Design Of Organization

Structure and Control System

P. GURU PRASAD
FACULTY
INC GUNTUR
 Organization Structure
• From a management control
perspective, the organization design
selected should promote
• communication, cooperation, team
work, motivation, and performance
and should be the one best suited for
the organization and its external and
internal environment.
 Organization Structure
• Organizations need to be structured
so that areas such as strategy,
investments, marketing, internal
processes, and human resources are
managed and controlled in a manner
that encourage communication,
alliance, and cooperation
Structural dimensions of organization design

DIMENSIONS DEFINITIONS
The extent to which written rules and records
Formalization are maintained in the organization
The extent of dividing the organizational
Specialization activities into sub-groups

Hierarchy of The reporting relationships prevalent in the

organization and the span of control
Authority
The level in the hierarchy which has the
Centralization decision making authority

The level of formal education of the employees

Professionalism
the distribution of people into different
Personnel ratios functions and departments
Types of organizational structures

• Functional structure
• Divisional structure
• Matrix structure
• Horizontal structure
• Hybrid structures
 Transfer pricing
• A transfer pricing is the internal price
charged by a selling department,
division, or subsidiary of a company
for a raw material, component, or
finished good or service which is
supplied to a buying department,
division, or subsidiary of the same
company.
 Responsibility structure
• Responsibility centers
• Cost centres
• Revenue centers
• Profit centers
• Investment centers
Designing responsibility centers
• While designing responsibility structures,
organizations need to first consider three
concepts.
• Controllability
• Goal congruence
• Transfer pricing
 Designing control systems
• Action controls:-
• Hierarchy and reporting relationships
• Clarity of roles, responsibilities, authorities and
distribution of power between key positions
• Workflows and channels of communication
• Behavior-based appraisal and reward systems
• Disciplinary action on absenteeism, violation of rules and
regulations, fraud, etc
• Change management: business process reengineering,
organizational restructuring
 Designing control systems
• Result control:-
• Employee performance management –
goal setting, performance appraisal, and
feedback
• Performance–based incentives and
disincentives for non performance
 Designing control systems
• Personnel / cultural controls:-
• Recruitment, selection, and placement, guidelines on
qualification, experience, skills, attitudes and behavioral traits.
• Orientation and socialization , especially for cultural values and
ethical norms
• Employee training, job skills, soft skills
• Management development, career planning, succession
planning
• Trait/ knowledge/ skill- based appraisal
• Compensation- merit pay, skill based pay
• Befits schemes to foster belongingness and a sense of security
• Quality of work life (QWL)
• Workers participation in management
• Employee relation to pre-empt conflicts
• VRS
 Management control of International Business

• Designing the organization structure of an

MNC entails taking decisions on three
main aspects-
• the strategy of international business,
• extent of centralization, and
• the division of an MNC into subsidiaries
• based on the product,
• based on operational location,
• or based on function.
 Management control in Non-Profit
organizations
• Different combinations of the four criteria give
rise to different types of controls which are
• Routine control
• Expert control
• Trial and error control
• Intuitive control
• Judgmental control
• Political control
 Control systems for empowerment , Innovation, and creativity

Organizational problems Managerial solutions Lever of control

Lack of focus or Communicate clear Diagnostic control
resources to targets, provide the
systems
accomplish objectives necessary support and
feed back
Ambiguity of purpose Convey core values Beliefs system
and mission
Pressure or Indicate and enforce Boundary
temptation to act rules systems
illegally or unethically
Suppressed creativity Open communication Interactive
due to lack of between functions to
prospects or fear of encourage control
risk organizational systems
learning
 Thanking you
• Management is doing things right; leadership is doing
the right things. There is only one valid definition of a
business purpose: to create a customer.
- Peter Drucker

• Women do not win formula one races, because

they simply are not strong enough to resist the
G-forces. In the boardroom, it is different. I
believe women are better able to marshal their
thoughts than men and because they are less
egotistical they make fewer assumptions.
- Henry Ford