MOB - MODULE 2

Syllabus Topic

Determinants Of Organisation Design

Although many things can affect the choice of an appropriate structure for an organization,
the following five factors are the most common: Size, Life Cycle, Strategy, Environment,
and Technology.

Organizational size

The larger an organization becomes, the more complicated its structure. When an
organization is small — such as a single retail store, a two‐person consulting firm, or a
restaurant — its structure can be simple.

In reality, if the organization is very small, it may not even have a formal structure. Instead
of following an organizational chart or specified job functions, individuals simply perform
tasks based on their likes, dislikes, ability, and/or need. Rules and guidelines are not
prevalent and may exist only to provide the parameters within which organizational
members can make decisions. Small organizations are very often organic systems.

As an organization grows, however, it becomes increasingly difficult to manage without

more formal work assignments and some delegation of authority. Therefore, large
organizations develop formal structures. Tasks are highly specialized, and detailed rules and
guidelines dictate work procedures. Interorganizational communication flows primarily from
superior to subordinate, and hierarchical relationships serve as the foundation for authority,
responsibility, and control. The type of structure that develops will be one that provides the
organization with the ability to operate effectively. That's one reason larger organizations
are often mechanistic—mechanistic systems are usually designed to maximize specialization
and improve efficiency.

Organization life cycle

Organizations, like humans, tend to progress through stages known as a life cycle. Like
humans, most organizations go through the following four stages: birth, youth, midlife, and
maturity. Each stage has characteristics that have implications for the structure of the firm.

 Birth: In the birth state, a firm is just beginning. An organization in the birth stage
does not yet have a formal structure. In a young organization, there is not much
delegation of authority. The founder usually “calls the shots.”
 Youth: In this phase, the organization is trying to grow. The emphasis in this stage is
on becoming larger. The company shifts its attention from the wishes of the founder
to the wishes of the customer. The organization becomes more organic in structure
during this phase. It is during this phase that the formal structure is designed, and
some delegation of authority occurs.
  Midlife: This phase occurs when the organization has achieved a high level of
success. An organization in midlife is larger, with a more complex and increasingly
formal structure. More levels appear in the chain of command, and the founder may
have difficulty remaining in control. As the organization becomes older, it may also
become more mechanistic in structure.
 Maturity: Once a firm has reached the maturity phase, it tends to become less
innovative, less interested in expanding, and more interested in maintaining itself in
a stable, secure environment. The emphasis is on improving efficiency and
profitability. However, in an attempt to improve efficiency and profitability, the firm
often tends to become less innovative. Stale products result in sales declines and
reduced profitability. Organizations in this stage are slowly dying. However, maturity
is not an inevitable stage. Firms experiencing the decline of maturity may institute
the changes necessary to revitalize.

Although an organization may proceed sequentially through all four stages, it does not have
to. An organization may skip a phase, or it may cycle back to an earlier phase. An
organization may even try to change its position in the life cycle by changing its structure.

As the life‐cycle concept implies, a relationship exists between an organization's size and
age. As organizations age, they tend to get larger; thus, the structural changes a firm
experience as it gets larger and the changes it experiences as it progresses through the life
cycle are parallel. Therefore, the older the organization and the larger the organization, the
greater its need for more structure, more specialization of tasks, and more rules. As a result,
the older and larger the organization becomes, the greater the likelihood that it will move
from an organic structure to a mechanistic structure.

Strategy

How an organization is going to position itself in the market in terms of its product is
considered its strategy. A company may decide to be always the first on the market with the
newest and best product (differentiation strategy), or it may decide that it will produce a
product already on the market more efficiently and more cost effectively (cost ‐leadership
strategy). Each of these strategies requires a structure that helps the organization reach its
objectives. In other words, the structure must fit the strategy.

Companies that want to be the first on the market with the newest and best product
probably are organic, because organic structures permit organizations to respond quickly to
changes. Companies that elect to produce the same products more efficiently and
effectively will probably be mechanistic.

Environment

The environment is the world in which the organization operates, and includes conditions
that influence the organization such as economic, social‐cultural, legal ‐political,
technological, and natural environment conditions. Environments are often described as
either stable or dynamic.

 In a stable environment, the customers' desires are well understood and probably
will remain consistent for a relatively long time. Examples of organizations that face
relatively stable environments include manufacturers of staple items such as
detergent, cleaning supplies, and paper products.
 In a dynamic environment, the customers' desires are continuously changing—the
opposite of a stable environment. This condition is often thought of as turbulent. In
addition, the technology that a company uses while in this environment may need to
be continuously improved and updated. An example of an industry functioning in a
dynamic environment is electronics. Technology changes create competitive
pressures for all electronics industries, because as technology changes, so do the
desires of consumers.

In general, organizations that operate in stable external environments find mechanistic

structures to be advantageous. This system provides a level of efficiency that enhances the
long‐term performances of organizations that enjoy relatively stable operating
environments. In contrast, organizations that operate in volatile and frequently changing
environments are more likely to find that an organic structure provides the greatest
benefits. This structure allows the organization to respond to environment change more
proactively.

Syllabus Topic
PARAMETERS OF ORGANISATIONAL DESIGN

Various parameters of organisational design are given below :

1) STRUCTURAL CHOICES
(i) SPECIALISATION:
Specialization in organizational design refers to how tasks are divided and
allocated to individuals or groups within an organization. This parameter focuses
on the extent to which activities are divided into specific, distinct jobs. Key
aspects include:
 Division of Labour: Breaking down complex tasks into simpler, specific
activities that can be performed efficiently by specialized workers.
Job Roles and Responsibilities: Clearly defining each role and its
corresponding duties, ensuring that each employee knows their specific
function within the organization.
 Skill Utilization: Leveraging the unique skills and expertise of employees
to perform specialized tasks, leading to higher productivity and quality.
Efficiency and Productivity: Increasing efficiency by allowing employees
to focus on their specialized tasks, reducing the time and effort required
to switch between different activities.
  Training and Development: Providing specialized training programs to
enhance the specific skills needed for particular jobs, fostering expertise
and proficiency.
 Coordination and Integration: Ensuring that specialized tasks are
coordinated and integrated effectively to achieve overall organizational
goals.
Specialization is just one of the parameters of organizational design, but it's
crucial for creating a structure that maximizes efficiency and effectiveness.
(ii) GROUPING:
Grouping in organizational design involves clustering similar tasks, activities, or processes
together to enhance coordination, efficiency, and effectiveness.
Here are key parameters of grouping:
 Function-Based Grouping:
Organizing tasks by functional areas, such as marketing, finance,
production, and human resources. Each function operates as a
specialized unit.
Example: In a manufacturing firm, departments like Marketing, Finance,
HR, and Production each focus on their specialized tasks.

 Product-Based Grouping:
Grouping tasks based on specific products or services. Each product line
operates as a distinct division within the organization.
Example: A tech company like Apple has separate divisions for iPhones,
iPads, and MacBooks, each handling its product's
development, marketing, and sales.

 Geographic-Based Grouping:
Organizing operations by geographic regions. Each region or territory
manages its own activities to address local market needs.

 Customer-Based Grouping:
Clustering activities around different customer segments. Each segment
receives tailored products and services.
Example: A bank could have separate departments for retail banking,
corporate banking, and wealth management, focusing on
their specific customer needs.

 Process-Based Grouping:
Grouping tasks around specific processes or workflows. This enhances
coordination and efficiency in operations involving multiple
departments.
Example: In a hospital, grouping could be done around patient
admission, diagnosis, treatment, and discharge processes.

By effectively grouping tasks and activities, organizations can improve coordination,

streamline processes, and better align their resources with strategic goals.
(iii) CO-ORDINATION
Coordination in organizational design involves ensuring that different parts of an
organization work together efficiently and effectively to achieve common goals.
Once the total organisation is divided into differentiated subunits and levels, adequate
linkages also need to be provided through coordination.
Here are the key parameters of coordination –
 Alignment of Objectives :
Ensuring that the objectives of different departments align with the
overall goals of the organization.
Example: The sales team’s goals align with the marketing team’s
strategies. A company's marketing and sales teams work
together to achieve the target revenue.

 Communication Channels :
Establishing clear and efficient communication pathways between
different departments and levels of the organization.
Example: Regular inter-departmental meetings and updates to ensure
everyone is on the same page.

 Integration Mechanisms :
Using tools and practices that integrate various functions and
departments.
Example: A company uses an Enterprise Resource Planning (ERP)

systems that unify information across departments.

 Mutual Adjustment :
Allowing for flexibility and adaptability through informal communication
and problem-solving among employees.
Example: Cross-functional teams working together to resolve issues as
they arise.

 Hierarchy of Authority :
Establishing a clear chain of command to ensure accountability and
decision-making.
Example: A software company with clear reporting lines from
developers to project managers to executives.
(iv) STANDARDISATION AND FORMALISATION :
STANDARDISATION
Standardisation in organisational design is all about creating uniform processes and
procedures across an organisation. This ensures consistency and predictability in
operations.
It involves –
 Processes and Procedures: Standardised workflows and procedures
ensure that tasks are performed in the same way, regardless of who
does them. This can improve efficiency and reduce errors.

 Products and Services: Maintaining consistency in product quality and

service delivery is crucial. For instance, every Big Mac should taste the
same, no matter which McDonald's you visit.

 Training and Development: Employees undergo standardised training

programs to ensure they have the same knowledge and skills. This helps
in maintaining a uniform standard of performance.

 Policies and Regulations: Standardised policies and regulations create a

predictable and controlled work environment. Everyone knows what to
expect and what is expected of them.

Example : High standardisation ensures that every burger, from Mumbai to

Bengaluru, tastes the same. The procedures, recipes, and even the layout
of the kitchens are consistent across all locations.

FORMALISATION
Formalisation in organisational design refers to the extent to which rules,
procedures, and communications are written down and explicitly followed.
Some key elements –
 Written Procedures: Having clear, documented procedures for tasks
ensures everyone knows exactly how to perform their duties. This
reduces ambiguity and increases consistency.

 Job Descriptions: Detailed job descriptions help employees understand

their roles, responsibilities, and the expected outcomes. It sets clear
expectations and boundaries.

 Policies and Guidelines: Formal policies, such as attendance rules, dress

codes, and disciplinary procedures, help maintain order and
predictability in the workplace.

 Communication: Formal channels of communication, like official memos

and emails, ensure that information is disseminated uniformly and
accurately.
 Example : Detailed employee handbooks and training manuals.

(v) CENTRALISATION AND DECENTRALISATION :

CENTRALISATION
Centralisation in organisational design refers to the extent to which decision-making
authority is concentrated at the top levels of the hierarchy.
Here are the key elements:
 Decision-Making Authority: In a centralised structure, most decisions
are made by top executives or senior managers. This provides a
consistent direction and reduces the risk of conflicting decisions.

 Control: Centralisation allows for tight control over the organization’s

activities. This can be beneficial for ensuring compliance with policies
and achieving uniformity across the organization.

 Coordination: With decision-making concentrated at the top,

coordination between different departments and units becomes easier.
This helps in achieving the overall strategic goals of the organization.

 Communication Flow: In a centralised structure, information typically

flows from the top down. This ensures that directives are clearly
communicated and understood at all levels.

 Efficiency: Centralised decision-making can be more efficient in stable

environments where quick, top-level decisions are needed without
extensive consultation.

 Accountability: Having decisions made at higher levels means that

accountability and responsibility are clearly defined. Senior managers
can be held accountable for the outcomes of their decisions.

Example : Consider the Indian Railways. It is highly centralised, with most major
decisions made at the top level. This centralisation ensures a unified
direction and consistent implementation of policies across the vast
network.

Centralisation can be highly effective in maintaining control and uniformity.

DECENTRALISATION
Decentralisation in organisational design refers to the distribution of decision-
making authority to lower levels in the organizational hierarchy.
 Key Elements:

 Decision-Making Authority: In a decentralised structure, decision-

making is distributed among various levels of the organization.
Employees at lower levels have the authority to make decisions related
to their specific functions or departments.

 Empowerment: Decentralisation empowers employees by giving them

the autonomy to make decisions that affect their work. This leads to
increased motivation, engagement, and job satisfaction.

 Responsiveness: With decision-making authority spread across different

levels, the organization can respond more quickly to changes and
challenges. This agility is particularly valuable in dynamic environments.

 Innovation: By allowing decisions to be made closer to the operational

level, employees can bring in new ideas and innovative solutions. They
are more likely to experiment and find creative ways to solve problems.

 Coordination: While decentralisation allows for flexibility, it requires

effective coordination mechanisms to ensure that all parts of the
organization work towards common goals. Communication channels
and information systems play a crucial role here.

 Accountability: Decentralisation requires clear accountability.

Employees need to understand their responsibilities and the extent of
their decision-making authority to ensure that decisions are made
effectively and align with the overall strategy.

Example:
Take Reliance Industries as an example. This conglomerate operates in diverse
sectors like petrochemicals, refining, oil, and retail. To manage its vast operations,
Reliance decentralises decision-making to different business units. Each unit has the
authority to make decisions relevant to its market and operational needs, allowing
for greater responsiveness and innovation.

Decentralisation can foster a more dynamic and adaptive organizational structure,

empowering employees and enhancing overall performance.

2) PROCESS RELATED CHOICES

i) PROCESSING OF INFORMATION
 Processing of Information in organizational design is about how information is
gathered, managed, and used within an organization. Effective information
processing is crucial for making informed decisions and ensuring smooth operations.
Some Key Elements :
 Information Flow
The pathways through which information travels within the organization,
from top to bottom or across departments.
 Information Systems
CRM Systems: Customer Relationship Management systems like Salesforce
help manage interactions with current and potential customers, providing
data about sales performance and customer satisfaction.
 Communication Channels
Formal Channels: Structured communication methods such as internal
newsletters, official emails, and corporate meetings.
Informal Channels: Unstructured communication like casual conversations,
instant messaging, and social networks within the organization.
 Data Integration
Combining data from different sources to provide a comprehensive view.
Example: Integrating sales data with inventory data to manage stock levels
effectively.
 Decision Support Systems
Systems that help in making decisions by providing relevant data and
analysis.
Example: Using data analytics tools to predict market trends and plan for
strategic decisions.
 Feedback Mechanisms
Processes for gathering feedback on decisions and actions.
Example: Implementing customer feedback loops to improve product quality
and service delivery.
 Security and Privacy
Ensuring that information is protected from unauthorized access and
breaches.
Example : Implementing user access levels to ensure that only authorized
personnel can access certain data.

(ii) CONTROL:
 Control in organisational design is about ensuring that the organization's activities
and outputs align with its goals. It involves monitoring performance, setting
standards, and implementing corrective actions when necessary.
Some key elements of control:
 Establishing Standards
Setting benchmarks or targets for performance.
 Measuring Performance
Tracking and measuring actual performance against the established
standards.
Example: Using Key Performance Indicators (KPIs) like sales volume,
production
output, and customer satisfaction scores.
 Comparison
Comparing actual performance with the set standards to identify any
deviations.
 Corrective Action
Implementing actions to address any deviations from the standards.
Example: Providing additional training to the sales team if they fail to meet
their targets or adjusting the sales strategy.
 Feedback Mechanisms
Establishing systems to provide feedback on performance to employees and
management.
Example: Regular performance reviews and feedback sessions with
employees.
 Documentation and Reporting
Maintaining records of performance data and control measures.
Example: Creating detailed reports on monthly sales performance and
improvement plans.

By having a robust control system in place, the organization can ensure it stays on
track to meet its goals, maintain high standards of quality and efficiency, and
continuously improve its operations.

(iii) INDIVIDUAL Vs TEAM PERFORMANCE

The choice between focussing on individual performance or team performance
needs to be made.
Whether individual performance or team performance is desired, it must be clearly
seen in the goals that are set, the way the performance is going to be measured, and
the way the performance and results are rewarded.
The design and flow of work, distribution of responsibility, and sharing of authority
show be clearly documented if team performance is preferred.
Syllabus Topic
ORGANISATION AND ENVIRONMENT

Internal Environment

The environment that has a direct influence on the business is termed as the internal environment.
The internal factors which influence the business environment are controllable in nature. Hence, the
factors like physical facilities and organizational and functional means can be revised and
transformed as per the requirements of the environment.

The strategy and decisions of the internal organization are determined by the following key internal
factors:

1) Value System: The selection of business, its mission, vision, objectives, business policies, and
practices are all elements of the value system in an organization. The founders and
management team of a business enterprise play an important role in decision-making of the
value system.

2) Mission and Vision and Objectives: Vision is a broader view to define the future prospects of
the business. Vision aids in meeting the objectives of the business organization. Mission is the
short-term action through which objectives are attained.

3) Management Structure and Nature: Generally, business decisions are influenced by the
organizational structure. This structure comprises the board of directors, managers,
executives, etc. The number of members in an organizational structure determines the
duration of decision-making.

4) Internal Power Relationships: The coordination between the levels of the organizational
structure is very important. The three levels, i.e., top, middle, and bottom levels must have
mutual relationships among them. This helps the organization to function smoothly.

5) Human Resource: Human resource is the key component of any organization. They define the
strengths and weaknesses of an organization. The essential requirements of human resources
include skills, quality, commitment, sincerity, right attitude, etc. The level of employee
participation and initiative varies from organization to organization and is determined by the
organizational culture.

6) Company Image and Brand Equity:

The internal environment of the enterprise is affected by the image that it carries in the
outside market. The image of the organization helps in raising capital, mergers, and other
alliances, etc. Likewise, brand equity also influences the organization.
7) Miscellaneous Factors:
Various other factors that determine the success or failure of a business are as follows:
(i) Physical Assets and Facilities: The availability of assets and facilities is very
important for the smooth functioning of the business. The facilities influencing the
competitiveness of the firm include technology, production, labour, etc.

(ii) Research and Development: The capability to innovate and compete is determined
by the R&D department of an organization. However, although it is one of the
external factors, it also influences the internal environment of the business.

(iii)Marketing Resources: The marketing effectiveness of an organization is directly

influenced by resources such as the marketing department of the company,
marketing personnel, distribution channels, and brand equity.

(iv) Financial Factors: Finance is the lifeblood of an organization. Proper allocation of

financial resources affects business performance, business policies, and strategies.
Some important factors influencing the internal environment are financial policies,
financial capital, etc.

EXTERNAL ENVIRONMENT

1) Micro Environment:

Micro environment refers to factors which directly influence the performance of the company. The
micro factors include suppliers, competitors, marketing intermediaries, consumers, and public. The
micro environmental factors are more closely related to the company in contrast to the macro
factors. The micro factors affect different industries in different ways.

For example, the micro environment of a restaurant can be its customers, suppliers of raw material,
human resources, etc.

The success or failure of a firm depends on how effectively it deals with its micro elements. Some
of them are:

i) Customers: Customer is the most important element of the business enterprise. The main
aim of any business is to attract and retain its customers. This helps the business to attain
long-term survival and profitability. Therefore, to increase the level of loyal customers,
business enterprise should carefully observe the needs and wants of the customers and fulfill
them effectively. The business enterprises must also analyse the changing tastes and
preferences of the customers and make changes in its product and services accordingly. No
business can neglect the customer's interest, as this may adversely affect the company.
Hence, customer is the central focus of the business environment.
 ii) Suppliers: Suppliers are those who supply raw materials, components and machines to the
business enterprises. The suppliers are an important micro factor in the business
environment. They should be trustworthy and cordial with business enterprise. This will help
the enterprise to attain the customer expectations and companies will become free from the
burden of keeping heavy stocks.

iii) Marketing Intermediaries: Intermediaries are those who act as a mediator between the
manufacturer and final consumer. The number of marketing intermediaries varies according
to the size and type of distribution network. Marketing intermediaries are beneficial to the
organization only when there is a proper coordination between channels without any hurdle.

iv) Competitors: The organizations which manufacture similar products and try to conquer
over the market share are termed as competitors. To earn more profit and stay competitive,
the company needs to monitor the competitor's activities and then prepare its future plan.
This helps the company to remain beyond its competitors in the long run.

2) Macro Environment:

Macro environment prevails outside the business enterprise. These are the external factors which
are uncontrollable and affect the business operations.

Depending on macro factors, many changes need to be made in the areas like production,
marketing, management, etc.

Some of the key macro environmental factors are listed as follows:

i) Political Environment: The factors such as government, political institutions, policies and
legislations, public and private stakeholders influence the business environment. The
stability & success of the business depends on the prevailing political environment.
Sometimes, the changes made in the government policies (e.g. tax policies, government
contracts, etc.) & regulations (e.g. safety regulations) affect the smooth functioning of the
business.

ii) Economic Environment: The economic conditions of a country may affect the business
decisions and plans of an organization. The factors such as economic growth rate,
unemployment ratio, foreign exchange rates, inflation and deflation conditions can help or
create problems in the management of the business environment.

iii) Social Environment: Social environment comprises of the customs and values of the
society from where the business originates. The business enterprises, at large, are
influenced by the factors such as the changing tastes and preferences of customers,
standard of living and educational level.

iv) Technological Environment: It refers to the changes in the business operations such as
use of modern equipment, upgraded technologies, improved production techniques, etc.
These changes must be monitored by the organization to remain competitive in the market.
The technological changes help the business enterprise to provide standardized and quality
products to the customers.
 v) Environmental Environment: In the short and long term, concerns related to the
environmental changes are crucial for business. The environmental changes like natural
disasters can affect the overall business operations like production and supply, damage of
company's assets, etc.

vi) Legal Environment: Any business transaction has to follow certain laws and legislations.
An organization cannot ignore the legal factors, as this may change the way it operates. A
proper legal environment is essential for all business organizations.

vii) Demographic Environment: The demographic changes have a huge impact on the
business decisions. The demographics differ from place to place. These changes can be in the
size of population, age, income levels, etc. Before formulating any strategy for present and
future, the business must consider these demographic factors.

Syllabus Topic
ORGANISATIONAL STRATEGY

Strategy works as a blueprint of an organisation that defines its vision, mission, and also helps in
determining the future course of action.

Strategy helps an organisation to minimise the strengths of competitors by maximising its own
strengths.

Strategy is formulated to achieve current goals of an enterprise by optimum allocation and

utilisation of internal resources and by collaborating different organisational pursuits.

Strategy tries to achieve synergy and balance between objectives, resources, and concepts to
maximise the possibility of success and fruitful results.

strategy refers to determining the fundamental long-term organisational goals and at the same time
developing plans, acquiring, allocating, and deploying resources in order to achieve those goals.

The purpose of formulating strategy is to bring consistency and alignment in the activities of an
organisation, which can be accomplished by various endeavours, methods, and resources.

The aggregate of all the actions intended to be carried out by an organisation for attaining its long-
term objectives is known as an organisational strategy.

It takes at least a year and the collaboration of every level of the organisation to accomplish a
strategic plan. Therefore, large organisational strategies are developed by the top-level management
whereas plans and goals are adopted by the lower and middle levels of management so that the
overall strategy can be realised gradually.
Basically, an organisational strategy is a proposal or plan whereby an organisation allots resources,
such as material, labour, machinery, etc., for assisting various business activities like marketing,
production, inventory, etc.

According to George A. Steiner, "Strategy means deciding the basic mission of a company, the
objectives which it seeks to achieve, and the policies governing the use of resources at the
disposal of the firm to achieve its objectives."

LEVELS OF STRATEGY

Organisational Strategies are divided into 3 distinct levels :

1. Corporate level strategy.

2. Business level strategy.
3. Functional level strategy.

1. Corporate Level Strategy

Corporate level strategies or corporate strategies are the plans of top management developed for
supervising the overall functioning of the enterprise and achieving the expected level of
performance. These strategies outline the organisational activities and objectives in various areas of
an organisation like divisions, product lines, technologies, consumers and their needs, etc. Corporate
strategies guide an organisation to become what it wants to be in order to maximise the
performance levels.
For example: Since the effort of Nokia to launch its own operating system failed, in the year 2011
Microsoft and Nokia formed an alliance in which Nokia agreed to produce smartphones with the
Windows operating system. With this alliance, Microsoft was able to access the market of one of the
largest cell-phone manufacturers.

2. Business Level Strategy

Business level strategies are also called business strategies or Strategic Business Unit (SBU) level
strategies. A Strategic Business Unit (SBU) is based on the idea of recognising the separate market
segments catered by the company. Business strategies are formulated differently for each segment
due to the differences in their environmental conditions. The business level strategies are
formulated to satisfy the needs of the customers of different segments and also to provide value to
them. Hence fulfilling the demands of customers belonging to different segments helps the
organisation in increasing and sustaining its competitive advantage.
 3. Functional Level Strategy

Functional level denotes the operating division levels and departments in an organisation such as
marketing, finance, human resources, R&D, etc. Various strategic decisions at functional levels are
associated with business practices and the value chain. The functional level strategies are focused on
expanding and synchronising the resources for implementing the business level strategies in an
efficient manner.
The functional level of an organisation provides input to the higher level strategies such as business
level and corporate level strategies and converts them into action plans for various departments.
These plans are needed to be carried out for the strategy to be successful. Higher level strategies
depend on the functional level for information regarding resources and capabilities on the basis of
which strategies at business and corporate level are formulated.
For example: Marketing strategy can be broken into various functional level strategies such as
pricing strategies, distribution strategies, promotion strategies, sales strategies, etc.

FORMULATION OF ORGANISATIONAL STRATEGY

The steps in the formulation of organisational strategy are described below:

1. Organisational Mission and Objectives:

The first and foremost elements required for strategy formulation are organisational mission and
objectives. Mission denotes the unique purpose (reason for existence) whereas the objective is what
an organisation tries to accomplish. A clear mission should be developed which illustrates the basic
concept behind the formation of the organisation. Generally, it is understood that a strategy is a way
of accomplishing organisational objectives. Objectives denote the position of the organisation where
it wants to reach, whereas strategy describes the method and procedure to reach there. Strategy
decides the organisational objectives as well as the method to be used to achieve those pre-
determined objectives. Therefore, strategy is a comprehensive concept which explores the method
of utilising the resources so as to attain the objectives. Both these elements (mission and objectives)
together provide necessary guidance for other essentials of the strategy.

2. Environmental Analysis:

The next important element of strategy formulation is environmental analysis. Since strategy acts as
a connecting channel between the organisation and its environment, the strategists must analyse
the concerned environment. The competitive standing of the organisation is also analysed in this
stage. An assessment of the competitive standing of the firm is necessary both in terms of quality
and quantity of the firm's current product line. The main aim of such an assessment is to ensure that
all the elements crucial to attain success over the competition in the marketplace can be identified.
The environmental analysis process comprises gathering appropriate information from the external
environment and analysing this information so as to determine the positive as well as negative
points (opportunities and threats) attached to the environment which are crucial for the
organisation. Forecasting, spying, interviewing individuals or groups, and studying different
publications may assist in collecting environment-related information. Continuous observation of the
environment results in better environmental analysis.
3. Corporate Analysis:

Along with environmental analysis, corporate analysis is also an important element of strategy
formulation. While environmental analysis explores the factors present outside the organisation,
corporate analysis focuses on exploring internal ones. Both these analyses are jointly known as
SWOT analysis, i.e., determining the strengths, weaknesses, opportunities and threats concerning
the organisation. Identifying environmental opportunities and threats is not the end, but exploring
organisational strengths and weaknesses is also crucial in order to exploit available opportunities
and remove threats.
It also highlights the potential business areas for the organisation. Thus, corporate analysis is a
sequential process that first identifies crucial factors for the current as well as future business of the
organisation and then determines whether they affect it positively or negatively. In case they affect
the business positively they are denoted as strengths, otherwise called as weaknesses.

4. Identification of Strategy Alternatives:

Both corporate and environmental analyses, if combined together, can provide several alternatives
for a strategy. Generally, a huge number of alternatives are offered through this practice. As soon as
the internal as well as external aspects of an organisation are defined, it focuses on determining the
strategic alternatives that can be utilised. Stabilising, expanding, retrenching or even combining the
different organisational operations (concerning its markets, functions or products) are the common
strategy alternatives to choose.

5. Selection of Best Alternative:

Selection of best alternatives depends on various parameters. The essential parameters that are
analysed to select the best alternative include the structure of organisational objectives, ETOP
(Environmental Threat and Opportunity Profile), strategy itself and strategic advantage profile.

6. Choice of Strategy:

The final component of any strategy formulation process is to select the best strategy for the
organisation. After evaluating strategy alternatives in the previous step in accordance with
organisational strengths, limitations, threats, opportunities as well as organisational long-term
objectives, the best strategy is chosen. This choice of strategy is affected by a variety of factors like
the nature of internal and external associations, earlier strategies adopted, power lobbying, risk-
handling attitude of managers, etc. The decision-maker selects the strategy as per his/her attitude,
beliefs and personal values.
Syllabus Topic
ORGANISATION AND TECHNOLOGY

The nature and type of technology being adopted by the organisations will have an impact on the
design of an organisation, including its structure.

Technology influences the task structure, which in turn will determine the roles, relationships across
functions, decision-making, coordination, and control mechanisms.

The degree of routineness of technology will differ depending on whether the tasks to be carried out
are standardised or customised.

Routine technologies are appropriate for standardised tasks and will require a departmentalised
structure with centralised decision-making and control.

Whereas, in the case of customised tasks, the degree of routineness has to be low, thus
necessitating a decentralised structure.

IMPACT OF INFORMATION TECHNOLOGY ON ORGANISATION

Some implications of advances in IT for organisations are :

1. Smaller Organisations:
Some internet-based businesses exist almost entirely in cyberspace; there is no formal
organisation in terms of a building with offices, desks, and so forth. One or a few people may
maintain the site from their homes or a rented workspace. Even for traditional businesses,
new IT enables the organisation to do more work with fewer people. For example, in many
insurance companies, customers can buy insurance without ever speaking to an agent or
sales representative. In addition, ERP and other IT systems automatically handle many
administrative duties, reducing the need for clerical staff.

2. Decentralised Organisational Structures:

IT enables organisations to reduce layers of management and decentralise decision-making.
Information that may have previously been available only to top managers at headquarters
can be quickly and easily shared throughout the organisation, even across great
geographical distances. Managers in varied business divisions or offices have the information
they need to make important decisions quickly rather than waiting for decisions from
headquarters. Technologies that enable people to meet and coordinate online can facilitate
communication and decision-making among distributed, autonomous groups of workers. In
addition, technology allows for telecommuting, whereby individual workers can perform
work that was once done in the office from their computers at home or other remote
locations. People and groups no longer have to be located under one roof to collaborate and
share information.
 3. Improved Horizontal Coordination:
Perhaps one of the greatest outcomes of IT is its potential to improve coordination and
communication within the firm. Intranets and other networks can connect people even
when their offices, factories, or stores are scattered around the world. Managers use the
intranet to communicate with one another and to stay aware of organisational activities and
outcomes.

4. Improved Interorganisational Relationships:

IT can also improve horizontal coordination and collaboration with external parties such as
suppliers, customers, and partners. Suppliers are becoming closer partners, tied
electronically to the organisation for orders, invoices, and payments. In addition, IT has
increased the power of consumers by giving them electronic access to a wealth of
information from thousands of companies just by clicking a mouse.

5. Enhanced Network Structures: The high level of interorganisational collaboration needed in

network organisation structures would not be possible without the use of advanced IT. In
the business world, these are also sometimes called modular structures or virtual
organisations. Outsourcing has become a major trend, thanks to computer technology that
can tie companies together into a seamless information flow.

Syllabus Topic
ORGANISATIONAL STRUCTURE

TYPES OF ORGANISATIONAL STRUCTURE

1. Line Organisation/Military Organisation:

The kind of organisation in which the managers have direct control over their relevant subordinates
through line of hierarchy is known as "line organisation" or "military organisation". The chain of
authority flows from the top-most level and reaches the lower-most level passing through a series of
management designations. There is a clear awareness among the personnel about the immediate
superiors who are entitled to give commands.

 It is the oldest and simplest method of organization.

 It is also called scalar type organization.
 Here the authority flows from top to bottom in an organization.
 The line of command is carried out from top to bottom. This is the reason for calling
this organization as scalar organization which means scalar chain of command is a
part of this type of organization.
 This organization is a vertical structure where one person delegates authority to his
subordinate and who in turn delegates to his subordinate.
MERITS OF LINE ORGANIZATION

 SIMPLEST: Line organization is simple to establish and can be easily understood by

the employees.
 UNITY OF COMMAND: In line organization, every person is under the command of
one boss only. This type of organization is in accordance with the principle of scalar
chain.
 FLEXIBILITY: There is coordination between the topmost authority and bottom line
authority. Since the authority relationships are clear, line officials are independent
and flexibly take decisions.
 QUICK DECISION: Due to the factors of fixed responsibility and unity of command,
the officials can take prompt decisions.
 EFFECTIVE COMMUNICATION: In line organization, there is a direct link between the
superior and his subordinate; the reactions of subordinates also reach top
management in a short span of time.

DEMERITS OF LINE ORGANIZATION

 EXCESS WORK: Here the managers have to take numerous decisions and supervise
the work of subordinates under them which makes them overloaded with
responsibilities.
 LACK OF SPECIALIZATION: A line organization flows in a scalar chain from top to
bottom and there is no scope for specialized functions.
 IMPROPER COMMUNICATION: The authority for taking all decisions lies with line
officers, which makes them autocratic and they start decision-making without
consulting their subordinates, which causes improper communication.
 LACK OF INITIATIVE: In line organization, final decision-making is done by the top
management so the lower-level officials do not suggest new things as they feel that
their suggestions can be neglected by their superiors; so they avoid taking any type
of initiative.
 AUTHORITY LEADERSHIP: The line officials have a tendency to misuse their authority
positions. This leads to autocratic leadership and monopoly in the concern.
2. Line and Staff Organisation:

 Line and staff organization is a modification of line organization, although it is more

complex than the line organization.
 Here the line executives and staff specialists are combined together.
 The line executives are the doers, whereas the staff refers to experts and they act
as expert advisors.

MERITS OF LINE AND STAFF ORGANIZATION

 CLEAR AREA OF WORK: The planning and investigation are done by the staff specialist, while line
officers concentrate on the execution of plans.
 BENEFIT OF SPECIALIZATION: Line and staff, through the division of the whole concern into two types
of authority, divide the enterprise into parts and functional areas. This way, every officer or official
can concentrate on their own area.
 BETTER CO-ORDINATION: Line and staff organization, through specialization, is able to provide better
decision-making and concentration remains in few hands.
 TRAINING: Due to the presence of staff specialists and their expert advice, line executives can
concentrate on decision-making.
 BETTER DECISION MAKING: In the line and staff authority, all the officials have got independence to
make decisions.
DEMERITS OF LINE AND STAFF ORGANIZATION
 LACK OF UNDERSTANDING: In this organization, there are two authorities flowing at the same time,
causing confusion among workers about who their commanding authority is.
 LACK OF SOUND ADVICE: At times, the staff specialists may give wrong decisions that the line
executives have to consider.
 LINE AND STAFF CONFLICTS: Disagreements between line and staff can cause conflicts. Poor human
relations, overlapping authority and responsibility, and misuse of staff personnel by top management
are reasons for resentment between line and staff personnel.
 COSTLY: Maintaining high remuneration for staff specialists can be costly for an organization with
limited finances.
 ASSUMPTION OF AUTHORITY: While the power of the organization lies with the line officials, the staff
may dislike this as they consider themselves to be the ones doing more mental work.

FUNCTION ORGANIZATION STRUCTURE

 A functional structure divides the organization into departments based on common

job functions.
 Each department is headed by a functional manager and employees are classified
according to their function in this structure.
 The departmental head helps the organization control the quality and uniformity of
their performance.
 Here the system is vertical, communication flows through the department heads
from and to the top management.
 The functional organization structure is suitable for small industries.
ADVANTAGES OF FUNCTIONAL ORGANIZATION

 SPECIALIZATION: The functional organizational structure helps in achieving

specialization of work. Every functional manager is an expert in his area and can help
the subordinate to perform better.
 OPERATIONAL CLARITY: Segregating the workforce according to function clarifies
organizational responsibility and allocation of tasks. This helps in the elimination of
duplicate work that wastes time and effort, and makes it easier for management to
direct work to appropriate employees.
 BETTER CONTROL: The expert knowledge of the functional managers facilitates
better control and supervision in the enterprise.
 MORE EFFICIENCY: It creates a high degree of efficiency as the groups of employees
and the functional heads perform their limited and specialized operations which
brings expertise in performance and reduction in costs.
 MANAGERIAL DEVELOPMENT: A functional manager has expertise in one function
only, this facilitates better managerial development in functional organizational
structure.

DISADVANTAGES OF FUNCTIONAL ORGANIZATIONAL

 LIMITED PERSPECTIVE: A functional manager tends to create boundaries around

himself and thinks only in terms of his own department rather than the whole
enterprise.
 DELAY IN DECISION MAKING: There is a general lack of coordination among the
functional executives which causes delays in decision making.
 COMPLEXITY: The operation of the functional organizational structure is complicated
and is not easily understood due to its various technicalities. Workers get confused
by a number of instructions from different functional heads.
 MONOTONOUS: Employees do not learn any new skills and their roles don’t change
often.
 POOR COMMUNICATION: Communication is weak among the departments. This
causes poor inter-department coordination, affecting flexibility and innovation.
DIVISIONAL ORGANIZATION STRUCTURE

 Divisional organization structure is followed by big companies which manufacture

more than one product or have operations in a wide geographical area.
 In this organizational structure, the whole organization is divided on the basis of
different factors.
 These divisions might be based on a product or service, a geographical location, or a
customer group, etc. Each unit is equipped with its own resources to function
independently.

TYPES OF DIVISIONAL STRUCTURES

 PRODUCT ORGANIZATION STRUCTURE - Here, the organization structure is based

on the product line present in the organization. For example, an organization dealing
in various product lines like cosmetics, food products, and electronic goods. For
every product line, it can have different departments like production, finance,
marketing, and HR.
 GEOGRAPHICAL ORGANIZATION STRUCTURE - Here, the organization structure is
based on the territory or geography in which the organization does business, such as
the East Coast, Western Zone, or perhaps by regions like the US, Europe, India, and
Asia-Pacific.
 PROCESS ORGANIZATION STRUCTURE - The process structure divides the
organization around different processes.
ADVANTAGES OF DIVISION ORGANIZATION STRUCTURE

 ACCOUNTABILITY: This approach makes it much easier to assign responsibility for

actions. A division is run by its own management group, which looks out for the best
interests of the division.
 CULTURE: This structure helps to create a culture at the divisional level that meets
the needs of the local market. For example, a retail division could have a culture
specifically designed to increase the level of service to customers.
 LOCAL DECISIONS: The divisional structure allows decision-making to be shifted
downward in the organization, which may improve the company's ability to respond
to local market conditions.
 MULTIPLE OFFERINGS: When a company has a large number of product offerings or
different markets, and they are not similar, it makes more sense to adopt the
divisional structure.

DISADVANTAGES OF DIVISION ORGANIZATION STRUCTURE

 COST: When a complete set of functions is set within each division, there are likely to
be more employees in total which adds more overhead cost to the business.
 INEFFICIENCIES: When there are a number of functional areas spread among many
divisions, no one functional area will be as efficient as would have been the case with
one central organization for each function.
 RIVALRIES: The various divisions may have no incentive to work together and may
even work at cross-purposes, as some managers undercut the actions of other
divisions in order to gain localized advantages.
 STRATEGIC FOCUS: Each division will tend to have its own strategic direction, which
may differ from the strategic direction of the company as a whole.
PROJECT ORGANIZATION STRUCTURE

In project organisation, a project structure is created as a separate unit or division within a

permanent functional structure.

Here, a team of specialist workers is drawn from the functional structure of the organisation
to work on a project.

The project team functions under the leadership of a project manager. During the
continuance of the project, the functional managers give up their authority over
subordinates in favour of the project manager.

When the project is over, the project team is disbanded and team personnel go back to their
respective functional departments.

The size of the project team varies from one project to another. Projects require quick
decisions and actions, and the flow of information is lateral and not vertical.
ADVANTAGES OF PROJECT ORGANIZATION

 It provides a logical approach to a large project with a definite beginning, end, and
clearly defined result.
 Team members report directly to project managers; the line of authority is clear.
This reduces conflict and decision-making is faster and more flexible.
 A single reporting system helps shorten communication lines, creating effective
communication within the team.
 Communication is fast because of a single authority. This helps solve stakeholders'
concerns quickly.
 Being the only authority, project managers can make quick decisions and complete
the project faster.
 Team members are very flexible due to working on different projects.

DISADVANTAGES OF PROJECT ORGANIZATION

 There is an organizational uncertainty because the project manager has to deal with
professionals drawn from different departments.
 Organizational uncertainties may lead to interdepartmental conflicts.
 There is a considerable fear among personnel that the completion of the project may
result in loss of job. This feeling of insecurity may create considerable worry about
career progress.
 Projects always have deadlines and tight schedules, which can make the work
environment stressful.
 The cost of employees and equipment can be higher because they are being hired
for a shorter period.
 The employees may not be highly skilled in a particular area because they work on so
many different projects. This may affect the quality of the project.
MATRIX ORGANIZATION STRUCTURE

 Matrix organization or grid organization is a hybrid structure. It is suitable for large

and complex organizations which require a flexible and technically oriented
structure.
 This structure is a combination of two complementary structures: functional
departmentalization with a pure project structure. Here, an employee will have two
reporting authorities – their functional (departmental) manager and their project
manager.
 Functional departments create a vertical chain of command, while the project team
forms the horizontal lines, thereby forming a matrix.
 In this structure, a group of employees from various departments comes together to
form another group assigned to a particular project. They are headed by a project
manager who directly reports to the CEO. At the same time, these employees also
report to the departmental managers or department heads.
 The functional structure is a permanent feature of the matrix organization. Project
departments are created whenever specific projects require a high degree of
technical skill and other resources for a temporary period.
ADVANTAGES OF MATRIX ORGANIZATION

1. It helps to focus attention, talent, and resources on a single project individually,

which facilitates better planning and control.
2. It is more flexible than the traditional functional structures.
3. It provides an environment in which professionals can test their competence and
make maximum contributions.
4. It provides motivation to the project staff as they can focus directly on the
completion of a particular project.

DISADVANTAGES OF MATRIX ORGANIZATION

1. It violates the principle of unity of command. Each employee has two superiors - one
functional superior and one project superior.
2. The scalar principle is also violated as there is no fixed hierarchy.
3. Conflict may arise because of the heterogeneity of team members.
4. Matrix organization is expensive to maintain because of dual management.
5. It may also lead to unhealthy competition between the managers when it comes to
choosing of employees.
Syllabus Topic
ORGANISATIONAL DECISION MAKING

CONCEPT OF ORGANISATIONAL DECISION MAKING

Organisational decision-making is formally defined as the process of identifying and solving
problems. It always involves making a choice to alter some existing condition.
It is choosing one course of action in preference to others.
Organisational decision-making is not a single, self-contained event; it is a complex process that
extends over some period of time.
A decision-making is the process of reducing the gap between the existing situation and the
desired situation through solving problems and making use of opportunities.
In organisations, decisions are required to be taken to either solve problems or achieve certain
results.
Decision-making helps the managers in resolving problems and exploiting business opportunities
by minimising the gap between desired and actual situations.
A decision is an end result that is achieved by analysing the situation, formulating alternative
solutions, and selecting the best one for achieving the desired results.

TYPES OF ORGANISATIONAL DECISIONS

1. PROGRAMMED AND NON PROGRAMMED DECISIONS :
(i) PROGRAMMED DECISIONS :
These decisions are taken while formulating the policies of the organisation and are
repetitive in nature. The problems and choices related to programmed decisions are
predictable, and hence, responses or outcomes are also as per the plans. There are
templates in the form of standard operating procedures, rules, etc., which lay down
the decisions that need to be taken in a particular situation, e.g., employee
orientation and verification procedures. These decisions have low impact and are
taken by low-level management without the involvement of the top-level
management.
(ii) NON PROGRAMMED DECISIONS :
Non-programmed decisions are unique and unpredictable. They are taken according
to particular problems or situations. They are based on logical thinking with sound
judgement and are hence normally taken by top-level managers, e.g., decisions
related to business expansion, adopting new technology, launching new products,
etc.

2. MAJOR AND MINOR DECISIONS:

Decisions can also be major or minor. Major decisions are those that carry a high risk or
involve a heavy cost, e.g., opening a new factory. Decisions are termed as minor when they
involve low risk or low cost, e.g., replenishment of cleaning supplies in the organisation. They
are generally taken by low-level management.

3. ROUTINE AND STRATEGIC DECISIONS :

Routine decisions are those common day-to-day decisions that do not require any great
evaluation or deliberation. Being low on risk, they also do not involve any substantial cost.
They do not require a lot of time and are monotonous in nature. Strategic decisions are also
known as basic decisions and involve high risk and cost. They are related to the formulation
and implementation of strategies and policies. They are non-monotonous in nature and are
taken keeping in mind a particular problem or situation. Such vital decisions are in the hands
of the top management and require higher-level expertise, knowledge, evaluation, and
experience. For example, the decision taken by Reliance Industries to set up Asia's largest
Refinery in Jamnagar was one such strategic decision.

4. POLICY AND OPERATIVE DECISIONS:

The primary task of the top management is to set goals and formulate policies. Policy
decisions give direction to the organisation and have great significance in the long-term
functioning of the organisation. Every large corporation has a 'policy manual' that acts as a
base for the operative decisions.
Operative decisions are taken within the ambit of the policy decisions. They relate to daily
operations and are generally taken by the executive and supervisory level management as
they are responsible for the day-to-day functioning of the business.

5. ORGANISATIONAL AND PERSONAL DECISIONS:

 Organisational decisions relate to the achievement of organisational goals, whereas personal
decisions are taken to achieve personal goals. Organisational decisions are taken by middle-
level managers based on organisational policies. These decisions can be delegated to the
employees of the organisation. Personal decisions cannot be delegated and are taken by the
managerial personnel on an individual level. Personal decisions vary from person to person.

6. INDIVIDUAL AND GROUP DECISIONS:

As the name implies, individual decisions are taken by individuals based on rules, procedures,
policies, and standard operating procedures of the organisation. These low-risk and low-cost
decisions can be easily evaluated by the decision-maker. Decisions that require due
deliberation and diligence are known as group decisions. They are generally taken by Board
members or a specially formulated committee. They are extremely significant for the success
of the organisation and require willing involvement of the group members.

7. LONG-TERM, DEPARTMENTAL AND NON-ECONOMIC DECISIONS :

Decisions that are high in risk and can impact the organisation in the long run are known as
long-term decisions. Departmental decisions are related to a particular department and do
not necessarily influence other departments or the organisation as a whole. Non-economic
decisions are related to the conduct of moral and ethical behaviour, technical values, etc.
While making decisions, the manager should remain unbiased and should make conscious
efforts to provide justice to all members of the organisation.

8. CRISIS AND RESEARCH DECISIONS :

As the name suggests, crisis decisions are required to be taken in response to a crisis or an
unanticipated situation, which inherently carries a threat and demands an immediate
response. Hence, such decisions are unexpected, have high risk, and require quick response.
However, many organisations draw up contingency plans so that they have some protection
against a sudden crisis or problem. On the other hand, decisions that involve research and
study of a problem are called research decisions. They do not require a prompt response, and
the decision-maker can take time before handing over the results.

9. PROBLEM AND OPPORTUNITY DECISIONS:

Problem decisions are taken in response to a problem that is less severe than a crisis. These
decisions are taken by the decision-maker to solve predictable problems. Opportunity
decisions are required to be taken to create and exploit business opportunities.
Example : Decisions related to cross-selling and up-selling.
STEPS IN ORGANISATIONAL DECISION-MAKING

Decision making is a process which involves the following steps –

Step 1 : Identify the Problem or Opportunity :

In an organisation, decision-making process is conducted either to solve a problem or to
achieve some goal. Hence, identifying the problem or the objective is the starting point of
arriving at a decision. While defining the problem, it is the responsibility of the decision-maker to
identify and detail the possible alternatives to the problem in a structured format.

Step 2: Gather Relevant Information :

After the problem has been defined, the next step is to collect the required data for evaluating
the problem. Correct and accurate data is the basis of sound decision-making. Data on the issue
at hand gives a total and complete picture and enables correct and proper evaluation and the
right choice of alternatives. Data is either obtained from internal sources or external sources
like reports, journals, sales trends, etc. However, it has to be ensured that the data collected is
relevant, reliable, and up-to-date. There are certain problems for which relevant data may not be
available. In such cases, primary data should be collected for proper analysis of the problem.

Step 3: Define Objectives and Criteria :

Clearly outline the goals and objectives that the decision aims to achieve. Establish criteria for
evaluating potential solutions to ensure they align with organizational goals.

Step 4: Generate Alternatives :

Brainstorm and develop a list of possible solutions or courses of action. Encourage creative
thinking and consider a wide range of options.

Step 5: Evaluate Alternatives :

Assess each alternative against the defined criteria. Analyse the potential risks, benefits,
feasibility, and impact of each option.
Evaluation of various models and the data at hand helps in arriving at a decision for a particular
problem.

Step 6 : Select the Best Alternative :

Choose the most suitable solution based on the evaluation. Ensure that the chosen
alternative aligns with the organizational objectives and offers the best balance of
benefits and risks.

Step 7 : Develop an Action Plan :

Create a detailed plan for implementing the chosen solution. This includes defining tasks,
assigning responsibilities, setting timelines, and allocating resources.
Step 8 : Implement the Decision :
Put the action plan into practice. Ensure effective communication, coordination, and
management of the implementation process.

Step 9 : Monitor and Evaluate :

Continuously monitor the progress and outcomes of the decision. Collect feedback and
assess whether the decision is achieving the desired results.

Step 10: Follow-up Actions:

Perhaps the most important consideration in arriving at a decision is anticipating its likely impact
or reaction on the concerned areas. Hence, the decision-maker must have follow-up plans or
strategies for dealing with the reactions of implementing the selected decision. Strategies to
counter the reactions, both immediate and long term, have to be put in place. Decision-making
is termed as a continuous process as one decision often leads to a state where further decisions
are required to be made.
Syllabus Topic
ORGANISATIONAL STRATEGY FORMULATION

Strategy Formulation
Strategy formulation is a process used by an organization to develop plans for achieving
long-term purposes, competitive advantage edge and its objectives. This involves analyzing
both the internal and external environments to understand strengths, weaknesses,
opportunities, and threats. Strategy formulation requires careful consideration of resources,
capabilities, and forms of market to create a structured plan that guides decision-making
and resource allocation. Ultimately, it provides a roadmap for the organization’s strategic
direction and helps in navigating challenges and seizing opportunities for growth. In the end
it sets up much needed strategic decision making and action that propel a company forward
to success.

Importance of Strategy Formulation

It is essential for the development of long-term direction and execution to maintain a

successful running. The definition of a structured plan allows for a concentrated
understanding of an organization's resources that will directly align with their strategic
goals. This ensures that you can both weather market headwinds and also seize open field
growth opportunities.

Provides Clear Direction

Strategy provides clear direction for the organization by setting some goals and defining a
proper way to achieve them. Raising that level of clarity gets everyone through all levels of
the organization pulling in one direction and allows efforts to be more focused and
coordinated. A well- defined strategy serves as a blueprint that helps in decision-making and
also directs efforts to be executed cohesively towards long term goals.

Better Resource Utilization

Creating a strategic plan allows an organization to allocate resources effectively, as it helps
in easily identifying where funds need to be invested and focused. It helps organizations to
direct its resources towards more fruitful opportunities which have higher growth potential
and competitive advantage after identifying the internal strengths and weaknesses. In this
way, resources get allocated to the right place and less resources are wasted giving cost-
effective efficient results.
Enhances Competitive Positioning
Developing a game plan lets organizations to study the market and competitors, thus
adjusting positioning accordingly. This allows organizations to know where the opportunities
are as well as the threats, when we identify these then it would be possible for us to
differentiate ourselves from competitors and grab a part of market share. Taking this
proactive stance improves their competitive outlook and allows them a healthier market
space.

Helps Adapt to Change

An effective strategy gives a structure for dealing with changes in the business landscape
such as market trends or new inventions. That will obviously occur by refining and adjusting
our strategies, to ensure the organization is dynamic enough to address everything that
comes at it. This flexibility is what enables the organization to remain responsive and
competitive in a rapidly changing environment.

Strategy Underpins Long-Term Success

A strong vision and strategic goals are the foundations of long term success, but how can an
organization know what they should be doing without strategy? It allows organizations to
think ahead and make informed decisions which are in sync with their objectives. By
proactively focusing on strategic priorities and examining progress as no more than
extended reality checks - a baseline for organizational continued growth, success in
achieving those up-and-coming measures will be assured.
Syllabus Topic
ORGANISATIONAL CULTURE

Organizational culture refers to the shared values, attitudes and practices that characterize
an organization. It’s the personality of accompany, and it shows up in the way employees do
their work, interact with each other and represent the company to the broader world.
Organizational culture is the set of values, beliefs, attitudes, systems, and rules that outline
and influence employee behaviour within an organization. The culture reflects how
employees, customers, vendors, and stakeholders experience the organization and its
brand.
Organisational culture is either built and maintained by founders to grow their organisation
in a particular direction or develops over time from the interactions of people working in the
organisation. Organisational culture is essential for developing the traits necessary for
success. It defines how individuals behave and function when working together. The main
goal of companies is to foster a productive, healthy and positive culture.
According to O’ Reilly, “Organisational culture is the set of assumptions, beliefs, values,
and norms that are shared by an organisation’s members”.

TYPES OF ORGANISATIONAL CULTURE

1. Clan Culture

Description:
The emphasis is on mentoring, teamwork, and collaboration. Companies with this culture
focus on employee involvement and are often very people-centric. Leaders act as mentors and
even parental figures.
Characteristics:
Friendly work environment, strong relationships among employees, emphasis on team-
building and cohesion, high level of employee involvement.
Advantages:
High employee engagement, loyalty, and satisfaction. Promotes a supportive work
environment.
Disadvantages:
Can be resistant to change. Might struggle with scaling or competitive pressures.
Example:
Tata Group is known for its clan culture, where the emphasis is on employee welfare, ethical
practices, and a strong sense of community.
2. Adhocracy Culture

Description:
This culture thrives on innovation and risk-taking. Companies with an adhocracy culture are
dynamic, entrepreneurial, and are constantly on the lookout for the next big thing. They
encourage employees to think outside the box and to be creative. This culture focuses on
innovation and agility. The organization values creativity, risk-taking, and the ability to adapt
quickly to changes.
Characteristics:
Dynamic and entrepreneurial environment, encourages innovation and the freedom to
experiment, flexible and adaptable processes.
Advantages:
Highly innovative, quick to adapt to market changes. Encourages creative problem-solving.
Disadvantages:
Can lead to chaos and lack of structure. Risk of burnout due to constant pressure to innovate.
Example:
Infosys fosters an adhocracy culture by promoting innovation and providing employees with
the freedom to explore new technologies and solutions.

3. Market Culture

Description:
This culture is results-oriented, with a focus on competition, achievement, and getting the job
done. The organization emphasizes efficiency, productivity, and achieving measurable goals.
Market culture is all about results and getting things done. Companies with this culture are
highly focused on achieving measurable outcomes and maintaining a competitive edge.
Performance and productivity are heavily emphasized.
Characteristics:
Competitive and aggressive environment, high emphasis on outcomes and performance,
strong focus on external success and profitability.
Advantages:
High efficiency and productivity. Strong focus on achieving goals and profitability.
Disadvantages:
Can create a high-pressure environment. May lead to cutthroat competition among
employees.
Example:
Reliance Industries operates with a market culture, focusing on achieving high performance
and maintaining a competitive edge in the market.
4. Hierarchy Culture

Description:
This culture values order, structure, and control. Companies with a hierarchy culture rely on
clear procedures and protocols to ensure stability and efficiency. Decision-making processes
are typically formal and structured.
Characteristics:
Well-defined roles and responsibilities, formal policies and procedures, emphasis on efficiency
and predictability, hierarchical decision-making.
Advantages:
Clear roles and responsibilities. Efficient and predictable operations.
Disadvantages:
Can be inflexible and resistant to change. May stifle creativity and innovation.
Example:
State Bank of India (SBI) exemplifies hierarchy culture with its structured processes, formal
policies, and clear chain of command.

5. Innovative Culture

Description:
This culture encourages employees to be creative and pursue new ideas and approaches. It
supports risk-taking and unconventional and creative thinking.
Characteristics:
Encouragement of new ideas and innovation, a high level of autonomy, support for research
and development.
Advantages:
Encourages innovation and out-of-the-box thinking. Can lead to significant breakthroughs.
Disadvantages:
High risk of failure with new initiatives. Can be costly and resource-intensive.
Example:
Wipro promotes an innovative culture by encouraging employees to develop new solutions
and continuously improve processes.
6. Performance Culture

Description:
This culture emphasizes high performance and accountability. Employees are driven to
achieve individual and organizational goals. Performance culture demands excellence and sets
high expectations for employees.
Characteristics:
High expectations for employee performance, regular performance reviews and feedback,
reward-based on achievement.
Advantages:
Drives high levels of achievement and excellence. Rewards top performers.
Disadvantages:
Can lead to high stress and burnout. May create a highly competitive environment.
Example:
HDFC Bank has a performance culture, setting high expectations for employees and rewarding
top performers.

7. Customer-Focused Culture

Description:
This culture prioritizes customer satisfaction and service excellence. The organization places
the needs and feedback of customers at the centre of all its activities.
Characteristics:
Strong emphasis on customer service, continuous improvement based on customer feedback,
alignment of products and services with customer needs.
Advantages:
High levels of customer satisfaction and loyalty. Can create a strong brand reputation
Disadvantages:
May neglect internal processes and employee welfare in the pursuit of customer satisfaction.
Example:
Maruti Suzuki focuses on customer satisfaction by continuously improving its products and
services based on customer feedback.

8. Safety Culture

Description:
This type of culture emphasizes the importance of maintaining a safe working environment.
Safety is prioritized over all other aspects. Companies with this culture prioritize maintaining a
safe working environment for their employees.
Characteristics:
Strict adherence to safety protocols and regulations, continuous safety training and
awareness, proactive approach to hazard identification.
Advantages:
Reduces risk of accidents and injuries. Promotes a healthy work environment.
Disadvantages:
Can be seen as overly cautious and hinder operational flexibility.
9. Mechanistic Culture

Description:
Mechanistic culture is characterized by a structured and bureaucratic approach. It relies on
well-defined procedures, formalized communication channels, and hierarchical decision-
making. This culture emphasizes stability, predictability, and efficiency.
Characteristics:
Formalized Processes: Standardized procedures and rules govern operations.
Centralized Decision-Making: Decisions are made at the top levels of management.
Advantages:
Efficient and predictable operations.
Clear responsibilities and accountability.
Disadvantages:
Limited innovation and creativity.
Slow decision-making process.
Example:
Indian Railways operates with a mechanistic culture, characterized by its rigid hierarchical
structure, formalized procedures, and centralized decision-making.

10. Organic Culture

Description:
Organic culture is characterized by a flexible and adaptive approach. It emphasizes
decentralized decision-making, open communication, and a flat organizational structure. This
culture encourages innovation, collaboration, and responsiveness to change.
Characteristics:
Decentralized Decision-Making: Decisions are made at various levels within the organization.
High Flexibility: Ability to quickly adapt to changes and new opportunities.
Advantages:
Encourages innovation and creativity.
Faster decision-making process.
Disadvantages:
Risk of lack of control and coordination.
Requires a high level of trust and communication.
Example:
Infosys embraces an organic culture, promoting innovation, collaboration, and decentralized
decision-making. This allows the company to stay agile and responsive in the dynamic tech
industry.
11. Authoritarian Culture
Description:
This culture is characterized by centralized control, strict adherence to rules, and a clear chain
of command. Decisions are made by top management with little input from lower levels.
Characteristics:
Centralized Decision-Making: Decisions are made at the top level and communicated down
the hierarchy.
Strict Control and Supervision: Employees are closely monitored and expected to follow rules
and procedures.
Advantages:
Clear direction and control.
Efficient execution of decisions.
Disadvantages:
Low employee morale and motivation.
Risk of high turnover due to lack of employee involvement.
Example:
Government organizations and public sector units like Bharat Sanchar Nigam Limited (BSNL)
often exhibit authoritarian culture with strict hierarchical structures and centralized decision-
making.

12. Participative Culture

Description:
This culture emphasizes employee involvement and collaboration in decision-making
processes. It values the input and opinions of all employees, leading to a more inclusive and
democratic work environment.
Characteristics:
Decentralized Decision-Making: Employees at various levels are involved in making decisions.
Open Communication: Encourages sharing of ideas and feedback among all employees.
Advantages:
Increased creativity and innovation.
Higher employee satisfaction and morale.
Disadvantages:
Can lead to slower decision-making.
Potential for conflicts and disagreements.
Example:
Infosys promotes a participative culture, encouraging employees to share their ideas and
actively participate in decision-making processes, leading to a more innovative and
collaborative work environment.
Syllabus Topic
ORGANISATIONAL FAILURE AND PATHOLOGY

ORGANISATIONAL FAILURE

Organizational failure occurs when an organization experiences significant underperformance or

collapses due to a multitude of internal and external factors. One primary cause of organizational
failure is ineffective leadership. Poor decision-making, lack of strategic vision, and unethical
practices by leaders can create a culture of mistrust and uncertainty within the organization. For
instance, the downfall of Enron was precipitated by fraudulent accounting practices and deceitful
leadership, which ultimately led to its bankruptcy and dissolution.

Another major cause is an inflexible organizational structure. Organizations that resist change and
fail to adapt to evolving market conditions or technological advancements often find themselves
at a disadvantage. Kodak’s decline is a classic example of this; the company’s reluctance to embrace
digital photography, sticking instead to its traditional film business, led to its eventual bankruptcy.
This failure to innovate and adapt prevented Kodak from competing effectively in a rapidly changing
industry.

Poor financial management is also a critical factor in organizational failure. Misallocation of

resources, excessive spending, and failure to manage cash flow can lead to financial instability and
insolvency. Lehman Brothers' collapse during the 2008 financial crisis is a prime example, where
risky investments and inadequate financial oversight resulted in one of the largest bankruptcies in
history.

A toxic organizational culture can severely impact employee morale and productivity, leading to
failure. When a work environment is characterized by fear, lack of trust, and poor morale,
employees are less likely to perform effectively. Uber faced significant challenges due to its toxic
culture, which led to numerous legal issues and the resignation of its CEO. This negative work
environment can hinder collaboration, stifle creativity, and increase employee turnover, further
deteriorating the organization’s performance.

Communication failures within an organization can also lead to its downfall. Ineffective
communication channels can result in misunderstandings, poor coordination, and a lack of alignment
in goals. Yahoo! struggled due to its inability to communicate a cohesive strategy, which resulted in
missed opportunities and declining market share. Clear and effective communication is vital for
ensuring that all members of the organization are working towards the same objectives.

Strategic missteps and poor planning can lead to organizational failure. Companies that do not
conduct thorough market analysis or fail to anticipate changes in consumer preferences may
struggle to maintain their competitive edge. Myspace, once a leading social media platform, failed
to innovate and strategize effectively, allowing Facebook to surpass and dominate the market. This
highlights the importance of continuous strategic planning and execution in maintaining a
competitive advantage.

External factors such as economic downturns, regulatory changes, and competitive pressures can
also impact organizational performance. The 2008 financial crisis led to the collapse of several major
financial institutions, demonstrating how external shocks can precipitate organizational failure.
Organizations must remain agile and responsive to external changes to mitigate these risks.
Organizational failure is often the result of a combination of leadership failures, rigid structures,
poor financial management, toxic culture, communication issues, strategic missteps, and external
pressures. Recognizing and addressing these factors proactively can help organizations build
resilience and sustain long-term success. Understanding the causes of failure and implementing
strategies to mitigate them are crucial for any organization aiming to thrive in a competitive and
ever-changing environment.

Reasons / Causes of Organizational Failure

 Leadership Failures

 Inadequate Decision-Making: Poor strategic decisions, lack of vision, and

mismanagement by leaders can lead to organizational failure.
 Example: Enron’s collapse was due to unethical leadership and fraudulent
accounting practices.

 Inflexible Organizational Structure

 Resistance to Change: Organizations with rigid structures may fail to adapt to

market dynamics, technological advancements, or changing customer preferences.
 Example: Kodak’s reluctance to embrace digital photography led to its downfall.

 Financial Mismanagement

 Poor Resource Allocation: Inefficient management of financial resources,

overspending, and failure to manage cash flow can lead to insolvency.
 Example: Lehman Brothers declared bankruptcy during the 2008 financial crisis due
to poor financial management and risky investments.

 Lack of Innovation

 Failure to Innovate: Companies that do not invest in research and development may
fall behind competitors who bring new and improved products to the market.
 Example: Blockbuster’s failure to innovate and compete with digital streaming
services like Netflix led to its decline.

 Toxic Organizational Culture

 Negative Work Environment: A toxic culture characterized by fear, lack of trust, and
low morale can severely impact employee productivity and retention.
 Example: Uber faced significant challenges due to its toxic culture, leading to legal
issues and the resignation of its CEO.
 Poor Communication

 Ineffective Communication Channels: Lack of clear communication can result in

misunderstandings, poor coordination, and misalignment of goals.
 Example: Yahoo!’s failure to communicate a cohesive strategy resulted in missed
opportunities and declining market share.

 Strategic Missteps

 Flawed Strategy: Poor strategic planning and execution can lead to market
misjudgments and loss of competitive advantage.
 Example: Myspace lost its position as the leading social media platform due to
strategic missteps and failure to innovate, allowing Facebook to dominate the
market.

 External Factors

 Market Changes: Economic downturns, regulatory changes, and competitive

pressures can impact organizational performance.
 Example: The 2008 financial crisis led to the failure of several major financial
institutions due to sudden and severe market changes.

Remedies For Organisational Failure

Preventing organizational failure requires a comprehensive approach that addresses various

internal and external factors. Here’s a detailed look at preventive measures that
organizations can implement to avoid failure and enhance resilience:

1. Effective Leadership

Vision and Strategic Direction:

 Clear Vision: Leaders should articulate a clear and inspiring vision that guides the
organization’s strategic direction and unites employees towards common goals.
 Strategic Planning: Develop and implement strategic plans that align with the
organization’s mission and vision. Anticipate market trends, identify opportunities,
and mitigate risks.

Decision-Making:

 Informed Decisions: Make informed decisions based on data, analysis, and input
from diverse sources. Consider the long-term impact of decisions on the
organization.
 Decisiveness: Take timely and decisive actions to address challenges and seize
opportunities.
 Communication:

 Open Communication: Foster an environment of open communication where

information flows freely across all levels of the organization.
 Active Listening: Listen to feedback from employees, customers, and stakeholders.
Value different perspectives and use feedback to make improvements.

2. Flexible Organizational Structure

Adaptability:

 Flexible Structure: Implement a flexible structure that allows the organization to

adapt to market changes and technological advancements.
 Decentralization: Encourage decentralized decision-making to empower employees
and enhance responsiveness.

Innovation:

 Encouraging Innovation: Foster a culture of innovation where employees are

encouraged to experiment, take risks, and develop new ideas.
 Continuous Improvement: Invest in research and development to stay ahead of
market trends and continuously improve products and services.

3. Sound Financial Management

Resource Allocation:

 Efficient Use of Resources: Allocate financial resources efficiently to ensure

sustainability and growth.
 Budgeting and Forecasting: Implement robust budgeting and forecasting practices
to manage cash flow and plan for the future.

Financial Oversight:

 Regular Audits: Conduct regular financial audits to identify and address

discrepancies.
 Risk Management: Develop risk management strategies to mitigate financial risks
and ensure stability.
4. Positive Organizational Culture

Employee Engagement:

 Inclusive Culture: Build an inclusive and supportive organizational culture where

diversity is valued.
 Employee Well-Being: Prioritize the well-being of employees, promoting work-life
balance and a healthy work environment.

Recognition and Development:

 Recognition: Recognize and reward employee achievements to foster a positive and

motivating work environment.
 Professional Development: Invest in the development of employees by providing
training, mentoring, and growth opportunities.


5. Effective Communication

Clear Channels:

 Effective Communication Mechanisms: Establish clear and effective communication

channels to ensure alignment of goals and coordination among team members.
 Transparency: Maintain transparency in communication to build trust and credibility
within the organization.

Feedback Loop:

 Regular Feedback: Implement regular feedback mechanisms to gather insights from

employees and stakeholders.
 Actionable Insights: Use feedback to make informed decisions and improvements.

6. Strategic Planning

Market Analysis:

 Thorough Analysis: Conduct thorough market analysis to understand customer

needs, competitive landscape, and market trends.
 Data-Driven Decisions: Use data-driven insights to inform strategic planning and
decision-making.

Long-Term Focus:

 Visionary Planning: Develop long-term strategies that align with the organization’s
mission and vision.
 Adaptability: Stay agile and responsive to market dynamics and external pressures.
7. Crisis Management

Preparedness:

 Contingency Plans: Develop contingency plans to handle crises effectively. Anticipate

potential challenges and prepare responses.
 Crisis Training: Train employees on crisis management protocols to ensure swift and
effective action.

Resilience:

 Resilience Building: Build organizational resilience by fostering a culture of

adaptability and continuous improvement.
 Stress Testing: Conduct stress tests to evaluate the organization’s ability to
withstand adverse conditions.

8. Governance and Ethics

Ethical Leadership:

 Strong Ethical Standards: Leaders should adhere to high standards of integrity and
honesty, setting a positive example for employees.
 Accountability: Hold leaders and employees accountable for their actions to
maintain trust and transparency.

Governance Structure:

 Effective Governance: Implement effective governance structures to oversee

organizational activities and ensure compliance with regulations.
 Regulatory Compliance: Stay updated on regulatory changes and ensure compliance
to avoid legal issues.
DIAGNOSTIC FRAMEWORK OF ORGANISATIONAL FAILURE

A diagnostic framework for organizational failure involves a systematic approach to identify,

analyse, and address the underlying issues causing dysfunction within an organization.

Some of the key components of diagnostic frame work of organisational failure are:

1. Environmental Analysis

 External Factors: Assess external factors such as market trends, competition,

regulatory changes, and economic conditions that may impact the organization.
 Internal Factors: Evaluate internal factors such as organizational structure, culture,
and resources.

2. Organizational Assessment

 Mission and Vision: Review the organization's mission, vision, and strategic goals to
ensure they are clear, relevant, and aligned with the current environment.
 Performance Metrics: Analyse key performance indicators (KPIs) to measure the
organization's effectiveness and identify areas of underperformance.

3. Leadership Evaluation

 Leadership Style: Examine the leadership style and its impact on the organization.
Assess whether the leadership is effective, participative, and supportive.
 Decision-Making Processes: Evaluate the decision-making processes and their
efficiency. Identify any bottlenecks or issues in the decision-making hierarchy.

4. Cultural Analysis

 Organizational Culture: Assess the organizational culture to determine if it fosters

innovation, collaboration, and employee engagement.
 Employee Morale: Evaluate employee morale and satisfaction through surveys,
interviews, and feedback mechanisms.

5. Structural Analysis

 Organizational Structure: Analyse the organizational structure to identify any

inefficiencies or redundancies. Assess whether the structure supports the
organization's goals and objectives.
 Communication Channels: Evaluate the effectiveness of communication channels
within the organization. Identify any gaps or barriers to effective communication.
6. Financial Analysis

 Financial Health: Review the organization's financial statements to assess its

financial health. Identify any issues related to cash flow, profitability, and debt
management.
 Resource Allocation: Evaluate how resources are allocated and utilized within the
organization. Identify any areas of wastage or inefficiency.

7. Process Evaluation

 Operational Processes: Analyse the operational processes to identify any

inefficiencies or bottlenecks. Assess whether the processes are streamlined and
effective.
 Quality Management: Evaluate the quality management systems in place to ensure
they meet industry standards and customer expectations.

8. Stakeholder Feedback

 Customer Feedback: Gather feedback from customers to understand their

satisfaction levels and identify areas for improvement.
 Employee Feedback: Collect feedback from employees to gain insights into their
experiences and identify any issues affecting their performance.

9. Diagnostic Tools

 SWOT Analysis: Conduct a SWOT (Strengths, Weaknesses, Opportunities, Threats)

analysis to identify internal and external factors affecting the organization.
 Benchmarking: Compare the organization's performance with industry benchmarks
to identify areas of improvement.
 Root Cause Analysis: Use root cause analysis techniques to identify the underlying
causes of problems and develop solutions.

10. Action Plan

 Recommendations: Develop a set of recommendations based on the diagnostic

findings to address the identified issues.
 Implementation Plan: Create an implementation plan with clear timelines,
responsibilities, and resources required to execute the recommendations.
 Monitoring and Evaluation: Establish a monitoring and evaluation system to track
the progress of the action plan and make adjustments as needed.

By following this diagnostic framework, organizations can systematically identify and

address the root causes of failure, leading to improved performance, resilience, and long-
term success.
ORGANISATIONAL PATHOLOGY
 Organizational pathology refers to the study and analysis of -
dysfunctional behaviours,
processes, and
structures within an organization
that lead to inefficiencies, decreased performance, and potential failure.
 Organizational pathology examines the underlying issues that ail an organization.
These issues can stem from various sources such as leadership failures, toxic culture, poor
communication, and rigid structures.
 Leadership failures often manifest as ineffective decision-making, lack of vision, and unethical
practices, which can create a ripple effect throughout the organization.
 A toxic culture characterized by fear, lack of trust, and poor morale can severely impact
employee engagement and productivity, leading to high turnover rates and reduced innovation.
Poor communication, both in terms of information flow and clarity, can result in
misunderstandings, misalignment of goals, and inefficiencies.
 Rigid structures that resist change and fail to adapt to evolving market conditions can also stifle
growth and responsiveness.
 Additionally, financial mismanagement, including inadequate resource allocation and poor
financial oversight, can lead to instability and insolvency.
By identifying and addressing these pathological issues, organizations can implement corrective
measures to improve their health, enhance resilience, and achieve long-term success.
Understanding and treating organizational pathology is crucial for fostering a productive, positive,
and sustainable organizational environment.
TYPES OF ORGANISATIONAL PATHOLOGIES

Organizational pathologies refer to dysfunctions within an organization that hinder its

effectiveness and performance. These pathologies can manifest in various forms, each with
distinct characteristics and impacts on the organization. Here are some common types of
organizational pathologies explained in detail:

1. Leadership Pathologies

Autocratic Leadership:

 Description: Decision-making is centralized, with little to no input from subordinates.

This leads to a lack of empowerment and creativity among employees.
 Impact: Can result in low morale, high turnover rates, and resistance to change.
Employees may feel undervalued and disengaged.

Inconsistent Leadership:

 Description: Leaders frequently change their strategies and priorities, creating

confusion and instability within the organization.
 Impact: Can lead to a lack of direction, decreased trust in leadership, and reduced
productivity.

2. Cultural Pathologies

Toxic Culture:

 Description: A work environment characterized by fear, favoritism, bullying, and lack

of trust.
 Impact: High levels of stress, decreased employee engagement, and high turnover
rates. A toxic culture stifles innovation and collaboration.

Silo Mentality:

 Description: Departments or teams operate in isolation, with little communication or

collaboration between them.
 Impact: Leads to inefficiencies, duplication of efforts, and missed opportunities for
synergy. It can also create internal competition and conflict.
3. Structural Pathologies

Bureaucratic Rigidity:

 Description: Excessive adherence to rules and procedures, with little flexibility or

adaptability.
 Impact: Slows down decision-making processes, stifles innovation, and reduces the
organization's ability to respond to changes in the market.

Overly Complex Structures:

 Description: An overly complex organizational hierarchy with too many layers of

management.
 Impact: Can lead to communication breakdowns, inefficiencies, and a lack of
accountability.

4. Communication Pathologies

Poor Communication:

 Description: Lack of clear, open, and effective communication channels within the
organization.
 Impact: Misunderstandings, misaligned goals, and decreased productivity. Important
information may not reach the right people at the right time.

Information Hoarding:

 Description: Individuals or departments withhold information to maintain power or

control.
 Impact: Reduces transparency, collaboration, and trust. It can lead to poor decision-
making and inefficiencies.
5. Financial Pathologies

Misallocation of Resources:

 Description: Inefficient allocation of financial resources, leading to wastage or

underutilization of assets.
 Impact: Financial instability, reduced operational efficiency, and an inability to invest
in growth opportunities.

Short-Term Focus:

 Description: An excessive focus on short-term gains at the expense of long-term

sustainability.
 Impact: Can result in risky financial decisions, neglect of strategic planning, and long-
term decline.

6. Innovation Pathologies

Resistance to Change:

 Description: An organizational culture that resists new ideas and changes.

 Impact: Stagnation, inability to innovate, and loss of competitive edge. The
organization may fail to adapt to market shifts and technological advancements.

Lack of R&D Investment:

 Description: Insufficient investment in research and development to drive

innovation.
 Impact: Can lead to outdated products and services, decreased competitiveness, and
long-term decline.
7. Ethical Pathologies

Unethical Practices:

 Description: Engagement in unethical behavior, such as fraud, corruption, or

exploitation.
 Impact: Legal repercussions, reputational damage, and loss of trust among
stakeholders. Can lead to financial penalties and organizational collapse.

Lack of Accountability:

 Description: Failure to hold individuals accountable for their actions and decisions.
 Impact: Can create a culture of complacency and irresponsibility. It undermines trust
and can lead to widespread unethical behavior.

By identifying and addressing these organizational pathologies, organizations can implement

corrective measures to improve their health, enhance resilience, and achieve long-term
success. Understanding and treating these dysfunctions is crucial for fostering a productive,
positive, and sustainable organizational environment.
Syllabus Topic
ORGANISATIONAL LEARNING AND TRANSFORMATION

ORGANISATIONAL LEARNING

Organizational learning is dynamic process through which organizations acquires, develop,

enhance, and transfers knowledge throughout its structure, leading to continuous
improvement and innovation. This concept involves both the acquisition and spreading of
knowledge within the organization to ensure that employees are well-informed and capable
of adapting to new challenges and opportunities. This process enhances the organization’s
ability to adapt, innovate, and improve its processes, strategies, and performance.

According to Fiol and Lyles, “ Organisational Learning is the process of improving actions through
better knowledge and understanding”

Key aspects of organizational learning include:

1. Knowledge Acquisition:
At the heart of organizational learning is the ability to acquire new knowledge. This can happen
through various means, such as training programs, workshops, seminars, and interactions with
external stakeholders. Organizations also learn through experiences, whether those are successes
or failures. Effective knowledge acquisition ensures that the organization is always evolving, with
employees gaining new skills and insights that can be applied to improve performance.

2. Knowledge Sharing :
Once knowledge is acquired, it needs to be shared throughout the organization. It involves the
distribution of information among employees. Tools such as internal databases, collaborative
platforms, and regular meetings can facilitate this sharing of information. An organization that
excels at knowledge sharing fosters a culture of transparency and collective growth.

3. Knowledge Utilization :
Organizational learning is not just about acquiring and sharing knowledge; it also requires putting
that knowledge to practical use. This means applying new insights to solve problems, innovate,
and make informed decisions.
4. Feedback and Reflection :
A crucial component of organizational learning is the ongoing process of feedback and
reflection. Organizations need to regularly evaluate their performance, assess the
outcomes of their actions, and reflect on what has been learned.
Reflecting on experiences allows organizations to learn from their mistakes, celebrate
their successes, and make informed adjustments to their strategies and processes.

Organizational Learning is about creating a learning culture where continuous development

is embedded in the organization's DNA. It empowers employees, and ensures that the
organization remains competitive and innovative.

Need For Organisational Learning

Some key reasons highlighting the need for organizational learning:

1. Adaptation to Change

In a rapidly changing business environment, organizations must continuously adapt to new

technologies, market trends, and consumer demands. Organizational learning enables
companies to stay agile and responsive to these changes, ensuring long-term sustainability
and competitiveness.

2. Continuous Improvement

By fostering a culture of continuous learning, organizations can consistently improve their

processes, products, and services. This leads to higher efficiency, better quality, and
increased customer satisfaction.

3. Innovation and Creativity

Organizational learning encourages experimentation and the exploration of new ideas. This
innovation is essential for developing unique solutions, staying ahead of competitors, and
driving business growth.

4. Employee Development

Learning opportunities help employees enhance their skills and knowledge, leading to
higher job satisfaction and motivation. Well-trained employees are more competent,
confident, and capable of contributing to the organization’s success.

5. Employee Engagement and Retention

Organizations that invest in their employees’ growth and development tend to have higher
engagement and retention rates. Employees feel valued and are more likely to stay with a
company that supports their professional development.
PROCESS OF ORGANISATIONAL LEARNING

S. Ramnarayan and T. V. Rao, in their book "Organization Development: Accelerating

Learning and Transformation," outline a comprehensive process of organizational learning
that emphasizes the importance of continuous improvement and transformation within
organizations. Process as per them are as follows –

1. Creating a Learning Environment

 Open Communication: Encouraging open and transparent communication within the

organization to foster a culture of trust and knowledge sharing.
 Supportive Leadership: Leaders play a crucial role in creating an environment that
supports learning by providing resources, encouragement, and recognition.

2. Identifying Learning Needs

 Assessment: Conducting assessments to identify the learning needs of the

organization, including skills gaps, knowledge deficiencies, and areas for
improvement.
 Feedback Mechanisms: Implementing feedback mechanisms to gather insights from
employees, customers, and other stakeholders.

3. Designing Learning Interventions

 Tailored Programs: Designing learning programs and interventions that are tailored
to the specific needs of the organization and its employees.
 Innovative Methods: Using innovative methods such as workshops, simulations, and
experiential learning to engage employees and enhance learning outcomes.

4. Implementing Learning Initiatives

 Execution: Executing the designed learning initiatives with a focus on practical

application and real-world relevance.
 Monitoring: Continuously monitoring the progress of learning initiatives to ensure
they are effective and achieving the desired outcomes.

5. Evaluating Learning Outcomes

 Measurement: Measuring the impact of learning initiatives on organizational

performance, employee satisfaction, and other key metrics.
 Adjustment: Making necessary adjustments based on evaluation results to improve
the effectiveness of future learning initiatives.
6. Sustaining Learning

 Continuous Improvement: Promoting a culture of continuous improvement where

learning is an ongoing process rather than a one-time event.
 Knowledge Management: Implementing knowledge management practices to
capture, store, and share knowledge within the organization.

7. Fostering Innovation

 Encouraging Creativity: Encouraging employees to think creatively and explore new

ideas to drive innovation and organizational growth.
 Collaboration: Facilitating collaboration and teamwork to leverage diverse
perspectives and expertise.

By following these steps, organizations can create a robust learning environment that
supports continuous development, innovation, and transformation. This approach helps
organizations stay competitive and adapt to changing market conditions.

ORGANISATIONAL TRANSFORMATION

Organizational transformation refers to a comprehensive and fundamental change in the

way an organization operates. This change can involve alterations in the organization's
structure, strategy, culture, processes, and systems. The goal of organizational
transformation is to improve performance, adapt to new market conditions, and achieve
sustainable growth.

Here are some key aspects of organizational transformation:

1. Structural Changes

Organizational transformation often involves restructuring the organization to improve

efficiency and effectiveness. This can include changes in the hierarchy, the creation of new
departments, or the realignment of roles and responsibilities.

2. Strategic Shifts

Organizations undergoing transformation may need to redefine their strategic goals and
objectives. This can involve entering new markets, developing new products or services, or
changing the business model to better align with the external environment.

3. Cultural Evolution

Transforming an organization's culture is critical for ensuring that the changes are embraced
by employees. This can involve fostering a culture of innovation, collaboration, and
continuous improvement.
4. Process Improvement

Organizations may need to re-engineer their processes to become more efficient and
customer-focused. This can involve adopting new technologies, streamlining workflows, and
implementing best practices.

5. Technological Adoption

Embracing new technologies is often a key component of organizational transformation.

This can include implementing digital tools, automating processes, and leveraging data
analytics to drive decision-making.

6. Change Management

Successful organizational transformation requires effective change management to ensure

that the changes are implemented smoothly and that employees are supported throughout
the transition. This can involve communication, training, and providing the necessary
resources.

7. Leadership and Vision

Strong leadership is essential for guiding the organization through the transformation
process. Leaders must articulate a clear vision, inspire employees, and drive the change
initiatives.

Benefits of Organizational Transformation

 Improved performance and efficiency

 Greater adaptability to changing market conditions
 Enhanced competitiveness and innovation
 Increased employee engagement and satisfaction
 Better alignment with strategic goals

In essence, organizational transformation is a holistic approach to making significant

changes within an organization to achieve long-term success and sustainability.
Process Of Organisational Transformation

The process of organizational transformation involves a comprehensive and strategic

approach to change, aimed at improving performance and ensuring long-term success.

Some key steps involved in the process of organizational transformation:

1. Assess the Current State

 Diagnose Issues: Identify the strengths and weaknesses of the current organizational
structure, processes, and culture.
 Gather Data: Collect data through surveys, interviews, and performance metrics to
understand the existing situation.

2. Define the Vision and Goals

 Set a Clear Vision: Develop a clear and compelling vision for the future state of the
organization.
 Establish Objectives: Define specific, measurable, achievable, relevant, and time-
bound (SMART) goals that align with the vision.

3. Develop a Transformation Strategy

 Strategic Planning: Create a detailed plan outlining the steps needed to achieve the
vision and goals.
 Resource Allocation: Identify the resources required, including budget, personnel,
and technology.

4. Engage Stakeholders

 Stakeholder Analysis: Identify key stakeholders, including employees, customers,

suppliers, and investors.
 Communication Plan: Develop a communication plan to keep stakeholders informed
and engaged throughout the transformation process.

5. Implement Change Initiatives

 Pilot Programs: Start with pilot programs to test new initiatives on a small scale
before full implementation.
 Rollout Plan: Execute the transformation plan in phases to manage the change
effectively and minimize disruptions.
6. Monitor and Evaluate Progress

 Performance Metrics: Establish key performance indicators (KPIs) to monitor

progress and measure success.
 Regular Reviews: Conduct regular reviews to assess the impact of change initiatives
and make necessary adjustments.

7. Foster a Culture of Continuous Improvement

 Feedback Mechanisms: Implement feedback mechanisms to gather insights from

employees and other stakeholders.
 Iterative Improvements: Use feedback to continuously refine and improve
processes, systems, and strategies.

8. Ensure Sustainability

 Institutionalize Changes: Embed new practices, processes, and behaviors into the
organizational culture to ensure sustainability.
 Training and Development: Provide ongoing training and development
opportunities to support employees in adapting to new ways of working.

9. Leadership Commitment

 Leadership Alignment: Ensure that leadership at all levels is aligned with the vision
and committed to the transformation process.
 Visible Support: Leaders should visibly support and champion the transformation
efforts to motivate and inspire the rest of the organization.

10. Celebrating Successes

 Recognize Achievements: Celebrate milestones and successes to maintain

momentum and keep employees motivated.
 Share Success Stories: Communicate success stories to demonstrate the positive
impact of the transformation and reinforce the benefits.

Organizational transformation is a complex and ongoing process that requires careful

planning, strong leadership, and active engagement from all stakeholders. By following
these steps, organizations can navigate the transformation journey effectively and achieve
their desired outcomes.

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