3.

Organizing
 3. Organizing
• Organization, Organizing, Organizational Structures,
Principles of Work Specialization , Departmentalization,
Chain of Command, Span of Control, Centralization and
Decentralization, Formalization. Mechanistic and Organic
Structures, Factors Affecting Structural Choice - Strategy,
Size, Technology, Environmental Uncertainty. Traditional
Organizational Designs - Simple Structure, Functional
Structure, Divisional Structure, Matrix Structure, Team
Structures, Project Structure, Adaptive Organizations –
Boundary less Organization, Virtual Organizations,
Learning Organization, Flexi Work,
Tele-working, Global Organizations.
 DEFINITION OF ORGANISATION
• According to Sheldon, "Organisation is the process of
so combining the work which individuals or groups
have to perform with facilities necessary for its
execution, that the duties so performed provide the
best channels for efficient, systematic, positive and
coordinated application of available effort."
• In the words of Chester I Bernard, "Organisation is a
system of co-operative activities of two or more
persons."
• Mc Ferland has defined organisation as, "an
identifiable group of people contributing their efforts
towards the attainment of goals".
 ORGANISATION
• Organising is what managers do when they design
structure and arrange the components of an
organisation’s internal environment to facilitate
attainment of organisational goals.
• Organising therefore means (1) identification and
classification of required activities, (2) grouping
activities necessary to attain objectives, (3) the
assignment of each grouping to a manager with the
appropriate authority to supervise it; and (4) the
provision for co-ordination horizontally (on the same
or similar organisational level) and vertically (for
example, corporate headquarters, division, and
department) in the organisation structure.
 NATURE OF ORGANISATION
• 1. Group of Persons
• 2. Common Objectives
• 3. Division ofWork
• 4. Cooperative Efforts 5. Communication
• 6. Central Authority
• 7. Rules & Regulations
• 8. Dynamic Element
 NATURE OF ORGANISATION
i) Organization is a group of Individuals: Organization can consider as a group of
individuals who comes together and make co-operative relationship with each-
other and contributing their efforts with a view to attain pre set goals. Infact, in the
absence of group of individuals there is no existence of organization. Thus it is
clear that organization is a group of individuals.
ii) Organization is a process: The feature of organization can put to be as a
process, because a large number of events are done under organizing process
towards the attainment of predetermined goals, such as determination of various
activities, grouping of activities, allocation of work amongst the employees and
delegation of authority as well. Hence, organization is a process.
iii) Organization is an important Function of Management: It is an essential
feature of organisation. Organization refers to an important function of
management because all other functions of management like staffing, directing,
controlling etc,will become ineffective in the absence of this function.
iv) Organization is related to its Objectives: Organization is directly concerned
with the objectives of enterprise. In the absence of objectives there is no life of
organization. If there is an organization then the objectives must be attached with
it. Hence, Organization is related with its goals.
 Purposes of Organizing

• Divides work to be done into specific jobs and

departments.
• Assigns tasks and responsibilities associated with
individual jobs.
• Coordinates diverse organizational tasks.
• Clusters jobs into units.
• Establishes relationships among individuals, groups, and
departments.
• Establishes formal lines of authority.
• Allocates and deploys organizational resources.
 PROCESS OF ORGANISATION
• The process of organising consist of 4 steps which are explained as follows :
i) Identification and Division of work: The organising function begins with the
division of total work into smaller units. Each unit of total work is called a job.
And an individual in the organisation is assigned one job only. The division of
work into smaller jobs leads to specialization because jobs are assigned to
individuals according to their qualifications and capabilities. The division of work
leads to systematic working. For example, in a bank every individual is assigned
a job. One cashier accepts cash, one cashier makes payments, one person
issues cheque books, one person receives cheques, etc. With division of work
into jobs the banks work very smoothly and systematically.

ii) Grouping the Jobs and Departmentalisation: After dividing the work in smaller
jobs, related and similar jobs are grouped together and put under one
department. The departmentation or grouping of jobs can be done by the
organisation in different ways. But the most common two ways are:
a) Functional departmentation: Under this method jobs related to common
function are grouped under one department. For example, all the jobs related to
production are grouped under production department; jobs related to sales are
grouped under sales department and so on.
 PROCESS OF ORGANISATION
(b) Divisional departmentation: When an organisation is producing more than one
type of products then they prefer divisional departmentation. Under this jobs
related to one product are grouped under one department. For example, if an
organisation is producing cosmetics, textile and medicines then jobs related to
production, sale and marketing of cosmetics are grouped under one department,
jobs related to textile under one and so on.

iii) Assignment of Duties: After dividing the organisation into specialised

departments each individual working in different departments is assigned a duty
matching to his skill and qualifications. The work is assigned according to the
ability of individuals. Employees are assigned duties by giving them a document
called job description. This document clearly defines the contents and
responsibilities related to the job.

iv) Delegation of Authority : Any position in the organisation comes into existence
only when the positions are empowered to carry out the activities, for which the
positions are designed. This means injecting the positions with managerial
authority. To carry out any activity, one must have enough authority.
 ORGANIZATION STRUCTURE

• An organization is the structural framework for

carrying out the functions of Planning, decision
making, control, communication, motivation etc.
• Organo-gram (Organization Chart)
– It is snapshot of an organization at a particular point
in time which shows the flow of authority,
responsibility and communication among various
departments which are located at different level of
hierarchy.
– The connecting lines on this chart show who is the
accountable to whom and who is the In charge of
what department.
 ORGANIZATION STRUCTURE
• Organizational Structure
• – How job tasks are formally divided, grouped, and
• coordinated
• – Key Elements:
• 1. Work specialization
• 2. Departmentalization
• 3. Chain of command
• 4. Span of control
• 5. Centralization and decentralization
• 6. Formalization
 1. Work Specialization
• The degree to which tasks in the organization are
• subdivided into separate jobs
 Division of Labor
• Makes efficient use of employee skills
• Increases employee skills through repetition
• Less between-job downtime increases productivity
• Specialized training is more efficient
• Allows use of specialized equipment
 Can create greater economies and efficiencies –
but not always…
 Work Specialization Economies and
Diseconomies

 Specialization can reach a point of diminishing returns

 Then job enlargement gives greater efficiencies than does
specialization
 2. Departmentalization
• The basis by which jobs are grouped
together
•  Grouping Activities by:
• – Function
• – Product
• – Geography
• – Process
• – Customer
 Departmentalization by Type
• Functional : Grouping jobs by functions
performed
• Product : Grouping jobs by product line
• Geographical : Grouping jobs on the basis of
territory or geography
• Process : Grouping jobs on the basis of
product or customer flow
• Customer : Grouping jobs by type of customer
and needs
 Functional Departmentalization

Advantages :
• Efficiencies from putting together similar specialties and
people with common skills, knowledge, and orientations
• Coordination within functional area
• In-depth specialization
Disadvantages :
• Poor communication across functional areas
• Limited view of organizational goals
 Geographical Departmentalization

Advantages
• More effective and efficient handling of specific
regional issues that arise
• Serve needs of unique geographic markets
better
Disadvantages
• Duplication of functions
• Can feel isolated from other organizational areas
 Product Departmentalization

Advantages :
+ Allows specialization in particular products and services
+ Managers can become experts in their industry
+ Closer to customers
Disadvantages :
– Duplication of functions
– Limited view of organizational goals
 Process Departmentalization

Advantages :
+ More efficient flow of work activities
Disadvantages :
– Can only be used with certain types of products
 Customer Departmentalization

Advantages :
+ Customers’ needs and problems can be met by
specialists
Disadvantages :
- Duplication of functions
- Limited view of organizational goals
 3. Chain of Command
The continuous line of authority that extends from upper
levels of an organization to the lowest levels of the
organization and clarifies who reports to who.
Authority
• The rights inherent in a managerial position to give orders
and to expect the orders to be obeyed
Responsibility
• The obligation or expectation to perform
Unity of Command
• A subordinate should have only one superior to whom he
or she is directly responsible
 4. Span of Control
The number of subordinates a manager can
efficiently and effectively direct
– Wider spans of management increase
organizational efficiency
– Narrow span drawbacks:
• Expense of additional layers of management
• Increased complexity of vertical communication
• Encouragement of overly tight supervision and
discouragement of employee autonomy
 Span of Control
• The number of employees who can be effectively
and efficiently supervised by a manager.
• Width of span is affected by:
• Skills and abilities of the manager
• Employee characteristics
• Characteristics of the work being done
• Similarity of tasks
• Complexity of tasks
• Physical proximity of subordinates
• Standardization of tasks
Contrasting Spans of Control
 5. Centralization and Decentralization
Centralization
• The degree to which decision-making is
concentrated at a single point in the organizations.
• Organizations in which top managers make all the
decisions and lower-level employees simply carry
out those orders.
Decentralization
• Organizations in which decision-making is pushed
down to the managers who are closest to the action.
 Factors that Influence the Amount of
Centralization
• More Centralization
• 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 to have 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.
 Factors that Influence the Amount of
Decentralization
More Decentralization
• 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 to have a
say in what happens.
• Company is geographically dispersed.
• Effective implementation of company strategies depends
on managers having involvement and flexibility to make
decisions
 Advantages & Disadvantages of
Decentralization
Advantages of Decentralization
1. Reduced cost—The standardised procedure and method helps in considerably
reduction of office cost. Office cost is reduced as it does not emphasizes on more
specialists, and more departmental machines and equipment.
2. Uniformity in action — Uniformity in action is established throughout the organisation
because of central administrative control. The same executive supervises the work
and same type of office equipments are used which ensure uniform performance of
activities.
3. Personal leadership—Centralisation encourages and permit personal leadership.
The introduction of personal leadership facilitates quick action, aggressive marketing
and attainment of pin-pointed objective or purpose,
4. Flexibility — Centralisation permits flexibility and adaptability of the organisation to
the changed circumstances. Occasional pressure of extra clerical work is handled
with the existing staff.
5. Improved quality of work—Improved quality of work is possible because of
standardised procedure, better supervision and use of improved- machinery.
6. Better co-ordination — Centralisation facilitate better coordination among various
operations. Direct control & supervision are facilitated which results in less likelihood
of conflict of authority & duplication of work.
 Advantages & Disadvantages of
Centralization
Disadvantages of Decentralization
1. Divisions may become individualized and competitive and work against the best
interests of the organization.
2. Increase costs, need more manager and large staffs
3. Division managers may not inform top manager of their problems.
 Advantages & Disadvantages of
Decentralization
Advantages of Decentralization
1. Increases morale & promotes interpersonal relationships
2. encourage informality and democracy in management
3. Facilitate local decision making by Managers & others
4. Develops managers by allowing them to manage
5. Increase flexibility.
6. Releases top managers from the routine administration.
7. Freeing managers for planning, and policy development, and systems
integration.
Disadvantages of Decentralization
1. Divisions may become individualized and competitive and work against the
best interests of the organization.
2. Increase costs, need more manager and large staffs
3. Division managers may not inform top manager of their problems.
 6. Formalization
• The degree to which jobs within the organization are
standardized and the extent to which employee
behavior is guided by rules and procedures.
• Highly formalized jobs offer little discretion over
what is to be done.
• Minimum worker discretion in how to get the job done
• Many rules and procedures to follow
• Low formalization means fewer constraints on how
employees do their work.
• Job behaviors are nonprogrammed
• Employees have maximum discretion
 Mechanistic and Organic Structures
Mechanistic Organization
1. A rigid and tightly
controlled structure
2. High specialization
3. Rigid departmentalization
4. Narrow spans of control
5. High formalization
6. Limited information
network (downward)
7. Low decision
participation
Organic Organization
1. Highly flexible and
adaptable structure
2. Non-standardized jobs
3. Fluid team-based
structure
4. Little direct supervision
5. Minimal formal rules
6. Open communication
network
7. Empowered employees
 Mechanistic Vs. Organic Structures

Mechanistic Organization Organic Organization

1. High specialization 1. Cross-functional teams
2. Rigid 2. Cross-hierarchical
departmentalization teams
3. Clear chain of 3. Free flow of information
command 4. Wide spans of control
4. Narrow spans of control 5. Decentralization
5. Centralization 6. Low formalization
6. High formalization
 Factors Affecting Structural Choice
Structural decisions are influenced by:
• Overall strategy of the organization
• Organizational structure follows strategy.
• Size of the organization
• Firms change from organic to mechanistic organizations
as they grow in size.
• Technology use by the organization
• Firms adapt their structure to the technology they use.
• Degree of environmental uncertainty
• Dynamic environments require organic structures;
mechanistic structures need stable environments.
 Factors Affecting Structural Choice
• Strategy Frameworks:
Innovation
• Pursuing competitive advantage through meaningful and
unique innovations favors an organic structuring.
Cost minimization
• Focusing on tightly controlling costs requires a
mechanistic structure for the organization.
Imitation
• Minimizing risks and maximizing profitability by copying
market leaders requires both organic and mechanistic
elements in the organization’s structure.
 Factors Affecting Structural Choice
Strategy and Structure
• Achievement of strategic goals is facilitated by
• changes in organizational structure that
• accommodate and support change.
Size and Structure
• As an organization grows larger, its structure tends to
change from organic to mechanistic with increased
specialization, departmentalization, centralization, and
rules and regulations.
 Factors Affecting Structural Choice
Technology and Structure
• Organizations adapt their structures to their technology.
• Woodward’s classification of firms based on the
complexity of the technology employed:
i. Unit production of single units or small batches
ii. Mass production of large batches of output
iii. Process production in continuous process of
outputs
• Routine technology = mechanistic organizations
• Non-routine technology = organic organizations
 Factors Affecting Structural Choice
Environmental Uncertainty and Structure
• Mechanistic organizational structures tend to be most
effective in stable and simple environments.
• The flexibility of organic organizational structures is
better suited for dynamic and complex environments
 Traditional Organizational Designs
Simple structure
• Low departmentalization, wide spans of control,
centralized authority, little formalization
Functional structure
• Departmentalization by function
 Operations, finance, human resources, and product
research and development
Divisional structure
• Composed of separate business units or divisions
with limited autonomy under the coordination and
control the parent corporation.
Strengths and Weaknesses of Traditional
Organizational Designs
 Contemporary Organizational Designs
Team Structure : A structure in which the entire organization is
made up of work groups or teams.
Advantages: Employees are more involved and empowered. Reduced
barriers among functional areas.
Disadvantages: No clear chain of command. Pressure on teams to perform.
Matrix-Project Structure :
Matrix : A structure that creates dual lines of authority and combines
functional and product departmentalization.
Project : A structure that assigns specialists from different functional areas
to work on projects but who return to their areas when the project is
completed. Project is a structure in which employees continuously work on
projects. As one project is completed, employees move on to the next
project.
Advantages: Fluid and flexible design that can respond to environmental
changes. Faster decision making.
Disadvantages: Complexity of assigning people to projects. Task and
personality conflicts.
 Contemporary Organizational Designs
Boundaryless Structure : A structure that is not defined by or limited
to artificial horizontal, vertical, or external boundaries; includes virtual
and network types of organizations.
• An flexible and unstructured organizational design that is intended to break
down external barriers between the organization and its customers and
suppliers.
• Removes internal (horizontal) boundaries:
 Eliminates the chain of command
 Has limitless spans of control
 Uses empowered teams rather than departments
• Eliminates external boundaries:
 Uses virtual, network, and modular organizational structures to get closer to stakeholders
Advantages:
Highly flexible and responsive. Draws on talent wherever it’sfound..
Disadvantages:
Lack of control. Communication difficulties
 Removing External Boundaries
Virtual Organization
• An organization that consists of a small core of full-time
employees and that temporarily hires specialists to work
on opportunities that arise.
Network Organization
• A small core organization that outsources its major
business functions (e.g., manufacturing) in order to
concentrate what it does best.
Modular Organization
• A manufacturing organization that uses outside suppliers
to provide product components for its final assembly
operations.
The Learning Organization
• An organization that has developed the capacity to
continuously learn, adapt, and change through the practice of
knowledge management by employees.
Characteristics of a learning organization:
• An open team-based organization design that empowers
employees
• Extensive and open information sharing
• Leadership that provides a shared vision of the organization’s
future, support and encouragement
• A strong culture of shared values, trust, openness, and a
sense of community.
Thank You