Organizing

Organizational Structure
 Organizing
 The Calm Seas Story continues ….
 Organizing
 Two most influential figures in the way organizations
are structured today.

 Henri Fayol
 Max Weber
 Henri Fayol 1841-1925
 French Mining Engineer

 Developed 5 functions of management and 14 “general

principles of administration” (1916)
 Fayol’s 14 Principles of
Management
1. Division of work. Work should be divided among individuals and
groups to ensure that effort and attention are focused on special
portions of the task. When employees are specialized, they
become increasingly skilled and efficient .

2. Authority. Managers must have the authority to give orders, but

they must also keep in mind that with authority comes
responsibility

3. Discipline. Employees must obey and respect the rules that govern
the organization. Good discipline is the result of effective
leadership, a clear understanding between management and
workers regarding the organization's rules, and the judicious use
of penalties for infractions of the rules.
 Fayol’s 14 Principles of Management

4. Unity of command. Every employee should receive orders from only

one manager or supervisor.

5. Unity of direction. Employees with the same objective should be

working under the direction of one manager, using one plan. This will
ensure that action is properly coordinated.

6. Subordination of individual interests to the general interest. The

interests of any one employee or group of employees should not take
precedence over the interests of the organization as a whole.

7. Remuneration. Workers must be paid a fair wage for their services.

Many variables, such as cost of living, supply of qualified personnel,
general business conditions, and success of the business, should be
considered in determining a worker’s rate of pay.
 Fayol’s 14 Principles of Management
8. Centralisation. Centralisation refers to the degree to which
subordinates are involved in decision making. Whether decision making
is centralized (to management) or decentralized (to subordinates) is a
question of proper proportion. The task is to find the optimum degree of
centralisation for each situation.

9. Chain of command. Managers in hierarchies are part of a chain like

authority scale. Each manager, from the first line supervisor to the
president, possess certain amounts of authority. The President
possesses the most authority; the first line supervisor the least. Lower
level managers should always keep upper level managers informed of
their work activities.

10.Order. People and materials should be in the right place at the right
time. Must have social order and material order

11.Equity. Employees should be treated fairly.

 Fayol’s 14 Principles of Management
12.Stability of tenure of personnel. High employee turnover is costly.
Retaining productive employees should always be a high priority of
management. Recruitment and Selection Costs, as well as increased
product-reject rates are usually associated with hiring new
workers.

13.Initiative. Employees who are allowed to originate and carry out plans
will exert high levels of effort. Management should take steps to
encourage worker initiative, which is defined as new or additional work
activity undertaken through self direction.

14.Esprit de corps. Promoting team spirit will build harmony and unity
within the organization.
 Max Weber (1864-1920)
 German Sociologist:
 Bureaucracy – model for a rational and efficient large
organization
 Division of labor
 Hierarchy of authority
 Employment based on expertise
 Weber’s 6 Principles of Bureaucracy
Weber noted six major principles.

1. A formal hierarchical structure – authority hierarchy

Each level controls the level below and is controlled by the level above. It
is an authority structure.

2. Formal rules and regulations

A set of explicit policies and procedures that determine how the

organization functions.

3. Organization by functional specialty

Work is to be done by specialists, and people are organized into units

based on the type of work they do or skills they have.
 Weber’s 6 Principles of Bureaucracy
4. Career Orientation

Career building opportunities are offered. Life long employment and

protection against arbitrary dismissal are guaranteed.

5. Purposely impersonal

Rules are applied uniformly, avoiding favoritism. The idea is to treat all
employees and customers equally, and not be influenced by individual
differences.

6. Formal Selection

All organizational members are to be selected on the basis of technical

qualifications and competence demonstrated by training, education or
formal examination.
 Weber’s Bureaucracy
 The Office – Basic organizational unit. Specific functions, clearly
defined authority and responsibility

 Loyalty to the office, not to the individual

 Office holders are appointed based on technical ability
 Hierarchy – Offices arranged in from highest to lowest
 Office holders are constrained by rules in how they operate.
Subordinates can appeal decisions

 Acts, decisions and rules must be in writing

 Office is the primary employment of the office holder
 Officials are not the owners of the organization
Strengths of Ideal Bureaucracies
 Strengths of Ideal Bureaucracy
 Accountability
 Orders are carried out
 Consistency in performance
 Predictability
 Technically competent people assigned to offices
 Rules govern all behaviour
 Office holders become great at their specialized job
 Strengths of Ideal Bureaucracy

 Career orientation of employees

 Facilitates communication up and down the
hierarchy
 Mutual respect
 No favoritism
 Meritocracy
 Potential Weaknesses of
Bureaucracies
 List them
 Potential Weaknesses of
Bureaucracies
 Slow to make decisions
 Does not handle exceptions well
 Office holders become too specialized “that’s not my
job”

 Office holders lose touch with the customers

 Office holders main priority is to reach the next level
rather than serve the customer

 Horizontal Communication difficult

 Potential Weaknesses of
Bureaucracies
 Not much scope for initiative
Bureaucratic Structure
Snr.
Mgrs
Middle
Managers

Supervisors
 Line and Staff Functions
 Line and staff departments
 Line – Core functions
 Manufacturing,
 Sales,
 Finance
 Staff – Support functions
 Human Resources
 Engineering
 4 Bureaucratic Structures
Draw them:

1. Functional Structure
2. Product Structure
3. Customer Structure
4. Geographic Structure
 Major Issue with Bureaucracies:
Centralization vs Decentralization
 Centralization – Decisions made at the top
 Decentralization – Decisions made lower down in the
organization
 Advantages of Centralization
 List them
 Disadvantages of
Centralization
 List them
 Advantages of
Decentralization
 List them
 Disadvantages of
Decentralization
 List them
 When best to Centralize or
Decentralize

 List them
 Changing the Bureaucratic
Structures
 Flattening the structure – reducing the layers of
management. (diagram)

 Adding work teams -

 Consequences of Reducing
layers of management
 List them
 Work Teams
 Team responsible for all aspects of producing the
product:

 checking on raw material,

 ensuring everyone is doing their work,
 making sure everything is on schedule,
 quality is good
 What is required for
successful work teams?
 List them
 What is required for
successful work teams?
 Must get training in team skills
 Common purpose
 Get everyone involved
 Good communication
 Respect for each other
 Strong Leadership
 Summary
 Two leading theorists
 Rules of bureaucracies
 Strengths and Weaknesses of bureaucracies
 Four bureaucratic structures
 Centralization and decentralization
 Flattening the bureaucracy
 Home Work
 Draw an organizational chart of any organization. It can
be real or imagined.

 Give 5 examples of when the organization may have

followed or not followed Fayol’s or Weber’s rules.