Week 8: 23 March 2015 Principles of organising Objectives: 1. Explain the principles of organizing that should be considered in designing an organizational structure. 2. Explain the concepts of authority 3. Differentiate between Formal and Informal Authority, Line and Staff Authority, Centralized and Decentralised Authority. 4. Discuss the Advantages and Disadvantages of centralized and decentralization Authority. 1. Principles of organising • Unity of command and direction: Each employee report to only one supervisor. Unity of direction: all tasks and activities should be directed toward the same mission and goal. • Chain of command: Clear unbroken chain of command should link every employee with someone at a higher level – to top of org. • Span of control: Refers to the number of subordinates reporting to a manager. The fewer employees supervised, smaller the span of control. The more employees – wider. • Division of work: Determine how the work should be divided. Specialised jobs in functional areas: Accounting, administration, marketing, HR, etc. • Standardization: Principle of uniform practices that employees are to follow in doing their jobs. Develop a certain level of conformity. • Coordination: All units work together to accomplish the goals. Balanced Responsibility and Authority • Responsibility The obligation to achieve objectives by performing required activities. 1 • Authority The right to make decisions, issue orders, and use resources. • Accountability The evaluation of how well individuals meet their responsibilities. • Power: the ability to influence the behavior of others. • Delegation: The process of assigning responsibility and authority for accomplishing objectives. • Downsizing: Aiming at reducing the size of the workforce. (Cost effective/competitive). • Delayering: Process of reducing the number of layers in the vertical management hierarchy. • Flexibility: The ability to adapt to exceptions to the rules, policies, and procedures of the organisation. 2. Power • Power of Reward – power to give or withhold rewards. • Coercive Power – to force other persons to action by means of disciplinary action - Fear • Legitimate Power – stems from position or rank of person. Authority granted to a particular position. • Referent Power – has reference authority if others want to identify with your personal actions Egg. Charismatic leaders – Personal power: like, respect. • Expert Power: – stems from special knowledge or skills with reference to a task. 2 3. Organising process: The point of departure is the formulation of vision, mission, goals and strategy of the organization. Management first needs to outline the tasks and activities in order to achieve goals. After the outlining of tasks jobs must be designed and assigned to staff members. Define worker relationships between workgroups and individuals. Next will be the development of an organisational design that will support the strategic, tactical and operational plans – grouping members, coordinate efforts, Centralisation or decentralisation of decision making. Management should then put a control mechanism in place to ensure that the organizational structure enable organization to attain mission and goals. 4. Authority: Is the right to make decisions, issue orders and use resources. It includes the right to take action to compel the performance of duties and to punish default or negligence. Authority resides in in position rather than in people – managers acquire authority by means of their hierarchical position in the organisation, rather than from their person characteristics. 5. Types of authority Formal authority refers to the specified relationships amongst people illustrated by organisational chart; and Informal authority – patterns of relationship and communication that evolve as employees interact and communicate Line authority (originates at top management)– responsibility to make decisions and issue orders down the chain of command; and Staff authority- responsibility to advise and assist other personnel egg HR department, Company secretary, economists in staff position Centralized Authority – important decisions re made by top management, and Decentralised organisational authority - important decisions are also made by middle and lower level management. 6. Centralize or Decentralize authority? Factors to consider • External environment : The more complex the environment and the greater the uncertainty, the greater the tendency to decentralize. • The History of the Organisation: Organisations tend to do whatever they have done in the past. Hence there will be a tendency to follow the history of the organisation when it comes to centralization or decentralization. 3 • Nature of the decision – risky and costly – centralize • Strategy of the organisation - depends on size of business, how products are developed etc. – larger businesses/ ones doing research with product development diversify and look at decentralized structures. Predictable business centralized • Skills of lower level managers – if not properly equipped/qualified – centralize • Size and growth rate of organisation – larger organisation - decentralize 7. Advantages of decentralisation • Workload of top management is reduced • Decision making improves i.e. close to action • Improved morale and initiative at lower levels • Faster and more flexible NB in rapidly changing environment • Fosters a competitive climate in organisation – managers performance constantly compared with that of colleagues 8. Disadvantages of decentralisation • Danger of loss of control with too much decentralisation • Danger of duplicating tasks i.e. HR at head office and sub unit • Decentralisation requires more expensive and intensive management training • Decentralisation demands sophisticated planning and reporting methods References Smit, P.J., Cronje, G. J., Brevis, T., Vrba, M. J. (2011). Management principles. A contemporary edition for Africa. (5th Ed.). Cape Town, Juta. Robbins, S. P, DeCenzo, D. A. (2005). Fundamentals of Management: essentials concepts and applications. (5th ed.). New Jersey, Pearson Prentice Hall. 4