4.1.3 Organization as a process

Implementation of the plans requires an organization that represents the next stage of management. Organization is the process.

• definitions of rational forms of division of labor;
• distribution of work among employees, groups of employees and departments;
• management structure development;
• regulation of functions, subfunctions, works, operations;
• establishing the rights and obligations of government bodies and officials;
• recruitment and placement;

The function of an organization can be viewed in two aspects: firstly, as the process of creating a system, secondly, as the process of improving it, streamlining it.

Fig. 3. 5. Diagram of the development of a prospective plan using the program-target method

Organization of work is a function that all managers must perform regardless of their rank. However, although the meaning of this concept is to delegate rights and obligations for the division of labor horizontally and vertically, the decision on the choice of the structure of the organization as a whole is almost always made by senior management. At the same time, the task of managers ^* is to choose an organizational structure that best meets the goals and objectives of the organization, allows it to effectively interact with the external environment, productively distributes and directs the efforts of its employees.

The structure of an organization cannot remain unchanged - because it changes both its external and internal environment.

The traditional principle of building an organizational structure is a pyramid consisting of three main levels (Fig. 3. 6).

At the same time, several proposals were made in theory and practice on alternative organizational structures [].

A future firm may resemble a certain inverted pyramid - no one at the bottom, a few people in the middle and a majority at the top. That is, the organizational structure ^* looks like an inverted pyramid (Fig. 3. 7).

It is possible that there will be fewer top managers due to the consolidation of positions and fewer workers due to automation, therefore more middle managers, that is, the organizational structure ^* looks like a rhombus (Fig. 3. 8).

The organizational structure ^{* of the} future under the influence of computer technology may somewhat resemble a soccer ball resting on the top of a bell (Fig. 3. 9). Inside the soccer ball (in the upper echelons of the organization) problems of coordination, individual autonomy and collective decision-making will increase.

The organizational structure of the "soccer ball on the bell" ^* basically provided for a significant reduction in the number of middle managers based on computerization. It is possible that when organizations become larger, with a greater number of internal connections and greater complexity, they will take on different forms. International organizations will tend to be more like a wheel than a traditional pyramid.

Can gain popularity and new organizational concepts. For example, "flexible pyramid", which is capable of changing and corresponding to temporary working groups and special units. Specific types of organizational structures and methods of their construction will be discussed in the next paragraph.

At the same time, the general opinion of specialists, with whom it should be agreed that the pyramid still remains the best management structure in a formal organization. Other forms will be used to experiment or demonstrate the basics, but the real structure will basically be a pyramid. In general, it is believed that the number of people employed in management by the end of the century will increase by about 10-11%, although the percentage ratio between the echelons of the organizational structure may vary. Medium-sized organizations will need managers stronger than the largest ones. In addition, the emergence of new firms leads to an increase in demand for managers. However, it is clear that the practice of using a smaller number of managers to perform larger duties will be applied.

In any organization, along with the formal, there is an informal structure. The influence of the informal structure on the functioning of the organization is sometimes crucial. Informal relations can be of various types: kinship ties, ties based on common interests (for example, sports); just friendships based on, for example, past joint studies, affiliation of a public organization, etc. Understanding informal relationships in an organization is important because, first, informal relationships tend to cross the entire formal structure; secondly, many relationships occur outside of work, but have an impact on the work of the entire organization; and, thirdly, the informal structure, according to experts, has a positive impact on the work of the organization, although here, of course, there are certain dangers, which, in particular, were found by E. Mayo in his Hawthorne experiments. Informal structure is the human, behavioral aspect of management. Knowledge of this phenomenon will allow the manager ^{* to} understand the reasons for the failure of his plans and to use the informal structure of the organization with the greatest benefit.

When forming the organizational structure, the question of how to divide the activities of the organization’s employees horizontally, that is, determine which tasks each structural unit should solve, acquires special significance. Another important task of building an organization is to divide the work vertically.

The decision ^* on the level at which the hierarchy of the structure should make important decisions belongs to the top management of the organization. This determines the form of organizational structure and the effectiveness of management decisions.

The head must delegate to his subordinate at least such amount of authority that is necessary for the latter to solve the tasks assigned to him.

Organizations in which senior management retains most of the powers necessary to make important decisions are called centralized. Decentralized organizations are those in which important decisions are made at lower levels of government. For example, in highly decentralized organizations, middle managers have very large powers in specific areas of activity.

You can estimate the level of centralization using the following characteristics:

1. The number of decisions made at lower levels of government . The more such decisions, the greater the degree of decentralization.
2. The importance of decisions made at lower levels . In a decentralized organization, middle and lower managers can make decisions related to the formation of significant material and labor costs or a change in the direction of the organization’s activities.
3. Implications of decisions made at lower levels. It is believed that if lower and middle managers can make decisions affecting more than one function, then such an organization is apparently decentralized ^* .
4. The amount of control over the work of subordinates . In a highly decentralized organization, senior management rarely checks the daily decisions of subordinate managers, trusting their competence, and focuses only on the total results achieved.

It should be borne in mind that in the divisions of one organization the level of centralization may be different. However, with a decentralized structure, any unit cannot have absolute autonomy, meaning practically sovereignty. The central management apparatus to preserve the integrity of the organization should at least:

• approve the tasks of each unit in accordance with the overall goals of the organization;
• approve the organizational structure and candidates for key positions;
• control cash, patents and finance.

The degree of decentralization is proportional to the level of functional interconnection of the company's departments. The decentralized system allows you to unleash the initiative from below. At the same time, the effectiveness of the work of the structural units in this case is largely connected with the competence of its leaders. A centralized management system contributes to economies of scale. However, this system requires a high level of coordination and control.

There is also a mixed management structure ^{* of the} company. With this option, each unit is focused on profit, and its activities are provided with decentralized leadership, but the central management unit provides centralized coordination based on the overall policy of the company.

The delegation of authority implies a division of responsibility, which implies an obligation to carry out certain activities with full responsibility for the effectiveness of their implementation. The distribution of managerial responsibility should be fixed in the form of official positions and instructions. This includes defining the function of the manager, official duties, authority, and relationships. Centralization and decentralization have their own advantages and disadvantages. The main advantages of centralization and decentralization are as follows.

The advantages of centralization:

1. Centralization improves the control and coordination of specialized independent functions, reduces the number and scope of erroneous decisions made by less experienced managers.
2. Strong centralized management allows you to avoid a situation in which some departments of an organization grow and develop at the expense of others or the organization as a whole.
3. Centralized management makes it possible to use the experience and knowledge of the staff of the central administrative body more economically and easily.

Benefits of decentralization:

1. It is impossible to manage especially large organizations centrally due to the huge amount of information required for this and as a result of this complexity of the decision-making process.
2. Decentralization gives the right to make decisions to the leader who is closest to the problem and, therefore, knows it best.
3. Decentralization stimulates initiative and allows individuals to identify with the organization. With a decentralized approach, the largest division of the organization seems to its manager to be quite small, and he can fully understand its functioning, fully control it and feel itself as a part of this division. This manager may have the same enthusiasm in his department as an independent entrepreneur in all his business.
4. Decentralization helps prepare the young manager for higher positions, giving him the opportunity to make important decisions at the very beginning of his career. This provides an influx of talented managers to the organization. It is assumed that talented leaders are not born, but become in the process of gaining experience. Since then the time of advancement from the rank and file to high positions becomes shorter, decentralization contributes to the fact that the ambitious and energetic young manager remains in the firm and grows with it.

The drawbacks of centralization are that it closes the ways of obtaining the benefits of decentralization and vice versa. Each company is divided into a number of independently operating links. Between them there is a series of connections. They are based on linear connections, i.e. the relationship between managers and subordinates, covering the company from top to bottom. These formal relations determine the subordination of each performer and the responsibility for coordinating the work of all employees. On the linear relationship, the principle of unity of command is maintained: each employee should be responsible only to one leader, although he is obliged to follow the permanent or temporary instructions of others.

The specificity of relationships within the company determines its overall constructive structure. There are pyramid (vertical) and flat (umbrella) organizational structures. The pyramid structure requires a large number of levels of coordination relative to the number of employees. In flat structures there are less levels, therefore the number of coordinators is less in relation to an equal number of subordinates. With a vertical organization system, more communications are required up and down the guide line. Here, the main focus for achieving horizontal coordination is placed on a vertical chain of leadership. This can overload the communication channels, slow down decision making. Such a system is not very efficient. Flat structures are more effective in a situation of rapid change. They contribute to a large extent to creative decisions, provide a sensitive reaction to the situation. At the same time, when decisions are made depend on each other, a communication network is necessary that links them together.

Issues related to the definition of the norms of controllability and, consequently, the number of levels of the hierarchy are discussed in more detail in the next paragraph.

It should be noted here only that if the standards of manageability ^{* are} not kept at a sufficiently low level, the management will not be able not only to fulfill the duties of coordination, but also to control the activities, improve the skills and motivation of subordinates. Therefore, if the controllability rate becomes too high, then linear authority should be delegated and additional levels of management introduced to prevent loss of coordination.