Organizational Systems

Chapter 6 – Semi Finals

This lecture discusses:
• Organizational Components
• Organizational Structures
Organizational Components
• To successfully implement the strategies of the
organization, its structure must support its unique
system while the entire machinery of the company
must be aligned to the direction where it wants to
go.
• The functional strategies of the company should be
complementary to the much desired goals; there
must be a fit between and among organizational
elements, including its departments and small
business units
Organizational Components
What is an Organization?
- It is an entity composed of people that is
structured and managed in such a way that it is
able to achieve its set goals and objectives
- It generally consists of elements that act and
work together through coordinated activities
- These components are the management,
employees, facilities and equipment, financial
resources, and organizational policies
Management
• Refers to the administrative supervision of an
organization
• Includes leadership, and the organization’s
VMGO to attain organizational success

• Review on VMGO
Leadership
• Foremost in the management of any business
• A good leader inspires his employees and stretches
them to their optimum productivity
LEADER
Tasks POSDCON
Roles Strategist, facilitator, and administrator
Skills Technical, human skills, and other skills required
to attain organizational success

• Review about POSDCON

Employees
• People who work, support, and earn profits
for the organization.
• Salary, benefits, work environment and
organizational climate affect employee
productivity – ration of the output with
respect to input.
Levels of Organization-Employee Relationship
I. Employee Satisfaction
- an emotional state where the employee experiences a
feeling of content in the workplace
II. Employee Involvement
- a higher level of organizational relationship where an employee
becomes more participative in company activities and essentially aims
to contribute to the growth of the company
III. Employee Commitment
- highest level of organization-employee relationship where the
employee cultivates within himself an attitude and a “sense of
owning” where he treats the interest and welfare of the enterprise as
if he owns it
Facilities and Equipment
• May vary from simple and crude to the most
sophisticated and the latest machinery and
technology
Financial Resources
• Determine the direction the organization will
take and affect its capability to realize its set
business goals and objectives.
Organizational Policies
• They put organizational structure and system
in place.
• Ensure order, hierarchy of authority, clear
delineation of functions, efficiency,
productivity, and good interpersonal
relationships.
Organizational Structures
Organizational Structures
• Refers to the system or mode by which a
group of individuals is able to achieve its
desired goals.
• Subject to internal and external factors
• Need to possess a built-in flexibility that will
enable them to adapt readily to unstable
conditions
Types of Organizational Structures
• Functional
• Territorial
• Product
• Market-centered
• SBU
• Matrix
Functional Organizational Structures
• is set up so that each portion of the organization is
grouped according to its purpose.
• works very well for small businesses in which each
department can rely on the talent and knowledge of
its workers and support itself.
• However, one of the drawbacks to a functional
structure is that the coordination and communication
between departments can be restricted by the
organizational boundaries of having the various
departments working separately
Functional Organizational Structures
Territorial Organizational Structure
• In this system, the target market is divided
into geographical units according to certain
criteria
ADVANTAGES DISADVANTAGES
• Personnel familiar with the area can • It becomes cumbersome as the
cultivate the local markets product line becomes varied
• Allows quick response to changes in • Multiple territory offices results in
the competitive environment and duplication of services and
make quicker strategic decisions positions
• Closer contact between managers • More expensive
familiar with the territory and their
subordinates
General
Manager

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Territorial Organizational Structure

Product Organizational structure
• is a framework in which a business is organized in
separate divisions, each focusing on a different
product or service and functioning as an
individual unit within the company.
• The structure may have several layers of managers
and employees.
• Each layer (division) can have its own marketing
team, its own sales team, and so on.
Product Organizational Structure
ADVANTAGES DISADVANTAGES
help business: • duplicating functions and resources, eg
• focus on specific market segments a different sales team for each division
• meet customer needs more effectively • dispersing technical expertise across
• extend knowledge or expertise within smaller units
specialized divisions • nurturing negative rivalries among
• respond to market changes more divisions
flexibly and quickly • over-emphasizing divisional, rather
• encourage positive competition than organizational goals
between each department • losing central control over each
• coordinate and measure the separate division
performance of each division directly
Product Organizational Structure
Market-Centered Organizational Structure

• Describes the wide range of structural forms that

center on a group of customer needs rather than a
region, product line, or function.
• the divisions of an organization are based around
markets, industries, or customer types
• Decentralized by market
• Is ideal for an organization that has products or
services that are unique to specific market segments,
and is particularly effective if that organization has
advanced knowledge of those segments.
• Keeps the business constantly aware of demand
changes among its different audience segments
Market-Centered Organizational Structure
SBU Organizational Structure
• Strategic Business Unit (SBU)
– business unit which has all the required elements
to be considered as complete corporate business
entity like vision & mission statements, certain
external market with proper products &
customers and management of that business unit
can perform strategic planning.
– When the organization expands to very large size,
then it is better for them to involve in Strategic
Business Unit Structure.
SBU Organizational Structure
• One of the types of formal organizational structure
• They are usually used for large enterprises operating in various fields
- such as corporations operating in many markets in many countries.
• To avoid any decision making concentrated only in the central
management, there are created separate strategic business units -
SBUs.
• They have quite a considerable flexibility in management and
decision making, only at the level of global strategy the corporation
must coordinate its activities with the top management.
• Arrangement of large corporations into SBUs is an example of
decentralization
SBU Organizational Structure
Matrix Organizational Structure
• Typically used in large multinational companies
• Allows for the benefits of functional and divisional
structures to exist in one organization
• Employees may report to two or more bosses
depending on the situation or project
• This is challenging because it can be tough reporting to
multiple bosses and knowing what to communicate to
them.
• That’s why it’s very important for the employees to
know their roles, responsibilities and work priorities.
Matrix Organizational Structure
Choice of an Organizational Structure

Some of the factors which may influence the

firm’s decision to adopt the type of organizational
structure appropriate to its needs include;
• Size of the firm
• Product offerings
• Market of its products
• Prevailing competition
• Management philosophy
Choice of an Organizational Structure
• Size of the firm
– size indicates the complexity of the organization
– A small firm may opt the functional structure; a larger firm may opt
for a regional form
• Product offerings
– The nature of the product to be sold influences the choice of an
organizational structure
– Consumer and industrial goods may require different types of
services from the producer.
– Some products require extensive after sales services so a marketing
organizational structure may work best
– Technical products may require a different type mof salesmanship
Choice of an Organizational Structure
• Market
– Geographic dispersion, income class, and buyer behavior
– Ex. If markets are dispersed, or if consumers buy in small
quantities, the producer may opt to use intermediaries
• Competition
– If a major competitor uses an existing pattern of distribution,
the firm may find it necessary to accommodate such a pattern
• Management Philosophy
– Some companies may be more business-oriented than others
– Some may believe more on centralization than
decentralization
Evaluation of an Organizational Structure

• A number of criteria may be used in evaluating

organizational structures
• These include the ability of the organizational
structure to;
1. Facilitate control
2. Draw coordination among employees
3. Provide information
4. Compute for the costs involved
5. Adopt a culture of flexibility
Evaluation of an Organizational Structure

• Facilitating control
– Control involves a comparison of actual performance with pre-
established standards or plans
– If the organization structure enables a manager to identify and
correct problems, then the firm may be said to have a control
mechanism
• Coordination
– The coordination of individual actions is often called team effort
– team work indicates an efficient and well-organized operation
• Providing information
– A good organization should have ab adequate information
system and proper channels through which information flows
Evaluation of an Organizational Structure

• Cost of the System

– Weigh the performance against its costs
• Flexibility
– Organizations should adjust to changes
– According to Peter Drucker in his book The Practice of
Management, there are 3 criteria for evaluating
organizational strategies:
• Clarity which reflects the individual’s needs to understand his
tasks and the group’s tasks
• Personal relationship from within the group
• Availability of information
end