Business organization - Assignment Example

?Business Organisation Table of Contents Business Organisation Table of Contents 2 Introduction 3 System of Hierarchical Structure 4 System of Social Relationship 7 System of Status and Power 9 Arguments on Organisational System 10 Conclusion 13 References 14 Introduction Organisations can be of two kinds, one is formal organisation and other is informal organisation. In case of informal organisation there is no specific structure. However, the formal organisation is built upon the organisational goals and missions. Thus, in formal organisation the structure is hierarchical type. In those organisations, employees at every level possess their own purposes. In formal organisation structure the lower level workers give statement to higher level manager. The structure of organisation also varies according to size, geographical position, managerial employees, and product or service offered by the organisation (New Age International, n.d.). System of Hierarchical Structure The structure of organisation can be of four types namely, functional, horizontal, divisional and that of matrix. The functional structure is also recognised as ‘vertical dimension’. This kind of organisation is based on people who have the power to make decision in the organisation. The ‘span of control’ is the vital part in this type of organisation. The span of control can be recognised as the number of employees who have the power to give report to the boss inside the organisational hierarchy. This is based on the status and management system of the organisation (Fontaine, 2007). Tall organisational structure: In this organisational structure, there are more hierarchical levels. The manager possess ‘narrow span of control’. The number of employee is limited who can give statement to the immediate boss. Source: (Fontaine, 2007). The status plays important role in this organisational structure. As there are many hierarchical levels it is quite difficult for lower level employee or manager to report to high level person with high status because each level has its own rules and regulations. The decision making process is quite slow as the communication has to pass through different levels of the organisation and approval is needed in every level. The interaction between high level managers and employees is less compared to flat organisational structure. Higher cost is required in tall structure because the decision making process is too slow. As the managers have limited workers under them, they can supervise or train them more effectively. In tall structure there is opportunity of improvement or promotion in career. For example, General Motors, an American automotive manufacturing company has tall organisation structure. It has almost 12–16 levels between the top to the bottom level. Thus, the managers in General Motors have ‘narrow span of control’ i.e. there is approximately 5–6 workers who can give statement to any individual manager. A large number of organizational levels can lead to job insecurity of workers and loss of professional skill (Fontaine, 2007). Flat organisational structure: In this organisational structure, there is less hierarchical level. Thus, the manager possess ‘wide span of control’. The manager builds good social relationship and establishes friendly environment which can confer power to the staffs. Source: (Fontaine, 2007). Flat organisational structure assists in higher level of interaction between staffs and managers. Thus, the process of communication is usually faster, reliable and much efficient compared to tall organisation structure. The leaders tend to be more democratic in nature and thus it leads to superior level of innovation. This type of organisational structure is more elastic and compliant compared to taller structure. The decision is not based on the status of the manager. It is based on need of the people. The employees possess more power to arrive at a decision instantly. Faster decision provides the organisation, high level of liveliness and mobility. The flat organisational structure leads to satisfied employees and thus the turnover rate is also low. When the workers become more responsible and involved in the business operation it can increase their self status in the organisation (Fontaine, 2007). The main disadvantage in this type of organisational structure is that employees can have more than one supervisor which makes it difficult for the growth of the organisation. The operation of each department may overlie and distort the responsibility of another person which can bring misunderstanding in the organisation (Griffin, 2011). For example IKEA, a Swedish retailer and furniture production company follows the flat organization based structure. It helps to increase job interest among the workers and participation in decision making. However, IKEA faced certain obstacles due to the flat organization structure such as the workers have lack of opportunity to obtain supervision or assistance from the senior managers which makes it obligatory for them to be self-reliant (Flat World Knowledge, 2011). System of Social Relationship The social relationship can interact with the organisational process in many ways. In an organisation, the social relationship is the relationship between persons outside the organisation. Thus, the activities and behaviour of one employee can influence the performance of other whether directly or indirectly. The social relationships have no limits. It involves exchange of knowledge, material and culture within the organisation or outside the organisation (Infinity Internet Inc, 2011). The human relationship encompasses the lifestyle, society, ethnicity, ideas and practices. People in any organisation depend on social relationship because it provides strength, safety, understanding, and the capability to respond in any situation. Thus, any change in organisational structure is a threat for people because it can hamper the social relationship in the organisation. Employee fear that the change in system will bring instability and the safety may be lost. The individualisation takes place in the organisation when any person successfully wields the pressure of the social relationship system in the organisation (Infinity Internet Inc, 2011). Source: (Infinity Internet Inc, 2011). In the above diagram box A depicts low socialisation and individuality in an organisation which can lead to loneliness in a company. In case of box B the high individualisation and little socialisation can cause insurgence in organisation. The high socialisation and little individualisation in box C will result in consistency in organisation. Finally, the blend of high socialisation with high individualisation in box D will help to develop creative working environment within the organisation. Where individualisation supports the self status, reward and progress in career, socialisation supports the social relationship and harmony. This is vital for every organisation to maintain high level of socialisation and individualisation to endure in this competitive business environment (Infinity Internet Inc, 2011). System of Status and Power According to Max Weber, organisational power is the accomplishment of the need of one person in a social relationship regardless of the resistance of other person. Power can change the activities of one or more persons in any organisation. It is the capability to influence the activities of other person whether he possess the right or not. Power can be of three types (Management Consulting Courses, n.d.). Coercive power: This type of power entails a person to obey other person’s desires. Fear or penalising actions can be used to influence the behaviour of any person. This kind of power is applied in organisation to make sure that the rule set out will be accepted by any employee or team. Utilitarian power: This type of power involves reward system or penalty. It is based on the status of any employee in the organisation. Functional organisation can use increase in salary, promotion, termination, to impose this type of power. Normative power: This type of power is based on the conviction of the employees that the organisation has the authority to administer their activities (Management Consulting Courses, n.d.). Arguments on Organisational System There are two prime theories of organisational system namely ‘Classical Organisational Theory’ and ‘Neoclassical Organisational Theory’. Classical theory argues that the supervisors must have strong power over the employees and thus this theory supports the tall organisational structure. It is based on high level of rules and regulations which can manage the behaviour of subordinates in an organisation. This theory is suitable for functional organisation. In case of neoclassical approach it argues that organisation must focus on worker satisfaction more than controlling the activities of employee. Neoclassical theory believes that high level of employee satisfaction can lead to organisational success. Thus, this theory supports the flat organisational structure (Fontaine, 2007). As the development of new technology had arrived the concept of traditional organisations structure had changed. The non material structure became unnecessary and people are becoming more machine operators. In the 20th Century, the organisation had become more decentralised and hierarchical. Every department has particular position in the organisation. Previously, the organisational structure was based on hierarchical principles and it had many divisions. Traditional Organisational Structure Source: (McMillan, n.d.). However, in the last periods of the 20th Century, the tendency of large organisational structure had ended. Organisation uses rationalise approach to amend the structure so as to be more suitable and successful in the business environment. This approach argued that it can cause loss of skill and precious experience and certain organisations were unsuccessful to take advantage of the reform and development of new organisational system (McMillan, n.d.). The current tendency is towards ‘Flattened Organisational Structure’. This kind of organisational structure is based on decentralised control, less organisational level and employees have direct access to the upper level of management. This type of organisational structure allows lower level of control which can support the worker’s independent decision. The ‘Human Relation School of Thought’ suggests that only financial benefit cannot inspire employees to become more effective; for certain employees the opportunity, responsibility, freedom in decision making can help to accomplish the organisational goal. There is an argument that certain employees prefer secure jobs with high probability of career progression. This type of employees prefers the taller organisational structure because they want more yearning and secure job. The tall organisations are much more stable and provide a long lasting prospect to achieve success in career by a chain of promotion. Still the flat organisational structure provides employee the freedom of decision making, more authority and development of managerial skill (Fontaine, 2007). Conclusion Today, the success factors of organisations have changed considerably. Previously, the organisations put much emphasis on control, authority, the role of employees and specialisation of work. In modern era, organisation depends on elasticity, innovation and integration of new thought. Thus, an organisation must be extremely cautious while developing the commercial structure and employees also should look at the organisational structure carefully before entering into an organisation. It has been seen that employees who want success and achievement in their career prefer the tall structure and employee who want freedom and power in the working environment prefer the flat structure. References Fontaine, C. W., 2007. Organizational Structure: A Critical Factor for Organizational Effectiveness and Employee Satisfaction. Northeastern University. [Online] Available at: http://www.professorfontaine.com/files/Organizational_Structure_White_Paper_v7b.pdf [Accessed May 21, 2011]. Flat World Knowledge, 2011. Organizational Structure. Node. [Online] Available at: http://www.flatworldknowledge.com/node/21796 [Accessed May 21, 2011]. Griffin, D., 2011. Benefits in a Flat Organizational Structure. Small Business. [Online] Available at: http://smallbusiness.chron.com/benefits-flat-organizational-structure-281.html [Accessed May 21, 2011]. Infinity Internet Inc, 2011. Social Systems, Culture, and Individualization. Leadership and Organizational Behavior. [Online] Available at: http://www.nwlink.com/~donclark/leader/leadob.html [Accessed May 21, 2011]. Management Consulting Courses, No Date. Power and Organizational Politics. Lesson:-30. [Online] Available at: http://managementconsultingcourses.com/Lesson30Power&OrganizationalPolitics.pdf [Accessed May 21, 2011]. McMillan, E., No Date. Considering Organization Structure and Design from a Complexity Paradigm Perspective. Centre for Complexity and Change. [Online] Available at: http://www.ifm.eng.cam.ac.uk/mcn/pdf_files/part5_5.pdf [Accessed May 21, 2011]. New Age International, No Date. Study of Organizational Behavior. Introduction to Organizational Behavior. [Online] Available at: http://www.newagepublishers.com/samplechapter/001395.pdf [Accessed May 21, 2011]. Read More