CHAPTER FOURTHE ORGANIZING FUNCTION

CHAPTER FOUR

THE ORGANIZING FUNCTION

INTRODUCTION TO CONCEPT
Organization is the backbone of management. Without efficient organization,
no management can perform its functions smoothly. Sound organization
contributes greatly to the continuity and success of the enterprise. Once
Andrew Carnagie, an American industrialist said, "Take away our factories,
take away our trade, our avenues of transportation, our money. Leave
nothing but our organization, and in four years we shall have re-established
ourselves". That shows the significance of managerial skills and organization.
However, good organization structure does not by itself produce good
performance – just as good constitution does not guarantee great presidents
or good laws a moral society. But a poor organization structure makes good
performance impossible, no matter how good the individuals may be. The
right organizational structure is the necessary foundation; without it the best
performance in all other areas of management will be ineffectual and
frustrated.
MEANING AND CHARACTERISTICS OF ORGANISATION
The term 'organization' connotes different meanings to different people.
Many writers have attempted to state the nature, characteristics and
principles of organization in their own may. For instance, to the sociologists
organization means a study of the interactions of the people, classes, or the
hierarchy of an enterprise; to the psychologists organization means an
attempt to explain, predict and influence behaviour of individuals in an
enterprise; t o a top level executive it may mean the weaving together
the functional components in the best possible combination so that an
enterprise can achieve its goals. The word 'organization' is also used widely
to connote a group of people and the structure of relationships.

Some important definitions of organization are given below : "It is grouping

of activities necessary to attain enterprise objectives and the assignment of
each grouping to a manager with authority necessary to supervise it". Koontz
and O'Donnel
"The process of identifying and grouping the work to be performed, defining
and delegating responsibility and authority and establishing relationship for
the purpose of enabling people to work more effectively together in
accomplishing objects". Louis A. Allen
"The structure and process by which a cooperative group of human beings
allocates its tasks among its members, identifies relationship, and integrates
its activities towards common objectives". Joseph L. Massive
From the above definitions, it is clear that organizing is the process of
determining the total activities to achieve a given objective, grouping and
assigning of activities to individuals, delegating them authority necessary to

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perform the activities assigned and establishing authority relationship among

different positions in the organization.
An analysis of the above definitions reveals the following
characteristics of an organization:
1. It is a group of individuals which may be large or small.
2. The group in the organization works under the executive leadership.
3. It is a machine or mechanism of management.
4. It has some directing authority or power which controls the concerted
efforts of the group.
5. The division of labour, power and responsibilities are deliberately planned.
6. It implies a structure of duties and responsibilities.
7. It is established for accomplishment of common objectives
8. It is a functional concept.
Sound organization brings about the following advantages:
1. Facilitates attainment of the objectives of the enterprise.
2. Facilitates optimum use of resources and new technological development.
3. Facilitates growth and diversification.
4. Stimulates creativity and innovation.
5. Facilities effective communication.
6. Encourages better relations between the labour and the management.
7. Increase employee satisfaction and decreases employee turnover.
6.3 NATURE OF ORGANISATION
The term 'organization' is used in two different senses. In the first sense it is
used to denote the process of organizing. In the second sense, it is used to
denote the results of that process, namely, the organizational structure. So,
the nature of organization can be viewed in two ways:
(a) Organization as a process; and
(b) Organization as a structure or framework of relationship.
Organization as a process: As a process, organization is an executive
function. It becomes a managerial function involving the following activities:
(i) Determining activities necessary for the accomplishment of the business
objective.
(ii) Grouping of interrelated activities.
(iii) Assigning duties to persons with requisite competence,
(iv)Delegating authority, and
(v) Coordinating the efforts of different persons and groups.
When we consider organization as a process, it becomes the function of
every manager. Organizing is a continuous process and goes on throughout
the life time of an enterprise. Whenever there is a change in the
circumstances or material change in situation, new type of activities spring
up. So, there is a need for constant review and reassignment of duties. Right
persons have to be recruited and necessary training has to be imparted to
enable them to be competent to handle the jobs.
The process of organization thus, involves dividing the work into rational way
and interpreting the activities with work situation and personnel. It also
represents humanistic view of the enterprise since it is the people which are

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uppermost in the process of integration of activities. Continuous review and

adjustment makes this dynamic as well.
Organization as a structure or framework of relationships: As
structure, organization is a network of internal authority, responsibility
relationships. It is the framework of relationship of persons, operating at
various levels, to accomplish common objectives. An organization structure
is a systematic combination of people, functions and physical facilities. It
constitutes a formal structure with definite authority and clear responsibility.
It has to be first designed for determining the channel of communication and
flow of authority and responsibility. For this, analysis of different types has to
be done. Peter F. Drucker suggests following three types of analysis :
(i) Activities analysis
(ii) Decision analysis, and
(iii) Relations analysis,
A hierarchy has to be built-up i.e., a hierarchy of positions with clearly
defined authority and responsibility. The accountability of each functionary
has to be specified. Therefore, it has to be put into practice. In a way,
organization can be called a system as well.
The main emphasis here is on relationships or structure rather than on
persons. The structure once built is not liable to change so soon. This
concept of organization is, thus, a static one. It is also called classical
concept. Organization charts are prepared depicting the relationship of
different persons.
In an organizational structure, both formal and informal organizations take
shape. The former is a per-planned one and defined by the executive action.
The latter is a spontaneous formation, being laid down by the common
sentiments, interactions and other interrelated attributes of the people in the
organization. Both formal and informal organizations, thus, have structure.

STEPS IN THE PROCESS OF ORGANISING

The managerial function of organizing may be called as the 'process of
organizing'. When the objectives have been set and policies framed, the
necessary infrastructure of organization has to be built up. The concentration
goes to activities and functions. These form 'the building blocks' of the
organizational structure. There are no such rules as to which will lead to the
best organizational structure. But the following steps can be of great help in
the designing a suitable structure, which will laid in achieving enterprise
objectives:
1. Clear definition of objectives: The first step in developing an
organizational structure is to lay down its objectives in very clear terms. This
will help in determining the type, stability and basic characteristics of the
organization. In fact, organization activities are detailed in terms of objective
to be achieved.
2. Determining activities: In order to achieve the objectives of the
enterprise, certain activities are necessary. The activities will depend upon
the nature and size of the enterprise. For example, a manufacturing concern

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will have production, marketing and other activities. There is no production

activity in retail establishment.
Each major activity is divided into smaller parts. For instance, production
activity may be further divided into purchasing of materials, plant layout,
quality control, repairs and maintenance, production research etc.
3. Assigning duties: The individual groups of activities are then allotted to
different individuals according to their ability and aptitude. The responsibility
of every individual should be defined clearly to avoid duplication and
overlapping of efforts. Each person is given a specific job suited to him and
he is made responsible for its execution. Right man is put in the right job.
4. Delegating authority: Every individual is given the authority necessary
to perform the assigned activity effectively. By authority we mean power to
take decisions, issue instructions, guiding the subordinates, supervise and
control them. Authority delegated to a person should commensurate with his
responsibility. An individual cannot perform his job without the necessary
authority or power. Authority flows from top to bottom and responsibility
from bottom to top.
5. Coordinating activities: The activities and efforts of different individuals
are then synchronized. Such coordination is necessary to ensure effective
performance of specialized functions. Interrelationship between different job
and individuals are clearly defined so that everybody knows from whom he
has to take orders and to whom he is answerable.
6. Providing physical facilities and right environment: The success of
an organization depends upon the provision of proper physical facilities and
right environment. Whereas it is important to have right persons on right
jobs, it is equally important to have right working environment. This is
necessary for the smooth running and the prosperity of the enterprise.
7. Establishment of structural relationship for overall control: It is
very essential to establish well defined clear-cut structural relationships
among individuals and groups. This will ensure overall control over the
working of all departments and their coordinated direction towards the
achievements of predetermined goals of business.
It is thus clear from the foregoing analysis that organization provides a
structural framework of duties and responsibilities. It not only establishes
authority relationship but also provides a system of communication. The
various processes of organization explained above are technically performed
through
A. Departmentation
B. delegation of authority and fixation of responsibilities
C. Decentralization of authority subject to central control through
centralization of decision-making.
OBJECTIVES OF ORGANISING
Every economic activity which is deliberately done has some purpose. When
a group of people assemble without any per-planed aim or purpose, it is not
an organization but just a mob. But when, for instance they are invited to
participate in a conference, an element of purpose has been introduced. A

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purpose refers to commitment to desired future. Objectives and purposes,

generally, are interchangeable terms.
Why should business enterprise organize itself ? The answer to this question
brings out its objectives. Objectives of a business organization are
distinguished from the objectives of other social organizations. To put it more
precisely, the nature of an organization (i.e. political, social, religious or
economic) can only be known by studying its objectives. The following may
be, generally speaking, the objectives (or purpose) of organizing business:
1. Effective management of the enterprise: Effective management
largely depends upon effective organization. It is the effective organization
which ensures proper balance between authority and responsibility. It
achieves a clear line of communication, and defines the areas of work. It is
the organization which allows the top management to concentrate on overall
planning and supervision, leaving the routine work for the lower levels of
administration. It saves the entire enterprise from adhocism, over lappings
and inefficiency.
2. Maximum production at minimum cost: The activities are allotted
according to the principle of division of labour. The efficient system of
organization encourages every employee to make his best contribution in
raising output. The increase in output and control of wasteful expenditure
helps to decrease the cost of production. The profitability of the concern will
also go up.
3. Sustained growth and diversification: A business enterprise should be
a growing organism. With the passage of time, an enterprise must expand its
activities. It should also aim at diversification of products and markets.
A static business soon grows stale and get out of run. It should grow from a
small scale concern to a medium scale one and from a medium scale
concern to large scale one. Organization plays an important role in this
respect. Execution of policies in organized manner builds the necessary
capacity and confidence in undertaking bigger activities.
4. Cooperation of employees: The organizational structure will succeed
only if employees cooperate in the work. The employees learn working in
closer cooperation of others. The management introduces various incentive
schemes and gives monetary and other benefits to the employees, so that
they work in a team spirit.
5. Discharging social responsibility: Maximizing of profits, no doubt, is
the motive of every business. Without profit, no business can exist. But
business is a part and parcel of society at large. It cannot survive long by
exploiting consumers and society. It has to serve the society by providing it
with goods of good quality at reasonable prices. It has to ensure smooth
supply of goods as per the needs to consumers. The service motto cannot be
realized without a well-knit organization structure. So, to discharge social
obligation is an important objective of building up sound organization.
The purpose of sound organization is:
 to establish an activity-authority environment in which people can
perform most effectively.

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 to make group action efficient and effective by providing centres for

decision making and a system of communication to effectively
coordinate individual efforts towards groupgoals.
 to create relationships which minimize friction, focus on the objective,
closely define the responsibilities of all parts and facilitate the
attainment of the objective.
 to subdivide the management process by which plans are translated into
actions so as to make management most effective.
Thus, to sum up we can say that organization is a process by which the
manger brings order out of chaos, removes conflicts between people over
work or responsibility, and establishes an environment suitable for
teamwork.
PRINCIPLES OF ORGANISATION
Effective and efficient working of any organization depends on how the
managerial function of organization is being performed. The function of
organization can be carried effectively with the help of under mentioned
principles:
(i) Division of work: While structuring organization, division of work, at the
very outset, should be considered as the basis of efficiency. It is an
established fact that group of individuals can secure better results by having
division of work. Therefore, while designing the organization we should aim
at making suitable grouping of activities. This is also called the principle of
specialization.
(ii) Attention to objectives: An organization is a mechanism to accomplish
certain goals or objectives. The objectives of an organization play an
important role in determining the type of structure which should be
developed. Clearly defined objectives facilitate grouping of activities,
delegation of authority and consequently effective coordination.
(iii) Span of management: Span of management also refers to span of
control signifying the number of subordinates reporting directly to any
executive. It is an established fact that larger the number of subordinates
reporting directly to the executive, the more difficult it tends to be for him to
supervise and coordinate them effectively.
This important principle of management should also be kept in mind.
(iv)Unity of command: Organization structure should also be designed in
such a way that there exists unity of command in the sense that a single
leader is the ultimate source of authority. This facilitates consistency in
directing, coordinating and controlling to achieve the end objectives.
(v)Flexibility: While designing the organization it should be kept in mind
that organizational structure should not be regarded as static.
Every organization is a living entity in a living environment which is fast
changing . As such there must be sufficient room for changing and modifying
the structure in the light of environmental changes so that the ultimate
objective of the organization is achieved.
(vi)Proper balance: It is important to keep various segment or departments
of an organization in balance. The problem of balance basically arises when

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an activity or a department is further divided and subdivided into smaller

segments. The problems of balancing also crops up with the growing of any
organization in its size and functioning
(vii)Management by exception: It is a fundamental principle that makes
any organization effective in its true sense. This principle signifies that
problems of unusual nature only should be referred upward and decided by
higher level executives in the managerial hierarchy, whereas the routine
problems should be passed on to lower levels and resolved there. Application
of this principle as such, certainly requires adhering to the principle of
delegation of authority. The principle of exception is thus of significant
practical utility and applies to all levels in the organization structure.
(viii)Decentralization: this principle is of great significance to big
organizations. Decentralization implies selective dispersal of authority to
help departments and units to run effectively and efficiently without frequent
interruptions from the top of the enterprise. It requires very careful selection
of what decisions to push down into the organization, of what to hold at or
near the top specific policy making to guide the decision-making, selection
and training of people and adequate control. Decentralization, as such,
embraces all areas of management and evidently is of overwhelming
significance in organization structure.
(ix) Departmentation:
Departmentation is the process of grouping activities into units for purposes
of administration. In other words, it denotes grouping of related jobs and
activities without violating the principle of homogeneity over which an
executive has authority to exercise and assert. The main advantages of
departmentation are that it enables individual executive to mange his
subordinates effectively since a manageable number of persons are brought
under the direct supervision of individual executive.
(x) Efficiency : The organization should be able to attain the predetermined
objectives at the minimum cost. It is done so, it will satisfy the test of
efficiency. From the point of view of an individual, a good organization
should provide the maximum work satisfaction.
Similarly, from the social point of view, an organization will be efficient when
it contributes the maximum towards the welfare of the society.
(xi) Scalar principle: Scalar chain refers to the vertical placement of
superiors starting from the chief executive at the top through the middle
level to the supervisory level at the bottom. Proper scalar chain or line of
command is prerequisite for effective organization.
(xii) Unity of direction: This means that each group of activities having the
same objectives should have one plan and one head. There should be one
plan or programme for each segment of work which is to be carried under
the control and supervision of one head or superior. If different plans or
policies are followed in one department by the subordinates, confusion is
bound to occur.
(xiii) Continuity: The form of organization structure should be such which is
able to serve the enterprise to attain its objectives for a long period of time.

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(xiv) Coordination: The principal of coordination underlines that there

should be proper liaison and cooperation between different departments and
units of work. Unity of efforts for the accomplishment of desired objectives is
the main aim of organization. This can be achieved through the principle of
coordination.
(xv) Authority and responsibility: Authority should commensurate with
responsibility. While assigning the responsibility, authority should also be
assigned. If authority is not granted, the subordinates cannot discharge their
responsibility properly.
ADVANTAGES OF ORGANISATION
The primary duty of management is to achieve the objectives of the
enterprise. The objectives may be social, economic, political or religious.
Proper organization of men, materials, money and equipment is necessary.
Organization is the mechanism through which management directs,
coordinates and controls the business. A sound organization offers the
following advantages, which summarizes its importance:
1. Enhancement of managerial efficiency: A sound organization brings a
proper coordination among various factors of production and leads to their
optimum utilization. It avoids confusion, duplication and delays in work. It
motivates the worker by proper division of work and labour. It reduces the
work load of executives by delegation of authority.
2. Growth, expansion and diversification: Organization provides the
framework within which an enterprise can expand and grow. Through
organization, management can multiply its strength. In a good organization,
the money and effort spent on different activities are in proportion to their
contributions. It is through proper organization setup that many firms have
grown from humble beginning to a giant size.
3. Specialization: A sound organization structure provides the benefits of
specialization. Various activities are allocated between different individuals
according to their qualifications, experience and aptitude. It increases their
efficiency. Systematic organization of activities helps to secure economics
and to minimize costs.
4. Adoption of new technology: A properly designed and well balanced
organization permits prompt adoption and optimum use of technological
improvements. It has the capacity to absorb changes in the environment of
business and to provide a suitable reaction to such changes. A good
organization helps in the development of new and improved means of doing
things.
5. Coordination: Organization facilitates coordination of diverse activities.
Different functions are welded together to accomplish the desired objectives.
Clear lines of authority and responsibility between various positions; ensure
mutual cooperation and harmony in the enterprise. A good organization
enables people to work with team spirit.
6. Training and Development: By delegating authority to lower levels,
training and development of future executives is made possible. A good

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organization puts 'right man at the right job' and provide them right training
and managerial development
programmes. By appointing employees in different department assigning
them different jobs, their training needs can be ascertained.
7. Creativity, initiative and innovation: A good organization encourages
initiative and creative thinking. Employees are motivated to break new
grounds and try unconventional methods. A sound organization offers the
scope for recognition of merit followed by financial incentives to the
personnel showing creativity.
8. Check on corrupt practices: A weak and unsound organization is source
of corruption and inefficiencies. Well organized, well defined, disciplined and
sound organizations boost the morale and motivation of workers. It develops
a feeling of involvement, belongingness, devotion, honesty and sincerity
among employees. It prevents corruption, inefficiencies and wastage in an
enterprise.
9. Proper weightage to all activities: A sound organization divides the
entire enterprise into different departments, sections and subsections
according to the functions to be performed by them. Each function of an
enterprise has got its own importance. Emphasis is given according to their
relative importance. Funds and manpower is allocated to their relative
importance.
10. Better human relations: Human beings involved in an organization are
only dynamic element of organization. A dedicated and satisfied group of
persons proves an asset to any establishment.
An organization, built on sound principles, helps harmony in human relations.
With properly defined authority, responsibility and accountability, different
persons enjoy job-satisfaction. Organization consists of human beings and
their satisfaction helps in improving human relations.
Thus, organization is the foundation of management. Sound organization is
an indispensable mean for efficient management and better business
performance. It not only facilitates efficient administration but also
encourages growth and diversification. It provides for optimum use of new
technology, stimulates innovation and creativity.
FORMAL AND INFORMATION ORGANISATION
Formal organization refers to the structure of relationships deliberately built
up by the top management to realize the objectives. In these form
instructions, responsibility, authority, accountability, lines of command, and
positions and authority are clearly defined and declared. Each person is
aware of his duties and authority. Every subordinate is expected to obey his
supervisor in the formal chain of command. Each individual is fitted in the
organization like a cog in the machine. It is designed after careful
identification, classification and assignment of business activities. So, it is
conscious creation of relationships.
Informal organization refers to the network of personal and social
relationships which arise spontaneously when people working together
interact on personal whims, likes and prejudices. Such relations are not

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created by the top management and they are not recognized formally. The
informal groups sometimes run parallel to the formal ones. Informal relations
are not portrayed on organization charts and manuals. An informal
organization provides an opportunity to workers to come close to each other,
develop a feeling of cooperation and coordination among themselves.
Difference between Formal and Informal Organizations
The difference between formal and informal organizations can be
enumerated briefly as below:
1. Formation: Formal organization is deliberately created by management.
It is the result of a conscious and deliberate effort involving delegation of
authority. On the other hand, informal organization arises spontaneously and
no conscious efforts are made to create it. It takes place on the basis of
relationships, caste, culture, occupations and on personal interests etc. No
delegation of authority is essential in informal organization.
2. Basis: A formal organization is based upon rules and procedures, while an
informal organization is based upon attitudes and emotions of the people. It
depends on informal, social contacts between people working and
associating with one another.
3. Nature: A formal organization is stable and predictable and it cannot be
changed according to the whims or fancies of people. But an informal
organization is neither stable nor predictable.
4. Set up: A formal organization is a system of well defined relationships
with a definite authority assigned to every individual. It follows
predetermined lines of communication. On the contrary, an informal
organization has no definite form and there are no definite rules as to who is
to report to whom. Even a low-placed employee may have an informal
relationship with an officer far above him in the formal hierarchy.
5. Emphasis: In a formal organization, the main emphasis is placed on
authority and functions. In an informal organization the stress is on people
and their relationships.
6. Authority: Formal authority is attached to a position and it flows from top
to bottom. Informal authority is attached to a person and it flows either
downwards or horizontally.
7. Existence: A formal organizations exists independently of the informal
groups that are formed within it. But an informal organization exists within
the framework of a formal structure.
8. Rationality: A formal organization operates on logic rather than on
sentiments or emotions. All activities follow a predetermined course.
As an association between like-minded people, an informal organization has
little rationality behind it. In an informal organization, activities are
influenced by emotions and sentiments of its members.
9. Depiction: Formal organization can be shown in an organization chart or
a manual. But an informal organization cannot be depicted in the chart or
manual of the enterprise.
FORMS OF ORGANISATION STRUCTURE

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Organization requires the creation of structural relationship among different

departments and the individuals working there for the accomplishment of
desired goals. The establishment of formal relationships among the
individuals working in the organization is very important to make clear the
lines of authority in the organization and to coordinate the efforts of different
individuals in an efficient manner. In order to organize the efforts of
individuals, any of the following types of organization structures may be set
up : (i) Line organization, (ii) Line and staff organization, (iii) Functional
organization, (iv) Committee organization, (v) project Organization, and (vi)
Matrix organization. The nature, merits and demerits of line organization,
and line and staff organization are discussed as under:
Line Organization
The line organization represents the structure in a direct vertical relationship
through which authority flows. It is the simplest form of organization
structure and is also known as scalar or military organization.
Under this, the line of authority flows vertically downward from top to bottom
throughout the organization. The quantum of authority is highest at the top
and reduces at each successive level down the hierarchy.
In line organization, the line of authority consists of an uninterrupted series
of authority steps and forms a hierarchical arrangement. The line authority
not only becomes the avenue of command to operating personnel but also
provides the channel of communication, coordination and accountability in
enterprise.
Advantages of Line Organization
(i) It is very easy to establish line organization and it can be easily
understood by the employees.
(ii) If facilitates unity of command and thus conforms to the scalar principle
of organization.
(iii) There is clear-cut identification of authority and responsibility
relationship. Employees are fully aware of the boundaries of their jobs.
(iv) It ensures excellent discipline in the enterprise because every individual
knows to whom he is responsible.
(v) It facilitates prompt decision-making because there is definite authority at
every level. An executive cannot shift his decision making to others, nor can
the blame be shifted.
Disadvantages of Line Organization
(i) With growth, the line organization makes the superiors too overloaded
with work. If the executive try to keep up with every activity, they are
bogged down in myriad details and are unable to pay proper attention to
each one. It will hamper their effectiveness.
(ii) There is concentration of authority at the top. If the top executives are
not capable, the enterprise will not be successful.
(iii) Line organization is not suitable to big organizations because it does not
provide specialists in the structure. Many jobs require specialized knowledge
to perform them.

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(iv)There is partially no communication from bottom upwards because of

concentration of authority at the higher levels. If superiors take a wrong
decision, it would be carried out without anybody having the courage to
point out its deficiencies.
In spite of these drawbacks, the line organization structure is very popular
particularly in small organizations where there are less number of levels of
authority and a small number of people. A modification of this structure is
line and staff organization under which specialists are attached to line
executives to provide them specialized assistance on matters of great
importance to be enterprise.
Line and Staff Organization
The line executive is often described as the individual who stands in the
primary chain of command and is directly concerned with the
accomplishment of primary objectives. Line organization provides decision-
making authority to the individuals at the top of the organization structure
and a channel for the flow of communication through a scalar chain of
authority. Line executives are generalists and do not possess specialized
knowledge which is a must to tackle complicated problems. With a view to
give specialist aid to line executives, staff positions are created throughout
the structure. Staff elements bring expert and specialized knowledge to
provide advice to line managers so that they may discharge their
responsibilities successfully.
In line and staff organization, the line authority remains the same as it does
in the line organization. Authority flows from top to bottom. The main
difference is that specialists are attached to line managers to advise them on
important matters. These specialists stand ready with their specialty to serve
line men as and when their services are called for to collect information and
to give help which will enable the line officials to carry out their activities
better. The staff officers do not have any power of command
in the organization as they are employed to provide expert advice to the line
officers. Staff means a supporting function intended to help the line
manager. In most organizations, the use of staff can be traced to the need
for help in handling details, gathering data for decision-making and offering
advice on specific managerial problems. Staff investigates and supplies
information and recommendations to managers who make decisions.
Specialized staff positions are created to give counsel and assistance in each
specialized field of effort
Line and staff structure has gained popularity because certain problems of
management have become very complex and, in order to deal with them,
expert knowledge is necessary which can be provided by the staff officers.
For instance, personnel department is established as staff department to
advise the line executives on personnel matters. Similarly, finance, law and
public relations departments may be set up to advice on problems related to
finance and accounting, law and public relations.
The staff officers do not have any power of command in the organization as
they are employed to provide advice to the line officers. In most

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organizations, the use of staff can be traced to the need for help in handing
details, gathering data and offering advice on specific managerial problems.
Advantages of Line and Staff Organization
(i) Specialized knowledge. Line managers get the benefit of specialized
knowledge of staff specialists at various levels.
(ii) Reduction of burden. Staff specialists relieve the line managers of the
botheration of concentrating on specialized functions like accounting,
selection and training, public relations, etc.
(iii) Proper weightage. Many problems that are ignored or poorly handled
in the line organization can be properly covered in the line and staff
organization by the use of staff specialists.
(iv) Better decisions. Staff specialists help the line executives in taking
better decisions by providing them with adequate information of right type at
the right moment and expert advice.
(v) Flexibility. Line and staff organization is more flexible as compared to
the line organization. General staff can be employed to help line managers at
various levels.
(vi) Unity of command. Under this system, the experts provide special
guidance without giving orders. It is the line manager who only has got the
right to give orders. The result is that the enterprises takes advantage of
functional organization while maintaining the unity of command i.e., one
subordinate receiving orders from one boss only.
Demerits of Line and Staff Organization
Line and staff organization suffers from the following drawbacks:
(i) There is generally a conflict between the line and staff executives.
There is a danger that the staff may encroach on the line authority.
Line managers feel that staff specialists do not always give right type of
advice, and staff officials generally complain that their advice is not properly
attended to.
(ii) The allocation of duties between the line and staff executives is generally
not very clear. This may hamper coordination in the organization.
(iii) Since staff men are not accountable for the results, they may not be
performing their duties well.
(iv) There is a wide difference between the orientation of the line and staff
men. Line executives’ deals with problems in a more practical manner. But
staff officials who are specialists in their fields tend to be more theoretical.
Superiority of Line and Staff Organization over Line Organization
Line and staff organization is considered better than the line organization
because of the following reasons:
(i) Staff makes available expert advice to line executives. This is necessary
to deal with complex problems of management. For instance, personnel
department is established as a staff department to advise the top executives
and other line executives on personnel matters.
(ii) Better decisions are ensured in line and staff organization as compared to
a simple line organization.

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(iii) Line and staff structure is more suitable for large organizations as expert
advice is always available. The line managers can make use of the
knowledge of staff specialists to deal with complicated problems. Therefore,
line and staff organization is certainly better than line organization.

Delegation

The process by which authority passes from one managerial level to another
is known as delegation. As organizations grow in size and complexity, no
one person can perform all the tasks or exercise all the authority that is
needed to accomplish goals. Delegation is the downward transfer of
authority from a manager to a subordinate. Delegation of authority denotes
the superior vesting decision-making power in his subordinate.

Delegation is one of the most important skills a manager must possess. The
overworked managers are often those who do not know how to delegate. For
they lack the skill to get results through others. An individual can perform
limited work in a day, all by himself. But through delegation he can
accomplish much more. No manager and no organization can run smoothly
and effectively without delegation.

Most organizations today encourage managers to delegate authority in order

to provide maximum flexibility in meeting customer needs. In addition,
delegation leads to empowerment, in that people have the freedom to
contribute ideas and do their jobs in the best possible ways. This
involvement can increase job satisfaction for the individual and frequently
results in better job performance. Without delegation, managers do all the
work themselves and underutilize their workers. The ability to delegate is
crucial to managerial success.

METHODS OF DELEGATION
In a big manufacturing concern the following may be the methods of
delegation of authority to ensure better result, unified direction and
command and effective delegation:
1. Administrative Delegation – When a few of the administrative
functions are delegated to sub-ordinate staff it is called administrative
delegation. These functions are generally of routine nature, e.g. to maintain
discipline, to supervise the work, to recommend for the reward or
punishment etc.
2. Geographical Delegation – When the work of enterprise is located at
different distant places it is not possible for an executive to mange the whole
affairs single handed. He then proceeds to delegate his authority to those
who are posted at the places where physically he cannot be present round
the year. This is known as geographical method of delegating the authority.

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3. Functional Delegation – When the enterprise is organized on the basis

of functional organization, the delegation of authority is also done on the
functional basis. All the heads are given to manage their departments
according to their skill, knowledge and experience of course, they are
accountable to the chief executives.
4. Technical Delegation: This method of delegation of authority is based
on technical knowledge and skill. Here the authority is delegated in order to
get the advantages of expert and experienced hands and their technical skill.
TYPES OF DELEGATION
The important kinds of delegation of authority are as follows :
1. General and Specific Delegation:
(i) General Delegation: It is that delegation in which the authority is given
to perform general managerial functions, like planning, organizing, directing
etc. The sub-ordinate managers perform these functions and enjoy the
authority required to carry out these responsibilities. The Chief Executive
exercises over all control and guides the subordinates from time-to-time.
(ii) The Specific Delegation: Specific Delegation relates to a particular
function or an assigned task. The authority delegated to the production
manager for carrying out this function will be a specific delegation. Various
departmental managers get specific authority to undertake their department
duties.
2. Formal or Informal Delegation:
(i) Formal Delegation: Formal delegation has been considered as a part of
organizational structure. Whenever a task is assigned to a person, the
required authority is also given to him. This delegation is a part of the normal
functioning of the organization. Every person is automatically given authority
as per his duties. When production manager gets powers to increase
production then it is formal delegation of authority.
(ii) Informal Delegation: This delegation does not arise due to position but
it arises according to the circumstances of the case. A person may undertake
a particular task not because he has been assigned it but because it is
necessary to do his normal work.
3. Written or Unwritten Delegation:
(i) Written Delegation: Written delegation is normally given through
letters, instructions, circulars etc. Whatever has been delegated it must be in
writing.
(ii) Unwritten Delegation: Unwritten delegation is given to the person
concerned not in any particular way but through conventions, customs and
usages the other party has to do work accordingly.
4. Downward or Upward Delegation
(i) Downwards Delegation: Downwards delegation is a common type of
delegation and is used in every type of the working concern. This delegation
has been considered as a superior's delegation of authority to his immediate
subordinate.

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(ii) Upward Delegation: This type of delegation takes place when a

subordinate assigns some of his tasks to his superiors. This is an uncommon
type of delegation and its instances are very rare.
Elements of Delegation
The number of delegation marks the effectiveness of the manager and
influences the relationship between the superior and the subordinate.

Delegation is the process where a manager divides the work assigned to him
so as to get help from others in accomplishing the same. It involves the
following four steps that are indivisible:

1. Assignment of Duties to subordinates.

The delegator assigns duties. He indicates what work the subordinate is
expected to do. While assigning duties the delegator must be clear in his
mind as to what tasks he should assign to his subordinates. As a general
rule, should delegate duties of less importance and reserve those of greater
importance. Delegation implies a prior division of work. The executive should
also make allowances for cost and inadequate performance. If the
subordinate is not able to turn out good performance, delegation should be
delayed till the subordinate has acquired the requisite skills. The quantum of
assignment thus depends on the availability of competent subordinates
possessing knowledge, competence and skills.

2. Granting the correct amount of authority to accomplish

assignments.
Authority refers to the powers and rights entrusted to enable performance of
the task assigned or delegated. Certain authority is imperative to shoulder a
given responsibility. In organizations people derive authority mainly from two
sources: position and personal. Position authority is related to powers of
decision-making, reward and punishment. Personal authority refers to the
expert knowledge and certain qualities which are part of the personality of
an individual manager. Position authority can be delegated, but not personal
authority. Authority could be formal or informal. Here we refer to formal
authority that is clear, structured and communicated to all. Typically, an
employee is assigned authority commensurate with the task. A classical
principle of organization warns managers not to delegate without giving the
subordinate the authority to perform to delegated task. When an employee
has responsibility for the task outcome but little authority, accomplishing the
job is possible but difficult. The subordinate without authority must rely on
persuasion and luck to meet performance expectations.

3. Make sure that team members accept responsibility.

Responsibility is the flip side of the authority coin. Responsibility is the duty
to perform the task or activity an employee has been assigned. An important
distinction between authority and responsibility is that the supervisor
delegates authority, but the responsibility is shared. Delegation of authority

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gives a subordinate the right to make commitments, use resources, and take
actions in relation to duties assigned.

4. Create accountability.
Accountability is the obligation to carry out responsibility and exercise
authority as per established standards or norms. It is an obligation to
account for, and report upon, the discharge of responsibility or use of
authority. It means answering for one’s actions and accepting the
consequences. Accountability cannot be delegated. The person who
delegates continues to be responsible to his superior for what he had
delegated as well.

Since accountability cannot be delegated, the accountability of superiors for

the acts of their subordinates is absolute. By the same token, we see that
the delegatee is accountable to the delegator to the extent he is delegated
responsibility and authority

While accountability always moves upward, responsibility and authority

move downward in a hierarchy. A person can be accountable only to one
superior for delegated responsibility and authority. Accountability is easy to
establish if the standards and measures of performance are predetermined.

MERITS OF DELEGATION
(i) It avoids wastage of time : Present-day management is a complicated
process. A manager has to perform various functions as a matter of routine
work. It is not possible for him to give proper attention to all matters coming
to him. Delegation helps him in transferring the less important subject to his
juniors and attends to more important works.
(ii) It helps in training the new incumbents : The lower units that use the
delegated power, get a spontaneous feel of their future responsibility.
They become aware of the works at the higher level to which they may be
promoted. Delegation also helps in developing the managerial personnel
within the organization.
(iii) It avoids over-work : Delegation shifts some portions of the responsibility
and work from the shoulders of the manager. To quote Beach : "The over
worked manager who learns the art of delegation, is at one and the same
time able to relieve himself of some of his burden, increase the competence
of his men, and raise the level of accomplishment of his unit.
(iv) It develops increased sense of responsibility : Delegation generates an
increased sense of responsibility in the subordinate personnel. It also
increases their working capacity and helps in enhancing their unspotted
caliber which could be helpful for management.
Delegation also helps in avoiding any kind of act at a higher level which may,
otherwise undermine the powers vested in the lower level units.
(v) It avoids delay : Delegation helps in taking timely and accurate
decisions. The personnel at lower level, being delegated, act quickly which
serves the organization with due economy, efficiency and rapidly.

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Advantages of Delegation

Delegation is an indispensable component of good organization. It is

essential to the existence of a formal organization. It is one of the
mainsprings of effective management. Delegation, when used properly, has
several important advantages.

1. Superior related advantages

The essence of delegation is empowering another person to act for the
manager. There are certain practical reasons for this managerial preference:

 To reduce the burden of responsibility carried by him.

 To provide more time for constructive review, or deliberation in
the interest of progress.
 To enable selected activities or services to be more expertly
covered and provided.
 To provide for the extension of facilities by the establishment of
local centers in different areas.
Delegation frees top management from operational responsibilities. It helps
the managers to distribute their load of work to others and thus multiply
their limited personal capacities. Delegation determines the effectiveness of
the manager in his work; it is both the “gauge and the means of manager’s
accomplishment”.

2. Subordinate related Advantages

Delegation has a ‘tonic effect’ on the psychology of subordinates. It allows
subordinates to grow, enlarge their understanding and develop their
capacities. It causes subordinates to accept responsibility and exercises
judgment. It raises the subordinates’ position in stature and importance. It is
delegation of authority that gives subordinates the means with which to act
and learn.

3. Advantages to organization
At the extreme, if there is no delegation, one person has to do everything
and hence, there would be no organization. But for delegation firms would
remain small and an increase in their size would burn up the candle of
managerial energies too soon. The primary purpose of delegation, as pointed
out earlier, is to make organization possible. Delegation leads to better
decisions, since subordinates closer to the ‘firing line’ are likely to have a
clearer and more complete view of the facts. In addition, effective delegation
speeds up decision making in an organization. Instead of waiting at the door
steps of the superior of an audience for painfully long time, the subordinates
can now take decisions independently.

Delegation problems

Although most contemporary managers proselytize the virtues of delegation

of authority, in reality their use of the concept turns out to be more fiction

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than fact. Quite often they are handicapped by a temperamental aversion to

taking a chance. Added to this, the subordinate may be reluctant,
sometimes, to accept delegation. A closer examination of some of the tugs
and pulls on the superior and subordinate involved in each delegation may
reveal the following trouble spots.

Reluctance to Delegate

Managers offer numerous explanations in support of their conservative

outlook.

Better performance. I can do it better by myself. Many mangers, suffering

from an inflated sense of their own worth, believe that if you want something
done right, do it yourself. The subconscious belief that nobody could possibly
do the job as well as he can compels a manger to bury him self in routine. He
likes the busyness and security of work piled high on his table.

No trust. I cannot trust others to do the job. A manager trapped in this

fallacy may delegate but continues to breathe so closely down the necks of
his subordinates that he makes effective action rather impossible. Such
insistence on performing all the important aspects of the job not only affects
his work performance but also robs subordinates of important motivational
and growth opportunities.

Subordinate may get credit. I’ll lose importance if I let others do the job:
For managers who are habituated to the constant flattery of subordinates
bringing matters to them for approval, turning over a part of their work may
be difficult choice. Their reasoning is that if subordinates make decisions
concerning the work, the superior may not be kept informed and will thus
lose authority. Adding salt to the wound, a subordinate after learning the
tricks of the trade may overstep. It is also quite possible that in course of
time the subordinate may become a contender for the boss’s job. Ultimately
it is this loss of power, influence and control that proves to be extremely
painful for the superior.

Continuous guidance is difficult. I cannot coach everything. Effective

delegation requires that the manager must communicate to his subordinate
far in advance what is to be done. This may prove to be a troublesome
exercise for the executive because he is now forced to think ahead and
visualize the work situation, formulate objectives, general plans of action and
finally communicate these to his subordinates’ action can be monitored.
Managers, normally, do not enjoy the process of guidance, review and cross
examination that are bound to arise if they delegate work to subordinates.

Reluctance to Accept Delegation

It takes two parties for delegation to be useful-a delegator willing to share

his work and a delegate to accept responsibility. Delegation proves to be a

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futile exercise in such situations where the boss is ready to delegate but the
subordinate is unwilling to accept it. Normally the following of the delegate
attitudes hinder the delegation process.

Easy to ask: ‘It is easier to ask the boss’. Wise decisions are products of
hard mental work. It is better to seek the guidance of the boss. If a
subordinate finds that he can take a problem to his superior and get an
answer, naturally he will do so. Sharing the burden with the superior is a safe
proposition. Confronting the decision single handed is nothing but an open
invitation to trouble latter on.

Fear of criticism. ‘Why should I stick my neckout for that guy?’ if there is
failure the superior is likely to direct the arrows of criticisms against the
subordinates. If delegation proves to be a success then the superior is likely
to steal the credit away from the subordinate. The subordinate is always on
the losing side.

Lack of information resources: ‘Nobody tells me anything’. Assuming

greater responsibilities may be risky in the absence of necessary information
and resources. The fears of subordinates in this connection are real. In many
cases it is true that duties are not clearly defined, authority is not specific
and instructions are vague. The resources at their disposal may be grossly
insufficient to do a good job. Starved of necessary facilities, their enthusiasm
gets dampened forcing them to reject further assignments.

Too heavy: I am already overburdened. In the absence of adequate rewards

for satisfactory performance, subordinates are typically reluctant to assume
added responsibilities and subject themselves to emotional pressures. The
risk of failure is unpleasant and unless the inducements are attractive no one
is interested in accepting delegated responsibilities. A safe reply would be: I
am already overburdened. Why should I take on more work? To be effective,
delegations must be supported by adequate incentives.

Lack of self confidence: I do not have the psychological make-up to

shoulder heavy responsibilities. Sometimes, subordinates mat simply refuse
to take the risk of the outcome due to lack of self-confidence. He may not be
able to do the task as well as the boss. The fear of criticism arising out of
failure may be a strong deterrent preventing him from becoming a candidate
for delegate roles.

Principles of effective delegation

A manager can improve the performance of his or her work groups by

empowering subordinates through effective delegation. Few managers are
successful in the long term without learning to delegate effectively. So, how
do managers learn to delegate effectively? The following principles may be
helpful for managers:

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Principle 1: Match the employee to the task. Managers should carefully

consider the employees to whom they delegate tasks. The individual
selected should possess the skills and capabilities needed to complete the
task. Perhaps even more important is to delegate to an individual who is not
only able to complete the task but also willing to complete the task.
Therefore, managers should delegate to employees who will view their
accomplishments as personal benefits.

Principle 2: Be organized and communicate clearly. The manager must

have a clear understanding of what needs to be done, what deadlines exist,
and what special skills are required. Furthermore, managers must be capable
of communicating their instructions effectively if their subordinates are to
perform up to their expectations.

Principle 3: Transfer authority and accountability with the task. The

delegation process is doomed to failure if the individual to whom the task is
delegated is not given the authority to succeed at accomplishing the task
and is not held accountable for the results as well. Managers must expect
employees to carry the ball and then let them do so. This means providing
the employees with the necessary resources and power to succeed, giving
them timely feedback on their progress, and holding them fully accountable
for the results of their efforts. Managers also should be available to answer
questions as needed.

Principle 4: Choose the level of delegation carefully. Delegation does

not mean that the manager can walk away from the task or the person to
whom the task is delegated. The manager must maintain some control of
both the process and the results of the delegated activities.

Depending upon the confidence the manager has in the subordinate and the
importance of the task, the manager can choose to delegate at several
levels.

Centralization and Decentralization

Centralization and decentralization are extensions of delegation. Delegation

refers mainly to entrustment of responsibility and authority from one person
to another. Downward transfer of responsibility and authority at individual
level is referred to as delegation and when the same is done organization-
wide in a systematic way it is known as decentralization. Decentralization
refers to systematic delegation of authority in an organization. An
organization is considered centralized to the degree that authority is not
delegated, but concentrated at higher levels of management. In
juxtaposition, to the degree that authority is delegated, an organization is
considered decentralized. The general pattern of authority throughout an
organization determines the extent to which that organization is centralized
or decentralized. A centralized organization systematically works to
concentrate authority at the upper levels. In a decentralized organization,
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management consciously attempts to spread authority to the lower

organization levels. As Henry Fayol puts it, "Everything that goes to increase
the importance of the subordinate's role is decentralization; everything
which goes to reduce it is centralization".

The terms centralization and decentralization are meaningful only in a

relative sense. No organization can operate on a completely decentralized
basis since all authority to make decisions would rest at the lowest
managerial levels and make it difficult to achieve coordination. Similarly,
except very small firms, no organization can be completely centralized. In
principle, neither philosophy is right or wrong.

Factors Influencing Decentralization and Centralization

A variety of factors can influence the extent to which a firm is centralized or

decentralized. The following is a list of possible determinants:

 The external environment in which the firm operates. The more

complex and unpredictable this environment, the more likely it is that top
management will let low-level managers make important decisions. After
all, low-level managers are closer to the problems because they are more
likely to have direct contact with customers and workers. Therefore, they
are in a better position to determine problems and concerns.
 The nature of the decision itself. The riskier or the more important
the decision, the greater the tendency to centralize decision making.
 The abilities of low-level managers. If these managers do not have
strong decision-making skills, top managers will be reluctant to
decentralize. Strong low-level decision-making skills encourage
decentralization.
 The organization’s tradition of management. An organization that
has traditionally practiced centralization or decentralization is likely to
maintain that posture in the future.
MEANING AND SOURCES OF POWER
Power is a method of operating in order to influence the behaviour of others.
It is the power politics within the organization that gives rise to power
centres in the organization. The power-centres need not necessarily be
located at the position of higher authority. Nobody wants to lose power
because power can be used in desirable or undesirable ways.
Power may be defined as "the ability to exert influence. If a person has
power it means that he is able to change the attitude of other individuals". In
any organization for sound organizational stability, power and right to do
things must be equated, when power and authority for a given person or
position are roughly equated, we may call the situations as "Legitimate
Power".
Sources of Powers
If we study the origin and sources of power we cannot forget the name of
John French and Berhram Raven. They have written that there are five

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sources of power which are found at all levels of the organization. They are
as follows :
(i) Legitimate Power: The power corresponds to the term authority. It
exists when an influencer acknowledge that the influencer is lawfully entitled
to exert influence. In this the influence has an obligation to accept this
power.
(ii) Reward Power: This power is based on the influencer having the ability
to reward the influence for carrying out orders.
(iii) Corrective Power: It is based on the influencer's ability to punish the
influence for not carrying out orders or for not meeting requirements.
(iv) Referent Power: It is based on the influencer's, desire to identify with
or imitate the influence.
(v) Expert Power: This power is based on belief that the influencer has
some relevant expertise or special knowledge that the influence does not
have. For example a doctor has expert power on his patients.
In having the study of power the role of the influence in accepting or
rejecting the attempted influence is very important.
Difference between 'Authority' and 'Power'
If we study from close in practice the terms 'Authority' and 'Power' are
generally used interchangeably but there is a clear-cut difference between
these two words and they are as follows :
1. Right to Command: Authority is the right to command where as power
is the ability or power to command.
2. Right to Exercise: Authority usually resides in the position in the
organization, but power is exercised by the person. Authority includes the
right to exercise which have been institutionalized.
3. Positional and Legitimate: Authority is always positional and legitimate
and is conferred on the position. But power is not institutional, rather it is
personal. It is acquired by people in various ways and then exercised upon
others.
4. Authority Increases: It has been observed that authority increases as
soon as one goes up in the organizational hierarchy, but it need not
necessary be accompanied by more power.
In actual practice – the power centres may be located at the power levels in
the organization. Therefore, one cannot have an idea of power centres in an
organization by merely looking at its organization chart.
5. Authority Relationships: In practice, authority relationships are
modified by power politics in the organization. Some individuals may have
more power and less authority or more authority and less power. It is the
operating mechanism of the organization which is relevant for studying
organizational behaviour.
6. Authority a Downward Concept: Authority is a downward flowing
concept; whereas power flows in all directions.
7. Delegation of Authority: Authority can be delegated to the lower levels
in the organization. The lower we go down the lesser is the authority.
SELF ASSESSMENT QUESTIONS

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1. Define organization and discuss its characteristics.

2. Explain the meaning of organization and state its principles.
3. Discuss the nature and importance of organization.
4. What are the important steps in the process of organization?
5. "Organization is an important tool to achieve organizational objectives,"
Comment.
6. What do you understand by informal organization? How does it differ from
a formal organization?
7. Explain the various steps in the process of organizing.
8. What do you mean by (a) line organization and (b) line and staff
organization. Discuss their respective merits and demerits.
9. What are the types of authority? What are the sources of authority?
10. What is meant by decentralization of authority? Distinguish between
delegation and decentralization of authority? How would you decide the
degree of decentralization?
11. State the advantages and limitations of decentralization
12. "Delegation and decentralization are interchangeable terms in
management and organization theory". Comment.
13. "Centralization is not necessarily bad, no is decentralization necessarily
good". Elucidate the statement.
14. "Delegation is the key to administrative effectiveness". Elucidate.
15. What is the relationship between delegation, control and accountability?

SUGGESTED READINGS
1. Kootnz & O'Donnell, Principles of Management.
2. Peter F. Drucker, Practice of Management
3. J.S. Chandan, Management Concepts and Strategies.
4. Arun Kumar & Rachana Sharma, Principles of Business Management.

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