Department of Human Resource Management

Faculty of Management studies and Commerce

University of Jaffna
Course Title ALEMA 12021: Management & Entrepreneurial Skills
Chapter Title: Organizing Hand out No: 04
Prepared by: Ms.N.Jasintha Issued on: 05/07/2023

Intended Learning Outcome

After completing this chapter successfully, you should be able to:

 Discuss the fundamental characteristics of organizing including concepts of work
specialization, chain of command, span of management, and centralization Vs
decentralization.
 Describe functional, divisional and matrix approaches to structure.

1. INTRODUCTION
Managers in every organization face the question about how to organize for maximum efficiency
and effectiveness. Organizing refers to the deployment of organizational resources to achieve
strategic goals.

2. ORGANIZATION STRUCTURE
The organizing process leads to the creation of organization structure which is defined as the
framework in which the organization defines how tasks are divided, resources are deployed, and
departments are coordinated. The characteristics of structure can be portrayed in the
organization chart which is the visual representation of an organization’s structure.
Characteristics of organization structure include work specialization, chain of command, span of
management, and centralization and decentralization.

2.1.Work specialization
Work specialization, sometimes called, division of labor, is the degree to which organizational
tasks are subdivided into individual jobs.

2.2.Chain of command
The chain of command is an unbroken line of authority that links all employees in an
organization and shows who reports to whom. It is associated with two underlying principles.
Unity of command means that each employee is held accountable to one superior. The scalar
principle refers to a clearly defined line of authority in the organization that includes all
employees.

2.3.Authority, Responsibility and Delegation

Authority is the formal and legitimate right of a manager to make decisions, issue orders, and
allocate resources to achieve outcomes desired by the organization.

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Authority is distinguished by three characteristics;
1) Authority is vested in organizational positions, not people.
2) Authority flows down the vertical hierarchy
3) Authority is accepted by subordinates

2.3.1. Responsibility is the flip side of the authority coin; it refers to the duty to perform the
task or activity that one has been assigned.

2.3.2. Accountability is the mechanism through which authority and responsibility are brought
into alignment. Accountability means that the people with authority and responsibility
are subject to reporting and justifying task outcomes to those above them in the chain of
command.

2.3.3. Delegation is the process managers use to transfer authority and responsibility to
positions below them in the hierarchy.

2.4.Line and staff authority

Managers may have line authority, which refers to the formal power to direct and control
immediate subordinates, or staff authority, which refers to the right to advise, counsel, and
recommend in the manager’s area of expertise.

2.5.Span of Management
Span of management, sometimes called span of control, refers to the number of employees
reporting to a supervisor.
The average span of control used in an organization determines whether the structure is tall or
flat. A tall structure has an overall narrow span and more hierarchical levels. A flat structure has
a wide span, is horizontally dispersed, and has ever hierarchical levels.

2.6.Centralization and Decentralization

Centralization and decentralization pertain to the hierarchical level at which decisions are made.
Centralization means that decision authority is located near the top of the organization. With
decentralization, decision authority is pushed downward to lower organization levels.
Factors that typically influence centralization versus decentralization are as follows;
1) Greater change and uncertainty in the environment are usually associated with
decentralization.
2) The amount of centralization or decentralization should fit the firm’s strategy
3) In times of crisis or risk of company failure, authority may be centralized at the top.

2.7.Departmentalization
Departmentalization is the basis for grouping individual position into departments and
departments into the total organization.
Three traditional approaches to departmentalization are functional, divisional, and matrix.

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2.7.1.1.Functional Structure
A functional structure groups employees into departments based on similar skills, tasks, and use
of resources.
Advantages Disadvantages
 Efficient use of resources; economies of  Poor communication across functional
scale departments
 In-depth skill specialization and  Slow response to external changes;
development lagging innovation
 Top management direction and control  Decisions concentrated at top of
hierarchy, crating delay

2.7.2. Divisional Structure

The divisional structure groups employees and departments based on similar organizational
outputs (products or services), such that each division has a mix of functional skills and tasks.
An alternative approach to divisional structure is to group employees and departments based on
geographic region or customer group.

Advantages Disadvantages
 Fast response  Duplication of resources across
divisions
 Flexibility in unstable environment  Less technical depth and specialization
 Fosters concern for customer needs  Poor coordination across divisions
 Excellent coordination across
functional departments

2.7.3. Matrix Structure

The matrix approach uses both functional and divisional chains of command simultaneously, in
the same part of the organization. In a matrix structure, some employees, called two-boss
employees, report to two supervisors simultaneously.
A matrix boss is a functional or product supervisor responsible for one side of the matrix. In a
matrix structure, the top leader oversees both the product and the functional chains of command
and is responsible for the entire matrix.
Advantages Disadvantages
 More efficient use of resources than  Frustration and confusion from dual
single hierarchy chain of command
 Flexibility and adoptability to changing  High conflict between two sides of the
environment matrix
 Interdisciplinary cooperation, expertise  Many meetings, more discussion than
available to all division action

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2.8.CONTEMPORARY APPROACHES TO ORGANIZATIONAL STRUCTURE

2.8.1. Team Approach

The team approach gives managers a way to delegate authority, push responsibility to lower
levels, and be more flexible and responsive in a complex and competitive global environment.
One approach to using teams in organizations is through cross-functional teams, which consist of
employees from various functional departments who are responsible to meet as a team and
resolve mutual problems.
Second approach is to use permanent teams, groups of employees who are organized in a way
similar to a formal department.

Advantages Disadvantages
 Reduced barriers among departments,  Dual loyalties and conflict
increased compromise
 Shorter response time & quicker  Time and resource spent on meetings
decisions
 Better morale & enthusiasm from  Unplanned decentralization
employee involvement

2.8.2. Virtual Network Structure

With a virtual network structure, the organization subcontracts most of its major functions to
separate companies and coordinate their activities from a small headquarters organization.
A similar approach to networking is called the modular approach in which a manufacturing
company uses outside suppliers to provide large chunks of a product such as an automobile,
which are then assembled into a final product by a few employees.

Advantages Disadvantages
 Can draw on expertise worldwide  Lack of control; weak boundaries
 Highly flexible and responsive  Greater demands on managers
 Reduced overhead cost  Weaker employee loyalty

Reference:
Daft, R.L. (2015). New Era of Management, New Delhi: South-Western

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