PRINCIPLES OF

MANAGEMENT

BCM 112 POM RESHU TYAGI

 UNIT 2 : ORGANISING
Nature and purpose
Formal and informal organization
organization chart
organization structure & Types
Line and staff authority
Departmentalization
Delegation of authority
Centralization and
Decentralization

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 Definition of Organizing
Organization is the process of
identifying & grouping of the works to be
performed, defining & delegating responsibility
& authority and establishing relationships for
the purpose of enabling people to work most
efficiently
Koontz & O’ Donnell defines as “organization is the establishment of
authority & relationships with provision for coordination between them
both vertically & horizontally in the enterprise structure

Jobs related & co-ordination between authority &

responsibility

Organizational function is central to achieving the goals

 Importance of Organizing function
Coordination
Delegating
Authority
Sense of
security
Job definition
Management
Growth
Personal Growth

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Importance of
Organizing
function
 Process of Organizing
1 1

2
3
Linking Departments
4

5
2
CEO
VP Sales VP Service
4

Sales
Service
Managers
Managers
3

Sales Support
Session
 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
Playing meaningful organizational role involves
Variable objectives
Clear idea of major duties or activities involved
Understood of authority, role & Responsibility
 Purpose of organizing
 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
 To perform managerial function
Planning, staffing, Directing & controlling
cannot be implemented without proper organization
 Facilitates growth & diversification
A good organization are essential for expanding
business activity & essential for product
diversification such as establishing a new product
line
 Human treatment of employees
Organization has adapted the modern concept
of system approach based on human relations
 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
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Advantages of formal organization
Reduces confusion
Ensures specialization
Fixing of responsibility
Help in achievement of
objectives
Provide stability to the firm
Increase organizational
efficiency
Disadvantages of formal
organization
Reduced Initiatives
Lack of match between
objectives
Delay in work due to rules &
regulations
Disturbance in relations
Problem due to informal relations
 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
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Advantages of informal organization
Cooperation
Sense of Belonging ness (Stress free)
Fast communication
Aid (Help or assist ) on the job
Disadvantages of informal organization
Resistance to change (sometimes
management are not
accepted )
Clash (fight) in interest
It is very much affected by the rumors
Disturbance in relations
Problem due to informal relations
 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

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 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

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 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
avoided
Types of Organizational Structure
Based on the power flow within the organization may be
classified as
4. Bureaucratic or Mechanistic structure
5. Organic or adaptive structure
Based on the formation of departments or groups may be
classified as
6. Line organization structure
7. Functional organization structure
8. Divisional organization structure
9. Line & Staff organization structure
10.Product organization structure
 Elements of Organizational Structure
Specifies how employees and their
activities are grouped together
Number of people directly
reporting to the next
Departmentalization Span of Control
level
Assumes coordination
through direct
Formalization supervision
Centralization
Formal decision
making authority is
The degree to which organizations standardize held by a few people,
behavior through rules, procedures, formal training, usually at the top
and related mechanisms.
Bureaucratic (Technical) or Mechanistic
organization
 It is based on a formal, centralized
network
 It is high in specialization,
formalization & centralization
 It is easy to maintain & rarely needs
to be changed
 well defined hierarchy where top
level make the majority of decisions
Organic or Adaptive organization
 It is unstable & dynamic environment
It is complex & need to quickly adapt
or changed
It is low in specialization,
formalization & centralization
When environment changes an
organization must be able to gather,
process & distribute information very
 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 tolowest
level in a step by step manner
 It is straight & vertical
 Responsibility moves upward

Line Authority = individuals in management

positions have the formal power to direct
and control immediate subordinates

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 Advantag
es  Highly informal
 Centralized decision making
 Little specializationon
 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)
 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)
 Vertical functional approach
People are grouped together in departments by
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
 Divisional Structure
Divisional approach. Grouped together based
on a common product, program, or
geographical region.
 Also called multidivisional structure or M-
Form

Advantages
 Separation of strategic and operating control
 Quick response to important changes in
external environment
 Minimal problems of sharing resources across
functional departments
 Development of general management talent is
enhanced

Disadvantages
 Can be very expensive
 Can be functional competition among divisions
 Line and Staff organization structure
Line Authority = individuals in management positions have the
formal power to direct and control immediate subordinates

Staff Authority = granted to staff specialists in their area

of expertise
The authority to make recommendations to line
organization The recommendations can be accepted, rejected, or
altered by the line organization

Organizations begin as line only with line

mangers having direct control over all activities
including administrative ones. Only later as
organizations grow in size, do they add staff
positions.

 It is combination of Line & functional authority

Note
 Departmentalization
Specifies how employees and their activities are
grouped
together It is process of grouping tasks into jobs,
the combining jobs into effective work groups
Departmentation takes place at all levels
 Primary Departmentation (Top Level)
 Intermediate Departmentation (Middle
Level)
 Ultimate or Secondary Departmentation
(Lower Level)
Koontz Definition
“A department is a distinct area, division or
branch of an enterprise over which a manager has
authority for the performance of specified activities

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 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,
Advantages
coordination & control
 Employees can develop skills
depth
 Good Coordination
 Easily direct & control
 Responsibility easily located
Disadvantages
 Lack of communication
 Span of control
Span of control in management & administration thus
refers to the total number of people (subordinates or
employees working under) whom a manager can
effectively control or supervise
 Number of people directly reporting to the next level
 Assumes coordination through direct supervision
 It is often known as “Span of Supervision” or
“ Span of Management” or “ Span of
Attention”
 Span of control depends on nature of work , ability
of superior, ability of subordinates etc
Top Level  1 : 6 (more than 6 subordinates under
control) Lower Level  1 : 20 (more than 20
subordinates under control)

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Types of Span of
control

Narrow span (Tall Structure)

A supervisor or manager oversees few subordinates
Selected number of employees present
Coordination is difficult to be achieved Span of
Specialization can be achieved 3
Tight Control below
Wide span (Flat Structure)
A supervisor or manager oversees large subordinates
Few hierarchy level
Facilities delegation  Suitable for repetitive jobs
Loose Control Span of 7 below
Better supervision & coordination
Advantages of Span of control
 Better supervision & control
 Increases efficiency
 Increases goodwill (Friend
lineless)
 Good professional relations
 Facilities quick action
 Superiors can concentrate
on important work
 Centralization
Formal decision making authority is held by
a few people, usually at the top
Centralization is said to be a process where
the concentration of
decision making is in a few hands.
Centralization is the systematic & consistent
reservation of authority at central points in the
organization
The important & key decisions are taken by the
top management & the other levels are into
Decentralization
implementations as per the directions of top level
Formal decision making Decision making
authority is held by a authority is
few people, usually at dispersed
the top throughout the
Centralization organization
Centralization
A function of how much decision-making
authority is pushed down to lower levels in an
Decentralization
organization
The pushing down of decision-making authority
to the lowest
levels of an organization
Organizational authority for most
departmental decisions is delegated to the
department heads

Burger King
Pizza Hut WM Morrison
McDonalds Tesco
Pending
 Delegation of Authority
Delegation of Authority
It is the essence of management
It is very important factor in formal
organization
Delegation of Authority means the granting
of authority to subordinates to operate within
prescribed limits
Assigning jobs to others & giving
rights to execute them
Importance of Delegation of Authority
 It develops Team Spirit
 Allows for efficiency & fast actions
 Maintains Harmony
Harmony
 Elements of Delegation of Authority
1. Responsibility
It is obligation of the subordinate to complete
the work which is assigned to him
Basis of responsibility is superior subordinate
relationship that exists in the organization
Koontz :
“Responsibility may be defined as the obligation of
a subordinate to whom the duty has been assigned
to perform”
2.Authority
Rightful power or Rightful
command Henry Fayol
Authority is the right to give orders to &
power to extract obedience (submission) from the
subordinates
It helps to control subordinates
The purpose of granting authority is to
accomplish the organizational objectives
It is not absolute & is limited
It is to influence the behaviour of
subordinates to
in the right direction
If the subordinate does not obey
superior can take disciplinary action &
can be exercised through advice &
approve
3.Accontability
It denotes answerability for the
accomplishment of the task assigned by the
superior to his subordinates
To be accountable is to be answerable
for one’s conduct In respect to obligation
fulfilled or unfulfilled

It is not only what we do, but also

what we do not do, for which we are
accountable

Accountability – Empowerment =
Blame Empowerment – Accountability =
Low performance Accountability +
Empowerment = High performance