04: The Nature of Organizing, Entrepreneuring and Reengineering

Good people and those who want to cooperate will work together most effectively if they know the parts they are to play in any team operation and the way their roles relate to one another. This is true in business or government as it is in football or in a symphony orchestra. Designing and maintaining these systems of roles is basically the managerial function of organizing.

Managing of Organizing and Organization

In addition, to make a role work out effectively, provision should be made for supplying needed information and other tools necessary for performance in that role. In this sense that we think of Organizing as,

1. The identification and classification of required activities.
2. The grouping of activities necessary to attain objectives.
3. The assignment of each grouping to a manager with the authority (delegation) necessary to supervise it.
4. The provision for coordination horizontally and vertically.

An organization structure should be designed to clarify who is to do what task and who is responsible for what results, to remove obstacles to performance cause by confusion and uncertainty of assignment, and to furnish decision-making and communications networks reflecting and supporting enterprise objectives.

The term Organization implies a formalized intentional structure of roles or positions.

Formal and Informal Organization

Formal Organization means the intentional structure of roles in formally organized enterprise.
Informal Organization is a network of personal and social relations not established or required by the formal organization but arising spontaneously as people associate with one another.
Organizational Division: One aspect of organizing is the establishment of departments. The word department designates a distinct area, division or branch of an organization over which a manger has authority for the performance of specified activities.

Organization Levels and the Span of Management

While purpose of organizing is to make human cooperation effective, the reason for levels of organization is the limitations of the span of management. In other words, organization levels exist because there is a limit to the number of persons a manager can supervise effectively, even though this limit varies depending on situations. A wide span of management results in few organizational levels, and a narrow span results in many levels.

Problems with Organization Levels

The division of activities into departments and hierarchical and creation of multiple levels are not complete desirable in themselves.
First, levels are expensive. Accountants refer to such costs as “overhead” or “burden” or “General and Administrative” in contrast to so called direct costs. Real product is accomplished by factory, engineering or sales employees, who are, or could logically be accounted for as “direct labor”. Levels above the “firing line” are predominantly staffed with managers whose cost it would be desirable to eliminate.
Second, department levels complicate communication. An enterprise with many levels has greater difficulty communicating objectives, plans and policies downward through the organization structure than does a firm in which the top manger communicate directly with employee. Omission and misinterpretations occur as information passes down the line. Levels also complicate communication from the firing line to the commanding superiors, which is every bit as important as downward communication.
Finally, numerous department and levels complicate planning and control.

Operational Management Position: A situational Approach

Principle of span of the management states that there is a limit to the number of subordinates a manager can effectively supervise, but the exact number will depend on the impact of underlying factors. (This include the degree of training of subordinates that is required and possessed, the clarity of authority delegation, the clarity of plans, the use of objective standards, the rate of change, the effectiveness of communication techniques, the amount of personal contact needed and the level in the organization) Examining what consumes the time of managers in their handling of superior-subordinate relationships and ascertaining devices that can be used to reduce these time pressures will be not only a helpful approach for determining the best span in individual case but also a powerful tool for finding out what can be done to extend the span without destroying effective supervision.

Factors determining an Effective Span

Apart from such personal capacities as comprehending quickly, getting along with people, and commanding loyalty and respect, the most important determinant is manager’s ability to reduce the time he or she spends with subordinates. This ability naturally varies with managers and their jobs, but several factors materially influence the number and frequency of such contacts and therefore the span of management.

Need for Balance

What is required is more precise balancing. One must balance all the costs of adopting one course or the other, not only thefinancial costs but also costs in morale, personal development and attainment of enterprise objectives.

An Organizational Environment for Entrepreneuring and Intrapreneuring

The essence of entrepreneurship is innovation, that is, goal-oriented change to utilize the enterprise’s potential.

The Intrapreneur and Entrepreneur

An intrapreneur is a person who focuses on innovation and creativity and who transforms a dream or an idea into a profitable venture by operating within the organizational environment. In contrast, entrepreneur is a person who does similar things, but outside the organizational setting. Entrepreneurs have the ability to see an a opportunity, obtain the necessary capital, labor and other inputs, and the know-how to put together an operation successfully. They are wiling to take personal risk of success and failure.

Creating an Environment for Entrepreneurship

Since it is a managerial responsibility to create an environment for effective and efficient achievement of group goals, managers must promote opportunities for entrepreneurs to utilize their potential for innovation. Entrepreneurs take personal risks in initiating change, and they expect to be rewarded for it. Finally, entrepreneurs need some degree of freedom to pursue their ideas; this in turn, requires that sufficient authority be delegated. Innovative persons often have ideas that are contrary to “conventional wisdom”. The Wharton school in Philadelphia has an entrepreneurial center. Important requirements for becoming an entrepreneur are self-confidence, willingness to work hard, experience with the product, good general education and some money to start.

Innovation and Entrepreneurship

Entrepreneurs have creative ideas they use their management skills and resource to meet identifiable needs in the marketplace. If successful, an entrepreneur can become wealthy. An innovation applies not only to high-tech companies but equally to low-tech, established business. Worthwhile innovation is not a matter of sheer luck; it requires systematic and rational work, well organized and managed for results.

Innovation comes about because of some of the following situations:

1. The unexpected event, failure or success.
2. The incongruous- what assumed and what really is.
3. The process of task that needed improvement.
4. Change in the market or industry structure.
5. Change in demographics.
6. Changes in meaning or in the way things are perceived.
7. Newly acquired knowledge.

Innovations based solely on bright ideas may be very risky and are, at times, not successful. The most successful innovations are often the mundane ones.

Reengineering the Organization

Reengineering is fundamental rethinking and radical redesign of business process to achieve dramatic improvements in critical contemporary measures of performance, such as cost, quality, service and speed.

Key aspects of Reengineering

1. Fundamental Rethinking: What the organization is doing and why. Systems and procedures were often outdated, inefficient and completely unnecessary.
2. Radical Redesign: not modification but a reinvention. Radical redesign often results in radical downsizing with detrimental effects on organizations. Downsizing or “rightsizing” is not the primary purpose of reengineering, intent is reducing costs, without necessarily addressing customer needs and expectations. While radical redesign, accompanied by downsizing, may indeed result in short-term cost savings, but it may also negatively affect the remaining work force. Teamwork has become increasingly important in the modern organization. But team efforts are built on trust and trust has to be built over a long period of time. With radical redesign, trust can be destroyed at once.
3. Dramatic Result: Dramatic improvements are moderated by failures. Some 50 to 70 per cent of reengineering efforts fail to deliver the intended the dramatic result.
4. Process: The need for carefully analyzing and questioning business process is indeed important. However, the process analysis must go beyond operations and must include the analysis and linking the enterprise to the external environment. Various subsystems need to be integrated into a total system. Process of transforming the inputs into outputs must go beyond technological and human aspects, and indeed the total managerial system as suggested in this book.

Integrating reengineering with other systems through a new systems model called “Management by Processes” can be suggested to overcome some of the weaknesses of the narrowly focused reengineering approach.

The Structure and Process of Organizing

Looking at organizing as a process requires that several fundamentals be considered.

1. The structure must reflect objectives and plans, because activities derive from them.
2. It must reflect the authority available to an enterprise’s management.
3. An organization structure, like any plan, must reflect its environment. Just as the premises may be economic, technological, political, social or ethical, so may be those of an organization structure.

Organizational structure must be designed to work, to permit contributions by member of group and to help people gain objectives efficiently in changing future. A workable organization structure can never be static. There is no single organization structure that works best in all kind of situations. An effective organization structure depends on situation. Organization structure must take into account people’s limitations and customs. This is not to say that the structure must be designed around individuals instead of around goals and accompanying activities. But an important consideration is the kind of people who are to staff it.

Logic of Organizing

1. Establishing enterprise objectives.
2. Formulating supporting objectives, policies and plans.
3. Identifying, analyzing and classifying the activities necessary to accomplish these.
4. Grouping these activities in the light of human and material resources available and the best way, under the circumstances, of using them.
5. Delegating to the head of each group the authority necessary to perform the activities.
6. Tying the group together horizontally and vertically, through authority relationship and information flows.

Note, organizing does not imply any extreme occupational specialization. To say that tasks should be specific is not to say they must be limited and mechanical. In any organization, jobs can be defined to allow little or no personal leeway or the widest possible discretion. One must not forget that there is no best way to organize and that the application of structural organization theory must take into account the situation.