Chapter :Two

Principles and types of

organization
 Meaning Of Organizing
 organizing is the process of coordinating and
allocating a firm's resources in order to carry out
its plans. Organizing includes developing a
structure for the people, positions,
departments, and activities within the firm.
 Meaning Of Organizing
• Organizing is the basis function of management. The term
organization means different things to different people. It is used
widely to mean a structure of relationship, a process, a group of
people and a function of management. However, organization
refers to identification and grouping of activities, assigning the
activities to individuals, and establishing authority, responsibility
and relationship among them. Thus, organization is related to
the determination of organizational structure and division of
activities. By organizing, a manager brings the manpower and
material resources together for achieving the goals of the
enterprise. An organization, as a group of people contributes
their efforts towards attainment of common goals.
 Organization as a structure

Organization as a structure is a static concept. It is merely a structure

of relationship between various positions of the organization. It is a
structural framework of duties and responsibilities through which
an organization functions. It is an established pattern of
relationship among the components of the organization. It is the
mechanism through which management directs, control and
coordinates the activities of the enterprise. Organization is a
structure of framework. It is only a chart showing the relationship
between various positions of the enterprise. The horizontal line of
the chart divides the activities among various departments. For
example, marketing, personnel, finance department etc. the main
purpose of creating organization structure is to allocate authority
and responsibility among the staffs. The structure facilitates work
flow in the enterprise. The organization structure looks like pyramid
with a narrow top and a broad bottom.
 Organization as a process

Organization as a process is a dynamic concept. This is the

most acceptable concept of organization. As a process,
it determines, arranges, groups and assign the activities
of the enterprises to achieve the common goals. in
other words, organization 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 in accomplishing objectives.
Hence, organizing is a process of grouping task,
assigning duties, establishing authority and allocating
resources to achieve planned goals.
• Effective organization can provide a number of benefits. First,
the process of organizing helps to clarify the specialized tasks
and performance expectations for each person. Second, it
produces appropriate authority structure with accountability to
support planning and control throughout the organization. Third,
it creates channels of communication that support decision
making and control. Forth, the organizing process establishes a
logical flow of work that can be comfortably performed by
individuals and work groups. Fifth, it develops a decision of
labour that avoids the misuse of resources, conflict and
duplication of effort. Sixth, it creates coordinating mechanisms
that produce harmony among organizational members in
diversified activities. Finally organizing produces focused work
efforts that are logically and efficiently related to a common
goal.
• From the above analysis it is clear that
organization consists of identification and
grouping of activities, defining responsibility,
delegation of authority, establishing authority
responsibility and relationship and
coordinating interrelated activities.
 Principles of organization

Organization is one of the major functions of

management. it is continuous process
performed by managers of all levels. The
success or failure of the organization depends
upon sound and efficient organizational
structure. Hence there is need to follow
certain principles of organization to formulate
and develop sound and efficient organization.
These principles are as follows.
 Unity of objectives/goals

• The goals of the organization influence the

organization structure. Hence, the goals and
objectives must be clearly defined for the entire
organization, for each department and even for
each position in the organization structure. If
there is contradiction among the various levels
of objectives, then entire goals of the
organization cannot be achieved. Thus, there
must be unity of objectives so that all efforts
can be concentrated on the set of goals.
 Specialization
• The total task in an organization should be divided
in such a manner that every person is confined to a
single job. This leads to the specialization. An
individual employee repeatedly performing a
specific single job becomes an expert in that job.
The work assigned should be according to his
abilities and attitudes. Then he can work with
greater economy and efficiency. Thus, specialization
is necessary to increase the output of the
employees.
 Span of control
• Span of control represents a numerical limit of subordinates to be
supervised or controlled by a manager. There is a limit to the
number of subordinates that can be supervised effectively.
However, the exact number of subordinates will vary depending
upon the nature of job, competence of the manager, quality of
subordinates, etc. the ideal span control cannot be
predetermined. if subordinates are kept without considering the
span of control, then supervision and control cannot be effective.
Narrow span permits more effective and close supervision of
subordinates since there are only a limited number of
subordinated under the manager. On the other hand, a wide span
implies general and flexible supervision of subordinates.
 Exception
This principle emphasizes that the top level management
must concentrate only on exceptional and creative
issues. These activities involve planning, policy making,
setting long term objectives and formulation of
strategies. The repetitive and operational activities
should be assigned to the subordinate levels. The
exception principle is not only essential to optimize
efficiency of both the top level and subordinate
officials. It is supportive to make effective delegation of
authority in accordance with responsibility.
 Chain of command
It is unbroken line of authority from the top level
to the bottom of an organization. This links all
the managerial positions from top to bottom; it
makes clear about who will work under whom.
The chain of command (scalar chain) should be
short and clear which makes decision making
and communication more effective. Scalar
chain means a stepwise chain. The amount of
command or authority decreases as one goes
down the chain.
 Unity of command
The principle of command suggests that an
employee should have one and only one boss.
Each subordinate should have only one
superior whose command he has to obey. This
principle is based on the fact that an
employee cannot effectively serve two
managers. Directions from several superiors
may result in confusion, chaos conflict and
indiscipline
 Delegation of authority
Proper authority should be delegated at all levels
of management. Without adequate delegation
effective performance is not possible. The
authority delegated should be equal to
responsibility so as to enable each manager to
accomplish the task assigned to him.
 Responsibility
According to this principle, the responsibility of
all employees should be made clear. The
superior should not be allowed to avoid
responsibility by delegating authority to his
subordinates. It means the superiors should
be held responsible for the acts of his
subordinates. The responsibility cannot be
delegated under any circumstances.
 Efficiency

The efficiency of an enterprise is measured

through the ability of achieving the
predetermined goal at minimum cost. The
organization structure should enable
accomplishment of organizational goals
efficiently. Hence, it should ensure optimum
utilization of all resources.
 Simplicity
The organizational structure should be simple
with minimum numbers of levels so that each
member can understand his duties and
authority relationship. An organization with
few levels is a simple organization. A large
number of levels in organization mean
difficulty of communication and coordination.
 Flexibility
The organization structure should be adaptable
to changing environment and needs of the
organization. For this, organization structure
should be flexible. It should permit expansion
and replacement without dislocation and
disruption of the basic design.
 Balance
The principle of balance should be followed
while designing the structure of the
organization. There should be a reasonable
balance in the size of various departments and
between centralization and decentralization.
Overemphasis of any type should be avoided.
Balanced structure brings efficiency and
economy to the operation of the organization.
 Importance of organization

Organization is structured process in which

individuals interact to accomplish
predetermined enterprise goals. It is the
foundation stone upon which the whole
structure of management is built. A sound
organization facilitates administration,
promotes specialization, encourages growth
and stimulates creativity. The importance and
need of the organization can be discussed as
below:
 Efficient administration
A sound organization is necessary for efficient
administration and management. Organization is an
important and the only tool to achieve enterprise goals.
A sound organization helps the management in many
ways. It defines various activities and their authority
relationships in the organizational structure. It can
avoid confusion and delays as well as duplication of
work and overlapping of effort. Organization is the
mechanism by which management directs controls and
coordinates the various activities in the enterprise.
 Optimum use of human resources

Sound organization ensures that every individual is

placed on the job for which he is best suited.
Such matching of jobs and individuals helps in
better use of human talent. it also provides the
benefits of specialization, which results in
economy of operations and reduction in costs.
 Growth and diversification

A sound organization is based on scientific

principles. It contributes to the growth and
diversification of the enterprise through
decentralization.Through organization,
management can multiply its strength and
undertake more activities. That is why many
small firms have growth and become big.
 Optimum Use of New Technology

A sound organization is flexible. It has the capacity

of absorbing changes in the environment. New
and improved means of doing work can be
introduced easily. Hence, it provided
opportunity for optimum use of technological
improvement.
 Coordination and communication
Organization is an important means of creating
coordination and communication among
different departments of the enterprise.
Different jobs and positions are bonded
together by structural relationship. It specifies
the clear relationships among positions and
helps to ensure coordination among them. It
also specifies the channels of communication
among different members of the enterprise.
 Training and Development

• A sound organizing provides a good

opportunity for the development of
managerial ability though proper delegation of
authority and decentralization. It provides
responsibility, sufficient freedom to the
supervision and creative thinking in different
levels. By this practice, managers are trained,
developed and tested for assuming greater
responsibilities in the future.
 Formal organization structure
Formal organization is established in planned way. An organization is
formal when the activities of two or more person are intentionally
coordinated towards a common goal. Formal organization means
the intentional structure of roles in a formally organized enterprise.
The formal organization refers to the structure of jobs and
positions with clearly defined functions and relationships as
prescribed by the top management. This type of organization is
built by the management to realize the enterprise objectives. It lays
down the functions, authority and responsibility of every
individual.

The common way of showing a formal organization is by means of

organizational chart. It is a snapshot of an organization that shows
the flow of authority, responsibility, and communication among
various departments, which are located at different levels of the
hierarchy. The basic characteristic of organization is as follows.
 Features of formal organization
• It is created by the top management.
• it is based on division of work or specialization
• It defines clearly the authority and responsibility of
every position.
• It is developed through delegation of authority.
• it specifies the communication line
• it has written rules and procedures
• It focuses on jobs to be performed.
• it is shown on the organization chat of the company
 Informal organization

• Informal organization is the result of human interaction at work

place. When a number of people work together in a formal
group, they develop personal and social relationships on the basis
of their likes and dislikes. They associate informally to fulfill their
needs. These groups are not pre planned but develop
automatically within the formal organization. The informal
organization is thus a system of social relationships among the
members. The informal organization refers to people in group
associations at work, which is not specified in the formal
organization chat. These social groups are usually based on
caste, language, culture, emotions, interest; similarity of work
etc. according to Keith Davis an informal organization has a
powerful influence upon productivity and job satisfaction.
• Informal organization has great impact upon
the productivity and work satisfaction of the
members. In every organization both formal
and informal systems are necessary for group
activates, just as two blades are essential to
make pair of scissors workable. Hence, there
cannot be a completely formal or informal
organization. The basic characteristics of
informal organization are given below.
• it is unplanned
• it reflects human or social relationships among
people
• it is based on common interest, language,
religion, culture etc
• The membership of informal organization is
voluntary.
• It has no written rules and regulations.
• It is not shown on the organization chat.
 Features of a good organizational structure

The following are the features of a good organization

structure.
• Clear line of authority
• Adequate delegation of authority
• Less managerial levels
• Proper span of control
• Simple and flexible
 Organizational Structure

Organizational structure is the process of identifying

and grouping the work to be performed, defining
and delegating responsibility and authority and
establishing relationship for the purpose of
enabling people to work most effectively and
efficiently in accomplishing objectives.
It is a frame work of duties and responsibilities
though which an organization functions.
It is a blue print of how management likes to perform
the various functions.
• It is a chat showing the relationship between various
positions of the enterprise.
• The main purpose of creating organization structure is
to allocate authority and responsibility among the staff.
• It defines the relationship between various position,
departments, and person.
• Organization structure constitutes a formal structure
with definite authority and clear responsibility. It has to
be first designed for determining the channel of
communication and flow of authority and
responsibility. A hierarchy of positions has to be built
up with clearly defined authority and responsibility.
 Type of organizational structure

• Organization structure differs from organization to

organizations. Considering the internal and external
environment, the enterprise selects the proper
organization structure.

• The adoption of a particular type of organizational

structure largely depends upon the nature, scale
and size of the business. Some important types or
form of organization structure are given below :
 Line organization

It is a simplest and oldest type of organization. It is also

know n as military organization because it is developed
in the army. Line organization is characterized by direct
lines of authority flowing from top to the bottom levels
of the organizational hierarchy and lines of responsibility
flowing in an opposite but equally direct manner. It
creates superior subordinate relationship from top to
bottom. It also provides the channels of communication
and accountability. In the line organization each superior
is independent and takes decision in his own area of
work. Each subordinate is directly responsible to his
superior for work performance. Every individual is
responsible to one executive only.
• Line organizations are the organizations that
have only direct and vertical relationship
between different levels. In this structure, the
line of authority flows vertically downward
from top to bottom throughout the
organization. Every person in the organization
is the direct chain of command as shown as in
figure.
• A line organization can be of two types i.e pure line
organization and departmental line organization. In a
pure line organization, all similar activities are
performed at one level. In other words, at a particular
level of work, all the individuals perform the same type
of work. All the workers may be divided into different
groups, but each group of activity is self contained and
independent. Whereas in a departmental line
organization, the whole structure is divided into a
number of departments, on functional basis, such as
production department, marketing department, finance
department, human resources department etc.
A specimen of line organization
 Features

• Flow of authority, in a line structure authority flows

vertically downward from top to bottom.
• Unity of command, an employee receives orders and
instructions form only one manager
• Scalar chain, there is an unbroken scalar chain between
superior and subordinates throughout the organization.
Scalar chain means line of command
• No provision for staff expert, line authority is decision-
making authority. No level of management is equipped
experts.
• Communication, all communication takes place strictly in
accordance with organizational hierarchy
 Important

• Simplicity, well defined authority and

responsibility
• Quick decision
• Unified control, no confusion and conflict
• Less expensive,
• Flexibility
 Demerits

• Autocratic
• Lack of specialization
• Overloading chief is over loaded, too many job
have to be performed
• Scope of nepotism, one man is the main
person, favoritism
• One way communication
• No participation from lower level staff in
decision making process.
 Line and staff organization structure

As the size and activities of business

organizations grew, it was realized that a few
executives cannot perform all the functions
themselves and they needed assistance from
the specialist's in different areas. As a result,
the line and staff type of organization structure
was evolved. In line and staff structure, there
are two types of authority ie line authority and
staff authority.
Line authority has a direct vertical relationship with the
subordinates as in the line structure. Staff authority
consists of specialists who are responsible for advising
and assisting line managers. They advise but do not
command any authority over the line managers and
subordinates. Thus, the staff is usually advisory in nature
and has only the power to recommend not to make and
implement the decisions. The staff collects and analyses
information, generate and evaluates the alternative
solutions and provides suggestion to line managers who
make decisions.
 Features of line and staff structure
• Two types of authority: in line and staff organizationi.e. line
authority and staff authority
• Flow of authority: line authority exercises direct
supervision over subordinates and subordinates have direct
responsibility towards accomplishing the objectives of the
organization
• Role of staff members: staff members are the specialists
who are primarily concerned with investigating, conducting
research, assisting and advising line managers.
• Line manager is responsible for maintaining disciple and
stability. Line managers make all decisions and also
implement them. Staff members only offer assistance and
• As depicted in the above figure, a line and staff
organization, there are two types of authority ie line
authority and staff authority. General Manager
Production manager marketing manager and
finance manager are the line authorities who
command their subordinates. Quality experts and
legal advisors are the staff authority who provides
advice to the line mangers i.e general manager,
production manager, marketing manager and
finance manager.
 Advantages of Line and Staff Organization

• Focus on specialization: line managers receive the benefit of

specialized knowledge of staff specialists at various levels.
• Relief to line managers: it relieves the line officers of routine
specialized functions. Staff members collect and analyze the
relevant information and provide them to line officers. Line officers
will be able to take a decision properly and effectively.
• Sound decision: as exports are consulted before making any
decisions by line managers, it provides a base for sound managerial
decisions.
• Career development: line managers improve their ability and
performances with expert assistance. This increases the opportunity
for them to get higher positions.
• Discipline and stability: it helps maintaining discipline and stability
in organization.
 Demerits of line and staff organization
• Conflict: there is generally a conflict between the line managers
and staff executives. Line managers feel that staff specialists do not
always give right type of advice and staff specialists generally
complain that their advice is not properly considered.
• Confusion: the allocation of authority and responsibility between
the line and staff executives may not be very clearly made which
may result in confusion and may hamper coordination.
• Expensive: since two types of authority should be managed in a line
and staff organization, it is more expensive than line organization.
• Loss of initiative: line managers excessively depend on staff advice
for decision making. The original ideas, actions and initiative of the
line managers may be gradually reduced.
• Negligence: staff members lack practical managerial knowledge.
They also are not accountable for the result. Thus they may not be
performing their duties well as expected.
 s Line organization Line and staff organization
ure Line structure is a very simple form of Line and staff structure is more complex
organization

s of There is only one type of authority ie There are two types of authority ie line
ority line authority authority and staff authority

mand All executives command authority over Only line managers command authority. The
ority their subordinates function of staff members is purely advisory.

ialization No or very little specialization. All work is Line managers are assisted by staff
performed by the line manager managers who provide specialized
knowledge in relevant matters.
sion Decision making is quick but not Decisions are delayed but matured.
ing matured
e of No chances of any conflict because High risk of conflict between line authority
flict there is only one supreme authority. and staff authority

nomy The cost is less in line organization This organization is more expensive.

ability It is suitable for small organization It is suitable for medium and large
where the work involved is simple, of organizations where the work is complex
routine nature and mechanical. and requires specialized knowledge
 Functional Organization
F.W Taylor, the father of scientific management,
initiated the concept of a functional
organization under the scheme of functional
foremanship. Functional organization structure
is very much based on the philosophy of
functional foremanship scheme. However, in
practice, functional organization concept is
limited only to the top level management and
not implemented in the subordinate level.
• In functional organization, all business activities of an
enterprise are divided into a number of functions and each
function is entrusted to a specialist. Each specialist, to
whom a function is entrusted, is known as functional
specialist and authority delegated to each specialist is
known a s functional authority. For instance, business
activates of an enterprise might be divided into various
functions like production, marketing, finance, personnel,
research and development; purchasing etc. in a similar
manner, a particular function is entrusted to a functional
specialist like the production function to the production
manager, personnel function to the personnel manager,
and so on.
One of the main features of functional organization is
that a functional manager can exercise functional
authority not only over his own subordinates but
also over all subordinates in all other functional
department of the enterprise. For instance, the
marketing manager has functional authority over all
subordinates of the enterprise when marketing
matters are dealt with. The functional organization
structure can be presented as follows:
 
 Advantages of functional organization

• Benefits of specialization
The functional organization structure provides the
benefit of functional specialization. Every manager is
expert in his own field of knowledge. The expertise
of every manager is beneficial to all the members as
well as to the enterprise. Functional specialization
leads to many advantages like best managerial
decision, minimizing cost of operation and
increasing efficiency and productivity of the
enterprise.
 Increases efficiency

• Each department of the enterprise is under the

supervision of a functional specialist. The top
level management makes decisions by taking
suggestions, advice and guidance from functional
specialist. It helps in taking the right decisions.
This leads to an increase in the working efficiency
of both the mangers and the subordinates. This
process automatically facilitates maximization of
productivity within minimum costs
 Healthy competition among experts

A functional organization structure gives importance

to functional specialization. Here, the management
makes the recruitment, selection, appointment and
placement of the managers on the basis of their
specialization. Besides, functional organization
encourages healthily competition among functional
experts. In the present day of competitive business
environment, every manager wants to demonstrate
a better performance. Obviously, this spirit of
healthily competition brings out efficient executives.
 Relief to executives

In a functional organization, work is divided on

the basis of functional specialization. Under
this structure, managers are not
overburdened with maximum workload as in
the case of line organization. Here, every
manager has to work in one line of activity
where he has functional specialization. This
contributes to develop working efficiency of
an enterprise.
 Mass production

• There is a provision of functional specialization

and standardization in work in functional
organizations. This contributes to developing
working efficiency of both the executive and
subordinate level members. The development
of efficiency facilitates in maximizing
productivity of the enterprise. Thus, an
enterprise can be involved in mass production
and distribution on the basis of requirement
 Facilitates growth and expansion

• The functional organization structure scopes

for the existing volume of business to grow
and also for the expansion of various lines of
business. Each and every executive is an expert
in this own sector. The executives can handle
their business in an effective manner in
accordance with requirements, this helps to
expand the business activities.
 Suitable for present environment

The functional organization structure is suitable for the

management of large scale business enterprises in
present day environment. The development of
production volume, expansion of markets,
customers, government regulating etc create new
and challenging environment in business activities.
The completion of business operation under such
environment requires the services of various areas.
The functional organization fulfills such type of
requirements for successful operation of business.
 Disadvantages of functional organization
• Multiple command system
The lack of unity of command is the major limitation of
functional organization structure. The subordinates are
always in confusion to obey orders because they receive
more than one order at a time. They may be a possibility
of division of loyalty of subordinates among many
functional managers. Besides, there is more difficulty in
fixing the responsibility of jobs. Here, both functional
specialists and subordinates do not want to take full
responsibility of works because of the violation of the
principle of unity of command.
 Lack of coordination:

• Every department of the enterprise is given to a

functional specialist. The department heads are
independent to perform their departmental works.
There is no provision of formal relationship among
departmental specialists. There is lack of mutual
understanding among them. The general manager
may face serious problems in coordinating
departmental activities because of the static and
narrow vision of departmental specialists.
 High administrative cost

• The functional organization needs more

administrative cost. In such case of an
organization, many functional specialists are
appointed in various departments. The functional
experts are to be paid more remuneration. So, it is
impossible to minimize cost and maintain higher
efficiency in operation. Thus, this structure is not
suitable for small and medium scale enterprises
having limits resources.
 Delay in decision making

• Quick decision and prompt implementation are

present day needs of a business organization.
However, in functional organization, there is no
possibility of quick decisions. It is essential to take
suggestions and guidance from expert before
taking a decision. Thus, the management has to
invest more time to come into a concrete decision.
The delay in decision making, some situations, may
become the reason for business loss.
 Spoils human relations
• In functional structure, it is more difficult to
maintain the relationship between the superiors
and the subordinates which spoils human
relationship in the enterprise. Due to lack of unity
of command, a subordinate has to work under
many executives. In many situations he receives
conflicting instructions from executives which may
divide his loyalty. Therefore, it is difficult to
maintain a discipline in a functional structure.
 Narrow outlook of specialists

The narrow vision of departmental specialists creates

problems in functional organizations to achieve overall
objectives of the enterprise. The departmental specialists
are more concerned about efficient functioning of their
respective functional areas. They do not want to
maintain mutual relations with co workers of the
functional areas. In a similar manner, they do not
cooperate with each other in solving organizational
problems. Such way, the chief executive has to face many
problems while maintaining coordination among all the
functional areas of the enterprise.
 Shifting responsibility

• Fixing a definite responsibility for the functional

specialist or a subordinate is difficult in this
type of organization. There is lack of work to
others. For instance, a functional specialist may
shift his responsibility to subordinates and if in
the similar manner subordinates may shift their
responsibility to functional specialists. Such an
environment creates problem in achieving
defined objectives.
Functional structure
 Matrix organization structure

• Matrix organization structure is a special type

of problem solving form of an organization.
Generally, matrix organization is formed to
complete various types of project of specific
and unique nature. This is also known as
project management structure. It requires
diverse technical and administrative experts to
adjust efficiently with the dynamic and rapidly
changing environment of the business
• In matrix organizational structure, a major
project is assigned to the project manager and
he is given a team of specialists from different
disciplines. The team members may be
finance, marketing etc. this team provides
support to the general manager to complete
the project in a given time frame. In general
sense, matrix organization is a combination
and interaction of functional and project
managers.
• The project manager is responsible for the overall
direction and integration of activities and resource of
the concerned project. Generally, their responsibility
is to integrate the efforts of all functional managers,
planning and implementing the project policies,
accomplishing work on schedule and within the
predetermined budget. The functional managers look
after the operational side of the project. Their
responsibility is to provide technical guidance and
skilled functional staff and to complete the project
within the standard technical specifications.
• Especially, matrix structure integrates the
efforts of the functional and project authority.
The authority of the functional manager flows
vertically down from the superior to the
subordinates. The project authority flow
horizontally crossing vertical line. In this
structure, each subordinate works under two
superiors: first one is the project manager and
the other one is the functional manager
• As such, this structure does not follow the
principle of unity of command and scalar chain.
This organization is more democratic, human
and participates and it maintains collaboration
and cooperation among a wider range of
people. A specimen of the matrix structure is as
follows.
 Advantages of matrix organization

• Better coordination and control

The main responsibility of the project manager is to
maintain coordination among interrelated factors of
a particular project. He has to communicate both
with the horizontal and vertical authorities so that
the project work can be run smoothly. Similarly,
functional managers are responsible for providing
technical and administrative guidance to projects.
This leads to a better and more effective control
over regular operation.
 Adaptable to dynamic environment

• This structure is adaptable to the frequent

changing and uncertain environment of the
business world. These project managers have
functional independency and they can get
quick feedback with information related with
projects. Thus, decisions can be made in time,
which contributes to reducing the adverse
effects of any sudden change in the
environment.
 Maximum use of resource

• In matrix structures, many projects are handled at a

time. As such, there is more possibility of maximum
use of available resources including manpower. The
specialization staff and experts of a completed project
can be used in other projects. It minimizes extra cost
of hiring new personnel. Similarly, surplus material,
plant, equipment and other resources of a completed
project can be transferred to another project. Thus,
available resources can be used with the organization
and the wastage of resources can be minimized.
 Participated management

• Matrix structure emphasizes on participative

management. Here, people are working
together on a project as a team. High level
management provides motivational
atmosphere within the organization. It takes
suggestions, information and ideas from
functional and project experts before taking the
commitment of members to complete the given
work within the defined time and standards.
 Sufficient time to top management

• This structure encourages delegation of authority to

project managers. They are responsible for regular
operation of the project. They have the authority to
take decisions related to the day to day operation of
projects. This provides sufficient time to the top
management to make strategic planning and
policies rather than operational activities. The
initiation and creativity of the top level
management are necessary for future development
of organizational activities.
 Excellence in inter disciplinary specialization

• Since specialists and experts are involved in

many inter disciplinary areas, there is possibility
of quality performance and output. Similarly,
specialists from any inter disciplinary area
interact with each other to get better
opportunity to expand technical excellences into
many inter disciplinary areas and also in many
activities. Again, this contributes in developing
the overall working efficiency of the organization.
 Development of teamwork

• Here, many members, both from the project

and functional areas, involve in achieving
common objective. They interact with project
and fictional managers play the role of
coordinators among them. This working
environment develops a feeling of team sprit
among the members. This contributes to
develop the overall working efficiency of the
organization.
 Disadvantages of matrix organization

Violation of unity of command

• In matrix organizational structures, subordinates
have to follow instructions from more than one
superior. Generally, they receive orders from
functional managers as well as from project
managers. In some cases, subordinates may receive
instructions from both the superiors at a time, which
confuses the subordinates. To avoid this problem,
frequent and comprehensive communication among
project and functional managers is necessary.
 Costly

• This structure maximizes administrative cost.

Here, specialists from the project as well as
functional authorities involve in project works.
It maximises paperwork and other information
costs. Besides, it is essential to pay lump sum
remuneration to functional and project
specialists.
 Problem of over specialization

• In some situations, matrix organization creates a

problem of over specialization. Specialists from both
functional and project works gather to solve many
complex problems of the organization. As many
experts gather to solve problems, in some cases,
they waste valuable time in discussing unrelated
subject matters. Thus, there is a possibility of delay
in decision making. In one way, it maximizes the cost
of the organization, and in the other it delays
decisions resulting in losses in the business
 Difficult to balance

• Matrix structure demands a high level of interpersonal

relations and skill. It is essential to involve both
functional and project specialists. Besides, it is essential
to maintain a balance among these authorities to bring
about uniformity in the organizational performance. In
practical field, it is more difficult to maintain a balance
among these authorities, especially if they have no
positive attitude towards each other. Thus the top level
management has to invest more time to maintain
mutual relation among these authorities.
 Feeling of insecurity

• A feeling of insecurity among the employees is

one of the limitations of matrix structure. In
many cases, a project runs only for a fixed
duration. After completion of the defined
works, there is more probability of the
dissolution of the project. In such a situation,
the problem of unemployment may arise if
another project is not available to the
organization.
 Authority

• Authority is a right and power to guide and direct the actions

of others so that the organizational goals can be achieved. It
is essential for discharging the various managerial functions.
Authority is the formal right of the superior to command and
compel his subordinates to perform a certain act. Authority
is the power to command others to act or not to act in a
manner. It is the right to act or command others to act,
towards the attainment of the organizational goal. Thus
authority involves the power to make decisions, to issue
orders, to compel obedience., to guide the activities of
subordinates, and to utilize organizational resources.
 Delegation of authority

• The process of assignment of specific work to individuals

with the organization and giving them the right to perform
those works is delegation. The delegation of authority is
one of the most significant concepts in management
practice, which affects managerial functions. Management
is the art of getting things done through others and
delegation is the means to get the result through the
subordinates. In present day business organizations, when
the expansion of business volume and diversification of
line of business makes it impracticable to handle all the
business by a single manager.
• Therefore, the concept of delegation of some
managerial authority to subordinates comes into
practice in present day business organization. Here,
the manager delegates some of his authority to his
subordinates. The top level management plays only
the role of a supervisor and visits them to provide
guidance, suggestions and instructions. It minimizes
the work load of the top manager and also develops
the overall working efficiency of the organization.
• In other words, delegation of authority is assigning
work to others and giving them the required
authority to perform the assigned task effectively.
The concept of delegation has been developed
due to the increase in the size of business and its
complexity. A manager, then, needs to delegate
some of this authority to subordinates along with
a specified responsibility. It is necessary to
complete the work efficiently and effectively.
 Features of delegation of authority

• No delegation of total authority: A manager cannot delegate

his or her total authority to his subordinates. He can
delegate only a portion of it. A superiors status would be
affected if he or she delegates total authority to the
subordinates. It is not possible and is also not allowed by the
management concept.

• Delegation of only that authority that a manager has: a

manager cannot delegate that authority to a subordinate
which he himself does not possess. It means that no one can
give what he has not got. This feature is based on legality.
• Delegation for organizational purpose: a superior
delegates his authority to a subordinate only for
organizational purposes. He cannot delegate the
authority to fulfill his personal objectives.

• Restoration of delegated authority: authority

once delegated may be enhanced or reduced on
the basis of nature of the duties and its
effectiveness.
• Balance of authority and responsibility: a manager has to delegate authority to the
subordinates on the basis of given of responsibility given to him. The assignment of
responsibility to a subordinate without proper authority becomes worthless because that
subordinate cannot perform the functions independently and efficiently. In a similar manner,
delegation of more authority than actually needed may create problems and may be
misused.

• No delegation of responsibility: a manager can delegate authority to his subordinates in

accordance with assigned responsibility, but the final responsibility , however, lies on him ,
cannot escape from his responsibilities.
 Responsibility

• Responsibility has been generally used in two

different senses. Some writers define the term
as duty or task assigned to a subordinate
matching with his position in the organization.
Responsibility is the duty to which a person is
bound by reason of his status or task. In this
sense, responsibility means duty, which is
attached to a position in the organization.
• Many others defines the term responsibility in more
comprehensive way. For them, responsibility is the
obligation of an individual to perform the assigned
duty. According to Theo Haimann, responsibility is the
obligation of a subordinate to perform the duty as
required by his superior. In the words of Stephen
Robbins: responsibility is the obligation to perform the
delegated duties and tasks. Thus responsibility is an
obligation to perform certain functions to achieve
certain results. It is not only a duty that had been
assigned to a position but it is an obligation of the
person to perform such duty.
• Responsibility is a personal obligation, which
can never be delegated. It arises only when a
superior has assigned a duty to a subordinate.
The essence of responsibility is the obligation
to complete the job.
 .
The main characteristics of responsibility are as follows:

• Responsibility can be assigned to human beings only.

• Responsibility arises form superior-subordinate
relationship.
• Responsibility may be defined in terms of functions
or goals.
• It is derivative of authority.
• It is absolute and cannot be delegated.
• Responsibility flows upwards.
 Accountability

• Accountability is the logical obligation of authority and

responsibility. It is the obligation of reporting about he assigned
job. When a superior assigns certain jobs to his subordinates and
delegates the necessary authority to complete the assigned job,
the subordinate becomes responsible to complete the jobs
according to the standards set by the superior. In other words, the
subordinate undertakes an obligation to complete the assigned job
by fair use of his authority and account for the proper discharge of
responsibility assigned. Thus, accountability is the obligation of a
subordinate to report back to his superior that the assigned job
has been completed. It means an obligation is answerability for
the performance of an assigned job.
• In other words accountability is the obligation of an individual
to report formally to his superior about the work he has done
to discharge the responsibility.
• Accountability is the obligation to carry out responsibility and
exercise authority in terms of established standards of
performance.
• The degree of accountability depends upon the degree of
authority and responsibility.
• Accountability always moves upward from a subordinate to a
superior.
• Accountability requires as formal report by a subordinate to
his superior.
• Accountability is different from responsibility.
Responsibility is the work to be done while
accountability is the obligation to do it
satisfactorily.
• Just as responsibility is a derivative of
authority, accountability is a derivative of
responsibility.
 Advantages of delegation of authority

• The increase in volume of business and dynamic

environment create complexities in business activities.
Therefore, a single manager cannot perform all the
works of the organization. Here is when the concept of
delegation of authority comes into practice. Delegation
of authority extends the personal capacity of the
manager and helps him expand his ability through
subordinate's support which is essential for the
achievement of organizational objectives. The following
are the major advantages of delegation of authority.
 Minimize work load of managers

• Delegation of authority minimizes the workload of

managers. They can assign regular and routine
nature of work to their subordinates while they
concentrate more effectively in managerial and
creative functions. In this way, delegation of
authority helps in improving managerial efficiency
and effectiveness. The improvement of managerial
efficiency contributes to making the organization
competitive in the modern business environment.
 Benefit of specialization

• Specialization is the means of success in a

dynamic environment. The management
delegates authority to subordinates on the
basis their ability and knowledge. This
contributes in the development of the concept
of specialization among the subordinates. The
development of professionalism among the
subordinates is helpful in developing the
overall working environment
 Motivation and morale

• Delegation of authority develops among the

subordinates a feeling of status and prestige. It
helps to improve their working efficiency. It also
promotes a sense of initiative and responsibility
among them. This ultimately leads to
maintenance of high morale on the part of
subordinates. This motivation and morale of
subordinates encourages them to devote their
effort towards the achievement of common goals.
 Training and development

• Delegation of authority provides a background for

training and development of subordinates. The
manager delegates some of his authority to the
subordinates in accordance with their ability. The
subordinates have to perform a task on behalf of
the superior and in the same situation they have to
take decisions by using their own ideas and
knowledge. This environment provides a framework
for the development of managerial ability among
the subordinates
 Facilitates growth and expansion

• Delegation of authority facilitates growth and

expansion business activities. It provides flexibility in
the organizational structure. According to the
requirement, more layers can be added to the existing
organizational structure through the process of
delegation. It helps in adjusting additional managerial
functions that come up due to expansion and
diversification of business. The work, authority and
responsibility are divided among the subordinates while
the top management plays the role of a supervisor.
 quicker and better decision

Delegation of authority ensures a quicker and

better decision. Through it subordinates get
the authority to decide on the matters of their
own area by remaining within the limitations.
Here, subordinates can take quick decisions
without consulting the superior. Decision
making is also better because subordinates
are closer to the reality of the situation
 Basis of organizing

• Delegation of authority is the basis of forming an

organizational structure. The number of layers in
the organization structure depends upon the
nature of delegating of authority. In a similar way,
the functioning of the enterprise is not possible
without an organizational structure. Therefore,
the management has to first decide on the layers
of delegation of work, authority and then proceed
with the formation of organizational structure.
 Concept of span of control

• There is a limit to the number of subordinates,

which a superior can effectively supervise. The
limit is known as the span of control. The term
span of control is also referred to as span of
supervision or span of management. It
indicates the number of subordinates that a
manager can manage effectively.
• A manager's ability to manage subordinates is limited by his
time and energy in order to enable him to give personal
attention to work performance. He should have a
manageable number of subordinates. If the number of
subordinates is very large, the superior may not be able to
exercise effective control and supervision over them. On the
other hand, if the number is too small the supervisors' ability
may not be fully utilized and subordinates may not have full
autonomy of work. Moreover, supervision will be costlier.
Thus, the concept of span of control has a significant
influence on the overall performance of an enterprise.
• It is not easy to decide the appropriate number of
subordinates to be supervised by a manger. In actual practice,
the span varies widely and there is no best or ideal number
that can be applied in all situations. There are different views
on an ideal span of control. In the opinion of Lyndall , a
manager can supervise only four subordinates at the upper
levels and between eight and twelve at the lower levels.
According to some experts, a manager can supervise four to
eight subordinates at the upper level of organization and
between eight to twenty at lower level. Modern management
experts believe that the actual span of control cannot be right
and universal.
 Factors determining span of control
• Nature of work
The nature of work affects the span of control. If the work
performed is simple, routine, and repetitive nature the
subordinates do not require frequent guidance. As a result the
manager can supervise a large number of subordinates. But if
the work is different or non identical, the span will be narrow.

• Ability of supervisors/managers
Ability of managing the affair differs from individual to individual.
A manager possessing the qualities like effective leadership,
communication, decision making, and control can supervise a
large number of subordinates. Moreover, the attitude and
personality also determine the span.
 Ability of subordinates

• Span of control largely depends upon the ability of

the subordinates. If subordinates are efficient,
trained, and experienced with self confidence and
self control, they will need minimum supervision or
attention of the superiors. Only broad guidelines are
sufficient for them. In such a case the span may be
larger. The unskilled and inexperienced subordinates,
on the other hand, require more time of supervision,
hence span will be narrow. Thus, the quality of the
subordinates influences the span of control.
 Time available for supervision

• The span at the particular level depends upon the

time available to the manager for supervision. He
has to devote his time in planning, organizing,
controlling etc. in addition to the responsibility of
supervision. If he is burdened with other
responsibilities, he cannot devote more time for
supervision. In such as case span shall be
narrower. If he has no other responsibility except
supervision, the span shall be wider.
 Degree of decentralization

• If manager does not delegate his authority, then he has to

take many decisions and subordinates require frequent
consultation. As a result he can supervise only few
subordinates. On the other hand, if manager liberally
delegates his authority, subordinates will take many
decisions and the manager can effectively supervise more
subordinates.
• Facility of staff assistance
• If a manager gets staff assistance in performing his
responsibilities such as planning, organizing, controlling etc
then he can bear a greater work load and can have a larger
span of control. With adequate staff services, a manager
even at a higher level can handle many subordinates
 Communication technique

• Communication technique used in the enterprise will also

influence the span of control. If everything is to be
communicated by face to face contact, it takes much of
manager's time and he cannot supervise more subordinates.
When electronic and other devices are used, the system speeds
up the communication and increases the span of control.
• Clearly defined plans and responsibilities
If the enterprise has clearly defined plans and responsibilities,
the subordinate need not make frequent calls on his superior
for guidance and instructions. In this case, the span can be
wider. On the other hand subordinates have to consult their
manager for guidance and direction very frequently, then it
requires narrow span of control.
 Authority, Responsibility, and Accountability
• The three terms authority, responsibility, and accountability
are interrelated. The following figure shows the relationship
among them.
• Authority denotes granting of power. Responsibility indicates
obligation to carry out assigned duties and accountability
refers to answerability regarding ones work and conduct.
• Work cannot be carried out in an organization unless authority
is delegated by the superior to his subordinates. It always flows
downward. As soon as the authority is delegated it can be
assumed that the responsibility to perform certain jobs has
been assumed by the subordinates. But accountability cannot
be delegated. One has to answer about his work and conduct.
Accountability is the derivative of responsibility.
• The three terms go together. Authority and
responsibility follow each other. Responsibility
without authority is as meaningless as
authority without responsibility.
 Process of structuring an organization

• Organizing is one of the important parts of management

functions. As a process, organizing involves division of
work, grouping of activities, delegation of authority and
coordination of activities among the members. It also
involves the establishment of formal relationship among
the individuals so that they can perform their work
jointly for the achievement of common objectives.
Therefore, organizing is a continuous process and
involves series of activities rather than one stop work.
The following are the steps of organizing process.
 Division of work
division of work is the first step of organizing process. It is the breakdown of
complex work into small and manageable units. It is done to make
individuals responsible for a limited set of activities and not for the whole
jobs of the organization. This also enables the workers to know what is
expected from them as a member of the group and help to avoid
duplication of efforts. Thus, the great advantage of division of work is that
it contributes to develop specialization among the workers and finally it
contributes to maximize productivity.
A single person is physically and psychologically unable to perform the entire
complex jobs, even if he is expert in certain sector of business. But the
division of work creates simplicity in work so that each person can learn it
and complete in efficiently. Similarly, division of work creates facility to
the workers to choose the job on the basis of their interest and talent.
Therefore, work should be divided into small and simplified units on the
basis of their complexity and entrusted to the skilled and talent workers.
 Grouping of work
all the activities determined to achieve enterprise objectives must
be classified on the basis of nature and should be put at one
group or subgroups. This step of organizing involves creating
departments and selection for specific work. It means a
separate depart is created for specific work and responsibility is
entrusted to the specialized member. Again, a department may
be sub divided into sections and individual job units by using
the concept of division of labor and specialization. The basis of
creation of department may vary from enterprise to enterprise
but common and widely used basis of departmentalization is
business functions like purchase, production, finance,
marketing, human resource , research and development etc.
thus this grouping of work is helpful to maintain coordination
and exercise control over activities.
 Delegation of authority
• delegation of authority is one of the important parts of
organizing. No individual can complete his assigned
responsibility unless he is given sufficient authority. Thus, for
efficient completion of works, there must be balance between
authority and responsibility. This brings confidence among the
individuals to perform their assigned works and develop the
feeling of self responsibility among them. The manager has to
delegate authority to the subordinates in accordance with
their responsibilities. There must be a Chan of command from
the top level to the subordinate level in an enterprise. This is
possible only through proper delegation of authority
 Coordination of work:
• exchange of information among the members in the enterprise is a
must during the course of performance. For which, managers have
to communicate with their subordinates and with co workers of
other departments. In the similar way, the subordinates also need
to maintain communication with their colleagues and superiors.
Thus, it is necessary to establish an effective, suitable and speedy
system of communication within the establish an effective, suitable
and speedy system of communication within the enterprise. Finally,
this is helpful to develop mutual relation among all the members to
bring smoothness in performance. Besides, another task of
organizing is to create and identify the relation to achieve common
objectives. It has to maintain coordination among all departments
and persons of the enterprises and develop the feeling of group
effort and team sprit to meet mutual objectives.
 Approaches to Organizing

• Classical approach
The classical approach to organizing signifies traditionally
accepted norms and systems. This approach focuses on
efficiency and recommends that managers continually
try to increase organizational efficiency to increase
production. This approach includes the ideas of scientific
management, administrative management and
bureaucratic theory. All these theories were propounded
on almost similar assumption and the practical effort of
all the three theories are basically the same.
• Scientific management theory is developed by F W Taylor
and later on several scholars expanded his idea. Notable
among them are: Demry L Gantt, Frank and Lillian
Gilberth, Harrington Emerson and Willam H. Lleffingwell.
Scientific management is an attitude and philosophy,
which discards the traditional method of rule of thumb,
and trial and error of managing work and workers. This is
also concerned with development and application of
scientific, problem solving approach, the principles of
scientific management of workers, close cooperation
between management and workers, equal division of
work and responsibility, maximum output .
• Hennery Foyal, a French industrialist and mining engineer by
profession, developed the theory of administrative management.
According to him, management is a distinct field of study and which
involves many managerial functions like forecasting planning,
organizing, commanding, coordinating and controlling. He also has
divided all industrial activities into six groups consisting of
technical, commercial, financial, security, accounting and
managerial. Based on his experience he has further developed the
fourteen principles of management eg division of work, authority
and responsibility, discipline, unity of command, unity of direction,
subordination of individual interest, remuneration, centralization,
scalar chain, order, equity, stability of tenure, initiative, sprite de
corps. . Thus, these principles are universally applicable in all types
of organization.
• Max Weber developed a theory of bureaucracy. It is
form of organization characterized by division labor,
a clearly defined hierarchy, detailed rules and
regulations and impersonal relations. He has
offered bureaucratic model for management of any
large and complex organization. The features of
bureaucracy consist of hierarchy of authority, chain
of command, clear cut division of work, system of
rules, regulations and procedures, system of work
procedure, selection and promoting based on
technical competence.
 Behavioral approach
• Behavior approach to organizing is concerned with scientific
investigation, analysis, and understanding of human behavior in
organizations. It is multidimensional and interdisciplinary in
nature. It focuses on human behavior in organization.

Behavioral approach to organizing also focuses on psychology,

sociology and anthropology. Psychology is the study of human
behavior. Sociology is the study of human behavior in groups.
Anthropology is the study of physical, biological and cultural
influences on human behavior as individuals and members of
group. A large number of behavioral scientists have made
contributions to the behavioral approach. Notable among them
are Abraham Maslow, Douglas McGregor, Frederic Herzberg,
Mary Parker Follet etc.
• Abraham Maslow, a human psychologist, has developed
a theory of human needs. According to him, people
always have needs, and when one need is relatively
fulfilled, others emerge in a predictable sequence to take
place. Because, human needs tend to follow a basic
hierarchical pattern from the most basic needs to the
highest level needs. And until the most basic needs are
fulfilled, person will not try to meet his higher level
needs. He also has classified human needs into five levels
as physiological, safety, social, esteem and self
actualization needs
• Douglas McGregor has proposed two distinct views
of human beings: one negative labeled theory X
and another positive labeled theory Y. according to
h, theory y is a set of optimistic assumption about
human nature and theory x is set of pessimistic
assumptions about the worker. As the manager
gets the work done form the subordinates, it is
necessary for them to understand the behavior of
each worker as well as group
• Fredrick Herzberg has developed the two factor theory
for work motivation consisting of motivating factor and
hygiene factor. Hygiene factors are external to the job
itself. The presence of these factors does not motivate
employee but absence of which cause dissatisfaction.
Hygiene factors include company policy and supervision,
relationships with supervisor, working conditions, salary,
relationship with peers, personal life, relationship with
subordinates, job security, status etc. the motivating
factors are job centered and relate directly to the job
itself.
• The presence of motivating factor causes high
levels of motivation and job satisfaction, whereas
absence of which does not cause high
advancement, work itself, the possibility of
personal growth, responsibility etc. Herzberg
came into conclusion that enriched jobs are the
key to motivate employees. Therefore, managers
need to identify the behavior of subordinates to
inspire them to get the things done. He needs to
know workers psychology and treat them
accordingly.
 Contingency approach

• Contingency approach to organizing is also

known as situational or practical approach to
management. It was developed by practicing
managers, consultants and researchers, who
tried to apply the concept of earlier
management theories into practice. This
approach says that there is not probably one
best way to solve management problem in all
organizations.
• According to this approach, the best way to lead, plan,
organize and conduct managerial activities varies with
the situation. A particular method suitable in one
organization at the time may not necessarily be suitable
to another organization at other time. Hence, there are
no plans, organization structure, and leadership style or
control technique that will fit in all situations. Significant
difference exists between one situation and other. Every
organization is unique and management decision and
structure must be unique. The manager must
understand the uniqueness and complexity of each
situation. There should be a match between situation
and the manner of dealing. There are four contingency
variables that determine management practice.
• Organization size: the number of people in an organization is a major
influence on what managers do
• Routine of task technology: organizations apply technology to
transform inputs into outputs. Routine technologies require
organizational structures, leadership styles sand control systems that
differ from those required by non routine technologies.
• Environmental uncertainty: the degree of uncertainty caused by
political, technological, socio cultural and economic change influences
the management process. The style best in a stable environment may
be totally inappropriate in a rapidly changing and unpredictable
environment.
• Individual difference: individuals differ in terms of their desire for
growth, autonomy, and tolerance of ambiguity and expectation. These
and other individual differences are particularly important when
managers select motivation techniques, leadership styles and job
designs.
• Therefore, management cannot have
readymade universally applicable and patent
principles to be applied to all situations as
everlasting truth. Hence management will have
to recognize the nature of technology, the
variations in management human
participations, and the wide diversity in
environmental relationship. And all managerial
actions will depend upon particular prevailing
circumstance and situational factors.
 Departmentalization
• Departmentalization is the process of logical grouping the similar
nature functions into manageable units for the purpose of overall
coordination of organizational resources. In an organization, many
persons perform various activities in different situations. Their
nature, process, and procedures may vary. It is not possible to
perform all types of works at a time and also by a group or people.
It is essential to classify activates into manageable units. Therefore,
departmentalization divides the large and complex organizational
faction's into small and flexible units to complete the work in
efficient and effective manner.
• Departmentalization facilities to maintain coordination,
communication, and control among all the mechanisms of the
enterprises. It creates separate units with improve their working
efficiency and effectiveness. Besides, it also facilitates to supervise
and maintain control over all functional units and therefore,
expansion of the organizational becomes easier.
 Advantages/ importance of Departmentalization

• Develops specialization: departmentalization leads to the

benefits of specialization: In departmentalization, works are
divided into different departments on the basis of their nature
and responsibility is entrusted to skilled and efficient manager.
When a manager is involved in one specific function, his
expertise increases in that particular field.

• Administrative control: in departmentalization, the standard of

performance of each department and objective to be achieved is
planned. When actual performance derivates with planned
performance, corrective measures are taken to remove the
barriers.
• Fixation of responsibility: departmentalization divides
works into different units on the basis of nature, and
responsibility is entrusted to departmental managers.
And the departmental managers are accountable to the
job performed by the staff of their concerned
departments.
• Feeling of autonomy: departmentalization develops the
feeling of autonomy among departmental managers. In
one sense they are responsible to complete the assigned
task. But in another sense, they are given sufficient
freedom to operate their departments
• Helpful for expansion: departmentalization facilitates top
manager to direct and supervise the work performed by
subordinate managers. It also helps divide work into
different units on the basis of nature, and responsibility is
entrusted to departmental managers. Such division of
work, thus, is helpful for expansion of business.
• Management development: departmentalization helps to
develop new managers by providing them opportunity to
take independent decision and initiatives. Consequently, a
high skilled subordinate level manager can get opportunity
to promote to the higher level.
 Types of Departmentalization

• Departmentalization by functions
This is common and popular basis of departmentalization of an
enterprise. Under this form, various departments are created on
the basis of nature of functions to be performed like production,
marketing, finance, personnel etc. a departmental head or
manager is appointed to supervise and control the activities of the
concerned department. All departmental heads are specialists and
experts in their own area of business. When workload of a
particular department becomes more, a department may again be
classified into sub departments. Since, the members working in a
department have similar background and interest, it gives rise to
specialization which makes manpower more efficient and skilled.
The typical departmentalization may be as follows.
 Advantage:

• It is most logical and natural form of

departmentalization.
• It brings about specialization which makes optimum
utilization of human resource.
• It lays emphasis on each and every activity.
• It enables top management to exercise control over a
number of factions.
• Ti facilitates delegation of authority and therefore,
reduces the work burden of top manager.
• It eliminates the duplication of efforts which brings
efficiency
  
Disadvantages

• There may be conflict between departments

as the responsibilities are interdependent.
• There may be difficulty in coordinating the
activities of different departments.
• There is over emphasis on specialization.
• It maximizes supervision cost.
• It is not responsive to environmental changes.
• It does not promote innovation and creativity
 Departmentalization by product
• This method of departmentalization is used specially by those
manufacturing firms that involve in large sale and various lines of
products or services. A separate department is created for a
single product or product line and all functions like production,
finance, marketing, personnel etc of one department are
brought together under the concerned department. Each
department is independent and responsible to improve and
expand its business performance. The department manager is
responsible for its expenses, revenue, profits, failure and
success. Therefore, it facilitates to measure the managerial as
well as operational result and contribution of each product line
to whole organization. This typical departmentalization may be
as follows.
 Advantages:

• It is suitable for the organization having various lines of

products.
• It brings about specialization in a product or service which
makes optimum utilization of human resources.
• It directs attention toward specific product line and service.
• It facilitates to monitor and evaluate the performance of
each production service department.
• Product managers can be held accountable for the
profitability of each product.
• It permits maximum use of specialized production facilities.
 Disadvantages
• There may be conflict between production and
other department as the responsibilities are
inter dependent.
• There may be under utilization of plant capacity
if the demand of the product is not sufficient
• It creates the problem of effective control over
production divisions by the top management.
• It maximizes administrative cost.
• The product manager may ignore overall
objective of the organization.
 Departmentalization by customers

• This type of departmentalization is applied by those

organizations which deal different with different
types of customers. Banking organization create
departments on the basis of customer service like
deposit, cash withdrawal, letter of credit, loan etc.
similarly, a business organization may be divided
into industrial product buyer and consumers
product buyers. Likewise, consumer product buyers
again may be sub classified into wholesaler buyer,
retailer and final consumers. The
departmentalization by customers is as follow.
 Advantages
• It is suitable for the organization dealing with
various types of customers.
• Management can concentrate on clearly
identified and potential customers.
• It considers the environmental change.
• Special attention can be given to the taste and
preference of customers.
• It provides the benefit of specialization.
 Disadvantages
• It may be difficult to maintain coordination.
• There may be under utilization of facilities
especially during the period of low demand.
• There may be possibility of duplication of
activates.
• There is possibility of conflict between
departments due to over emphasis of own
department by departmental manager.
• Over emphasis of on customers may lead to
wastage of resources.
 Departmentalization by Territory

• This form of departmentalization is applied specially in those

organizations that involve in business activities indifferent
geographical locations. It is also appropriate for large scale
enterprises which are geographically spread out in many
locations like insurance company, bank, Transport Company,
chain store or a product which is distributed throughout the
nation. All activities of specified territory are assigned to
particular department or regional manager. Activities are
grouped into regions, zones, district, branches etc. in such
departmentalization; the local customers are served by the
divisional manager while the plans and policies are
formulated at the head office. The departmentalization by
territory is as follows.
 Advantages

• It helps to achieve local operations.

• It facilitates the expansion of business into
various regions.
• It considers the environmental change.
• There is better coordination of activities
through the setting up of regional divisions.
• It can meet the local demands more
effectively.
 Disadvantages

• There may be a problem of integration various

regional office.
• There is the possibility of duplication of physical
facilities. It is more difficult to maintain central
control over regional departments.
• There may be lack of skilled and efficient
persons to take incharge of regional
departments.
• It is costly method of departmentalization.
 Departmentalization by process
• This method of departmentalization is applicable in those
organizations where production activities need some distinct
process. Specially, this method is used in large scale
manufacturing concerns such as textile, cement, chemical,
medicine etc. the activities are grouped on the basis of
process. The activities of each process are assigned to a
departmental head who is responsible for all the functions of
concerned department. This is made to maintain working
efficiency of each process and to economize productivity. For
instance, department of a textile industry may be formed into
ginning, spinning, weaving, dyeing, and finishing department.
The departmentalization by process is as follows.
 Advantages

• There is proper division of work into different

processes
• It facilitates coordination by grouping products.
• It ensures effective utilization of specialized skills
and equipments
• It provides full responsibility to process head to
complete process activities which improves product
efficiency
• It helps to make appropriate use of resources and
facilities.
 Disadvantages:

• It is appropriate only for manufacturing

organizations.
• The technical problem in one process may create
problem for the whole process.
• There is possibility of conflict among managers of
different process.
• It is more difficult to maintain coordination among
different process.
• The responsibility of total profit cannot be assigned
to process department.
 Departmentalization by time
• Time is also a basis of departmentalization in many
organizations, especially, those that involve in public
utility, production or service. Generally, hospitals, hotels,
telecommunication and other public utility organizations
which work among the clock form departments on the
basis of time shift such as day, evening and night shifts.
Therefore, a separate department is created on the basis
shift and a departmental head is appointed for each shift
to maintain control the activities of concerned shift. A
figure of departmentalization of the basis of time is as
follows.
 Advantages

• There is proper division of works into different shifts.

• It facilitates coordination by grouping members into
shifts.
• It ensures effective utilization of specialized skills and
equipments.
• It provides full responsibility to the shift head to
complete activities which improves product
efficiency.
• It helps in the appropriate use of resources and
facilities
 Disadvantages
• It is appropriate only for public utility enterprises where the work is
round the clock.
• The technical problem in one shift may create problems for the
entire shift.
• There is possibility of conflict among managers of different shifts.
• It is more difficult to maintain coordination among different shift
managers.
• The responsibility of total profit cannot be assigned to a shift
department.
• It is more difficult to maintain coordination among different shift
managers.
• The responsibility of total profit cannot be assigned to a shift
department.  
 Pure Project Organization

A "pure project organization" is a model of a business

where project managers have total control over the
project they oversee. Central control at the
managerial level must be weak for this to occur. Put
simply, a "pure project organization" might also be
termed a "task force." In the case of a "pure
project," the leader of this task force would have to
be given total authority for a limited period to solve
a particular problem. In business, it is a great
challenge to find an example of such purity.
 LINEAR RESPONSIBILITY CHART

Linear Responsibility Chart is also known as linear chart

(LC), Matrix Responsibility Chart (MRC), Responsibility
Interface Matrix (RIM), Responsibility and Accountability
Matrix (RAM). It is the chart of responsibility which
identifies the project participants and shows authority
and responsibility relationship among the project
participants due to their overlapping involvement in
project management. The participants may be general
manger, manager of projects, project manager and
functional managers. It clearly specifies the authority
and responsibility relationships of project participants to
avoid confusion and conflicts.
• Specially, it is used in matrix organization
structure in order to minimize the confusion
and conflicts between project manager and
functional managers. It explains what and who
of project work. It links the project activities or
task to the responsible person which ensures
effective implementation of project to achieve
define objectives within constraints.
 Linear Responsibility Chat

Responsibility General manager Project manager Functional

manager
Establish departmental 1 3 3
objectives and policies
Project planning 4 3 1
Functional planning 2 3 1
Project budget 4 1 3
Project work break down 4 1 3
structure
Project control 4 1 3
Functional control 2 3 1
Symbol/ Code
1 = Actual responsibility
2 = General responsibility
3 = Must be consulted
4 = May be consulted
5 = Must be notifies
6 = Must approve
• It describes the role of project participants in
project matters. Authority, responsibility and
accountability for project activities are defined
among various project participants. Problem-
solving becomes easier.
• Communication is facilitated.
• It is a useful tool for supervising of authority and
responsibilities.
• There is delegation of authority.
• Without clearly defining who is accountable for
what in a project, an imbalance of responsibilities
often occurs. Not only can these cause problems
within the project team, it also can affect the
entire project timeline. A linear responsibility
chart establishes a clear structure that assigns and
keeps track of who is doing what. It’s vital for
clarifying working relationships, making sure there
are no gaps in the work breakdown structure.
 organizational chart
• An organizational chart is diagram of employees. The
chart details the hierarchy in a company, showing who
reports to whom. The chart is designed in a pyramid
format. The top level of an organizational chart is the
president or CEO of the company, followed by a level of
upper management employees. The next level lists the
names of middle management supervisors, followed by
employees. A description of employee responsibilities
can also be added to the document. Organizational
charts are an excellent strategic planning tool.
 Job Description
• A job description is a foundation stone of many human resource
practices ranging from recruitment to training program. It indicates
the tasks, duties and responsibilities of a job. Job description identifies
what is done, why it is done, where it is done and briefly how it is
done. This is the end process of job analysis in the form of Witten
records of the job and its requirements. More specifically, it provides
enough information to the job on the following job matters.
• The title, department, section, and other identifying data to
distinguish one job from the another job,
• Basic organization, the person to whom the employee is responsible
and people responsible to him/her
• A summary statement of the work performed and the scope and
overall purpose of the job, which also helps to add perspective to the
individual duties,
Format of job description
• The job title, department, section, and other
identifying data to distinguish one job from the
another job,
• Basic organization, the person to whom the employee
is responsible and people responsible to him/her.
• A summary statement of the work performed and the
scope and overall purpose of the job, which also helps
to add perspective to the individual duties,
• The individual duties, assignments, and tasks which
make up the job.
 An example of job description
• Job title: production supervisor
• Position : assistant production officer
• Department/section/office: production department
• Rank: technical, seventh
• Main function and responsibility
follow broadly based policy of the organization
select trains and develop subordinates
plans, directs, and controls the production activities
interacts and communicate the production plans and strategies
makes different study on the production management
Recommends, suggest and follow the top level management.
• Job contents
Directs the operations of different production activities.
Production control
Production planning
• Authorities
• Can hire, place and dismiss the subordinates
• Can direct transfer and warm the subordinates
• Can suggest and recommend the production manager
• Can make some meaningful operational strategies
• Job characteristics
• Hard technical and managerial job but combined with achievement
oriented
• Skillful and passionate subversion needed
• Challenging and innovative supervision needed
 
• Signature of job holder
• signature of head of department
• signature of chief executive officer
 Checks and balances
It is an internal control mechanism that guards against fraud and 
errors due to omission. In a system with checks and balances,
the authority to make a decision, and the associated 
responsibility to verify its proper execution, is distributed among
different departments. These departments are kept logically and
physically apart, and no one department can complete a 
transaction all on its own. For example, the purchasing
department orders goods, the stores-department receives and
compares them with the respective purchase orders, the 
quality assurance department inspects and verifies their quality,
the accounts department verifies the invoice amount, and only
then the comptroller authorizes the payment for the purchase.
The various procedures set in place to reduce
mistakes or improper behavior. Checks and
balances usually ensure that no one person or
department has absolute control over decisions,
and clearly defines the assigned duties.

Checks and balances are important, especially in

businesses where one individual can make
decisions that affect company operations.
• Checks and balances help keep organizations
and departments honest by filtering
information through several different and
individuals. Financial and accounting
departments utilize many forms of checks and
balances to reduce the amount of fraud and
inaccurate information.
• After the many financial frauds that have taken place in the
American economy, the government has implemented a system
of checks and balances to protect the public from inaccuracy.
The most notable enactment of this nature is known as the
Sarbanes Oxley Act of 2002, which requires that publicly held
organizations keep track of financial documents and restrict
access to them. Reporting accuracy is greatly increased in a
system that will have open access to auditing. Heavy penalties
are issued to companies that do not adhere to the legislation.
Accuracy in the business world is a very important key for
success. To keep investors confident, organizations must be
solid and truthful. A market that is constantly fluctuating due to
poor financial accuracy will quickly fail.
 Mechanistic organization
• A mechanistic structure, also known as a
bureaucratic structure, describes an
organizational structure that is based on a
formal and centralized network. It is a rigid and
tightly controlled structure characterized by
high specialization, narrow spans of control,
high formalization, and a limited information
network. In this organization works are carefully
scheduled, tasks are certain, roles are defined
strictly and most formal communication flow
along the line of hierarchy.
• The whole structure is organized like a well
designed machine. It has mostly downward
communication, and there is the provision of
little participation of subordinates in decision
making. In mechanistic organizations, it is
typical for each person to be assigned one task
that is relatively stable and easy to control.
• This structure is best suited for companies that operate in a
stable and certain environment. In general, a mechanistic
structure is easy to maintain and rarely needs to be changed
when an organization operates in a stable environment. In
mechanistic organizations, authority reflects a well defined
hierarchy where top level managers make the majority of the
decisions. Because the environment is relatively stable, in
complex decision making processes involvement of multiple
parties is not required. Subordinates are expected to follow
the directions of management and they are not in a position
to make questions. Mechanistic organizational structure
focuses on individual efficiency along with rules, regulations,
standardized tasks, and centralized control. The mechanistic
form organization is appropriate for the traditional
hierarchical way of organizing.
 Characteristics

• Rigid departmentalization: in mechanistic

structure, activities are divided into various
groups on the basis of common nature. For
each group of work, a separate department is
formed and each department is entrusted to
responsible individual. Departmental activities
are carried out on the basis of organizational
rules, regulation and system.
• Clear chain of command: since it is like a bureaucratic type
of structure, there is clear chain of command from top level
to subordinate levels in managerial hierarchy. Every
subordinate is responsible for his immediate superior for
functioning of the organization.

• Narrow spans of control: in mechanistic organization

structure, separate type jobs are assigned to individuals on
the basis of their efficiency. They need to be performed
activities independently without consulting with other
members. They may face difficulties in the course of doing
activities. Manager needs to maintain close supervision
over their performance. Therefore, there is narrow span of
control over performance of subordinates.
• Central command: in mechanistic organization there is
provision of chain of command decision making authority
is only at the top level management. All the subordinates
need to work in accordance of instruction from their
immediate superior. They have no right to participate in
decision making process.
• Formal rules, regulation and polices: this organization has
the provision of formal rules, regulations and policies. All
the activities of organization run on the basis of specified
rules and regulation. It is more difficult to modify or
amend rules on the basis of changing environment. So, it
becomes difficult to adapt in dynamic environment.
• High formalization: it is a bureaucratic form of
organization. In every step of performance it is
necessary to fulfill formal system of the organization.
No member can use their logic or creativeness in doing
job. They need to do assigned work by considering
organizational procedures.
• Communication flow downward: it is vertical form of
organization. There is centralized power. Information of
instruction and guidance flows downward from
superior to subordinates. Subordinates have no right to
provide information of problems and process of work
to managers.
 Importance

• Benefit of specialization
• Proper discipline
• Minimize supervision cost
• Quick decision and implementation
• Fixation of responsibility
• Effective management
 Disadvantages

• Work overload on manager

• Autocratic leadership
• Static and rigid
• More formalization
• Impractical decision
• One way communication
• Difficult for coordination
 Organic organization
• Organic organization model is a structure that is highly
adaptive and flexible according to changing environment. They
are more flexible and open. Tasks and role are less rigidly
defined, allowing people to adjust to situational requirements.
This structure is used in organizations that face unstable and
dynamic environment and need quick adaption according to
change. When an environment changes, an organization must
be able to gather, process, and circulate information very
quickly. Failure to do so can directly affect an organizations
ability to maintain its complex environments. To achieve this,
organizations that use an organic structure would integrate
functional areas and departments together so that
information can flow smoothly between them. This fast
distribution of knowledge results in an increased ability to
respond to changes in the internal and external environment
• Organic organizations may have specialized jobs,
but those jobs are not rigid because they can be
changed on the basis of requirement. Work, over
here, is frequently organized around team of
employees as it is needed. Though employees are
highly trained and empowered to handle various
activities and problems independently, they need
to consider minimum formal rules and regulations,
small direct supervision from superiors.
• Decision making in organic structures is
decentralized, allowing for more complex
decision making processes involving
subordinates at all levels of the organization. In
organic organization uncertainty is minimized by
taking suggesting and information from all the
concerned subordinates to solve the problems.
Therefore, power and authority should also be
delegated to lower level employees.
 Features of organic organization
• Cross functional team: in organic
organizational structure there is the provision
of cross functional teams. Works, in there, are
divided into different groups on the basis of
common nature and each group of work is
assigned to team members of which have
diversified skills. They work together for
achieving common goals through mutual
support.
• Free flow of information: there is the system of two way
communication. There is free flow of information within
organization. Top level management provides information,
instruction and guidance to subordinates and similarly,
subordinates provide information of achievement and
problems in work to manager. Such two way communication
helps to solve problems and to enhance smoothness in
activities.
• Wide span of control: in organic organization there is
possibility of wide span of control. It emphasizes on
specialized team performance. Team members are expert in
their own area of performance. They are independent and
responsible for accomplishment of given jobs. Thus, they do
not require close supervision, only simple instruction and
guidance become sufficient to them.
• Low formalization: employees need to consider
minimum formal rules and regulations and small direct
supervision from superiors. They can perform assigned
jobs by using specialized skill and ability. They
coordinate task of a larger project often in the form of
team. This facilitates to bring smoothness in
organizational performance.
• Jobs are less standardized: in organic structure, job
standard is not predetermined. Needs of the
organization would change quickly due to dynamic
environment of the society. Therefore, it is necessary to
redefine tasks at a time. Such redefinition of tasks helps
to adapt in accordance of changing environment of
society.
• Fewer rules and regulations: the fulfillment of fewer rules and
regulations is one of the important features of organic
organization. Team members can do assigned works
independently according to their best of efficiency. Only
competition of some system of the organization becomes
sufficient. However, they need to consider some instruction
and guidance from top level management.
• Decentralization of decision: participate decision making is
one of the important components of organic organization.
Top level management invites subordinates to provide
suggestion, information, and ideas in decision making
process. Decisions are taken on the basis of mutual consent
with subordinates. It helps to take rational decision which
becomes supportive in implementation.
 Advantages

• Decentralization of authority
• Free flow of information
• Feeling of team work
• Wide span of control
• Adaptable in dynamic environment
• Relief to manager
• Increase efficiency
 Disadvantages

• Lack of coordination
• Complex in decision
• High administrative cost / because of the functional specialists
• Spoil human relation: team members perform given job
independently through mutual support. And this team
performance is the main motive of organic organization.
However, if any misunderstanding arises among team
members or among teams, it will spoil human relation. In
such situation it becomes more difficult to develop good
working environment in organization.
• Difficult to control
 Difference between mechanistic and organic
organization
Basis of different Mechanistic organization Organic organization
Task definition It has rigid or static task definition It has flexible or adaptable
task definition
Specialization It emphasizes on individual specialization It emphasize on team
specialization.
Working process In this structure employees work In this structure employees
separately who are specialized in task work together by coordination
task to each other
Integration It has simple integration mechanism as It has complex integration
hierarchy of authority is well defined. mechanism as primary work
and task force.
Decision Decision making is Decision making is decentralized to
centralized at the top level subordinate levels

Communication Communication is vertical Communication is both way

from top level subordinate
levels , it is one way

Rules and There is extensive use of There is little use of rules regulation
standard rules, regulation and standard and standard .

Work process in this structure work process In this structure work process tends
tends to be predictable to be unpredictable.