CHAPTER FIVE

THE STRUCTURE OF ORGANIZING

 1. The meaning of Organizing

 Organizing is the process by which the work is arranged and

allocated among organizational members so that the goal of the
organization can be effectively achieved.

 It is the detailed arrangement of work and working conditions in

order to perform the assigned activities in an effective manner. The
whole work is divided into manageable components in order to
facilitate the achievement of objectives or goals.
 1. The meaning of Organizing

Organizing consists of two elements:

a) Components (parts) as people, tasks, resources, authority,

responsibility, procedures and goals.

b) Relationships by which all these components are tied together.

Each organization has its own external and internal environments

that define the nature of the relationships according to its specific
needs. Organizing is the function that managers undertake to design,
structure, and arrange the components of an Organization’s internal
environment to facilitate attainment of organizational goals.
 1. The meaning of Organizing

 Organizing leads to the process of organization structure. It is

defined as (1) the set of formal tasks assigned to individuals and
departments; (2) formal reporting relationships, including lines of
authority, decision responsibility, number of hierarchical levels,
and span of managers’ control; and (3) the design of systems to
ensure effective coordination of employees across departments.

 Organization chart, is the visual representation of an organization.

It is assigned to every organization.
1. The meaning of Organizing
 2. Importance of Organizing

• Organization is important because it allows individuals and groups to

perform tasks more efficiently. It helps people find information and
items faster, and it allows groups to work together without wasting
time.
• Comprehensive approach to organizing helps the management in many
ways and this enables them to gain the following advantages:
1. Specialization - Organizational structure is a network of
relationships in which the work is divided into units and
departments. This division of work helps in bringing specialization.
2. Well defined jobs - Organizational structure helps in putting the
right person on right job which can be done by selecting people
according to their qualifications, skill and experience.
 2. Importance of Organizing

• Comprehensive approach to organizing helps the management in many

ways and this enables them to gain the following advantages:
3. Clarifies authority - Organizational structure helps in clarifying the
role positions to every manager. This can be done by clarifying the
powers to every manager and the way he has to exercise those
powers.
4. Co-ordination - Organization is a means of creating co-ordination
among different departments of the enterprise.
5. Effective administration - The organization structure is helpful in
defining the jobs positions. The roles to be performed by different
managers are clarified. Specialization is achieved through division
of work. This all leads to efficient and effective administration.
 2. Importance of Organizing

• Comprehensive approach to organizing helps the management in many

ways and this enables them to gain the following advantages:
6. Sense of security - Organizational structure clarifies the job
positions. The roles assigned to every manager are clear. Therefore,
clarity of powers helps to increase mental satisfaction and thereby a
sense of security in a concern.
7. Scope for new changes - Where the roles and activities to be
performed are clear and every person gets independence in his
working, this provides enough space to a manager to develop his
talents and increase his knowledge, i.e to make new changes.
 3. Formal and Informal Organizations

Formal Organizations are organizations in which the job of each

member is clearly defined, whose authority, responsibility and
accountability are fixed.
It is a structure that comes into existence when two or more people
come together for a common purpose, and there is a legal & formal
relationship between them.
The basic objective of the establishment of an organization is the
attainment of the organization’s goal. For this purpose, work is
assigned, and authorities are delegated to each member and the
concept of division of labor is assigned on the basis of their
capabilities.
 3. Formal and Informal Organizations

Informal Organizations is a network of interpersonal relationship

when people interact with each other.

It is formed within the formal organization. It is a system of

interpersonal relationships between individuals working in an
organization.

In an informal organization, there are no defined channels of

communication, and so members can interact with other members
freely.
 4. Work Specialization

• Work specialization is the degree to which

organizational tasks are subdivided into separate jobs.
Employees within each department perform only the
tasks relevant to their specialized function. Jobs tend to
be small, but they can be performed efficiently.

• Work specialization is sometimes called division of

labor.
 5. Chain of Command

It is the clear and distinct lines of authority, which needs to be

established among all positions in an organization. The chain of
command actually has two components.

• The first, called unity of command, suggests that each person

within an organization must have a clear reporting relationship to
only one manager.

• The second, called the scalar principle, suggests that there must
be a clear and unbroken line of authority that extends from the
lowest to the highest position in the organization.
 6. Span of Management

The span of management is the number of employees reporting to a

supervisor. Another part of establishing reporting relationships is
determining how many people will report to each manager. This
characteristic of structure determines how closely a supervisor can
monitor subordinates. The tasks associated by less supervision are when:
1. Work performed by subordinates is stable and routine and perform
similar work tasks.
2. Rules and procedures defining task activities are available.
3. Subordinates are experienced, highly trained and need little direction
in performing tasks.
4. Subordinates are concentrated in a single location.
5. Support systems are available for the manager.
 7. Centralization and Decentralization

Centralization and decentralization related to the hierarchical level

at which decisions are made.
• Centralization is the degree to which decision making takes place
at upper levels of the organization. Centralization means that
decision authority is located near the top of the organization.

• On the other hand decentralization indicates that decision

authority is pushed downward to lower organization levels.
Decentralization is the degree to which lower-level managers
actually make decisions. Centralization-decentralization process
is a matter of degree. No organization is completely centralized
or completely decentralized.
 8. Departmentalization

• A fundamental characteristic of organization structure is

departmentalization, which is the basis for grouping positions into
departments in the organization. Managers decide how to group
people together to perform their work.
• There are five approaches to structural design that reflect different
uses of departmentalization. The functional, divisional, and matrix are
traditional approaches that rely on the chain of command to define
departmental groupings and reporting relationships along the
hierarchy. There are also two innovative approaches which are teams
and virtual networks, which have emerged to meet changing
organizational needs.
• The organization departments can be structured in several ways.
 8. Departmentalization
1) Functional Departmentalization
The most common base for departmentalization, especially among smaller organizations,
is by function. Functional departmentalization- groups together those jobs involving the
same or similar activities, such as finance, production, marketing, and human resource.
Chairman

Managing Director

Production Manager Marketing Manager Finance Manager

Manufacturing Quality Control Accounting Taxes

Sales Customer Service

 8. Departmentalization

• Functional departmentalization approach has three primary

advantages. First, each department can be staffed by experts in
that functional area e.g. marketing experts can be hired to run the
marketing function. Second, supervision is facilitated because an
individual manager needs to be familiar with only a relatively
narrow set of skills. Finally, coordinating activities inside each
department is easier.

• On the other hand, decision making tends to become slower and

more bureaucratic. Employees may also begin to concentrate on
their own unit and could not view of the total organizational
system.
 8. Departmentalization

2) Product Departmentalization
Product departmentalization involves grouping and arranging activities
around products or product groups. large businesses adopt this form of
departmentalization for grouping activities at the business level.

Chairman

Managing Director

Product Product Product

A B C
 8. Departmentalization

• Product departmentalization approach has some advantages.

First, all activities associated with one product or product group
can be easily integrated. Second, the speed and effectiveness of
decision making are enhanced.

• On the other hand, Product departmentalization indicate that

managers in each department may focus on their own product or
product group and excluding of the rest of the organization. For
example, a marketing manager may focus on his department
rather than helping the overall organization.
 8. Departmentalization

3) Customer Departmentalization
Under customer departmentalization, the organization structures
respond to and interact with specific customers.
 8. Departmentalization

• The basic advantage of this approach is that the organization is

able to use skilled specialists to deal with unique customers or
customer groups.

• On the other hand, a large administrative staff is required to

integrate the activities of the departments as coordination is
necessary to make sure that the organization does not
overcommit itself in any one area.
 8. Departmentalization

4) Location Departmentalization
Location departmentalization groups jobs on the basis of defined
geographic areas.
 8. Departmentalization

• The primary advantage of location departmentalization is that it

enables the organization to respond easily to unique customer
and environmental characteristics in the various regions.

• On the negative side, a larger administrative staff may be

required if the organization must keep track of units in scattered
locations.
 8. Departmentalization

5) Matrix Approach
The matrix structure is controversial because of the dual chain of command.
However, the matrix can be highly effective in a complex, rapidly changing
environment in which the organization needs to be flexible and adaptable.
CEO

Production Marketing Finance HRM

Project A

Project B

Project C
 8. Departmentalization

• The matrix structure makes efficient use of human resources

because specialists can be transferred from one division to
another.

• The major problem is the confusion and frustration caused by the

dual chain of command. The matrix structure also can generate
high conflict. This could lead to time lost in meetings and
discussions devoted to resolving this conflict.
 8. Departmentalization

6) Team Approach
• The team causes cooperation across departments and improves coordination
and cooperation. The team concept also enables the organization to more
quickly adapt to customer requests and environmental changes and speeds
decision making because decisions need not go to the top. Employees get
involved in big projects rather than narrow tasks
• A cross-functional team may make different work demands on members than
do their department managers. A large amount of time is devoted to
meetings, thus increasing coordination time, the team approach causes too
much decentralization.
• However, team members often do not see the whole picture of the
corporation and may make decisions that are good for their group but bad for
the organization.
 8. Departmentalization

7) Virtual Network Approach

Virtual Network Approach is selling its products and services worldwide. A
network organization can depend on resources and expertise worldwide to
achieve the best quality and price to sell its products and services worldwide.
• The virtual network approach is flexible and competitive on a global scale.
Flexibility comes from the ability to hire services needed, and to change
without constraints from owning plant, equipment, and facilities. The
organization can produce new product and enter market opportunities.
• One of the major disadvantages is lack of hands-on control. Managers do not
have all operations under one roof and must rely on contracts, coordination,
negotiation, and electronic linkages to hold things together. Each partner in
the network necessarily acts in its own self-interest.
 9. Guidelines for Effective Organizing

1. Each person in the organization should report to only one boss.

2. The lines of authority should be clearly stated and should run
from the top to the bottom of the organization.
3. The responsibility and authority of each supervisor should be
established clearly.
4. The number of levels of authority should be as few as possible.
5. The senior managers are responsible for the acts of their
subordinates.
6. Specialization should be applied wherever possible.
7. The line function and the staff function should be kept separate.
8. The span of control should be reasonable and well established.
9. The organization should be simple and flexible.