Module No.

3: Organizing
Introduction-Meaning-Concept and Process of Organizing – An overview-Span of
management-Different types of authority (line, staff and functional)-Decentralization
Delegation of authority; Formal and Informal Structure-Principles of Organizing; Network
Organisation Structure.
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Organizing

Definition: Organizing is the second key management function, after planning, which
coordinates human efforts, arranges resources and incorporates the two in such a way which
helps in the achievement of objectives. It involves deciding the ways and means with which
the plans can be implemented.

Meaning of Organizing
Once the objectives and plans are laid down, management has to identify and establish
productive relationships between various activities and resources for implementing plans. In
general words organising refers to arranging everything in orderly form and making the most
efficient use of resources. The aim of organizing is to enable people to work together for a
common purpose.

‘Organizing is the process of identifying and grouping the work to be performed, defining and
delegating responsibility and authority and establishing relationships for the purpose of
enabling people to work most effectively together in accomplishing objectives.’

Steps Involved in the Process of Organizing

1. Identification & Division of Work: –

The total work to be done should be divided into specific jobs as according to predetermined
plans. –
Job = a set of related tasks that can be performed by an individual. It should have specific and
definite tasks to be performed. As far as possible, it should define expected results along with
the job.
– Division of work → specialization of efforts and skills + avoids duplication of work.
– Management must ensure that all the activities required to achieve organizational objectives
are identified.
2. Departmentalization:
– Grouping similar and related jobs into larger units called departments, divisions or sections
and placing them under a department head. It facilitates specialization.
– The departments are linked together and are interdependent.
– Aims at achieving co-ordination and facilitate unity of action. Departmentation can be done
on the basis of:

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•Functions: marketing, personnel, finance etc.
•Products: Textiles, chemical, power division etc.
•Territories: Western, northern, central, eastern etc.
3. Assignment Of Duties:
– Define the work of different job positions and allocate work accordingly.
– Once departments are formed, the dept is placed under the charge of an individual.
– Jobs are assigned to an individual best suited to perform it.
– Qualifications, experience, ability and aptitudes of people should be matched with duties.
– E.g. activities of finance should be assigned to persons having qualifications and experience
in finance.
4. Establishing Reporting Relationships:
– Granting requisite authority to enable employees to perform the job satisfactorily.
– Superior subordinate relations between different people and job positions created, so that
everybody knows from whom he is to take orders and to whom he can issue orders.
– Creates management hierarchy = a chain of command from the top manager to the
individual at the lowest level.
– This helps in coordination.

Importance of Organizing
1. Benefits of specialization: In organizing every individual is assigned apart of total work
and not the whole task. This division of work into smaller units and repetitive performance
leads to specialization. Thus organizing promotes specialization which in turn leads to
efficient & speedy performance of tasks.
2. Clarity in working relationship: It helps in creating well defined jobs and also clarifying
the limits of authority and responsibility of each job. The superior-subordinate relationship is
clearly defined in organizing.
3. Effective Administration: It provides a clear description of jobs and related duties which
helps to avoid confusion and duplication. Clarity in working relationships enables proper
execution of work which results ineffective administration.
4. Optimum utilization of resources: The proper assignment of jobs avoids
overlapping/duplication of work. This helps in preventing confusion and minimizing the
wastage of resources and efforts.
5. Adoption to Change: A properly designed organizational structure is flexible which
facilitates adjustment to changes in workload caused by change in external environment
related to technology, products, resources and markets.
6. Development of Personnel: Sound organization encourages initiative and relative thinking
on part of the employees. When managers delegate their authority, it reduces their workload
so they can focus on more important issues related to growth & innovation. This also develops
the subordinates’ ability and helps him to realize his full potential.

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7. Expansion and growth: It helps in growth & diversification of an enterprise by adding
more job positions, departments, products lines, new geographical territories.

Span of Management

Span of Management refers to the number of subordinates who can be managed efficiently
by a superior.

Span of control or Span of Management refers to the number of employees who report to one
manager. It is the number of direct repartees that a manager has and whose results he is
accountable for.

Span of control is critical in understanding organizational design and the group dynamics
operating within an organization. Span of control may change from one department to another
within the same organization.

The span may be wide or narrow. A wide span of control exists when a manager has a large
number of employees reporting to him. Such a structure provides more autonomy. A narrow
span of control exists when the number of direct reportees that a manager has is small. Narrow
spans allow managers to have more time with direct reports, and they tend to spark
professional growth and advancement.

Types of Authority

Three types of authority are;

 Line Authority
 Staff Authority
 Functional Authority

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Line Authority

The work of an employee is directed with the help of line authority. It takes the form of an
employer-employee relationship that moves from top to bottom. So certain decisions are made
by the line manager without consulting any other person. In some cases, line managers are
differentiated from the staff managers by using the word “line”. Hence the manager whose
functions are linked directly with the achievement of organizational objectives is called line
manager.

Staff Authority – Staff authority is the right to advise or counsel those with line authority. For
instance, human resource department staff assists other divisions by selecting and developing
a qualified workforce. A quality control manager helps a production manager by confirming
the acceptable quality level of products or services, initiating quality programs, and executing
statistical analysis to ensure compliance with quality standards. Therefore, staff authority
provides staff personnel the right to offer advice in an effort to improve line operations.

Functional Authority – Functional authority (limited line authority) gives a staff member
power over a particular function, such as safety or accounting. Generally, functional authority
is provided to specific personnel with expertise in a certain subject. For instance, members of
an accounting department might have authority to request documents they need to prepare
financial reports. Functional authority is a special type of authority for staff personnel, which
must be designated by top management.
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.

Decentralization:
Decentralization can be defined as the organizational structure. In such a structure, the top
management of a firm entrusts the middle and lower-level management with the responsibility
to take decisions pertaining to the firm’s daily operations.

Advantages of Decentralization

1. Facilitates Smooth Communication

With the presence of fewer hierarchical levels, there is a smooth flow of communication
between the superiors and subordinates in each department. In turn, such a set-up comes in
handy for the top management and keeps them informed about the grievances and functioning
of each department.
2. Promotes Expansion
With the middle and lower-level management being more involved with the everyday
operation, the top management seeks the opportunity to focus on expansion and sustenance of
profitability.
3. Motivates Subordinates
Decentralization is an effective way to boost the morale and feeling of job satisfaction among
employees. Being entrusted with responsibilities around the department offers them a sense of
belonging and further inculcates a team spirit in them.
4. Improves Administration
As the manager at each level is allowed to make decisions pertaining to their department, it
offers them more room to bring necessary adjustments through the course of operation. In
turn, it not only helps to improve the quality of the department’s performance as and when
required but also allows them to come up with suitable solutions to tackle departmental
challenges. All of this helps to improve the quality of administration at each level
significantly.

5. Facilitates Greater Control

With the help of decentralization, top management can evaluate the performance of different
departments more effectively. Further, it helps them to review and identify the prevailing
shortcomings and helps to bring necessary changes to the same. This not just helps to lower
the occurrence of operational shortcomings but also offers greater control over each area of
operation.

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Disadvantages of Decentralization
1. External factors
Factors like market fluctuations, government policies and intervention and trade union
movement often present a challenge to optimize the productivity of a company through
decentralization.
2. Lack of coordination
Each department is given due powers to delegate their operations adequately. However,
different departments may not be eager to cooperate, which defeats the purpose of a
decentralized structure altogether.

Delegation of Authority

Delegation of Authority
Meaning: It means the granting of authority to subordinates to operate within the prescribed
limits. The manager who delegates authority holds his subordinates responsible for proper
performance of the assigned tasks. To make sure that his subordinates perform all the works
effectively and efficiently in expected manner the manager creates accountability.
Process/Elements of Delegation
1. Authority: The power of taking decisions in order to guide the activities of others.
Authority is that power which influences the conduct of others.
2. Responsibility: It is the obligation of a subordinate to properly perform the assigned duty.
When a superior issues orders, it becomes the responsibility of the subordinate to carry it out.
3. Accountability: When a superior assigns some work to a subordinate, he is answerable to
his superior for its success or failure.
Principle of Absoluteness of Accountability: Authority can be delegated but
responsibility/accountability cannot be delegated by a manager. The authority granted to a
subordinate can be taken back and re-delegated to another person. The manager cannot escape
from the responsibility for any default or mistake on the part of his subordinates. For example,
If the chief executive asks marketing manager to achieve a sales target of sale of 100
units/day. The marketing manager delegates this task to deputy sales manager, who fails to
achieve the target. Then marketing manager will be answerable for the work performance of
his subordinates. Thus, accountability is always of the person who delegates authority.

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Formal and Informal Organisation:

FORMAL ORGANISATION
Informal Organisation refers to the organization . structure that is designed by the
management to accomplish organizational objectives. It specifies clearly the boundaries of
authority & responsibility and there is a systematic coordination among the various activities
to achieve organizational goals.

INFORMAL ORGANISATION
An informal organization is that organization which is not established deliberately but comes
into existence because of common interests, tastes and religious and communal relations. The
main purpose of this organization, structure is getting psychological satisfaction. For example,
employees with similar interest in sports, films, religion etc. may form their own informal
groups.

Difference between Formal and Informal Organisation:

SL. INFORMAL ORGANIZATION INFORMAL ORGANIZATION

NO.
1. A formal organization is defined as On the other hand, an informal
an organization that has set rules organization is defined as an organization
and regulations to be followed by that focuses on building social
the employees. relationships and networks.
2. The main aim of a formal The main purpose of the informal
organization is to achieve the long- organization is to build social networks and
term and short-term goals of the create a positive work environment.
organization.
3. The formal organization has a An informal organization does not have a
hierarchical structure. hierarchical structure.
4. The formal organization is created Informal organization is created
by the management. spontaneously by the members. The
organization is made based on personal
interactions.
5. Achievement of goal is the priority Fulfilling the psychological and social
of a formal organization. needs of the employees is the priority of
the informal organization.
6. A formal organization is stable, i.e., An informal organization is spontaneously
it continues for a long time. made and is not stable.
7. Formal organization follows An informal organization has a grapevine
official communication. communication.
8. The employees are controlled by The employees are controlled by values,
rules, regulations, and protocols. morals, norms, and beliefs.
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 9. There are different levels of All the members in the informal
authority in a formal organization. organization are equal.
The employees are bounded by the
hierarchical structure.
10. The size of the formal organization The size of an informal organization is
is large. small.

Principles of Organizing
 Work Specialization
Also called division of labor, work specialization is the degree to which organizational tasks
are divided into separate jobs. Each employee is trained to perform specific tasks related to
their specialized function.
Specialization is extensive, for example running a particular machine in a factory assembly
line. The groups are structured based on similar skills. Activities or jobs tend to be small, but
workers can perform them efficiently as they are specialized in it.
In spite of the obvious benefits of specialization, many organizations are moving away from
this principle as too much specialization isolates employees and narrows down their skills to
perform routine tasks.

Also it makes the organization people dependent. Hence organizations are creating and
expanding job processes to reduce dependency on particular skills in employees and are
facilitating job rotation among them.

 Authority

Authority is the legitimate power assigned to a manager to make decisions, issue orders, and
allocate resources on behalf of the organization to achieve organizational objectives.

Authority is within the framework of the organization structure and is an essential part of the
manager’s job role. Authority follows a top-down hierarchy. Roles or positions at the top of
the hierarchy are vested with more formal authority than are positions at the bottom.

The extent and level of authority is defined by the job role of the manager. Subordinates
comply with the manager’s authority as it is a formal and legitimate right to issue orders.

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  Chain of Command

The chain of command is an important concept to build a robust organization structure. It is

the unbroken line of authority that ultimately links each individual with the top organizational
position through a managerial position at each successive layer in between.

It is an effective business tool to maintain order and assign accountability even in the most
casual working environments. A chain of command is established so that everyone knows
whom they should report to and what responsibilities are expected at their level. A chain of
command enforces responsibility and accountability.

Unity of command states that an employee should have one and only one manager or
supervisor or reporting authority to whom he is directly accountable to. This is done to ensure
that the employee does not receive conflicting demands or priorities from several supervisors
at once, placing him in a confused situation.

However, there are exceptions to the chain of command under special circumstances for
specific tasks if required. But for the most part organizations to a large extent should adhere to
this principle for effective outcomes.

Scalar principle states that there should exist a clear line of authority from the position of
ultimate authority at the top to every individual in the organization, linking all the managers at
all the levels. It involves a concept called a gang plank using which a subordinate may contact
a superior or his superior in case of an emergency, defying the hierarchy of control. However,
the immediate superiors must be informed about the matter.

 Delegation

Another important concept closely related to authority is delegation. It is the practice of

turning over work-related tasks and/or authority to employees or subordinates. Without
delegation, managers do all the work themselves and underutilize their workers. The ability to
delegate is crucial to managerial success.

Authority is said to be delegated when discretion is vested in a subordinate by a superior.

Delegation is the downward transfer of authority from a manager to a subordinate. Superiors
or managers cannot delegate authority they do not have, however, high they may be in the
organizational hierarchy.

Delegation as a process involves establishment of expected outcomes, task assignment,

delegation of authority for accomplishing these tasks, and exaction of responsibility for their
accomplishment. Delegation leads to empowerment, as employees have the freedom to
contribute ideas and do their jobs in the best possible ways.

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  Span of Control

Span of control (also referred to as Span of Management) refers to the number of employees
who report to one manager. It is the number of direct reportees that a manager has and whose
results he is accountable for.

Span of control is critical in understanding organizational design and the group dynamics
operating within an organization. Span of control may change from one department to another
within the same organization.

The span may be wide or narrow. A wide span of control exists when a manager has a large
number of employees reporting to him. Such a structure provides more autonomy. A narrow
span of control exists when the number of direct reportees that a manager has is small. Narrow
spans allow managers to have more time with direct reports, and they tend to spark
professional growth and advancement.

NETWORK ORGANIZATIONAL STRUCTURE:

A network organization is a decentralized company structure that operates as a network of

autonomous businesses or business units as opposed to a traditional centralized, hierarchical
structure.

Each unit is responsible for its own profit and losses, and all units share a common goal of
maximizing the value of the network as a whole. Units can share resources and collaborate
where it makes sense to do so commercially. Units can be under the same consumer brand or
operate under independent brands.

Network organizations can be described as a structure in which individuals are connected

through a series of relationships. These relationships can be categorized into various types:

1. Vertical: Refers to status relationships (boss/employee)

2. Horizontal: Refers to task relationships (colleague/co-worker)
3. Initiative/Assignment based: Refers to forming and adjourning teams that only exist
for a specific purpose and then disbands
4. 3rd party relationships: Relationships with vendors or sub-contractors that are not
permanent members of the organization
5. Partnerships: Collaborating with other organizations or sharing resources to the benefit
of both parties.

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Network organization theory suggests that organizations should be structured as a network of
teams instead of a hierarchy of departments and individual managers to allow for more
flexibility and adaptability to changing market conditions.

here are two types of network organizations: Internal network organization and external
network organization.

 Internal: Within organizational design, a network organization consists of various

internal working relationships operating across multiple departments, functions and
levels (as well as outside parties) to deliver the organizational goals.
 External: Network organizations form a group of companies that share resources via
formal and informal relationships to deliver on individual goals. For example, sharing
of workspaces in a building or bulk ordering from a supplier to reduce logistics costs.

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