Chapter Four

Organizing
1. What is organizing?
The planning process determines what and how to do, what actions to be
taken to accomplish predetermined objectives, how long it will take and
where it will take.

After planning comes organizing; and organizing is highly related with

planning.
Organizing is the process of identification, classification and grouping of
tasks that are necessary to achieve objectives and assigning of resources
and designing hierarchy of decision-making relationship i.e. it is deciding
how best to group organizational activities and resources.

Organization is a group of people working together in some type of

coordinated efforts to achieve commonly stated objectives.

The main objectives of organizing are

 Determining what kind of activities should be performed to
materialize objectives
 Classifying those activities and grouping them based on certain
criteria
 Assigning resources and delegating authority
 Creating hierarchy of decision making

There are six building blocks or elements of organizing that managers can
use in constructing an organization. They are
1. designing jobs 5. coordinating activities
2. grouping jobs between jobs &
3. establishing reporting 6. differentiating between
relationships b/n jobs positions
4. distributing authority among jobs
1. Designing jobs: Job design is the first building block i.e. designing
jobs within the organization. Moreover, it is the determination of work-
related responsibilities for positions created in the organization. Job
design is a fundamental cornerstone of organizing.
Job specialization: It is the degree to which the overall task of the
organization is broken dawn & divided in to smaller component parts. It
evolved from the concept of division of labor.
Alternatives to specialization
To counter problems associated with specialization, managers have
sought other approaches to job design. The five alternative approaches to
job specialization are

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1. Job rotation 4. Job characteristics approach and
2. Job enlargement 5. the work team
3. Job enrichment the
They are structural techniques.
Job rotation is an alternative to job specialization that involves
systematically moving employees from one job to another. i.e. moving
from job to job.

Job enlargement is an alternative to job specialization that involves

increasing the total number of tasks workers perform.
Job enrichment: is an alternative to job specialization that evolves
increasing both the number of tasks the worker does and the control the
worker has over the job.
Job characteristics approach is an alternative to job specialization that
suggests that jobs should be diagnosed and improved along five core
dimensions, taking into account both the work system and employee
preference. The five core dimensions along which the jobs should be
diagnosed and improved are
1. Skill variety: the number of tasks a person holding the position does
a job
2. Task identity: the extent to which the worker holding the position
does a complete or identifiable portion of the total job.
3. Task significance: the perceived importance of the task
4. Autonomy: the degree of control the worker holding the position has
how the work is performed,
5. Feed back: the extent to which the worker knows how well the job is
being performed.

Formal Vs informal organization

Organizations can be classified into formal and informal types.
Formal organization
Formal organization is an organization that is deliberately and rationally
designed and approved by management through organizing process to
achieve organizational goals/ objectives.
Common characteristics of formal organization are
1. Consciously designed: Formal organization are purposefully
designed and established to attain certain end results.
2. Based on delegated authority: In a formal organization each
employee has delimited authority; therefore there is superior-
subordinate relationship.
3. Organizational chart is drawn: Organizational chart shows jobs &
departments, and it is the most tangible depiction/ picture of an
organizational structure.

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4. Deliberately impersonal: Positions in an organization are not
personal properties. They are always open to some one who fit the
position. People who meet the requirements of the job can fulfill the
position.
Informal organization
Informal organization refers to people in-group associations, but these
associations are not specified in the structure of the formal organization.

They are not included or established deliberately/ officially in the formal

organization channel but formed adjacent to the formal organization.

They always exist in the formal organization; nothing can destroy them;
they can not be avoided.
Managers should recognize that it exists in a formal organization; and
should try to use it for the benefit of the formal organization.
Reasons for the formation of informal organization are
1. Mutual benefit: Members of an organization have their own personal
interests that tie them to their colleagues so as to meet these
interests. Hence the communality of people’s interest in the formal
organizations leads to the formation of informal organization.
2. Friendship: Members of an organization establish friendship among
themselves due to different reasons. This friendship among the
members paves the way for the formation of informal organization.
3. The need to fulfill social needs: A need to be the member of a
society put the workers in the organization together. Therefore, one of
the mechanisms through which people in the organization meet their
social needs is being the member of informal organization.
4. Physical work condition: People working in the same unit are
closely related. Hence, working in proximity or together is one of the
reasons for the formation of informal organization.
5. Administrative practice: Some managers encourage while others
suppress the formation of informal organization. Thus the type of
management entertained by managers is the result for the
establishment of informal organization.
Characteristics of informal organization
1. Group norms: This is the core behavior among the workers in the
informal organization. There are agreements/ rules and regulations
which may not be written that govern the behavior of members.
The members act accordingly with out showing any deviation.
2. Group cohesiveness: Members of the informal organizations
basically have strong relationships. The more the group sticks
together the more they will be successful in attaining the
objectives.

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 3. Group leadership: Members in the informal organization select
someone who is most active among the others as a leader, and
such people are conventional leaders.
4. Communication network: It is also called grapevine. It is the
network outside the formal communication channel established by
the organization;.
5. Lifespan and purpose: Informal organizations have short life
span in comparison with formal organization. Therefore, they cease
to exist when the members meet their interests and re-established
when another need arises.
6. Existence of a number of informal organizations in a formal
organization: The divergent nature of people’s interest, their
feeling, tradition, attitude, etc, lead to the formation of different
informal organizations in a big formal organization
7. Informal organizations gradually con develop in formal
organization: Informal organizations gradually can emerged as
formal organization.
Advantages and disadvantages of informal organizations
Advantages
1. They are additional assets for the formal organization- because
they may come up with innovative ideas to promote the work of the
organizations.
2. They could be useful channels of communication. In the informal
organization information can be easily and rapidly reach the members
of the organization through their informal ways of communication.
3. They provide satisfaction and stability in the organization.
When workers are given opportunity to establish the informal
organizations, they entertain their idea that leads them to be satisfied
and stable in the organization.
4. Their existence alerts managers to plan and act accordingly
than otherwise. A manager becomes watchful more than any other
time when there are informal organizations to check whether they are
out of line or not. And if the activities seem against the interest of the
formal organization, necessary measures can be taken to normalize or
reverse the condition.
5. They inform managers sensitive issues that would be
embarrassing if formally released. Some information may destruct
the normal organizational climate if formally released. In such cases,
informal organizations informally disseminate the information to the
group’s endurance and then the manager also becomes aware of the
consequences if formally communicated.
Disadvantages
1. Resistance to change: There is often a tendency to resist changes.

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 2. Role conflict: Both types of organizations have their own objectives.
These objectives will not be the same and this may raise role conflict
in the organization.
3. Rumor: Managers may not equally release information to the
members of the organization. When there is too much secrecy or
ambiguous situations informal organizations disseminate distorted
information.
4. Conformity /compliance: Some leaders of informal organizations
may have hidden agenda or promote destructive actions, hence such
leaders may use the members as an instrumental to create challenge
to the leaders of formal organization.
Steps of organizing process
Step 1. Consider plans and goals: Organizing process should consider
this step before attempting to perform other steps. Plans and their goals
affect organizing and its results of the organization. Organization is
formed to achieve the goals already formulated during planning process.
Organizing will create new structure, relationship and modify the existing
ones.
Step 2. Determine the work activities necessary to accomplish
objectives: This is identifying/ knowing all jobs that are going to be
performed. i.e. creating a list of tasks to be accomplished.
Step 3. Classifying and grouping activities: Division of work creates
the need for coordination. In order to provide a smooth flow of work, all
closely related and similar activities must be grouped together.
Division of labor is a breaking down the work into its basic components/
activities, and assigning them to individuals/ be specialists and performing
the job more efficiently and effectively. After classifying and grouping
tasks into related work units comes departmentalization.
Step 4. Assign work and delegate appropriate authority: Activities
that are departmentalized have to be assigned to individuals by giving
appropriate authority to accomplish the tasks.
Step 5. Design a hierarchy of relationships: This step requires the
determination of both vertical and horizontal operating relationships of
the organization as a whole. Vertical structuring of an organization results
in decision making hierarchy showing who is in charge of each task. It
creates the chain of command or hierarchy of decision making levels in
the company.
The horizontal structuring has two important effects.
 It defines the working relationships between operating departments
 It makes the final decision on the span of control (the number of
subordinates under the direction) of each manager.
The result of this step is to complete organizational structure.
Organizational structure is shown usually by an organization chart.

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Organization chart represents basic framework of the organization. It tells
us
1. who reports to whom – the chain of command
2. how many subordinates work for each manager – span of control
3. channel of communication
4. how the company is structured – e.g. by function, customer or
product
5. the work being done in each job – the levels on the box
6. the hierarchy of decision making – where the decision maker is
located
7. when the existing structure is formulated
8. types of authority and relationship – solid line connect line of
authority; doted lines show staff and functional authority
Organizing process is an ongoing and should not be viewed as a one time
process. It results organization structure and organization chart.

Departmentalization
Departmentalization is the process of grouping/ combining jobs into
groups or manageable units. A manager must have basis for combining
jobs. The main bases for departmentalization are
1. Function 4. Customer
2. location or Geography 5. process
3. Product

1. Functional departmentalization: The common form where activities

are grouped based on similarity in function or content.

General Manager

Marketing Productio Finance Personne R&D

n l
2. Geographic departmentalization: It is also called location
departmentalization or departmentalization by territory. It is grouping
of jobs on the bases of geographic areas. It is established when
accompany has different branches that are geographically dispersed.

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 General Manager

Region Region Region

one two three
3. Product based departmentalization: It is grouping on the bases of
products (goods/ services). Such kind of departmentalization is best to
large and multiple product organizations.
General Manager

Shoe Clothing Cosmetic

Dep’t Dep’t Dep’t
4. Customer based departmentalization: It is grouping of tasks
based on the type of customers served. Customers are the key to the
way activities are grouped. Such forms of departmentalization are
more common in banking, book publishing and food industry
General Manager

Women Men shoe Kids shoe

shoe
5. Departmentalization by process: It is appropriate when
departmentalization by production is inflow. Under it activities are
grouped on the basis of various manufacturing process.
General Manager

Drilling Grinding Welding Assembl Finishi

ing ng
Multiple bases for departmentalization: It is the combination of two
or more departments discussed above. It helps to divide work
exhaustively. It is also a way of combining jobs into departments.
Major concepts of organizing
In the process of management, conceptualization and application of
certain major organizational concepts are necessary. Thus, some major
organizational concepts and principles that managers must be familiar are
 Authority

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  Power
 Delegation
 Accountability
 Unity of Command
 Span of control; and
 Centralization Vs Decentralization
Authority
All managers in an organization have authority. They have different
authorities based on the management position they occupy.
Authority is the right to act, or to give order or command, or deploy
resources in an organization. It is the power derived from the rights that
comes with position.
.
Essential features of authority
 It is the relationship between two individuals’ one superior and the
other subordinate.
 It is the right to act.
 It is the power to make decisions and seeing that they are carried
out.
 It is used to achieve organizational goals.
Types of authority: The process of accomplishing organizational
objectives through people entails the establishment of relationship among
the members of the organization and different hierarchies of the
management. This again results the presence of the three distinct types
of authority in business organization, namely line authority, staff
authority, and functional authority.
A. Line of authority: Line authority is the relationship between superior
and subordinates. It is directed supervisory relationship. It enables the
manager to tell subordinates what to do. It is represented by the chain
of command. Line authority flows downward in an organization. E.g. the
general manager has line authority over the marketing manager,
production manager, finance manager, personnel manager. A manager
supervising employees or other managers has line authority
B. Staff authority: Staff authority is the right to give advice. It is
advisory in nature. Thus the people in the staff position assist and
advise the line manager. People in theses positions have the authority
to offer advice and recommendations. E.g. legal service exercises staff
authority by advising general manager of the organization; public
Relation service exercises staff authority by releasing information
about the organization on the behalf of the general manager or other
managers. It is an advisory authority for the staff to provide advice or
technical assistance for manager. Advisory authority doesn’t provide

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 any basis for direct control over subordinates or activities of other
departments
C. Functional authority: Functional authority is an authority exercised
or the right to control activities in other departments. It is an authority
delegated to an individual or department over specific activities
undertaken by personnel in other departments. Functional authority is
usually limited in scope and duration. It is exercised one level below
the person who has it. Incase, the general manager doesn’t have the
skills and knowledge to handle a given problem or situation, s/he gives
the authority to those who have the expertise.
General Manager

Legal service PR
service

Marketing Production Personnel Financial

Mgr. Mgr. Mgr. Mgr.
Indicates line authority Indicates
functional authority

Line and staff departments

 Line departments: Departments are normally designated as line
departments. Line departments are departments established to meet
the major objectives of the organization. They are headed by line
managers. Line managers exercise line authority.
 Staff departments: Staff departments are supporting staff those
provide assistance to the line departments and to each other. They
are created on the basis of the special needs of the organization. Staff
departments play vital role in the success of a company. They include:
Public Relations; legal service; personnel service; and computer
service.
Unity of Command: The principle requires that each person within
the organization takes orders from and report to only one person. Unity
of command should guide any attempt to develop operating
relationships.
Although each person should have only one boss, the operating
relationships developed through staff departments mean that workers
may have more than one supervisor in a given situation—or at least
perceive that they do from the style with which advice is given.

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Power
The ability to influence others to do something

Sources of Power
 Legitimate or Position Power: Holding a managerial position with
its accompanying authority provides a manager with a power base.
 Reward Power: The opposite of coercive power, reward power
comes from the ability to promise or grant rewards.
 Coercive Power: Coercive power is dependent on fear. A person
reacts to this power out of the fear of the negative results that may
happen if one fails to comply.
 Referent Power: Referent power is based on the kind of
personality or charisma an individual has and how others perceive
it.
 Expert Power: Persons who have demonstrated their superior skills
and knowledge possess expert power.

Delegation: Every manager must delegate tasks/ duties to

subordinates since management means getting work done through
others.

Effective managers normally delegate as many operation tasks as

possible to subordinates and concentrate their efforts on core
managerial tasks. Delegation is authorizing subordinates to act in a
certain manner independently. It is a concept describing the passing of
formal authority to another person or passing authority downward to
subordinates.

Delegation is a two side relationship, i.e. the assigner and assignee. It

is an act of trust; an expression of confidence; requires necessary skills
& strength, and requisite application and dedication to duties.

Delegation occurs for two purposes

 When managers are absent from their jobs
 Subordinates act on behalf and exercise authority.
 To develop subordinates and facilitate decision making process
Accountability: Accountability means taking the consequence - either
credit or blame. If one accepts assignments and authority, s/he is
(answerable) for the actions taken. A manager is accountable for the
use of his/her authority and performance, and the performances and
actions of subordinates.

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 Span of control: Span of management/ control refers to the number
of subordinates that single manager can effectively supervise or should
have to direct.
As a general rule, the more complex a subordinate’s job, the fewer will
be the manager’s number of subordinates. And the more routine the
work of subordinates, the grater will be the number of subordinates
that can be effectively directed and controlled.

Factors that influence spans of control of a manager are

1. The ability & the experience of a manager;
2. the complexity & variety of the subordinates’ work
3. the qualification of the manager and subordinates;
4. growth in competence and experience in personnel
5. The company’s philosophy towards centralization or
decentralization in decision making.
If the manager has
 Too many people to supervise, the subordinates will be frustrated
by their ability to get immediate assistance from their boss; time &
other resources could be wasted; plans, decisions& actions be
delayed or made without proper control or safeguard.
 Too few people to supervise, the subordinates could become
overloaded or over supervised; and frustrated & dissatisfied.
 The more capable & experienced the subordinates, the more that
can be effectively supervised by one competent manager; the less
time is needed to train & acclimate; the more there is to devote to
producing output.
Centralization Vs decentralization
 Centralization: It is the concentration of authority for decision making
within the hands of one or few. In centralization
 There is little delegation of authority
 Rules, power & discretion are concentrated at the top level
 Control & decision making reside at the top level of management
The more highly centralized the organization, the more control and
decision making will be exercised at the top.

Special circumstances forcing managers to reserve/ keep authority and

centralize decision making power are
1. To facilitate personal leadership: Centralization generally works
well in the early stages of organizational growth. Dynamic and talented
leader can derive advantages in a small firm in the form of quick
decisions, enterprising & imaginative action, and highly flexible.

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2. To provide for integration: Under centralization the organization
moves as a unit. It keeps all parts of the organization moving together
harmoniously toward a common goal.
3. To handle emergencies: Centralization is highly suitable in the time
of emergency. The resources and information can be mobilized quickly.
Centralization makes
 difficult for managers to process the bundles of data in time and
take decision in an appropriate manner
 the manager burdened with a great amount of detailed &
exhaustive work
 managers to work painfully long hours
 forces top management to posses a broad view they may have
beyond their capacity
 the vast amount of power given to a few people may be abused
 the organization is highly vulnerable to what happens to its dynamic
and talented top management people
Centralization floods communication lines to a few individuals at the top of
the organization. As a result the speed of communication upward and
decision processes are slow. Centralization kills the initiative; self reliance
and judgment of lower level personnel.
 Decentralization
Decentralization is a systematic effort to delegate to the lowest levels all
authority except that which can be exercised at central point.

Some guidelines to identify the degree of decentralization in a company

1. The greater the number of decisions made at the lower level of
management, the more the company is decentralized.
2. The more the important decisions are made at the lower level, the
greater is the decentralization.
3. The more flexible the interpretation of the company policy at the
lower levels, the greater the degree of decentralization.
4. The more widely dispersed the operations of the company
geographically, the greater the degree of decentralization.
5. The less the subordinate has to refer to his/her manager prior to
decision, the greater the decentralization.
Decentralization is extremely beneficial but also dangerous unless it is
carefully constructed and constantly monitored.
Advantages of decentralization
Decentralization
 reduces the work load on overburdened manager.
 brings the decision making process closer to the scene of the action.
 facilitates product diversification. i.e. it treats each product lines as
separate and important.

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  gives individuals an opportunity to learn by doing.
 facilitates effective control. i.e. it often results in improved controls
& performance measurements.
 ensures participative management.
Disadvantages of decentralization
 Conflict: Decentralization puts increased pressure on each heads to
realize profit at any cost. To meet this each deviate or veer away
form corporate objective. i.e. leads to competition that may
ultimately result in bitter individual rivalries.
 Cost or duplication: Decentralization results in duplication of staff
effort. To be independent each division should have access to
purchasing, personnel, etc. hence each carry a large group of
specialists at numerous cost.

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