Organisational Systems

Organisational systems & processes are the wheels that

make an organisation go. An organisational system is a
set of interacting elements devised to accomplish a
process. Systems have sub- systems that are the
interacting elements that make up a unified whole.
There are six organisational systems which are
as below:-

1. Information System.
2. Control System.
3. Appraisal System.
4. Motivation System.
5. Development System &
6. Planning System.
 1. Information System.
• A structure subdivides the total responsibility while the
information system serves to coordinate the divided
responsibility. If a strategy is to be effectively implemented,
Organisational arrangements that provide the information to
managers to perform their task & relate their work to others
are necessary. The information system, therefore, serves two
important purposes: it enables the managers to know what
they need to grasp in order to perform their tasks & also to
coordinate their activities with others.
• A broader term “management information system” (MIS) is
used to denote the organisational arrangements designed to
aid managers in performing their activities.
 2. Control System.
• Control has traditionally been considered as a major
management function. While controlling, the manager
essentially deals with “the measurement & correction of the
performance of activities of subordinates in order to make
sure that enterprise objective & plan devised to attain them
are being accomplished”. In other words, control ensures that
the implementation of strategy takes place according to
predetermined plans.
 The control cycle.
1. Establish standards.
2. Measure performance.
3. Evaluate performance
against standards.
4. Determine corrective
performance.
 3. Appraisal system.
• The achievement of organisational objectives has to be
monitored if the implementation of strategy is to take place.
The appraisal system performs this critical role of evaluating
managerial performance in the light of organisational
objectives. Managerial appraisal is an important element in
the total control system.
• The use of the results of appraisal have to be guided by the
true function of measurement which is “to increase the
perceptions of the problems limiting achievement”. Only a
system of appraisal that provides the strategists with an
understanding of the problems before the managers who
are responsible for implementation, is an effective system. In
this context management by objectives (MBO) provides
participatory method of performance & objective setting,
where managers can be involved in appraisal so that they
themselves & their superiors know what has prevented them
from achieving the desired objectives.
 4. Motivation System.
• The motivation system plays a positive role in inducing
strategically desired behaviour so that managers are
encouraged to work towards the achievement of
organisational objectives. But, as yet, there is no complete
understanding of how motivation works. However, it is known
that incentives play an important role in motivation.
Incentives are the means by which individuals can be
encouraged to perform better. Generally, the incentives are
divided into two groups : the monetary & the non monetary
incentives. Monetary incentives are provided in the form of
money. Salary, bonus, profit sharing plan, & so on, are
common monetary incentives. Non- monetary incentives are
in the form of rewards, recognition, designation, perquisites,
& so on.
 5. Development System.
• Management development is considered to be a
“process of gradual, systematic improvement in the
knowledge, skills, attitudes, & performance of those
individuals in an organisation who carry management
responsibilities”. The strategic aim of a development
system is to see that the new experience is provided in
the light of strategic tasks required for the
implementation of strategy. The development system
has to be activated in such a manner that it prepares
the managers to perform a vital function in strategy
implementation.
 6. Planning System.
• In an organisation, the function of formulation of strategy is a
staff function while the implementation of strategy is a line
function. Both these views prevails & affects organisational
policies related to the role of the planning system.
• Strategists are concerned with the mechanism of the
planning system & the way it should be changed to suit the
requirements of a new or modified strategy. It would be
natural to expect that the planning system would work better
in a centralised manner in entrepreneurial & functional
structured organisations. In divisional organisation, the
planning system could be a decentralised one with the active
involvement of SBU-level managers in the formulation as well
as implementation of strategy. Thus, it is important to adapt
the planning system to the requirements of the strategy that
is to be implemented.
 Conclusion.
• In this way, we can say that, Organisational system like
information, control, appraisal, motivation, development, &
planning form the core of any structure. Each of these
systems plays a significant role in strategy implementation.
There design has to come from a consideration of the
requirement of the strategy being implemented. In
implementation, these systems have to be changed to suit
the requirements of a new or modified strategy.
(A) STRUCTURE FOR BUSINESS STRATEGIES:

Business strategies are cost leadeship,

differentiation or focus strategies.
For a cost leadership strategy , requires a strong ,
centralised authority to direct actions , backed
by stringent controls to keep a close check on
costs. There would be less autonomy for
employees & more emphasis on strong
leadership. Decision- making authority could
be centralised in a staff function , to emphasise
cost reduction in all functional areas.
 CEO
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Organisations that adopt a differentiation business
strategy want to produce products & services that
customers see as being different in ways for which
they are willing to pay a premium price. A
differentiation strategy would require a learning
approach to organisation design. The organisation
structure would have to be flexible . Decision –
making authority needs to be decentralised so that
the organisation can respond fast to changes in the
external environment. Employees would have to be
empowered to exhibit creativity & innovation in
looking for newer ways for differentiating products
& services and be in close touch with markets &
customers.
 CEO

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Corporate strategies of integration ,
diversification , internationalisation,
cooperation & retrenchment generate
differing requirements to be satisfied by
different organisation designs &
structures.
(a) Structure for Concentration
strategy:
Under the corporate strategy of
concentration, the organisation does not
plan anything different from what it is
already doing and so does not require
structural changes. In market
penetration , the emphasis will be on
marketing & in product development
strategy, on R& D and other operations.
(b) Structures for Integration strategies:
Horizontal integration generates commitment
to adjacent business.Organisation design &
structure may have to be changed to
accommodate those adjacent businesses.
Addition to the existing structure may lead the
organisation to create a geographical or product
structure to cater to the requirements of horizontal
integration.Under the vertical integration, the
organisation extends itself either backward to
raw material or foreward to the customers.
Diversification strategies would satisfy these
requiments.
(c) Structures for Diversification
strategies:
According to related or unrelated
diversification multidivisional & SBU
structures would be implemented. Related
diversification would create the requirement
of retaining the linkages among functions &
departments within the organisation .
Unrelated diversification implemented mainly
through the multidivisional structure , could
ignore such linkages in favour of divisional
autonomy to pursue a different line of
business.
 Structure for related diversification

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 Structure for unrelated diversification

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