CHAPTER 7

ORGANIZING

Principles of Management Second Edition

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 LEARNING OUTCOMES

After studying this chapter, you should be able to:

 Define the concept of organizing, and explain the
importance of the organizing function.
 Describe the process of organizing.
 Describe the types of organizing structures and
organizational relationships.
 Explain the types of organizational structures or designs.

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 7.1 INTRODUCTION

 Organizing is a function of management which

follow planning. It is also defined as the process of
determining what needs to be done, how it will be
done and who is to do it. (What,How,Who)
 According to Chester Barnard, organizing is a
function by which the concern is being able to define
the role positions, the job related and the
coordination between authority and responsibility.

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 IMPORTANCE

Identification

Departmentalization

Classifying

Coordination

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 7.2 ORGANIZING AND ITS
IMPORTANCE

Identification of organizational activities (I)

 The organizing function helps an organization to
identify important and relevant activities which
have to be performed during the planning process.
 For instance, preparation of account, achievement
of sales targets, record keeping, quality control
and inventory control.

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 7.2 ORGANIZING AND ITS
IMPORTANCE

Departmentalization of organizational activities (D)

 A manager attempts to combine and group similar
and related activities into departments and units.
 For instance, the marketing department,
production department and finance department
are some examples of how activities are grouped.

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 7.2 ORGANIZING AND ITS
IMPORTANCE

Classifying authority (C)

 Clarification of authority helps in bringing efficiency
in the running of an organization.
 For example the top level management is into
formulation of policies, whereas the middle level
management is into departmental supervision, and
the lower management is into supervision of non-
managerial employees

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 7.2 ORGANIZING AND ITS
IMPORTANCE

Coordination between authority and responsibility

(C)
 Relationships are established among various
groups to enable and ensure smooth interaction
towards the achievement of organizational goals.
 For example, each individual is made aware of
his/her authority, and whom they are to receive
orders from, account for and report to.

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 7.3 ORGANIZING PROCESS

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 7.4 ORGANIZATIONAL STRUCTURE
AND RELATIONSHIPS

 Understanding organizing structure helps us to

understand the different types of organizational
relationships.
 Organizational or working relationships that exist
within an organization affect how its activities are
accomplished and coordinated.

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 7.4.1 Formal and Informal
Organizations

 Formal organization
– A formal organization has a structure comprising of
well-defined jobs; each of which bears a measure of
authority and responsibility.
 Informal organization
– An informal organization, has a network of both
personal and social relationships that spontaneously
originates within the formal set up.

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Principles of Management Second Edition
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 7.4.2 Types of Organizational
Relationships

Chart and
Span of control
chain of command

Types of
Organizational
Relationships

Centralization and
Delegation
decentralization

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 Chart and Chain Command

Chart and chain of command

 Level of management eg top level. Middle level,
lower level
 Chains of command eg specifies who report to
whom
 Position and type of work performed eg title of
position
 Departmentalization eg clustering of specialization
of work

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 Chart and Chain Command

President

Vice President Vice President Vice President

(Marketing) (Human resource) (Production)

Marketing Production
Sales Manager Staffing Manager
Manager Manager

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 Span of control

Narrow
span

Span of
control

Wide
span

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 Span of control

Supervisor A Supervisor B
monitored 3 subordinates of Monitored 10> subordinates
employees of employees

Narrow span Wide Span

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 Span of control

Narrow span of control

 Requires a manager to supervise a small group of
employee
 Diss- inefficient due to cost of effective-need to hire
more manager
Wide span of control
 Requires a manager to supervise a large group of
employee
 Adv- Less overhead supervision, prompt response
from employee, better communication
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 Delegation

Line authority

Staff authority

Functional authority

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 Delegation
Line authority
 Possessed by those who are directly responsible for
achieving organizational goals. Requires a manager to
supervise a small group of employee based on his
managerial line.
 Eg Manager involved with manufacturing may limit line
functions to production and sales.
Manager

Finance Production Sales

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 Delegation

Staff authority
 Authority that belongs to individuals or groups in an
organization who provide varied types of services and
advice to the line manager-expert power (hr function)
 Eg law firm company are adding staff members to
operate business side of the organization, the presence
of this specialist allows lawyers free from its line function
( focus on practice law).
Functional authority
 Is the right to control activities of other departments
which are related to specific staff responsibilities
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 Centralization and
decentraization
Centralization
 Focal point of approval for decision made are subjected
to the approval of top management.
Decentralization
 Decision making is delegated from one unit of an
organization to another, usually lower level
management.
Advantages of decentralization
Less burden to top management
Subordinates will get chance to decision making
Fasten in execution
Boosting employees morale and motivation
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 7.5 TYPES OF ORGANIZATIONAL
STRUCTURES

 The types of organizational structures chosen are

influenced by certain factors—nature of an
organization, its specialization and its decision-
making hierarchy.
 A successful organization tends to follow a pattern
of structural development as it grows and expands.

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 7.5.1 Types of Departmentalization

1. Functional departmentalization

2. Divisional departmentalization
- product departmentalization
-customer departmentalization
-process departmentalization

3. Geographical departmentalization

4. Matrix departmentalization

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 7.5.1 Types of Departmentalization

 Functional departmentalization
– the grouping of related work activities according to functions
 Divisional departmentalization
– an organization structure, whereby corporate divisions operate as
relatively autonomous businesses under a larger corporate
umbrella
 Geographical departmentalization
– the grouping of related work activities according to areas that are
served by a business
 Matrix departmentalization
– teams are formed in which individuals report to two or more
managers, usually the functional manager and project manager
– brings together personnel from several specialties to complete
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 7.5.1 Types of Departmentalization
(cont.)

 Product departmentalization
– done according to products or services available.
– Eg Maybank may handle customer loans in one department and
commercial loans in another department.
 Customer departmentalization
– groups related work activities according to what customers are likely
to buy in terms of an organization’s products or services.
– Eg, Sogo, I-setan, Parksons, Aeon, etc divided into departments-
men’s dpt, women dpt, comestic dpt, children dptwhich cater
different customers.
 Process departmentalization
– groups related work activities according to production processes

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 7.5.1 Types of Departmentalization
(cont.)

 Geographical departmentalization
– the grouping of related work activities according to
areas that are served by a business.
– Eg, Northern Port, South Port, West Port
 Matrix departmentalization
– teams are formed in which individuals report to two or
more managers, usually the functional manager and
project manager
– brings together personnel from several specialties to
complete limited-life tasks
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