SHS DEPARTMENT

BUSINESS ORGANIZATION AND MANAGEMENT

WEEK 6: ORGANIZING
“Surround yourself with the best people you can find, delegate authority, and don’t interfere as
long as the policy you’ve decided upon is being carried out.” – Ronald Reagan
THE NATURE OF ORGANIZATIONS
TEACHER:
Differentiation of the Organization's
MR. JESS MAR RS T. FRANCISCO, MBA Internal Environment
DESCRIPTION: An organization is a collection of people Differentiation in organizations involves
or groups of people working together to achieve a common division of labor and specialization. These
goal. Organizing is a management function that involves necessarily result from the organization's
assigning tasks, allocating resources, and coordinating work composition——many different work units
activities to achieve a common purpose. An organization chart with different kinds of tasks, using different
is a visual representation of the organization's structure skills and work activities coordinating with
showing the different job positions in the firm and their one another for a common end.
hierarchical arrangement to divide labor and provide a picture
Division of labor involves assigning different
of the reporting structure. Organizational design is how
tasks to different people in the organization's
management achieves the right combination of differentiation different work units. Related to it is
and integration of the organization’s operations, in response to specialization, the process in which different
the level of uncertainty in its external environment. individuals and units perform different tasks.
Organizational design is how management achieves the right An organization's overall work is complex
combination of differentiation’s operations, in response to the and would be too much for any individual,
level of uncertainty in its external environment. Formal therefore, the bigger the organization, the
organizations are organizations formed by the company owner more work units or work divisions and
or manager to help the firm accomplish its goals; made up of specializations are to be expected.
formal groups (workgroups/project team/committee) similarly
Integration of Work Units
formed by company authorities to support their activities and
achieve their objectives and informal organization is an Integration is another process in the
organization that exists because of friendship or common organization's internal environment that
interest; made up of informal groups which exist for the involves the collaboration and coordination
members' need for social affiliation. of its different work units or work divisions.
Coordination refers to the procedures that
connect the work activities of the different
work divisions/units of the firm to achieve its

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OBJECTIVES: overall goal. Structural mechanisms may be devised to

increase collaboration and coordination. The more
Analyze the nature of organizations and highly differentiated one's organization is, the greater
types of organization structures. the need for integration among the different units.
TYPES OF ORGANIZATION STRUCTURES
Apply organization theories for effective
business management. An organization structure is a system made up of tasks
to be accomplished, work movements from one work
level to other work levels in the system, reporting
relationships, and communication passageways that
unite the work of different individual persons and groups. The types of organizational structures
include:
a. vertical structure
b. horizontal structure
c. network structure
A vertical structure clears out issues related to authority rights, responsibilities, and reporting
relationships. Authority rights refer to the legitimate rights of individuals, appointed in positions
like president, vice president, manager, and the like, to give orders to their subordinates, who in
turn, report to them what they have done.

Figure. Sample of Functional Organization

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Figure. Organization Chart with vertical structure.

Owners of private business companies are said to have absolute authority, even if other persons
are appointed as managers in their companies. In corporations, the owners are the stockholders
and they elect a board of directors to manage the organization's activities. The board has a chairman
who acts as the leader, while the members act as the corporation's authority figures, responsible
for making major decisions affecting their organizations, subject to the corporation's constitution
and by-law provisions. Besides the chairman of the board, a chief executive officer (CEO) is
appointed to occupy the top post in the organization pyramid and is personally accountable to the
members of the board and other owners for the organizational performance.
Below the top-level managers are the middle-level managers in charge of departments who, as
earlier mentioned, report to them. Below the middle-level managers are the lower-level managers
which include office managers, sales managers, and supervisors who directly report to the former.
Employees under the lower-level managers also have reporting relationships with their respective
department managers.
A horizontal structure refers to the departmentalization of an organization into smaller work units
as tasks become increasingly varied and numerous.
Departments formed are of two types:
Line departments - deal directly with the firm's primary goods and services; responsible for
manufacturing, selling, and providing services to clients.
Staff departments - support the activities of the line departments by doing research, attending to
legal matters, performing public relations duties, etc.
Meanwhile, departmentalization may be done using three approaches:
Functional approach — where the subdivisions are formed based on specialized activities such
as marketing, production, financial management, and human resources management

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Divisional approach — where departments are formed based on the management of their products,
customers, or geographic areas covered.
Matrix approach - is a hybrid form of departmentalization where managers and staff personnel
report to the superiors, the functional manager, and the divisional manager.

Figure. Example of an organization chart with a divisional structure.

Finally, a network structure is a collection of independent, usually single-function

organizations/companies that work together to produce a product or service. Such network
organizations are each capable of doing their specialized work activities independently, like
producing, distributing, designing, etc., but are capable of working effectively at the same time
with other network members. Often their communication is by electronic means where sharing of
information is speedy. This results in their ability to respond at once to their customers' demands.

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ORGANIZATION THEORIES AND APPLICATIONS
There are two main classifications of theories regarding organizational design according to
Robbins and Coulter (2009): traditional and modern. Traditional pertains to the usual or old-
fashioned ways, while modern refers to contemporary or new design theories.
Traditional organizational design theories include:
Simple
This organizational design has few departments, wide spans of control, or a big number of
subordinates directly reporting to a manager; has a centralized authority figure and has very little
formalization of work; usually used by companies that start as entrepreneurial ventures.
Simple Organizational Design
Strengths Weaknesses
The risk that over-dependence with over-
Flexible
dependence on a single person
Fast decision-making and results No longer appropriate as the company grows
Clear accountability

Functional
This organizational design groups together similar or related specialties. It is, generally, functional
departmentalization utilized and put into practice in an entire organization. For example, A
marketing firm that markets cars and related products like tires, car batteries, and accessories.
Functional Organizational Design
Strengths Weaknesses
Managers have little knowledge of other
Cost-saving advantages
units’ functions.
Management is facilitated because workers
with similar tasks are grouped.

Divisional
This organizational design is made up of separate business divisions or units, where the parent
corporation acts as overseer to coordinate and control the different divisions and provide financial
and legal support services.
Divisional Organizational Design
Strengths Weaknesses
Possible duplication of activities and
Focused on results
resources
Managers are responsible for what happens to
Increased cost and reduced efficiency
their products and services

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Meanwhile, modern organizational design theories include:
Team Design
In team design, the entire organization is made up of workgroups or teams. Its advantages include
empowerment of team members and reduced barriers among functional areas. It also has
disadvantages, including a clear chain of command and great pressure on teams to perform.
Matrix-Project Design
Matrix design refers to an organizational design where specialists from different departments work
on projects that are supervised by a project manager. This design results in a double chain of
command wherein workers have two managers—their functional area manager and their project
manager—who share authority over them. Advantage: specialists are involved in the project.
Disadvantage: task and personality conflicts.
Project design refers to an organizational design where employees continuously work on a project.
Advantages: flexible designs and fast decision-making. Disadvantages: the complexity of
assigning people to projects and tasks and personality conflicts.
Boundary-less Design
This is another modern organizational design where the design is not defined or limited by vertical,
horizontal, and external boundaries. In other words, there are no hierarchical levels that separate
employees, no departmentalization, and no boundaries that separate the organization from
customers, suppliers, and other stakeholders. Virtual organization designs are often used in this
design; small groups of full-time employees and outside specialists are temporarily hired to work
on projects. Its advantages include being highly flexible and responsive, while its disadvantages
are lack of control and problems in communication.
DELEGATION
Delegation refers to assigning a new or additional task to a subordinate; it may also refer to getting
work done through others by giving them the right to make decisions and take action. Steps in the
delegation include:
Defining the goal clearly - Managers must clearly explain the task objective and the work or duties
someone else is expected to do.
Selecting the person who will be given the task — The selected subordinate must be competent
and must share the manager's task objectives.
Assigning of responsibility - Managers must explain that the responsibility assigned to the selected
subordinate is an expectation for him or her to perform the assigned tasks well.
Asking the person assigned about his or her planned approaches to accomplish the task
objectives - It is expected that the person chosen to do the task already has a tentative plan of action
that may be presented to the manager, to assure him or her that the person assigned could achieve
the task objective.

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Granting the assigned person the authority to act — If the manager is satisfied with the tentative
plan of action presented, granting the authority to act immediately follows. Authority is a right to
act in ways needed to carry out the assigned task.
Giving the assigned person enough time and resources to do the task, while at the same time
emphasizing his or her accountability — Accountability is the assigned person's willingness to
complete the job, as agreed upon.
Checking the task accomplishment progress - following up and discussing the task
accomplishment progress at regular intervals is necessary.
Making sure that the task objective has been achieved
The delegation has advantages and disadvantages as well:
Advantages of Delegation Disadvantages of Delegation
It prevents work overload among organization It may cause laziness among organization
managers. managers
It provides opportunities for employees or
It may encourage too much dependence on
subordinates assigned to do the task to fully
others
utilize their talents on the jobs.
It leads to the empowerment of employees or
subordinates assigned to do the task, as it
It may cause a lack of control over priority
allows them the freedom to contribute ideas
management problems
and to perform their job in the best possible
way.
It increases job satisfaction among the
It may cause low self-confidence among
assigned employees or subordinates, which
managers
may lead to better job performance.

FORMAL AND INFORMAL ORGANIZATIONS

Whether an organization is formal or informal is determined by the kind of relationships that
prevail in each organization type.
Formal organizations are characterized by hierarchical and reporting relationships among groups
or members. On the other hand, informal organizations consist of informal groups born out of the
need for social affiliation. Both formal and informal organizations may exist in the same
organizational structure.
Formal organizations and informal organizations both have functions and advantages that benefit
the organization and its members.

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Formal organizations have the following functions/advantages:
1. Accomplish goals that require cooperation or collaboration among formal groups in the
organization
2. Produce or bring about new and creative ideas and solutions to company problems
3. Coordinate interdepartmental activities
4. Implement company rules/regulations and policies
5. Orient/train new employees

Meanwhile, informal organizations' functions/advantages include the following:

1. Satisfy the members' need for affiliation
2. Give the individual members a chance to develop their self-esteem
3. Allow individual members to share their ideas
4. Lessen individual members' insecurities
5. Provide a mechanism to solve members' personal and interpersonal problems

FORMAL ADVANTAGES:
1. Working systematically
2. Established on and for the organization's objectives
3. No duplication or overlapping of work
4. Efficient coordination among departments
5. Implementation of a chain of command and professional relationship.

FORMAL DISADVANTAGES:
1. delay in feedback and action due to the established chain of command
2. Ignores the psychological and social needs of employees
3. Emphasis on work only and overlooks the human relations, talents, and creativity of employees

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INFORMAL ADVANTAGES
1 . Fast communication due to the absence of standard operating procedures and protocols
2. Gives importance to the psychological and social needs of employees
3. Top managers can solicit feedback directly from the employees on new policies and plans

INFORMAL DISADVANTAGES
1 . More susceptible to rumor-mongering
2. There is no systematic workflow in place
3. Difficulty in implementing new rules and policies
4. More emphasis on the individual interest of each employee rather than the overall goal of the
company

References: Cabrera, Ph.D, Helena Ma.; Altarejos, Ph.D, Anthony; Benjamin, Riaz;.
Organization and Management. Vibal Group, Inc.

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