The Mature of Organization ::Class

Organisations have some common factors which include:

·         people

·         objectives

·         structure

·         management

A structure is needed in which people interact as they channel their efforts and resources towards some objectives. Management is needed to organize and channel efforts of both human and other resources towards a common goal.

Classifications of organisations

Organisations can be classified based on various characteristics; various writers differed in their classifications. Some of the factors that can be used to classify organisations include:

·         major purpose

·         primary activity

·         nature of products

·         objectives/aims

·         people employed in the work

Classification by major purpose

A common classification of organisations is by their major purpose. This leads to a distinction between, for example,

v  economic organisations – such as business firms, eg Safaricom

v  public service organisations– such as government departments, local authorities etc e.g. KPA

v  protective organisations– such as the military, trade unions and police forces; e.g. Kenya Police

v  social or associative organisations– such as clubs and societies;

v  religious organisations – such as churches and monastries;

v  political organisations – such as political parties; e.g. Wiper, TNA,ODM

v  educational organisations – such as universities, colleges and training centres;

v  voluntary organisations and charities– e.g.

Such a distinction, however, tends to lack refinement, and not all organisations fit simply into one classification. For instance many universities combine business consultancy with teaching. Some hospitals are concerned as much with training and/or research as with treatment of patients

Prime beneficiary of the organisation

Blau and Scott propose a classification on the basis of the prime beneficiary.

The people involved in a relationship with any organisation are categorised into:

v  the members e.g. shareholders

v  the owner or managers of the organisation

v  the clients

v  the public at large– the members of the society in which the organisation operates

Organisations are then classified on the basis of who benefits – that is, which of the four categories is the prime beneficiary of its operations. Four types of organisation are identified on this basis:

v  mutual-benefitassociations, where the prime beneficiary is the membership, such as political parties, trade unions and professional associations;

v  business concerns, where the owners are the prime beneficiaries, such as industrial and other firms privately owned and operated for profit;

v  service organisations, where the client group is the main beneficiary, such as hospitals, schools and welfare agencies e.g. KNH

v  commonwealth organisations, where the prime beneficiary is the public at large, e.g. government departments, Kenya Police,

THINK….what are some of the problems associated with this type of classification?

Based on primary activity of the organisation

It is not easy to find a comprehensive classification into which all organisations can be simply and satisfactorily categorized. An alternative form of classification is provided by Katz and Khan. Their classification is based on ‘genotypic (first-order) factors’ and on ‘second-order factors’.

In terms of the genotypic function, which is the primary activity of the organisation as a subsystem within the larger society, there are four broad types of organisations:

v  Productive or economic– concerned with the creation of wealth, the manufacture of goods, and the provision of services for the public e.g.

v  Maintenance– for example, schools and churches, concerned with the socialization ofpeople to fulfill roles in other organizations and in society;

v  Adaptive– for example, research establishments, concerned with the pursuit of knowledge and the development and testing of theory; and

v  Managerial or political– for example, government departments, trade unions and pressure groups. These are concerned with adjudication, co-ordination and control of physical and human resources and other sub-systems.

Object-moulding or people-moulding

Organisations can, then, be described in terms of second-order factors. Among other things these factors relate to structure; the system of intrinsic or extrinsic rewards to attract and retain members and to achieve satisfactory performance from them; and the nature of the through put – the transformation or processing of objects or the moulding of people as the end product of the organisation. A distinction can be made between object-moulding organisations, and people moulding organizations.

Object-moulding organisationsare concerned with physical or material objects as the nature of work being carried out – for example, a manufacturing plant, a car plant or an oil company.

People-moulding organisationsare concerned with human beings as the basis of the nature of work being carried out – for example, a school or a leisure centre. In people-moulding organisations a further distinction can be made between

ü  people-processing organisations– for example, an employment agency or a social security benefit office, and

ü  people-changing organisations– for example, a mental hospital or an open prison

Private or public sector organizations:

Organisations can, traditionally, be distinguished in terms of two generic groups:

·         private enterprise organisations; and

·         Public sector organisations.

The distinction can be made on the basis of ownership and finance, and the profit motive.

Private enterprise organisationscan be distinguished on basis of ownership as being owned and financed by individuals, partners, or shareholders in a joint stock company, and are accountable to their owners or members. The main aim is of a commercial nature such as profit.

Public sector organizations- This refers to are created by government and include, for example, municipal undertakings and central government departments, which do not have profit as their goal. Municipal undertakings such as local authorities are ‘owned’ by the council tax payers and ratepayers and financed by council taxes, rates, government grants, loans and charges for certain services. Central government departments are ‘state owned’ and financed by funds granted by parliament. Public sector organisations have political purposes and do not distribute profits. Any surplus of revenue over expenditure may be reallocated through improved services or reduced charges. The main aim is a service to and the well-being of the community.

Not-for-profit organisations

The increasing scale of privatisation and the blurring of commercial interests and social interests have led to an alternative classification of organisations:

·         those run for profit; and those clearly

·         Not-for-profit.

Not-for-profit organisations include on the one hand charities, private societies and most religious organisations, and on the other hand National Health Service hospitals, universities, prisons, and most government and local authority departments.

Another major distinction is arguably between production and service organisations.

Compared with ‘production’ industries, services tend to display a number of characteristic features, including the following:

·         The consumer is a participant in the service process. This requires particular attention to the surroundings and characteristics of the service operations.

·         Services cannot be stored, they are time-perishable and if they are not used they are likely to be wasted. For example, the income lost from a hotel room unsold on one day is lost forever.

·         Unlike physical products, services are less tangible and more difficult to explain or communicate. Benefits derived from services tend to be associated with feelings and emotions.

·         In service operations, work activities are people-oriented and the characteristics of the workforce are particularly important in determining organisational effectiveness.

·         Measurement of output is difficult and there is unlikely to be a single, important criterion by which to measure effective performance.

THINK….Discussion question: what are the differences between services and goods?

Formal and informal organisations

A formal organisation has been defined by Schein as: the planned co-ordination of the activities of a number of people for the achievement of some common, explicit purpose or goal, through division of labor and function, and through a hierarchy of authority and responsibility.

The formal organisation can exist independently of the membership of particular individuals.

The formal organisation is:

v  deliberately planned and created;

v  concerned with the co-ordination of activities;

v  hierarchically structured with stated objectives;

v  based on certain principles such as the specification of tasks, and defined relationships of authority and responsibility

Informal organisations

A major feature of organisational life is that whatever the type or nature of an organisation or its formal structure, an informal organisation will always be present. The informal organization arises from the interaction of people working in the organisation, their psychological and social needs, and the development of groups with their own relationships and norms of behaviour, irrespective of those defined within the formal structure.

ü  The informal organisation is flexible and loosely structured.

ü  Relationships may be left undefined.

ü  Membership is spontaneous with varying degrees of involvement.

Group relationships and norms of behaviour exist outside the official structure and the informal organisation may, therefore, be in conflict with the aims of the formal organisation.

Functions of the informal organisation

The informal organisation can serve a number of important functions.

ü  It provides satisfaction of members’ social needs and a sense of personal identity and belonging.

ü  It provides for additional channels of communication – for example, through the ‘grapevine’, information of importance to particular members is communicated quickly.

ü  It provides a means of motivation – for example, through status, social interaction, variety in routine or tedious jobs, and informal methods of work.

ü  It provides a feeling of stability and security, and through informal ‘norms’ of behaviour can exercise a form of control over members.

ü  It provides a means of highlighting deficiencies or weaknesses in the formal organisation – for example, areas of duties or responsibilities not covered in job descriptions, or outdated systems and procedures. The informal organisation may also be used when formal methods would take too long, or not be appropriate, to deal with an unusual or unforeseen situation.

DISCUSSION QUESTION: what are the differences between the formal and the informal organisation?

COMPONENTS OF AN ORGANISATION

Generally an organisation can be described as being composed of:

·         The operating component comprises the people who actually undertake the work of producing the products or providing the services.

·         The administrative component comprises managers and analysts and is concerned with supervision and co-ordination.

Work organisation can further be analyzed in terms of five basic components: the operational core, operational support, organisational support, top management and middle management

·         The operational core is concerned with direct performance of the technical or productive operations and the carrying out of actual task activities of the organisation – for example, people putting together parts on an assembly line, teaching in a classroom, treating a patient, cooking meals in a hotel, serving in a bank or repairing a hole in the road.

·         Operational support is concerned indirectly with the technical or productive process but closely related to the actual flow of operational work – for example, people working in quality control, work study, progress planning, storekeeping, works maintenance or technical services.

·         Organisational support is concerned with provision of services for the whole organisation, including the operational core, but which are usually outside the actual flow of operational work – for example, people working in human resources, medical services, canteens, management accounting or office services.

·         Top management is concerned with broad objectives and policy, strategic decisions, the work of the organisation as a whole and interactions with the external environment – for example, managing directors, governors, management teams, chief executives, boards of directors or council members.

·         Middle management is concerned with co-ordination and integration of activities and providing links with operational support staff and organisational support staff, and between the operational core and top management.

TYPES OF AUTHORITY

Weber distinguished three types of authority: traditional, charismatic and legal–rational.

These types of authority are based on the form of control regarded as legitimate by subordinates and their acceptance of the power of superiors. The three types of authority relate to different types of organisations.

v  In traditional organisations, authority is legitimised by custom and a longstanding belief in the natural right to rule, or is possessed by traditional (‘proper’) procedure. Examples would be the authority of the pope, kings or queens or a paternalistic employer.

v  In charismatic organisations, authority is legitimised by belief in the personal qualities of the leader; authority is based on the leader’s strength of personality and inspiration. Winston Churchill might be quoted as an example. On the impending demise of the charismatic leader the movement might collapse unless a ‘legitimate’ heir is found. This process tends to transform a charismatic organisation into either a traditional organisation or a bureaucratic organisation.

v  In bureaucratic organisations, authority is based on the acceptance of the law of formal rules and procedures, and on impersonal principles. There is a legal–rational authority which stems from hierarchical position in the organisation and not from personality.Examples are the armed forces and the authority of government ministers or a college principal.

v  The concept of legal–rational authority is of most interest to us because most business organisations, particularly large-scale ones, tend to be of the bureaucratic type of structure, although there are variations in degree. Bureaucracy, as applying to certain structural features of organisation, is the most dominant type of formal organisation.

Centralization and Decentralization of Authority

Centralization of Authority-refers to the retention of decision-making rights by the top management.

Factors influencing centralization of authority

       I.            Costliness of the decisions to be made

Costly decisions are more likely to be made by the top management. Cost is not only in monetary terms. It may also be measured shown in intangibles such as the company’s reputation, its competitiveness and employee morale. Some decisions such as to invest huge amounts of money in buying assets will be made by the top management while less costly decisions will be made by the middle or lower management.

Give other examples of costly decisions

    II.            Top management philosophy.

The character and philosophy of top executives have an important influence on the extent to which authority is decentralized. If the philosophy of the management is to retain power at the top level then this will influence centralization.

 III.            Sensitiveness of the decision to be made.

A sensitive decision is that which is likely to have far reaching consequences on the organization. The more sensitive the decision to be made is the more likely that it will be centralized with the top management.

 IV.            Desire for uniformity in decisions /policies made.

An organization may opt for centralized decision making to ensure uniformity of decisions. Uniformity ensures consistency in policies applied in undertaking organization activities.

    V.            Training and level of qualifications of managers at middle and lower level positions.

A real shortage of qualified managers could limit decentralization of authority since in order to decentralize superiors must have qualified managers to give authority. But too often, the scarcity of good managers has made it impossible for several organizations to decentralize.

 VI.            Size of the organizations.

In small to medium sized organizations there is tendency to centralize decisions making since the size of the organization is not big enough to support decentralized decision making.

VII.            History and culture of the enterprise.

Whether authority will be centralized frequently depends on the way the business has been built. These are enterprises which expand under the direction of their owners/founders e.g. Ford Motors Corporation has the tendency to centralize authority.

VIII.            Confidentiality/secrecy required of certain decisions.

An organization may opt to centralize its decision making if there is a desire to ensure that certain secrets remain with the top management.

Decentralization of Authority

This involves the process or the state of the organization’s decisions being dispersed to the middle and lower levels of the organization.

Factors Influencing Decentralization of Authority

1. Size of the organization e.g. large scale organizations has the tendency to decentralize authority because the size of the organization is large enough to ensure the dispersion of authority to lower levels.
2. Need to relieve top management of some burden of decisions making.
3. Need to encourage decisions making and assumption of authority and responsibility by middle level managers.
4. Need to give managers more freedom and independence in decision making.
5. Need to promote establishment and use of broader controls in the organization.
6. Need to make performance of different organization of units possible.
7. Need to facilitate product diversification
8. Need to facilitate the setting up of profit centers.
9. Need to promote development of managers.
10. Need to motivate managers by making them to be in charge of certain decisions.
11. Need to adapt the organization to the fast changing environment e.g. meeting specific needs of consumers etc.

ORGANISATIONAL GOALS

“Many a time men achieve only that which they target to achieve”

What is a goal? What is the purpose of goals?

A goal can be described as a specific target to be achieved and which inspires individuals to work towards its achievement. It has also been said that the things an organization strives for and prides itself in are its organisation goals.

Each organisation has its own main aims or goals. Often, the aims of an organisation can define its identity and differentiate it from other similar organisations. What distinguishes Toyota from Nissan? Can you guess what their goals are?

Organizational goals are more manifest in the decisions an organization makes. For instance an organization that hires more staff to improve customer service can be said to have a goal of delivering quality services.

Conflicts can occur when goals collide: what if a private school that valued the quality of its education had to cut costs? Would a private hospital start using second-hand scalpels to save money in tough times? It's pretty common to hear of company directors or staff resigning because they believe their company has started ignoring its primary organisation goals.

Problems that arise from organizational goals

Difficulties can arise at any stage of goal setting or implementation. Some of the problems that can be cited include:

·         Goal ambiguity- when goals are not specific

·         Having goals that are beyond the reach of the organization

·         Goal conflicts which may arise when goals of an organization target conflicting results

·         Setting goals which are not in touch with reality of the market

·         Poor implementation of the goals

·         Lack of involvement of key stakeholders of the organisation in the goal setting process

Typical examples of goals for organisations include:

• Profit (for commercial organisations)
• Good customer service
• Good communications with staff and customers
• Efficient work practices
• Good reputation
• Good decision-making practices
• Protection of data
• Good staff morale
• Quality products
• Cheap but reliable products

Furthermore, an organisation may aim for:

• efficiency: Every organisation wants to be efficient: they don't want to waste time, money or effort.
• good decision making: Every organisation wants to make informed and wise decisions to help them achieve their organisation goals.
• effectiveness. Every organisation wants to do their work well. How well they are prepared to do it, of course, will be affected by organisational goals.
• good reputation:every organisation wants to be known for being competent in whatever it does. No organisation aims to look stupid or incompetent. Companies will often go to extreme lengths to build or hold on to a reputation because their reputation is their biggest asset.
• good customer service: it is expected most will value this.

Think…. give examples of reputable companies in Kenya and what they are known to be competent in.

INTERACTION WITH THE ENVIRONMENT

The structure, management and functioning of an organisation are not only determined by internal considerations and choices but are also influenced strongly by a range of volatile external environmental factors. In order to be effective and maintain survival and growth, the organisation must respond to the opportunities and challenges, and the risks and limitations, presented by the external environment of which it is part. Changes in the environment will affect inputs, and changes in inputs will affect the transformation or conversion process and hence the outputs. The open systems approach views the organisation within its total environment and emphasises the importance of multiple channels of interaction.

The increasing rate of change in major environmental factors (technical, economic, social and governmental) has highlighted the need to study the total organisation and to adopt a systems approach. In addition to these major environmental factors, there is a multiplicity of constantly changing environmental influences that affect the operation of an organisation

In order to understand the operations of organisations, and to improve organisational performance, it is necessary to consider how they achieve an internal and external balance and how they are able to adapt to changes in their environment and the demands placed upon them.

Consider, for example, how the management and operation of a large comprehensive school might be affected by such external influences as government proposals for reform of education, changing demographic trends, the general economic climate, advances in information technology, changing views of the role of education in society, greater diversity of people in the catchment area, reports from Her Majesty’s Inspectors, increased health and safety concerns, representations from employers’ associations and trade unions, parent groups and equality campaigners.

PESTEL analysis

Organisational performance and effectiveness will be dependent upon the successful management of the opportunities, challenges and risks presented by changes in the external environment. One popular technique for analyzing the general environment is a PESTEL analysis– that is,

·         Political,

·         Economic,

·         Socio-cultural,

·         Technological,

·         Environmental

·         Legal influences

DISCUSSION QUESTION: how does each of the above elements affect an organization?