UNIT FOUR

THE ORGANIZING FUNCTION

The Concept of Organizing and Organization Structure
 The term organizing stems from the word organism,
which means an entity with parts so integrated.
 Is bringing together and coordinating human and
physical resources to accomplish the objectives
established in the planning process.
 It involves developing a structure to coordinate the
efforts of different people.
 Process of achieving a coordinated effort through the
design of structure of tasks, authority relationships,
people, and communication 1
Fundamental steps (building blocks) of Organizing
1. Division of work/labor
 Breakdown of a complex task into components so that
individuals are responsible for a limited set of activities
instead of the task as a whole.
 Divide the total workload into tasks that can logically and
comfortably be performed by individuals or groups
 No one person is physically or psychologically able to
perform all the operations that make up most complex tasks-
even assuming one person could acquire all the specialized
skills needed to do so.
 Thus, division of work creates simplified tasks that can be
learned and completed relatively quickly. Thus it fosters
specialization, as each person becomes expert in a certain job.
 Fundamental steps (cont.)
2. Departmentalization
 Combine tasks in a logical and efficient manner
 To keep track of the complex web of formal relationships
in an organization, managers typically draw up an
organization chart to depict how work is divided.
 In an organization chart, boxes represent the logical
groupings of work activities that we call departments.
 Your lecturers in OSU are grouped into departments of
ABVM, Accounting, HRML, Management, Economics
etc for example.
 Departmentalization, therefore, is the result of managers
deciding what work activities, once they are divided into
jobs, can be connected in “like” groupings.
 Fundamental steps (cont.)
3. Hierarchy
 Specify who reports to whom in the organization
 This concept pertains to the span of management
 The span of management control refers to the number of
people and departments that report directly to a particular
manager.
 Once work is divided, departments created, and the span
of control chosen, managers can decided on a chain of
command- a plan that specifies who reports to whom in
an organization
 Fundamental steps (cont.)
4. Coordination
 Set up mechanisms for integrating departmental
activities into a coherent whole and monitoring the
effectiveness of that integration
 Without coordination, people would lose sight of their
roles within the total organization and be tempted to
pursue their own departmental interests at the expense
or organizational goals.
 The extent of coordination depends on the nature of the
tasks performed and the degree of interdependence of
people in the various units performing them
 Organization structure
 Is a formal framework that shows a set of tasks assigned to individuals
and departments, reporting relationships and the design of systems to
effectively coordinate employees across departments.
 A diagram or chart of all the positions in an organization and their
formal relationship to one another. It illustrates an organization’s overall
shape or configuration in comprehensive manner.
 An organization chart shows:
 The hierarchical structure that is typical of most organizations
 The number of management layers
 Degrees of authority, status, and compensation
 How an organization’s activities are departmentalized
 The work being done in each position
 Relations b/n superiors and subordinates-who reports to whom
 How many subordinates report directly to each manager
 Career pathways to the top; and
 Formal channels of communication.
 The Importance of Organizing
 Promotes collaboration and negotiation. Thus, it improves
communication within the organization
 It sets clear-cut lines of authority and responsibility for each
individuals or department’s
 Improves the directing and controlling functions of managers
 Develops maximum use of all organization resources.
 Encourages employee’s creativity, decision-making, &
independent thinking based on well-defined policies, rules &
procedures
 It helps to adopt new technologies. Effective managers
continuously react to changes
 It reduces internal and external problems through controlling
and planning units of the organization
 Formal vs. Informal Organization
 Formal organization
 Intentional structure of roles in a formally organized enterprise.
 Describing an organization as “formal,” however does not mean
there is anything inherently inflexible or unduly confining about
it. Formal organization must be flexible.
 Informal organization
 Is the undocumented & officially unrecognized relationships
between members of an organization that inevitably emerge out
of the personal and group needs of employees.
 Chester Barnard described informal organization as any joint
personal activity without conscious joint purpose, even though
contributing to joint results.
 It is much easier to ask for help on an organization problem
from someone you know personally, even if he or she may be in
a different department, than from someone you know only as a
name on an organization chart.
 Work Specialization/Division of Labor

 Traced back to Adam Smith's discussion of division

of labor and his conclusion was specialization
increases employees’ productivity.
 Is dividing large tasks into smaller packages of work
to be distributed among several people.
 Advantages and disadvantages of specialization
 Advantages:  Disadvantages:
 Maximizes the output of workers as  Limits the flexible use of workers
they perform small & well-defined from one type of work to another
tasks  Workers may be over qualified
 Allows employee's to master the task for the job
in the shortest time  They feel bored and fatigue
 Employees with appropriate ability
 think in terms of their department
and attitude can be selected
or function instead of the
 Allows human labor to be
company;
interchangeably used.
 It creates communication barriers
 Create many, different and often
narrow jobs, which help for effective  Different specialists often
managerial coordination formulate rules, policies, and
 Training is easier with specialization procedures that conflict with
and takes shorter period; those of other operational units
 Production instructions and controls  Time-orientation confusion
become simple
 Span of Management (span of control)

Number of subordinates and departments reporting

directly to a given manager.
Related to a chain of command- a plan that specifies
who reports to whom in an organization
The result of these decisions is a pattern of multiple
levels that is called a hierarchy.
Choosing an appropriate span of management control
for an organizational hierarchy is important for two
reasons.
i. Affects what happens to work relationships in one
particular department.
ii. Affects the speed of decision making in situations where
multiple levels in the organizational hierarchy are
necessarily involved.
 Span of Management…
 According to classical school, the number of subordinates to
be controlled by any executive is from 6-8 persons.
 Others recommended that the span of control to be between 4-
7 subordinates per manager.
 However, the majority argues that as one goes up in the
organization hierarchy, he or she should have to deal with
smaller number of subordinates.
 This is because top executives should deal with a great variety
of complex issues and ill-structured problems.
 Likewise, middle level managers have a narrow span of
control than supervisory level managers.
 Thus, it is advisable to compare the advantages and
disadvantages of wide and narrow span of control.
 Wide Span of Management

Advantages:
Expedites communication between managers and subordinates
Forces managers to delegate greater responsibility & authority.
This in turn helps to develop competent & self-reliant managers;
Broadens the scope of the managers operation & management
can emphasize on executive training and development; and
Shortens channels of communication and reduces distortions
 Narrow Span of Management

Advantages:
It makes close supervision possible. There will be more
effective managing of subordinates
It is easy to coordinate and control activities
It expedites more personalized and close contact between
superiors and subordinates
 Factors Determining the Span of Management
1. Superior Related Factors:
 Manager's personality
 Need to share power = wide
 Need to develop reputations as empire builders = narrow
 The manager's abilities and competencies
 Experienced, well-trained and knowledgeable manager = wide
 Fatigue tolerance
 The greater the physical or mental demands of a job = narrow
 Supervisory style
 If tasks and responsibilities are defined to subordinates clearly = wide
 Non-supervisory activities:
 The more time spent on non-supervisory activities such as long-range
planning and outside assignments = narrow
 Delegation of authority
 if they delegate adequate authority to supervisors = wide
 Factors (cont.)
2. Subordinate Related Factors
 Ability and competence
 If subordinates are experienced, well trained, and knowledgeable
to perform their tasks = wide
 Motivation and commitment:
 Motivated, responsible and committed subordinates = wide
 Need for autonomy
 Subordinates with high need for autonomy prefer to make
decisions by themselves = wide
 Factors (cont.)
3. Organizational Factors
 Nature of tasks: If tasks are simple and repetitive or routine = wide
 Geographic dispersion of subordinates: If all subordinates are
physically located in the same place = wide
 Plans and policies: Organizations with well-defined plans and
policies provide a framework of decision-making = wide
 Availability of objective criteria of performance evaluation: if
performance cannot be measured quantitatively = narrow
 Rate of change: If the organization has products that change rapidly
in technology, customer's tastes and preferences changes frequently,
operate in an unstable market where there are possible rivals
(competitors), frequent changes in plans, policies, and tasks are
needed = narrow
 Use and available assistants: The more a manager receives help from
assistants/advisors or the availability of high-speed
telecommunications (electronic mail, internet, and telephone) = wide
 Centralization and Decentralization
 Refer to the concentration or dispersion of employees, physical
facilities, and decision-making power.
 In some organizations, top-level managers make all the decisions
and the lower level managers merely carry out the decisions made
by top managers (Centralization). Centralization is the
concentration or systematic reservation of decision-making power at
the top of the organization.
 Decentralization is the transfer of responsibility from top level
managers to lower-level managers and subordinates by giving them
discretion to make decisions and considering them as important
agents in any decision making process.
 An organization could not operate on a completely decentralized
basis, as it would lack coordination. A complete centralization, on
the other hand, would lack the needed flexibility and responsiveness
to get a variety of jobs done.
 Centralization and Decentralization
Advantages of Centralization Advantages of Decentralization
 Gives power and prestige to the Spreads an organization’s workload.
chief executives This allows top-level managers focus
 Permits greater uniformity of on strategic planning
policies, practices, and decisions Provides opportunity for lower level
 Promotes full utilization of the managers to develop their decision-
making skills
main office and information
Promotes intimate personal ties and
 Minimizes duplication of
relationships
functions Greater motivation
 Requires less extensive planning
Familiarizes workers with important
and reporting procedures aspects of special work
 Develops strongly coordinated Increases efficiency since managers are
top management team and near to the activities
efficient communication & Risks involving possible losses of
control systems personnel, facilities and plants are
spread out
 Departmentation
 Is the grouping into departments of work activities that are
similar and logically connected.
 To keep track of the complex web of formal relationships in an
organization, managers typically draw up an organization
chart to depict how work is divided.
 In an organization chart, boxes represent the logical groupings
of work activities that we call departments.
 Once jobs have been divided through work specialization,
then, they will be grouped together to form specialized
activities in a logical manner that facilitates coordination.
 It aims at achieving unit direction, effective communication,
coordination, and control.
 Importance of Departmentation
 Helps to limit the size of the work to a manageable size
 Create work units that are more flexible and adaptive to
changes
 Creates independent and semi-autonomous units that give
them a feeling of satisfaction and recognition
 Helps to fix responsibility equivalent to the delegated
authority to each unit
 Helps to develop managers that in turn develop them for
higher-level positions and exercise decision-making in their
own areas of specialization
 Simplifies the performance appraisal of departments
 Bases of Departmentation
1. Functional Departmentation
 Functional departmentation is one of the most popular ways
to group activities in organizations
 It is the process of grouping the activities of the organization
into separate units or departments based on the essential
functions needed in the organization such as productions or
operations, marketing, finance, engineering and so on
 Other departments may, in turn, establish their own respective
units
Functional Departmentation
 Product Departmentation
 Grouping activities on the basis of products or product lines
has been growing in importance in multiline, large-scale
enterprises.
 Organizations with diversified products are organized
according to their product lines.
 For each product manufactured by the enterprise, there is a
separate department that looks after its operation. Each
product requires special knowledge and placed under a
separate department.
 Examples: Computer sales and computer services in the data
processing division, cosmetics and chemical divisions in the
domestic operations appliance.
Product Departmentation
 Geographic/Territorial Departmentation
 Common in enterprises that operate over wide geographic
areas.
 This is grouping of activities based upon location, area or
territory.
 This method becomes feasible when nearness to local
conditions appears to offer advantages such as in terms of
saving time and cost of operation. It provides good
arrangement for training and developing, executives in a
certain area. However, it necessitates the employment of large
number of managers.
 Territorial departmentation is especially attractive to large-
scale firms or other enterprises whose activities are physically
or geographically dispersed.
Geographic/Territorial Departmentation
 Customer Departmentation
 Customers are the key to the way activities are grouped when
each of the different things an enterprise does for them is
managed by one department head.
 Business owners and managers frequently arrange activities on
this basis to cater to the requirements of clearly defined
customer groups, and educational institutions offer regular and
extension courses to serve different groups of students.
 This is when great emphasis is placed on effectively serving
different groups of customers.
 When an organization’s clients have very different needs and
the organization seeks to provide to their specific
requirements, this approach becomes more valuable.
Customer Departmentation
 Process Departmentation
 This is when special skill is needed to operate different
machines. Manufacturing firms commonly group activities
according to the product’s manufacturing process.
 The physical layout of a typical manufacturing plant permits
raw material to enter the plant, move through the various
manufacturing processes, and exit as a finished product. It is
most commonly found in production departments and
frequently at operative levels.
Process Departmentation
 Choosing the pattern of departmentation
 There is no one best way of department zing that is
applicable to all organizations and all situations.
 Managers must determine what is best by looking at the
situation they face – the jobs to be done and the way they
should be done, the people involved and their personalities,
the technology employed in the department, the users being
served and other internal and external environmental
factors in the situation.
 However, if they know the various departmentation
patterns, and the advantages, disadvantages, and dangers of
each, practicing managers should be able to design the
organization structure most suitable for their particular
operations.
 The Concept of Power, Authority and
Responsibility
 Authority may be viewed as the cement that holds the various
levels of an organization together complemented by equivalent
responsibility.
 Power, a much broader concept than authority, is the ability of
individuals or groups to induce or influence the beliefs or
actions of other persons or groups.
 Authority is the right in a position to exercise discretion in
making decisions affecting others. It is, of course, one type of
power, but power in an organization setting.
 The Sources of Power
John French and Bertram Raven have identified five sources or basis of
power.
1. Reward Power is defined as power derived from the ability to reward
another person, for carrying out orders, which may be expressed or
implied.
2. Coercive Power: negative side of reward power. Influencer’s ability to
punish the influencee for not meeting requirements. Punishment may
range from a reprimand to loss of a job.
3. Legitimate power is defined as power that exists when a subordinate or
influence acknowledges that the influencer has a “right” or is lawfully
entitled to exert influence-within certain bounds; also called formal
authority. Such power can be downward or upward
4. Expert Power: power based on the belief that the influencer has specific
knowledge or expertise that the influence does not.
5. Referent power: power based on the desire of the influencee to be like or
identify with the influencer. For example, popular, conscientious managers
will have referent power if employees are motivated to emulate their work
habits.
The Concept of Authority and Responsibility
 Authority is the right to give orders and the power to exact
obedience. It is the power to make decisions, which guide the
actions of others. Thus, a person with authority influences the
behavior of others. It is derived from the person’s official position in
the organization, not because of their personal characteristics.
 Responsibility is the obligation of an individual to carry out
assigned duties to the best of his or her ability. It is what one is
expected to perform a duty as required by the superiors or as
prescribed by the job.
 Managers with authority are responsible for other people, money,
and resources.
 Unlike authority, responsibility cannot be assigned or given away. It
must be willingly accepted.
 Thus, authority should be given only to managers who are willing to
assume an equal amount of responsibility.
 Sources of Authority
 There are three major theories about the sources of authority.
1. Top-down/classical view of authority: This is also called
formal or institutional authority. It assumes that authority
originates from the top high-level of the organization and
passed lawfully to the bottom. That is, authority flows from
the elected president or owner to middle managers and then,
to first-line managers.
2. Acceptance or bottom-up theory of authority: directives of
management will be implemented as long as the subordinates
accepted it & willing to implement it. The formal authority
becomes nominal until subordinates accept it.
3. The competence theory of authority. A person gives orders
or command because of his/her technical know-how,
intelligence, and other personal qualities.
 Delegation
 Delegation is conferring authority from one manager or
organization level to another in order to accomplish particular
assignments.
 It is the process of allocating tasks to subordinates, giving
them adequate authority to carry out those assignments, and
making them obligated to complete the tasks satisfactorily.
The Importance of Delegation of Authority
1. Enables managers to perform higher-level work
2. Results into better decisions
3. Improves morale and enterprise sprit of subordinates.
4. Without delegation, the chief executive, would be the only
management member of the enterprise
5. Delegation can develop subordinates
 Factors Determining Delegation
 Managers can be reluctant to delegate authority, and they often
have a number of causes for not delegating:
 “I can do it better myself”;
 “My employees just aren’t capable enough”;
 “It takes too much time to explain what I want done.”
 The real reason may be the manager is simply too
disorganized or inflexible to delegate work effectively.
 Other barriers to delegation are:
 Insecurity and confusion about who is ultimately responsible for a
specific task- the manager or the employee
 Managers cannot sidestep their responsibility to higher-ups
 Managers feel that it reduces their own authority
 Managers feel threatened if their employee does “too good” a job
 Some employees want to avoid responsibility & risk
 Factors Determining Delegation (cont.)
 The following factors have effects on delegation:
1. Mental and physical capacity of subordinates to carry out the
desired task
2. The willingness and attitude of subordinates to accept
responsibility
3. The willingness of managers to delegate authority
4. Feeling of loosing importance and position in the organization
5. The amount and quality of information on which subordinates
base their decisions
6. The nature and amount of work to be carried out by
subordinates
7. The type & dynamic growth of the organization, the expansion
of the organization necessitates the delegation of authority.
 Guidelines for Effective Delegation
 The practice of delegation challenges managers and
employees alike to pay close attention to the terms of their
working relationships. Delegation will have a better chance of
succeeding, for all parties concerned, if they work to build
trust in each other.
 Prerequisites:
 Manager’s willingness to give employees freedom to
accomplish delegated tasks
 Open communication between managers and employees
 Manager’s ability to analyze such factors as the
organization’s goals, the task’s requirements, and the
employee’s capabilities
 Tasks of Effective Delegation
 Decide which tasks can be delegated
 Decide who should get the assignment
 Provide sufficient resources for carrying out the delegated task
 Delegate the assignment: in doing so, effective managers provide all
relevant information on the task.
 Be prepared to run interference, if necessary
 Establish a feedback system
The Process of Delegation
 The three core steps in the process of delegation include:
i. Identify and assign the tasks
ii. Grant the authority to people who will perform the work
iii. Make the workers responsible for the job
 Basic Principles/Guidelines of Delegation
 Authority and responsibility should be equivalent
 Avoid dual subordination/maintain unity of command
 The exception principle must be followed. Within limits set by their
superiors. They should refer their superiors for problems outside of their
scope
 Although authority and responsibility might be delegated, they can never
be abdicated, misused, or arbitrarily acted rather they are subjected to the
policies, rules, procedures of the organization and the limits set by
superiors
 Can be increased, reduced, or totally overturn back from the
subordinates when there are changes in the structure of the organization,
its policies, and procedures.
 Delegation can be downward, upward, or sidewise
 The subordinates receive authority from their superiors and yet the
superiors retain all the authority of the organization
 A manager cannot delegate authority, which he/she does not have
 Delegation nay be specific or general, written or oral
 Forms of Organization Structure
 Different managers need different decision-making power to
make the groups effort meaningful. They need to create a
system of accountability, management control, and
performance evaluation. Based on these assumptions, the
major forms of organization structure include: line
organization, line and staff organization, functional
organization, and the matrix organization.
.
 Line Organization
Oldest and the simplest form of organization. All other kinds of structures
are modifications of line structures.
It is characterized by vertical relationships, which connects jobs and
positions at each level with those above and below it. It thus, creates a
network of hierarchy throughout the organization based on a chain of
command.
Line units are those that contribute directly to accomplishing an
organization's goals. Thus, managers, who work in line units, have line
authority that follows an organization's direct chain of command, starting
from board of directors and extending down through intervening layers to
first-line managers.
Therefore, production, sales, and finance are considered the major line
units in a manufacturing firm because they contribute directly to achieving
the objectives of producing and selling goods at profit. Similarly, infantry,
artillery, and armor are line units in an army because they contribute directly
to achieving the objectives of meeting and defeating an enemy
 Line authority
Line authority: the authority of those managers directly
responsible, throughout the organization’s chain of command, for
achieving organizational goals. They are directly responsible for
achieving organizational goals. Line authority is based primarily
on legitimate power.
General
General
Manager
Manager

SalesManager
Manager Production Manager Finance
Sales Production Manager Finance
Manager
Manager

Salesworker
Sales worker ProductionWorker
Production Worker FinanceWorker
Finance Worker
 Line and Staff organization
 When organizations grow in scope and complexity, it becomes
necessary to seek the assistance of specialized staff.
 Line and staff authority allows staff units to provide
specialized expertise, advice, support, or service to line
managers in the effective performance of their functions.
 They have no general command authority over line mangers
but within their own units staff specialists are related with one
another in a scalar chain.
 The staff units contribute indirectly to accomplishing an
organization's goals. Each staff is a specialist in his/her area
and operates with considerable independence.
 They are customarily indicated on organization charts by a
broken line. This shows that they fall outside an organization's
direct chain of command.
 The Principles of Line & Staff Relationships
 The principle of staff advice: The staff has no right of
command rather the right of advice, suggestion, and
recommendation. If the staff gives orders it violates unity of
command or breaks integrity.
 The principle of limiting the staff economy: In order for a
line to perform with maximum efficiency, the staff should
operate with less than maximum cost or expense.
 The principle of staff independence: The staff personnel must
be sufficiently secured so that they can provide worthy and
confidential advice.
 Generally, line and staff relationship work with a principle
"the staff thinks while the line acts."
 Functional Structure
 Functional authority is the authority of members of staff departments to
control the activities of other departments as they relate to specific staff
responsibilities.
 The role of staff members – to provide advice and service to line members
–implies that staff lacks independent, formal authority.
 In reality, staff departments, especially those responsible for audit
functions, may have formal authority over line members within the limits
of their function.
 This authority exists when staff units exercise command authority over
specific matters of line functions.
 Example, if a quality control manager prescribes quality specifications, it
binds the production manager and the quality control manager exercises
functional authority over the latter. Similarly the personal manager may
lay dawn specifications or systems that line managers are obliged to follow
when hiring and promoting workers.
 Functional managers generally lay dawn policies, methods, and procedures
to be followed by line managers and exercise functional control to ensure
whether all these are followed or not.
 Matrix Organization
 Introduced in response to the growing complexity and size of
technically oriented enterprises. It is the result of the need for
specialized decision making and to achieve more balanced
form of organization structure.
 It organizes activities by combining functional & task force
or product departmentalization to form a grid or matrix.
 As a result, many employees belong to two groups
simultaneously, a functional group & a product/project group.
 They report to two or more superiors (a permanent boss in a
functional or technical department and one or more temporary
bosses called project managers or administrators who direct
various projects.
 Characteristics of Functional and
Project Managers
 Functional Managers’ Characteristics
 Provide line service in their area of discipline.
 Have a line authority over subordinates.
 Emphasize their area by ignoring other tasks, which the organization
might have to perform.
 They concentrate on technical performance decisions.
 Project Mangers’ Characteristics
 Project managers are responsible to accomplish specific projects that
require personnel from outside (functional departments).
 Project managers do not work in the normal superior subordinate role
of functional managers.
 Coordinate or integrate the efforts of people drawn from various
functional areas or departments.
 Use different management (motivation and control) techniques to
coordinate varied and highly competent professionals.
 When to use matrix
 It is generally recommended that the following situations must
be considered in using, the matrix organization.
 When complex, short-run products are an organization's principal
output.
 When a complicated product design calls for both innovation and
timely completion.
 When several kinds of sophisticated skills are needed in designing,
building and testing a product. Skills that need constant updating and
development.
 When a rapidly changing marketplace calls for significant changes in
products.
 The matrix organization, however, violates the unity of
command principle. Both supervisors may call upon a worker
at the same time. This special arrangement can cause power
struggles and conflict of interest.