Lecture 6

Organization and Organizational

Management

Outline
▪ Definition of organization
▪ Types of organizations
▪ Organizational structure and design
▪ Types of organizational structures
▪ Site layout
 1. Definition of an organization
• An organization is a pattern of interwoven
simultaneous relationships through which
people pursue and accomplish their common
goals under the direction of managers

• An organizational setup provides a stable and

understandable framework with in which
members of an organization can work
together toward organizational goals.

2. Types of Organizations
I. Based on Their Formation
• For a construction firm to operate in the industry, it
has to present the legal business ownership possessory
right.
• These possessory rights can be obtained in different
forms of business proprietorship. These different
forms of business ownership's are:
1. Individual proprietorship (traders in Ethiopia)

2. Partnership(General or Limited partnership)

3. Ltd. Liability Companies(Private or Public)

4. Corporation(profitable, non profitable, govt., etc)

▪ Individual proprietorship: This type of business
ownership is most widely used and is limited to small
firms due to capital involvement of an individual is
often within certain capacity.
▪ Partnership (General or limited): Formed when two
or more individual proprietors combine their resources,
capital and talents to form a business ownership.
▪ Private limited companies: A private limited company
is a company whose members are liable only to the
extent of their contributions.
▪ Share companies: A share company is a company
whose capital is fixed in advance and divided into
shares and whose liabilities are met only by the assets
of the company.
▪ Corporation: is a company or group of people authorized
to act as a single entity (legally a person).

Types of Organizations cont.

II. Based on Their Licensing in Ethiopia

• A contractor is defined as a company, or a person with

formal contract to do a specific job, supplying labor
and materials.
• According to Ministry of Works and Urban
Development, firms are categorized into four major
groups including:
✓ General Contractors/Consultants,

✓ Building Contractors/Consultants,

✓ Road Contractors/Consultants, and

✓ Specialized Contractors.
▪ General Contractor: is a contractor that is allowed to
engage in any types of construction contract works such as
buildings, roads, bridges, airports, dams, railways, etc.

▪ Building Contractor: Engaged only in building

construction,

▪ Road Contractor: Engaged only in road construction, and

▪ Specialized Contractor: in a special construction works

other than those mentioned above such as water works,
airport field construction...etc.

3. Organizational Structure and Design

• The specific pattern of relationships that
managers create is called Organizational
Structure

• This is a framework that managers devise for

dividing and coordinating the activities of
members of an organization

• Selection and design of organization structure

for a firm is called Organizational Design
Organization Theory and Organization Structure
• four fundamental steps are taken when making decisions about
organizing:
• Dividing the total work load into tasks that can logically
and comfortably be performed by individuals or groups.
This is called division of work.
• Combining tasks in logical and efficient manner. The
grouping of employees and tasks is referred to as
departmentalization.
• Specifying who reports to who in the organization. This
linking of departments results in an organizational
hierarchy.
• Setting up mechanisms for integrating departmental
activities into a coherent whole and monitoring the
effectiveness of that integration. This process is called
coordination.

Departmentalization
To keep track of the complex web of formal
relationships in an organization, managers
typically draw up an organization chart to
depict how work is divided

• In an organization chart, boxes represent the

logical groupings of work activities which we
call departments
Hierarchy
• Since the early days of industrialization, managers
worried about the number of people and
departments one could effectively handle. This is
called the span of management control
• Once work is divided, departments created, the
span of control chosen, managers can decide on the
chain of command - a plan that specifies who
reports to whom
• The result of these decisions is a pattern of
multiple levels called a hierarchy

Tall and Flat Hierarchies

CEO

a) Tall Hierarchy
CEO

b) Flat Hierarchy
Coordination
• Is the process of integrating the activities of
separate departments in order to pursue
organizational goals
• The extent of coordination depends on the
nature of the tasks performed and the degree
of interdependence of people in the various
units performing them
• When these tasks require communication
between units, then a high degree of
coordination is best.

4. Types of Organizational Structures

• Project managers should understand the

various forms of organization structures, and
their relative merits and demerits
• An organization's departments can be
structured in five major ways:
✓ Traditional / Functional Organization
✓ Geographical Organization Structure
✓ Product Organization Structure
✓ Matrix Organization Structure or
✓ Pure Project Organization Structure
 I. Traditional / Functional Organization
• brings together every one engaged in one
activity or several related activities called
functions into one department
• It is used mainly by smaller firms that offer a
limited number of products or services -
repetitive
• Effective for companies producing one or two
product lines in mass production
• Most prevalent type of organization structure
even Today

Traditional / Functional Organization

Organization

Procure-
Research Design Engineering Production Marketing Finance
ment

Hard- Soft- Draw- Sub- Assem- Inspect- Packag-

Purchase
ware ware ings contract bly tion ing

Fig. Typical traditional/functional organization structure

 Traditional / Functional Organization –
Merits and Demerits
Merits Demerits
1. Works well in 1. No individual
repetitive, stable responsible for the total
environments, such as project
in mass production 2. Difficult to integrate
2. Low level of integration activities which cross
can get the job done functional lines
3. Easier budgeting and 3. Conflicts may often
cost control occur as each functional
group struggles for
power

II. Geographical Organization Structure

• When the operations of an organization
encompass several distinct geographical
regions

• Each regional unit may operate relatively

autonomously, as independent profit centers

• some integration is provided by the

organization's head office through standardized
accounting and reporting procedures
 Geographical Organization Structure

President

Vice president Vice president Vice president Vice president

Marketing Finance Production Human resources

Vice president
Overseas

District Manager District Manager District Manager

North America Latin America Africa

Geographical Organization Structure – Merits and

Demerits
Merits Demerits
1. Can offer personalized services 1. Communications between the
to its clients who may be widely regional units may be time
dispersed geographically consuming, difficult to manage
2. Each regional unit can be highly 2. If each regional unit is sub
market oriented divided on a functional basis, all
3. Can tap more business the relative demerits of the
opportunities in diverse traditional organization come
geographical areas into play
4. Greater career opportunities and 3. Higher overheads due to
challenges for staff replication of the technical skills
and facilities
4. May develop the 'us' (regional
units) and 'them' (head office)
syndrome
 III. Product Organization Structure
• Suitable for a company producing many separate
products
• Each divisions designs, manufactures, and markets
its own product line - each division is accountable
for profit or loss
• Within each product subdivision, one can have a
functional, geographical, or any other form of
breakdown
• Each division resembles a business firm, but the
difference is that each division reports to central
head quarters

Product Organization Structure

Organizat
ion

Product Product
A B

Sched- Inven- Produc- Distri- North South East West

Sales
uling tory tion bution Region Region Region Region
 Product Organization Structure – Merits
and Demerits
Merits Demerits
1. Each product division works as 1. High overhead costs to maintain
an independent Profit center dedicated personnel and
2. There is a dedicated manager facilities for each product
for handling each product line line
3. Promotes strong market 2. Difficult to integrate people
orientation with diverse technical skills
4. Ability to generate new in product line
businesses and respond 3. Low integration between
To market shifts effectively and different product divisions
efficiently 4. A successful product may
develop into a separate
company
5. Need quick response
mechanisms to handle
obsolescence of product lines

IV. Matrix Organization

▪ The matrix structure also called multiple command
system is a hybrid system that attempts to combine
the benefits of both types of design while avoiding
their draw backs
▪ In here two types of structure exist simultaneously.
Employees in effect have two bosses, i.e., they work
in two chains of command.
▪ One chain of command is functional or divisional.
The second is a horizontal overlay that combines
people from various functional departments or
divisions into a project led by project manager who is
an expert in the teams assigned area of specialization
Matrix Organization
Matrix Organization
Mkt Oper Eng Fin

Project 1
JJ JJ
Project 2
J J J J
Project 3
JJ J
Project 4
J JJ JJ

Matrix Organization Structure - Contd. . .

 Matrix Organization Structure – Merits
and Demerits
Merits Demerits
1. Maximum efficient utilization 1. Needs information system and
can be made of company's human Behavior to support
human & physical resources multi-dimensional working
2. Clear and workable mechanism 2. Authority and responsibility may
for achieving project integration be unclear
3. Project objectives are visible 3. Conflicts may occur amongst
4. Can provide rapid response to projects, and between
changes and conflicts functional and project managers
5. Effective information 4. Reaction times may be slow
dissemination 5. Project personnel have to report
6. Teams of experts kept together to two bosses
7. Less morale problems occur

V. Pure Project Organization Structure

• To be used when an organization has a project that
entails high complexity, requires major resource
commitments, and involves heavy stakes in the
outcome
• an autonomous division is created in company
headed by the project manager
• Project manager has full authority and maximum
control over all human and physical resources
assigned to the project
 Pure Project Organization Structure

Pure Project Organization Structure

Merits Demerits
1. The project manager has 1. High cost of maintaining a
complete line authority over the separate Organization for each
project project
2. Strong communication links 2. Project personnel may not have
develop, each reports to only 'home' to return to and may
one boss unnecessarily retained
3. Rapid reaction times and after the project is over
reduced lead time on project 3. Resources dedicated for the
activities project may have to be
4. Flexibility in cost, schedule, and acquired in advance
performance trade-offs 4. Decline in morale as project
5. Can maintain qualified nears completion
personnel for dedicated
work on project
6. Easier interface management
Contractor’s Site Organization

• Once the contract is signed between the

contractor and the employer, the contractor has
to start the work within stipulated time(after
mobilization).
• Depending on the type of the project, to carry
out the work smoothly and effectively, contractor
has to employ staff to take the charge of the
work.

Project Manager

Office Deputy Project Site

Manager Manager Engineer

Sanitary Electric Concrete Carpentry Assistant

Accountant
Forman Forman Forman Forman Engineer

Office
Clerk Fitters Electricians Gangers Carpenters
Engineer

Store
keeper Laborers Assistants Laborers Laborers Draftsmen

Secretary
Typical contractor’s site
organization
Engineer’s Site Organization
• The team has to perform mainly the following
jobs:
1. They have the responsibility of supervising
the construction of works as laid in the
contract documents.
2. They are also administer the contract.
3. They make revisions as necessary.

Engineer

Resident
Engineer

Office Contract Specialist

Deputy RE
Manager Engineer Engineers

Accountant Assistant Soil, Concrete,

Clerk
Clerk Engineer etc

Draftsmen, Surveyors,
Secretary Recorder
Inspectors etc

Typical Engineer’s site organization

5. Site Layout

Site layout will be designed to:

• Facilitate free and smooth movement of vehicles
and people
• Material storages will be so located and arranged
to facilitate easier and faster supply to trades
preparing them for placement in permanent
structure
• Work stations will be so located and designed to
minimize distance workers move, and facilitate
placing of materials in the permanent structure
(formwork, re-bars and fresh concrete)

Construction(Job) Site

• A construction site is like a factory. Both

transform row materials into a finished, permanent
product that is more than the sum of its parts.
• Each new product that come to the factory requires
only minor retooling at the plant.
• But construction site deals with one unique
product. When product is complete, site is
disbanded and its parts sent off to new sites.
Advantage:
• site is set up specifically to manage a project most
efficiently.
Disadvantage:
• lessons learned are not transferable to the next project.
This is unique challenge of construction.
➢Before the contractor sets up the job site, the contractor
should plan it on paper.
➢A scaled version of the site, with dimensions, access road,
utility locations, elevations, and existing structures, should
be noted. Then decide how people will move into and
around the site.

Typical jobsite layout 2D

 Typical jobsite layout 3D

• A good job layout will pay a good dividend to the

construction programs.

The following points to be considered

• The entry should be near to the engineer’s office
• The check post and watchman cabin near to the exit
• Testing lab near to the engineer’s office
• The materials to be stored near to the site
• The job layout plan should include all the other facilities
such as labor camp, garage, workshop, power house,
parking, etc.
• For the site to operate efficiently over time, many
organizational and procedural decisions and policies
need to be made.

• Contractor's designated area for storage

• Designated locations for lunch and breaks
• Use of toilet facilities
• Start and finish times for work; regular and overtime rules
• Security access after hours
• Everyday access to and from the site
• Safety rules and first-aid stations
• Emergency evacuation and accident procedures.

• Superintendent must ensure that each new employee is

aware of these rules and obey them.

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