different departments and functional areas. If the departments of production, marketing and finance, each went its own way, then each would try to make decisions that would be beneficial to its own department, even at the cost of other departments. This would be harmful to the organization as a whole. The centralized system looks at these different sub-units as parts of the whole and relates these sub-units to each other so as to maximize the total benefits.

11 Cont. 4. Centralization results in the optimal utilization of human and physical resources. One of the disadvantages of divisionalization and decentralization is the duplication of efforts and resources for similar activities being conducted by different sectors of the Organization 5. Central management is better equipped to handle any emergencies that might affect all the units of the organization. This emergency may be related to policy matters or operational matters. This may be a breakthrough in technology or a sudden change in the tactics of competitors 6. Centralization provides for the services of staff specialists in those areas where they are needed. Different units of the same organization independently would not have the resources to provide for specialized services. 7. Centralization can be highly motivating and morale boosting for It provides prestige and power which strengthens the self-confidence which in turn would be useful in decision-making at time of a crisis

12 Advantages for decentralization. 1. It relieves the top executive from excessive work load, since in decentralization, most of the routine managerial responsibilities are delegated to subordinates. This gives the central management more time to concentrate on such tasks as planning, coordination and policy making, control. 2. It provides the foundation for the development of future executives. The more responsibility is given to subordinates, the more experience they will gain thus preparing them for higher positions. 3. Decentralization is highly motivational for subordinates because it gives them the freedom to act and to make decisions. It gives them a feeling of status and recognition which results in a feeling of dedication, commitment and belonging.

13 Cont.. 4. Decentralization leads to prompt actions and quick decisions, since the matters do not have to be referred to the higher-ups and spending time for their guidance, approvals or decisions. Also, the supervisors are much closer to the points of operations and are in a position to know the problems more accurately and are more likely to make the right decisions. 5. Decentralization results in effective control over operations and processes. In decentralization, the responsibility is much more specific and any mistakes are easily traceable. This makes accountability much more clear-cut and hence controls much more effective. In can be seen that decentralization is advantageous in most situations and unavoidable in large diversified organizations. To make decentralization more effective, its concept that it does not mean total autonomy but only operational independence and that the unit managers are responsible to the central management for their actions and results must be understood. Perhaps, the best form of decentralization would be centralized control with decentralized responsibilities.

14 A Virtual Organization

15 New Design Options (cont d) Boundaryless Organization An organization that seeks to eliminate the chain of command, have limitless spans of control, and replace departments with empowered teams. T-form Concepts: Eliminate vertical (hierarchical) and horizontal (departmental) internal boundaries. Breakdown external barriers to customers and suppliers.

16 Why Do Structures Differ? Mechanistic Model A structure characterized by extensive departmentalization, high formalization, a limited information network, and centralization. Organic Model A structure that is flat, uses cross-hierarchical and cross-functional teams, has low formalization, possesses a comprehensive information network, and relies on participative decision making.

17 Mechanistic Versus Organic Models

18 Why Do Structures Differ? Strategy Innovation Strategy A strategy that emphasizes the introduction of major new products and services. Cost-minimization Strategy A strategy that emphasizes tight cost controls, avoidance of unnecessary innovation or marketing expenses, and price cutting. Imitation Strategy A strategy that seeks to move into new products or new markets only after their viability has already been proven.

19 The Strategy-Structure Relationship Strategy Structural Option Innovation Organic: A loose structure; low specialization, low formalization, decentralized Cost minimization Mechanistic: Tight control; extensive work specialization, high formalization, high centralization Imitation Mechanistic and organic: Mix of loose with tight properties; tight controls over current activities and looser controls for new undertakings

20 Why Do Structures Differ? Size Size How the size of an organization affects its structure. As an organization grows larger, it becomes more mechanistic. Characteristics of large organizations: More specialization More vertical levels More rules and regulations

21 Why Do Structures Differ? Technology Technology How an organization transfers its inputs into outputs. Characteristics of routineness (standardized or customized) in activities: Routine technologies are associated with tall, departmentalized structures and formalization in organizations. Routine technologies lead to centralization when formalization is low. Nonroutine technologies are associated with delegated decision authority.

22 Why Do Structures Differ? Environment Environment Institutions or forces outside the organization that potentially affect the organization s performance. Key Dimensions- Capacity: the degree to which an environment can support growth. Volatility: the degree of instability in the environment. Complexity: the degree of heterogeneity and concentration among environmental elements.

23 The Three Dimensional Model of the Environment Volatility Capacity Complexity

24 Organization Structure: Its Determinants and Outcomes Associated with Implicit Models of Organizational Structure Perceptions that people hold regarding structural variables formed by observing things around them in an unscientific fashion.

25 Controlling as a Management Function Controlling A process of monitoring performance and taking action to ensure desired results. It sees to it that the right things happen, in the right ways, and at the right time.

26 Controlling as a Management Function Controlling Done well, it ensures that the overall directions of individuals and groups are consistent with short and long range plans. It helps ensure that objectives and accomplishments are consistent with one another throughout an organization.

27 Controlling as a Management Function Controlling It helps maintain compliance with essential organizational rules and policies.

28 Controlling as a Management Function Cybernetic Control System One that is self-contained in its performance monitoring and correction capabilities. (thermostat) The control process practiced in organizations is not cybernetic, but it does follow similar principles.

29 The Control Process Establish objectives and standards. Measure actual performance. Compare results with objectives and standards. Take necessary action.

30 Establish Objectives and Standards The control process begins with planning and the establishment of performance objectives. Performance objectives are defined and the standards for measuring them are set.

31 Establish Objectives and Standards There are two types of standards: Output Standards - measures performance results in terms of quantity, quality, cost, or time. Input Standards - measures work efforts that go into a performance task.

32 Measuring Actual Performance Measurements must be accurate enough to spot deviations or variances between what really occurs and what is most desired. Without measurement, effective control is not possible.

33 Comparing Results with Objectives and Standards The comparison of actual performance with desired performance establishes the need for action. Ways of making such comparisons include: Historical / Relative / Engineering Benchmarking

34 Taking Corrective Action Taking any action necessary to correct or improve things. Management-by-Exception focuses managerial attention on substantial differences between actual and desired performance.

35 Taking Corrective Action Management-by Exception can save the managers time, energy, and other resources, and concentrates efforts on areas showing the greatest need. There are two types of exceptions: Problems - below standard Opportunities - above standard

36 Effective Controls The Best Controls in Organizations are Strategic and results oriented Understandable Encourage self-control

37 Effective Controls The Best Controls in Organizations are Timely and exception oriented Positive in nature Fair and objective Flexible

38 Types of Control Preliminary Sometimes called the feedforward controls, they are accomplished before a work activity begins. They make sure that proper directions are set and that the right resources are available to accomplish them.

39 Types of Control Concurrent Focus on what happens during the work process. Sometimes called steering controls, they monitor ongoing operations and activities to make sure that things are being done correctly.

40 Types of Control Postaction Sometimes called feedback controls, they take place after an action is completed. They focus on end results, as opposed to inputs and activities.

41 Types of Controls Managers have two broad options with respect to control. They can rely on people to exercise selfcontrol (internal) over their own behavior. Alternatively, managers can take direct action (external) to control the behavior of others.

42 Types of Control Internal Controls Allows motivated individuals to exercise selfcontrol in fulfilling job expectations. The potential for self-control is enhanced when capable people have clear performance objectives and proper resource support.

43 Types of Control External Controls It occurs through personal supervision and the use of formal administrative systems. Performance appraisal systems, compensation and benefit systems, employee discipline systems, and management-by-objectives.

44 Organizational Control Systems Management Processes Strategy and objectives Policies and procedures Selection and training Performance appraisal Job design and work structures Performance modeling, norms, and organization culture

45 Organizational Control Systems Compensation and Benefits Attract talented people and retain them. Motivate people to exert maximum effort in their work. Recognize the value of their performance contributions.

46 Organizational Control Systems Employee Discipline Discipline is defined as influencing behavior through reprimand. Progressive Discipline ties reprimand to the severity and frequency of the employee s infractions. Positive Discipline tries to involve people more positively and directly in making decisions to improve their behavior.

47 The Hot Stove Rule To be Effective Discipline Should be: Immediate Focus on activity not personality Consistent Informative Occur in a supportive setting Support realistic rules

48 Organizational Control Systems Information and Financial Activity-based costing - the true cost of all products and services. Economic value added - examine the value added by all activities. Understand the implication of key financial measures of (ratios) organizational performance

49 Operations Management and Control Purchasing Economic Order Quantity automatic reorder points Just-In-Time Scheduling

50 Operations Management and Control Project Management Program Evaluation and Review Technique (PERT) - Identifies and controls the many separate events in complex projects.

51 Operations Management and Control Statistical Quality Control Based on the establishment of upper and lower control limits, that can be graphically and statistically monitored to ensure that products meet standards.

52 Co-Ordination

53 Introduction Co-ordination is the process which ensures smooth interplay of the functions of management. Common objectives are achieved without much wastage of time, efforts and money with the help of co-ordination.

54 Definition Co-ordination is balancing and keeping the teams together by ensuring a suitable allocation of working activities to the various members and seeing that these are performed with due harmony among the members themselves.

55 Features or Characteristics Not separate functions of management. Managerial responsibility Provides unity of action Co-ordination is necessary to all levels of organization Relevant of group efforts. Continuous and dynamic process System concept

56 Need and importance of co-ordination Unity in diversity Term work or unity of directions Functional differentiation Specialization Reconciliation of goals Large number of employees Congruity of flows or congruent flows Empire building Differential and integration

57 Principles of coordination or Essentials of effective coordination Personal contact Early Start Dynamism Effective supervision Continuity simplified organization Self coordination Principles of coordination Effectives communicati on Clear cut objectives Reciprocal relationship Effective leadership Clear definition of authority and responsibility

58 Techniques of Co-ordination Clearly Defined Objectives Effectives chain of command Coordination through group meetings Harmonious policies and procedures Effective communication

59 Techniques of Co-ordination Sound organizational structure Coordination through a liaison officer Co-operation Self coordination Coordination by leadership Incentives

60 Types of coordination Internal coordination Vertical coordination Horizontal coordination External coordination

61 Internal coordination It is the establishment of relationship of the managers, executives, divisions, subdivisions, and other workers.

62 Internal coordination Vertical coordination: Superior coordinates his work with his sub coordinates and vice versa. Sales manager coordinates his work with the activities of the sales supervisor.

63 Internal coordination Horizontal coordination: Horizontal Coordination refers between the persons of the same status. Coordination between the departmental heads, supervisors, co-workers

64 External coordination It is the establishment of relationship of the managers, executives, divisions, subdivisions, and other workers.

65 External coordination Market agencies Different Industrial organization General public Competitors Different institution Financial Institutions Technological Agencies Technological organization Customers government agencies Different commercial organizations

66 Problems of Co-ordination In practice coordination faces certain problems listed below. Natural hindrance Lack of administrative talent lack of techniques of coordination Ideas and objectives Misunderstanding

67 Steps of effective Co-ordination proper delegation of authority and responsibility Whole or entire activates of the organization should be divided department wise or sectionwise according to the organization Preparing and adherence to rigid rules and regulations, procedures, policies, etc. Establishment of an effective communication system

68 Steps of effective Co-ordination Establishment of employees grievances cell. There should be a proper system for reporting. Skilled workers are to be rewarded adequately. The management should induce the employees to take active part in meeting, committees, encourage the employees to have friendly relationship with others.

69 Steps of effective Co-ordination The management should encourage the employees to have friendly relationship with others. Managers should have opportunities to get training to get training in the area of leadership, coordination, planning staffing and the like.

70 Co-ordination and Co-operation Co-ordination It is the function of management. Coordination is an orderly arrangement of group efforts. The early success of an organization depends upon the degree of co-ordination. Co-ordination is obtained officially. There is a direct link between the achievement of objectives and co-ordination. Co-operation It is not a function of management. Co-operation is willingness to work with others or help others. Co-operation is the basis for co-ordination. Co-ordination is a voluntary service. There is no such direct connection between cooperation and the achievement of objectives.

71 Human Resource Planning Assessing Current Human Resources Assessing Future Human Resource Needs Developing a Program to Meet Needs

72 The staffing function, which is the process of providing qualified personnel to the various activities of the organization, is handled by the personnel department. It is a process through which managers recruit, select, train and develop organization members at all levels of the hierarchy. Several trends, such as global competition, technological dynamics, increasingly knowledgeable and sophisticated customers and more educated workforce have led companies to organize their manpower more responsively.

73 Staffing is the traditional management function of attraction and selection of the best people and putting them on jobs where their talents and skills can be best utilized, and retention of these people through incentives, job training and job enrichment programmes, in order to achieve both individual and organizational objectives. This emphasizes managing human and not material or financial resources. This function is becoming extremely specialized due to the unique importance and complexity of human nature and its ever-changing psychology, behaviour and attitudes. The staffing function is generally handled by the Personnel Department where the Personnel Management is concerned with planning, organizing, directing, and controlling of the procurement, development, compensation and integration of people into the system for the purpose of contributing to organizational, individual and social goals.

74 Recruitment Process of locating, identifying, and attracting capable candidates Can be for current or future needs Critical activity for some corporations. What sources do we use for recruitment

75 Internal Searches School Placement Employee Referrals Employee Leasing Recruitment Sources Temp Services Employment Agencies Advertisements

76 Selection Prediction exercise Thus, Not Perfect Decision-making exercise Purpose is to hire the person(s) best able to meet the needs of the organization Tied Back to Strategy

77 Selection Are there ways that managers can ensure that the decision achieves the desired outcome? (time and time again) Yes, use HR Tools which are Reliable & Valid

78 Reliability Degree to which selection tool measures the same thing consistently Can be a test or an interview Same questions need to be asked.

79 Validity Relationship between selection tool and appropriate criterion What a selection technique measures and how well it measures Must be proven and relevant to job

80 The Effectiveness of Interviews Prior knowledge about an applicant Attitude of the interviewer The order of the interview Negative information The first five minutes The content of the interview The validity of the interview Structured versus unstructured interviews

81 Common Types of Interviews Non-directive Most Latitude Questions are open ended This can get you into trouble Behavioural Description As about a situation you have experienced. Structured Panel Situational Why is a Situational Analysis Good.

82 Training and Development Learning experience that seeks relatively permanent change Involves changing skills, knowledge, attitudes or behaviours Training tends to be done for current job Develop usually means acquiring skills for future work

83 Employee Training What deficiencies, if any, does job holder have in terms of skills, knowledge, abilities, and behaviours? Is there a need for training? What are the strategic goals of the organization? What behaviours are necessary? What tasks must be completed to achieve goals?

84 Performance Management Integration of management practices that includes a formal review of employee performance How often should this take place? Includes establishing performance standards and reviewing the performance Means to ensure organizational goals are being met

85 Performance Review Methods Written Essay Critical Incidents Graphic Rating Scales BARS Multiperson MBO 360-Degree Review

86 If Performance Falls Short Train Discipline Coach Out the Door

87 Compensation Management Process of determining cost-effective pay structure Designed to attract and retain Provide an incentive to work hard Structured to ensure that pay levels are perceived as fair

88 Factors That Influence Compensation Size of company Geographical location Employee s tenure and performance Level of Compensation and Benefits Company profitability Kind of job performed Kind of business Management philosophy Labour- or capital-intensive Unionization Source: Management, Seventh Canadian Edition, by Stephen P. Robbins, Mary Coulter, and Robin Stuart-Kotze, page 274. Copyright Reprinted by permission of Pearson Education Canada Inc. Robbins et al., Fundamentals of Management, 4th Canadian Edition 2005 Pearson Education Canada, Inc.

89 Employee Benefits Indirect financial rewards Designed to enrich employees lives Vary widely in scope Costs range from 30% to 40% of payroll costs

90 Health and Safety Employers are responsible for ensuring a healthy and safe work environment Employees are required for follow instructions and any legal requirements Workplace violence is a growing concern