Page 120 - DCOM102_DMGT101_PRINCIPLES_AND_PRACTICES_OF_MANAGEMENT

Principles and Practices of Management

Notes Organisation structure must be designed so as to make possible to attainment of the objectives
of the business for five, ten, fifteen years hence". Peter Drucker has pointed out three specific
ways to find out what kind or structure is needed to attain the objectives of a specific business:
1. Activities Analysis: The purpose of 'activities analysis' is to discover the primary activity
of the proposed organisation, for it is around this that other activities will be built. It may
be pointed out that in every organisation; one or two functional areas of business dominate.
For example, designing is an important activity of the readymade garments manufacturer.
After the activities have been identified and classified into functional areas, they should
be listed in the order of importance.

2. Decision Analysis: At this stage, the manager finds out what kinds of decisions will need
to be made to carry on the work of the organisation. What is even more important, he has
to see where or at what level these decisions will have to be made and how each manager
should be involved in them. This type of analysis is particularly important for deciding
upon the number of levels or layers in the organisation structure.
3. Relations Analysis: Relations Analysis will include an examination of the various types
of relationships that develop within the organisation. These relationships are vertical,
lateral and diagonal. Where a superior-subordinate relationship is envisaged, it will be a
vertical relationship. In case of an expert or specialist advising a manager at the same
level, the relationship will be lateral. Where a specialist exercises authority over a person
in subordinate position in another department in the same organisation it will be an
instance of diagonal relationship.

7.3.3 Principles of Organisational Structure

The following are the main principles that a manager has to keep in mind while formulating an
organisational structure.

1. Consideration of unity of objectives: The objective of the undertaking influences the
organisation structure. There must be unity of objective so that all efforts can be
concentrated on the set goals.

2. Specialisation: Effective organisation must include specialisation. Precise division of work
facilitates specialisation.
3. Co-ordination: Organisation involves division of work among people whose efforts must
be co-ordinated to achieve common goals. Co-ordination is the orderly arrangement of
group effort to provide unity of action in the pursuit of common purpose.
4. Clear unbroken line of Authority: It points out the scalar principle or the chain of command.
The line of authority flows from the highest executive to the lowest managerial level and
the chain of command should not be broken.
5. Responsibility: Authority should be equal to responsibility i.e., each manager should
have enough authority to accomplish the task.
6. Efficiency: The organisation structure should enable the enterprise to attain objectives
with the lowest possible cost.
7. Delegation: Decisions should be made at the lowest competent level. Authority and
responsibility should be delegated as far down in the organisation as possible.
8. Unity of Command: Each person should be accountable to a single superior. If an individual
has to report to only one supervisor there is a sense of personal responsibility to one
person for results.

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