Formal And Informal Framework Of Policies And Rules Commerce Essay


Organizational Structure can be defined as the formal and informal framework of policies and rules, within which an organization arranges its lines of authority and communications, and allocates rights and duties. Organizational structure determines the manner and extent to which roles, power, and responsibilities are delegated, controlled, and coordinated, and how information flows between levels of management. This structure depends entirely on the organization's objectives and the strategy chosen to achieve them. In a centralized structure, the decision making power is concentrated in the top layer of the management and tight control is exercised over departments and divisions. In a decentralized structure, the decision making power is distributed and the departments and divisions have varying degrees of autonomy. An organization chart illustrates the organizational structure [1].

An example of organizational Structure as shown:

Fig 1.1 [2]


Organizational culture is an idea in the field of Organizational studies and management which describes the psychology, attitudes, experiences, beliefs and values (personal and cultural values) of an organization. It has been defined as "the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with stakeholders outside the organization."

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This definition continues to explain organizational values also known as "beliefs and ideas about what kinds of goals members of an organization should pursue and ideas about the appropriate kinds or standards of behaviour organizational members should use to achieve these goals. From organizational values develop organizational norms, guidelines or expectations that prescribe appropriate kinds of behaviour by employees in particular situations and control the behaviour of organizational members towards one another."

Organizational culture is not the same as corporate culture. It is wider and deeper concepts, something that an organization 'is' rather than what it 'has'. [3]


The literature has suggested that structure and culture in organisations exist in close alignment. Structure is one of the determinants of culture; conversely, culture has been shown to have an influence on the organisational structure and operational systems in an organisation.

Both are mechanisms for the coordination of organisations: structure as an integrating mechanism for organisational activities, and culture as an integrating mechanism concerned with behaviour and values within organisations.

Organisations and individuals need an understanding of these mechanisms in order to manage uncertainty in the face of ever-changing markets and business conditions. An effective alignment of structure and culture provides a means of getting people to work together to reach strategic goals and achieve an organisation's vision.

Together they provide a focus to enable organisations and individuals to reduce uncertainty, variability and ambiguity, so providing a framework for acting in a consistent manner. Structure and culture have overlapping functions, but one mechanism is not necessarily a substitute for the other. Both are needed.

The literature also shows no one pattern or 'right way' for the development of a relationship between structure and culture. However, it offers many examples of this relationship generated by a range of variable factors inside and outside organisations.

In one example, O'Neill, Beauvais and Scholl (2001) propose that different organisations face different problems in reducing organisational variability. Variable structural factors such as the complexity of tasks and the geographic dispersal of employees act to increase uncertainty. They demand different responses even within similar cultures.

Likewise, differences in organisational culture can explain why organisations in the same industry, with similar structures, can be quite different. This goes some way to explain why TAFEs, with similar structures, and which exist in the same system, can still vary widely in the way they operate.

From another perspective, Hodge, Anthony and Gales (1996) observe that while an organisation might 'authorise' a formal structure, an informal structure not necessarily sanctioned by the organisation also exists. This informal structure, whose interactions are shaped by culture and sub-cultures, comes about in part because of ambiguity in the formal design or because of changes in conditions the organisation faces. This further explains some of the operating variability within RTO's. [4]


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It is the quality of the employee's workplace environment that most impacts on their level of motivation and subsequent performance. How well they engage with the organization, especially with their immediate environment, influences to a great extent their error rate, level of innovation and collaboration with other employees, absenteeism and, ultimately, how long they stay in the job. Many studies have revealed that most employees leave their organization because of the relationship with their immediate supervisor or manager.

So, what are the workplace environment factors that need to be taken into consideration by any serious manager? Described below are the key factors and how each can be utilized by supervisors and managers to boost performance.

Workplace Performance Factors


Involve employees in setting meaningful goals and performance measures for their work. This can be done informally between the employee and their immediate supervisor or as part of an organization's formal performance management process. The key here is that each employee is actively engaged in the goal-setting process and takes ownership of the final agreed goals and measures.

Performance feedback

Regularly feed back to employee's information on how they are performing. This should consist of both positive feedback on what the employee is doing right as well as feedback on what requires improvement.

Role congruity

Work to ensure that the role that the employee is required to perform is consistent with their expectations on joining the organization and any subsequent training. The organization's role expectations are typically reflected in formal documents, such as Job Descriptions and Role Specifications. These expectations should be consistent with tasks allocated by the employee's immediate supervisor.

Defined processes

Many errors, defects and customer complaints are the result of poor process management. Constrain the variability of how work is actually performed through documenting processes and communicating such expectations to employees. Verify on a regular or random basis that the work is actually performed in the way required. Along with goal setting, getting employees to help define and improve processes is a powerful opportunity for engagement.

Workplace incentives

Determine what motivates your employees in particular and set up formal and informal structures for rewarding employees that behave in the way required. Rewards may consist of a mix of internal rewards, such as challenging assignments, and external rewards, such as higher compensation and peer recognition.

Supervisor support

Act as advocates for employees, gathering and distributing the resources needed by them in order for them to be able to do a good job. Immediate supervisors and managers need to display the interpersonal skills required to engage employees and enhance their self-confidence. This includes providing positive encouragement for a job well done.


Make available to employees skilled and respected people to help them perform better in their current role and to assist them develop further into a future role. Mentors and coaches may be internal to an organization or external. Either way, they will need to possess the necessary facilitation skills to assist employees apply existing sills and develop new skills.

Resource availability

The vast majority of employees take pride in their work and try hard to do a good job. Make sure that individual workloads and organizational systems and processes do not hinder employees from applying established skills or from practicing newly learned skills. Adequate time and material resources need to be available to enable them to perform to the best of their ability.

Money is not a sufficient motivator in encouraging the superior workplace performance required in today's competitive business environment. Managers and supervisors will need to be comfortable with working with the whole gamut of workplace factors that influence employee motivation. Last but not least, to drive their organizations to peak performance managers and supervisors must put out front the human face of their organization. Paramount here is the human-to-human interaction through providing individualized support and encouragement to each and every employee [5]



Leadership is stated as the "process of social influence in which one person can enlist the aid and support of others in the accomplishment of a common task." Definitions more inclusive of followers have also emerged. Alan Keith of Genentech stated that, "Leadership is ultimately about creating a way for people to contribute to making something extraordinary happen Tom DeMarc says that leadership needs to be distinguished from posturing.

Contexts of leadership

Leadership in organizations

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An organization that is established as an instrument or means for achieving defined objectives has been referred to as a formal organization. Its design specifies how goals are subdivided and reflected in subdivisions of the organization. Divisions, departments, sections, positions, jobs, and tasks make up this work structure. Thus, the formal organization is expected to behave impersonally in regard to relationships with clients or with its members. According to Weber's definition, entry and subsequent advancement is by merit or seniority. Each employee receives a salary and enjoys a degree of tenure that safeguards her/him from the arbitrary influence of superiors or of powerful clients. The higher his position in the hierarchy, the greater his presumed expertise in adjudicating problems that may arise in the course of the work carried out at lower levels of the organization. It is this bureaucratic structure that forms the basis for the appointment of heads or chiefs of administrative subdivisions in the organization and endows them with the authority attached to their position. In contrast to the appointed head or chief of an administrative unit, a leader emerges within the context of the informal organization that underlies the formal structure. The informal organization expresses the personal objectives and goals of the individual membership. Their objectives and goals may or may not coincide with those of the formal organization. The informal organization represents an extension of the social structures that generally characterize human life - the spontaneous emergence of groups and organizations as ends in themselves.

Leaders emerge from within the structure of the informal organization. Their personal qualities, the demands of the situation, or a combination of these and other factors attract followers who accept their leadership within one or several overlay structures.

Leadership versus management

Over the years the philosophical terminology of "management" and "leadership" have, in the organisational context, been used both as synonyms and with clearly differentiated meanings. Debate is fairly common about whether the use of these terms should be restricted, and generally reflects an awareness of the distinction made by Burns (1978) between "transactional" leadership (characterised by eg emphasis on procedures, contingent reward, management by exception) and "transformational" leadership (characterised by eg charisma, personal relationships, creativity

Leadership by a group

In contrast to individual leadership, some organizations have adopted group leadership. In this situation, more than one person provides direction to the group as a whole. Some organizations have taken this approach in hopes of increasing creativity, reducing costs, or downsizing. A common example of group leadership involves cross-functional teams. A team of people with diverse skills and from all parts of an organization assembles to lead a project. A team structure can involve sharing power equally on all issues, but more commonly uses rotating leadership. The team member(s) best able to handle any given phase of the project become(s) the temporary leader(s). Additionally, as each team member has the opportunity to experience the elevated level of empowerment, it energizes staff and feeds the cycle of success.[6]


You should be able to:

Summarize the quantitative approach to management

Describe the contributions of the early organizational behavior advocates

Explain the importance of the Hawthorne Studies to management

Describe the effects of: globalization, workforce diversity, entrepreneurship, e-business, need for innovation and flexibility, quality management, learning organizations, and knowledge management

Academic Disciplines that Affected Management

Anthropology - work on cultures and social environments

Economics - concern about the allocation and distribution of scarce resources

Philosophy - examines the nature of things

Political science - effect of political environment on individuals and groups

Psychology - seeks to measure, explain, and change human behavior

Sociology - studies people in relation to their fellow human beings

SCIENTIFIC MANAGEMENT F.W. Taylor - Principles of Scientific Management

Use of scientific methods to define the "one best way" for a job to be done

Perspective of improving the productivity and efficiency of manual workers

Applied the scientific method to shop floor jobs

Frank and Lillian Gilbert

Use of motion pictures to study hand-and-body movements

Therbligs - classification system for 17 basic hand motions[7]



There are a number of different approaches, or 'styles' to leadership and management that are based on different assumptions and theories. The style that individuals use will be based on a combination of their beliefs, values and preferences, as well as the organizational culture and norms which will encourage some styles and discourage others.

Charismatic Leadership:

The Charismatic Leader gathers followers through dint of personality and charm, rather than any form of external power or authority [8].

Participative Leadership:

A Participative Leader, rather than taking autocratic decisions, seeks to involve other people in the process, possibly including subordinates, peers, superiors and other stakeholders.

The question of how much influence others are given thus may vary on the manager's preferences and beliefs, and a whole spectrum of participation is possible, as in the table below [9].

<Not participative

Highly participative >

Autocratic decision by leader

Leader proposes decision, listens to feedback, then decides

Team proposes decision, leader has final decision

Joint decision with team as equals

Full delegation of decision to team

Situational Leadership

When a decision is needed, an effective leader does not just fall into a single preferred style, such as using transactional or transformational methods. In practice, as they say, things are not that simple.

Factors that affect situational decisions include motivation and capability of followers [10].

Yukl (1989) seeks to combine other approaches and identifies six variables [11]:

* Subordinate effort: the motivation and actual effort expended.

* Subordinate ability and role clarity: followers knowing what to do and how to do it.

* Organization of the work: the structure of the work and utilization of resources.

* Cooperation and cohesiveness: of the group in working together.

* Resources and support: the availability of tools, materials, people, etc.

* External coordination: the need to collaborate with other groups.

Transactional Leadership

The transactional leader works through creating clear structures whereby it is clear what is required of their subordinates, and the rewards that they get for following orders. Punishments are not always mentioned, but they are also well-understood and formal systems of discipline are usually in place [12].

Transformational Leadership

Transformational Leadership starts with the development of a vision, a view of the future that will excite and convert potential followers. This vision may be developed by the leader, by the senior team or may emerge from a broad series of discussions. The important factor is the leader buys into it, hook, line and sinker [13].

The Quiet Leader

The approach of quiet leaders is the antithesis of the classic charismatic (and often transformational) leaders in that they base their success not on ego and force of character but on their thoughts and actions [14].

In 'personal humility' they put the well-being of others before their own personal needs, for example giving others credit after successes but taking personal responsibility for failures [14] [15].

Servant Leadership

The servant leader serves others, rather than others serving the leader. Serving others thus comes by helping them to achieve and improve.

There are two criteria of servant leadership:

The people served grow as individuals, becoming 'healthier, wiser, more autonomous and more likely themselves to become servants' (Greenleaf, 1977) [16].

The extent to which the leadership benefits those who are least advantaged in society (or at least does not disadvantage them).

Spears (2002) lists: listening, empathy, healing, awareness, persuasion, conceptualization, foresight, stewardship, commitment to growth of people, and building community [17].


A leader is a person who influences a group of people towards a specific result. It is not dependent on title or formal authority.

Leaders are recognized by their capacity for caring for others, clear communication, and a commitment to persist [18].

An individual who is appointed to a managerial position has the right to command and enforce obedience by virtue of the authority of his position. However, she or he must possess adequate personal attributes to match his authority, because authority is only potentially available to him.

In the absence of sufficient personal competence, a manager may be confronted by an emergent leader who can challenge her/his role in the organization and reduce it to that of a figurehead. However, only authority of position has the backing of formal sanctions. It follows that whoever wields personal influence and power can legitimize this only by gaining a formal position in the hierarchy, with commensurate authority [19].

Leadership can be defined as one's ability to get others to willingly follow. Every organization needs leaders at every level [20].



Motivation is to inspire people to work, individually or in groups in the ways such as to produce best results. It is the will to act. It is the willingness to exert high levels of effort towards organizational goals, conditioned by the efforts and ability to satisfy some individual need.

Motivation is getting somebody to do something because they want to do it. It was once assumed that motivation had to be injected from outside, but it is now understood that everyone is motivated by several differing forces.

Motivation is a general term applied to the entire class of drives, desires, needs, wishes and similar forces. To say that managers motivate their subordinates is to say that they do those things which they hope will satisfy these drives and desires and induce the subordinates to act in a desired manner.

In the initiation a person starts feeling lackness. There is an arousal of need so urgent, that the bearer has to venture in search to satisfy it. This leads to creation of tension, which urges the person to forget everything else and cater to the aroused need first. Because of the performance of the activity satisfaction is achieved which than relieves the tension in the individual [21].


Some of the theories that are used for the motivation process are discussed as under [22].

1. Jeremy Bentham's "The Carrot and the Stick Approach":

Bentham's view was that all people are self-interested and are motivated by the desire to avoid pain and find pleasure. Any worker will work only if the reward is big enough, or the punishment sufficiently unpleasant. This view - the 'carrot and stick' approach - was built into the philosophies of the age and is still to be found, especially in the older, more traditional sectors of industry.

For centuries, however, they were too often thought of as the only forces that could motivate people. At the same time, in all theories of motivation, the inducements of some kind of 'carrot' are recognized. Often this is money in the form of pay or bonuses

2. Abraham Maslow's "Need Hierarchy Theory":

One of the most widely mentioned theories of motivation is the hierarchy of needs theory put forth by psychologist Abraham Maslow. Maslow saw human needs in the form of a hierarchy, ascending from the lowest to the highest, and he concluded that when one set of needs is satisfied, this kind of need ceases to be a motivator.

As per his theory these needs are:

(i) Physiological needs:

Food, water, warmth, shelter, sleep, medicine and education are the basic physiological needs which fall in the primary list of need satisfaction.

(ii) Security or Safety needs:

These are the needs to be free of physical danger and of the fear of losing a job, property, food or shelter. It also includes protection against any emotional harm.

(iii) Social needs:

People try to satisfy their need for affection, acceptance and friendship.

(iv) Esteem needs:

According to Maslow, once people begin to satisfy their need to belong, they tend to want to be held in esteem both by themselves and by others. It includes both internal esteem factors like self-respect, autonomy and achievements and external esteem factors such as states, recognition and attention.

(v) Need for self-actualization:

It is the drive to become what one is capable of becoming; it includes growth, achieving one's potential and self-fulfilment. It is to maximize one's potential and to accomplish something.

3. Theory X and Theory Y" of Douglas McGregor:

McGregor, in his book "The Human side of Enterprise" states that people inside the organization can be managed in two ways. The first is basically negative, which falls under the category X and the other is basically positive, which falls under the category Y.

On analysis of the assumptions it can be detected that theory X assumes that lower-order needs dominate individuals and theory Y assumes that higher-order needs dominate individuals. An organization that is run on Theory X lines tends to be authoritarian in nature, the word "authoritarian" suggests such ideas as the "power to enforce obedience" and the "right to command." In contrast Theory Y organizations can be described as "participative", where the aims of the organization and of the individuals in it are integrated; individuals can achieve their own goals best by directing their efforts towards the success of the organization.

4. Contributions of Elton Mayo:

The work of Elton Mayo is famously known as "Hawthorne Experiments." He conducted behavioural experiments at the Hawthorne Works of the American Western Electric Company in Chicago. Although this research has been criticized from many angles, the central conclusions drawn were:

* People are motivated by more than pay and conditions.

* The need for recognition and a sense of belonging are very important.

* Attitudes towards work are strongly influenced by the group.

5. The Porter and Lawler Model:

Lyman W. Porter and Edward E. Lawler developed a more complete version of motivation depending upon expectancy theory.

Actual performance in a job is primarily determined by the effort spent. But it is also affected by the person's ability to do the job and also by individual's perception of what the required task is.

6. Equity Theory:

As per the equity theory of J. Stacey Adams, people are motivated by their beliefs about the reward structure as being fair or unfair, relative to the inputs. People have a tendency to use subjective judgment to balance the outcomes and inputs in the relationship for comparisons between different individuals. Accordingly:

If people perceive that they are rewarded higher, they may be motivated to work harder.

7. Reinforcement Theory:

Skinner states that work environment should be made suitable to the individuals and that punishment actually leads to frustration and de-motivation. Hence, the only way to motivate is to keep on making positive changes in the external environment of the organization.

8. Goal Setting Theory of Edwin Locke:

The goal setting theory states that when the goals to be achieved are set at a higher standard than in that case employees are motivated to perform better and put in maximum effort. It revolves around the concept of "Self-efficacy" i.e. individual's belief that he or she is capable of performing a hard task.


The job of a manager in the workplace is to get things done through employees. To do this the manager should be able to motivate employees. But that's easier said than done! Motivation practice and theory are difficult subjects, touching on several disciplines [23].

Human nature can be very simple, yet very complex too. An understanding and appreciation of this is a prerequisite to effective employee motivation in the workplace and therefore effective management and leadership.

The schematic below indicates the potential contribution the practical application of the principles this paper has on reducing work content in the organization.

Motivation is the key to performance improvement

There is an old saying you can take a horse to the water but you cannot force it to drink; it will drink only if it's thirsty - so with people. They will do what they want to do or otherwise motivated to do.

Are they born with the self-motivation or drive? Yes and no. If no, they can be motivated, for motivation is a skill which can and must be learnt. This is essential for any business to survive and succeed.

Performance is considered to be a function of ability and motivation, thus:

* Job performance =f (ability) (motivation)

Ability in turn depends on education, experience and training and its improvement is a slow and long process. On the other hand motivation can be improved quickly. As a guideline, there are broadly seven strategies for motivation.

* Positive reinforcement / high expectations

* Effective discipline and punishment

* Treating people fairly

* Satisfying employees needs

* Setting work related goals

* Restructuring jobs

* Base rewards on job performance

These are the basic strategies, though the mix in the final 'recipe' will vary from workplace situation to situation. Essentially, there is a gap between an individual's actual state and some desired state and the manager tries to reduce this gap.

Motivation is, in effect, a means to reduce and manipulate this gap. It is inducing others in a specific way towards goals specifically stated by the motivator [23].




A small collection of people who interact with each other, usually face to face, over time in order to reach goals

The size of the group can vary from three people to seven to 20. Normally the smallest number is considered which is capable of performing the task


Groups come in many forms, shapes, and sizes. Most managers belong to several different groups at the same time, some at work, some at community, some formally organized, and some informal and social in nature. The most basic way of identifying types of groups is to distinguish between [24]:

Formal groups

Informal groups

Formal Groups

The organization's managers to accomplish goals and serve the needs of the organization deliberately create formal groups. The major purpose of formal groups is to perform specific tasks and achieve specific objectives defined by the organization.

The most common type of formal work group consists of individuals cooperating under the direction of a leader. Examples of formal groups are departments, divisions, taskforce, project groups, quality circles, committees, and boards of directors.

Informal Groups

Informal groups in organizations are not formed or planned by the organization's managers. Rather, they are self-created and evolve out of the formal organization for a variety of reasons, such as proximity, common interests, or needs of individuals. It would be difficult for organization to prohibit informal working relationships from developing.

Informal groups develop naturally among an organization's personnel without any direction from management. One key factor in the emergence of informal groups is a common interest shared by its members. For example, a group of employees who band together to seek union representation may be called an interest group


Whether in the workplace, or in sports, or amongst members of a community, effective teamwork can produce extraordinary results. However, that is easier said than done, for, effective teamwork does not happen automatically.

There are a number of factors that are required to cohere together, working seamlessly, for an effective team to develop and work. So, what makes an effective team?

Well, given below are some of the factors that are vital for building a good team that works successfully [25]:

Good Leadership

Effective Communication

Defining Clear-cut Roles

Creating Procedures for Conflict Resolution

Setting a Good Example

Good Leadership: One of the most important aspects of effective teamwork is effective leadership. This means that the team leader should have the skills to create and maintain a working culture that is positive. This helps to motivate and even inspire the team members to get involved in creating an environment where there is a positive approach to work, along with high levels of commitment.

Effective Communication: It goes without saying that communication is a vital factor of interpersonal interaction, and the very term 'teamwork' represents interpersonal interaction. Hence, one of the key aspects of effective teamwork is open communication, wherein it enables the members of the team to articulate their feelings, express their plans, share their ideas, and understand each other's viewpoints.

Defining Clear-cut Roles: It is necessary for teams to know clearly what their purpose is, what role each member of the team has to play, what each person is responsible for, what is not within their scope, and the resources they have to achieve their goals. The team leader can enable this by defining the purpose in a clear-cut manner up front.

Creating Procedures for Conflict Resolution: No matter how good a team may be, conflicts will inevitable occur some time or the other. The best way to counter this is to have structured methods of resolving them. Team members should have a way of expressing their opinions without fear of causing offense to anyone.

Setting a Good Example: And finally, effective teamwork can only come about when the team leader sets a good example, which can be emulated by the team members. In order to keep the team committed, positive, and motivated, the team leader himself/herself has to have all these qualities and make it apparent that he/she does.


The use of new technologies can improve and in some cases hinder team functioning.

As technology changes teams must update and maintain their knowledge in order to function effectively [26].

Technologies which have improved team functions


mobile phones




E-mail allows asynchronous communication which means team members do not need to be in the same place at the same time in order to communicate effectively. E-mail also has it's negative aspects in terms of managing e-mail and the misuse of e-mail.

Mobile phones allow teams to communicate even when team members are out of the office, on the road or otherwise unavailable. Sometimes having always access to team members can hinder team functioning.

Phone technologies such as blackberry and 3G data cards allow team members to work and communicate remotely and this out in the field or with clients.

Groupware enables teams to plan meetings, collaborate, delegate all within a virtual environment which can often be accessed remotely from anywhere in the world.

Personal computers allow team members to carry out various tasks and communicate more effectively. Laptop computers allow you to do this anywhere. They are now lighter, more powerful and a longer battery life. Personal Digital Assistants (PDA) now have much of the same functionality as their bigger cousins, but are smaller, more portable and have a longer battery life. Many PDAs now have wifi as standard and some are also phones (and some phones have many PDA features).