Introduction To Business

Chapter 7

Designing An Organization Structure

A business  is an organization, it is created by owners and managers to achieve a specific goal : to provide a product or services to a customer at a profit. To reach this objectives, it must establish a framework of operating relationships of people and activities : who supervise whom, who reports whom, what departments are formed, and what kind of work is performed in each department. This operating framework is known as the formal organization-the official organization that top management conceives and builds.

The Organizing Process

Managers use the organizing process to establish (and modify) the relationships between activities (what work people do) and authority (manager-subordinate relationships). The formal organization is developed through a series of organizing steps :

  1.  Review objectives and plan

A company’s objectives and its plans to achieve them dictate its activities.

  2.  Determine activities

Managers ask what work activities are necessary to accomplish the company’s objectives.

  3.  Classify and group activities

      (functional, geographic or territorial,product, costumer)

Managers know that task must be done, they can classify and group these activities into manageable work units.

  4.  Assign the work and delegate authority

Identified the activities necessary to achieve objentives, classified and grouped these activities into major operational areas, and selected a departmental structure, management must now assign these activities to individuals and give them the appropriate authority to accomplish the task.

  5.  Design a hierarchy

Determine the vertical and horizontal operating relationships of the organization as a whole. Levels of management are established from bottom to top.

The result of this process is a formal organizational structure. Struktur ini ditunjukkan secara visual dengan bagan organisasi. Setelah organisasi dikembangkan, Manager dapat menerapkan beberapa konsep organisasi untuk membantu organisasi dalam mencapai tujuan. Konsep-konsep ini meliputi :

       a.     Authority

The formal, legitimate right of a manager to make decision, give orders, and allocate resources. There are three types of authority : line, staff, and functional.

       b.     Unity of Command

The requirement that each person within the organization take orders from and report to only one person.

       c.     Power

The ability to exert influence in an organization. There are three sources of power :

·      Legitimate or position power

Holding a managerial position

·      Referent power

Based on an individual’s personality or charisma and how that personality is perceived by others.

·      Expert power

Held by persons who have demonstrated their superior skills and knowledge.

       d.     Delegation

The downward transfer of formal authority from one person to another

       e.     Span of Control

The number of subordinates under the direction of a manager

        f.     Centralization or Decentralization

¹ A philosophy of organization and management that concentrates authority within an organizational structure.

² A philosophy of organizing and management that disperses authority within an organizational structure

There are five types of formal organizational structures :  Line, line-and-staff, team, matrix, and network. Each types has its advantages and disadvantages. The structure selected will depend on the organization’s objectives, stage of development, and philosophies of management.

Within the formal organization is the informal organization, a network of personal and social relationship that arises spontaneously as people associate with each other in the work environtment. Managers need to recognize and work with the informal organization, as it assist them in meeting organization objectives.