Unit-1 Organising

Concept, nature,process and significance,Principles of

organization, Span of control,Departmentation,Types
of an organization, Authority-responsibility,Delegation
and Decentralisation:Formal & informal organisation
 Concept
• Organization is the process of identifying and
grouping of the works to be performed,
defining and delegating responsibility and
authority and establishing relationships for
the purpose of enabling people to work most
efficiently“
• - Louis A. Allen
 FUNDAMENTAL CONCEPT OF
ORGANIZING:
• DIFFERENTIATION: It means that an
organization is composed of units that work
on specialized tasks using different work
methods and requiring employees with
unique competencies.
• INTEGRATION: It means that the various units
must be put back together so that work is
coordinated.
 Common Elements of Organization
• Common Purpose
• Coordinated Effort
Proposed by Edgar Schien,
• Division of Labor professor in organizational
development
• Hierarchy of Authority
• Span of Control
• Authority, Responsibility, & Delegation Most
• Centralization v.s. Decentralization of authorities
agree on
Authority
 NATURE OF ORGANIZING
• 1. Group of Persons
• 2. Common Objectives
• 3. Division of Work
• 4. Cooperative Efforts
• 5. Communication
• 6. Central Authority
• 7. Rules & Regulations
• 8. Dynamic Element
• Group of Persons: An organization is a group of
people working together for the achievement of
common. The group may be large or small. An
organization is a system of cooperative
relationships of two or more persons.
• Common Objectives: Every organization has a
common objectives distinct from personal
objectives of the members. The common goal is
the basis of cooperation among the members.
The objectives of the organization are usually are
made explicit
• Division of Work: An organization comes into existence
when the total task is divided into the members of the
group. Division of work is necessary not only because
one individual cannot do all the work but specialization
results in efficiency and effectiveness.
• Cooperative Efforts: The members of an organization
are willing to help each other for the achievement of
desired goals. Cooperative relationships are stabilized
both vertically and horizontally among different units
of the organization:
• Communication: People who form an
organization communicates with each other in
order to integrate or coordinate there efforts. The
structure must be such that people can perform
together efficiently.
• Central Authority: In an organization, there is a
central directing authority which controls the
concerted efforts of the group. The chain of
authority- responsibility relationships is known as
the chain of command.
• Rules and Regulations: For the orderly and
systematic working of the members, rules and
regulations are laid down and enforced by the
central authority.
• The Dynamic Element: An organization is not a
mere mechanical structure but a living organism
arising out of the sentiments, attitudes, and
behavior of people. The people are the material
of construction that holds the structure together
and gives it vitality.
 IMPORTANCE OF ORGANIZING:
• Facilitates Administration: Achievement of the
objectives of an enterprise by providing a framework of
coordination and control. It provides a system of
authority and network for effective communication.
Individual goals can be coordinated towards group
goals. A properly balanced organization facilitated both
management and operation of the enterprise.
• Encourages Growth & Diversification: It has enabled
organizations to grow and expand to giant sizes.
Systematic division of work and consistent delegation
of authority facilitate taking up of new activities and
meeting new demands. It provides flexibility for growth
without losing control over various activities.
• Optimum Use of New Technology: It is made through
a sound structure manned with competent employees.
In addition, Optimum use of technology permits
optimum utilisation of human resources. Sound
organization ensures that every individual is placed on
the job for which one is best suited.
• Stimulates Innovation & Creativity: It stimulates
creative thinking and initiative on the part of
employees. It provides for effective management of
change and responds favourably to changes in
environment. It provides recognition for the
professional and the specialist in terms of their
achievement.
• Encourages Good Human Relations: The assignment of
right jobs to right person improves job satisfaction and
inter-personal relations. Well-defined jobs and clear lines of
authority and responsibility ensure good human relations.
• Ensures Continuity of Enterprise: It provides scope for the
training and development of future management. It
provides avenues for development and promotions throug
delegation and decentralisation.
• Coordination: It facilitates order and cohesiveness in the
enterprise. Division of labor, better utility of technology and
human talent helps to improve the efficiency and quality of
work. Clear channels of communication among the
members of the organization leads to coordination.
 PROCESS OF ORGANIZING:
1.Identification of Activities: First step is to determine the tasks
that must be performed to achieve the established objectives.
Activities and jobs are building blocks of any organization. The
activities to be performed depends upon the objectives, nature
and size of the enterprise.
2. Grouping of Activities: The various activities are the grouped
into departments or divisions according to similarity and
common purpose. Such grouping is necessary for the purpose of
specialization, coordination and control. It may be grouped on
various basis i.e. functions products, territories, customers etc
depending on requirements.
• 3. Assignment of Duties: Groups of activities or
departments are then allotted to different positions. Every
position is occupied by an individual best suited for it.The
assignments of activities creates responsibility and ensures
certainty of work performance. The process should be
carried down to the lowest levels. It is basically done to
avoid duplication of work and over-lapping efforts.
• 4. Delegation of Authority: Every individual is given the
authority required to carry out the responsibility assigned
to him. A chain of command is created through successive
delegation of authority. Different positions are linked
vertically and horizontally by establishing formal authority.
Every individual must know to whom he is accountable and
who are his subordinates.
 Principles of organizing
• Span of control
• Chain of command(Scalar chain)
• Hierarchy
• Authority & responsibility
• Delegation
• Empowerment
 Principles of Organizing
• Authority – the right to make decisions and carry out tasks
• Span of control – the number of people a superior
is responsible for
• Chain of Command – the relationship between different levels of
authority in the business the superior-subordinate authority chain
that extends from the top of the organization to the lowest echelon
• Hierarchy – shows the line management
in the business and who has specific responsibilities
• Delegation – authority to carry out actions
passed from superior to subordinate
• Empowerment – giving responsibilities to people
at all levels of the business to make decisions
 Factors Affecting(Determinants)
Organizational Structure

Figure 7.1
 Why Have a Structure?
• All businesses have to organise
what they do

• A clear structure makes it easier to see which part of

the business does what

• There are many ways

to structure a business
 TYPES OF ORGANIZATION
STRUCTURE
• LINE STRUCTURE
• LINE AND STAFF STRUCTURE
• FUNCTIONAL STRUCTURE
• COMMITTEE STRUCTURE
• PROJECT STRUCTURE
• MATRIX STRUCTURE
 8 Types of Organizational Arrangement

• Simple Structure
• Functional Structure
• Divisional Structure
• Conglomerate Structure
• Hybrid Structure
• Matrix Structure
• Team-Based Structure
• Network Structure
 1. Simple Structure
• For a small firm
• An organization with a simple structure has
authority centralized in a single person, a flat
person, a flat hierarchy, few rules, and low
work specialization
Owner

Simple structure: an example

Administrative
Assistant There is only one hierarchical
level of management beneath the
owner
 2. Functional Structure
• Grouping by similar work specialty
• In a functional structure, people with similar
occupational specialties are put together in
formal groups President Structure for a
Business
Vice President,
Vice President, Vice President, Vice President,
Human
Marketing Finance Production
Resources

Chief Structure for a

Administrator hospital
Chief of Director of Director of Director of
Medical Admistrative Outpatient Nutrition &
Services Services Services Food Services
 3. Divisional Structure
• Grouping by similarity of purpose
• In a divisional structure, people with diverse
occupational specialties are put together in
formal groups by similar products or services,
customers or clients, or geographic regions
Divisional Structure
Product
President divisional
structure
Motion
Internet
Pictures & Magazine
Music Division Product
Television Division
Division
Division

Customer
President
divisional
structure
Consumer Mortgage Agricultural
Business Loans
Loans Loans Loans

Geographic
President
divisional
structure
Western Northern Southern
Eastern Region
Region Region Region
 4. Conglomerate Structure
►Grouping by industry
►The conglomerate structure groups divisions or
business units around similar businesses or
industries
This resemble the
structure of Tyco
International, a global
President manufacturing company

Plastics & Engineered

Electronics Fire & Security Healthcare Products &
Adhesives
Services
 5. Hybrid Structure
• Functional & divisional used within the same
organization
• In a hybrid structure, an organization uses
functional and divisional structures in
different parts of the same organization
 Hybrid Structure

CEO
General
Product Motors
divisional
structure President, President, President, President,
Cadilac Buick Pontiac Chevrolet

Vice President, Vice President, Vice President, Vice President,

Production Marketing Finance Human
Resources
Functional
Manager, Manager, Manager, Manager, structure
Region I Region II Region III Region IV
Geographical
divisional
structure
 6. Matrix Structure
• A grid of functional & divisional for 2 chains of
command
• In a matrix structure, an organization
combines functional and divisional chains of
commands in a grid so that there are 2
command structures—vertical and horizontal
Matrix Structure Functional
An example of an arrangement President
Structure
that Ford might use

Vice President, Vice President, Vice President, Vice President,

Project Engineering Finance Production Marketing
Structure

Project
Manager,
Taurus

Project
Manager,
Mustang

Project
Manager,
Explorer

Project
Manager,
Expedition

Subordinate reports to both VP of Marketing (above) and Project Manager for Expedition
 7. Team-Based Structure
• Eliminating functional barriers to solve problems
• In a team-based structure, teams or workgroups,
either temporary or permanent, are used to improve
horizontal relations and solve problems throughout
the organization
• When managers from different functional divisions
are brought together in teams —known as cross
functional teams—to solve particular problems, the
barriers between the divisions break down.
Team-based structure
President
Functional
structure
Vice President, Vice President, Vice President, Vice President,
R&D Design Engineering Marketing

Product Team Product Team Product Team

Project Manager, Manager, Manager,
teams Manufacturing, Manufacturing, Manufacturing,
Light Trucks Sedans Sport Cars

Project team
members
 8. Network Structure
• Connecting a central core to outside firms by
computer connections
• The network structure is the organization has a
central core that is linked to outside
independent firms by computer connections,
which are used to operate as if all were a single
organization
• Corporations using this structure are sometimes
called virtual corporations
Network structure
Example of a personal computer company

Component
Design studio:
assembly:
Sweden
Mexico, Asia

Core of
personal
computer
company
Engineering USA Distribution
company: company:
Japan Canada

Accounting &
finance: USA
 Departmentation
• The process of grouping the activities known as departmentation Departmentation
means the process by which similar activities of the business are grouped into
units for the purpose of facilitating smooth administration at all levels

• According koontz & O,Donnell a departmentation is process of dividing the large

functional organization into small &flexible & administrative unit.
• Choosing basis for departmentation
• Specialization
• Coordination
• Control
• Economy
• Recognition of local condition
• Adequate attention
• Human consideration
 DEPARTMENTATION
• It is a process of grouping individual jobs into
departmentation.
• TYPES:
• Departmentation by function.
• Departmentation by products.
• Departmentation by territory.
• Departmentation by customers.
• Departmentation by process.
• Departmentation by time and numbers.
 Functional departmentation
• The grouping of common & homogeneous
activities to forman organizational unit is known
as functional organisation
• Function are two types basic function &
secondary function basic function can be divided
into sub-function
• Each department have a head with the title
departmental manager
• The functional departmentation will include both
line function as well as staff function
 functional Structure

• Let’s look at :

Chief Executive

Board of Directors

Production Marketing Accounts Personnel IT

 Divisional Structure Can Take
Different Forms
• Product
• Geographic
• Customer group served
 Divisional Organization
Organizational structure in which corporate divisions
operate as autonomous businesses under the larger
corporate umbrella

Food Service Infant Foods Condiments

Division Division Division

Star-Kist Tuna Pet Foods Frozen-Foods Misc. Products

Division Division Division Division

Division: Department that resembles a separate business in

producing and marketing its own products
Departmentalization by Product

President

VP
VP
VP (Fuels) (Lubricants &
(chemicals)
Waxes)

Marketing

Planning

Supply &
distribution

Manufacturing
 Departmentalization by Geography

VP (Sales)

Sales Manager Sales Manager Sales Manager Sales Manager

Western Region Southern Region Northern Region Eastern Region
 Apple: Geographical Structure
CEO
John Sculley

Apple Apple Apple Apple

Products USA Europe Pacific

Europe
Canada
West

Europe
Sales Australia
North
Service and
Marketing Japan
France
To Regions

South Latin
Europe America

Far
East
Market Structure

CEO

Central Support Functions

Commercial Consumer Government Corporate

Division Division Division Division

4- 43
 Organisation by Area
Hewlett-Packard’s Headquarters
Worldwide

Hewlett Packard

Americas Europe, Middle East, Africa Asia Pacific

Houston, Texas Geneva, Switzerland Hong Kong
 Exhibit 10–2 (cont’d) Process Departmentalization

+ More efficient flow of work activities

– Can only be used with certain types of products

© 2007 Prentice Hall, Inc. All

10–45
rights reserved.
• TIME AND NUMBER DEPARTMENTATION
• TIME:
• The activities or group on basis of time
• EXAMPLE: Call centers or any factory.
• NUMBER:
• The activities or group on basis of
performance by certain number of persons.
 FORMAL AND INFORMAL
GROUPS
• FORMAL GROUP- A formal group is a structured
group,which has a plan and positions each job’s
objective and functions.
• CHARACTERISTICS OF FORMAL GROUP
• Formal means something systematic.
• It is in an official structure
• It provides official relationship
• between individual.
• It is objective oriented
• It abides with rules and regulations
• ADVANTAGES:
• The line of communication is very clear
• It is accuracy of the information.
• systematic
• It is objective oriented.
• It has a heirarchial pattern
 INFORMAL GROUPS
• It is the outcome of personal ,social and friendly
relationship and it develops spontaneously.
• It arises naturally on the basis of friendship or some
common interest which may or may not be related with
work
• CHARACTERISTICS OF INFORMAL GROUP
• Informal group is created by the member of the
organisation for their social and psychological satisfaction.
• Informal groups are unstable in nature ,it is not permanent
• Informal groups are greater in numbers than the formal
groups
• Free interaction
 Comparison
• Formal Group-It is concisiously deliberate in nature .
• Informal Group- It arises spontaneously.
• F G-It is based on delegation of authority .IFG- It arises on account of
social interaction or it arises from account of personal factors like
friendship
• FG-Rules responsibilities are written and clearly defined
• IFG-Just unwritten rules and regulations
• FG-It shown in organization .IFG-It has no place in organization chart
• FG-provides a definite .IFG-It is structure less because it is social
• FG-Formal authority is attaches to a ,IFG-Informal authority attaches to a
person out of social interactions.
• FG-It flows downwards ( top to lower level)IFG- It flows upwards
• FG_It is permanent and stable,IFG- It is temporary and unstable
• FG-It is deliberately impersonal IFG-It is personal
 Authority -responsibility
Delegation of Authority
“Delegation of authority means assigning work
to others and giving them authority to do it.”
- F.G. Moore
“Delegation of authority merely means the
granting of authority to subordinates to operate
within prescribed limits.”
- Theo Haimann
• Hierarchy of Authority
• Or the Chain of Command
• It is a control mechanism for making sure the
right people do the right things at the right
time

• Without tiers or ranks of authority, a lone

manager would have to confer with everyone
in his/her domain, making it difficult to get
things done
Example
• Elements of Delegation of Authority :
• Responsibility
• Authority
• Accountability
• Authority, Responsibility, & Delegation: Line vs.
Staff Position

• Authority refers to the rights inherent in a

managerial position to make decisions, give
orders, and utilize resources.
• Authority means accountability—managers
must report and justify work results to the
managers above them.
• Being accountable means you have the
responsibility for performing assigned tasks
Authority, Responsibility, & Delegation: Line vs.
Staff Position
• Responsibility is the obligation you have to
perform the tasks assigned to you
• Example: a car assembly-line worker has little
authority but also little responsibility: just
install those windshields over and over.
Manager, however, has greater responsibilities
With more authority comes more
responsibility
Authority, Responsibility, & Delegation: Line vs.
Staff Position
• Delegation is the process of assigning
managerial authority and responsibility to
managers and employees lower in the
hierarchy.
• To be more efficient, most managers are
expected to delegate as much of their work as
possible
Delegation: Responsibility, Authority, and
Accountability
Authority, Responsibility, & Delegation: Line vs.
Staff Position
• Regarding authority and responsibility, the
organization chart distinguishes between 2
positions:

– Line position: Line managers have authority to make

decisions and usually have people reporting to them
(are indicated by solid line)

– Staff position: Staff personnel have authority

function; they provide advice, recommendations, and
research to the line managers (are indicated by
dotted line)
Line and Staff

Board of
Staff Directors
Line
Strategic
Planning CEO Legal Counsel
Advisor

Cost-
President Containment
Staff

Executive Executive
Administrative Medical
Director Director
 • Centralization vs. Decentralization of
Authority
• With centralized authority, important decisions are
made by high-level managers
• Very small companies tend to be the most
centralized, however, Kmart and McDonald are using
this kind of authority

• Advantages:
– Less duplication of work (fewer employees perform the
same task; rather, the task is often performed by a
department of specialists)
– Procedures are uniform and thus easier to control
Centralization vs. Decentralization
of Authority
• With decentralized authority, important decisions
are made by middle-level and supervisory-level
managers
• Here, obviously, power has been delegated
throughout the organization. General Motors and
Sears are using this kind of authority

• Advantages:
– Managers are encouraged to solve their own problems
rather than to buck the decision to a higher level
– Decision are made more quickly, which increases the
organization’s flexibility and efficiency
• Span of Control:
Narrow (or Tall) v.s. Wide (or Flat)
• or span of management, refers to the number of
people reporting directly to a given manager

• There are 2 kinds of spans of control:

– Narrow (or tall): manager has limited number of people
reporting — more managers are required, managers can
communicate quickly to subordinates and control them
easily
– Wide (or flat): manager has several people reporting—less
managers are required = more efficient in terms of cost,
the message reaches more employees faster, faster
decision making