BBG1114 Concept of Organization

Sello Hlabeli 901006823

INTRODUCTION
To protect shareholders goals, managers must constantly analyze
organizational structure. Organizational design refers to the way in which a
company functions. Good organizational design aligns the company's
processes and management functions with its overall goals. It can be defined
as decisions about such configurations as formal and informal structures,
systems and processes.

This study examines the vertical dimension of the structure, the hierarchy of
authority created to control an organizations members. Why does vertical
differentiation occur in the organizational? The hierarchy emerges when an
organization faces coordination and motivation problems due to increased
horizontal differentiation indicated by Richard (2008:17).

1) A HIERARCHY OF AUTHORITY EMERGES IN AN ORGANIZATION,

AND THE PROCESS OF VERTICAL DIFFERENTIATION.
Organizational theory involves the study of conventional social systems,
including businesses, and the relationships that form within those systems. In
terms of organizational theory, differentiation is the series of the processes
that organizations use to assign employees and assets to achieving their
goals. The process of differentiation determines the relationships between
employees and managers.

Determining the level of differentiation is a basic design. Managers must

determine the shape of the hierarchy, the number of levels, and the span of
control, the number of subordinates a manager oversees. The shape of the
hierarchy, plus the balance between centralization and decentralization,
establish the extent of vertical differentiation. Horizontal differentiation occurs
as employees and managers receive their assignments for various business
tasks.

Individual assignment 1
BSITY4S1 2017
Faculty of Information and Communication Technology
 BBG1114 Concept of Organization
Sello Hlabeli 901006823

James (2012:67) states that as an organization grows, differentiation and the

division of labor increases, which lead to coordination and motivation
problems. At this point the hierarchy emerges to coordinate and motivate
members by increasing the number of managers and organizational levels.
When an employee performance only a small part of a task, it is often difficult
to determine how much he or she actually contributes to the task, and thus it
is often difficult to evaluate each individuals performance. If employees
cooperate to achieve a goal it is often impossible to measure, evaluate, and
reward them based on their individual performance level.

An organization does two things to improve its ability to control-that is,

coordinate and motivate its members: increases number of managers it uses
to monitor, evaluate and reward employees, and increase the number of
levels in its managerial hierarchy so that the hierarchy of authority becomes
taller over time.
Managers choose between a flat hierarchy with few levels relative to company
size and a tall hierarchy with many levels relative to size.

Size and height limitation

Tall organization: an organization in which the hierarchy has many levels
relative to the size of the organization. A tall organization has more managers
to direct and control employees activities than does flat organization with the
same number of employees.
Flat organization: an organization that has few levels in its hierarchy
relative to its size. By the time an organization has grown to 1000 members it
is likely to have four to five levels in its hierarchy. At 3000 members it is likely
to have seven levels. At over 10,000 employees they typically do not have
more than nine or ten levels in their hierarchy.

Organizational differentiation Styles

Companies often use one or more styles of differentiation to establish order
and structure of their organization. A company that uses spatial differentiation
Individual assignment 2
BSITY4S1 2017
Faculty of Information and Communication Technology
 BBG1114 Concept of Organization
Sello Hlabeli 901006823

uses employees at different locations to accomplish different tasks. These

locations can include a manufacturing plant, a warehouse, a distribution
center and a retail shop. Vertical differentiation involves the installation of a
chain of command among employees and managers. Horizontal differentiation
separates workers by their assigned tasks such as accounting, sales or
computer networking.

2) THE ISSUES INVOLVED IN DESIGNING A HIERARCHY TO

COORDINATE AND MOTIVATE ORGANIZATIONAL BEHAVIOR MOST
EFFECTIVELY
BALANCING DIFFERENTIATION AND INTEGRATION

Subunit orientation - tendency to view ones role in the organization

strictly form the perspective of the time frame, goals, and interpersonal
orientations of ones subunit, horizontal differentiation has worked but hinders
cross-functional or divisional learning and coordination integration has to
promoted by promoting cooperation, coordination and communication.

Design issue is to establish a level of integration that matches the

organizational level of differentiation, but over differentiation or over
integration are extremely costly, thus managers have to find the right
balance. Differentiate to develop the core competences that give a
competitive advantage, and carefully to allow cooperation and build up the
core competences.

BALANCING CENTRALIZATION AND DECENTRALIZATION

The design challenge for managers is to decide on the correct balance

between centralization and decentralization of decision-making in an
organization. If authority is too decentralized, managers have so much
freedom that they can pursue their own functional goals and objectives at the
expense of organizational goals. The ideal situation is a balance between
centralization and decentralization of authority so that middle and lower
managers who are at the scene of the action are allowed to make important
Individual assignment 3
BSITY4S1 2017
Faculty of Information and Communication Technology
 BBG1114 Concept of Organization
Sello Hlabeli 901006823

decisions and top managers primary responsibility becomes managing long-

term strategic decision-making.

Paramasivan & Subramanian(2007:352) stipulates that, he result is a good

balance between long- term strategy making and short-term flexibility and
innovation as lower-level managers respond quickly to problems and changes
in the environment as they occur. The way managers and employees behave
in an organization is a direct result of managers decisions about how the
organization is to operate. Managers who want to discourage risk taking and
to maximize control over subordinates performance centralize authority.
Managers who want to encourage risk taking and innovation decentralize
authority.

How to balance authority is not a design decision that can be made once and
forgotten, it is made on an ongoing basis and is an essential part of the
managerial task.

BALANCING STANDARDIZATION AND MUTUAL ADJUSTMENT

The design challenge facing managers is to find a way of using rules and
norms to standardize behavior while at the same time allowing for mutual
adjustment to provide employees with the opportunity to discover new and
better ways of achieving organizational goals. Managers facing the challenge
of balancing the heed for standardization against the need for mutual
adjustment need to keep in mind that, in general, people at higher levels in
the hierarchy and in functions that perform complex, uncertain tasks rely
more on mutual adjustment than on standardization to coordinate their
actions.

For example, an organization wants its accountants to follow standard

practices in performing their tasks, but in R&D the organization wants to
encourage creative behavior that leads to innovation. Many integrating
mechanisms like taskforces and teams can increase mutual adjustment by
providing an opportunity for people to meet and work out improved ways of

Individual assignment 4
BSITY4S1 2017
Faculty of Information and Communication Technology
 BBG1114 Concept of Organization
Sello Hlabeli 901006823

doing things. Managers can also promote norms and values that emphasize
change rather than stability. For all organizational roles, however, the
appropriate balance between these two variables is one that promotes
creative and responsible employee behavior as well as organizational
effectiveness.

3) THE WAY IN WHICH THE DESIGN CHALLENGES PROVIDE

METHODS OF CONTROL THAT SUBSTITUTE FOR THE DIRECT,
PERSONAL CONTROL THAT MANAGERS PROVIDE AND AFFECT THE
DESIGN OF THE ORGANIZATIONAL HIERARCHY
Integration is the process of coordinating various tasks, functions and
divisions so that they work together not at cross-purposes. Managers often
fail to use the appropriate mechanisms. According to Gareth (2004:104)
example of integrating mechanism is direct contact, which means managers
meeting face to face to coordinate activities. Hierarchy of authority (simplest):
ranking or employees integrates by specifying who reports to whom. Direct
contact managers meet face to face to coordinate activities (important as
on same level have no authority about each other for disputes common
superior is important), and they are some roles and forces involved in the
integration mechanism namely: liaison roles, task force, and integrating role.

Michael & Eugene (2011) states that the design challenge for managers is to
decide on the correct balance between centralization and decentralization of
decision-making in an organization. If authority is too decentralized,
managers have so much freedom that they can pursue their own functional
goals and objectives at the expense of the organizations.

On the other hand, if authority is too centralized and top management makes
all-important organizational decisions, managers lower down in the hierarchy
become afraid to make new moves and lack the freedom to respond to
problems as they arise in their own groups and departments.

Individual assignment 5
BSITY4S1 2017
Faculty of Information and Communication Technology
 BBG1114 Concept of Organization
Sello Hlabeli 901006823

CONCLUSION
Hierarchy is such a prevalent form of social organization because it is
functionally adaptive and enhances a groups changes of survival and success.
We identified five ways in which hierarchy facilitates organizational success
being created a psychologically rewarding environment, motivates
performance through hierarchy-related incentives, capitalizes on the
complementary psychological effects of having versus lacking power, supports
division of labor, and as result, coordination, and reduces conflict and
enhances voluntary cooperation.

According Richard (2010:132) there are some factors considered for the
betterment of the company involves, maintaining control over the various
functions in an organization the need to create the role of the director,
manager, and an employee in respect to their tasks. For example manager
would report to director and would supervise lower level employees, this role
adds a level to the hierarchy.

Individual assignment 6
BSITY4S1 2017
Faculty of Information and Communication Technology
 BBG1114 Concept of Organization
Sello Hlabeli 901006823

REFERENCES
1. James L. Gibson, John M. Ivancevich, James H. Donnelly, Jr.
Robert Konopaske. 2012. Organisations: Behavior, Structure,
Processes. 14th edition. New York: McGraw-Hill.
2. Michael, C. Ehrhardt, & Eugene, F. Brigham., 2011. Business
Management: Theory and Practice.13th edition. USA: Cengage
Learning.
3. Paramasivan, C. & Subramanian, T., (2007) .Financial Management.
New Age International Publishers.
4. Richard, L. Daft., 2008.Organisational Theory and Design. 10th edition.
USA: Cengage Learning.
5. Richard, L. Daft.,2010. Management. 9th edition. USA: Cengage
Learning.

Individual assignment 7
BSITY4S1 2017
Faculty of Information and Communication Technology