2. Organizing Function
Organizing Defined
Formal & Informal Organizations
Importance of Organizing
The Organizing Process
Organizational Concepts
Division of Labor & Specialization
Centralization & Decentralization
Delegation of Authority
Span of Management
Organizational Structure
2
3. Organizing…
2.1 Overview
Definition:
Arranging and structuring work to accomplish
organizational goals.
Involves various sub functions
Identification of activities
Grouping of activities in to self contained jobs
Assignment of jobs to individuals/departments
Delegation of authority
Establish coordination of activities
4. Organizing…
Organizing is thus the basic
process of combining and
integrating Human, physical and
financial resources in productive
interrelationships for the
achievement of enterprise
objectives
5. 2.2 The difference between formal
and Informal Organization
Formal Organizations: A formal organization is logical
distribution of resources to achieve the company goal in a
most efficient manner
Characteristics
Group of people with common objective
Clear set of Objectives
Has rule and regulation
Authority is exercised-superior &subordinate
Assigned duties and responsibilities
Can be illustrated using organizational chart
6. Importance:
Provide company structure
Clarity of chain of command
Discipline
Easier organizational development
Easier decision making
Easier coordination between departments
8. Informal Organizations: Exist within the formal
organization
Characteristics
Based on social interaction
No objectives
Has no rule and regulation
No authority- superior &subordinate
Can not be illustrated using organizational chart
9. Importance:
Create a better total system
Lighter work load for management
Work group satisfaction
Safety valve for emotions
Cohesiveness
Fill up gap in management – eg.lubricate
communication
Encourage cooperation
10. Limitations:
Resistant to change
Role conflict-pursuit for group satisfaction VS formal
organizational objectives
Rumor-bad mouthing
11. 2.3 Importance of Organizing
The stage at which we develop
Organizational Structure - formal arrangement of jobs
Organizational Chart – visual presentation of the org.
structure
Organizational Design – process of creating the org.
structure; make decision on
Work specialization
Departmentalization
Chain of command
Span of control
Centralization and decentralization
formalization
12. 2.4 The organizing process
There are various steps of organizing process:-
Identification of Tasks: - All the relevant activities
and tasks are identified
Grouping Jobs: grouping of the related jobs.
departments and divisions
Assigning Work: - appoint suitable persons for the
various tasks.
Delegation of authority: -. Assigning work and
delegation goes parallel to each other.
Coordination: - coordination among departments,
divisions, individuals
13. Major Organizational Concepts
This presentation covers the following topics
Division of labor and Specialization
Departmentation
Centralization and Decentralization
Delegation of Authority
Span of Management
Organization Structure
13
14. Objectives
After this presentation you would be able to understand:
The concepts of organizing;
Briefly define the major organizational concepts;
Advantages and disadvantages of;
Division of labor and Specialization
Departmentation
Centralization and Decentralization
Delegation of Authority
Span of Management
April 9,2014 14
15. 1. Division of Labor and Specialization
Division of Labor
Tasks split into component
Task of organizing broken down and divided
in to smaller component
Training workers in performing specific
duties.
Advantages Division of Labor
It enables efficiency and
productivity increases
Decreased transfer time .
Less wastage of materials.
Ease of supervision.
It decrease training cost.
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16. Division of Labor
Disadvantages of Division of Labor
• Boredom(monotony) and fatigue caused
monotonous and repetitive tasks
• Specialization would result in workers are having
limited knowledge.
• Creates communication barriers
• It lose sight of the company's mission
• Specialization leads to time oriented confusion
• Different specialists often formulate rules, policies,
and procedures that conflict with those of other
operational units
April 9,2014 16
17. 2. Departmentation
What is Departmentation?
What are the basis for Departmentation?
Adv. And Disadv. Of different Departmentation
April 9,2014 17
Department:
-distinct area for the performance of specified
activities.
Departmentation:
-means for the accomplishment of objectives.
-process of grouping specialized activities in a
logical manner.
-group activities in to manageable unites.
19. Functional Departmentation
It is grouping based on similarity of:-
Expertise
Skill
Work activities.
• It is most common in business organization.
• It asks the question “what does the
enterprise/organization do” what kind of activities.
19
20. Cont`d
April 9,2014 20
Figure 1. functional Departmentation
President
Vice
president
loans
Vice
president
investment
Vice
president
marketing
Vice
president
operations
21. Functional Departmentation
advantage disadvantage
Avoid overlap basic business
activities
Provide chance for
occupational specialization
Linea clearly drawn between
functional areas
Promote communication
between department
Create strong team sprit in
one department.
De-emphasis of over all company
objectives- narrowmindness may
develop
Over specialize and narrow
viewpoints of key personnel
Reduce coordination and
communication between
functions
Decisions are concentrated at the
top management, creating delay.
Limits development of General
Managers
April 9,2014 21
22. Geographic Departmentation
it Groups activities on the basis of geographic or territory.
It is also known as Territorial Departmentation.
Is common in enterprise that operate over wide geographic
areas.
It is attractive to large -scale firms or other enterprises
whose activities are physically or geographically dispersed.
It works best when:-
Different laws,
Different currencies,
Different languages and
Different traditions exist and have a direct on the ways in
which business activities must be conducted
April 9,2014 22
24. Geographic Departmentation
Advantage Disadvantage
Local employment opportunity
Customer good will, awareness
of local feeling and desire.
Create conducive environment
to develop general manager
Facilitate decision making
Provide high level of service
Requires more persons with
general manager abilities
Duplicate staffs, services , or
effort
Tends to make maintenance of
economical central services
difficult.
Increase problem of top
management control.
It is costly to host many
dispersed departments.
Create a gap to communicate
with different geographic
departments.
April 9,2014 24
25. Customer based Departmentation
Customer oriented
Grouping of activities around customers
reflects a primary interest in customers
helps organizations meet the special and widely varying
needs of customers .
Eg. It can be used in medical institutions such as
hospitals and clinics –emergency services , out patient
services ,x-rays etc.
April 9,2014 25
26. Figure 3. Customer Departmentation
April 9,2014 26
President
Business
Customers
General
public
Vice president
marketing
27. Customer based Departmentation
Advantage Disadvantage
Encourages concentration on
customer needs
Gives customers the feeling
that they have an
understanding supplier
Develops expertness in
customer area
Create team sprit of workers in
a particular group
May be difficult to coordinate
operation between competing
customer demands
Requires managers and experts
in customers` problems
Customer groups may not
always be clearly defined
The possibility of
underemployment of facilities
and labor specialized workers in
customer groups
Higher competition among
employees may deter overall
organization performance.
April 9,2014 27
28. Product Departmentation
Grouping and arrangement of activities based on
products or product groups.
Focuses on an organization's particular products
e.g. Textile products-Nylon products, woolen products ,
silk products, cotton products etc.
April 9,2014 28
29. Cont`d
April 9,2014 29
Figure 3 . Product Departmentation
President
Product
A
Product
B
Product
C
Product
D
Vice president
Production
30. Product Departmentation
Advantage Disadvantage
Places attention and effort on
product line
Facilitates use of specialized
skill, capital facilitates and
knowledge
Permits growth and diversity of
products and services
Places responsibility for profits
at the division level
Furnishes measurable training
ground for general managers
Requires more persons with
general manager abilities
Tends to make maintenance of
economic central services
difficult
Presents increased problem of
top management control
April 9,2014 30
31. Departmentation by Process
• Manufacturing firms often group activities around a
process or type of equipment.
• This is when special skill is needed to operate different
machines.
e.g. involves several sequential processes :poling
(removing bark from logs);
April 9,2014 31
32. Figure 4 Process Departmentation
April 9,2014 32
General
Manager
New product
Development
Process
Order
fulfillment
process
Customer and
account
management
Process
33. Process Departmentation…
Advantages Disadvantage
Achieves economic advantage
Use specialized technology
Simplifies training
Coordination of department is
difficult
Responsibility for profit is at the
top
Is unsuitable for developing
general managers.
April 9,2014 33
34. Centralization & Decentralization
Centralization:
Power and authority are systematically retained by top
manager
The participation of lower - level managers in decision-making
is very low
Decentralization:
Power and authority are systematically dispersed
It tends to disperse decision making authority in an organized
structure
Power is pushed downwards and lower level managers
April 9,2014 34
35. Centralization & Decentralization…
More Centralization More decentralization
Environment is stable.
Lower-level managers are not as capable or
experienced at making decisions as upper-
level managers.
Lower-level managers do not want a say in
decisions.
Decisions are relatively minor.
Organization is facing a crisis or the risk of
company failure.
Company is large.
Effective implementation of company
strategies depends on managers retaining
say over what happens.
Environment is complex, uncertain.
Lower-level managers are capable
and experienced at making decisions.
Lower-level managers want a voice in
decisions.
Decisions are significant.
Corporate culture is open to allowing
managers a say in what happens.
Company is geographically dispersed.
Effective implementation of company
strategies depends on managers
having involvement and flexibility to
make decisions.
April 9,2014 35
36. Centralization vs. Decentralization
Centralization Decentralization
Authority in the hands of one or
few members of Orgn.
Authority dispersed to many
hands.
April 9,2014 36
• less important decision made at
lower level.
• small the number the decision at
lower level.
• Less flexible to interpret policy at
lower level.
• High subordinate to consult the
superior
• More important decision made at
lower level.
• large the number the decision at
lower level.
• more flexible to interpret policy at
lower level.
• less subordinate to consult the
superior
centralization decentralization
37. Delegation of Authority
Authority:
The right to command resources
legitimate right to give order
The right to make decisions, carry out actions
A formal right of a superior to command Another
early management writer, Chester Barnard, proposed
another perspective on authority. This view, called the
acceptance theory of authority, says that “Authority
comes from the willingness of subordinates to
accept it.”
April 9,2014 37
39. Delegation of Authority …
Barnard contended that subordinates will accept orders
only if the following conditions are satisfied:
1. They understand the order.
2. They feel the order is consistent with the organization’s
purpose.
3. The order does not conflict with their personal beliefs.
4. They are able to perform the task as directed
April 9,2014 39
40. Factors Determining Delegation
The history and culture of the organization
The nature of the decision
Availability and ability of managers(lower level managers)
Management philosophy
Size and character of the organization
Geographic dispersion of operations
Environmental uncertainty
April 9,2014 40
41. Importance of Delegation
It relieves the manager from his/her heavy workload
It leads to better decision
It speedup decision-making
It helps subordinates to retain and builds moral
It encourages the development of professional managers
It helps to create the organization structure
April 9,2014 41
42. Barriers to Delegation
Belief in the fallacy expressed in the advice “If you want it done
right, do it yourself”
Lack of confidence and trust in lower-level employees
Low self-confidence
Fear of being called lazy
Vague job definition
Fear of competition from those below
Reluctance to take the risks involved in depending on others
Lack of controls that provide early warning of problems with
delegated duties
Poor example set by bosses who do not delegate
April 9,2014 42
43. Overcoming the Barriers in Delegation
Managers to give their subordinates real freedom to
accomplish delegated tasks.
Give training for subordinates
Improved communication b/n managers and
subordinates
April 9,2014 43
44. Authority
The power or right to give orders, make decisions, and
enforce obedience;
Importance :
Accountability
Guidance
Career Path
Communication
April 9,2014 44
45. Types of Authority
Line Authority:
It is the relationship between superior and subordinates.
It is a direct supervisory relationship
It flows down ward in an organization.
Staff Authority:
Authority for managers to provide advice or technical assistance.
Does not provide direct control over subordinate and other
departments.
Functional Authority:
Authority over specific activities undertaken by personal in another
department.
April 9,2014 45
46. president
R &D Legal
Personnel Finance
Marketing
sales
Accounting Budget Advertising
April 9,2014 46
Functional Authority:
47. Delegation:
Is the transfer of formal authority to another person.
It occur for two purpose:-
A. When mangers are absent:
B. When managers /organizations/need to develop
their subordinates and facilitate the decision making
process:
April 9,2014 47
48. Steps for Delegation
Assignment of tasks:
-identify the kinds of tasks to be performed by subordinates.
Delegation of Authority:
-to carry authority give necessary authority
Acceptance of Responsibility:
-make them responsible to perform the task to the maximum
ability
Creation of responsibility:
-regard to the task assigned and authority delegated having an
answer for the action taken
April 9,2014 48
49. Unity of command
States an employee should have one and only one
immediate manager
It decrease dissatisfaction (for the manager)
The employee not to be puzzled to give priority
April 9,2014 49
50. Span of Management
Is the number of subordinates the manager should have
to direct.
General guide line that affect span of control:
1. Complexity of subordinates jobs
2. The variety of subordinates work
3. The ability and training of the subordinates.
4. The ability of the manager.
April 9,2014 50
51. Span of Management…
variables degree Span of
control
degree Span of
control
Complexity of
job
high narrow low wide
Variety of job high narrow low wide
Ability and
training
high wide low narrow
Ability of
manager
high wide low narrow
April 9,2014 51
52. Figure 4.11 wide and Narrow of
control
April 9,2014 52
president
V. President
mkt.
V. President
Prod.
V. President
personnel
Manager
manufacturing
Manager quality
control
Supervis
or I
Supervis
or II
A B C D E
Wide
span of
control
Narrow
span of
control
54. 2.5 Organizational Structure
What is Organizational Structure?
A system of tasks, workflow, reporting relationship
and common channels that links together diverse
individuals and groups.
Can be differentiated as
Vertical Differentiation
Horizontal Differentiation
55. Organizational Structure…
Vertical Differentiation
Tall Organization
has many layers and narrow
span of control.
Are more expensive than
because of the number of
managers involved.
Foster more communication
problems as many people are
involved.
Flat Organization
has few layers and wide span
of control.
Lead higher levels of
employee morale and
productivities.
Create more administrative
responsibilities for the
relatively few managers.
Creat more supervisory
responsibility for managers
due to wider spans of control.
56. Organizational Structure…
Horizontal Differentiation
Functional Structure
People with similar skills and perform similar tasks are
grouped together in to formal unit.
Members work in their functional area of expertise.
Functional structure is the simplest and least
expensive in organization design.
It provides facilities like communication and
coordination among the line managers
58. Organizational Structure…
Functional Structure
Advantages
Brings efficiency through specialization
It is simplest and less expensive.
To improve development of functional expertise.
Economic of scale.
High quality technical problem solving
59. Organizational Structure…
Functional Structure
Disadvantages
Sense of cooperation and common purpose break
down.
Narrow view of performance objective
It limits internal development of general managers.
Poor delegation of authority.
It involves inadequate planning for products and
markets.
60. Organizational Structure…
Divisional Organizational Structure
Group together people, who work on the same product
or process, serve similar customers and or are located
in the same area or geographic regions.
Common in a complex organization
62. Organizational Structure…
Advantages of Divisional Structure
It focuses on coordination and necessary authority
clearly defined roles in an each division.
It places strategy development and implementation in
closer proximity to the division’s unique environment.
It sharply focuses accountability for performance.
63. Organizational Structure…
It retains functional specialization within each
division.
It is good training ground for strategic managers.
It creates career development opportunities for
managers.
It allows new businesses added to new products easily.
64. Organizational Structure…
Disadvantages
It fosters potentially dysfunctional competition for
corporate level resources
It consists of problem with the extent of authority given
to division managers.
There is potential for the policy inconsistencies
between divisions.
It has problems of arriving at a method to distribute
corporate overhead costs that is acceptable to different
division managers with profit responsibility.
65. Organizational structure…
It is costly due to each division requires functional
specialists who must be paid high salaries because
these managers are highly qualified.
Duplication of staff services, facilities and personnel in
each division in an organization.
It requires an elaborate, headquarters driven control
system.
Divisional structure is not suitable to small firms.
66. Organizational Structure…
Matrix Organizational Structure
In matrix structure, functional and product forms are
combined simultaneously at the same level of the
organization.
It is the most complex of all designs due to it
depends upon both vertical and horizontal flow of
authority and communication.
67. Organizational Structure…
Advantages
It accommodates a wide variety of project oriented
business activity.
It provides good training ground for strategic
managers.
It maximizes efficient use of functional managers.
It fosters creativity and multiple sources of diversity.
It is broader middle management exposure to
strategic issues for the business.
68. Organizational structure
Its project objectives are very clear in an organization.
It is to be effective structure for planning, training,
responsibilities and clear mutual
Understanding of roles mutual trust and confidence.
It is very useful to external environment especially it’s
technological and market aspects is very complex and
changeable
69. Organizational Structure…
Disadvantage
It acts as dial accountability which can create
confusion and contradictory policies.
Necessitates tremendous horizontal and vertical
coordination.
It produce conflicts revolving around duties, authority
and resource allocation.
