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Organising: Principles and Design

Organising is important in business; it helps to achieve its strategic objectives.

The organizing function is the process of breaking down the overall task into individual jobs along with delegated authority to do those jobs and then putting then back together in units, or departments, of an optimal size. The key elements in the organizing function are authority relationships and company structure. Authority relationships are based on the 4 key principles in organizing: hierarchy (a system of authority with different levels, one above the order. It is characterized), centralisation, specialisation and coordination.

The first, hierarchy principle, involves such elements as chain of command, bureaucracy, authority and responsibility. Chain of command - is hierarchy of managerial levels created by delegation of authority. Bureaucracyis a relationship between people at the top, such as directors or elected politicians, and their subordinates. They are written rules. Authority and responsibility is the formal right of a manager to act as a manager, i.e. to plan, decide, give instruction, allocate resources and control in order to achieve the aims of organization. 3 types of organizational authority can be identified: 1) Line authority - is the most fundamental type of authority within an organization. It reflects the existing superior-subordinate relationship, which involves the right of a superior to give orders to a subordinate. Line authority connected with the final product of a company. 2) Staff authority that are not integrated into the hierarchy, no bosses and subordinates. These people are usually busy with services. The activities of the staff departments include, for example, accounting, personnel or human resource, credit and advertising. 3) Functional authority.It was the first organizing system to be studied and developed. Functional authority implies dividing organizations into units with distinct tasks and responsibilities as well as grouping workers according to the broad task they perform.

The traditional functional departments of a business are production, marketing and finance. These are the broad activities or functions every business must perform to attain its objectives.

Centralisation refers to the level in the hierarchy at which decisions are made. It is closely connected with delegation of authority. Delegation is the process of assigning job duties and related authority to specific organization members. According to some scientists, there are 3 steps in the delegation process: *The first is to assign specific duties to the individual. *The second is to grant appropriate authority to the subordinate. *The last step is to create the obligation for the subordinate to perform the duties. The terms centralisation and decentralisation are used to describe the general degree of authority that is given to various levels of management. Decentralisationis decision-making at lower levels, nowadays decentralisation is a fashion. Centralisation implies that minimal amounts of job activities and authority have been delegated to subordinates by management, while decentralisation implies that significant amounts have been delegated.The possibilities for decentralization vary from firm to firm and time to time. Crisis, for example, leads to centralization.

The problem of delegating authority involves balancing the advantages and disadvantages of decentralization and centralization of authority. The benefits of centralizationlie in gains in economic performance, taking advantages of economies of scale, avoiding wasteful conflict and competition among units, common policy, easier coordination and control, and quicker decision-making. Disadvantages of centralization are wasteful administration, poor motivation, excessive rules and control, stifle and initiative.

Advantages of decentralization:

1) The first advantage is that it encourages managers to develop their decision-making ability and take essential training for promotion into position of greater authority and responsibility.

2) The second advantage is competitive climate.

3) The third is more autonomy for managers, flexibility and profitability of the organization

4) Another plus is that decentralization helps to develop people, because staff get more responsibility, make more decision.

Disadvantages of decentralization:

1) More intensive and expensive management training.

2) More complicated planning and reporting methods

3) A third is that top management may be unwilling or unable to delegate authority.

Specialisation - is dividing tasks. The pluses of specialization: tasks are easier to learn, work becomes simpler, and training of people becomes easier and cheaper. The minus is that a single job becomes repetitive and boring. As with many other aspects, the problem concerns not whether specialization is good or bad, but finding its right pattern and degree. Coordination - is acting in unison and collaboration both within and between departments. Four basic methods can be distinguished to achieve coordination: 1)Line management 2) Liaison staff 3)Information systems 4)Cross-functional teams

General overview of organizational structures. The most common method of establishing formal relationships between resources n an organization is by establishing departments (a unique group of resources established by management to perform some organizational task), this process is called departmentalization. This process typically creates departments based upon such factors as the work functions being performed, the product being assembled, the territory being covered, the target customer and the process designed to manufacture product. Organisational structure means the relationship between positions and people who hold these positions. Organisation structures try to balance the need to specialize with the need to coordinate. Organisation charts or organograms describe organisational structures. Two dimensions of the chart are used to depict: 1)Hierarchy – number of levels, chain of command and span of control; and 2) Specialization – division of tasks between managers and deciding who is responsible for linking their work at each level.

Which organisation structure is best suited to the business is complicated issue. There are many forms organisation structure, one of them is functional form. It was invented by the French industrialist H. Fayol. Today, most large manufacturing organisations have a functional structure.

The functional type of organisation structure reflects an arrangement based on the nature of the activities that must be performed. The chief executive of each area occupies a position on the second level of the organisation and generally has the title of Vice-President. The structure’s most distinguishing feature is that staff managers may have line (functional) authority for their particular activities. The invention of the divisional or multi-divisional structure is attributed to Alfred Sloan who reorganized General Motors this way. Each division had its own engineering, production and sales departments, and made different category of product. Each division operates as if it is almost an autonomous business within the whole organisation. This type of organisation is valuable when:

the size of each division is sufficient for it to be able to provide its own specialists, such as accountants and specialists; and the work of each division is relatively independent so that their operations do not need close coordination A form of organisation structure that combines some aspects of both the functional and the product-manager types is the matrix structure. The unique feature of the matrix structure is that the personnel in the company’s functional divisions report to two or more superiors on the same level. Advantages of matrix organisations are the following: * integration of important functions * improved information flow * flexibility in response to changing market and competitive environments * managers report directly to those who is responsible Disadvantages are: * conflict between managers over range of responsibility * possible loss of efficiency through extra managerial overhead * stress caused by having several bosses with potentially conflicting interests

The network form is founded on the idea of disaggregation – separating major functions into independent units linked through a small core. Networks have advantages in the following aspects: they are more flexible structures, sharing resources and risk as well as reaching new markets.

The structure of any organisation should be a dynamic thing, adaptable to changing circumstances.



Goods is a commodity, or a physical, tangible item that satisfies some human want or need, or something that people find useful or desirable and make an effort to acquire. Marketing theorists tend to give the word producta very broad meaning, using it to refer to anything capable of satisfying a need or want. Thus services, activities, ideas, places, organizations, and even people, as well as physical objects offered for sale by retailers, can be considered as products.

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