Book one
Session 1
The nature of organization: objective, structure, management
functions and responsibilities
*What is an organization?
Book definition: is a group of individuals or people working together
to achieve one or more objective
Internet definition : A social unit of people that is structured and
managed to meet a need or to pursue collective goals.
So the organization concepts have been defined differently , all
definitions refer to five common features:
1-they are composed of individual and groups
2-they are oriented toward achieving collective goals
3-they consist of different functions
4-the functions need to be coordinated
5- They exist independently of individual members who may come
and go
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*Mintzberg’s five components of organization
Mintzberg’s suggested that all organization consist of five
components as show in diagram page 8
Mintzberg’s model will help you to understand the organization when
you read and understand the players who run the organization
(understand the organization structure)
1-stratgic apex:
 Refer to the top management to set the objective for long
term.
 Ensuring that the organization follow its mission in an
effective way and manages its relationship with its
environment.
 Responsible to the owner, government, agencies, unions and
communities.
 For example , the organization objective is increase the market
share by 10% through increase quality level and training the
employee
2-middle line:
 Group of managers who are like a chain joining the strategic
apex to the operating core by the use of delegated formal
authority
 The middle line will be responsible for translating the general
strategic plan in to detailed actions plan ,specifying managerial
responsibilities for particular tasks and how the resource can be
allocated
 Also will be responsibilities for monitoring activities
 For example, financial manger, marketing manger
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3-technostructure:
 as the organization grow and become more complex ,they
usually develop a separate group of people who are concerned
with the best way of doing a job and specifying criteria for
example , quality standard and personal training
4-support staff:
 The organization adds administrative units that provide service
to itself.
 For example, R&D , cafeteria , legal advice
5- Operating core:
 at the bottom of the organization
 these are the people that do the basic work of producing
product or delivering the service
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*Why do organizations exist?
In general terms organization exists because
1-they can achieve results which individual cannot achieve alone.
2-group of people working together can achieve more than the sum
of the achievements which the individual in the organization could
produce when working separately.
3-the organization exist as a result of the impact of transaction costs,
because they can arrange transactions between parts at lower total
cost than available in the open market
For example , some company are specialized in making car but they
need to obtain Wheels from other organization this give each
organization to be specialized in producing specific product at lower
price
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*What types of organization are there?
Diagram page 11
Organization may be classified:
1-For profit (commercial organization):
 may have several different objective
 It was generally accepted that maximizing the wealth of the
owner
 Also may aim to provide good and service to customers.
2-not for profit: comprise a large number of organization including
charities, social enterprises and public sectors organization.
Charities and social enterprises must generate sufficient funds from
their activities to sustain themselves on a continuing basis
Public sectors are owned, funded and run by central or local
government .they includes:
1-public hospital
2-schools and universities
3-Government department
4- The armed forces
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*what is organizational structure?
Organizational structures refer to relationship between the various
functions and positions in an organization. Structure determines
authority and responsibility for particular tasks and activities.
*Principles of organizational structure
Certain principles are basic to the operation of any organization
(common features):
1-specialisation:
 The work of organization is divided up in to separate activities
or task
 Each unit of the organization and each employee concentrate
on one function
 This will enable the application of specialized knowledge and
improve the efficiency and effectiveness
 For example , should teach the accounting subject by
specialized person in accounting
 Example, Taylor theory which divide major task to small task to
be specialist in one
What mean by the efficiency and effectiveness?
Efficiency: focus on relationship between the input and out put
For example: input = 100KG
Output =5units
To improve efficiency by produce 5 units by 80Kg or use input to
produce 6 units
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Effectiveness: focus on relationship between your goal and
outcome
For example: what about quality of product
So can arrive to efficiency without effectiveness
2- coordination:
Is a managerial function in which activities are to be separated in to
different areas or operations, it will be necessary to ensure that the
various actions are coordinated. This very important task of
management .the management hierarchy or (chain of command)
facilitates the coordination.
،‫هي وظيفة إدارية في األنشطة التي يتعين فيها فصل المجاالت المختلفة أو العمليات‬
‫ هذه المهمة الهامة جدا‬.‫وسوف يكون من الضروري ضمان تنسيق مختلف اإلجراءات‬
‫ إدارة التسلسل الهرمي أو (سلسلة القيادة) تسهل التنسيق‬.‫لإلدارة‬
Management principles of the hierarchy of authority:
Management theories (notably Henri Fayol) have, over the years
developed several principles relating to the hierarchy of authority for
coordinating activities .some of the most important are below :
1-unity of command: every person should receive orders and be
accountable to one and only one manger
Each subordinate receives assigned duties from one manager only
and is accountable to that manager
You need to determine relationship between you and one manager
not two manager because this lead to problem in realty so must
depend on unity of command
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2-the scalar chain: there should be a clear line of authority from
top to bottom, linking all managers at all level
3-the responsibility and authority principle: if an organization
member is allocated responsibility, then that person should also be
given the necessary authority to carry out the tasks necessary .for
example, manager should not be given responsibility without the
necessary authority
4- Span of control: refer to the number of subordinates directly
reporting to a manger or supervisor
The objective of any organization should be smart:
S: specific
M: measurable
A: achievable
R: realistic
T: time-bound
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*There are two main types of structure:
(Tall organization-flat organization)
In recent years, the tall organizations have tended to become flat
organization this has been facilities by:
1-information technology which has been reduced the need for many
middle manager jobs
2-the management of philosophy of empowerment, whereby people
at lower levels have been delegated authority to take actions
Tall organization
The tall organization: the span of control is narrow, and then there
will be many management levels.
Advantages of Tall Organization:
1- There is a narrow span of control; each manager has a small
number of employees under their control. This means that
employees can be closely supervised.
2- There is a clear management structure.
3- Clear progression in the organization
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Disadvantages of Tall Organization:
1- The freedom and responsibility of employees (subordinates) is
restricted.
2- Decision making could be slowed down as approval may be
needed by each of the layers of authority.
3- High management costs because managers are generally paid
more than subordinates.
4- Communication has to take place through many layers of
management.
Flat organization
2-flat organization: If the span of control is wide, then there will
be fewer levels of management.
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Benefits or advantages of a flat organization structure:
1. Significant reductions in costs as middle managers salary costs are
removed.
2. Increases motivation as people at lower levels are given
power/discretion to make decisions
3. Quick decisions and actions can be taken because it has only a few
levels of management.
4. Fast and clear communication is possible among these few levels of
management.
5. It is more suitable for routine and standardized activities.
Disadvantages of Flat Organization Structure:
1. There are chances of loose control because there are many
subordinates under one manager.
2. Flat organization structure may create problems of coordination
between various subordinates.
3. Efficient and experienced superior are required to manage a large
number of subordinates.
4. It may not be suitable for complex activities.
5. The quality of performance may be bad.
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*Forms of organization structure
(How can build the structure)
There are six forms of organization structure:
1-functional structure
2-product or service structure
3-geographical structure
4-matrix structure
5-project structure
6-hybrid structure
Functional structure
 an arrangement in which department are defined by the
function each one perform
 People are grouped according to the type of job they do
 Diagram page 16
 This structure maybe appropriate when people in functional
department need to communicate regularly with each other
 The disadvantage:
1-staff may work for the benefit of their department not the
organization as whole
2-many member of staff may never meet an external customer
3-functional organizations are partially due to its size and complexity
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Product or service structure
 the arrangement of department according to product or service
they provide and often occur in the large company
 staff members are grouped together on product or service lines
 for example, public education department may group staff
around different areas of work ( pre-school children and special
needs
 diagram page 17
 Advantage:
More responsive to customer needs and better to motivating
staff
 Disadvantage:
Can be expensive because of duplication of effort and
control of the separate unit maybe difficult
Geographical structure
 an arrangement of department according to geographical area
 variation on the product or service structure is to group staff by
physical location
 diagram page 18
 Advantage:
1-Useful for international organization because there are likely
to big difference in markets and culture
2-allow for decision making at the local level
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 Disadvantage:
1-high cost
2-managmant has difficulty controlling the performance
3-information flow between staff in different location can be
problematic and costly
4-it will be difficult to achieve integrated strategies across a
number of different countries
Matrix structure
 We have seen that functional, product or service and
geographical structure all have disadvantage. In a matrix
structure, each person has two reporting lines:
1-the functional head
2-to a product, service or region manager
 Advocates of matrix structure believe that they combine the
advantage of both functional and product or service
 Diagram page 19
 The disadvantage:
1-Matrix structures can be very difficult to manage
2-Dual reporting can lead to conflict, confusion and overlapping
responsibility
3-This can then result in loss of accountability
4-staff may feel uncomfortable with the change and uncertainty
implicit in a matrix structure
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Project team
 Project team which are often set up to react to changing
circumstance and allow the organization to response quickly
 Project team have two reporting lines:
1-functional head
2-project manager
 Diagram page 20
 The main difference between the matrix structure and project
team is: the project teams are not always grouping like the
service1, 2, 3, and 4 grouping we saw in the matrix structure.
Instead, this project team only last as long as the project on
which they are working
 Disadvantage: problem of control
 Advantage:
1-fast moving change can be implemented
2-flexability
3-speed of response
Hybrid structure
 Produce Hybrid structure to meeting the particular needs of the
moment.
 Diagram page 21
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*Recent trends in organization design
In response to a dynamic, fast, changing, competitive environment
and speed of design. This has led to a number of trends recent years
as below:
1-the emergence of the flexible firm in an increasingly
2- A customer service orientation rather than an inward, internal
process orientation
3- The establishment of multi-functional project team and an
empowered, multi skilled workforce to increase flexibility
*Business organization departments and functions
Business organization may consist of the following main department
or functions:






Production
Research and development (R&D)
Purchasing
Marketing
Human resource management
Accounting and finance
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The production function
The production function undertakes the activities necessary to
provide the organization product or service .its main responsibilities
are:
1-movment of material between operations
2-production planning and scheduling
3-maintenance of plant and equipment
4-deciding the best production methods and factory layout
5-managing product quality
The R&D function
 Is concerned with developing new product or process and
improving existing product / process.
 R&D activities must be closely coordinated with the
organization marketing activities to ensure that the organization
is providing exactly what its customers want
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The purchasing function
The responsibilities of this function usually extend to buying
goods and services for entire organization. For example, office
equipment, computer equipment
In buying goods and service, purchasing managers must take
in to account a number of factors –collectively referred to as
(purchasing mix) namely, Quantity, Quality, Price and Delivery
1-Quantity: buying in large quantities can attract price
discounts .on the other hand, there are many cost involved in
carrying high level of inventory such as holding inventory
2-Quality: there will usually be a trade –off between price and
quality in acquiring good and service
3-price: price must be considered in conjunction with quality
and supplier reliability, in order to achieve best value, rather
than lowest price only
4-Delivery: the time between placing an order and receiving
the goods and service
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The marketing function
Marketing involve researching what customer want and analyzing
how the organization can satisfy these wants
A fundamental activity in marketing is managing the marketing mix
consisting of the 4Ps: product, price, promotion and place.
 Product :having the right product in terms of benefits that
customer value
 Price : setting the right price which is consistent with potential
customer perception of the value offered by the product
Pricing is one of the 4 PC and it’s the only bring benefit or
income to the organization
There are two Approach of pricing:
1-cost plus (internal oriented, in outside approach)
Cost + mark up = price (from operation to market)
2-target costing (external oriented, out in side approach)
Target price – target mark up = target cost( From the market to the
operation)
 Promotion: promoting the product in a way which creates
maximum customer awareness and persuades potential
customer to make the decision to purchase the product
 Place :making the product available in the right place at the
right time –including choosing appropriate distribution
channels
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The human resource function
The human resource function is concerned with the following
 Recruitment and selection: ensuring the right people are
recruited to the right jobs
 Training and development : enabling employees to carry out
their responsibility effectively
 Employee relations: including negotiations over pay and
condition
 Health and safety matters : making sure employees work in a
healthy and safe environment
The accounting and finance function
The accounting and finance function is concerned with the following:
1-financial record keeping of transaction involving monetary inflow or
out flow
2- Preparing financial statement (income statement, balance sheet
and cash flow statement)
3-preparing management accounting information and analysis to help
managers to plan control and make decision
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Decentralization and centralization
Centralization: the extent to which authority is retained at the top
Decentralization: the extent to which authority is passed down to
lower level in an organization
The advantages of decentralization:
1-specialisation: Managers can develop more detailed and
specialized knowledge .this should result in better quality decisions
2-timeliness: quicker decisions are possible if it is not necessary,
because manger time is then available for more important decisions
affecting the future of the whole organization
3-motivation: having authority to make decision usually result in
greater motivation and improved performance
4-human resource development: the expansion of human capital
within an organization through the development of both the
organization and the individual to achieve performance improvement
5-organization segment performance comparison: by dividing
the organization in to separate segments, it is possible to evaluate
which aspects of operation are performing well and which are not.
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Disadvantage of decentralization:
1-loss of control:
There is danger that senior management may loss control of the
organization
2-increased cost of control:
Costly management information system may be necessary to monitor
the performance of lower management level
3-dysfunctional decision making:
This occurs where managers take actions which improve the
measured performance of their organization segment but damage the
organization as a whole
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Types of Responsibility Centers:
1- Cost center: Managers are accountable for costs (expenses)
only. Reports costs only.
2- Revenue center: Managers are primarily accountable for
revenues. Reports revenues only.
3- Profit center: Managers are accountable for both revenues
and costs (expenses). Reports revenues, expenses and net
income or loss.
4- Investment center: Managers are accountable for
investments, revenues and costs. Reports revenues, expenses,
income or loss and investment used.
Prepared by Kawther.Mohammed
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