CHAPTER- 11 ORGANIZING

• 11.1 Meaning of Organization

• 11.2 Features of Organization

• 11.3 Role of Organization

• 11.4 Process of Organizing

• 11.5 Principles of Organizing

• 11.6 Organization Structure

• 11.6.1 Span of Control/Management

• 11.6.2 Considerations in Designing an Organization Structure

• 11.7 Division of Labour and Specialization

• 11.8 Organizational Organograms

• 11.9 Traditional Structures- Line organisation, Line and Staff organisation and Functional Organisation

• 12.0 Modern organisation structures

 INTRODUCTION
• Louis Allen, “Organization is the process of identifying and grouping work to be performed, defining and delegating responsibility and
authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.”
In the words of Allen, organization is an instrument for achieving organizational goals. The work of each and every person is defined
and authority and responsibility is fixed for accomplishing the same.

• Koontz and O’Donnell, ‘The establishment of authority relationships with provision for co-ordination between them, both vertically and
horizontally in the enterprise structure.” These authors view organization as a coordinating point among various persons in the business.

• Oliver Sheldon, “Organization is the process so combining the work which individuals or groups have to perform with the facilities
necessary for its execution, that the duties so performed provide the best channels for the efficient, systematic, positive and coordinated
application of the available effort”. Organization helps in efficient utilization of resources by dividing the duties of various persons.

• Thus, organization refers to the relationship between the various factors present in a given endeavour. Factory organization concerns itself
primarily with the internal relationships within the factory such as responsibilities of personnel, arrangement and grouping of machines and
material control. From the standpoint of the enterprise as a whole, organization is the structural relationship between the various factors in the
enterprise. All factors of production are coordinated in order to achieve organizational objectives.
 ROLE OF ORGANIZATION

Facilitating
Encouraging
Management Job Satisfaction
Efficiency
Action

Optimum Use of
Communication Organizational
Resources
PROCESS OF ORGANIZATION
Principles of Organising

(i) Principle of unity of objective:

• Very simply stated, this principle requires that individual and departmental
objectives throughout the enterprise must be perfectly harmonized; and that all
objectives must be mutually supportive and collectively contributing to overall
common objectives.
(ii) Principle of simplicity:
• The observance of this principle requires that the management must, as far as
possible, design a simple organizational structure. A simple structure facilitates a
better understanding of superior- subordinate relationships; and provides
background for better co-operation among people.
(iii) Principle of flexibility:
• While designing the organizational structure, the management must provide for in-
built devices within the structure itself; which would facilitate changes in the
organizational structure to be effected as and when environmental factors-internal
and/or external- so demand.
Principles of Organising
(v) Principles of functional definition:
• The above stated principle implies that the role (or job) of each
individual and of each department of the enterprise must be
suitably defined, in terms of the-work content, the authority and
facilities required for job performance and the relationship of
the job with those of others, in the enterprise.

(vi) Principle of optimum departmentation:

• There are many ways and bases for creating departments within
an organization. According to the principle of optimum
departmentation, departments in an organization must be so
created and maintained-as to facilitate the best attainment of
the common objectives of the enterprise.
Principles of Organising
vii) Principle of unity of direction:
• The principle implies that each group of activities having the same objective
must have only one overall head and only one overall or master plan.
• As a principle of organization, this concept of unity of direction must be so
embedded in designing the organizational structure that for each group of
similar activities, there is a provision for only one overall head-having
authority over all personnel performing the same function, anywhere, in the
organization.
(viii) Span of management principle:
• The span of management principle is variously called as- the span of control
or the span of supervision. However, the phrase ‘span of management’ is the
widest; including also the notions of span of control and span of supervision.
• The span of management principle implies that there is a limit to the number
of subordinates; whose work could be effectively managed (controlled or
supervised) by a superior.
Principles of Organising

(ix) Principle of adequate delegation:

• By the principle of adequate delegation, we mean that each managerial
position be provided with adequate (or necessary or requisite) authority-to
enable the holder of the position i.e. the manager to cope successfully with
the requirements of his job.
(x) Scalar chain principle:
• Scalar chain implies a chain of superiors-ranging from the highest rank to the
lowest rank-in an organization. The scalar chain forms the base of authority-
responsibility relationships among managers and subordinates, in the
organisation; thus promoting mutual understanding among superiors and
subordinates at different levels of the organization.
• As a principle of organization, scalar chain principle requires its incorporation
into the design of the organisation, for ensuring smooth running of the
enterprise life.
Principles of Organising
(xi) Principle of unity of command:
• The above-sated principle implies that an employee must receive orders and
instructions, only from one superior, at a time. The observance of this principle
is desirable for reasons of removing doubts and confusions from the mind of
the employees; and for facilitating exact fixation of responsibility on individuals
for the results expected of them.
(xii) Authority-level principle:
• The authority-level principle implies that managers at particular levels in the
management hierarchy must decide only those matters which fall within the
purview of the authority vested in their managerial positions.
• A natural extension of this principle is that if a manager at any level of the
management hierarchy comes across a matter not covered by his authority;
the matter must either be referred upwards in the hierarchy or pushed down
the hierarchy at the appropriate level for decision.
 ORGANIZATION STRUCTURE
• An organizational structure is defined as “a system used to define a hierarchy within an organization. It identifies each
job, its function and where it reports to within the organization.” A structure is then developed to establish how the
organization operates to execute its goals.

CONSIDERATIONS IN DESIGNING AN ORGANISATION STRUCTURE

1. Objectives and strategy

2. Environment
3. Technology
4. People
5. Size
6. Job design
7. Departmentation
8. Span of control
Span of Control
• Span of Control can be defined as the total number of direct subordinates that a
manager can control or manage. The number of subordinates managed by a manager
varies depending on the complexity of the work. For example, a manager can manage
4-6 subordinates when the nature of work is complex, whereas, the number can go up
to 15-20 subordinates for repetitive or fixed work.
Second Example
Omar was recently hired as a Supply Chain Manager in a plastic bag manufacturer. It has
been a little difficult for him to perform his job correctly because the company hasn’t
structured the department correctly. It seems that some of his team members are also
employed by other departments of the company and they have been procrastinating
the activities that Omar handles to them. This has caused a poor performance for the
Supply Chain Department.
In order to correct this, Omar asked the CEO of the company to clarify his span of
control to understand the organizational structure adequately. After the situations was
evaluated, Omar’s department ended up with 4 team members that will work with him
only. This has increased Omar’s department performance considerably.
Factors influencing span of control
• Communication system
• Nature of work
• Capability of supervisors
• Ability of subordinates
• Availability of time
• Degree of decentralisation
• Availability of staff assistance
 DIVISION OF LABOUR AND
SPECIALIZATION
• The concept of division of labour was explained by Adam Smith using the example of a pin making factory. He pointed out that a worker will be
able to make 20 pins a day if he were to do all the tasks of pin production himself. According to Adam Smith, “Wealth of nations”, the economic
growth (i.e. the increase in the value of goods produced in a country in a year) of a county lies in the concept of division of labour. Under this
regime, each worker becomes an expert in one isolated area of production, thus increasing his efficiency. The fact that labourers do not have to
switch tasks during the say further saves time and money. Of course, this exactly allowed Victorian factories (UK) to grow throughout the
nineteenth century and develop themselves and their country simultaneously.

PROS CONS

Lower average cost of production Dependency on the whole labour force is

increased
Automation Possibility of increased unemployment

Workers become very skilful and effective Boredom and alienation due to repetitive
task
Saves Time
 ORGANIZATIONAL ORGANOGRAM
• Organogram shows the correlation among organizational unit in the form of graphics and it provides great convenience
for people to view detailed information on organizational units as well as the associated position and personnel.

Purposes of Creating an Organogram

a. Displays function division.

b. Allows people to know whether right and responsibility are set properly or not.

c. Assist people in finding if there is someone undertaking relevant work and staying idle.

d. Help managers to identify if some talented workers haven’t been able to draw out the best in themselves.
 TRADITIONAL STRUCTURE
• Traditional organization represent the organizational structure in a business is hierarchical, meaning power flows vertically
and upward, and employees are departmentalized. All employees follow a chain of command. It is classified as:

LINE

TRADITIONAL
ORGANIZATION

LINE AND STAFF FUNCTIONAL

1. Line Organization- In the theory of management literature, a line organization is defined as that organization, in
which line-authority responsibility relationship is found excluding any other type of relationship. This type of
organization presumably first originated in the military. Hence, this type of organization is historically also called
as the “military organization”.

Features of Line Organization

 a. A line organization is governed by the following principles-
i. The scalar chain principle (or the line of command)

ii. Unity of command,

iii. Span of management, according to which principle, the number of subordinates, under one superior, is kept limited; in
view of the managerial competence, of that particular superior.

b. In a line organization, there is no scope for managerial specialisation whatsoever- Each manager, located at a particular
point in management hierarchy, is supposed to undertake all functions, pertaining to his area of functioning i.e. each manager
would look after production, finance, marketing and other functions within his area of authority. Hence, such a type of
organization is suited only where routine type of business is conducted-not requiring much of specialization.
Merits of Line Organisation-
a. Simplicity
b. Clear relationships
c. Unity of command
d. Discipline
e. Prompt decision making
f. Fixed responsibility
g. Effective coordination

Demerits of Line Organisation

h. Concentration of Authority
i. Difficulty in Staffing
j. Instability
k. Lack of specialisation
l. Ineffective communication
2. Functional Organization- A functional organization is one, in which all business work is divided among various
activities or functions; and each of the function is entrusted to a specialist. Each such specialist is known as a
functional specialist, by virtue of, his expertise in the function entrusted to him; and the authority possessed and
enjoyed by each specialist is known as his functional authority.
A functional organization is regulated by the ‘multiple-command-system’ (i.e. an absolute violation of the unity of command);
as each subordinate in the organization is subject to multiple orders by different functional specialists – each one of the latter
commanding the former pertaining to the area of his specialisation.
Merits of Functional Organisation-

a. Specialisation
b. Increased efficiency
c. Executive development
d. Reduction in workload
e. Flexibility

Demerits of Functional Organisation

f. Conflicts
g. Difficult to fix responsibility
h. Expensive structure
i. Lack of discipline
j. Lack of coordination
3. Line and Staff Organization- Line organization is an over-simplification of the pattern of organizational structure.
Likewise, a functional organization, making for a multiple command system, creates so many complexities of superior-
subordinate relationships; that a smooth functioning of the organization is often not met with, in realty. There is thus, a
need for a developing a typical organizational structure, which combines the happy features of these two types of
organizations into such a system, that the organizational structure is one of the ‘practical-type’ conductive to operational
efficiency. Line and staff type of organization is one structure, designed by organizational experts; which seeks to combine the
positive side of both-line and functional organizational, in a unique manner.
Line and staff organization are one, in which there is basic departmentation for primary business functions, operated on the
concept of the scalar chain; and there is a provision for specialised activities performed through staff officers, the latter acting
ordinarily in an advisory capacity.
Merits of Line and Staff Organisation-

a. Scope of growth
b. Specialisation
c. Better decisions
d. Lesser burden on Line executives
e. Training of line officers

Demerits of Line and Staff Organisation

f. Conflicts between Line and Staff

g. Different orientations
h. Lack of coordination
i. Lack of responsibility
j. Costly structure
k. More dependence on Staff
MODERN
ORGANISATION
STRUCTURES
Departmentalization
• Merits based on functions
• Specialisation
• Simple
• Facilitates functional training
• Coordination
• Flexibility
• Better supervision and control

• Demerits based on Functions

• Problem of coordination
• Loss of focus on organisational objectives
• Addition to cost
• Delayed decisions
• Merits
• Product specialisation
• Fixes responsibility and accountability
• Flexibility in product decisions
• Managerial development
• Coordination

• Demerits
• Duplication of efforts
• Additional burden of cost
• Merits
• Ease in expansion
• Adaption to local market
• Managerial development
• Fixes responsibility and accountability
• Autonomy in decision making
• Demerits
• Problems in coordination
• Conflicts between division and head office
• Increase overhead costs
• Merits
• Customer orientation
• Expertise
• Positive perception and image

• Demerits
• Problems in understanding customer needs and preferences
• Improper utilisation of resources
• Not suitable for small organisations
Project Organisational Structure
• A project organisation is one, in which a project structure is created as
a separate unit or division within a permanent functional structure;
drawing specialists and workers from various functional departments
who work under the overall leadership, control and co-ordination of a
project manager to complete projects of a technical and costly nature.
• George R. Terry defines a project organisation as follows:
• “A project organisation is a preferred means whenever a well
defined project must be dealt with or the task is bigger than
anything, the organisation is accustomed to.”
• Conditions requiring the creation of a project
organisation are as follows:
• (i) Project is of a technical nature, requiring utmost
precision and accuracy e.g. ship-building, designing and
launching of satellites, aircraft manufacture etc.
• (ii) Project completion requires huge cost.
• (iii) Time factor is a critical factor; requiring project-
completion within a limited prescribed time. Any delays in
completion of project within time may tell upon the
reputation of the organisation.
 Merits and Limitations of the Project Organization:

• (a) Merits:
• (i) Concentrated attention on project work:
• In a project organisation, there is full and concentrated attention of the project
manager on project work; as the project manager has no work other than
attending to project management. He has full powers to co-ordinate and control
project activities. In fact, during continuance of the project, functional managers
renounce their authority over their project-team personnel, in favour of the
project manager.

• (ii) Advantages of team specialization:

• The project team formed for purposes of undertaking project work consists of
specialists drawn from many functional areas. This phenomenon makes available
to the project organisation, the advantages of team specialisation.
• (iii) Ability to cope with environmental influences:
• Due to the leadership of the project manager coupled with
specialised knowledge of project team members, the project
organisation is in a better position to cope with environmental
challenges. In fact, one of the reasons for creating a project structure
is to successfully combat environmental forces.
• (iv) Timely completion of the project:
• The project organisation ensures a timely completion of projects;
without disturbing the normal functioning of the whole organisation.
 Chief limitations of a project-
organisation:
• (i) Accentuated problems of co-ordination leading to conflicts:
• In a project organisation, there are increased problems of co-ordination; because of the
diverse viewpoints of team specialists. As a matter of fact, specialists have a tendency to
over-emphasize on their specialised viewpoints vis-a-vis the manner of project designing
and implementation.
• This tendency of specialists creates a serious headache for the project manager; who, all
the time, may be found busy in reconciling conflicting viewpoints of specialists getting
little time for attention towards project progress.
• (ii) Unclearly defined relationship:
• Usually, in a project organisation, the relationships between the project manager and
functional specialists are not very clearly defined. This situation may lead to tension
between them; resulting in poor human relations, in the project organisation. Ultimately,
the project work efficiency may be considerably reduced.
• (iii) Feeling of insecurity among personnel and fear of penalties on delay
in completion of a project:
• Usually, there is a feeling of uncertainty in the minds of the project team
personnel as to where they will seek shelter; after a particular project (on
which they were engaged) is over. This feeling of uncertainty about
assignment creates feeling of insecurity among personnel; and then they
tend to unduly stretch the existing project work-causing delays in timely
completion of the project.

• (iv) Duplication of efforts:

• A project organisation suffers from the limitation of duplication of efforts,
involved in the completion of project activities. When e.g. in a project
organisation more than one or two projects is/are undertaken; it is quite
likely that the same types of activities might be duplicated, during the
completion of various projects. This phenomenon ultimately tells upon
the overall organisational efficiency and profitability.
Matrix Organisation

• Meaning of Matrix Organisation:

• Matrix organisation or grid organisation is a hybrid structure combining
two complementary structures functional departmentation with pure
project structure.
• Functional structure is a permanent feature of the matrix organisation
and retains authority for the overall operation of the functional units.
• Project departments are created whenever specific projects require a
high degree of technical skill and other resources for a temporary period.
• Functional departments create a vertical chain of command while the
project team forms the horizontal lines, thereby forming a matrix. A
matrix organisation is a two dimensional structure, a combination of
pure project structure and the traditional functional departments
Diagram-
Merits of Matrix Organisation:

• 1. It helps to focus attention, talent and resources on single project

individually which facilitates better planning and control.

• 2. It is more flexible than the traditional functional structures.

• 3. It provides an environment in which professionals can test their

competence and make maximum contributions.

• 4. It provides motivation to the project staff as they can focus

directly on the completion of a particular project.
Demerits of Matrix Organisation:

• 1. It violates the principle of unity of command. Each employee has two

superiors-one functional superior and other project superior.

• 2. The scalar principle is also violated as there is no determinate hierarchy.

• 3. Conflict may arise because of the heterogeneity of team members.

• 4. Here the organisational relationships are more complex. Apart from

formal relationships, informal ones also arise which create problems of co-
ordination.
Network organisation Structure
• Literally, the word networking means a system of trying to meet and talk to
other people, who may be useful to one in one’s work.
• In the light of this concept of networking, a networking organisation might
be defined as follows:
• A networking organisation is one that is created around a central
organisation (called the hub organisation) that has relationship and
arrangement with some other organisations, to perform functions like
designing, manufacturing, marketing etc. for the central organisation, on a
contractual basis.
Diagram of network organisation
Salient Features of a Networking Organization:

• (i) In the central (or hub) organisation of the networking structure,

usually there is an absence of horizontal and vertical boundaries within
the organisation. There is emphasis on cross hierarchical teams and
participative decision making.

• (ii) A networking organisation rests on co-operative relationships with

suppliers, distributors and many other business partners. Co-operation
and co-ordination are the hallmarks of a networking organisation.
• (iii) In a networking organisation, the critical management
decisions are with whom to develop business relations, for what
and on what basis. The central organisation management is
specially involved in strategic decisions of developing new relations
and abandoning some old ‘less useful’ relations with business
partners.

• (iv) Sharing of information among constituents of the networking

organisation is greatly facilitated by electronic technology, such as
computer, e-mail, fax etc.