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Organization generally is recognized as the foundation of management. The term, as it is used in industry and business, means the distribution of the functions of the business to the personnel logically qualified to handle them. It should be noted that the organization should be built around functions rather than individuals.
In the past and to a large extent today, the majority of progressive concerns are organized on a line-and-staff basis. The relationships usually are shown on an organization chart, which reveals the relationships of the major divisions and departments and the lines of direct authority from superior to subordinate. Lines of authority usually are shown as vertical lines. Staff authority frequently is indicated by a dotted line, which distinguishes it from direct authority. This same procedure is usually used to indicate committee relationships. Departments or activities are clearly identified within framed rectangles. The names of individuals responsible for a given department or activity often are included with their job organization titles. Although the organization chart shows the relationship of organization units, it does not clearly define the responsibilities of the individuals and the groups. Thus organization charts must be supplemented with carefully prepared job descriptions for all members of the organization. Position descriptions are written definitions of jobs enumerating the duties and responsibilities of each position.
A line organization comprises those individuals, groups, and supervising employees concerned directly with the productive operation of the business. The paths of authority are clearly defined, as each individual has but one superior from whom he or she obtains orders and instructions. This superior reports to but one individual, who has complete jurisdiction over his or her operation and supplies necessary technical information. In large- and middle-sized organizations, a pure line-type enterprise cannot exist because of the complexity of our business society.
A staff organization involves personnel, departments, or activities that assist the line supervisor in any advisory, service, coordinating, or control capacity. It should be noted that a staff position is a full-time job and is essentially the work of a specialist. Typical staff functions are performed by the company’s legal department, controller, and production control. Figure 17.1.1 illustrates a typical line-staff activity. Committees are used in some instances.
A committee is a group of individuals which meets to discuss problems or projects within its area of assigned responsibility in order to arrive at recommendations or decisions. A committee operates on a staff basis. Although committees are time-consuming and frequently delay action, their use combines the experience and judgment of several persons, rather than a single individual, in reaching decisions. The control of organization is the responsibility of two groups of management: (1) administrative management, which has the responsibility for determining policy and coordinating sales, finance, production, and distribution, and (2) production management, which has the responsibility for executing the policies established by administration .
In building an efficient organization, management should abide by certain principles, namely:
1. Clear separation of the various functions of the business should be established to avoid overlap or conflict in the accomplishment of tasks or in the issuance or reception of orders.
2. Each managerial position should have a definite location within the organization, with a written job specification.
3. There should be a clear distinction between line and staff operation and control.
4. A clear understanding of the authority under each position should prevail.
5. Selection of all personnel should be based on unbiased techniques.
6. A recognized line of authority should prevail from the top of the organization to the bottom, with an equally clear line of responsibility from the bottom to the top.
7. A system of communication should be well established and definitely known—it should be short, yet able to reach rapidly everyone in the organization.
Staff members usually have no authority over any portion of the organization that the staff unit assists. However, the department or division that is being assisted by the staff can make demands upon the staff to provide certain services. There are instances where a control type of staff may be delegated to direct the actions of certain individuals in the organization that they are servicing. When this takes place, the delegated authority may be termed staff authority; it is also frequently known as functional authority because its scope is determined by the functional specialty of the staff involved.
Many businesses today are finding it fruitful to establish ‘‘temporary organizations’’ in which a team of qualified individuals, reporting to management, is assembled to accomplish a mission, goal, or project, and then this organization is disbanded when the goal is reached.
The term virtual corporation is used to identify those combinations of business and industry where technology is used to execute a wide array of temporary alliances in order to grasp specific market opportunities. With business becoming more complex and global, it is highly likely there will be more partnerships emerging among companies and entrepreneurs. Thus today’s joint ventures, strategic alliances, and outsourcing will expand to the virtual corporation utilizing high-speed communication networks.
Here, common standards will be used allowing for interchange of design drawings, specifications, and production data. Thus many businesses and industries are deviating from the classic line-and-staff organization into a more horizontal organizational structure. Each partner in the organization brings its core competence to the effort. Thus, it becomes practical for companies to share skills, costs, and global markets, making it easier to manage a large enterprise since others will be managing components of it for them. In such organizations there is a strong trend toward project teams made up of qualified persons, reporting to management, who are given the authority to do a project (short or long term), complete it, and then be restructured. These project teams frequently are referred to as ‘‘temporary organizations.’’ This type of organization characterizes participative management. Here position descriptions become less important than functional assignments. An extension of participative management is employee-owned companies in which employees not only assume a production role but also the decision-making shareholder type of role.
Good organization requires that (1) responsibilities be clearly defined; (2) responsibility be coupled with corresponding authority; (3) a change in responsibility be made only after a definite understanding exists to that effect by all persons concerned; (4) no employee be subject to definite orders from more than one source; (5) orders not be given to subordinates over the head of another executive; (6) all criticism be made in a constructive manner and be made privately; (7) promotions, wage changes, and disciplinary action always be approved by the executive immediately superior to the one directly responsible; (8) employees whose work is subject to regular inspection or appraisal be given the facilities to maintain an independent check of the quality of their work.
