ORGANIZING

Concept of Organising
 In the last lecture we discussed planning, which is making
plans for achieving objectives.
 Planning is only successful when the organizing function is
done well by management.
 So, organizing as a function of management is responsible
for the successful implementation of plans, to accomplish
business objectives.
 Organizing, which ensures that all physical and human
resources required to achieve objectives are available, the
enterprise is structured in a manner that it is able to adapt to
the dynamic business environment. management function
Concept of Organising
 Let us learn organizing in a simple way, - suppose
u have the objective to achieve more than 90%
marks in your exam this year and to get admission
to a reputed college/university.
 So what have you done to to achieve your
objective?
 You all must have prepared a plan for it.
 Plan may be like, to devote at least 5 hours in a
week of self-study towards each subject.
Concept of Organising
 Your plan is perfect but for achieving your goal, you will
require physical resources like all relevant books, a place
where you can study with concentration, and human
resources like a teacher/mentor who will guide you to
make short-term goals, help you to prepare notes, answer
questions, manage time, etc.
 Did you realize what are you doing?
 Nothing but organizing resources to achieve your
objectives.
 All this is part of the Organizing function of management.
MEANING OF ORGANISING
 ‘Organizing translates plans into action’ by deciding
who will perform a particular task, how and where it
will be performed.
 ‘Organizing is the process of defining and grouping the
activities of the enterprise and establishing authority
relationships among them’. ----- THEO HAIMMAN
 ‘To organize a business is to provide it with everything
useful to its functioning: raw materials, machines and
tools, capital and personnel’.– HENRY FAYOL
Organizational Structure

 Organization Structure refers to the hierarchical

arrangement of various positions in the
organization.
 Organization Structure defines the relationship
between various positions, departments and
persons.
 Organization Structure helps in allocating
authority and responsibility formally and decides
who is to report to whom, who is superior to
whom and who are his subordinates.
Types of Organizational Authority

 Right to make decisions that arise due to position in

organizational structure.
 Authority is the right to perform or command. It
allows its holder to act in certain designated ways and
to directly influence the actions of others through
orders.
 Following are the organizational authority types,
which are popular in the business world:
 Line Authority

 Staff Authority

 Functional Authority
 Line Authority
 It is the chain of command in the
organizational structure that flows major
decision-making power.
 Line authority is directly related to the
attainment of the organizational
objectives.
 Line organization is an organization
wherein a direct vertical relationship
between the superior and subordinate
exists.
 It relies on the scalar principle, which
encompasses that authority flows
downward, i.e. the person at the top,
delegates authority to the person at the
middle, who in turn delegates the
authority to the bottom level.
 Merits of Line Organisation

1. Simplest- It is the most simple and oldest method of administration.

2. Authority and Responsibility - Under this system, the authority and responsibility
of each person are clearly defined with reference to the assignment of the task
given.
3. Unity of Command- a superior-subordinate relationship is maintained and a scalar
chain of command flows from top to bottom.
4. Better discipline- The control is unified and concentrates on one person. Unified
control ensures better discipline.
5. Fixed responsibility- Every line executive has got fixed authority, power, and fixed
responsibility attached to every authority.
6. Economical - line organization is easy to operate and less expensive (own
decision)
7. Flexibility - There is a co-ordination between the topmost authority and bottom
line authority. Since the authority relationships are clear, line officials are
 Demerits of Line Organization
1. Over-reliance- The line executive’s decisions are implemented to the bottom
which results in over-relying on the line officials.
2. Lack of specialization- A line organization flows in a scalar chain from top to
bottom and there is no scope for specialized functions. For example, expert
advice whatever decisions are taken by line managers are implemented in the
same way.
3. Inadequate communication- The policies and strategies that are framed by the
top authority are carried out in the same way which leaves no scope for
communication from the other end(one-way communication)
4. Excess Work - In line organization, too much is expected from the executives.
Thus the workload increases with the increase in size of the organization.
5. Favouritism - There is always a chance of favouritism as the superiors judge the
performance of their subordinates as per their liking.
 Staff Authority
 Staff Authority helps Line authority in attaining the objectives of the
organization.
 Staff authority personnel are involved in investigation, research, and giving
advice to the line managers to carry out the operation.
 Functional Authority
 The right delegated to an individual or a department to
control specified processes, practices, policies, or other
matters relating to activities undertaken by persons in
other departments.
 The right given by higher management to specific staff
personnel to give orders concerning an area in which the
staff personnel have expertise.
 E.g: A company controller is ordinarily given functional
authority to prescribe the system of accounting
throughout the company.
ORGANISING PROCESS
Identification & Division Of Work: –

 The total work to be done should be divided into specific

jobs as according to predetermined plans. –
Job = a set of related tasks that can be performed by an
individual.
 It should have specific and definite tasks to be
performed. As far as possible, it should define expected
results along with the job.
 Division of work → specialization of efforts and skills +
avoids duplication of work.
 Management must ensure that all the activities required to
achieve organizational objectives are identified.
Departmentalization
 Grouping similar and related jobs into larger units called
departments, divisions or sections and placing them under
a department head. It facilitates specialization.
 The departments are linked together and are
interdependent.
 Aims at achieving co-ordination and facilitate unity of
action.
 Departmentation can be done on the basis of:
•Functions: marketing, personnel, finance etc.
•Products: Textiles, chemical, power division etc.
•Territories: Western, northern, central, eastern etc.
Assignment Of Duties:
Assignment Of Duties:
 Define the work of different job positions and allocate
work accordingly.
 Once departments are formed, the dept is placed under
the charge of an individual.
 Jobs are assigned to an individual best suited to perform
it.
 Qualifications, experience, ability and aptitudes of people
should be matched with duties.
 E.g. activities of finance should be assigned to persons
having qualifications and experience in finance e.g. C.A‘s
Establishing Reporting Relationships:

 Granting requisite authority to enable employees to

perform the job satisfactorily.
 Superior subordinate relations between different
people and job positions created, so that everybody
knows from whom he is to take orders and to whom
he can issue orders.
 Creates management hierarchy = a chain of
command from the top manager to the individual at
the lowest level.
 This helps in coordination.
Importance of Organizing

 Benefits of specialization: In organizing every individual is assigned apart

of total work and not the whole task. This division of work into smaller units
and repetitive performance leads to specialization. Thus organizing promotes
specialization which in turn leads to efficient & speedy performance of tasks.
 Clarity in working relationship: It helps in creating well defined jobs and
also clarifying the limits of authority and responsibility of each job. The
superior-subordinate relationship is clearly defined in organizing.
 Effective Administration: It provides a clear description of jobs and related
duties which helps to avoid confusion and duplication. Clarity in working
relationships enables proper execution of work which results ineffective
administration.
 Optimum utilization of resources: The proper assignment of jobs avoids
overlapping/duplication of work. This helps in preventing confusion and
minimizing the wastage of resources and efforts.
Importance of Organizing
 Adoption to Change: A properly designed organizational structure
is flexible which facilitates adjustment to changes in workload
caused by change in external environment related to technology,
products, resources and markets.
 Development of Personnel: Sound organization encourages
initiative and relative thinking on part of the employees. When
managers delegate their authority, it reduces their workload so they
can focus on more important issues related to growth & innovation.
This also develops the subordinates’ ability and helps him to realize
his full potential.
 Expansion and growth: It helps in growth & diversification of an
enterprise by adding more job positions, departments, products
lines, new geographical territories etc.
Meaning of Organizational Structure

 It seeks to establish relations among all the persons working

in the organization.
 Under the organizational structure, various posts are created to
perform different activities for the attainment of the
objectives of the enterprise.
 Relations among persons working on different posts are
determined.
 The structure provides a basis or framework for managers and
other employers for performing their functions.
 The organization structure can be defined as the frame work
within which managerial and operating tasks are performed.
Relation between Span of Management
and Organization structure:
 Span of management refers to the number of
subordinates that can be effectively managed by a
superior.
 The Span of management to a large extent gives
shape to the organization structure.
 This determines the levels of management in the
structure.
 Arrow span of management results in tall
structure whereas wider span of management
results in flat structure.
Functional Structure:
 In functional structure activities are grouped and
departments are created on the basis of specific
functions to be performed.
 For example, all the jobs related to production are grouped
under production department, sales departments etc.

 Suitability
 (1) Large organizations producing one line of product.
 (2) Organizations which require high degree of functional
specialization with diversified activities.
Functional Structure:
Advantages of functional structure

 Specialization: Better decision of labour takes place which

results in specialization of functions and its consequent
benefits.
 Coordination is established: All the persons working within a
departmental are specialists of their respective jobs. It makes
the co-ordination easier at departmental level.
 Helps in increasing managerial efficiency: Managers of one
department are performing same type of function again and
again which makes them specialized and improves their
efficiency.
 Minimizes cost: It leads to minimum duplication of effort
which results in economies of scale and thus lowers cost.
Disadvantages of functional structure

 Ignorance of organizational objectives: Each

departmental head works according to his own wishes.
They always give more weight to their departmental
objectives. Hence overall organizational objectives suffer.
 Difficulty in Inter-departmental Coordination: All
departmental heads work as per their own wishes which
leads to coordination within the department easier but it
makes inter-departmental coordination difficult.
 Hurdle in complete development – because each
employee specializes only in a small part of the whole job.
DIVISIONAL ORGANIZATION
STRUCTURE

 Dividing the whole enterprise according to the

major products to be manufactured (like metal,
plastic, cosmetics etc.) is known as divisional
organization structure.

 Suitability: This structure is suitable in

organizations producing multi product or different
lines of products requiring product specialization.
 Also growing companies which intend to add more
lines of products in future adopt this structure.
DIVISIONAL ORGANIZATION STRUCTURE
Advantages of Divisional organization structure

 Quick decision-making: Divisional manager can

take any decision regarding his division
independently which makes decisions quick and
effective.
 Divisional results can be assessed: Division results
(profit/loss) can be assessed easily. On this basis any
unprofitable division can be closed.
 Growth and Expansion: It facilitates growth and
expansion as new divisions can be added without
disturbing existing departments.
Disadvantages of Divisional organization
structure

 Conflicts among different divisions on allocation

of resources.
 Duplicity of Functions: Entire set of functions is
required for all divisions. It gives rise to duplicity
of efforts among divisions & increases cost.
 Selfish Attitude: Every division tries to display
better performance and sometimes even at the cost
of other divisions. This shows their selfish attitude.
Delegation of Authority

 Meaning: It means the granting of authority to

subordinates to operate within the prescribed
limits.
 The manager who delegates authority holds his
subordinates responsible for proper performance of
the assigned tasks.
 To make sure that his subordinates perform all the
works effectively and efficiently in expected
manner the manager creates accountability.
Elements of Delegation

 Authority: The power of taking decisions in order

to guide the activities of others. Authority is that
power which influences the conduct of others.
 Responsibility: It is the obligation of a subordinate
to properly perform the assigned duty. When a
superior issues orders, it becomes the responsibility
of the subordinate to carry it out.
 Accountability: When a superior assigns some
work to a subordinate, he is answerable to his
superior for its success or failure.
 Principle of Absoluteness of Accountability:

 Authority can be delegated but responsibility/accountability cannot be

delegated by a manager.
 The authority granted to a subordinate can be taken back and re-delegated to
another person.
 The manager cannot escape from the responsibility for any default or mistake
on the part of his subordinates.
 For example, If the chief executive asks marketing manager to achieve a sales
target of sale of 100 units/day. The marketing manager delegates this task to
deputy sales manager, who fails to achieve the target. Then marketing
manager will be answerable for the work performance of his subordinates.
Thus, accountability is always of the person who delegates authority.
 Difference between Authority, Responsibility and
Accountability

Basis Authority Responsibility Accountability

Accountability for the

Right to •bligation to perform an
1. Meaning outcome of the assigned
command assigned task.
task.
Arises from
Arises from delegated
2. Origin formal Arises from responsibility.
authority.
position.
Downward-
from superior Upward- from subordinate Upward- from subordinate to
3. Flow
to to superior. superior.
subordinate.
Can be
withdrawn Cannot be withdrawn once Cannot be withdrawn once
4. Withdrawl
anytime by created. created.
giving notice.
Delegation of Authority
Importance of the Delegation of Authority

 Reduction of Executives’ work load: It reduces the work

load of officers. They can thus utilize their time in more
important and creative works instead of works of daily
routine.
 Employee development: Employees get more opportunities
to utilize their talent which allows them to develop those
skills which will enable them to perform complex tasks.
 Quick and better decision are possible: The subordinate
are granted sufficient authority so they need not to go to
their superiors for taking decisions concerning the routine
matters.
Importance of the Delegation of Authority

 High Morale of subordinates: Because of

delegation of authority to the subordinates they get
an opportunity to display their efficiency and
capacity.
 Better coordination: The elements of delegation –
authority, responsibility and accountability help to
define the powers, duties and answer ability related
to various job positions which results in developing
and maintaining effective coordination.
Decentralization

 Decentralisation of authority means dispersal of authority

to take decisions throughout the organization, upto the
lower levels.
 It implies reservation of some authority with the top level
management and transferring rest of the authority to the
lower levels of the organization.
 This empowers lower levels to take decisions regarding
problems faced by them without having to go to the upper
levels.
 According to Allen,‘ Decentralisation refers to systematic
efforts to delegate to the lowest level, all authority except the
one which can be exercised at central points.‟
Centralization vs
Decentralisation
 Centralization = authority retained at top level
and Decentralization = Systematic delegation of
authority at all levels and in all departments of a firm.
Firm needs to balance the two.
 In case of a decentralized firm, Top level retains
authority for:
 Policies and decisions w.r.t the whole firm
 Overall control and coordination
 Middle and lower levels have authority to take
decisions w.r.t tasks allocated to them
Centralization and Decentralization

 Centralization and Decentralization-represents the pattern of

authority among managers at different levels.
 Centralization of authority means concentration of power of
decision making in a few hands. In such an organization very
little authority is delegated to managers at middle and lower
levels.
 No organization can be completely centralized or
decentralized.
 They exist together and there is a need for a balance between
the two. As the organization grows in size, there is tendency to
move towards decentralization.
 Thus, every organization is characterized by both.
Importance of Decentralization

 Develops initiative amongst subordinates: It helps to promote

confidence because the subordinates are given freedom to take their own
decisions.
 Quick and better decisions: The burden of managerial decisions does
not lie in the hands of few individuals but gets divided among various persons
which helps them to take better and quick decisions.
 Relieves the top executives from excess workload: The daily
managerial works are assigned to the subordinates which leaves enough time
with the superiors which they can utilize in developing new strategies.
 Managerial Development: It means giving authority to the subordinates
up to the lower level to take decisions regarding their work. In this way the
opportunity to take decisions helps in the development of the organization.

Better Control: It makes it possible to evaluate performance at each level
which results in complete control over all the activities.
 Difference between – Delegation and
Decentralization

Basis Delegation Decentralization

1. Nature It is a compulsory act. It is an optional policy.

More freedom of action due to

2. Freedom of Less freedom to take decisions due
less control by the top
action to more control by the superiors.
management.
It is the result of policy
It is a process of sharing tasks and
3. Status decisions taken by top
authority.
management.
Narrow- as it is confined to a Wide- It includes extension of
4. Scope superior and his immediate and delegation to all the levels of
subordinate. management.
To increase the role and the
5. Purpose To reduce the burden of manager. autonomy of lower level of
management.