Departmentation and Span of management

Process of Organising Differentiation and Integration Steps 1. Consideration of objectives 2. Grouping of activities into departments 3. Deciding which departments will be key departments 4. Determining levels at which various types of decisions are to be made. 5. Determining the Span of Management 6. Setting up a coordination mechanism

Departmentation The process of grouping the activities is known as Departmentation. Terms for Department Business organisation: Division, Department, Section Government: Branch, department, bureau, section

Need and importance of departmentation Need: The need for departmentation arises because of specialisation of work and the limitation on the number of subordinates that can be directly controlled by a superior. Importance: 1. Advantages of specialisation 2. Fixation of responsibility 3. Development of managers 4. Facility in appraisal 5. Feeling of autonomy

Bases of departmentation

Functional
Each major function of the enterprise is grouped into a department. Eg, manufacturing company production, finance and marketing.

Advantages: 1. simple form of grouping activities for small organisations 2. It develops expertise in a narrow range of skills. 3. improved planning and control of the key functions. Disadvantages: 1. Each manager thinks only in terms of his own departmental goals and does not think in terms of the company as a whole. 2. Unsuitable for organisations which are large in size. 3. customer needs evoke conflicting interpretations from each departmental head.

General Manager Manager Engineering Manager Accounts Manager Manufacturing Manager HR Manager Purchase

2. Products

For each major product, a separate semi-autonomous department is created and is put under the charge of a manager who is also responsible for profit. Advantages: 1. Top management can concentrate on centralised activities like finance, R&D and control. 2. Enables top management to compare the performances of different products and invest more resources in profitable products 3. Teamwork develops as each worker sees that his contribution is needed to make the whole product. Disadvantages: 1. Duplication of staff and facilities 2. Employment of large number of managerial personnel 3. Equipment in each product department may not be fully used.

Product Departmentation

3. Customers
Enterprise may be divided into a number of departments on the basis of the customers that it services. A big automobile servicing enterprise may have separate departments for servicing cars, heavy vehicles and scooters. Advantage: Ensures full attention to major customer groups which have a very different set of criteria governing their decisions to purchase.

Disadvantage: Under-utilisation of resources and facilities in some departments Duplication of facilities

Customer Departmentation

4. Regions or territory
Separate departments are established for each of the territories in which the enterprise does business Eg, Railways: Northern railways, Western railways, Southern railways, Eastern railways, Central railways.
Advantages: 1. Provides each regional head an opportunity to adapt to his local situation and customer need with speed and accuracy 2. Enables the organisation to compare regional performances and invest more resources in profitable regions. Disadvantages: 1. Duplication of various activities 2. Various regional units may become engrossed in short-run competition among themselves forgetting the overall interest of the total organisation.

Territory structure
Hewlett-Packards Headquarters Worldwide
Hewlett Packard

Americas Houston, Texas

Europe, Middle East, Africa Geneva, Switzerland

Asia Pacific Hong Kong

CEO Corporation

Corporate Managers

Northern Region

Western Region

Southern Region

Eastern Region

5. Divisional structure
When large, multi-product companies segment themselves into several independent profit centres on the basis of product, territory or customer, these units are called divisions.

CEO Corporation

Corporate Managers

Washing Machine Division

Lighting Division

Television Division

6. Process
Departmentation done on the basis of several discrete stages in the process or technologies involved in the manufacture of a product.

Advantage: Facilitates the use of heavy and costly equipment in an efficient manner.
Disadvantage: Breakdown in one department slows down work in all other departments
Plant Manager
Inspection, packing & Shipping Dept Manager

Cast Department
Manager

Press Department Manager

Tube Department Manager

Finishing Department Manager

7. Matrix Organization

An organization structure in which employees are permanently attached to one department but also simultaneously have ongoing assignments in which they report to project, customer, product, or geographic unit heads.

CEO

Matrix Structure

Vice President Engineering

Vice President Sales and Marketing

Vice President Finance

Vice President Research and Development

Vice President Purchasing

Product A Manager

Product B Manager

Product Team

Product C Manager

Product D Manager

Two-boss employee

Matrix Structures
Advantages -Increased flexibility and adaptability -Improved coordination -Empowered workforce Disadvantages -Dual reporting relationships -Potential power struggles -Problems associated with working in groups

Choice of a suitable base

Specialisation Coordination Economy Whole task

Mechanistic and Organic Structures

Span of Management Span of control, Span of supervision, span of authority, span of responsibility It indicates the number of subordinates who report directly to a manager. Importance: 1. Span of management affects the efficient utilisation of managers and the effective performance of their subordinates 2. There is a relationship between span of management and organisational structure

What is appropriate span?

5 to 6 - Higher level 8 to 12 Lower level Graicunas the limiting factor in the span of management is the number of relationships supervised. 3 types of relationships: 1. Direct one-to-one relationship N = n N = number of relationships n = number of subordinates 2. Direct group relationships: exist between the superior and each possible combination of subordinates N = n 2n - 1 2 Urwick and Hamilton:

3. Cross relationships
N = n (n 1)

The formula to ascertain the number of all 3 kinds of relationships is

N = n 2n +n-1

Therefore,

Subordinates
2

relationships
6

4
5 6

44
100 222

10
12

5210
24708

Contrasting spans of control

Factors governing span of management 1. 2. 3. 4. 5. 6. 7. 8. Ability of the manager Ability of the employee Type of work Well defined authority and responsibility Degree of planning Sophisticated information and control system Level of management Staff assistance

Span of management creates. Tall structure

Narrow span of management, large number of management levels and more centralised decision making Adv: close supervision, close control, fast communication Disadv: Too much control, creation of many levels of management, excessive distance between lowest level and highest level in the organisation

 Flat structure

Reduces levels of management, widens span of control of managers at various levels of the organisation, more decentralised decision making Adv: More delegation of authority, more clear policy, development of managers for higher positions Disadv: danger of superiors loss of control and requirement of highly trained managerial personnel