Business Organization (Prof. Ricciardi e Prof. Broccardo)
Taylorism has some basic concepts based on:
• Hierarchical order:
o Scalar principle: there is a clear line of hierarchy
o Unitary control: every person in the company must have just one boss
o Line and staff: the line of command between various levels
o Exception principle: everything that is ordinary, that repeats, it must be done by normal
employees, not by managers, which have to deal with exceptions.
o Balancing authority and accountability: when you’re responsible of something, you must
have the authority which is proportionate to the accountability that is requested
• Labour Specialization:
o By department (marketing, production, administration) = function
o Specific Tasks
• Management activities:
o Planning, management control system, leadership, organization, employee motivation.
Motivational Theories have also some principles based on:
• Needs in hierarchical order
• Policies/tools to satisfy needs
o Factors as a salary, safety and hygiene at work
o Motivational factors (recognition of results, job satisfaction, involvement, team spirit).
Contingency Approach where:
• The organization has to be analysed and designed in strict compliance with “contingency” variables
o External environment
o Trade and cultural associations
o Institutional variables
o Business strategy
• There are no best organizational choices, there are different options: the company must be like a
tailor and adapt its organizations to company needs.
1 Clearly inspired to military principles, applied to business.
2 Were a reaction to Taylorism, this stream of studies was thought by phycologists and it was focus to people’s needs.
3 The firm’s structure must depend on circumstances, on the context.
The contingency model, states that all the features are linked together and based on the general and
specifically environment on which are based behavioural input and behavioural output.
The organizational variables, we are considering, mainly, are:
➢ Structure: criteria of labour sharing and coordination and linked choices
➢ Management systems: planning and control systems, human resources etc…
➢ Management style: behavioural models, values, ideas and principles
Lecture Two – 27 April
Processes are sets of coordinated activities. They are analysed by divide them into pieces determined by
verbs (do, put, decide etc.). Example: of eggs and cakes: manage eggs purchasing.
Counting Check Less than Put eggs
eggs number 20 in order
Written down a process means to make a job description explicit; when you work in a well-organized
company, probably they will give you a job description. Moreover, it is not necessary than all the activities
are carried out by the same person.
There are several kinds of process:
• Vertical process: that are inside one single department (e.g. marketing, so internally focused).
• Horizontal process: when it goes through different departments to the customer (so externally
focused). These are considered the most important processes because the satisfaction of the
customer is essential.
A good design of processes is essential in order not to lose value and time.
Typical roles in our BPM projects:
1. Process owner – chairman, head of division
2. Process manager – head of department
3. Process participant – clerk etc.
4. Process analyst – inhouse consultant
5. Process engineer – software developer 4
The positive effects are that a good process implement the efficiency and avoid losing time and or value.
On the other hand, there is the risk to lose ourselves in the details, to have a very rich and precise process
but a low real value (rabbit image ndr).
Moreover, determine good processes can take quite long and can be expensive: a company can hire a
consultant to know what it needs to implement its process and he will ask long meetings that maybe
manager have not time to follow.
As we’ve said, a starting point for reasoning about the organizational structure could be focus on: activities
and operational processes. They are the basis to define the social organism.
The operational processes are sets of activities:
• With a specific output and for a defined goal
• To satisfy an internal or external customer
Some examples of operational processes that exist in any organization:
• Inbound and outbound logistics
• Customer services
• Research and development
The vision based on processes helps us to properly understand how business works.
This is often true even if a company does not have ab organizational structure for processes (usually the
company has a functional organization: processes are cross-functional).
The vision based on processes helps us to have a mindset (and operational approach) which could be:
Keep in mind than thinking just for your own department and not as a global system is one of the worst
things and sources of disappointment (thinking silos).
To draw an organizational structure means solving two basic problems:
1. How to assign the work (buy eggs, put them in order etc.)
2. How to coordinate these individuals and tasks
If you conduct good process analysis, you will be able to assign and coordinate easily the various
individuals. Once we’ve established the processes we go on with the structure of the business (anatomy).
We have to make different decisions based on the structure’s different parameters, as shown here:
✓ Specialization: varying numbers and complexity of tasks of each component of the work force.
✓ Grouping: building organizational units (vertical and horizontal development).
✓ Coordination: integrating different tasks and organizational units.
✓ Decentralization: distributing decision making-power.
✓ Formalization: defining organizational rules.
✓ Unit Size: how many people must have every unit (and the company).
Keep in mind that there is not a correct way to design the structure and to take decisions on the features
above; in fact, there are several ways!
To make correct decisions for each of these parameters (and combine them harmoniously), we should
remember:-organizational variables are an important element of competitive advantage;-different
parameters must be selected according to management goals and we need to simulate the impact on
efficiency and effectiveness (and indirectly on costs and revenues);-however, depending on the
parameters, the reasoning to do this is different and "targeted" (e.g. Choosing how to group, rather than
how to coordinate).
Is it appropriate to assign few or many tasks to individual positions? Simple or complex activities?
The answer to these questions is – at least initially – almost automatic for some typical organizational
• A high-level executive
• Supervisor (medium – low level)
• Unskilled operator
Careful! The type of job can lend itself to different organizational choices, even if it conditions the degree of
specialization. For Example:
- if unskilled positions are subject to rotation, variety and new challenges demotivation and poor
performance can be avoided or reduced;
- if professional positions are subject to rules and procedures arbitrary conduct can be avoided.
What are the appropriate criteria to group the working positions / organizational units? How necessary is it
to develop the structure “vertically"(number of organizational levels)?
It is what creates teams, departments and functional areas. Usually people are grouped in small groups on
till the top of the company.
What are the appropriate criteria to group the working positions/organizational units?
How necessary is it to develop the structure “vertically” (n. of organizational levels)?
There is no single answer to these questions. In fact:
• Grouping methods are different and they work well under different conditions
• Horizontal development (flat structure) is often praised, but it does not always attract or produce
the expected results.
However, it depends on the company’s size, big companies tend to have more layers, but there is more
bureaucracy. So, the number of department and functional area define the hierarchical levels.
You can group people by several criteria:
• Input: promotes efficiency (strengthening expertise)
• Output: promotes effectiveness (especially, services for external or internal customers)
o customer base
o geographical area
Grouping choices concern different levels and different areas of the same organizational structure.
Therefore, all the bases of grouping, seen before, can coexist at some different hierarchical levels and in
different "sectors" of the organization.
The choice of the level is immediately dependent on Top Management and defines the global face of the
macro organizational structure.
Or you can group following:
• Vertical Development: The vertical development of the organizational structure is defined by the
number of hierarchical levels. Vertical development tends to grow although not necessarily in
proportion to staff numbers. Vertical development is synonymous of a hierarchical chain and
undoubtedly involves problems with:
o Cost of Hierarchy
• Horizontal Development: On the contrary, “flat” structures can always alleviate these drawbacks, if
the reduction in levels is accompanied by effective decentralization of the decision-making. But this
does not always happen. Flattening the structure provokes the problem related to the so-called:
Span of control is defined by the number of individual positions controlled by a manager and it
originates the development of the horizontal structure. The span of control can, however,
complicate al managers’ tasks and responsibilities. This depends on various factors, such as:
o Heterogeneity and complexity of the tasks
o Tasks interdependency
o Managers and subordinates’attituedes
Grouping choices can create an organizational structure with more or less potential for efficiency and
"customer “orientation. 7
Additionally, the company opts for more or less rigid hierarchy development, in order to balance with the
"Span of control" and the structure’s horizontal development.
As we can see, these are a set of closely linked choices and it is difficult to quantify the impact on costs and
It means to put together, integrate, harmonize the work of several people, belonging to the same
organizational unit or different units. The need grows with the following factors. It is very difficult because
people tend to think silos.
The main coordination tools and mechanism are:
• designing and using physical space
• defining rules and formal procedures
• defining common goals, sub-goals and programs (budget)
• implementing hierarchical supervision
• creating self-sufficient organizational units
• creating reserve resources
• creating suitable support for the hierarchy (e.g. staff units)
• strengthening horizontal relations with organizational mechanism
• Introducing evaluation systems and incentives for HR
• introducing suitable staff training and learning systems
How can we make sure the coordination tools are in line with our specific business needs?
Coordination choices are crucial for an organization to work at its best, as they are aimed at optimizing
Suitable coordination also means avoiding unnecessary activities, duplication, loss of time and – in a word –
The different coordination mechanism:
• Usually coexist in the same organization (at different levels and in different units);
• There are organization “forms” that favour certain mechanisms rather than others (e.g.
bureaucracies are based on formal rules and procedures)
• ICT is a tool which makes different mechanisms more effective. It is not a stand-alone coordination
This is the dissemination of decision-making powers within the organizational structure, in particular
between the various hierarchical levels through delegation.
An organization can have different degrees of decentralization.
An organization is defined as “decentralized” where delegating power is widely practised:
• Not on marginal issues
• At lower levels 8
While coordination is related to horizontal relations, decentralization refers to vertical relationships.
The real problem is not so much the existence or not of a hierarchy, but rather the risk of rigidity of vertical
boundaries with the following consequences:
• Slow response
• Staff dissatisfaction especially at lower levels
• Customer dissatisfaction
How can we mitigate the vertical boundaries between the organization’s different levels?
The answer to this question assumes that attenuating boundaries is a good choice, because it can capture a
company’s potential and make more timely decisions.
Generally speaking this is true, even if there are situations where a high degree of centralization is
appropriate for example:
• When a company is going through a crisis
• In case of unproductive conflicts with a company
• When personnel lack decision making power
The correct degree and type of decentralization is the goal. Therefore, central to the topic is responsibility.
We should remember to apply the relevant principle of “balance” between authority and responsibility.
The latter may concern:
1. Actions and behaviours
2. Achieved results
It means to make official in writing something, more precisely
• WHO carries out a task
• WHAT a certain employee does
• HOW tasks and processes are carried out
Being aware of variations in personnel behaviour, formalization aims to:
1. Standardize work processes, encouraging efficiency and effectiveness;
2. Protect customers and employees from arbitrary conduct.
When an organization has a very high level of formalization, it is called Bureaucratic Organization.
Formalization tools are:
• Organizational chart (who – explanations of the organs and relations between them).
• Job descriptions (what – individual’s tasks and activities).
• Procedures and flow chart (how – how activities and processes should be carried out and their ideal
How much is it appropriate to formalize the organization?
To answer to this question, we should also consider the risk that formalization involves:
• Losing sight of goals, because priority is given to complying with the rules;
• Suffocating innovation; 9
• Mistreating customers;
• Creating a demotivating climate for employees.
For these reasons, it is better to limit formalization in small companies.
How much people are needed in any specific organizational unit?
More correctly, the problem must be faced at the level of every specific process, which – as we know – is a
sub-company system consisting of “inter-organizational units”.
It also involves breaking down the organizational unit or the process’s specific “activities”.
The problem is different for:
• Standardized operational work and quantifiable in relation to the output
o E.g. direct man labour there are standard times objective No. people
• Concept or “creative” work →
o E.g. non-routine administrative, research, professional and managerial work no standard
time estimated No. people 10
Lecture Three/Four – 2 /3 May
Business Structure – Configurations:
A structure’s different parameters can be combined with each other and other organizational variables
(managerial system and management style). There are some typical forms of organization, called
configuration (not to be confused with a structure’s operational schemes).
Configuration are based on the Minztberg Model and they are a conceptual model identified as follows:
a) prevalence of one of the organization’s five components (next slide) for business success;
b) relevance of a particular system of coordination and characteristics of the management control
c) prevalence of a particular model of management and organizational culture.
So, every organization can be distinguished on the base of 5 key features:
Strategic Apex: it is the higher level of the company, the governance (which can include CEO and other
officers like CIO, COO, CMO and CFO) and Board of Directors/owners.
Operating Core: which includes production, marketing, sales and supply management/logistics.
Middle Line: it is the link between the two above, here
we have the middle level managers. So, they connect the
decisions of the strategic apex to the production of the
Technostructure: it is constituted by all those people
that do not directly produce something but tend to give
order to those people that effectively produce. They take
decision and give instructions.
Supporting Staff: it is constituted by all those people and
department that provide support to the other
departments, they help me to conduct the operating
core etc, (e.g. broken chair, computers ‘errors). These
functions are sometimes outsourced.
So, for example the basic information system is contained in the supporting staff, on the other hand the top
of it is contained in the technostructure.
In the same way, also Research and Development depends on the nature of the company: it can be in the
operating core (if it is the main operations – university) or in the technostructure (if it is not the main
feature – automotive).
Human Resources, instead, are contained in the technostructure only, because they do not just support
(like IT support) but also, they tell people what they have to do (recruiting & training).
The same thing concern audit people.
Support Staff, Middle Line and Technostructure can also be not present in a small company, because they
are not essential, they can be outsourced and if the business is very small, then the CEO can directly
conduct the Operating Core. 11
+1 anno fa
I contenuti di questa pagina costituiscono rielaborazioni personali del Publisher Friz28 di informazioni apprese con la frequenza delle lezioni di Business Organization e studio autonomo di eventuali libri di riferimento in preparazione dell'esame finale o della tesi. Non devono intendersi come materiale ufficiale dell'università Torino - Unito o del prof Broccardo Laura.
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