Chapter Three

The
organizi By: Yabsiel G. ( BSc, BA,
ng MBA…)
Dec, 2021
functio
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 organizing and organization

Organizing

is the process of arranging people and physical
resources in an orderly manner to carry out
planned objective.

is the process of achieving a coordinated effort
through the design of structure of tasks,
authority relation ships, people, and
communication.

is the process of identifying, grouping,
assigning work among groups and individuals,
coordinating activities and prescribing authority
relationships to create a structure capable of
accomplishing predetermined objectives.

Organizing in a general sense means
systematic arrangement of activities.
 Organization
is the total system of social and cultural
relationship among peoples who are
joined together to achieve some specific
common objectives.
It is a whole consisting of unified parts
(a system) acting in harmony to execute
tasks to achieve goals effectively and
efficiently.
Organizing is a function of management,
while organization refers to a group of
persons who have come together to
achieve some common objectives.
 Process of organizing

The organizing process involves the following

steps:
1. Review plans and objectives to be
accomplished
2. Determine the work activities (tasks)
necessary to accomplish objectives: It is to list
down activities necessary to accomplish the
objectives.
3. Grouping of activities according to their
similarities to form department
4. Assign activities and delegate authority:
 Importance of Organizing

Organizing promotes collaboration and negotiation

among individuals in a group. Thus, it improves
communication within the organization.
Organizing sets clear-cut lines of authority and
responsibility for each individuals or department’s.
Organizing improves the directing and controlling
functions of managers.
Organizing develops maximum use of time, human, and
material resources.
Organizing enables the organization to maintain its
activities coordinated so that the efforts of managers and
employees can be well integrated
Improve efficiency and quality of work through
synergism.
Facilitate growth and diversification: identify necessary
 Organization chart

Organization chart
An organizational chart is a diagram that outlines the
internal structure of a company. i.e., is graphic illustration of
the organization’s management hierarchy and departments
and their working relationships.
It is a visual representation of the complete organization
structure.
Organization structure is a formal framework that shows a
set of tasks assigned to individuals and departments, reporting
relation ships (including line of authority, decision
responsibility, number of hierarchical levels, and span of
management control) and design of the systems to effectively
coordinate employees across departments.
solid connections between boxes illustrate line authority,
Zigzag lines show staff authority, and broken line show
 Importance Of Organizational Chart in the Workplace:

Organization chart remained use full because it

provides different important information
regarding:
The chain of command –who reports to whom
The span of control-the number of subordinate
under the direction of a manager
Basis of departmentation - how the organization
is departmentalized
The hierarchy of decision making
The type of authority relationships
With organizational chart, it's easy to find
whether the officer's workload is too heavy.
 Limitations Of Organization Chart

The organization charts show the relationship of different

positions and not the degree of authority and
responsibility.
A chart only depicts formal organizational relationship
whereas informal organization is ignored..
A chart shows organizational position and status at
different levels. It gives rise to superior-inferior feeling
among people and it retards the feeling of team work.
An organization chart needs frequent updating.
It shows a static picture of the dynamic business.
It induces certain structural rigidity and may encourage
red tape. This is because an organization chart marks
definite channels through which information must flow.
Short cuts, sometimes, may improve efficiency.
Informal organization and communication channel cannot
 Types of organization

1. Formal organization
are deliberately planned and created to
accomplish some objectives through the
coordinated efforts of people.
It is characterized by a well defined hierarchy
and authority reporting relationships, job titles
and specific job duties, polices and procedures,
division of labor, rules and regulations, and a
host of other factors necessary to achieve goals
or activities.
It can exist independently of particular
members and represented by a printed chart or
structures that appears in the formal company
 Characteristics Of Formal Organization

oIt is properly planned

oFormal organization is consciously designed
oIt is based on delegated authority
oIt is deliberately impersonal
oThe responsibility and accountability at all levels
of organization should be clearly defined
oOrganizational charts are usually drawn
oThe principle of unity of command is usually
observed
oIt provides for division of labor
2. Informal organization
It is unofficial relationship among people
based on their interest, behavior, attitude
etc.
it is created unconsciously.
They are instrumental in spreading
information quickly throughout the
organization and even beyond its boundaries.
cannot be depicted by formal organizational
chart.
The informal organisation is a network of
personal and social relationships that arise
spontaneously as people associate with one
another in a work environment.
 Characteristics Of Informal Organization
Unplanned structure: this structure is not planned. It arises
spontaneously out of formal interaction amongst people.
Social needs: the basic purpose of informal organization is fulfillment
of social and personal needs of people.
No formal structure: Informal organization does not have any formal
structure.
Informal leaders: Leaders are informally elected by group members.
They strongly influence group activities and contribute to formal
goals positively or negatively.
Informal communication system: It does not follow the chain of
command. It operates along with informal channel of communication
and works faster than the formal channel.
No rules and regulations: It has no fixed rules and regulations that
govern functions of the organization. Rules are framed and changed
by people according to their convenience.
No fixed tenure: It is formed at the will of people and dissolves at
their will. It does not operate for a fixed time period. Dissolution of
informal organization also does not follow any legal procedure.
 The Difference Between Formal And Informal Organizations

Formal Informal
Organization Organization
arises due to delegation of arises due to social
authority interaction of people
gives importance to terms gives importance to people
of authority and functions and their relationships
created deliberately spontaneous and natural
attached to a position attached to a person
rules, duties and No such written rules and
responsibilities are written duties
authority flows from flows upwards to
upwards to downwards downwards or horizontal
may grow to maximum size tends to remain smaller
 Why people form informal groups?

Informal groups are formed for different

reasons:
1. Need for satisfaction
 People have needs that in some cases are
not met through the formal organization.
2. Proximity and interaction
 A common reason people join groups is that
they work near one another. This can be
either through working in close proximity
physically or because of frequent
interaction.
3. Similarity
People may join informal groups
because they are attracted to other
people who are similar to themselves.
Several persons with the same
attitudes or beliefs may join one
group.
Other factors or similarity can be
personality, race, sex, economic
position, age, educational
background etc.
 The Difference Between Formal And Informal Organizations

Formal Informal
Organization Organization
arises due to delegation of arises due to social
authority interaction of people
gives importance to terms gives importance to people
of authority and functions and their relationships
created deliberately spontaneous and natural
attached to a position attached to a person
rules, duties and No such written rules and
responsibilities are written duties
authority flows from flows upwards to
upwards to downwards downwards or horizontal
may grow to maximum size tends to remain smaller
 Departmentation

Departementation is the process of dividing

the over all operations of the organization into
sub-activities and then grouping these
specialized activities and responsibility areas in
to work groups.
It is efficient and effective grouping of jobs
into meaningful work units so as to accomplish
organizational objectives. Similar activities that
are closely related with a distinct function are
grouped together to form departments.
It aims at achieving unity of direction,
effective communication, coordination, and
control.
It is the foundation of organization structure.
 Department
is a distinct area, division, or branch
of an organization over which a
manager has authority for the
performance of specified activities.
Reasons for departmentation
Helps to limit the size of the work to
manageable size
Creates independent and semi-
autonomous units that give them a
feeling of satisfaction and recognition.
Helps to fix responsibility equivalent to
the delegated authority to each unit.
Helps to develop managers that in
turn develop them for higher-level
positions and exercise decision-making
in their own areas of specialization.
Advantages of Specialization: it
enables an enterprise to avail of the
benefits of specialization
Feeling of Autonomy: Normally
departments are created in the
enterprise with cer­tain degree of
autonomy and freedom.
 Types (Bases ) Of Departmentation:

There are several bases of

Departmentation. The more The organization chart
commonly used bases are— based on functional
function, product, territory, departmentation is
process, customer, time etc. shown
(A) Departmentation by Functions:
The enterprise may be divided
into departments on the basis of
functions like production,
purchasing, sales, financing,
personnel etc.
This is the most popular basis of
departmentation.
If necessary, a major function
may be divided into sub-
functions. For example, the
activities in the production
department may be classified
into quality control, processing of
 B. Product Departmentation

In product departmentation, every major product is organized as a

separate department. Each department looks after the production,
sales and financing of one product. Product departmentation is useful
when the expansion, diversifica­tion, manufacturing and marketing
characteristics of each product are primarily significant.
It is generally used when the production line is complex and diverse
requiring specialized knowl­edge and huge capital is required for
plant, equipment and other facilities such as in automo­bile and
electronic industries.
In fact, many large companies are diversifying in different fields and
they prefer product departmentation. For example, a big company
with a diversified product line may have three product divisions, one
each for plastics, chemicals, and metals.
e.g. Textile products - Nylon products, woolen products, silk products,
cotton products
 C. Departmentation By Territory
(Geography):
Territorial or geographical departmentation is spe­cially
useful to large-scale enterprises whose activities are
widely dispersed.
 Banks, insu­rance companies, transport companies,
distribution agencies etc. are some examples of such
enterprises, where all the activities of a given area of
operations are grouped into zones, branches, divisions etc.
It is obviously not possible for one functional manager to
manage efficiently such widely spread activities. This
makes it necessary to appoint regional manag­ers for
different regions.
Example -East, South, North, and Central branches of the
Commercial Bank of Ethiopia.
 D. Departmentation By
Customers:
In such method of departmentation, the activities are grouped
according to the type of customers ( user of product or service).
 For example, a large cloth store may be divided into wholesale,
retail, and export divisions.
This type of departmentation is useful for the enterprises which sell a
product or service to a number of clearly defined customer groups.
 For instance, a large readymade garment store may have a
separate department each for men, women, and children. A bank
may have separate loan departments for large-scale and small-
scale businessmen.
 E. Departmentation By Process Or
Equipment:
In such type or departmentation the activities are grouped on the
basis of production processes involved or equipment used.
This is generally used in manufacturing and distribution enterprises
and at lower levels of organization.
 For instance, a textile mill may be organized into ginning, spinning,
weaving, dyeing and finishing departments.
 Similarly, a printing press may have composing, proof reading,
printing and binding departments.
 Such departmentation may also be employed in enginee­ring and oil
industries.
This is most applicable when special skill is needed to operate
different machines.
F. Matrix departmentation
It is the combination of functional
and product or project patterns of
departmentation.
For example, an Engineering
Company can use matrix structure
in which there are functional
managers in charge of engineering
functions (like design, mechanical,
electrical ,hydraulic)and project
managers responsible for end
product.
 Authority, Responsibility, Accountability
Responsibility
is the obligation to carry out one’s assignment to the best of one’s
ability
Accountability
refers to answerability to one’s action.
It means taking the consequences.
Definition of Authority
Authority is legal and formal right to a person, who can take
decisions, give orders and commands to others to perform a
particular task.
It is hierarchical in nature, it flows downward, i.e. delegated from
superior to the subordinate. In general, authority is exercised to get
things done through others.
It is attached to the position, i.e. any person who gets the position
enjoys the authority attached to it, the higher the position, the higher
would be his authority.
 Types Of Authority

There are three types of authorities created by the relationship

between individuals and between departments. These are:
i)Line authority: defines the relationship between superior and
subordinates.
Any manager who supervises operating employees or other manager
has line authority.
It allows managers to give direct orders, evaluate the actions, reward
and punish employees.
It is responsible to make decisions and issue orders down the chain of
command.
E.g. authority of GM over production or marketing department head
ii. Staff authority: is the authority to serve in an advisory capacity.
Managers who provide advice or technical assistance are granted
advisory authority.
Staff authority is responsible to advice and assist other personnel
E.g. Research and development (R&D)
iii. Functional authority:

An authority which permits staff managers make decision about

specific activities performed by employees with in other
departments.

E.g. personnel department can be given to look after performance

appraisal in production department.

Staff departments often use functional authority to control their

procedures in other departments.
 Ex. The maintenance department assists production by keeping
the operating activity. If the maintenance determines that a
machine is unsafe, the department may issue an order to line
manager to use the machine, but it cannot suggest which
products are produced.
 Delegation, Centralization and Decentralization

Delegation means the passing of authority and

responsibility by one person who is at a superior position
to someone else who is subordinate to him. It is a
temporary downward transfer of authority to another
person.
Delegation is the process of assigning authority and
creating obligation to accomplish objectives. It frees the
manager to use his time on high priority activities.
Delegation is the assignment of authority or decision-
making power or duty of a person who is at a higher level
to an individual who is below his level.
There are three major elements of Delegation:
 Authority: The rights and powers which are delegated.
 Responsibility: The duties and tasks which are to be
performed are delegated.
 Accountability: Reporting on the discharge of
 Guidance for delegation of authority

Delegation of authority is guided by several key

principles and concepts.
Exceptional principle: the most exceptional, rare, or
unusual decision end up at the top management
level
Scalar chain of command: formal distribution of
authority is in hierarchical fashion.
Decentralization: decision are to be pushed down to
the lowest feasible level in the organization.
Parity principle: delegated authority have equal
responsibility.
Span of control: the authority is delegated to the
number of subordinates a manager can effectively
lead.
 Importance of Delegation

It relieves the manager from his/her heavy

workload
It leads to better decisions
It encourages the development of
professional managers
It helps to create the organization
structure
It acts as a tool of development and
motivation of employees.
It speeds up decision-making.
It freed managers from routine activities
and enables them to focus on critical ones.
 Centralization and Decentralization

Centralization is a philosophy of management that focuses on

systematical retaining of authority in the hand of higher level
managers.
The participation of lower-level managers in decision-making is very
low
Decentralization is a philosophy of management that focuses on
systematical delegation of authority through out the organization to
middle and lower level managers.
 Decentralization refers to systematic effort to delegate to the
lowest level all authority except that which can be exercised at
central points .-Louis A. Allen
 Everything which goes to increase the important of a subordinate’s
role is decentralization, every thing that goes to reduce it is
centralization. -Henri Fayol
If authority is decentralized:
 Greater number of decision will be made at lower level.
 Important decisions are made at lower level, and subordinates will
refer less their superiors to make decisions.
 Span Of Management/Span Of Control

The Span of Management refers to the number of

subordinates who can be managed efficiently by a
superior. The number of people who report to one
manager in a hierarchy
 Simply, the manager having the group of subordinates
who report to him directly is called as the span of
management.
All the subordinates cannot be managed by one superior.
There has to be a limit on the number of subordinates
who can be effectively managed by one superior.
The number of subordinates that a superior can
effectively supervise is known as span of management or
span of control.
Span of management is of two types; Wider span of
management and Narrow span of management.
 Wider span of management leads to flat organization
whereas narrow span of management result in tall
Wide span of management
This means many subordinates report to a superior or a
superior supervises many subordinates.
If the span of management is wide, we get:
A flat organization structure with fewer management levels
between top and lower level
Many number of subordinates and decentralized authority
Managers are overstrained and their subordinates receive too
little guidance and control
Fewer hierarchal level
Narrow span of management
This means superior controls few numbers of subordinates or
few subordinates report to a superior.
This is when supervisors need to involve closely with
subordinates.
It is a tall organization structure characterized by narrow span
of control and a relatively large number of hierarchical levels.
Factors Affecting Span Of Control Or Span Of Management

Qualification and Qualities

If the superiors and subordinates are well-qualified, trained, experienced,
and if they are experts in their jobs then the span of control will be wide
and vice-versa.
Level of Management
If the superiors are working at the top-level of management, then they
have more responsibilities. Therefore, their span of control will be narrow
and vice-versa.
Nature of Work
If the work is difficult then the span of control is narrow and vice-versa.
Superior - Subordinates Relationship
If there are good relations between the superior and subordinates, then
the span of control will be wide and vice-versa.
Degree of Centralisation
Under decentralization, the superior has to take fewer decisions.
Therefore, he can have a wide span of control. However, under
centralization, the superior has to take many decisions. Therefore, he
Capacity of subordinates:
Efficient and trained subordinates can discharge their duties satisfactorily
without much help and direction from the superiors. In such a case, the
span may be larger because a superior will be required to devote less
time in managing them. Similarly, changes in subordinates make the span
narrower.
Clarity of Plans and Responsibilities
If the plans are clear and if the responsibilities are well-defined, then the
span of control will be wide.
Time available for Subordinates
If the superior is busy with another work, and if he has less time for his
subordinates then his span of control will be narrow and vice-versa.
Faith and Trust in Subordinates
If the superior has good faith, trust and confidence in his subordinates
then the span of control can be wider.
Financial position of the Organization
If the organization has a good financial position, then it can have a narrow
span of control. This is because a narrow span requires more managers.
More managers will increase the compensation or wage bill of the
organization. However, if the organization has a bad financial position,
 Individual Assignment ( 10%)
1. what are the merits and limitation of each
types( bases ) of departmentation?
2. which types of span of control is better ( wide or
narrow)? Give your reasons
3. what is the advantage of centralization and
decentralization? Which one is better ( the one having
more advantage)?
4. what is the difference between delegation and
decentralization? Try to construct a comparison chart.
5. Is there any limitation( weakness) for organizational
chart? If your answer is yes mention some
Submission date: January 4, 2021
Submission mode: only hand written
Chapter 4 3
Organizing
Staffing