Organization Structure & System Processes

Organisation
Organization refers to a collection of people, who are involved in pursuing defined
objectives.

“Organizations may be defined as a group of individuals large or small thetre cooperating

under the direction of executive leadership in accomplishment of certain common
objectives.”
– Keith Davis

"Organisation is the process of identifying and grouping the work to be done, defining and
delegating responsibility and authority, and forming relationships for the aim of enabling
people to work together most effectively in completing objectives."
- Louis A Allen

An organization encompasses division of work among individuals, and alignment of tasks in

order to attain certain goals and carry out predetermined tactics. The organization is the
foundation of management. It is the basis upon which the entire management structure is
based.

“Organisation is not an end itself, but a means to end of business performances and business
results. Organisation structure is an indispensable means; it must be designed so as to make
possible the attainment of the objectives of the business for five, ten, fifteen years hence.”
- Peter F. Drucker

Essential Characteristics of an Organisation

✓ Made of individuals/ People
✓ Objective/ Purpose
✓ Presence of one or more power centres
✓ Clearly defined Hierarchical structure
✓ Clearly defined tasks, authorities and responsibilities
✓ Interdependence, co-ordination and co-operation
✓ Rules and Regulations

Need/ Importance of Organisation

1. A tool for achieving objectives
2. Facilitates administration and management
3. Ensures optimum use of human resources
4. Effective coordination
5. Effective supervision and control
6. Eliminates overlapping and duplication of efforts
7. Fosters growth of the enterprise
Process of Organizing
The process of organising involves the following steps:

1. Determination of objectives
2. Division of activities into workable departments
3. Assignment of scope, authorities and responsibilities
4. Creation of managerial hierarchy
5. Establishing integration mechanism – Framing policies for coordination between
departments and groups

Organisation and Stakeholdres

A Stakeholder is either an individual, group or organization that’s impacted by the outcome
of a project or a business venture. Stakeholders can be within or outside the organization.

In business, a stakeholder is any individual, group, or party that has an interest in the
organization and the outcomes of its actions.

Stakeholders may include suppliers, internal staff, members, customers (including

shareholders, investors, and consumers), regulators, and local and regional
communities. Stakeholders may also include purchasers, clients, owners, and NGOs.

Stakeholders are important because they can have a positive or negative influence on the
project with their decisions.
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The environment of a business has a great impact on the functioning of the firm. It offers
opportunities and threats along with limitations and pressures influencing the structure and
functioning of the business.

For any organization, the environment consists of a set of internal and external forces that
have the potential to influence the organization and it’s functioning.

It is the source of opportunities and threats, as well as resources to the organisation.

Exchange of information is an important interaction between an organization and its

environment forming the basis of their relationship.

What is MANAGEMENT?
“Management is the process of planning, organizing, leading and controlling the efforts of
organization members and using all other organizational resources to achieve stated
organizational goals.”
- James A. E. Stone
“Business management is a human activity which directs and controls the organisation and
operation of a business enterprise. Management is centered in the administrators of
managers of the firm who integrate men, material and money into an effective operating
limit”.
- Wheeler
“Management is the art of getting things done through others and with formally organised
groups.”
- Harold Koontz
The Management Process
"Management is a distinct process consisting of activities of planning, organizing, actuating
and controlling, performed to determine and accomplish stated objectives with the use of
human beings and other resources".

Managerial functions are classified into five categories, viz.,

1. Planning
2. Organizing
3. Staffing
4. Directing (actuation or leading) and
5. Controlling.

Planning:
Planning is a function of anticipating the future and determining the course of action to
achieve the predetermined objective of an organization.

Planning involves deciding in advance what is to be done, how and when.

Planning is a function performed by managers at all levels. Though every manager plans, the
plans developed by different managers may vary in respect of scope and importance.

Importance of Planning
1. Planning makes the objectives clear and specific
2. Fills the gap between where we are and where we want to go
3. Helps define the roles and responsibilities of every member of the organisation
4. Makes provisions for unexpected events and risks
5. Facilitates efficient decision-making
6. Facilitates proper utilization of resources
7. Facilitates better co-ordination
8. Facilitates better supervision and control

Essentials of good plan:

✓ Must have Defined objectives
✓ Simple
✓ Clear
✓ Comprehensive
✓ Flexible
✓ Economical
✓ Should establish performance standards
✓ Balanced (Short/ Long-Term)
✓ Practicable
Organizing
Organising can be defined as a process that initiates implementation of plans by clarifying
jobs, working relationships and effectively deploying resources for attainment of identified
and desired results.

Organization is understood as a dynamic process and a managerial activity, which is

necessary for bringing people together and tying them together in the pursuit of common
objectives.

It is the process of defining and grouping activities, and establishing authority relationships
among them to attain organizational objectives.

Koontz and O’Donnell defines organizing as- “The establishment of authority relationships
with provision for coordination between them, both vertically and horizontally in the
enterprise structure.”

Principles of Organizing
1. Work Specialisation (Division of Labour)
2. Unity of Objectives - The working and the objectives of all the departments should
culminate into the achieving the objective of the business.
3. Authority-Responsibility - The working and the objectives of all the departments
should culminate into the achieving the objective of the business. Every person is
responsible and accountable for his/ her decisions and actions according to the
respective status in the organization.
4. Scalar Chain/ Unity of Command - a chain of command or authority which flows from
top to bottom. A scalar chain of command facilitates work flow in an organization
which helps in achievement of effective results.
5. Delegation and Decentralisation - It is the practice of turning over work-related tasks
and/or authority to employees or subordinates. Decentralization as the process of
distributing powers across the structure ensures its healthiness and steadiness
6. Span of Control/ Supervision - refers to the number of employees who report to one
manager. It is the number of direct reportees that a manager has and whose results
he is accountable for.

Staffing
Staffing is related to performing a set of activities which aim at inviting, selecting, placing
and retaining individuals at various jobs to achieve the organisational goals.

Staffing involves determining the need for people at various organisational posts, appointing
and retaining them at those posts by training and developing their abilities and skills.

In management, the meaning of staffing is an operation of recruiting the employees by

evaluating their skills, knowledge and then offering them specific job roles accordingly.
Staffing helps in coping with the needs of the organization for its survival and growth. A well
staffed organization with best policies can become highly competitive.

Importance of Staffing
✓ Efficient performance of all functions
✓ Ensures competency and efficiency
✓ Optimum utilization of resources
✓ Development of human capital
✓ Motivation of human resources
✓ Improves employee satisfaction and morale

Staffing Process
1. Manpower Planning
2. Selection
3. Recruitment
4. Workforce Orientation
5. Training & Development
6. Compensation
7. Identification of KRAs and Benchmarks
8. Performance Appraisal
9. Promotion

Objectives of Staffing
• To achieve organisational objectives by recognising its most valuable resource; work
force.
• To select people with suitable qualifications to fill organisational posts.
• To develop the skills of people on-the-job by providing appropriate training facilities.
• To develop abilities of the staff to assume jobs of higher skill, competence and
responsibility.
• To establish equitable and adequate compensation by providing them monetary and
non-monetary incentives.
• To make optimum use of human resource to achieve organisational objectives.
• To provide physical working conditions (Equipment, lighting, ventilation, recreation
facilities etc.) to maintain employees’ commitment to jobs.
• To maintain record of achievements so that managers can make policies with respect
to transfers, promotions and demotions.
• To reconcile individual, organisational and social interests by maintaining efficient
system of communication in the organization.
Directing

Directing refers to the process of instructing, guiding, counselling, motivating and leading
people in the organization to achieve its objectives.

Leadership, motivation, supervision, communication are various aspects of directing.

Directing is said to be the heart of management process. Planning, organizing, staffing have
got no importance without the direction function.

In field of management, direction is said to be all those activities which are designed to
encourage the subordinates to work effectively and efficiently.

Characteristics of Directing
✓ Pervasive Function - Required at all levels of the organization
✓ Continuous activity - Continues throughout the life of the organization
✓ Creative activity - Requires imagination and innovation.
✓ Executive Function - Carried out by all managers and executives at all levels
✓ Action-oriented - Helps in converting plans into performance.
✓ Delicate Function – Influencing and directing humans and their behaviour requires
skill and delicate handling

Importance of Directing
• Makes the organization goal-oriented
• Initiates action
• Integrates efforts
• Creates a motivated workforce
• Ensures conformity and facilitates control and coordination
• Creates adaptability
• Ensures internal discipline
• Ensures efficient utilization of resources

Principles of Directing
There are certain principles to be followed that makes directing more effective and
meaningful in an organisation.
1. Maximum individual contribution - management should motivate and encourage
employees to utilise their maximum intellectual and/or physical capacity in an
organisation that also contributes to meeting organisational objectives.
2. Harmony of Objectives – Harmony between personal or individual goals and
organisational goals.
3. Unity of Command - Following the scalar principle, there should be a clear line of
communication across superiors and subordinates for direction to be effective.
4. Use of informal organization - there must be free flow of information from top-level
of management to its consecutive levels of management.
 5. Effective communication systems - Prevalence of mutual communication between
superiors and subordinates, wherein subordinates express their ideas, concerns or
issues related to operations.
6. Managerial Leadership - A good leadership involves providing suitable directions by
the management to the employees that encourages a sense of ownership towards
work while also maintaining mutual respect and integrity.
7. Appropriateness of Direction Techniques - techniques such as supervision,
delegation, motivation and communication etc. should be utilised in accordance to
the situation and the subordinates involved in that situation should be able to
achieve maximum results.
8. Monitoring and follow-through - Constant monitoring of policies, procedures and
activities

Controlling
Controlling in Management is the process by which managers assure that resources are
obtained and used effectively and efficiently in the accomplishment of the organization’s
goals

Controlling can be defined as that function of management which helps to seek planned
results from the personnel at all levels of an organization.

The controlling function helps in measuring the progress towards the organizational goals &
brings any deviations, & indicates corrective action.

The purpose of the control function is to ensure that the organization makes progress
towards the established goals.

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Features of the Controlling Function
1. Controlling is the end function - A function which comes once the performances are
made in conformities with plans.
2. Controlling is a pervasive function - it is performed by managers at all levels and in
the entire organisation.
3. Controlling is forward-looking - Controlling always look to future so that follow-up
can be made whenever required.
4. Controlling is a dynamic process- since controlling requires taking reviewal methods,
changes have to be made wherever possible.
5. Controlling is related with planning - Planning and Controlling are two inseperable
functions of management. Without planning, controlling is a meaningless exercise
and without controlling, planning is useless.

Management By Objectives
The concept of ‘Management by Objectives’ (MBO) was first given by Peter Drucker in 1954.

Drucker drafted MBOs as an approach to get the management and employees to jointly set
goals to achieve known as objectives.

MBO is a process in which a manager and an employee agree on specific performance goals
and then develop a plan to reach them.

MBO is designed to align objectives throughout an organization and boost employee

participation and commitment.

The principle behind MBO is to ensure everybody in the organization has a clear
understanding of the aims, or objectives of that organization, as well as awareness of their
own roles and responsibilities in achieving those objectives.

A critical part of MBO is also to check employee performance through monitoring the
performance.

The complete MBO system intends to get managers and empowered employees acting to
implement and achieve their plans, which automatically achieve those of the organization.

Main Features of MBO

• MBO is a philosophy, not a technique
• All activities are goal-oriented
• MBO views organization as a dynamic entity
• MBO is a participative attempt
• MBO matches the objectives and resources
• MBO lays high emphasis on review and performance appraisal
 • MBO believe in providing autonomy to subordinates
• MBO lays higher emphasis on results, and not on work
Steps in the MBO Process
1. Define Organisational Goals
2. Define employee objectives
3. Continuous monitoring performance and progress
4. Providing regular feedback
5. Performance appraisal

S.M.A.R.T MBO
MBO follows the mnemonic S.M.A.R.T while setting objectives. ‘SMART’ objectives are-
• Specific - Target a specific area for improvement
• Measurable - Quantify or suggest an indicator of progress
• Assignable - Individual responsibility to be laid down
• Realistic - State what results can realistically be achieved, given available resources
• Time-bound - Specify when the result(s) can be achieved

Benefits of MBO
✓ Helps employees appreciate their on-the-job roles and responsibilities
✓ Employee-wise specific KRAs can be laid down for clarity and control
✓ Greater sense of identification
✓ Zero ambiguity
✓ Improved communication and coordination
✓ Result-based performance evaluation
✓ Stimulation and motivation for employees