Principles of Organization and Organizational Structures

Posted on Nov 13, 2024 in Other subjects

Principles of Organization

Objective

Every activity within the organization should align with the company’s objectives and purpose. A role is justified only if it contributes to achieving these goals.

Expertise

An individual’s job should be focused on a single activity. Greater specialization leads to increased efficiency and skill.

Hierarchy

Establish clear lines of authority for communication and plan execution. Authority and responsibility should flow from top management to the lowest levels.

Parity of Authority and Responsibility

The level of responsibility assigned should match the authority necessary to fulfill it.

Control Unit

Each function should have a single, designated authority or decision-making center. Subordinates should report to only one boss.

Dissemination

Responsibilities and authority associated with each position should be documented and accessible to all relevant members of the company.

Span of Control

There’s a limit to the number of subordinates a manager can effectively supervise.

Coordination

Maintain balance between different organizational units (Marketing, Finance, Production, Human Resources).

Continuity

The organizational structure should be regularly maintained, improved, and adapted to changing conditions.

Formal and Informal Organization

Formal Organization

Based on a rational division of labor, roles are differentiated and integrated according to a plan established by management. This is the officially documented structure.

Informal Organization

Emerges spontaneously from relationships between individuals in the formal organization. It’s based on personal connections, friendships, or rivalries, and isn’t formally documented.

Ranking

Arranges functions within the organization by rank, grade, or size, based on authority and responsibility, regardless of the specific function. It defines the company’s structure by establishing interconnected centers of authority.

Types of Organization

Different organizational structures can be implemented based on factors like company size, resources, objectives, and production.

Linear or Military Organization

Decision-making is centralized in one person. The top boss assigns tasks and subordinates report directly to them.

Advantages

  1. Simplified decision-making and implementation.
  2. Clear lines of authority and responsibility.
  3. Simple and straightforward structure.
  4. Suitable for small businesses.
  5. Easier to maintain discipline.

Disadvantages

  1. Rigid and inflexible.
  2. Reliance on key individuals can create instability.
  3. Limited specialization.
  4. Potential for executive overwork and focus on operations rather than strategic direction.

Functional or Taylor Organization

Divides work based on expertise, minimizing the number of functions each individual performs.

Advantages

  1. Increased specialization.
  2. Enhanced individual efficiency.
  3. Planned division of labor.
  4. Separation of manual and intellectual work.
  5. Reduced pressure on individual managers due to specialized support.

Disadvantages

  1. Difficulty in assigning responsibility, potentially impacting discipline and morale.
  2. Violation of the unity of command principle, leading to confusion and conflict.
  3. Unclear authority can cause friction between managers.