ORGANIZING FUNCTION

Meaning of organizing
Organizing is defined as the process of groping activities and resources in a logical and appropriate
fashion. In the study of management, organizing can therefore be regarded as a process of
management concerned with change or growth of structure. It involves shaping the organization
as it grows changes or shrinks.
Importance of organizing
According to Allen, sound organization can contribute to the success of an enterprise in the
following ways;
1. Facilitate administration
Sound organization contributes to effective management. It enables smooth operation of the
enterprise by providing a framework within which management can perform the functions of
planning, directing, controlling, etc.
2. Makes growth and development and diversification possible
Growth and diversification become possible due to systematic division of work and consistent
delegation of authority. An ideal organization would provide the flexibility and strength necessary
for meeting new demands.
3. Permits optimum use of resources
A sound organization helps in the optimum utilization of technological innovations and human
resources. It avoids duplication of work and overlapping of efforts. Optimum use of technological
improvements can be made through a sound structure manned with efficient employees.
4. Encourages good human relations
In a sound organization, every individual is assigned the job for which he is best suited. The
assignment of right jobs to right persons improves job satisfaction and interpersonal relations.
5. Stimulates initiative and creativity
A well-designed organization demands creative effort, encourages innovation and permits
extensive delegation and decentralization. A sound organization also helps in the continuity of the
firm by providing scope for the training and development of executives.
6. Facilitates coordination
Organization is an important means of unifying and integrating individual efforts. It helps in
putting balanced emphasis on different activities and in establishing effective relationships
between the different departments or divisions of the enterprise. It also provides efficient channels
for communication between different groups.
Structure and design of organizations
Organizational structures
Organization structure may be defined as the sum total of the ways in which a going concern
divides its distinct tasks and archives coordination among them.
The human capital in an organization should be organized and structured appropriately to enable
a given strategy to achieve its aims, goals and objectives.
Determinants of organization structure
Typically, and practically, the structure of an organization may be influenced by factors such as:
1. The age and size of an organization
The older and larger an organization, the more organized and standardized will be its behaviour,
politics, processes and processes. Because of these factors’ changes are more difficult to
implement in older and larger organizations than in infant and small organizations.
2. Technical systems
The more a technical system controls the workforce, the more standardized will be the operating
system and bureaucratic the organizational structure.
3. Power or capacity of an individual or group of individuals to influence decisions or effect
organizational outcomes. Sources of such power include reward power, legitimate power, coercive
power, expert power and referent power.
4. Environment in respective of variables concerning socio-culture, technology, economy,
politics, legalities and ethics have strong influence on a structure of a given organization. The
organization has to be structured in such a way that it can competitively survive in the market
environment.
5. The type of strategy adapted
The organization has to be structured in such a way that it matches strategies in put to drive it to
greater heights.
6. Operational processes and technology
The nature of the tasks undertaken by the operating core of an organization has an important
influence on the various aspects of organizational structure. The more sophisticated and complex
the technology of an organization, the more elaborate the structure becomes.
7. The type of organization
The nature of an organization’s accountability has a very strong effect on the structure. The way
of structuring various organizations in various sectors such as public, manufacturing, service,
construction, service etc will very much depend on the expectations of benefactors and
beneficiaries.
Types of organizational structures
The type of structure adapted by an organization will vary from one organization to another and
such structures may include:
1. The functional structure
This structure is typically found in medium sized organizations with narrow, rather than diverse
product ranges. It is a structure that groups its people together on the basis of their technical and
specialist expertise.
Advantages of a functional organizational structure
a) The top management is in touch with all operations.
b) Control mechanisms are simplified.
c) Responsibilities are clearly defined.
d) Managers easily specialize in specific areas.
e) Workers in a functional organizational structure tend to more cohesive
Disadvantages of a functional organizational structure
a) It encourages development of sectional interests which may conflict with the needs of the
organization as a whole
b) Functional structures are only best suited in a stable environment
c) Promotes narrow specialization and functional rivalry
d) Coordination between functions is very difficult.
e) Adapting to new practices is very difficult.
2. Product based structure
This is a type of structure that groups its operations according to the products. It is a popular
structural form in a large organization having a wide range of products and services.
Advantages of a product-based structure
a) It enables diversification to take place
b) It copes better with problems of technological change
c) Continuous utilization of equipment by staff enables them to be experts
d) By grouping staff in the product-based structure, it enables staff to reduce fatigue
Disadvantages of this product-based structure
a) Each general manager may promote his own group products to the detriment of other parts of
the company
b) Top management is forced to spend valuable time controlling general managers. Close control
by top management tends to demotivate general managers
c) By continuing working in the product-based areas, managers are deprived of the chance to know
the operations in other departments.
d) Managers tend to develop Empire building mentality due to excessive experience acquired in
product-based department.
e) Specialization in product-based department blunts manager’s initiative
3. Geographically based structure
This structure groups operations on a geographical basis. It is usually developed where the realities
of a national or international network of activities make some kind of regional structure essential
for decision making and control.
Advantages of a geographical based structure
a) Regional structured networks facilitate in control of activities effectiveness
b) Network of activities make some kind of regional structure essential for decision making
c) Improves functional co-ordination within the target market
d) Provides excellent training ground for higher level general managers
e) Allows tailoring of strategy to the needs of each geographic market
Disadvantages of geographically based structure
a) Can result in duplication of staff services at the headquarters and district level
b) Poses problem of deciding whether headquarters should impose geographic uniformity or
geographic diversity
c) Management spends a lot of funds by engaging services of senior functional managers at
headquarters to provide direction and guidance to line managers in the regions
4. The matrix organizational structure
It is a combination of different structures in one big structure. These structures are developed to
co-ordinate activities in highly complex industries such as aircraft manufacturers where functional
and product type of structures have not been able to meet organizational demands.
Matrix structures are often adopted because there is more than one factor around which a structure
could be built.
Advantages of a matrix structure
a) Quality of decision making where interests conflict.
b) Direct contact replaces bureaucracy.
c) Increases managerial motivation.
d) Development of managers through increased involvement in decisions.
Disadvantages of matrix structure
a) Takes longer time to finalize decision making.
b) Unclear job and task responsibilities.
c) Unclear cost and profit responsibilities.
d) High degree of conflicts.
e) Dilution of priorities.
f) Creeping bureaucracy.
Principles of organizing
1. Unity of Objectives
An organization and every part of it should be directed towards the accomplishment of common
objectives. The application of this principle implies the existence of formulated and understood
objectives. An organization structure can be called sound only when it is able to achieve the
desired objectives.
2. Efficiency
An organization is efficient if it is able to accomplish predetermined objectives at minimum
possible cost. An organization should also provide maximum possible satisfaction to its members
and should contribute to the welfare of the community.
3. Division of Work
The total task should be divided in such a manner that the work of every individual in the
organization is limited as far as possible to the performance of a single leading function. The
activities of the enterprise should be so divided and grouped that there is the most efficient
breakdown of tasks.
4. Span of Control
No executive should be required to supervise more subordinates than he can effectively manage.
On account of the limitation of time and ability there is a limit on the number of subordinates that
an executive can effectively supervise.
5. Scalar Principle
Authority and responsibility should be in a clear unbroken line from the higher executive to the
lowest executive. There must be a clear chain of command. Every subordinate must know who
his superior is and to whom policy matters beyond his own authority should be referred for
decision.
6. Delegation
Authority delegated to an individual manager should be adequate to enable him to accomplish
results expected of him. Authority should be delegated to the lowest possible level, consistent
with necessary control so that coordination and decision-making can take place as close as possible
to the point of action.
7. Functional Definition
The duties and authority-relationships of different individuals must be clearly defined so that there
is no confusion or overlapping. The relationships between various jobs should also be clearly
defined.
8. Absoluteness of Responsibility
The responsibility of the subordinate to his superior is absolute. No superior can escape
responsibility for the organizational activities of his subordinates. Similarly, subordinates must
be held responsible for the performance of task assigned to them.
9. Correspondence
Authority and responsibility must be coterminous and co-extensive. The responsibility exacted
from a position should be commensurate with the authority delegated to that position, and vice
versa.
10. Unity of Command
Each person should receive orders from only one superior and be accountable to him. This is
necessary to avoid the problems of conflict in instructions and divided loyalty and to ensure the
feeling of personal responsibility for results.
11. Unity of Direction
There must be one head and one plan for a group of activities directed towards the same objective.
12. Balance
The various parts of an organization should be kept in balance and none of the functions should be
given undue emphasis at the cost of others. In order to create organizational or structural balance,
it is necessary to maintain a balance between centralization and decentralization, between narrow
span of management and long lines of communication, between line and staff, etc.
13. Exception principle
Every manager should take all decisions within the scope of his authority and only mattes beyond
the scope of his authority should be referred to higher levels of management. This principle is also
known as authority level principle.
14. Coordination
There should be orderly arrangements of group effort and unity of action in the pursuit of a
common purpose. The purpose of organizing is to secure unity of effort.
15. Flexibility
The organization must be free from complicated procedures and red tape. Devices, techniques and
environmental factors should be build into the structure to permit quick and easy adaptation of the
enterprise to changes in its environment.
16. Continuity
Change is law of nature. The organization should be so structured as to have continuity of
operations. Arrangements must be made to enable people to gain experience in positions of
increasing diversity and responsibility.
Process of organizing
The process of building up an organization structure is an important function of management.
The process of organizing consists of the following steps:
1. Determination and division of work
The first step in organizing is to determine the tasks required for the accomplishment of established
objectives.
2. Grouping activities
The various activities identified under the first are then classified into appropriate departments and
divisions according to similarities and common purpose.
3. Assignment of duties
The individual departments are then allotted the different activities to perform.
4. Delegation of authority
Once the duties and responsibilities of every individual have been fixed, he must be given the
authority necessary to carry out the duties assigned to him.
Delegation
Meaning of delegation
In simple words, to delegate means to entrust authority to a subordinate in certain defined areas
and to make him responsible for results.
The main features of delegation
1. Delegation occurs when a manager grants some rights to a subordinate.
2. A manager cannot delegate authority unless he himself possesses the authority.
3. A manager never delegates all his authority to subordinates. He transfers only a part of his
authority.
4. Delegation does not imply reduction in the status of a manager. The manager retains the right
to exercise control over the subordinates. A manager can reduce, enhance or take back the
delegated authority.
5. Delegation never means abdication of responsibility. No manager can avoid his responsibility
by delegating authority to subordinates.
Need for delegation
1. Delegation enables a manager to distribute his work load among his subordinates. Through
delegation an executive can transfer routine work to subordinates and thereby concentrate on more
important tasks.
2. Delegation pushes authority near the point of action. As a result decisions can be taken more
quickly and without referring to higher authorities.
3. Delegation helps to improve the motivation and morale of subordinates. It helps to satisfy their
needs for recognition and responsibility.
4. Delegation is a means of training and developing subordinate executives. They acquire skills
through experience.
5. Delegation facilitates the growth and expansion of the organization. In the absence of delegation,
a firm cannot expand and grow.
Elements (process) of delegation
The process of delegation involves the following steps:
1. Assignment of duties
A manager defines the duties or tasks to be performed by his subordinates. Before assigning duties
to subordinates, an executive subdivides his job and allocates a part of it to each subordinate. He
also defines the results expected of subordinates.
2. Granting authority
An executive then confers on his subordinates the rights necessary to perform the duties assigned
to them. Subordinates are authorized to use resources, to take decisions, to represent the superior,
etc.
3. Excavation of responsibility
Excavation of responsibility implies creating an obligation and to hold the subordinates
accountable for results.
Principles of delegation
Delegation is essentially an art but it is based on certain principles. These principles serve as broad
guides to the manager who wants to delegate authority.
1. Functional definitions
The functions to be performed by a subordinate must be defined clearly and precisely. The limits
of authority of every subordinate should also be clearly defined.
2. Unity of command
Every subordinate must at a time receive orders and be accountable to only one superior. No
individual can serve more than one boss at the same time.
3. Delegation by results expected
Authority should be delegated according to the results expected of subordinates to know by what
standards their performance will be judged.
4. Absoluteness of responsibility
Responsibility can never be delegated. By delegating authority, a manager therefore, becomes
responsible for the actions of his subordinates.
5. Parity of authority and responsibility
Authority should be co-extensive and coterminous. It is unfair to hold a person responsible for
something over which he has no authority. Responsibility without authority causes frustration, and
authority without responsibility results in misuse of power.
Advantages of delegation
Delegation offers several advantages. Important among these are as follows.
1. Basis of effective functioning
Delegation provides the basis for effective functioning of an organization. It establishes
relationships thorough the organization and helps in achieving coordination of various activities
in accomplishing enterprise objectives.
2. Reduction in managerial load
Delegation relieves the manager of the need to attend to minor or routine types of duties. Thus, he
enabled to devote greater attention and effort towards broader and more important responsibilities.
3. Benefit of specialized service
Delegation enables the manager to benefit from the specialized knowledge and expertise of persons
at lower levels, thus, purchasing may be delegated to the purchase manager, accounting to an
accountant, legal matters to lawyers, and personnel functions to a personnel manager.
4. Efficient running of branches
In the modern world, where a business rarely confines its activities to a single place, only
delegation can provide the key to smooth and efficient running of the various branches of the
business at places far and near.
5. Aid to employee development
Delegation enables the employees of business to develop their capabilities to undertake new and
more challenging jobs. Also, it promotes job satisfaction and contributes to high employee morale.
6. Aid to expansion and diversification of business
With its employees fully trained in decision making in various fields, the business can confidently
undertake expansion and diversification of its activities because, it will already have a competent
team of contented workers to take on new responsibilities.
Why managers do not delegate
1. Feeling of superiority
A Manager may have a feeling that his subordinates are not capable enough to do any work without
close supervision. He may therefore concentrate all decision-making in his hands.
2. Habit pattern
If as a result of practice of close supervision, the manager has developed personal contact with all
aspects of the work, he may avoid delegation of authority so as to sustain the deep-seated habit
pattern.
3. Fear of exposure
If a manager is himself not competent to plan ahead and decide which task should be delegated to
whom, he may avoid delegation of authority, because doing so will expose him for what he is an
incompetent and disorganized person.
4. Feeling of indispensability
If a manager has an inflated sense of his own worth, and wants others to realize his importance, he
may not delegate authority such that everyone around him is dependent on him for decision-
making.
5. Risk avoidance
Feeling of insecurity may be a major reason for reluctance on the part of a manager to delegate
authority. Despite delegation of authority, the manager would continue to be accountable for the
actions of the subordinates and this might deter him from running the risk of leaving decision-
making to the care of subordinates.
6. Loss of importance
A manager may feel that delegation of authority to subordinates may lead to diminution of his own
authority, and divest him of the importance enjoyed by him as the centre of all authority. He may
also have a lurking fear that if any subordinate proves himself to be competent; his own position
in the department may be threatened.
Why subordinates do not accept delegation
Subordinates are reluctant to accept delegation of authority for the following reasons:
1. Insecurity
If subordinates are afraid of accepting risk and responsibility, they may avoid delegation and he
content with the superior making all the decisions. They consider it safer to carry out the decisions
handed down to them by superiors than to make decisions themselves.
2. Fear of criticism
Subordinates’ reluctance to accept delegation of authority may also be due to fear or criticism for
mistakes. They may have a fear that even the slightest mistake on their part may lead to their
dismissal from service.
3. Inadequacy of information and resources
subordinates may avoid acceptance of delegation of authority also because of a lurking fear that
adequate information and resources may not be available to them to carry out their decisions.
4. Lack of self-confidence
Sometimes, subordinates may avoid acceptance of delegation due to lack of confidence in their
capability to discharge new responsibilities.
5. Inadequate incentives
If delegation of authority is not accompanied by suitable incentives, subordinates may not be
motivated to accept it willingly.
Steps to make Delegation Effective
The following are the guidelines based on classical principles, to make delegation effective and
productive of the desired results.
1. Determination of specific goals
The basic purpose of delegation is to facilitate accomplishment of the stated objectives. The
objectives should be clearly defined and, where possible stated in quantitative terms.
2. Accountability
Every position in the organization structure should be assigned specific tasks, as also individuals
or groups who are to be held accountable for the accomplishment of those tasks.
3. Authority and responsibility
Individuals and groups will be able to carry out their tasks efficiently only if they are delegated
sufficient authority for the purpose. If they lack adequate authority, they would not be able to
accomplish the results and in that case it would be futile to hold them accountable for an inadequate
performance.
4. Chain of command
Delegation of authority can be effective only when everyone in the organization knows precisely
where he stands in relation to others.
5. Unity of command
The unity of command principle stipulates that each person should be answerable to only one
superior. If he is accountable to more than one superior, he may be consulted as to whom he is
accountable, and whose instructions he should follow.
6. Motivation
There will be greater willingness to accept delegation of authority and assignment of responsibility
if it is accompanied by adequate monetary and non-monetary incentive such as higher wages,
status, etc.
7. Training
Subordinates should be properly trained in accomplishing delegated jobs. Training should cover
all aspects of the assigned task and lead to greater morale, self-confidence and effective leadership.
Coordination
Definition of coordination
Coordination implies an orderly pattern or arrangement of group efforts to ensure unity of action
in the pursuit of common objectives.
Nature and Characteristics of Coordination
The main characteristics of coordination are given below:
1. Coordination is not a distinct function but the very essence of management.
2. Coordination is the basic responsibility of management and it can be achieved through the
managerial functions. No manager can evade or avoid this responsibility.
3. Coordination does not arise spontaneously or by force. It is the result of conscious and concerted
action by management.
4. The heart of coordination is the unity of action which involves fixing the time and manner of
performing various activities.
5. Coordination is a continuous or on-going process. It is also a dynamic process.
6. Coordination is required in group efforts, not in individual effort. It involves the orderly pattern
of group efforts. There is no need for coordination when an individual works in isolation without
affecting anyone’s functioning.
7. Coordination has a common purpose of getting organizational objectives accomplished.
Need and Significance of Coordination
Coordination is required whenever and wherever a group of persons work together to achieve
common objectives. Coordination becomes necessary because of the following reasons.
1. Increase in size and complexity of operations.
Growth in the number and complexity of activities is the major factor requiring coordination.
Need for coordination arises as soon as the operations become multiple and complex.
2. Specialization
Division of work into specialized functions and departments leads to diversity and lack of
uniformity. Specialists in charge of various departments focus on their own functions with little
regard to other functions.
3. Clash of interests
Individuals join an organization to fulfill their personal goals, i.e. their physiological and
psychological needs. Often individuals fail to appreciate how the achievement of organizational
goals will satisfy their own specialized personal interests often at the expense of the larger
organizational goals.
4. Different Outlook
Every individual in the organization has his own way of working and approach towards problems.
Capacity, talent and speed of people differ widely.
It becomes imperative to reconcile differences in approach, timing and effort to secure unity of
action.co-operation serves as the binding force in an organization in the face of narrow and
sectional outlook.
5. Interdependence of units
Various units of organization depend upon one another for their successful functioning.
For instance, the spinning plant supplies yarn to the weaving plant.
The output of one unit serves as the input of interdependence, namely; (a) pooled interdependence,
(b) sequential interdependence, and (c) reciprocal interdependence.
6. Conflicts
In an organization, conflicts may arise between line managers and staff specialists or between
management and workers. Human nature is such that a person emphasizes his own area of interest
and does not want to get involved in the activities of others.
Principles of coordination (requisites for effective coordination)
Mary Parker Follett has laid four principles for effective coordination:
1. Direct personal contact
According to this principle, coordination is best achieved through direct personal contact with the
people concerned.
Direct communication is the most effective way to convert ideas and information.
2. Early beginning
Coordination can be achieved more easily in early stages of planning and policy-making.
Therefore, plans should be based on mutual consultation or participation.
Integration of efforts becomes very difficult, once the uncoordinated plans are put into operation.
3. Reciprocity
This principle states that all factors in a given situation are reciprocally related.
For instance, in a group, every person influences all others and is in turn influenced by others.
When people appreciate the reciprocity of relations, they avoid unilateral action and coordination
becomes easier.
4. Continuity
Co-ordination is an on-going or never-ending process rather than a once-for-all activity.
It cannot be left to chance but management has to strive for it constantly.
Sound coordination is not firefighting, i.e., resolving conflicts as they arise.
Techniques of coordination
The main techniques of effective coordination are as follows:
1. Sound planning
Unity of purpose is the first essential condition of coordination. Therefore, the goals of the
organization and goals of its units must be clearly defined. Planning is the ideal stage for
coordination.
2. Simplified organization
A simple and sound organization is an important means of coordination. The lines of authority and
responsibility from top to the bottom of the organization structure should be clearly defined.
3. Effective communication
Open and regular communication is the key to coordination
Effective interchange of opinions and information helps in resolving differences and in creating
mutual understanding.
4. Effective leadership and supervision
Effective leadership ensures coordination of effort both at the planning and the execution stage.
A good leader can guide the activities of his subordinates in the right direction and can guide the
activities of his subordinates in the right directions and can aspire them to pull together for the
accomplishment of common objectives.
5. Chain of command
Authority is the supreme coordination power in an organization. Exercise of authority through the
chain of command or hierarchy is the traditional means of coordination.
6. Indoctrination and incentives
Indoctrinating organizational members with the goals and mission of the organization can
transform a neutral body into a committed body. Similarly, incentives may be used to create
mutuality of interest and to reduce conflicts.
7. Liaison departments
Where frequent contacts between different organizational units are necessary, liaison officers may
be employed.
For instance, a liaison department may ensure that the production department is meeting the
delivery dates and specifications promised by the sales department. Special coordinators may be
appointed in certain cases.
8. General staff
In large organizations, a centralized pool of staff experts is used for coordination. A common staff
group serves as the clearing house of information and specialized advice to all the departments of
the enterprise.
9. Voluntary coordination.
When every organizational unit appreciates the working of related units and modifies its own
functioning to suit them, there is self- coordination. Voluntary coordination is possible in a climate
of dedication and team-mutual co-operation.
Centralization and Decentralization
Centralization
This is a process of formulating authority in the same place. When top managers formulate policy
in the head office, it is said that the authority has been centralized.
Decentralization
This is a process of formulating authority at different center especially in organization's branches.
Factors determining the degree of centralization and decentralization of authority:
1. Costliness of the decision.
2. Desire for uniformity of policy.
3. Size and character of the organization
4. History and culture of the organization.
5. Management philosophy.
6. Desire for independence.
7. Availability of managers.
8. Control techniques.
9. Decentralization performance.
10. Environmental influence.
Advantages of centralization
1. Senior management can exercise greater control over the activities of the organization and co-
ordinate their subordinates or sub-units more easily.
2. With central control, procedures can be standardized throughout the organization
3. Senior managers can make decisions from the point of view of the organization as a whole,
whereas subordinates would tend to make decisions from the point of view of their own department
or section.
4. Centralized control enables an organization to maintain a balance between the different
functions or departments. For example, if a company has only a limited amount of funds available
to spend over the next few years, centralized management would be able to take a balanced view
of how the funds should be shared out.
5. Senior managers ought to be more experienced and skillful in making decisions. In theory at
least, centralized decisions by senior managers should be better in quality than decentralize
decisions by less experienced subordinates.
6. Centralized management will often be cheaper in terms of managerial overheads.
In times of crisis, the organization may need strong leadership by a central group of senior
managers.
7. Centralized decisions are accepted by all staff because they are made by senior management.
8. Centralization enables senior managers to know what is happening throughout the organization.
Disadvantages of centralization
1. Increase’s stress and burdens senior management.
2. Deprives subordinates of job satisfaction and more so in decision making which affects their
work.
3. Senior managers do not have better knowledge of local
4. Subordinates in centralized organizations are denied the chance to prepare for senior positions.
5. Centralizing authority enhances the possibility of top management misuse of power.
6. Centralizing authority adversely affects the relationship between management and subordinates.
Advantages of decentralization
1.It reduces stress and burdens of senior management.
2.It provides subordinates with greater job satisfaction by giving them more say in decision making
which affects their work.
3. Subordinates may have a greater knowledge of local conditions affecting their area of work.
4.Decentralization allows greater flexibility, a quicker response to changing conditions and quicker
decision making.
5.By allowing delegated authority to subordinates, management at middle and junior levels are
groomed for eventual senior management positions, because they are given the necessary
experience of decision making.
6. By establishing appropriate sub-units or profit centers to which authority is delegated, the
system of control within the organization might actually be improved.
7. By decentralizing authority, it reduces the possibility of top management misuse of power.
8. Decentralization improves relations between management and subordinates.
Disadvantages of decentralization
1. Senior management are denied the possibility of controlling activities of the organization.
2. Decentralization of authority undermines the standardization of procedures throughout the
organization.
3. Senior management are not able to maintain a balance between different functions or
departments.
4. Subordinate managers ‘decisions are likely to be of low quality because they are less qualified
and experienced.
5. Senior management is deprived of the right to make decisions from the point of view of the
whole organization.
6. Decentralized operations are often expensive in terms of Senior managers will not know what
is happening throughout the organization.
7. Decentralized decisions tend to be ignored by subordinates because they are not made by senior
management.
Informal organizations
Informal organization refers to the relationships between people in an organization based not on
procedures and regulations but on personal attitudes, prejudices, likes and dislikes etc. Informal
organization is a natural or spontaneous network of relationships based upon personal needs,
attitudes and emotions.
Distinction between Formal and Informal Organization
Formal Organization Informal Organization
1. It is created deliberately and is consciously it is natural and arises spontaneously
planned.

2. It is based on delegation of authority and it arises on account of social interaction

may grow to immense size. of people and tends to remain small.

3. It is deliberately impersonal and the it is personal with emphasis on people

Emphasis is on authority and functions. And their relationships

4. Rules, duties and responsibilities are it has unwritten rules and traditions.
Written and clearly defined.

5. It is shown on the organization chart. It has no place in the formal chart.

6. It provides for division of labour and it is structure less and develops out of
Has a definite structure. Social contacts.

7. Formal authority attaches to a position. Informal authority attaches to a person.

8. Formal authority flows downwards. Informal authority flows upwards or

horizontally.

9. Formal organization is created to meet informal organization arises from mans

organizational goals. quest for social satisfaction.
 10. It is permanent and stable. It is relatively fickle and unstable.

Merits and Demerits of Informal Organization

Merits Demerits
1. Helps in making the organizational system causes frustration and lack of
Highly effective motivation
2. Reduces managerial work-load Encourages negativism.
3. Promotes co-operation Generates inter-personal and
Group rivalries.
4. Enables work to be done opposes change of any kind
Quickly and effectively.
5. Promotes job-satisfaction on the part of causes undue harassment to
Employees certain employees.
6. Leads to effective communication. Promotes undesirable
Rumour mongering.
7. Provides an outlet for employee emotions promotes dissatisfaction among
employees
 ORGANIZATIONAL DESIGN
Organizational design is the administration and execution of an organization’s strategic
plan. This means that the organization’s strategy determines the optimal organizational
design.
Organizational design is determined by the strategic direction of the company, a.k.a. the
vision, mission, and goals of the company. These lead to strategies that the company
competes on, which are enabled through the organizational design.

What does an organizational design initiative deliver?

A sound organizational design initiative needs to deliver the following:

• A clear strategic intent: What are we aiming to deliver?

• Guiding principles: What are the principles that inform our design decisions?
• Capability maps: Which capabilities do we need to deliver on the strategic intent, and how
do they differ in strategic importance?
• Operating model blueprint: How will these capabilities work together to execute?
• Work design: What are the teams, jobs, and skills required to deliver, and how do we
organize them?
• Workforce plan: What are our strategies to resource the structure?
• Performance measures: How will we know that the design is working?

Five organizational design principles

1. Specialization principle. This principle states that boundaries should exist to encourage
the development of specialist skills. The test here is if any specialist cultures, which are
entities that have to be different from the rest of the organization, have sufficient protection
from the influence of the dominant culture.
2. Co-ordination principle. This principle states that activities that are done should be
coordinated in a single unit. This unit can be a business unit, business function,
(horizontally coordinating) overlay unit, sub-business, core resource unit, shared service
unit, project unit, or parent unit. The test here is if there needs to be coordination between
 departments which is hard to do. These ‘difficult links’ are links where normal networking
will not provide coordination benefits. In that case, coordination should be made easier, or
responsibility should be put in within a single unit. There are many different units that can
be used in organizational design, as we will show below.
3. Knowledge and competence principle. This principle states that responsibilities should
be allocated to the person or team best fit to do them. This means that tasks are retained by
higher levels based on their knowledge and competitive advantage. If this is not the case,
they should be positioned lower in the organization.
This means that the CEO should not be involved in every decision – especially not
decisions that involve specialists with much more subject-matter knowledge. The CEO is
there for the big picture and to balance complex decisions that impact the organization and
strategy.
4. Control and commitment principle. This principle is about having effective control on
the one hand while maintaining engagement and commitment on the other hand. This is
always a balance. The test here is to have a control process that is aligned with the unit’s
responsibility, cost-efficient to implement, and motivating for the people in the unit.
This means that the CEO is not giving the ‘go’ on the purchase decision for a $30 keyboard
– this would be highly demotivating, and control on such small expenditures should be put
lower in the organization to be adaptive anyway.
5. Innovation and adaptation principle. This principle states that organizational structures
should be sufficiently flexible to adapt to an ever-changing world. The test here is that the
organizational design will help the development of new strategies and adaptation to future
changes. Later in this article, we will give a case study of an organization that was unable
to adapt to a rapidly changing environment, hurting its internal processes and bottom line.

Factors affecting organizational design

There are five factors that greatly impact organizational design. These factors are:

1. Strategy. Strategy dictates the strategic priorities of an organization. This is the most
important influencing factor of organizational structure and design.
2. Environment. The environment a company operates in influences its strategy but also
dictates how it positions itself. In a rapidly-changing environment, the organization has to
design for more flexibility, or adaptability, while in a stable environment, the organization
can optimize for efficiency.
3. Technology. Information technology is a key enabler for decision-making. The state of IT
impacts organizational design as well. When systems are in place, and decision-making is
based on data, the organizational structure and design – including the potential for
hierarchical control – will be different from an organization where most of the data is stored
in unorganized Excel sheets.
4. Size & life cycle. The organizational size and life cycle also impact the organizational
structure and design. A 20-person company has very different challenges when it comes to
design compared to a 200,000-person company.
5. Culture. Organizational culture is another key element that impacts organizational
structure and design – and, vice versa, design also impacts culture.
Managing innovation and change

What is Organizational Change?

Organizational changes are those that have a significant impact on the organization as a whole.
Major shifts to personnel, company goals, service offerings, and operations are all considered
different forms of organizational change. It’s a broad category.

Before you can design your change management strategy, it is important to determine the type of
organizational change. This helps execute the right change management plan for the best
possible results. Knowing the type of organizational change will also help you choose the right
change management tools.

Selecting a change management strategy

The selection of a strategy for change management within an organization has consequences for
the final outcome. The following factors need to be considered in determining the nature of change
management strategy to adopt.
a) Degree of resistances
Strong resistance for change requires coupling of power-coercive and environmental adaptive
strategies. Weak resistance or concurrence requires a combination of rational empirical and
normative reductive strategies.
b) Target Population
Large populations require a mix of all four strategies i.e. Rational-Empirical, Normative-
Reductive, Power-Coercive, and environmental Adaptive strategies.
c) The stakes
High stakes require a mix of all the four strategies because there is nothing that can be left to
chance.
d) The time frame
Short time frames require a power-coercive strategy, longer time frames require a mix of rational-
empirical, normative-reductive, and environmental-adaptive strategies.
e) Expertise
Having available adequate expertise at making change requires some mix of the strategies outlined
below not having adequate expertise requires reliance on the power-coercive strategy.
f) Dependency
This implies that if the organization is dependent on its people, management ability to command
or demand is limited. Conversely, if people are independent upon the organization, their ability
to oppose or resist is limited.

Basic strategies available in change management

There are four main basic change management strategies available to managers:
a) Rational-Empirical
In this case, the assumption is that people are rational and will follow their self-interest once it is
revealed to them. Change is based on the communication of information and the proffering of
incentives.
c) Normative-Reductive
In this strategy, the assumption is that people are social beings and will adhere to cultural norms
and values. Change is based on redefining and reinterpreting existing norms and values and
developing commitments to new ones.
c) Power-Coercive
The assumption in this strategy is that people are basically compliant and will generally do what
they are told or can be made to do. Change is based on the exercise of authority and the imposition
of sanctions.
d) Environmental-Adaptive
In this strategy the assumption is that people oppose lessened disruption but they adapt readily to
new circumstances. Change is based on building a new organization and gradually transferring
people from the old ones to the new ones.
Resistance to organizational change
Some of the specific reasons that cause resistance to change within the organizations may include:
1. Desire for security
Changes scare people and individuals tend to find security in the way things have been done in the
past. This leads to psychological resistance. Giving up of the familiar is associated with a certain
amount of insecurity with the new idea ie the fear of the unknown which leads to uncertainty.
2. Threatened status
Changes are accompanied by shifting or loss of responsibility and most people are averse to this.
The introduction of new technology, new systems, new procedures and new managers can threaten
a person’s status and security and thus cause resistance.

3. Selective perception
A person who has biased interpretation of reality is quity of selective perception which leads to
misunderstanding of the change process. Whenever individuals do not clearly understand the
purpose, mechanics or potential consequences of a change programme, they are likely to resist it.
4. Awareness of Weaknesses in the proposed change
This is constructive resistance evidenced by some members of the organization who are aware of
potential problems in the proposed change. Knowing from experience or from inside information
that an idea will not work, these resisters can be valuable to the management. They can help the
organization save money, time and energy.
5. Dislike of Imposed change
Employees need to be involved in the change programme and failure to involve them can lead to
resistance.
6. Lack of conviction
Of the need for change can also become a ground for resistance for change.
7. Employees Dislike
Surprises and if there is no adequate information for readiness to embrace change they will resist
it.
8. Group norms
Established rules and procedures, both formal and informal, are powerful forces for resisting
change. There is always a reluctance to deal with unpopular issues.
9. Balance of Power
Any change that threatens the autonomy of a division or department within an organization may
be resisted because the group may perceive a decrease in control over its own affairs or an
appreciated shared authority and power.
10. Personal Inconveniences
Threats to interpersonal relationships and economic reasons will also cause resistance. Fear of
inadequacy and failures due to the need for new skills and luck of respect and trust on persons
promoting change are also causes of resistance.

Overcoming resistance to change

Some of the ways in which an organization can overcome resistance to change include:
1. Advance Planning
There is need for a prior planning and management of change through total systems orientation.
The whole organization and its systems would be required to make adjustments as change in one
area inevitably affects many other areas.
2. Explain and discuss change before it is implemented
This can enable the management to answer some questions and reduce some fears. If possible
employees should be involved in the planning and implementation of change. This will reduce
psychological uncertainty and insecurity.
3. Provide valid information
Adequate information based on facts should be provided to the affected parties.
4. Implement change gradually
This will enable people to adjust as the process is on course.
5. Avoid coercive tactics
Because these increase resentment and tension. Employees like to be convinced about change and
not to be coerced.
6. Minimize Social Changes
Social relationships are important to individuals and should not be disrupted by the change.
Maintain informal relationships as far as possible.
Diversity and inclusion
Diversity and inclusion in the workplace have a positive impact on the business bottom line, while
also improving a company’s culture and work environment. By ensuring fairness toward all your
employees, regardless of age, gender, or disability, you can increase the average level of
satisfaction across the company.
In other words, job satisfaction shouldn’t be limited to a select few – everyone, across the
company, should experience the same level of well-being.