Anna University R2017 Principles of Management Unit III Organizing

1. Dr.J.Nandhini
Prof/ ECE
Jai Shriram Engineering College
Tirupur
PRINCIPLES OF MANAGEMENT
UNIT III - ORGANISING

2. SYLLABUS
Nature and purpose – Formal and informal organization –
organization chart – organization structure – types – Line
and staff authority – departmentalization – delegation of
authority – centralization and decentralization – Job Design -
Human Resource Management – HR Planning,
Recruitment, selection, Training and Development,
Performance Management, Career planning and
management

3. Definitions
 Allen defines Organising as “the process of identifying and
grouping of the 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 their objectives.”
 Koontz and O’Donnell defines as “Organisation is the
establishment of authority and relationships with provision for
coordination between them, both vertically and horizontally in
the enterprise structure”.
 Organising is the task of mobilizing resources
 A structure involving a large number of people engaging
themselves in multiplicity of tasks, a systematic and rational
relationship with authority and responsibility between individuals
and groups.

4. Process of organizing
 The manager differentiates and intergrates the activities of his
Organisation
 Differentiation - the process of departmentalization or
segmentation of activities on the basis of some similarity
 Integration – Process of achieving unity of effort among the
various departments
 Establishing Enterprise Objectives
 Formulating Supporting objectives, policies and Plans
 Identifying and classifying the necessary to accomplish
 Grouping the activities in the light of human and material
resources available
 Delegating to the head of each group the activity necessary to
perform
 Tying the groups together horizontally and vertically through

5. Principles of Organizing
 Objectives
 Specialisation
 Span of Control
 Exception – the higher level
have limited time, only
exceptionally complex problem
should be referred to them and
routine matters be dealt by the
subordinates at the lower
levels
 Scalar Principle / Chain of
command – line of authority
 Unity of Command
 Delegation
 Responsibility
 Authority
 Efficiency
 Simplicity
 Flexibility
 Unity of Direction
 Personal ability

6. Nature of organizing
Division of work or specialization
 In specialization ,various activities are assigned to different people
who are specialists in that area
Orientation towards goals
 Organizing is the function employed to achieve the overall goals of
the organization
Composition of individuals & groups
 Individuals form a group, groups form an organization
Differentiated functions
 Organization divides the entire work & assigns the tasks to
individual
 Tasks of one individual must be coordinated with task of others
Continuous Process

7. Purpose of Organising
Facilitates Management and Administration
 Organization is a machine set by the management to execute the
objectives and policies set by the administration
 Management is required to make use of the organization to achieve
the organizational objectives.
Helps to achieve organizational goal
 Organization focuses attention of individual objectives towards overall
objectives
Optimum use of resources
 Make best use of resources such as Men, Material , Money . Machine
, Method & Market, It is necessary to design an organization properly.
Should be given right person for right job

8. Facilitates growth & diversification
 A good organization are essential for expanding business
activity & essential for product diversification such as
establishing a new product line
Optimum use of technological development
 To implement and make optimal use of any technological
improvement, an organization is essential
To perform managerial function
 Planning, staffing, Directing & controlling cannot be
implemented without proper organization
Human treatment of employees
 Organization has adapted the modern concept of system
approach based on human relations

9. Provides job satisfaction and morale
 If the workers do not get the job satisfaction, the
organizational structure should be redesigned.
Stimulate creativity
 Organization encourages challenges and challenge
stimulates creativity
 Creative people can behave in amore creative way in an
organization in which ideas are encouraged and the climate
is good.
Facilitates coordination
 Organization creates coordinating mechanism that produce
harmony among the diversified activities of employees.

10. Formal and Informal Organization
FORMAL ORGANIZATION
 An organization is formal when the activities are coordinated towards
a common objective
 It is basically goal oriented entity that exist the efforts of individuals
 It refers to the structure of jobs & positions with clearly defined
functions, responsibilities & authorities
 It has a specific set of commends to direct employees in achieving
goals
 Organization chart identifies the following aspects of
formal structure
 Division of work.
 Supervisory relationships.
 Communication channels.
 Major subunits.
 Levels of management.

11. INFORMAL ORGANIZATION
 Informal organizations are formed on the basis of individual
relations, communication, general knowledge etc
 It is found at all levels of management
 It reflects human relationships
 Informal organization is any human group interactions that occur
spontaneously & naturally over long period of time
Importance of Informal organization
 It serves as a very useful channel of communication in the
organization .
 It is very fast. It gives support to the formal organization
 Informal organization gives psychological satisfaction of the
members.
 They get a platform to express their feelings

12. Organization Chart
 A graphic representation of the structure of an organization
showing the relationships of the positions or jobs within it
 Visual representation of how a firm intends authority,
responsibility and information to flow within its formal
organizational structure
 It usually shows different management functions (accounting,
finance, human resources , marketing, production and R & D)
 It shows Decision making power travels downwards &
answerability travels upwards

14.  Organization chart shows departments and divisions at the
horizontal level and sub divisions and sub departments at the
vertical level.
 Organization chart shows the following:
 Interrelationship between members in an organization
 Flow of authority and responsibility
 Designations of managers and number of persons they supervise
 Shows line and staff relationship and functional relationship
 Types of Organization chart
 Horizontal chart
 Vertical chart
 Circular or concentric chart

15. Types of Organization Structure
 It defines how tasks are divided, resources are deployed and
Departments are coordinated
 Structure basically deals with the relationships.
 The system of job positions, role assigned to these positions &
specifying authority, responsibility & task of every position is
known as organization structure
 Organization structure shows the authority & responsibility
relationship also clarifies who reports to whom
 Structure provides a means of balancing two conflicting forces
 1. Need for the division of tasks into meaningful groupings
 2. Need to integrate the groupings for efficiency & effectiveness

16.  Three main objectives of organizational structure
1. To develop coordination among the different activities performed by
various department
2. To avoid duplication of the efforts at the time of execution of the
necessary activities
3. To execute all necessary activities & unnecessary activity avoid
 Types of Organizational Structure
 Based on the power flow within the organization may be classified
1. Bureaucratic or Mechanistic structure
2. Organic or adaptive structure
 Based on the formation of departments or groups may be classified
1. Line organization structure
2. Functional organization structure
3. Line & Staff organization structure
4. Product organization structure

18. Line organization Structure
 Line or Simple Structure
 An organizational form in which the owner-manager makes
most of the decisions and controls activities, and the staff serve
as an extension of the top executive.
 Military/Scalar organization
 Line of authority moves directly from top to lowest level in a step
by step manner
 It is straight & vertical
 Responsibility moves upward

19.  Advantages
 Highly informal
 Centralized decision making
 Little specialization
 Discipline
 Attracts to talented persons
 High efficiency & employee moral
 Limitations
 Heavy burden on line executive (Too many duties & responsibilities)
 Rigidity (strictness)**
 Delays in communication
 Non availability of services of experts
 Favoritism (partiality or bias)

20. Functional Structure
 An organizational form in which the major functions of the firm,
such as production, marketing, R&D, and accounting are
grouped internally
 People with similar skills and performing similar tasks are
grouped together into formal work units.
 All report up to one director or Vice President / CEO
 Members work in their functional areas of expertise (knowledge)

21. Advantages
 Enhanced coordination and control
 Centralized decision making
 Operational flexibility
 Ensures effective supervision
 More efficient use of managerial and technical talent
 Facilitated career paths and development in specialized areas
Disadvantages
 Absence of unity of command (Instructions from several bosses)
 Fixing responsibility is difficult
 Unsuitable to non-manufacturing activities
 Costly : More specialist are required to be appointed
 Crates confusion among workers
(Authority is overlapping the responsibility is divided)

22. Line and staff Organization
 Line executives are responsible for maintaining discipline,
production
 Staff division is responsible for research, planning, scheduling,
establishing standards and recording of performance.
 The staff executive are in the organization because of their
expert knowledge.
 The line managers are supplied with services of staff for the
basic functions like production, marketing, finance, accounting
personnel, R & D
 Line managers are decision takers (take decisions with the help
of staff experts).
 Implementation is the responsibility of line managers
 Staff experts are called as ‘thinkers’ while the line managers are

24. Line and staff Authority
 There are 2 approaches to understand the Line and Staff
authority
 1) Functional approach
 2) Authority approach
 Functional Approach – functions of an organization are classified
into Line and staff function.
 - Line functions are those that are directly related with the
attainment of the organizational objectives
 - Staff functions are those that help line functions in attaining the
objectives.
 Louis Allen – Line functions are those which have direct
responsibility for accomplishing the objectives of the enterprise
and staff functions refer to those elements of the organization
that help the line function to work most effectively in

25.  A line function in one organization may be staff function in
another.
 Eg: Production and sales are the line functions while financing,
personnel and accounting are the staff functions in
manufacturing organization.
 In bank, Finance and accounting are the line functions
 According to authority approach, line and staff are two kinds of
authority.
 Line authority is defined as a direct authority which a superior
exercises over his subordinates to carry out orders and
instructions.
 Staff authority involves giving advice to the line managers to
carry out the operation.

26. Line authority
 Line authority is the type of authority that reflects superior-subordinate
relationships.
 This is the most fundamental authority in an organization characterized
by power of decision making.
 Line authority is a less complicated way of allocating responsibility
since every employee is clear regarding his or her position and clear
lines of authority and responsibility is allocated to them.
 As a chain of command: Officials are in the chain of command from
higher position to lower position in the organization.
 As a channel of communication: Communication in the organization
flows through the line relationship. Every member of the organization
has someone to report and other to report him.
 As a carrier of responsibility: the line relationship carries ultimate
responsibility for the work assigned. Each subordinate is answerable
to his superior.

27.  Staff authority refers to the right to advice on improving the
effectiveness for line employees in performing their duties.
 Staff personnel are generally independent employees who do not
report to line managers.
 These are highly specialized individuals, thus are employed for
their expert knowledge and the ability to add value to the
company.
 Staff personnel may work part time for the organization, providing
their expertise.
 Staff managers complement the work of line managers since line
managers can focus more time on routine activities and related
decision making when specialized work is carried out by staff
personnel.
Staff Authority

28.  i) Advisory staff authority: provides advice, assistance and
information to the line manager.
 ii) Compulsory staff consultation: a staff person must be
consulted by a line person before action is taken.
 iii) Concurring Authority: A staff person may be granted authority
so that no action can be taken until he agrees it.

30. Departmentation
 ‘Departmentation’ or ‘departmentalization’ is the process of
classifying the activities of the enterprise into several units for
the purpose of administration at all levels.
 Koontz and O’Donnell defines “A departmentation is a process
of dividing the large monolithic functional organization into
small and flexible administrative units”.
 Departmentation involves the groupings of people or activities
into a single department or unit.
 It facilitates communication, coordination and control thus
contributing to organizational success.

31. Importance of
Departmentation
 Specialization -- One major
function & efficiency of
operation increases
 Expansion (Growth)
 Autonomy (Independent)
 Freedom provides job
satisfaction& motivation
 Fixation of responsibility
 It provides a basis for
building up locality &
commitment
 Appraisal of managerial
performance becomes easier
when specific tasks are
assigned to specific
personnel
 Managerial development
 It facilities communication,
coordination & control
Advantages
 Employees can develop skills
depth
 Good Coordination
 Easily direct & control
 Responsibility easily located
Disadvantages
 Lack of communication
 Individuality

32. Departmentation by different strategies
 1) Departmentation by numbers
 2) Departmentation by time
 3) Departmentation by enterprise function
 4) Departmentation by territory or geography
 5) Departmentation by customers
 6) Departmentation by equipment or process
 7) Departmentation by product or service

33.  Departmentation by numbers:
 Departments are created on the basis of number of persons
forming the department.
 Similar types of activities are performed by small groups.
 In such cases, each group is controlled by a supervisor or an
executive.
 Departmentation by time:
 Business activities are grouped together on the basis of the time
of performance.
 Having separate department for each shift.
 Get the advantages of people specialized to work in a particular
shift.

34.  Departmentation by enterprise function
 Most commonly followed
 The activities are grouped on the basis of functions which are to
be performed.
 Each department head is responsible for the respective
departments.
 People have similar backgrounds and similar interests, it gives a
rise to specialization which makes man power utilization more
efficient.

35.  Departmentation by territory or geography
 When an organization operates in different geographical areas
each with distinct needs, it is desirable to create the department
along geographical lines.
 The business activities are grouped into area basis and each area
has an in-charge.
 Suitable for large scale enterprise especially banking, insurance,
transport.

36.  Departmentation by customers
 Is created when the needs of the customers are different in
nature.
 Market oriented in which departments are created around the
markets served or around marketing channels.
 It is suitable where groups of customers are defined.
 Each department specialists is serving a particular group or
customers.
 The needs of each group of customers are given a special
attention.

37.  Departmentation by equipment or process
 Activities are grouped on the basis of production processes or
equipment involved.
 Used in manufacturing enterprise and at lower level organization
such as textile, oil, engineering and production industries.
 Achieve efficiency and economy in operation.

38.  Departmentation by product or service
 The units are formed according to the type of product.
 More useful in multi-line corporations where the product expansion and
diversification, manufacturing and marketing characteristics of the product are of
primary concern.
 Each department head is responsible for manufacturing a product and selling it to
customers.
 The coordination function is performed by the top level management