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Principles of Organizational Management Video

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  • 0:07 Organizational…
  • 0:39 Structuring the Organization
  • 2:39 Specialization &…
  • 3:42 Authority & Delegation
  • 6:38 Policies and Procedures
  • 7:37 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley
Many businesses today are complex systems that require more than ad hoc design and management. In this lesson, you'll discover some of the important principles of organizational management necessary to build a successful organization.

Organizational Management Defined

You can think of an organization as an entity consisting of members and resources that are directed towards the achievement of a goal. Organizational management is the process of structuring, planning and directing the resources and members of the organization to achieve its goal. In the world of business, the end goal is pretty much the same - to make a profit for the organization's owners. Let's take a look at some important principles of organizational management.

Structuring the Organization

Just like a house, an organization needs a solid foundation upon which to build. An organization's structure helps provide that foundation. Organizational structure is the manner in which the parts of an organization interact with each other to achieve the organization's goal. It determines lines of authority, communication, duties and responsibility among and between each part of the organization and its members. Let's take a quick look at some of the more common organizational structures.

Organizations can be designed with a tight vertical, hierarchical structure or a flatter, horizontal structure. Think about an organization as a pyramid. Each layer of the pyramid is a management level. In large organizations, there may be many layers of management.

For example, a large corporation has a board of directors at the apex of the pyramid who direct the president of the company. The president may direct the activities of four divisional vice presidents who each direct the activities of several department managers. The department managers lead several team supervisors who manage the primary workforce of the company. A horizontal organization, on the other hand, has just a few layers of management, perhaps only one.

Structuring an organization also involves grouping organizational activities in a way that will effectively allow it to achieve organizational goals. This grouping of activities is often referred to as departmentalization. You have several different methods of departmentalization. If taking a traditional approach, you can organize by function, geography, product or market. A matrix approach uses a combination of different organizational structures, such as functional and product.

Specialization & Division of Labor

Specialization and division of labor is another important principle of organizational management. We've already touched upon this concept a bit in our discussion of departmentalization. Specialization is simply assignment of tasks within an organization to specific people so they become specialized and efficient in the task. For example, if you own a bakery, you may have chefs that specialize in cakes, others that specialize in pies and others who specialize in pastries.

Division of labor, on the other hand, is taking advantage of specialization of labor through organization and cooperation. All the specialists cooperate to achieve a task that might not otherwise be achievable by contributing their specialty to a part of the overall task. For example, a car company will have engineers that design a car, production workers that build it, and marketing and sales people that make sales.

Authority & Delegation

The activities of an organization need to be directed and coordinated just like a conductor coordinates an orchestra performing a symphony. Authority in an organization can be either centralized or decentralized. Centralized authority is pretty much 'top-down'; most decisions and orders come from one, centralized source, which is usually at the top of the organizational hierarchy. Information flows up the organization to the top where it is analyzed and synthesized to make decisions. When a decision is made, the orders flow down the organization to accomplish the specified tasks. The military is an excellent example.

Alternatively, organizations can utilize a decentralized model of authority. In a decentralized organization, authority is not all at the top. Instead, the authority to make decisions exists at lower levels of the organizational hierarchy - sometimes even at the lowest levels. This can be advantageous because people on the ground often have better information about the task or issue. Many local co-ops use decentralized authority.

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