ABFM CAIIB notes – Unit 3

Module-A

UNIT 3 – Organizing Structure

Meaning of Organizing

Organising entails assigning tasks, grouping tasks into departments, and assigning authority with adequate responsibility, as well as allocating resources within an organisation to achieve common goals.

Organising is the process of establishing or organising effective authority relationships between selected tasks, individuals, and workplaces to group work together in an efficient manner, as well as the process of separating work into sections and departments. It is one of the most crucial functions of management.

Importance of Organizing

1. Efficiency in Administration: Efficiency in administration can be achieved by collapsing jobs that are comparable and linked into a single area of expertise, which brings together formerly separate departments.
2. Resource Optimization: Organising ensures that each worker in the organisation has a role and job that are a good fit for them.
3. Gaining Expertise: Division of labour process enables the completion of the most work in the shortest amount of time while maintaining the benefit of experience.
4. Promoting Effective Communication: Organising is an essential technique of fostering collaboration and communication among the many departments that make up an organisation.
5. Creating Transparency: The tasks, activities, duties and responsibilities that are expected of workers in each position are detailed in a written document known as the job description. This contributes to the organisation’s attainment of clarity and transparency.
6. Expansion and Development: When resources are utilised to their full potential and there is an appropriate division of labour between departments and personnel, management is able to increase its strength and carry out a greater number of operations.

Steps in Organizing Process

1. Review of plans and objectives: The initial step for managers should be to review the plans, and they should continue to do so even after the plans have been modified and new goals established.
2. Determining the work activities needed to accomplish the objectives: Managers need to simply compile a list and conduct an in-depth analysis of all of the tasks and activities that must be completed to realise the organisation’s objectives.
3. Categorising and grouping essential work activities into manageable units: A manager might choose to group activities using one of these four departmentalization models: functional, geographic, product, or customer.
4. Assigning activities and delegating authority: Managers delegate particular duties and responsibilities to particular employees. In addition to this, they grant the authority (right) to each individual to carry out the responsibilities that have been given to them.
5. Designing a hierarchy of relationships: It is the responsibility of a manager to analyse the vertical (decision making) and horizontal (coordinating) relationships that exist throughout the organisation.

Organizing Principles

Organising principles represent the truths of a fundamental nature that underpin the management function. These principles are generalisations that can be applied in any situation. The activities of an organisation are categorised into a number of different units, and then authority and responsibility are assigned to each of those units in accordance with the organising principles. Organising principles serve as guidelines for the organising process. Principle of objectives

• Principle of specialization
• Principle of coordination
• Principle of authority
• Principle of responsibility
• Principle of Span of control
• Principle of balance
• Principle of continuity
• Principle of unity of direction
• Principle of unity of command
• Principle of exception
• Principle of simplicity
• Principle of efficiency
• Scalar principle

Types of Organization

1. Centralised and Decentralised Organisation

(a) Centralised Organisation: A centralised business structure is one in which key decisions, such as those on resource allocation, are made by a single individual, and that individual also provides the primary strategic direction for the company. Most small firms are run in a centralised manner, in which the business owner is responsible for making all essential choices concerning products, services, strategic direction, and other crucial areas. On the other hand, the size of an Organisation is not necessary for it to be centralised.

(b) Decentralized Organisation: Most of the time, centralised organisational structures are less responsive to locally focused environmental challenges. Additionally, it may be discouraging to employees if they are not given the opportunity to participate in the decision-making process.

2. Line and Staff Organisation

The term “line organisation” refers to the method by which authorities (such as managers) formulate objectives and instructions, which are subsequently carried out by employees and other workers. A large and complicated business may use a line-staff organisational structure in an effort to increase their level of adaptability without giving up their managerial authority.

Line and staff organisation is a modification of line organisation that is more complicated than line organisation. Line organisation is the foundation of line and staff organisation.

In accordance with this administrative organisation, special and auxiliary activities are linked to the command line by assigning staff supervisors and staff specialists attached to the line authority. This allows the activities to be managed in accordance with this administrative structure. Line executives always hold the authority of command, and the primary responsibilities of staff supervisors are to guide, advise, and counsel line executives.

3. Functional Organisation

A functional organisation is segregated within the company so that specialists can maintain their positions at the highest levels. It is an organisation that we can define as a system in which functional departments are developed to deal with the difficulties of the business at various levels. This organisation is something that we can call a functional department organisation.

The functional authority continues to be delegated only to the functional direction provided by the individual departments.

FW Taylor was the one who initially proposed the idea of a functional organisation and advocated for the placement of knowledgeable individuals in key roles.

4. Committee Organisation

A group of individuals who have come together to solve issues that are experienced by the organisation as a whole form what is known as a committee organisation. Individuals are provided with the option to discuss the difficulties they have in committee through this approach. The term “committee

organisation” refers to a group of individuals who possess various forms of knowledge and who have been properly organised to address the challenges faced by the organisation.

A committee can assist in the gathering of collective ideas and information, as well as the accurate analysis of these items, which can assist in the making of sound managerial decisions and the resolution of challenging situations.

Organisation chart

Organisation chart is a vital instrument for conveying information about the working relationships inside a company. It is a diagrammatic form that illustrates the primary functions and how those functions are related to one another, as well as the formal channels of power and the degree of authority held by each manager in charge of a related function.

According to the definition provided by George R. Terry, an organisation chart is a “graphical form” that illustrates the essential components of an organisation. These components include key functions and

the relationships that are associated with them, channels of supervision, and the degree to which each employee is in charge.

Types of Organization Chart

1)         Master Charts: This chart displays the entirety of the formal organisation structure.

2)         Supplementary Charts: Supplementary charts provide an in-depth look at the linkages, authorities, and responsibilities that exist inside a particular department or significant component of an organisation’s specified area of responsibility.

Organisation charts can also be classified into the following three types based on how organisation charts are prepared:

1)         Vertical chart or Top-down chart: Vertical chart, also known as top-down chart depicts the level of organisation as a hierarchical pyramid with a line of command that descends from the highest level to the lowest. In this chart, the position that holds the highest ranking is displayed at the top level, while the position that holds the lowest ranking is displayed at the lower level.

2)         Horizontal Chart or left to right chart: The levels of organisation are shown going from left to right in this diagram. The chain of command is broken up into horizontal sections. Reading progresses from most difficult to least difficult as one moves from left to right.

Organization Manual

There is a possibility that organisation charts will not offer all of the facts that are often wanted and required to comprehend a company. However, an organisation manual adds to the information that is provided in an organisation chart by providing more data and serving as a supplement.

A compact book that contains information about the aims of the organisation, the authority and responsibilities of various positions, as well as the processes and procedures that are to be followed is called an organisation manual. Manuals can be drafted for the entirety of an organisation or for certain divisions within that organisation.

Information such as organisational goals and policies, job descriptions of important employees, organisational procedures, methods, and rules are all included in the organisation manual.

The organisation manual can be broken up into the following four sections:

1. Policy Manual
2. Operational Manual
3. Organisational Manual
4. Rules and Regulations Manual

Organisational Culture

The values, attitudes, beliefs, and behaviours that characterise and contribute to an organisation’s one-of-a-kind social and emotional work environment are referred to as the organisation’s culture. Organisational culture is also referred to as corporate culture. The organisational culture is one of the things that is the most difficult to change because it is unique to each company and is comprised of both written and unwritten rules that have been developed over the course of time.

The underlying beliefs, assumptions, values, and modes of interaction that contribute to the one-of-a-kind social and psychological environment of an organisation are what make up what is known as the “organisational culture.” Every organisation has a company culture, regardless of whether this culture was intentionally cultivated.

Types of Organisational Culture

1. The Clan Culture: This culture has its foundation in working together. Members have a lot in common with one another and have the perception that they are part of a large family that is very involved in activities.
2. The Adhocracy Culture: This culture is characterised by a high level of energy and inventiveness. It is expected of leaders to be innovative and entrepreneurial, and employees are actively encouraged to take calculated risks. Experimentation, with an emphasis on individual ingenuity and freedom, is the primary means by which the organisation maintains its cohesion.
3. The Culture of the Market: This culture is founded upon the competitive nature of the market and the pursuit of tangible success. The focus is on achieving the goals, and the leaders are known to be strict and demanding. The organisation’s members are all working toward the same objective, which is to achieve an edge over all of their competitors. Market share and profitability are the primary factors that determine value.
4. The Hierarchy Culture: This culture is characterised by its emphasis on hierarchy and control. The atmosphere at work is very formal, and there are stringent protocols established by the institution to provide direction.

Authority

In the context of a specific job, function, or situation, the term “authority” refers to the formal, institutional, or legal power that gives the holder of that job, function, or position the ability to successfully carry out the responsibilities associated with that job, function, or position.

A subordinate’s duty is known as responsibility, and it is delegated to them by his or her superior.

Authority:

1. a) A superior has the legal right to issue commands to those under his or her supervision.
2. b) The position of the boss within the organisation is the primary factor that, in most cases, determines who has authority.
3. c) A superior can give his subordinate the authority to do something under his supervision.
4. d) The chain of command moves from superior to subordinate in a downward direction.
5. e) Authority can be defined as the legitimate power that an individual or group possesses over other individuals.

Responsibility

1. a) A subordinate is obliged to his or her superior authority to complete the tasks that have been delegated to them.
2. b) Responsibility is an outcome of the superior-subordinate relationship, in which the subordinate accepts the obligation to carry out the responsibilities that have been delegated to him.
3. c) The subordinate cannot delegate this responsibility to anyone else.
4. d) The chain of responsibility moves from the subordinate to the superior position in an ascending order.
5. e) It means making a moral commitment to complete the work that has been allotted.

Organizational Change

The term “organisational change” refers to the actions that are taken by a company or business to modify a significant aspect of their organisation. These aspects may include the company’s culture, the underlying technologies or infrastructure that it makes use of to function, or their internal procedures.

The transition of an organisation from one state to another is what is meant by the term “organisational change.” Alterations to an organisation can take on a variety of forms. Changes could be made to the organisation’s structure, strategy, rules, processes, technology, or culture as part of this process.

The process of utilising change to bring about a successful resolution is referred to as organisational change management, and it typically involves three primary steps: planning, implementation, and follow-up.

Management of Change

A methodical and systematic strategy for addressing the transition or change of an organisation’s objectives, procedures, or technologies, is referred to as “change management.” The goal of change management is to put into action tactics that will bring about change, control change, and assist individuals in becoming accustomed to change.

The evaluation of each change request in terms of its potential effect on the project is an essential part of project management, and thus plays an important part in change management.

Approaches to Change Management

The implementation and operation of change management is a process that is ongoing and requires a significant amount of time, knowledge, devotion, and effort. Because it involves the participation of people or employees of the organisation, these people may also be affected by the changes that are being made.

An organisation must first determine why it needs changes and how it will benefit from the changes before adopting one of the many effective and popular techniques or models for change management.

The following is a list of some of the most effective techniques and methods for putting change management into action:

Lewin’s Change Management Model

Kurt Lewin (1890-1947) was a social psychologist who developed force field theory, the unfreeze/change/refreeze change management model, the action research approach to research, and the group dynamics approach to training, especially in the form of T-Groups.

Three Phases of Theory:

1. Unfreeze: According to Lewin’s methodology, Making people realise why there is a need to change the existing method and how change can offer benefits is the most important thing that can be done here.
2. Change: The true transformation or change happens during this step of the process. At this point, strong leadership and assurance are essential because they not only point the process in the right path but also make it simpler for the individuals or workers who are participating in the process. The successful completion of this phase relies heavily on clear communication as well as precise scheduling.
3. Refreeze: At this stage, the workers and processes begin to re-freeze, and things start getting back to the normal speed and routine that they were previously in. The employees gradually feel more at ease and confident about the adjustments that have been implemented because of the sense of stability that has been established.

McKinsey’s 7-s Model

One of the few models that has managed to remain relevant even as others have come and gone out of style is the McKinsey 7-S Framework or Model. The Seven Stages:

1. Strategy: Develop step by step procedure
2. Structure: Division of the organisation or the structure it follows.
3. Systems: The manner in which the day-to-day activities are carried to complete a task.
4. Shared Values: An organisation bases its operations and decisions to function effectively.
5. Style: Changes in leadership and organisational structure are accepted or put into effect.
6. Staff: The workforce as a whole or individual employees, their individual capacities for work.
7. Skills: The employees possess a variety of skills in addition to their core competencies.

Kotter’s Change Management Principles

John P. Kotter, a professor at Harvard Business School,  His theory of change management is structured in eight phases, with each phase concentrating on a key principle that addresses people’s reactions to change.

1. A rising sense of urgency: To encourage people to act and move closer to achieving their goals.
2. Putting together the team: Make sure that you have the right people on the team by choosing individuals.
3. Getting the vision right: Not only considering the strategy, but also considering creativity, emotional connection, and goals.
4. Communicating: Significant emphasis on communication with individuals concerning the change itself and the necessity for it.
5. Getting things off the ground: To get things moving or to empower action, one needs to get support, remove the roadblocks, and implement feedback in a constructive way.
6. Concentrating on goals for the near term: Breaking down the larger objective into sub-goals.
7. Not giving up: It is essential to refrain from giving up during the process of change management, no matter how challenging the circumstances may appear.
8. Adapting to new circumstances: One of the most important things to do is to reinforce it and incorporate it into the culture of the workplace.

Nudge Theory

Nudge Theory, also known simply as “nudge,” is a concept that has applications in the fields of behavioural science, economics, and political theory. However, it is also applicable to the process of change management in organisations and businesses. American Legal Scholar Cass R. Sunstein and American Economist Richard H. Thaler deserve the lion’s share of the credit for developing this theory.

The essence of this principle consists of gently nudging or pushing someone, as well as encouraging and motivating them to make a change. The Nudge Theory is helpful not only in locating and comprehending existing influences, but also in providing an explanation for those influences, with the goal of either removing them entirely or modifying them to the point where they allow for the achievement of positive outcomes.

ADKAR Model

The ADKAR model or theory of change is a goal-oriented tool or model that enables various change management teams to concentrate on the steps or activities that are directly related to the goals it wants to achieve. This makes it possible for change management to be more effective. The model produces cumulative and sequential results, both in terms of the goals achieved and the results that are defined by using the model.

This is possible thanks to the use of models.

ADKAR model basically stands for:

1. Consciousness – regarding the requirement and prerequisite for change
2. A strong desire – to both be a part of and contribute to the process of change
3. Knowledge – how to effect this transformation
4. Capability – the ability to integrate change on a consistent basis
5. Reinforcement – both to maintain its current position and to add additional support later.

Bridges Transition Model

The Bridges’ transition model was developed by William Bridges, an American author, speaker, and organisational consultant. The theory was brought to the attention of the general public after it was published in the book “Managing Transitions.”

This approach, model, or theory is distinguished by the fact that it concentrates on progression rather than modification and, as a result, remains static. Although there is often only a fine line between the two, it is essential to be aware of the distinction between change and transformation. Change is something that occurs to people, even if they are unaware of it happening to them, even though on the one hand the transition is something that occurs from the inside out.

The model centres on three primary steps, which are described in the following order:

• End, give up and let go
• Neutral zone
• New beginning

Kubler-Ross Five Stage Model

This model is also known as the grief model because it discusses the various emotional states and stages that people go through when they become aware that their time on earth is ending. The Kubler-Ross model can be broken down into several distinct stages, which are as follows:

1. Denial: One may experience tremors as well as a feeling of numbness. This is since everyone is fighting the change and does not want to believe what is taking place.
2. Anger: When a person realises that the change will in fact influence them, their initial state of denial transitions into anger.
3. Bargaining: People engage in bargaining as a means of warding off the worst-case scenario and as a natural response to limit their exposure to excessive change.
4. Depression: When someone realises that their attempts at bargaining are fruitless, it can cause them to experience feelings of depression and a loss of confidence.
5. Acceptance: Acceptance of what is occurring and the beginning of resigning oneself to it can eventually occur when a person realises that being depressed or fighting change serves no purpose and that there is no point in doing either.

Conflict Management

The process of resolving conflicts through conflict management aims to achieve a balance between minimising the potential for negative outcomes and maximising the potential for positive outcomes.

The goal of conflict management is to improve learning and group outcomes, such as an organization’s efficiency or performance in a given environment.

Some Examples of Skills needed for conflict management are given below:

• Clear and effective communication- Communication skills are one of the most important skills you need to have for conflict management because they are the key to successfully resolving conflicts.
• Listening attentively
• Engaging in the practice of empathy.
• Problem solving.
• Positive attitude.
• Setting the priority levels.
• Being patient.
• Understanding others’ body language

NOTE : 

Dear CAIIB Aspirants,

These notes are a part of 2024 CAIIB Video library course of ADVANCED BUSINESS & FINANCIAL MANAGEMENT  (ABFM)  by Motivational Banker. These notes are intended to help you prepare better for your CAIIB exam.

These notes are a sample version of the full PDFs prepared by team Motivational Banker.