Management. Company structure

Massachusetts Institute of Technology (MIT) teamthis complicated issue, but they had to accept that
was asked to explain what happened to industrialthere is no the best one for all the organizations; rather
performance of the United States during the past 20the appropriate structure varies from situation to
years and to suggest what could be done to improvesituation. It’s obvious that the structure of any
the situation. This team studied the problem andorganization should be dynamic thing, adaptable to
concluded:changing circumstances. And the challenge to
management is to design the appropriate structure.
1. American organizations were not producing as wellThus let’s go to the subject of different kinds of
as they ought to produce or as well as they used tostructures. There are a lot of different types of
produce or as well as the organizations in othercompanies according to the aims they were created
nations;for. They can be charity or commercial one, private or
2. American organizations certainly need to producepublic, parent company or affiliate, or we can classify
well, but to do this, they must be managed well.them according to ownership to cooperative,
The using the following principles can solve thisgovernmental, enterprises and so on. We can also
problem:distinguish between unlimited liability companies (such
1. The application of effective management principles,as sole trader and partnership) which imply that the
programs and techniques in organizations mustpersonal assets of the owners can be taken to pay
become commonplaceany business debts, and limited liability organizations
2. Participative management. Quality assurance.(Ltd. and Plc.) in which liability for business debts is
Customer service programs. New technologylimited to the amount of capital subscribed.
implementation. Employee stock-purchase. Just-in-timeThere can be two types of structure in organizations,
production systems. Rewards programs. Entrepreneurclassified in another way:
programs. All these management approaches must be1. Formal structure is one in which the relationship
managed.among organizational resources are outlined by
Management is the process undertaken by one ormanagement. An example of formal structure would
more individuals to coordinate the activities of others tobe the combination of groups of people into
achieve results not achievable by one individual actingdepartment of management. Formal organization
alone. Peter Drucker (the well-known Americanstructure is represented graphically in an organization
business professor) believes that the work ofchart. Traditionally, an organization chart is constructed
management is to make people productive. To regainin pyramid form with individuals toward the top of the
the competitive edge in the international arena, societypyramid having more authority and responsibilities than
must have managerial competence. Drucker states:individuals toward the bottom. Organizational chart
“Management, its competence, its integrity and itsshows the interrelationships of positions within an
performance will be decisive both to the United Statesorganization in terms of authority and responsibility.
and to the free world in the decades ahead”.Informal structure, on the other hand, is one in which
Another view o management is presented in thethe patterns of relationships among organizational
popular best-seller, In Search of Excellence, whereresources develop informally because of the
Peters and Waterman emphasize mentorship, love forexistence of organization members. Grapevine is an
managing and working with people; managers areinformal communication networks in organization.
excellent communicators and value shapers, lightningAs I have already said  managers are trying to find
rods to get the job done.the best organization structure and nowadays we can
Learning about management is important for twoview several types of them set apart according to the
reasons:chain of command and essence of them. and it’s
1. Our society depends on specialized institutions andobviously seen in the organization charts usually
organizations to provide the goods and services wedepicted somewhere in  every company.
desire. These organizations are guided and directed byBy the way it’s seemed I should mention a couple
the decisions of managers. They allocate society’sof words about the meaning of the chain of command.
resources, have the authority and responsibility to buildIt’s the formal channel that determines authority,
safe products etc…they establish the condition underresponsibility and communications; it’s hierarchy of
which people are provided jobs, incomes…jobs differentiated by authority. But let’s return to
2. Individuals not trained as managers often findthe subject.
themselves in managerial position.Historically line structure is the oldest type of
Peter Drucker suggests that the work of a managerorganization structure. The main idea of it is direct
can be divided into planning (setting objectives),vertical relationships between the positions and tasks
organizing, integrating (motivating and communicating),of each level, and the positions and tasks above and
measuring and developing people. He has spelled outbellow each level. Most organizations have a
that managers do. In his opinion managers perform 5hierarchical or pyramid structure, with one person or a
basic operations:group of people at the top, and an increasing number
1. First of all, managers (especially senior managersof people below them at each successive level. This is
such as company chairman – and women – anda clear line or chain of command running down the
directors) set objectives, and decide how theirpyramid. All the people in the organization know what
organization can achieve them. This involvesdecisions they are able to make, who their superior is
developing strategies, plans and precise tactics, andand who their immediate subordinates are.
allocating resources of people and money. For thisWhen a business grows in size and becomes more
task, they need analytical ability;complex, there is a need for specialists. In such case
2. Secondly, managers organize. They analyse andadministrators may organize staff departments and
classify th activities of the organization and theadd staff spesialists to do specific work. Thus the
relations among them. They divide the work intosecond type of company structure is staff one. These
manageable activities and then into individual jobs. Theypeople are usually busy with services, they do not tied
select people to manage these units and perform thein with the company product. The activities structure is
jobs. For this, they not only need analytical ability buta form of the organization of the staff departments
also understanding of human beings;include an accounting, personnel, credit and advertising.
3. Thirdly, managers practice the social skills ofThe holder of staff position has no line authority, and is
motivation and communication. They also have tonot integrated into the chain of command, e.g. an
communicate objectives to the people responsible forAssistant to the Marketing manager.
attaining them. They have to make the people whoYet the activities of most companies are too
are responsible for performing individual jobs formcomplicated to be organized in a single hierarchy.
teams. They make decisions about pay and promotion.Shortly before the first world war the French
As well as organizing and supervising the work of theirindustrialist Henry Fayol organized his coal-mining
subordinates, they have to work with people in otherbusiness according to the functions that it had to carry
areas and functions. To succeed in this task managersout. So the third structure, functional structure is a form
need social skills;of the organization based on functional performance;
4. Fourthly, managers have to measure theorganizational departments created to fulfill
performance of their staff, to see whether theorganizational functions such as marketing, finance, and
objectives set for the organization as a whole and forpersonnel. In other words related activities are grouped
each individual member of it are being achieved.together in the functional areas with which they are
Measuring requires analytical ability.most clearly identified. This means that for example
5. Lastly, managers develop people – both theirthat the production and marketing departments cannot
subordinates and themselves. They help to maketake financial decisions without consulting the finance
people more productive, and to grow as human beings.department. This type of the organization has
They make them bigger and richer persons.characteristics of both line and staff functions. And the
Obviously, objectives occasionally have to be modifiedmost distinguishing feature of this types is that staff
or changed. It is generally the job of a company’smanagers may have line (functional) authority for their
top managers to consider the needs of the future, andparticular activities. For example an advertising
to take responsibility for innovation, without which anymanager having some ideas in an organization
organization can only expect a limited life. Topcharacterized by strict adherence to line and staff
managers also have to manage a business’sauthority could only ask the sales people to perform
relations with customers, suppliers, distributors, bankers,his duty. But in functional structure the request could be
investors, neighboring communities, public authorities,an order.  Functional structures are efficient, but the
and so on, as well as deal with any major crises whichare three standard criticisms: 1) people are usually
arise. Top managers are appointed and supervisedmore concerned with the success of their
and analised (and dismissed) by a company’sdepartments that results in permanent battles between
board of directors).departments; 2) separating functions is unlikely to
In Peter Drucker’s view successful managers areencourage innovations; 3) sometimes people have too
not necessarily people who are liked or who get onmany bosses.
well with others. They are people who command theAn inherent problem of hierarchies is that people at
respect of workers and who set high standards. Goodlower levels are unable to make important decisions,
managers need not to be geniuses but must bringbut to pass on responsibility to their bosses. One
character to the job. They are people of integrity whosolution to this is matrix management, in which people
will look for that quality in others.report to more than one superior on the same level.
No one has had more influence on managers in theMatrix structure is a form of the organization that
20th century than Frederic W.  Taylor, an Americancombines some aspects of both the functional and
engineer. He set a pattern for industrial work withstaff structure. Thus, complete line authority may exist
many others have followed, and although his approachhorizontally as well as vertically. The personnel in the
to management has been criticized, his ideas are still offunctional areas of marketing and production are under
practical importance.the authority of two bosses. Such a system creates
Taylor founded the school of Scientific Managementproblems not found in the more traditional organization
just before the 1914-18 war. He argued that workstructures, but the advantages of increased flexibility,
should be studied and analyses systematically. Theas well as specialization and coordination are
operations required to perform a particular job couldconsidered by many to be compensating factors.
be identified, then arrange in a logical sequence. AfterFurthermore, when the system is properly
this was done a worker’s productivity wouldimplemented, conflicts are resolved before they get to
increase, and so would his wages. The new methodthe top. As for criticism Thomas Peters and Robert
was scientific. The way of doing a job would no longerWaterman in their well-known book “In Search of
be determined by guesswork and rule-of-thumbExcellence” insist on the necessity of pushing
practices. Instead, management would workauthority an autonomy down the line, but they argue
scientifically the method for producing the best results.that one element – probably the product – must
If the worker followed the prescribed approach hishave priority; four-dimensional matrices are far too
output would increase.complex.
He wanted companies to adopt a new approach toYet for a large organization manufacturing a range of
their work, which would change their thinkingproducts, having a single production department is
completely. The new way was as follows:generally inefficient. Consequently most large
1. Each operation of a job was studied and analised;companies are decentralized, following the model of
2. Using this information, management worked out theAlfred Sloan, who divided General Motors into
time and method for each job, and the type ofseperate operating divisions in 1920. Each division had
equipment to be used;its own engineering, production and sales departments,
3. Work was organized so that the worker’s onlymade a different category of car (but with some
responsibility was to do the job in the prescribedoverlap to encourage internal competition) and was
manner;expected to make a profit. Thus the last organizational
4. Men with the right physical skills were selected andstructure is divisional, and it has two main variants:
trained for the job.product (or brand) and geographical one.
5. Observing, analising, measuring, specifying th workThe geographical structure reflects decentralization
method, organizing and choosing the right person forand pushes authority and responsibility close to the
the job – these were the tasks of management.scene of action. Such an arrangement provides for
Taylor’s approach produced results! He made abetter relationships with customers in handling their
lasting contribution to management thinking. His mainproblems and adjusting complaint.
insight, that work can be systematically studied in orderThe essence of the product (or brand) structure is that
to improve working methods and productivity, wasthe effort associated with the marketing of a particular
revolutionary. Also, he correctly emphasizes thatproduct or group of products is coordinated and made
detailed planning of jobs was necessary.the responsibility of a product manager. This form of
The weakness of his approach was that it focused onorganization is suggested when a multiproduct firm
the system of work rather than on the worker. Withbecomes so large as to result in excessive dilution of
this system the worker becomes a tool in the handsmanagement expertise with respect to the expanded
of management. It is assumed he will do the samenumber of products in the firm’s offerings. But
boring, repetitive job hour after hour, day after daydespite the popularity of the product-manager system,
while maintaining a high level of productivity. Anotherthere have been many problems associated with its
criticism is that it leads to de-skilling- reducing the skillsuse. It’s argued, for example, that many product
of workers. Because the tasks are simplified, workersmanagers have had little advertising experience and
become frustrated. And with educational standardstherefore have only a halfhearted interest in that
rising among factory workers, dissatisfaction is likely tofunction. As a result, the system has undergone
increase. Finally some people think that it is wrong tonumerous changes over the years, and it is not
separate doing from planning. The two tasks can andpossible to illustrate a universally accepted structure.
should be don by the same person. A worker will beA further possibility to make a company more efficient
more productive if he is engaged in such activities asis to have wholly autonomous, temporary groups or
planning, decision-making, controlling and organizing. Forteams that are responsible for an entire project, and
all these reasons, a reaction has set in against theare split up as soon as it is successfully completed.
ideas of Frederick W. Taylor.Teams are often not very good for decision-making,
Although the tasks of manager can be analised andand they run the risk of relational problems, unless they
classified, management is not entirely scientific. It is aare small and have a lot of self-discipline. In fact thy still
human skill. Business professors obviously believe thatrequire a definite leader, on whom their success
intuition and ‘instinct’ are not enough; there areprobably depends.
management skills that have to be learnt. Drucker, for1. The last point I’d like to cover is concerned with
example, wrote over 20 years age that ‘Altogetherauthority relationships. As I’ve said before the
this entire book is based on the proposition that thepurpose of organization function is to achieve
days of the “intuitive” manager are numbered,coordinated effort through the company structure and
meaning that they were coming to an end. But someauthority relationships. Thus,   what concerns the
people will be unable to put management techniqueswork behavior of organization members, there are
into practice. Others will have lots of technique, butfour variables: 1) responsibility; 2) authority; 3)
few good ideas. Outstanding managers are ratheraccountability; and 4) delegation.
rare.Responsibility is perhaps the most fundamental
The 20th century emphasizes the transformation ofingredient that channels the activity of individuals within
management into science. Looter Gulic, a managementthe organization. Responsibility is the obligation to
theorist, states that management is becoming aperform an assigned activity. Responsibility is a
science as it studies phenomena systematically, that iscommitment that people take upon them to handle
why it’s trying to understand why and how peopletheir jobs to the best of their abilities. A summary of an
work together in order to achieve some certain goals.individual’s jobs activities within an organization is
On the other hand a lot of specialists highlight the ideausually contained in a formal statement called a job
that management is more an art than a science, fordescription. A job description is simply a listing of
the reason that managers ought to have a goodspecific activities that must be performed by the
command of it and should be talented. The foundationholder of the position.
of any science is the possibility to measure theAuthority is the right to perform or command, it’s
phenomena objectively. Some aspects ofright to make a decision without approval by a
organizations can be described in terms of quantity,higher-ranking manager. Authority not only allows its
exactly measured and analyzed. For exampleholder to act in certain designated way, but also allows
determination the most efficient ways of full filment theits holder to directly influence the actions of others
technical tasks. The authors in the field of scientificthrough orders that the holder issues. There are 3
management analyzed successfully the performancetypes of organizational authorities:
of such jobs. This resulted in that some people strictly1. Line authority is the most fundamental type of
believed that management could become a science.authority within the organization. It reflects the existing
Though this optimism had a limited life. The practicingsuperior-subordinate relationship, which involves the
executives have found out that it didn’t alwaysright of a superior to give orders to a subordinate;
worked to make a employee to do the job in the2. Staff authority is the right to advise or assist those
prescribed manner. People, as it was learnt, not aswho possess line authority and other staff personnel.
uncomplicated as mechanisms. Furthermore managersStaff authority exists to enable those responsible for
have to deal with not only particular workers but alsoimproving the effectiveness of line personnel to
with the groups. So many social factors act in a bigperform their required tasks. Line and staff personnel
group that it’s difficult to measure their size andmust work closely together to improve the efficiency
importance. The same thing can be said aboutand effectiveness of th organization;
numerous factors of environment, which affects the3. Functional authority is the right to give orders within a
organization. So, in our viewpoint management is atsegment of the organization in which this right is
least partly an art. Managers should be trained throughnormally nonexistent. It is generally established to cover
their experience and accordingly set practice againstonly specific task areas and is operational only for
theory. Though it doesn’t mean that thedesignated amounts in time.
management theory is useless. It rather signifies thatAccountability is a management philosophy whereby
managers should acknowledge the shortsightednessindividuals are held liable or accountable for how well
of theory and scientific research, and practice themthey used their authority and lived up to their
where they are useful. The management theoryresponsibility of performing predetermined activities.
shouldn’t be contemplated as the absolute truth, butDelegation is the fourth and the last of the main
as the tools, which help us to understand improvablyvariables that managers should consider in organizing
complex world of the organization.the work behavior of organization members.
Company structureDelegation is the process of assigning job duties and
Talking about company structure I’d start with therelated authority to specific organization members.
defining of what organizing function is. As it meant byThere are three steps of the delegation process: 1) to
managers  the organizing function is the process ofassign specific duties to the individuals; 2) to grant
breaking down the overall task into individual jobs alongappropriate authority to the subordinate; 3) to create
with delegating authority to do those jobs and thenthe obligation for the subordinate to perform the duties.
putting them back together in units, or departments, ofThe issue of delegating authority involves balancing the
an optimal size according to some consistent bases.advantages and disadvantages of centralization and
Thus we can describe the organizing function asdecentralization of authority and has implications for
dividing tasks into jobs, delegating authority, determiningthe creation of a chain of command and the use of
appropriate bases for departmentalizing jobs andstaff personnel.
deciding the optimal number of jobs in a particularCentralization implies that minimal amounts of job
department. Why was I speaking about this functionactivities and authority have been delegated to
you wonder? Nowadays I suppose in everysubordinates by management. It is an organization
efficiently-run company the activities of the variousalong a strictly hierarchical model; no delegation of
groups and the responsibilities of the individuals whoauthority is permitted. Centralization’s benefits of
work within them must be carefully defined in theclear direction and facilitated planning are offset by its
organization structure. And I can give many reasons toinflexibility as well as poor accountability since no
improve this statement. First of all in the modernsubunit has independent authority to act.
business world the process of managementDecentralization means that significant amounts have
decision-making is very complex. But there is a limit tobeen delegated. Essential decision-making and policy
the number of decisions that can be made by oneformulation done at several locations throughout an
person. This means that companies should  limit theorganization. The objective is to give decision-making
amount of responsibility given to individual employees.authority to those most directly responsible for the
Also there is an argued question about the number ofoutcome of those decisions, with first-hand experience
people one person can manage directly in an efficientand knowledge about the issues involved.
way. Thus the purpose of organizing function is toThe advantage of decentralized authority is that first
achieve coordinated and therefore more effectiveof all, it encourages managers to delevop their
effort through the company structure and authoritydecision-making ability, it creates competitive climate
relationships.and it motivates managers to contribute and perform.
Starting with company structure I can define it as theUnder the decentralization managers are able to
relationship between positions and people who hold theexercise more autonomy, and this freedom can lead
positions. It’s very important because it provides anto managerial creativity and ingenuity, which contribute
efficient work system as well as a system ofto the profitability of the organization.
communication. Organizational structure can beBut decentralization has also some disadvantages.
compared with the anatomy of a living organism,First of all it concirns the cost of training for managers,
acting as a framework, skeleton of the company. Andbecause mangers must often be retrained to make
it aims at providing an efficient work system, a meandecisions oncemade at higher levels. A second
of communication and satisfaction for the companyproblem is that decentralization requires more
personnel. Explaining the first point I  can add thatsophisticated planning and reporting methods.  And
business must try to maximize the output of productsthe last problem concirns the process of ghanging
and services which result from a given input orfrom centralized to decentralized authority. Such a
resources. This is possible only when companychange requires top managers to delegate a portion of
organization functions smoothly. Second point –their decision-making authority to middle – and
providing means of communication – is obvious,first-level managers and very often they may be
because the success of a company depends on aunwilling or unable to do it, because they view
steady flow of full and correct information. Thereforedelegation as undermining thier power and influence in
an appropriate communication system must exist tothe organization.
ensure that the right information reaches the rightSo to make the long story short,  in any company the
people. Finally speaking about satisfaction for thestructure should be a dynamic thing, adaptable to
company personnel as an aim of company structure,changing circumstances. The structure should be
what I can say is that  in a system what is suitablyorganized and the assignments of authority and
organized this should serve as the basis for jobresponsibility made on the basis of activities and
satisfaction.positions, not people. Spans of control should be
It ‘s rather hard to find the best suited companycarefully considered and the total structure should
structure to the business. Throughout the history ofreflect coordination among its various divisions.
management practice, managers have struggled with