(A) BBM 2103 ORGANIZATION BEHAVIOUR

Purpose: Enable the learner understand the importance of business organizational behaviour in achieving
its goals and objectives
Course Objectives: By the end of the course the students should be able to:-
• Define organizational behavior and culture
• Explain quality organization leadership
• Explain motivation and theories of motivation
• Describe methods of organization communication
Course Content:
Introduction to basic concepts in organization behavior; Organization behavior at individual and group
levels; Describing the organization as a whole and its components parts; Interpersonal and group
relationship; decision making process; Organization power and politics; Group dynamics
Leadership and its role in achieving organization goals and objectives; Motivation and theories of
motivation; Organization communication process.

Organisational Behaviour simply is a process of studying and understanding the behaviour of individuals
in the organisation.

Organizational Behaviour is concerned with the understanding, prediction and control of human behaviour
in organizations. It focuses on the individuals, the groups and the organization and also on their interactional
relationships. It is the study and application of knowledge about how people act with organizations.

It is a part of the management process which aims at improving the performance of organisations through
understanding and controlling human behaviour.

It is through the organisational behaviour that organisations are able to understand the behaviour of the
people working with them. Once they get to know about their peoples, organisations can easily influence and
motivating them towards achievement of goals.

Importance of organization behaviour

1)Improves The Satisfaction Of Employees
Organisation behaviour is mainly concerned with understanding the nature of peoples working in the
organisation. It gives the complete idea of how people will respond to the organisation. This helps employers
in treating their employees properly and providing them with better facilities.

2)Reduce The Chances Of Conflicts

Every business aims to avoid conflict with their employees. Organisation behaviour helps in developing
better relations among employees and also among employer and employee.

3)Facilitates Management
It is basically concerned with managing and influencing the individuals working in an organisation.
Managers find it easy to manage all the staff when they have a better understanding and knowledge
regarding their subordinates.

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4)Motivating Employees
It supports managers in motivating the people working under them towards their roles. Managers with
application of organizational behavior are easily able to identify their needs and problems. They develop
better understanding towards them. By focusing and fulfilling their needs efficiently, they can be motivated
to work with full dedication towards achievement of desired targets.

5)Increases Organisational Efficiency

It aims at increasing the efficiency of the organisation through maximum utilisation of resources.
Organisational behaviour attempts to reduce the wastage of resources. It helps in the identification of the
right type of human skill required for the organisation for better productivity. Accordingly, the selection and
recruitment process is conducted to hire the right peoples. It minimizes the wastage of cost and time
involved in these processes.

6)Develops Positive Attitude

Organisational behaviour develops a positive working environment within the organization as it leads to co-
operation and mutual trust among peoples working in the organisation. It makes it easy to predict the
individual’s behaviour, needs and requirements.

7)Helps In Performance Appraisal

Organizational behavior helps management in appraising the work quality of employees by providing them
with all details regarding them.

8)Understands Employee’s Behavior

It acquires and provides all information regarding behavioral aspects of employees to managers. Managers
are able to get which employees behave in what way while performing their roles.

9)Optimum Utilization Of Employees

. It enables managers to understand the working styles of employees and their skills and weakness.
Management with the help of proper understanding can impart proper training and develop employees for
using them in an optimum way. It ensures that right man is placed at right job and delivers efficient output.

10)Stimulates Innovation And Change

Every business is required to keep itself updated in terms of technological changes to beat competition in
market. Organizational behavior studies all market changes and requirements from time to time. It provides
all such information to management for implementation of required market changes within the organization.
It support business in bring innovative and differentiated products in market at minimized cost.

Features (Characteristics) of OB

1) OB is a part of general management and not the whole of management. It represents behavioural
approach to management.

2) OB contains a body of theory, research and application associated with a growing concern for
people at the work place. It helps in understanding human behaviour in work organizations.

3) OB is a human tool for human benefit. It helps in predicting the behaviour of individuals.

4) OB is inter-disciplinary field of study. It tries to synthesize knowledge drawn from various

behavioural and social sciences such as Psychology, Sociology, Anthropology, Political-science,
Economics, etc. In fact, OB is an applied behavioural sciences.

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 5) OB involves three levels of analysis of behaviour-individual behaviour, group behaviour and
behaviour of the organization itself.

6) OB is an action-oriented and goal-directed discipline. It provides a rational thinking about people

and their behaviour

7) OB is both a science and an art. The systematic knowledge about human behaviour is a science.
The application of behvioural knowledge and skills clearly leans towardss being an art.

8) OB seeks to fulfil both employees’ needs and organizational objectives.

Key Elements in OB
The key elements in organizational behaviour are people, structure technology and the environment in which
the organizations operates. When people join together in an organisation to accomplish an objective, some
kind of structure is required. People also use technology to help get the job done, so there is an interaction of
people, structure and the technology as shown bellow. In addition, these elements are influenced by the
external environment, and they influence it.

People

Environment Environment

Organization

Structure Technology

Environment

People: People make up the internal social system of the organisation. They consist of individuals and
groups. There are formal and informal groups. Groups are dynamic.

Structure: Structure defines the formal relationships of people in organisations. Different jobs are required
to accomplish all of an organisation’s activities. There are managers and employees who have to be related
in some structural way so that their work can be effectively co-ordinated.

Technology: Technology provides the resources with which people work and affects the tasks that they
perform. The technology used has a significant influence in working relationships.

Environment: All organizations operate within an external environment A single organisation does not exist
alone. It is part of a larger system that contains many other elements such as Govt, the family, and other
organizations. .

Contributing disciplines to the ob field

1)Psychology
Psychology is the behavioral science that studies human behavior and mental processes. It is the science
of humans. It is the best tool to understand why people think, what they think, and how they think.
Psychology helps to know why people think and behave the way they do. Psychology has contributed
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many important concepts to OB, such as:
Motivation,Learning,Perception,Personality,,Emotion,Training.Employee,Selection,Attitude,Work
Design;Job Stress, etc.

2) Sociology
Sociology is the study of human behavior in a social setting consisting of human interaction, social ties,
growth of society, structure, and regulations. Sociologists study humans in group behavior. The major
contributions areas of sociology are group dynamics, status, culture, status, power, communication,
socialization, organizational change, and technology. Sociologists view an organization as a system
consisting of a variety of people having different roles, statuses, power, and authorities.
A manager should use the concept of sociology to understand a group’s behavior at both group and
organizational levels and take appropriate managerial actions.

3) Social Psychology
Social psychology is the combination of both psychology and sociology. It studies the social behavior and
thought of people plus how people think, feel, process, and act. It explains the interaction, interdependence,
and influence of people among one another. It studies the behavior of people at the group level. Social
psychologists study various areas combining both sociology and psychology but the most important for
organizational behavior are the concept of behavioral change, attitude change, communication, group
process, and group decision making.

4) Anthropology
Anthropology is the science of humans. It studies the evolution or development stages of human beings
consisting of human nature, different societies, and how different cultures are developed.
It also studies how humans interacted with their environment, how they are now, and how in the future and
how humans are civilized. It helps to understand the society of humans and their activities. Its major
contributions include comparative values, attitude, analysis, and norms and it helps to understand cultural
factors in organizational settings such as organizational culture, environment, power, and so on.

5) Political Science
Political science deals with politics and its practices in different scenarios. It mainly concerns the
allocation of power, conflict resolution, group coalition, and how to manipulate power for individual self-
interest. Its concerns in OB mainly deal with the allocation of power to the employees, manipulation, and
controlling of conflicts in the organization. The study of politics helps managers to understand the
dynamics of power and politics and help apply them in the organizational settings in a proper way.

6) Medicine
Medicine is the branch of health science that deals with the identification and treatment of diseases to
improve the health of people. It treats both physical and psychological diseases of people.
While treating people it observes their behavior of people and tries to find out the causes. Some causes are
related to the body and some are mental. In organizational settings, employees also suffer from
psychological diseases, and applications of medical science help managers organize different wellness
programs so that employees’ health will be improved and they are ready again to work.

7) Economics
The science of economics is related to the cost. It is the study of how to minimize cost, how to best use
scarce resources, and achieve more from less. To run the daily operations of the organization there is a
need for money. The study of economics helps managers to best use the organization’s limited resources.
And, economic factors such as labor market dynamics, wages, demand-supply, cost of production, etc. also
influence organizational behavior

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 SCOPE OF OB
1. Individual Behaviour
a) Personality
b) Perception
c) Values and Attitudes
d) Learning
e) Motivation

2. Group Behaviour
a) Work groups and group dynamics
b) Dynamics of conflict
c) Communciation
d) Leadership
e) Morale

3. Organization: Structure, Process and Application

a) Organizational Culture
b) Organizational Change
c) Organizational Effectiveness
d) Organizational Development

INDIVIDUAL BEHAVIOUR
A) PERSONALITY
Personality refers to the sum total of ways in which an individual reacts and interacts with others.
Personality determinants include heredity, environment and situation.

Personality traits: The early work in the structure of personality revolved around attempts to identify and
label enduring characteristics that describe an individual’s behaviour. Popular characteristics include shy,
aggressive, submissive, lazy, ambitious, loyal, or timid. These characteristics, when they are exhibited in a
large number of situations, are called traits.

1) Biological Factors:
a) Heredity: It means the transmission of the qualities such as physical stature, facial attractiveness, sex,
temperament, muscle composition, reflexes etc, from the ancestors and parents to the descendants.
Heredity is generally more important in determining a person’s temperament than his values and ideals.

b) Brain: There is a general feeling that brain plays an important role in the development of one’s
personality..

c)Physical features: An individual’s external appearance may have a tremendous effect on his
personality. Such factors include height, weight, colour, facial features, etc. of the individual.

2) Cultural Factors
Among the factors that influence personality formation is the culture in which we are raised, early
conditioning, norms prevailing within the family, friends and social groups and other miscellaneous
experiences that impact us.
The culture largely determines attitudes towards independence, aggression, competition, cooperation and
a host of other human responses.

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3) Family Factors
Whereas the culture generally prescribes and limits what a person can be taught, it is the family, and later the
social group, which selects, interprets and dispenses the culture. Thus, the family probably has the most
significant impact on early personality development.
A substantial amount of empirical evidence indicates that the overall home environment created by the
parents, in addition to their direct influence, is critical to personality development.
The parents play an especially important part in the identification process, which is important to the person’s
early development.

4) Social Factors
There is increasing recognition given to the role of other relevant persons, groups and especially
organisations, which greatly influence an individual’s personality. This is commonly called the socialization
process. Socialization involves the process by which a person acquires, from the enormously wide range
of behavioural potentialities that are open to him or her, those that are ultimately synthesized and absorbed.

Socialization starts with the initial contact between a mother and her new infant. After infancy, other
members of the immediate family – father, brothers, sisters and close relatives or friends, then the social
group: peers, school friends and members of the work group – play influential roles.
.
5) Situational Factors
Human personality is also influenced by situational factors. The effect of the environment is quite
strong. Knowledge, skill and language are obviously acquired and represent important modifications of
behavior. An individual’s personality, while generally stable and consistent, does change in different
situations. The varying demands of different situations call forth different aspects of one’s personality.

Personality types/ attributes influencing OB

1) Locus of Control
Locus of control is a personality trait possessed by people who believe that their internal or external
factors are responsible for their behaviour. Such individuals believe that life's events are either under the
person's control (the internal focus of control) or are due to reasons that are beyond their control (external
locus of control).
The people who believe that they control their destinies are called externals, whereas those who see their
lives are controlled by outside forces are labelled "externals. Internals typically have more control over
their behaviour, are more active in seeking information to make decisions, and are more active socially
than externals.

2)Machiavellianism
Another trait is Machiavellianism, which owes its origins to Niccolo Machiavelli. People with a strong
Machiavellianism personality are more influenced and successful but are less influenced by others. The
reverse happens with people having weak Machiavellianism personalities. A person high in Machiavellian
orientation approaches situations thoughtfully and logically and is even capable of lying to achieve his own
personal goals. They are rarely swayed by friendships, past promises, loyalty, or the opinions of others, and
they are skilled at influencing others. A person low in Machiavellianism tends to accept direction imposed
by other people in loosely structured situations and works hard to do well in highly structured situations.

3) Self-Esteem
People tend to feel proud of their competence and at times about themselves. This kind of emotion is
termed self-esteem. The ones with high self-esteem feel that they are competent and commendable enough
to handle any kind of situation.

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 On the contrary, the ones with low self-esteem are always in doubt about their abilities and knowledge.
They are never sure about their true potential and are always afraid that they would fail in life.

4) Self-Monitoring
Self-monitoring refers to the degree to which people control how they display themselves in front of other
people. These people control their behaviour and follow the norms that are socially acceptable and suitable.
Such people are regarded as high self-monitors. They put effort so that their behaviour is situationally
appropriate. High self-monitors are better skilled to customise their behaviours as per the situation.

5) Risk-Taking Personality
Risk-taking is the person's willingness to take risks. People with a high propensity for risk make decisions
faster and are willing to take chances. Risk-aversive people are more cautious, make decisions more
carefully, and try to minimise risk.

6) Proactive Personality
Proactive personality is defined as an individual's tendency to intentionally and directly affect change in the
environment. A proactive personality describes people who identify opportunities, show initiative, take
action, and persevere until meaningful change occurs.

7) Type A and Type B

Individuals with intolerant, competitive and hostile personalities are termed Type A whereas Type B
personalities are stress-free, relaxed and casual in nature.

Type A Personality
People with Type A personalities appear to be ones with a lot of hurry and eagerness. Such people give
priority to money and finances to such an extent that they believe that even their relationships must depend
on money .People with Type A personalities give more importance to their work as compared to their
relationships.

They are always interested in doing something worthy; otherwise, they will feel guilty about wasting their
time. The positive aspect of Type A personality is that such people are winners. Since they give their best
to every project, even if they are totally ignorant of the concept, still, they accomplish the task successfully
due to their competitive and adventurous nature.

They tend to set up a timetable for themselves and then stick to it. The most evident trait of Type A
personality is hostility and restlessness. They display unfriendliness and impoliteness many times
Alternatively, they are highly motivated and are positive thinkers.

Type B Personality
People with Type B personalities are totally opposite to Type A people. They are silent, tolerant, and
relaxed a belief in doing things at their own pace. They tend to take up things slowly, think before coming
to conclusion and might postpone work till the last minute.
They are social people and like to interact with both friends and strangers. They receive a lot of attention
everywhere and are more comfort-seeking than driven towards success while at work.
They are kind, thoughtful and friendly and have the talent of building strong relations and also striking a
balance between work and personal life.
They usually lead a satisfied and happy life They can also be portrayed as bombers and human magnets
who grab the attention wherever they go m minimum effort. All these traits make Type B unique among all
personality types.

8) Need Patterns

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 Several people have an immense desire to stand out by performing difficult jobs and meeting their own
standards of perfection. They prefer taking responsibility for challenging situations and then like to get
genuine feedback on the entire effort. Such kinds of people are found in jobs that give them a chance to
quench their thirst for excellence.

9) Authoritarianism
The main idea here is that within an organisation, there exists a difference in power and status among
employees. A person who has an authoritarian personality believes in enforcement and obedience of
authority.
He has negative opinions about other people and is rationally inflexible. Authoritarians consider their
beliefs to be ethically supreme and give excessive importance to rules and regulations. For such a person, a
steady work environment governed by clear-cut norms is preferred.

10) Introversion and Extroversion

Introversion and Extroversion are generally associated with an individual's sociability and interpersonal
orientation. These two major types of personality are discussed as follows:

i)Introverts: Introverts are concerned with their own thoughts and feelings. They are quieter than
extroverts and prefer to be removed from the social world. As such, they are happy being alone.
Introverts do socialise, but it will be with a few close friends rather than with large groups of people. They
will probably feel lonelier in a crowd than on their own. Introverts prefer to plan and analyse things and are
careful in their decision-making.

Introverts tend to be low-key, deliberate, and relatively less engaged in social situations. They often take
pleasure in solitary activities such as reading, writing, drawing, watching movies, and using computers.
The archetypal artist, writer, sculptor, composer, and inventor are all highly introverted.

An introverted person is likely to enjoy time spent alone and find less reward in time spent with large
groups of people (although they tend to enjoy interactions with close friends). They prefer to concentrate
on a single activity at a time and like to observe situations before they participate.

ii) Extroverts: Extroverts are interested in the external world. Their focus is on people and objects. They
enjoy being with others and like group activities. As such, they like to be noticed. Extroverts find it
difficult to be alone and feel lonely if they are not with other people. Possessions and success are valued by
an extrovert.
Extrovert people tend to enjoy human interactions and to be enthusiastic, talkative, assertive, and
gregarious. They take pleasure in activities that involve large social gatherings, such as parties, community
activities, public demonstrations, and business or political groups.
Acting, teaching, directing, managing, and brokering are fields that favour extroversion. An extroverted
person is likely to enjoy time spent with people and find less reward in time spent alone. They enjoy risk-
taking and often show leadership abilities

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2)PERCEPTION
Perception is a process by which individuals organize and interpret their sensory impressions in order
to give meaning to their environment . It is the process of interpreting something that we see or hear in
our mind and use it later to judge and give a verdict on a situation, person, group etc

Perceptual Process
A) Perceptual Inputs
Perception input means the stimuli available in the environment. These stimuli include objects, events and
people. When a person comes in contact with the stimuli in the environment, the process of perception
starts. Characteristics of stimuli, characteristics of the perceiver himself and the situation have a significant
role to play in the choice of stimuli by an individual. In reality, perceptual inputs is not a part of the process
of perception but it is needed to start the process of perception. The process is as follows:

1) Receiving –Receiving is the first and most important stage in the process of perception. It is the initial
stage in which a person collects all information and receives the information through the sense organs.

2) Selecting- Selecting is the second stage in the process. Here a person doesn’t receive the data randomly
but selectively. A person selects some information out of all in accordance with his interest or needs. The
selection of data is dominated by various external and internal and situational factors factors.

3)Organizing- Keeping things in order or say in a synchronized way is organizing. In order to make sense
of the data received, it is important to organize them.

4) Interpreting -Finally, we have the process of interpreting which means forming an idea about a
particular object depending upon the need or interest. Interpretation means that the information we have
sensed and organized, is finally given a meaning by turning it into something that can be categorized. It
includes stereotyping, halo effect etc.

B) Perceptual Outputs
When the perceptual inputs go through the process of perceptual throughputs, perceptual outputs start
appearing. In other words, at this stage the results of the perception process can be seen. These results are
in tune with the individual’s opinions, attitudes, values, feelings, etc. The results of this perception process
influences the behaviour of an individual along with some other factors.

Importance of Perception in OB
We need to understand what the role of perception in an organization is. It is very important in establishing
different role of perceptions like −
a) Understanding the tasks to be performed.
b) Understanding associated importance of tasks allotted.
c) Understanding preferred behavior to complete respective tasks.
d) Clarifying role perceptions.

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 Factors that Influence Perception
1. Characteristics of the Perceiver ( Internal factors)
The major characteristics of the perceiver influencing perception are:
a) Attitudes- Attitudes have a powerful influence on what we pay attention to, what we remember, and
how we interpret information. Different attitudes lead to different interpretations.
b) Motives- Motives stimulate individuals. It is unsatisfied need. They exert strong influence on
perception. For example; hungry people tend to see images of food.
c) Emotions- An individual’s emotional state strongly influences perception. Anger and frustration distort
perception.
d) Interests- Individual interests differ considerably. Interest influences the focus of attention. Differences
in individual interests result in differing perceptions.
e) Experiences- Past experiences affect the focus of attention. Individuals tend to perceive those objects or
events to which they can relate to.
f) Expectations- People see what they expect to see.

2. Characteristics of the Target( External factors)

Characteristics in the target that is being observed can affect what is perceived. Physical appearance plays a
big role in our perception of others. Extremely attractive or unattractive individuals are more likely to be
noticed in a group than ordinary looking individuals.
a) Novelty- Novelty targets are more likely to be noticed than the targets observed in the past.
b) Motion, sound, size- They shape the way we see the target. Loud people are more likely to be noticed.
c) Background- a target is not looked at in isolation. The relationship of target to its background
influences perception.
d) Proximity- Objects that are close to each other tend to be perceived together.
e) Similarity- Similar things need to be grouped together. For example; black people are perceived as
alike even in unrelated characteristics.

3. Characteristics of the Situation

The factors in the situation that affect perception are:
a) Time- The time at which an object or event is seen affects perception. For example; a daily report
arriving after two days may be ignored by the perceiver.
b) Work setting- The changing context of the work setting influences perception. For example; stressful
work situations distort perception.
c) Social setting- The changing social setting influences perception. For example; a male student wearing
earrings may not be noticed in a disco but highly noticeable in the classroom.

Reasons as to why people see things differently.

1) Their physical senses vary e.g. color blindness, less than perfect vision, poor hearing, imperfect
sense of smell .
2) Healthy differences.
3) Their general intelligence levels vary.
4) Nature and effects of past experienced are different for individuals .
5) Individual values and attitudes cause people to see things differently
6) Personality differs and thus individuals tend to adopt particular stances towards outside events.

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 7) Individuals aspirations and goals also differ widely and these affect the relative importance attached
to outside events.
8) Status.
9) The situation or context in which perception take place can have a major bearing on the behavior
of the perceiver .
10) The number of parties involved.

3) VALUES
Values are defined in Organizational Behavior as the collective conceptions of what is considered good,
desirable, and proper or bad, undesirable, and improper in a culture.
Values represent basic convictions that “ a specific mode of conduct or end state of existence is
personally or socially preferable to an opposite or converse mode of conduct or end state of
existence.
Values contain a judgmental element in that they carry an individual idea as to what is right, good or
desirable.

In organization behavior values are important study because they lay on foundation for the
understanding of attitudes , perceptions and motivation. Values can be reactive, tribalism, egocentric ,
conformity, manipulative Socio centric, existential.

Sources of values are

1) Family: A child leams his first value from his family.
2) Friends & peers: Friends and peers play a vital role in achieving values.
3) Community or society: As a part of society, a person leams values from society or different groups of
society.
4) School: As a learner, school and teachers also play a very important role in introducing values.
5) Media: Media such as – Print media, Electronic media also play the role of increasing values in the mind
of people.
6) Relatives: Relative also helps to create values in the minds of people.
7) Organization: Different organizations and institutions also play a vital role in creating value.
8) Religion.
9) History.
10) Books.

4) ATTITUDES
Meaning: Attitudes are our feelings, thoughts and behavioral tendencies towards a specific object or
situation. Attitude is a predisposition to respond to a certain set of facts. Attitudes are evaluative statements –
either favourable or unfavorable, concerning the objects, people or events. In the language of the layman,
we may describe an attitude as the way we feel about something. This may be a feeling towards college,
cricket team, temple, democracy, parents, things, ideas, policies and so on.
Attitudes are complex cognitive process but can be characterized in three ways:
a) They tend to persist unless something is done to change them
b) Attitudes can fall anywhere along the continuum from very favorable to very unfavorable
c) Attitudes are directed towards some object about which a person has feelings and beliefs.

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 1)Basic components of attitude
Affective component: The attitudes of the affective component are mentioned as emotion connected with
the attitude. The responses stimulate the attitude in various ways. The effective way in which emotions
influence attitudes because of the emotional reactions that stimulate the individual after contact with the
attitude object. For example, many individuals represent the spiders to make them get afraid. The negative
effects are reactions to the formation of a negative approach toward spiders. Emotions can become
connected with objects in numerous ways.

2)Cognitive component: The attitudes of the cognitive component are mentioned as beliefs connected with
the object. The individual attitudes are based majorly upon deliberation of the positive and negative
attributes about the object. For example, the individual recently buys a new car; he committed considerable
notice to factors like safety record of vehicles, petrol mileage, and repair costs.

3)Behavioral component: The attitudes of the cognitive component are mentioned as past behaviors
connected with the object. For example, the individual might deduce that they have negative thoughts about
the nuclear power plants that were stored by formerly signing a petition opposite to have the nuclear power
plant built near their area..

Attitude formation
The question often arises “where do attitudes come from”? Attitudes are basically learned. People are not
born with specific attitudes, rather they acquire them through the “process of learning”. The determinants of
a person’s attitudes are as follows:

1. Past Experience: Individuals learn attitudes through job experiences. They develop attitudes about such
factors as salary, performance reviews, job design, work group affiliation and managerial capabilities.

2. Association: The major groups, associations, geographic region, religion, educational background, race, sex,
age and income – class strongly influence our attitudes.

3. Family: Individuals develop certain attitudes from their family members – parents, brothers, sisters, etc.

4. Peer groups: As people approach their adulthood, they increasingly rely on their peer groups for approval,
attitude. We often seek out others who share attitudes similar to our own, or else we change our attitudes to
confirm to the attitudes of those in the group whose approval is important to us.

5. Society: Social class, religious affiliation, culture, languages and the structure of society influence the
formation of attitudes. For ex., the attitudes of Russians towards communism are radically different from
those held by an average American.

6. Personality factors: Personality factors such as individuality, self – confidence, independence, creativity,
innovation, defensiveness etc., also determine the formation of attitudes.

Functions of Attitude
1. The adjustment function

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Helps people adjust to their work environment .When the employees in an organization are well
treated by the boss, they will develop a positive attitude toward supervision and the organization
.When the boss treats the employees negatively , the opposite is the true. When employees are
criticized and given a minimal salary, they are likely to develop a negative attitude toward management and
the organization. These attitudes help employees adjust to their environment and are a basis for future
behavior.

2. The ego-defensive function

The ego-defensive function refers to holding attitudes that protect our self-esteem or that justify actions that
make us feel guilty. This function involves psychoanalytic principles where people use defense mechanisms
to protect themselves from psychological harm. Mechanisms include denial, repression, projection,
rationalization, etc. For example; an older manager whose decisions are continually challenged by a younger
subordinate manager may feel that the latter is immature, and inexperienced. In truth, the younger
subordinate may be right in challenging the decisions. The older manager may not be a very effective leader
and may constantly make poor decisions. On the other hand, the older manager is not going to admit this but
will try to protect the ego by blaming the other party.

3. The value expressive

Whereas ego defensive attitudes are formed to protect a person’s self-image, value-expressive attitudes
enable the expression of the person’s centrally held values. Central values tend to establish our identity
and gain us social approval thereby showing us who we are, and what we stand for. Some attitudes are
important to a person because they express values that are integral to that person’s self-concept. Our value-
expressive attitudes are closely related to our self-concept. One whose central value is freedom, the
individual may express very positive attitudes towards the decentralization of authority in the organization,
flexible work schedules, and relaxation of dress standards.

4.Knowledge Function
The knowledge function refers to our need which is consistent and relatively stable. This allows us to predict
what is likely to happen, and so gives us a sense of control. Some attitudes are useful because they help to
make the world more understandable. They help people ascribe causes to events and direct attention towards
features of people or situations that are likely to be useful in making sense of them. Consequently, they help
to make the world more understandable, predictable, and knowable. Knowing a person’s attitude helps us
predict their behavior.

Ways of Changing Attitude

1) New information will help to change attitudes.
2) Attitudes may change through direct experience.
3) By resolving discrepancies between attitudes and behavior.
4) Through the persuasion of friends or peers.
5) Through legislation.
6) Since a person’s attitudes are anchored in his membership group and reference groups, one way to
change the attitude is to modify one or the other.
7) Fear.If low levels of fear are used, people often ignore them.

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5) LEARNING
Learning is a process in which experience brings about permanent changes in behaviour or
attitudes .The study of learning has had to concentrate on observable changes.
Learning is a process by which human beings becomes aware of themselves and their environment
and the need to adopt the one to the other in order to survive, grow and prosper .

Learning is a process by which people acquire knowledge , understanding skills and values and apply
them to solve problems throughout their daily life.

Theories of learning
1) Classical Conditioning Theory: Classical conditioning is a type of conditioning in which an individual
responds to some stimulus that would not ordinarily produce such as response. It is the process of
learning to associate a particular thing in our environment with a prediction of what will happen next.
When we think of the classical conditioning, the first name that comes to our mind is Ivan Pavlov, the
Russian psychologist.

The normal stimulus for a flow of saliva is the taste of food. But often the mouth waters at the mere sight
of luscious peach, on hearing it described or even thinking about it. Thus, one situation is substituted for
another to elicit behavior. This is called conditioning. In the case of classical conditioning, a simple
surgical procedure allowed Pavlov to measure accurately the amount of saliva secreted by a dog.

When Pavlov presented one dog with a piece of meat, the dog exhibited a noticeable increase in salivation.
When Pavlov withheld the presentation of meat and merely rang a bell, the dog did not salivate. Then
Pavlov proceeded to link the meat and the ringing of the bell. After repeatedly hearing the bell before
getting the food, the dog began to salivate as soon as the bell rang. After a while, the dog would salivate
merely at the sound of the bell, even if no food was offered.

In classical conditioning, learning involves a conditioned stimulus and an unconditioned stimulus. Here,
the meat was unconditioned stimulus; it invariably caused the dog to react in a specific way. The reaction
that took place whenever the unconditioned stimulus occurred was called the unconditioned response.
Here, the bell was a conditioned stimulus. When the bell was paired with the meat, it eventually produced a
response when presented alone. This is a conditioned response

2)Operant Conditioning Theory

Here, we learn that a particular behavior is usually followed by a reward or punishment. What Pavlov did
for classical conditioning, the Harvard psychologist B.F. Skinner did for operant conditioning. Operant
conditioning argues that one’s behavior will depend on different situations. People will repeatedly behave
in a specific way from where they will get benefits.

On the other hand, they will try to avoid a behavior from where they will get nothing. Skinner argued that
creating pleasing consequences to specific forms of behavior would increase the frequency of that
behavior.
In one famous experiment displaying operant learning, the psychologist B.F. Skinner trained rats to press a
lever to get food. In this experiment, a hungry rat placed in a box containing a lever attached to some

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concealed food. At first, the rat ran around the box randomly. In this process, it happened to press the lever,
and the food dropped into the box. The dropping of food-reinforced the response of pressing the lever.

After repeating the process of pressing the lever followed by dropping off food many times, the rat learned
to press the lever for food. People will most likely engage in desired behaviors if they are positively
reinforced for doing so. Rewards are most effective if they immediately follow the desired response. Also,
behavior that is not rewarded, or is punished, is less likely to be repeated.

3)Cognitive Theory
Cognition refers to an individual’s thoughts, knowledge of interpretations, understandings, or ideas about
himself, and his environment. This is a process of learning through active and constructive thought
processes, such as a practice or using our memory. One example might be that you were taught how to tell
time by looking at a clock. Someone taught you the meaning of the big hand and little hand, and you might
have had to practice telling the time when you were first learning it.

This process of learning was entirely inside your mind and didn’t involve any physical motions or
behaviors. It was all cognitive, meaning an internal thought process. The theory has been used to explain
mental processes as they are influenced by both intrinsic and extrinsic factors, which eventually bring
about learning in an individual. Cognitive learning theory implies that the different processes concerning
learning can be explained by analyzing the mental processes first.

4)Social Learning Theory

The social learning theory also called observational learning, stresses the ability of an” individual to learn
by observing what happens to other people and just by being told about something. One can learn things by
observing models, parents, teachers, peers, motion pictures, TV artists, bosses, and others.

ORGANIZATION CULTURE
Culture sums up the dominant values visions, perspectives ,standards and models of behavior that are
in organizations.
The shared beliefs, values and expectations held by individual also constitute organization
culture.

Organization culture is defined as a pattern of basic assumptions invented , discovered or

developed by a group as it learns to cope with its problems of external adaptation and internal
integration that has worked well enough to be considered valuable and therefore to be taught to new
members as the correct way to perceive ,think and feel in relation to these problems.( Edgar Schein)

Organizational culture is the collection of values, expectations, and practices that guide and inform the
actions of all team members. Think of it as the collection of traits that make your company what it is. A
great culture exemplifies positive traits that lead to improved performance, while a dysfunctional company
culture brings out qualities that can hinder even the most successful organizations.

Organization culture can therefore said to be the essential collection of shared values which
provide both explicit and implicit sign post to preferred behavior in the organizations.

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Organization culture refers to a system of shared meaning held by members that distinguishes the
organization from other organizations.

Functions of cultures
1. Provides a Sense of Identity
Organizational culture conveys a sense of identity for organization members. Many are known as a fun
place to work that values employee satisfaction and customer loyalty over corporate profits.

2. Generates Collective Commitment

Organizational culture facilitates the generation of commitment to an organization’s mission which is
larger than one’s individual self-interest. When there is a strong, overarching culture, people feel that they
are part of that larger, well-defined whole. Firms with good culture may be committed to the highest
quality of customer service.

3. Reinforces Values and Behaviours

Organizational culture clarifies and reinforces standards of behavior. It guides employees with words and
deeds. Thus, it is especially useful to newcomers. In this sense, organizational culture provides stability to
behavior. It also reinforces the values in the organization. It helps employees understand why the
organization does what it does and how it intends to accomplish long-term goals.

4. Promotes Social System Stability.

Social system stability reflects the extent to which the work environment is perceived as positive and
reinforcing and the extent to which conflict and change are effectively managed.

5. Gives Members a Clear Vision

An organizational culture gives its members a clear vision of the organization’s mission.
It also presents a consistent image to its markets, customers, and clients. Over time, this image can give an
organization a competitive advantage by building commitment to its products or services.

6. Defines Rewards and Sanctions

Organizational cultures define the rewards and sanctions that managers can use. Rules develop about how
good performance will be rewarded and about what sanctions will be levied for poor performance.
Organizational cultures differ in the way they use reward systems.

7. Integrates Subsystems and Processes

Organizational culture also helps integrate organizations’ subsystems and processes.
The integration lets the organization coordinate its various actions effectively. Common language develops
within a culture, helping communication.

8. Defines Boundaries of Group

Organizational culture defines boundaries of group and criteria for inclusion in the group. Well-defined
group boundaries enhance members’ identification with the group and the group’s work. Strong groups
support and help members get their work done.

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9. Defines Rules for Power and Relationships
Organizational cultures define rules for power, rules for social stratification, and the ways in which social
status is determined. Some accord social status and power to people of high achievement. Others base staus
and power on seniority. The nature and quality of peer relationships and interpersonal interactions are also
defined by the organization’s culture.

10. Develops an Ideology

The last organizational culture function is the development and communications of an ideology that defines
what the organization is all about. An ideology is a set of overarching values that collect all the basic
assumptions embedded in the organization’s culture. An ideology is a guide to action. It is
communicated to the newcomers.

11. Serves as a Control Mechanism

Organizational culture also serves as a control mechanism for shaping behavior. Norms that guide behavior
are a part of the culture

12. Other Functions

1) Organizational culture is an important source of stability and continuity to the organization.
2) It helps newer employees interpret what goes on inside the organization.
3) It helps stimulate employee’s enthusiasm for their tasks.
4) It expresses the rules of the game for getting along and getting things done and ways of interacting
with outsiders.
5) It defines organizational goals

Characteristics of Organization Culture

i. Innovation and risk taking: The degree to which employees are encouraged to be innovative and
take risk.
ii. Attention to detail :The degree to which employees are expected to exhibit precision ,analysis
and attention to detail .
iii. Outcome orientation . The degree to which management focuses on result or outcomes rather than
on the techniques and processes used to achieve those outcomes.
iv. People orientation : The degree to which management decisions take into consideration the effect
of outcomes on people within organization.
v. Team orientation : The degree to which work activities are organized around teams rather than
individuals.
vi. Aggressiveness: The degree to which people are aggressive and competitive rather than easy going
vii. Stability: The degree to which organizational activities emphasize maintaining the status quo in
contrast to growth.
viii. Norms: Standard to behavior exist including guidelines on how much work to do.
ix. Dominant values: These are those values that the organizations advocates and expects
from the participants in an organization e.g. High quality, low absenteeism and high efficiency.
x. Rules: These are strict guidelines related to getting along in the organization

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Creating an Ethical Organization Culture
1. Be a visible role model: Employees will look to top management behavior as bench mark for
defining appropriate behavior.

2. Communicate ethical expectations: Ethnical ambiguities can be minimized by creating and

disseminating an organizational code of ethics. It should state the organization’s primary values and
ethical rules that employees are expected to follow.

3. Provide ethical training: Set up seminars ,workshops and ethical training programs .Use the
training sessions to reinforce the organization’s primary values, rules and standard of conduct .

4. Visibility rewards to ethical acts and punish unethical ones: Performance appraisals of managers
should include a point by point evaluation of how his or her decisions measure up against the
organization code of ethics .People who act ethically should be visibly rewarded for their behavior and
unethical acts should be punished .

5. Provide protective mechanisms: The organization needs to provide formal mechanisms so that
employees can discuss ethical dilemmas and report unethical behaviour without fear of reprimand.

ORGANIZATIONAL ENVIRONMENT
Definition: The organizational environment is the set of forces surrounding an organization. These
forces may hamper or facilitate the organization's access to resources, which means they can both offer
opportunities and pose threats.

Internal Environment/micro environment

Internal environment consist of forces that affect business directly and include competition, employees,
financial institutions, suppliers, shareholders etc.

1. Competitors: market competition is the cornerstone of managerial capitalism. organizations that do not
compete effectively are often confronted with the uncomfortable prospect of either changing or being
eliminated. Kenyans telephone users are benefiting greatly from competition of Safaricom, Airtel,
Orange/Telkom, Yu etc.

2.Customers: all enterprises rely on customers for existence. A customer could be an individual, an
institution, a government or another firm. The manager must understand his customers and find ways of
maintaining customer relationships.

3. Suppliers: organizations are dependent upon suppliers of materials and labor and will try to take
advantage of competition among suppliers to obtain lower prices, better-quality work and faster deliveries.
Many organizations will try to reduce suppliers to reduce costs. A favorable supplier relationship leads to
better shipping arrangements, early warning of major changes and advanced information about
technological or marketing developments.

4. Financial institutions: An enterprise depends on a variety of financial institutions such as commercial

banks, investment banks, insurance firms etc for supply of long-term and short-term loans. Because
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effective working relationships with financial institutions are so vital, establishing and maintaining these
relations is the work of finance officer and CEO of the organization. Some organizations incorporate a
banker in their board of directors to enhance the relationship.

5. Employees: all enterprises their objectives through the action of their employees. For their part,
employees work to meet their own personal, social and economic needs. Management has to design and
influence leadership in a way that employees view their contributions as supportive and consistent with
their sense of personal importance. The challenge is to create a situation in which both employer and
employee achieve their goals. Management must maintain sound relationships with the unions for effective
running of their organizations.

6. Owner/shareholder: they are technically the owners of organizations through stock ownership. Some
shareholders have ability to influence the running of their organization. They exercise their powers through
voting in general meeting, special general meetings or even in selling their shares. Task environment
responds to organization through networks & coalitions and multiples roles while management tries to keep
the relationship between stakeholders and organization.

External/Macro-Environment
organizations operate in an external environment where they not only need to be concerned with
competition from rivals business but also take into account the legal, political, social and economic
influences, technological, commonly referred to as SLEPT factors.

1. Social factors: these relates to changes in society and demographics structures to which the business is
exposed. Demographics are the characteristics of the population such as average age, birth rate, level of
education. A consumer preference changes over time given changes in the environment. The advancement
in technology has seen so many changes in consumer preferences. Kenyans are no longer buying cassette
tapes with the advent of CDs, DVDs, and USBs.

2. Legal factors: these relates to changes in laws and regulations. Business must be careful to keep the law
and anticipate ways in which change in laws will affect the way they do business e.tobacco bill, media bill.

3. Political factors: these relate to ways in which changes in government and government policies can
influence business. In a country where there is political turmoil business is threatened too, since stability is
necessary for every business operations. Business may influence the government actions through lobby
groups and/illegal actions as well as in some countries to fund their preferred candidate or party to form the
next government.

4. Economic factors: this relates to changes in the wider economy. Country’s economy goes through;
decline, recession and recovery. A growing economy provides greater opportunities for business to make
profits, like banks, and cement industry etc

5. Technological factors: change in technology can have positive or devastating effects on business.
Managers need to be aware of the changes in technology that is taking place in the environment so as to
update themselves and their organization. Technological changes provide opportunities for business to
adopt new breakthroughs, innovations and inventions to cut costs and develop new products.
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 Other factors include: pressure groups such as environmentalists, special interest groups.

ORGANIZATION STRUCTURE
This is the arrangement and inter-relationship of the components parts and positions of
organizations. Organization structure defines how tasks are formally divided, grouped and coordinated.

Importance of an organisational structure

1. Facilitates Administration: Sound organisation helps in the performance of management functions like
planning, staffing, directing and controlling. Inadequate organisation may result in duplication of work and
efforts and some of the important operations may be left out. Sound organisation facilitates the
performance of various managerial functions by division of labour, consistent delegation or job definition
and clarity of authority and responsibility relationship.

2. Promoters Growth and Diversification:Sound organisation designed on scientific principles can create
conditions conductive to planned expansion and diversification of the activities of the enterprise. It can
help in keeping the various activities under control and increase the capacity of the enterprise to undertake
more activities.

3. Co-Ordination: Organisation is an important means of bringing co-ordination among the various

departments of the enterprise. It creates clear-cut relationship between the departments and helps in laying
down balanced emphasis on various activities. It also provides for the channels of communication for the
coordination of the activities of different departments.

4. Optimum Use of Technological Innovations: A sound organisational structure is flexible to give

adequate scope for the improvement in technology. It facilitates introducing changes in the enterprise by
modifying the authority and responsibility relationship in the wake of new developments.

4. Optimum Use of Human Resources: Sound organisation matches the jobs with the individuals and
vice-versa. It ensures that every individual is placed on the job for which he is best suited. This helps in
the better use of individuals working in the enterprise.

5. Stimulates Creative Thinking: An organisational structure based on clear-cut demarcation of authority,

higher range of responsibility, discretionary freedom granted to personnel, incentives offered for
specialised work, etc. will certainly foster the spirit of constructive and creative thinking. Such an
atmosphere will give an opportunity for the staff to display their hidden creative talents which, in turn,
will lift the enterprise to achieve higher goals of business.

6. Training and Development: An effective organisation facilitates delegation of authority which is an

important device for training and developing the personnel. Delegation of authority is also an important
means of directing the subordinates. It prepares them to take more responsibilities whenever need arises.

Determinants of Organization Structure

Organization structure provides a basis or framework within which managers and non-managerial
employees perform the jobs assigned to them. In order words, organization structure may be considered as

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the core element around which various functions are performed and several processes operate. The
structure of organisation is consciously designed by the management. However, in designing the structure,
the following factors are to be considered:

1)Objectives and Strategy: Design of structure begins with the identification of organisational
objectives. Since an organisation is a goal-oriented system, it is quite legitimate that its goals have
decisive role in designing its structure. The goals determine its tasks and strategies.

2)Environment: Organisation is a system and every system has its boundaries. Beyond the boundaries,
there exists external environment which affects not only the formation and functioning of the organisation
but also its structure. To cope with changing environment, among other things, organisational process,
goals and structure are changed and made in line with changes. Environment includes all those economic,
social, cultural, political, legal and technological factors which directly or indirectly affect the functioning
of the organisation. Therefore, the structure of the organisation is to be designed in view of changes likely
to take place in environment. Added to it, organisation being a sub-system of environment interacts with
the environment on regular basis for getting inputs and supplying output.

3)Technology: An organisation is a socio-technical system. Technological aspect which refers to the

manner in which various activities will be performed, is an important part of organisational structure. As
the activities are related to objectives, they are also related to technology. Because every activity to be
performed requires some kind of technology, the type of technology being used in the organisation for
performing different activities would also affect the structure of the organisation directly and indirectly.

4)People: Organisations are formed by and operated through people. Large number of people are
employed for both managerial and non-managerial jobs and various activities are assigned to them and
finally they are put in authority relationships. These people carry some goals, values, perceptions, beliefs
and attitudes which have direct reflection on the structure of organisation. Therefore, these factors must
be taken care of at the time of designing the organisational structure. Indeed, the tasks, activities, goals
and technology will gain more meaning if they are built around the people.

5) Size: There are several criteria to determine size of an organisation such as number of persons
employed, amount of capital invested, volume of turnover, and physical capacity. However, ‘size’ has
generally been used to refer to the number of employees or members of an organisation. Thus
organisations could be small or large depending upon the number of their employees. As an organisation
grows in size, its structure naturally becomes more complex or complicated. Jobs that could once be
handled by a single person are split and split again; new layers of supervision are inserted between the top
executive and the rank and file. An organisation is forced, it its size increases, to realign duties and
responsibilities and more often than not, to add new integrating units.

Six Elements of Organizational Design

Organizational design is the process of creating the hierarchy within a company. The six elements of
organizational design help business leaders establish the company departments, chain of command and
overall structure. The aspects of organizational structure most notably reviewed is the organizational
chart. Consider these six key aspects when creating the design elements of an organization.

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1)Work Specialization
Work specialization is the first of the elements of organization structure. Business leaders must consider
the job tasks and specific duties associated with given positions. Dividing work tasks among different
jobs and assigning them to definite levels, is the role of work specialization elements. An example would
be giving the first person in the assembly line the job of putting the first three components together. The
second person in the assembly line might then put the decals on the product, and the third would put the
item in the box.

2)Departmentalization
Departmentalization and compartments are two other components of organizational design. Departments
are often a group of workers with the same overall functions. They are often broken down by broad
categories such as functional, product, geographical, process and customer. Common departments
include accounting, manufacturing, customer service and sales.

3)Chain of Command
The chain of command is what the organizational chart typically illustrates. It shows who reports to who
in the company's human resources structure. Some companies have a more traditional hierarchy with
very clear department leaders and executives in charge. Other companies use a more fluid chain of
command and structure where more people are considered part of the same level of command on a cross-
functional team.

4)Span of Control
The span of control is the organizational design element that considers the capacity of any manager.
There are limits to the number of people one person can oversee and supervise. The span of control
addresses this design element. If a manager has too many people to oversee, he might lose his
effectiveness and not recognize problems or successes.A span of four means that for every four
managers, sixteen employees can be effectively managed. Other industries might use a span of eight or
another number that describes how the human resources directors need to disburse managers.

5)Centralization and Decentralization

Centralization and decentralization are organizational design elements deciding the degree which
decision-making is made at one central level or at various levels by employees. For example, all major
budget decisions would filter to the chief executive officer and chief financial officer in a centralized
fashion. Customer service decisions might be decentralized giving those interacting with customer
directions on how to handle issues but the authority to make certain decisions.
6)Formalization of Elements
Smaller organizations tend to have informal elements where large organizations formalize roles more
specifically. The reason smaller organizations use less formal standards is that employees may serve
multiple roles as necessary. Bigger organizations need to formalize elements to ensure the right stuff gets
done on time and correctly.

Formalization might also be seen with specific job duties. For example, there may be a very specific way
that payroll is done to ensure that everyone gets paid on time, with the correct withholding. The sales
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department might not be very formalized, and might allow each representative to find his organic process
so that he may succeed.

Various Forms of Organization Structure

1. Functional Structure
In a functional structure, activities are grouped and departments are created on the basis of specified
functions to be performed. Activities related to a function are grouped in a single unit with a view to give a
well defined direction to the whole group. For instance, in an industrial enterprise, the major functions like
production, finance, marketing and personnel may be grouped into different departments. Functional
departmentalization is the most widely used basis for organizing activities. It is found in almost every
enterprise at some level in the organisation structure as it leads to better planning and control of the key
functions on which the survival and growth of the enterprise depends. It facilitates specialized performance
of various functions.
The advantages of functional structure are as under:
1) It is easier to organise departments bases on functions and sub-functions.
2) It allows giving balanced weightage to the basic functions on which the survival of a firm depends.
3) It introduces specialization leading to higher productivity and economical operations.
4) It ensures effective utilization of personnel in different departments.
5) It helps in training of specialist managers rather than generalist managers.
6) It facilitates better coordination of activities within each department.
7) It allows delegation of authority by the chief executive to the various functional heads.

The demerits of functional structure are as under:

1) Each department concentrates on a narrow range of activities relating to its function only.
2) It may be difficult to achieve coordination between different departments because of their different
orientations.
3) There may be lack of understanding between different departments. The atmosphere of mistrust
may lead to inter-departmental conflicts.
4) Decisions are delayed where decision-making involves two or more departments.
5) Excessive specialization may destroy teamwork in the organisation.
6) Functional organisation may prove unsatisfactory in handling diversified product lines and
specialized projects.
7) Functional specialization restricts development of generalists or managers with all-round
capabilities.

2. Divisional Structure
Divisional structure is formed by creation a set of autonomous units or division which are coordinated by
the central headquarters. For examples, a company may have three divisions to manage textiles, cement
and shipping. But to coordinate their functioning, certain essential services such as corporate planning,
Finance, legal and research & development are organised at the headquarters. This structure is popular with
giant firms dealing in multiple products and operating in different geographical regions. The products are
often unrelated and require different emphasis on different function. And the territories served by the firm
have their unique problems.

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In a divisional structure, each division is semi-autonomous and has its own resources and facilities. Thus,
there is duplication or multiplication of activities, personnel and equipment. For instance, two divisions
may have their separate marketing research wings or public relations departments. Let us assume that a
typical company has two divisions for metal products and cement respectively. Each division may have
further organization based on functional departmentalization.

3. Product Based Structure

Product based structure is followed by giant organizations having multiple product lines. Under this, each
major product or product line is organised as a separate division. It is employed where the unique
characteristics of the product are of great significance and they require specialized machines and equipment
and trained personnel. It is appropriate when each product is relatively complex and a great deal of capital
is required for each product. For instance. Cement and shipping.

The advantages of product based structure are as follows:

1) Product departmentalization can reduce the coordination problems which are created under
functional departmentalization. There is integration of activities relating to a particular line of
product. It facilitates product expansion and diversification.
2) It focuses individual attention on each product line.
3) It leads to specialization of physical facilities on the basis of products which results in economy.
4) It is easier to evaluate and compare the performance of various product divisions.
5) It keeps problems of production isolated from those of others.
6) Since each product manager is required to supervise the diverse functions of production, sale and
finance with respect to a particular product line, there is a wide scope for the training and
development of all-round executives.

The Disadvantages of product based structure are as under:

1) It results in the duplication of personnel and physical facilities. Each product division maintains its
separate facilities and personnel. It may become of each department. High cost of operations and
large investment make it unsuitable for small firms.
2) It may be difficult for an enterprise to adapt itself to changes in technology, demand, etc. though
product lines can be added and dropped easily without dislocation the existing operations.
3) Product departmentalization may sometimes lead to difficulties in coordination of certain
specialized activities like marketing, financing and accounting.

4. Geographical or Territory Based Structure

Geographical structure is followed in case of service organizations which have offices in different regions
or geographical areas. Each regional office has independent functional departments to realize its objectives.
For instance. Life insurance Corporation of India (LIC) has semi-autonomous divisions indifferent regions
of the country.
Territorial departmentalization has the following advantages:

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 1) It leads to the benefits of local operations. The local managers are more conversant with their needs
and those of their customers. They can adapt and respond to the local situations with speed and
accuracy.
2) The company can meet the demands of various regions more effectively.
3) Better attention can be paid to local customer groups thereby raising the image and goodwill of the
company. It ensures quick delivery of products to customers in different areas, and intensive
exploitation of local markets.l
4) A regional division can achieve better coordination and supervision of activities in a particular area,
It also help in reducing transportation and distribution costs.

Territorial departmentalization may suffer from the following difficulties:

1) There is multiplication of physical facilities. It leads to uneconomical operations.

2) There may be problems of integration between various regional offices. They may compete with
each other in certain areas.
3) There may be lack of talented personnel to take charge of regional departments.
4) There will also be problems in providing centralized services to various departments which are
located in different regions.

5. Customer Based Structure

Departmentalization by customer may be followed in enterprises engaged in providing specialized services
to different classes of customers. Under this, customers are the guide for grouping the activities. The
management groups the activities on this basis to cater to the requirements of clearly defined customer
groups. For instance, a big automobile servicing enterprise may organize its departments as follows: heavy
vehicle servicing division, car servicing division, and scooter servicing division.
The benefits of structure based on customers are as follows:

1) Customer departmentalization can focus on the special needs of different kinds of customers.
2) It employ’s personnel with special abilities for meeting different customer requirements.
3) It leads to greater satisfaction of customers which enhances the reputation of the enterprise among
the public.

Customer based structure is also not free from drawbacks. For instance, it creates the difficulty of co-
ordination between the departments organised on this basis and those organised on other bases. Greater
emphasis to the need of the customers may lead to less than optimum use of space, equipment and
specialized personnel.

6. Matrix Structure
Matrix organization, also called grid organization, is a hybrid structure combining two complementary
structures namely, functional departmentalization with pure project structure. Matrix organization is a two
dimensional structure, a combination of pure project structure and the traditional functional departments.
Members of particular project team are drawn from the functional departments and are placed under the
direction of the project manager. The project manager has overall responsibility for the success of the
particular project.
The merits of matrix organization are as under:

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 1) The matrix structure is an efficient means for bringing together the diverse specialized skills
required to a complete a complex assignment or execute a project.
2) It is flexible in nature. It can be applied more usefully to an organization involved in project ranging
from small to large.
3) It motivates personnel engaged in the project. They can utilize their competence and make
maximum contribution for the execution of the project.
4) It helps in improving flow of communication around the organization as required information is
communicated both vertically as well as horizontally.

The disadvantages of matrix structure are as follows:

1) The matrix organization violates the classical principle of unity command. The personnel from
functional department have to face the situation of two bosses, project manager and functional
manager.
2) In matrix organization, the problem of coordination is more complicated because neither functional
head has an authority over project unit in a direct manner nor the project manager has full authority
over project activities.
3) Matrix organization is not a homogeneous and compact group. The multiplicity of vertical and
horizontal relationships may impair organizational efficiency.
4) Dual reporting relationship in matrix organization can contribute to indiscipline, ambiguity and role
conflict.

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