9.1 Introduction
Organizations play role in man’s existence. In fact it has been said that we are born in organizations, educated in organizations, spend much of our lifetime in organizations.
It is therefore of paramount importance that we study and be knowledgeable about organizations.
Equally important are the organizations structures as they may influence the functions and efficiency of organizations.
9.3 Meaning of an Organization
Organizations can be seen as a group of members accomplishing certain goals through group efforts.
This definition covers a variety of groups such as businesses, schools, hospitals, fraternal groups (e.g. Trade Union) religious bodies, government agencies e.t.c
These are three significant aspects in the above definition. We analyze them as follows:
a) They are Social Inventions - The word “social” as a derivative of society, basically means a gathering of people.
Building, machines, plants by themselves do not form an organization although they may be necessary contributors to the existence of an organization.
For example, if everybody resigns from a company and no one is replaced, then it is no longer an organization even though all material aspects of the company remain indisposed.
Accordingly therefore it is people who make up organizations.
b) They are set up to accomplish certain goals - Let us point out here that all organizations have reasons for their existence.
These reasons are goals towards which all organizational efforts are directed.
c) They require group effort - Many goals of organization require coordinated group effort.
Man as an individual is limited by his abilities both physiological and psychological.
This calls for inter-independence hence forming groups to solve or achieve more complex goals of an organization.
Organization can be broadly be classified into (i) formal and informal organizations as discussed below:-
9.4 Distinction between Formal and Informal Organizations.
9.4.1. Formal Organization
A formal organization is a deliberate creation: It can be said to be the planned coordination of the activities of a number of people for the achievement of some common, explicit purpose or goal, through division of labour.
Some of the objectives of a business organization for instance would be:
- To achieve sufficient profit in order to finance the company’s growth.
- To provide quality products for their customers.
- To be socially responsible to all the stakeholders of the business.
Another distinction between formal and informal organizations depends on the degree of structure.
The formal organizations have a hierarchical structure.
In this type of organization, position, responsibility and the lines of command are clearly defined and established.
We may add that it is a system of well defined jobs with a prescribed pattern of communication with coordination and delegation of authority to achieve stated objectives.
An organization chart for example gives a representation of the formal organization.
9.4.2. Informal Organization.
The informal organizations or informal groups come into being due to the social, psychological forces at the work place.
They come about because people interact, communicate to each other, have some common likings or disliking.
It may be observed that the informal organizations are outside the formal authority system and may operate within formal organization.
They have their own structure with their own followers, group goals, social roles and working patterns.
Further, the informal organization has its own unwritten rules, a code of conduct, which every member implicitly accepts.
Here below is a summary of the distinction between a formal and an informal organization. (Figure 9.1)
(Table 9.1) Formal and Informal Organization
ASPECT | FORMAL | INFORMAL |
1.Origin | - Deliberately & consciously created to serve the objectives of the organization | - Created because of the operation of social/psychological forces operating at the work place, to serve the interests of individual members - Spontaneous, rises for interaction of people. |
2. Purpose | - Created to achieve the legitimate objectives of the organization. | - Is a product of the formal organization; to serve the social & psychological needs of members |
3. Goals | - Specific stated objectives | - No specific goals |
4. Structure | - Has an organization hierarchy which spells out authority, responsibility relationships. - Concerned with coordination of activities. | - No definite structural hierarchy - Flexible loosely structured - No specified purpose. |
5. Size | - Tend to be large | - Tend to be smaller than formal. |
6. Membership | - Membership is carefully selected through organization process for instance through interviews, specific predetermined number | - Membership is spontaneous and open - No limit on membership. |
7. Nature of Groups | - Groups are relatively stable | - Are quite unstable in nature. |
8. Number of Groups | - Whole organization may be divided into groups and sub-groups for organization purposes for instance, Departments are created according to work patterns - An individual is a member of one group | - There may be many informal groups in an informal organization. - An individual may be a member of several groups. |
9. Authority | - Legitimate authority flows through chain of command | - All members are equal. However, some individuals in informal organization may command more authority by virtue of their personal qualities e.g. Charisma, expertise. - Authority is usually to those who are likely to meet needs of the members or informal leaders. |
10. Behavior of members | - Governed by formal rules and regulations. These rules & regulations are normally directed towards rationality and efficiency. | - Behavior governed by norms, beliefs and values of the groups. - There is a varying degrees of membership participation |
11. Communication | - Is prescribed normally through a chain of command. | - Passes through informal channels |
12. Abolishment | - Easy to abolish | - Hard to abolish. Attempts to abolish may be thwarted by members. This is because of group cohesiveness arising out of the psychological satisfaction derived from these groups. |
9.5 Organization Charts
9.5.1 Meaning
The structure of an organization is depicted in the form of an organization chart.
This will show at a given moment in time how work is divided, the levels of authority and formal organizational relationships.
The organizational charts provide a picture representation of the structural framework of an organization.
Charts provided us with a picture of the structure. They are means through which we see and understand the organization as a whole.
“What is the purpose of depicting organization structures into charts?”
9.5.2 Purpose of Organizational Charts.
There are many purposes served by organization charts.
These may include;
- They are useful in explaining the outlines structure of an organization.
- They may be used as a basis for the analysis and review of an organization structure.
- They may be used for training and management succession
- They may be used for review and formulating changes.
- They may indicate apparent weakness in the structure such as too wide a span of control, too long a scalar chain, poor lines of communication etc.
- They also provide guidance for preparing job analysis, job evaluation and determining the requirements of manning the organization and its training needs.
- They provide guidance to outsiders in deciding about the point at which they may contact the organization.
9.5.3. Types of Charts
Broadly speaking there are three types of charts namely
- Pyramidal charts
- Horizontal charts and
- Concentric charts.
Pyramidal charts
a) A pyramidal chart is the traditional and most widely used type of chart.
It shows the vertical flow of authority and communication.
b) The horizontal chart moves from left to right.
The managing director is shown at the extreme left and operative workers at the extreme right. This can be illustrated as follows:
(c) A concentric or circular chart. They show the General manager in the centre of a series of concentric circles.
Each of which depicts the next successive levels in the hierarchy. The outmost circles show the operatives workers.
The organization charts depicts, the organization structure.
9.6 Organization Structure
We may describe an Organization Structure as the pattern of relationships among positions in an organization.
It is a mechanism through which the organization achieves its objectives. It is a means to an end and not an end in itself.
An organization structure shows the tasks and relationships as well as channels of communication of an organization structure.
9.6.1 Benefits of a Good Organization Structure
While there are many different structures that organizations can adopt depending upon the type of organization, whether service or manufacturing a well-structured organization has many benefits.
a) A good organization structure enables attainment of objectives through proper co-ordination of all activities.
It is an in build system of “Checks and balances” so that the progress towards the attainment of objectives is evaluated along the way and any new decisions required taken.
b) A good organization structure eliminates conflicts between individuals over jurisdictions hence conflicts are kept to a minimum.
Since each person is assigned a particular job to perform, the responsibility of performing that job rests solely with him/her.
Hence, the interdependence is reduced to a minimum.
c) It eliminates overlapping and duplication of work. Duplication only exist when the work distribution is not clearly identified but also when work is performed in a haphazard and disorganized way.
Since a good organization structure demands that the duties be clearly assigned, such duplication of work is eliminated.
d) It decreases likelihood of “run-around” The “run arounds” occur when we do not know who is responsible for what or being sent to wrong people for getting some work done.
e) It facilitates promotions since the organizational chart clearly pinpoints the positions of individuals relative to one another, it is easier to know as to which level a person has reached.
Further, since each job is well described in terms of qualifications and duties, the promotional stages can be more clearly established.
f) Communication is easier at all levels of organization hierarchy.
Since the lines of communications and the flow of authority is quite clear in the organization chart, the inter-communication is both clearer and easier and it eliminates ambiguity.
g) It encourages creativity. Because a sense of belonging and high morale and with the help of clearer out accountability, recognition of skill and appreciation for the contribution towards organizational growth, it encourages resourcefulness, initiative and a spirit of innovation and creativity.
9.7 Forms of Organizational Structure and Charts
As pointed earlier, a formal organization structure is a deliberate creation showing interrelations among positions in an organization.
The types of organization structure would depend upon the type of organization itself and its philosophy of operations.
Some of the organization structures are explained as follows:
9.7.1 Line Organization
This is the simplest form of organization structure and is most common among small companies.
Authority is embedded in the hierarchical structure and it flows in a direct line from the top of the managerial hierarchy down to different levels of managers and subordinates and further down to different levels of workers.
These relations in the hierarchy connect the position and tasks of each level with those above it and below.
ACTIVITY ; research on various Lines and Staff Organization
This is commonly adopted organization structure. In this type of organization, the functional specialists is added to the line organization structure thus giving the line advantages of specialists.
The line and staff organization structure can be illustrated as follows:
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(LINE) (LINE)
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Fig. 9.6 Line and staff organization structure
We may point out here that this type of organization is common in our business economy and especially in large enterprises.
The staff personnel are basically advisory in nature and usually do not possess authority over line managers.
9.7.3 The Divisional Organization Structure
The Divisional Organizations are also known as self-contained structures.
They involve grouping people or activities with similar characteristics into a single department or unit.
The departments operate as if they were autonomous within a large organization’s umbrella.
Decisions are generally decentralized. This facilitates communication, coordination and control and ultimately contributing to organizations’ efficiency and effectiveness.
The semi-autonomy of departments can be a source of motivation and innovation in their respectful departments.
There are various bases used to departmentalize an organization. These include:-
a) Departmentation by Functions
Departmentation based on a distinct and major function and is one of the most common bases of organizing.
It results into the creation of units, each one of which deals with functionally similar activities.
Functions differ from organization to organization and depend on objectives, nature of inputs and outputs and work activities.
For instance key functions in a manufacturing organization are production, marketing and finance.
There would be supportive functions like Industrial Relations, Purchasing, Quality Control, Transportation,
b) Departmentation by Product.
Companies with multiple product lines or products often adopt this basis of departmentation.
The manufacturing and marketing characteristics are of primary concern.
Each department is autonomous and strives to improve and expand its own product line.
Its manager is responsible for the costs, profits failures and successes.
Responsibility and accountability are easily traceable thus making the heads sensitive to product needs and changing consumer tastes.
The following is an illustration of departmentation by product
This type of organization structure facilitates the measurements of managerial efficiency as well as operative results.
It also provides feedback on the contribution of each product or product line to the organization profit.
c) Departmentation by Process on Activities
Department by process may be suitable for companies where production operations flow in a sequence from one stage to another.
For instance in a Sugar Company various processes are involved.
These would be weight crushing refining transportation distribution. There is a distinctive sequence in these operations so that the finished product of one department is the basic raw material for the department next in sequential order.
The following chart shows a possible process departmentation of a sugar factory.
d) Departmentation by Territory or Geographical
Companies having their operations on market activities in widely dispersed geographical locations may chose to organize on territorial or geographical basis.
As their activities are dispersed in branch plants, regional offices, regional warehouses etc to take advantage of the economics of location nearer to the customer.
Multinational corporations are typical/examples of territorial organization.
Other local examples are commercial banks, insurance companies, Kenya Power and Lighting Company.
The diagram below shows territorial departmentation
Fig. 9.10 Geographical Departmentation
e) Departmentation by Customers or Service
This type of departmentation is used by organizations which deal differently with different types of customers.
As we know customers differ in their needs. Hence the customers are key to the way, these activities are grouped.
Most commercial banks in Kenya departmentalize their customers into Saving and Current Account Departments.
An Airline or Locomotive would departmentalize its customers into 1st Class passengers and given better attention than the Economy class passengers.
A manufacturing concern may be divided into industrial product and consumers product buyers.
f) Alpha Numerical Departmentation
ALPHA – Numerical departmentation is found in many organizations. They use alphabets or numbers as a basis to departmentalize.
For instance an Insurance company, servicing insurance policies may be organized on the basis of alphabetical order of the names of policy holders.
In banks, ledger clerks may be assigned work on basis of account numbers or by alphabetical order of customer’s names.
g) Departmentation by Shift
Under this method employees are organized on basis of “time of the day”. Thus there would be Morning Shift, Afternoon shift or Department, Night shift etc.
Activity 9.1
With reference to an organization you are familiar with try to establish the bases for its departmentation
9.7.4 Project Organization Structure
Line, Line and staff as well as functional structures emphasis unity of command, vertical distribution of authority and specialization of task
However, organizations – with multiple activities, facing new technologies, uncertainties in the market, having need for innovation are moving towards project type of organization structure.
The project organization emphasis on horizontal relations and the creation of teams for achieving specific goals. Team members are selected on basis of task related skills and technical expertise.
The diagram below shows territorial departmentation
Fig. 9.12 Project Organization Structure
Once the team has accomplished its objective it is dismantled. The project organization structures are most useful when:
a) The project is clearly defined in terms of objectives to be achieved and the target date for the completion of the project set.
b) The project is separate and unique and not part of the daily work routine of the organization.
c) There must be different types of activities which require specialized skills and there have to be coordinated.
d) The project must be temporary in nature and not extend into other related projects.
Matrix Organization
A matrix is, in a sense, a combination and interaction or project and functional structures.
The Key features of a matrix structure are that the functional and project lines of authority are super-imposed with each officer and are shared by both functional and project managers.
Programs  | |||
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NB. Vertical flow of functions Authority responsibility Relationships
Fig. 9.13 A matrix organization structure
It can be seen from the illustration that the managers of various programmes staff their courses from the school’s various departments and the same schools serves various programmes.
The Matrix provides clear lines of responsibility for each programme.
For example, the responsibility for the success or failure of executive development programe lies directly with its programme manager.
The Matrix structure provides for coordination among departments offering various courses and programmes.
Without the matrix, such coordination would not be possible.
Matrix organization design is most useful when there is pressure for shared resources.
For instance the various departments would offer service to each other instead of hiring more personnel.
Let us also note that each Matrix contains three unique sets of role relationship.
a) There is the top manager who heads and balances the dual chain of command.
b) The managers of functional and project (or product) departments share subordinates.
c) The specialists report to both the respective functional managers and their project manager.
We may observe therefore that an important aspect about matrix structure is that each person working on the project has two supervisors, the project manager and the functional manager.
Since the matrix structure integrates the efforts of functional and project authority the vertical and horizontal lines of authority are combined and authority flows both downwards and across.
The vertical pattern is brought about by the typical line structure where the authority flows down from supervisor to subordinates.
The project authority flows across because the authority is really meant for coordinating of activities rather than giving orders and directions which is a vertical function.
NB.We also learned that the pictorial representation structure is known as an organization chart.
Activity
- Imagine an organization without an organization structure. What would be the consequences? List them down.
- Define an organization.
- Is the University of Nairobi a formal or informal organization? Give reasons to support your answer.
- Distinguish between an organization chart and an organization structure.
- Explain the benefits of a good organization structure.
- Outline and describe at least five organization structures.
