Charts showing such things as flows of authority, information, and funds are part of the systems approach to the study of organization by diagramming structure and function, it becomes easier to analyze or review a system in order to improve its operation. In addition, any growing organization must change to accommodate changing needs. In the charts above, the functions of personnel were carried out by the managers until they became too large for one person to handle effectively then a staff function was created, and as the job continued to grow, it was placed in the line structure.
A chart is static, however, and may not be revised often enough to keep up with changes in an organization. If it is not kept up to date, it loses its usefulness and is no longer valid as a tool for change. Moreover, a chart may not accurately reflect the relationships in an organization. It is very hard to picture day-by-day operations in a complicated large-scale modern enterprise.
To show all the organization charts of the entire Department of the Army would take more pages than there are in this book. An organization chart may itself become a barrier to more efficient structure. It may be so rigid that it cuts efficiency because new development may be forced to fit the mold rather than the mold changed to reflect new growth.
Pfiffner and Sherwood define organization as the way large numbers of people-too many to have face-to-face contact in complex tasks-relate in the conscious, systematic accomplishment of agreed-on purposes. To develop a “feel” for the inter action processes that take place or must be considered, they suggest placing a series of overlays on the formal job-task hierarchy to show the forces that modify the organizational form. Here the overlays indicate a series of relationships.
a. Sociometric: contacts within the organization between people attracted to one another. Sociometric patterns may have no relation to formal structure but they exist in every enterprise. Sociometry will be discussed in more detail.
b. Functional: relationships created by technical experts who exercise a type of authority based upon special knowledge and skills.
c. Decision: patterns that are closely related to the patterns of authority and power within the organization.
d. Power: persons with “influence” who may or may not have formal authority.
e. Communications: how information may be transmitted in an organization.
Business firms, like other enterprises, generally build from a functional organization, when it is relatively small, a business firm is usually centralized, operates under a single roof, and grants authority to few people within its structure. Centralization also exists in single departments, and in management.
Decentralization is more than the delegation of authority-it is a philosophy of organization and management involving selective dispersal and concentration of power. The decision to centralize or decentralize depends on many factors of the enterprise and its personnel. Economical size is one major factor, since the larger the firm is, the more decisions there are to be generally made. Size may also slow decision-making and limit flexibility. A business’s history may be a factor: some firms have grown from within and cling to a philosophy of centralization. In others, the character and habits of high level executives may set limits to the delegation of authority. A shortage of managerial talent may inhibit decentralization, as may lack of adequate control techniques. Decentralization can further depend on technical concerns, such as specialization and economical division of labor. Other possible factors are the nature of the market and the competitive situation, government regulations, and environmental circumstances.
Changes usually take place in the organization of a business when it grows and diversifies. A firm manufacturing one type of product and marketing it to one kind of consumer in a specific area will probably be highly centralized. Such a firm usually starts with departmentalization by functions. If the firm decides to expand sales in another area, it may be expedient to organize by territories. This is reflected in this organizational change:
Sales may increase so much in this new area that a larger manufacturing facility. is needed, and the decision to open a second factory in the new area rather than expand the original facility brings further expansion of the organization.
We could go on to expand territories, production facilities, new products, and new markets, and all these factors could bring about changes in the organization in order to facilitate decision-making at every level. Change is usually stimulated by growth, market and product considerations, international markets, production characteristics, and cost factors.
Decisions to centralize or decentralize will then depend on the abilities of management to coordinate activities for greatest efficiency. Rarely will two firms be organized in quite the same way because there is little uniformity in the way people approach and solve the same problems. Because managers direct people to make the best use of production factors, the organization cannot be examined without considering the human element. So far we have been talking about a framework within which people may be coordinated toward a goal. Let us now take a look at behavior.
