UNIT 3

ORGANIZING

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 DEFINING ORGANIZING

Organizing is the process of identifying and grouping the work to be performed, defining and
delegating responsibility and authority and establishing relationships for the purpose of enabling
people to work most effectively together in accomplishing objectives.

Organizing is the second key management function. Once the objectives and plans are laid down,
management has to identify and establish productive relationships between various activities and
resources for implementing plans. In general words organizing refers to arranging everything in
orderly form and making the most efficient use of resources. The aim of organizing is to enable
people to work together for a common purpose.

NATURE AND PURPOSE OF ORGANIZING

From the study of the various definitions given by different management experts the following
information about the characteristics or nature of organization,

1) Division of Work
Division of work is the basis of an organization. In other words, there can be no organization
without division of work. Under this the entire work of business is divided into many
departments. The work of every department is further sub- divided into sub works to achieve the
goal efficiently.

2) Coordination
Under organizing different persons are assigned different works but the aim is to be the same.
Organization ensures that the work of all the persons depends on each other’s work even though
it happens to be different. The non-completion of the work of one person affects the work of
everybody. Therefore, everybody completes his work in time and does not hinder the work of
others.

3) Common Objectives
There are various parts of an organization with different functions to perform but all move in the
direction of achieving a general objective.

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4) Well-defined Authority and Responsibility
Under organization a chain is established between different posts right from the top to the
bottom. Every individual working in the organization is given some authority for the efficient
work performance and it is also decided simultaneously as to what will be the responsibility of
that individual in case of unsatisfactory work performance.

5) Organization is a Structure of Relationship

Relationship between persons working on different posts in the organization is decided. In other
words, it is decided as to who will be the superior and who will be the subordinate. The person
working on the top-level post has no superior and the person working on the lowest level post
has no subordinate.

6) Organization is a Machine of Management

Organization is a machine of management because the efficiency of all the functions depends on
an effective organization. In the absence of organization, no function can be performed in a
planned manner.

7) Organization is a Universal Process

Organization is needed both in business and non-business organizations. Not only this,
organization will be needed where two or more than two people work jointly. Therefore,
organization has the quality of universality.

TYPES OF ORGANIZATION STRUCTURE

Organization structure refers to the system that defines the hierarchy and flow of information
within a company. It determines how roles are assigned, how tasks are divided and how
reporting occurs. Understanding the types of organization structure can help leaders choose a
setup that enhances growth, collaboration, and efficiency.

There are 7 types of organization structure, let us understand them more:

1. Functional Organization Structure

The first types of organization structure is functional organization structure that divides the
company based on specialized roles, such as marketing, finance, HR, and production. Each

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department operates under a specific leader, creating an organized hierarchy within each
specialty.

Advantages:
i) Employees focus on tasks specific to their area of expertise, leading to higher productivity and
skill development within departments.
ii) Each department has a clearly defined role and reporting hierarchy, reducing ambiguity about
responsibilities.
iii) Resources are allocated effectively within departments as tasks are standardized and
streamlined according to departmental needs.

Disadvantages:
i) Communication between departments can be limited, creating isolated “silos” where
departments focus on their goals rather than company-wide objectives.
ii) Decisions that involve multiple functions may take longer, as each department must
coordinate, which can slow down processes

2. Divisional Organization Structure

In the divisional organization structure, the company is divided by product lines, markets, or
geographic regions. Each division operates as a semi-independent unit with its own resources
and management.

Advantages:
i) Each division can quickly adapt to changes in its specific market or region, leading to
improved responsiveness to customer needs.
ii) Divisions have the autonomy to make decisions specific to their area, which can streamline
processes and improve efficiency within each division.
iii) Divisions can tailor products or services to meet the unique needs of their market, often
resulting in better customer satisfaction.

Disadvantages:
i) Each division may require its own resources, such as HR, marketing, or finance, leading to
redundancy and higher operational costs.
ii) Divisions might compete for resources or customers, which can lead to conflicts and reduce
collaboration across the company.

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3. Matrix Organization Structure

The matrix organization structure blends functional and divisional structures. Employees report
to both a functional manager and a project or product manager, creating multiple reporting lines.

Advantages:
i) Employees work across departments, promoting teamwork, resource-sharing, and better
communication.
ii) Skilled employees are shared across projects, ensuring that talent and resources are allocated
where they are most needed.
iii) Teams can be assembled and adjusted based on project needs, making the structure adaptable
to changing demands.

Disadvantages:
i) With dual reporting to multiple managers, employees can face confusion or conflicts, making
accountability more difficult.
ii) Competing priorities between project and functional managers can lead to conflicts, affecting
productivity and employee morale.

4. Flat Organization Structure

The flat organization structure minimizes management levels, providing a collaborative

environment with few hierarchical layers. This structure is common in startups and smaller
businesses.

Advantages:
i) Fewer layers in the hierarchy allow decisions to be made faster, as information flows freely
without extensive approvals.
ii) Empowered employees have more responsibility, which can lead to greater satisfaction,
engagement, and motivation.
iii) With fewer managerial levels, the structure reduces administrative costs and encourages a
leaner management team.

Disadvantages:
i) Employees may feel stuck with fewer management positions available, reducing growth
prospects.
ii) As the company grows, managing a large number of employees without hierarchy can become
chaotic.

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5. Network Organization Structure

The network organization structure is fifth types of organization structure that commonly used
by companies that rely on outsourcing or partnerships to complete specific functions. The main
company coordinates and collaborates with external partners to fulfill business needs.

Advantages:
i) Easily scales up or down by adding or removing partners based on business needs.
ii) This allows the company to concentrate on its core functions while outsourcing other tasks to
specialized partners.
iii) By outsourcing non-core functions, companies can significantly reduce fixed costs and
overheads.

Disadvantages:
i) Relies on the quality and efficiency of third-party partners, reducing direct control over these
functions.
ii) Coordination between the main company and partners can be challenging, leading to potential
misalignment.

6. Team-Based Organization Structure

The team-based organization structure organizes employees around projects or products rather
than departments. Specialists from different areas work together in teams to complete shared
goals.

Advantages:
i) Cross-functional teams foster idea-sharing, which leads to creative problem-solving and
innovation.
ii) Teams can be quickly formed or dissolved as needed, making it easier to respond to changing
project requirements.
iii) Working in teams provides employees with a sense of ownership and a collaborative
environment, boosting morale.

Disadvantages:
i) Employees may experience unclear roles or conflicting responsibilities, especially when teams
overlap.
ii) With multiple teams operating simultaneously, managing resources and ensuring alignment
can become complicated.

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7. Circular Organization Structure

In types of Organization structure another type is the circular organization structure arranges
roles in concentric circles, with higher-level managers at the core and lower-level employees in
outer rings. It promotes a collaborative culture and an equal flow of information.

Advantages:
i) Information flows freely across levels, creating an environment where employees feel heard
and valued.
ii) The structure promotes equality, as everyone contributes to decision-making, fostering a
collaborative culture.
iii) Employees are involved in decisions, which increases their sense of responsibility and
ownership over outcomes.

Disadvantages:
i) Without a traditional hierarchy, employees may find it difficult to understand their direct
reporting lines.
ii) Implementing a circular structure can be complicated and inefficient for larger companies
with complex operations.

TYPES OF GROUPS
Individuals in an organization form various formal and informal groups for the purpose of
achieving similar goals or to simply exchange ideas, thoughts, and attitude with the group
members.
A group is a collection of two or more individuals who interact with each other and are inter-
dependent on each other for a common purpose, and hence perceive themselves as a group.

A) Formal Groups

A group created by formal authority to accomplish a specific task. A formal authority structure
governs the behaviour and roles of members. Rules, incentives, regulations & sanctions guide
the action of members.

Formal Groups can be categorized into –

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1) Command Group: It consists of a supervisor and his/her subordinates. Subordinates report to
a common superior. These groups form a permanent part of the organizational structure and
remains intact even if a member leaves.

2) Task Group: It consists of employees who work together to complete a particular task on
project. Individuals from different divisions and departments come together and work on a
particular task.

3) Project Group: It consists of individual from many different backgrounds who come together
to achieve predetermined objectives within predetermined time, cost & quality limits.

4) Committees: There are ad-hoc groups formed to examine, analyze, and evaluate areas of
organizational operations. They usually have only advisory authority. There are also standing
committees like Board of Directors which exist indefinitely.

B) Informal Groups

Groups in which membership is voluntary are informal groups. These groups are evolve
gradually among employees with common interests.

Informal Groups can be categorized into –

1) Friendship group: People with common interests, social activities, political beliefs, religious
values, opinions etc. form an association and extend their interaction to off the job activities.

2) Interest group: Individuals who may or may not be members of similar task or command
group may come together to achieve some mutual benefit. Objectives of such a group are not
related to the organization’s objectives but are specific to each group.

3) Reference group: It refers to a group of people, a person refers to while taking decisions and
uses reference group’s opinion to evaluate himself. It is a group that serves as a reference point
for the individuals to evaluate and make decision regarding his/her belief, attitude, and
behaviour.

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 AUTHORITY AND POWER

1) Line Authority

The work of an employee is directed with the help of line authority. It takes the form of an
employer-employee relationship that moves from top to bottom. So certain decisions are made
by the line manager without consulting any other person. In some cases, line managers are
differentiated from the staff managers by using the word “line”. Hence the manager whose
functions are linked directly with the achievement of organizational objectives is called line
manager.

2) Staff Authority

Staff authority is the right to advise or counsel those with line authority. For instance, human
resource department staff assists other divisions by selecting and developing a qualified
workforce. A quality control manager helps a production manager by confirming the acceptable
quality level of products or services, initiating quality programs, and executing statistical
analysis to ensure compliance with quality standards. Therefore, staff authority provides staff
personnel the right to offer advice to improve line operations.

DELEGATION OF AUTHORITY

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

Process / Elements of Delegation

1. Authority

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Authority is that power which influences the conduct of others. The top-level management has
greatest authority. Authority always flows from top to bottom. It explains how a superior gets
work done from his subordinate by clearly explaining what is expected of him and how he
should go about it. Authority should be accompanied with an equal amount of responsibility.
Delegating the authority to someone else does not imply escaping from accountability.
Accountability still rest with the person having the utmost authority.

2. Responsibility
It is the obligation of a subordinate to properly perform the assigned duty. When a superior
issues orders, it becomes the responsibility of the subordinate to carry it out. Responsibility
without adequate authority leads to discontent and dissatisfaction among the person.
Responsibility flows from bottom to top. The middle level and lower-level management holds
more responsibility.

3. Accountability
When a superior assigns some work to a subordinate, he is answerable to his superior for its
success or failure. For example, if ’A’ is given a task with sufficient authority, and ’A’ delegates
this task to B and asks him to ensure that task is done well, responsibility rest with ’B’, but
accountability still rest with ’A.’ The top-level management is most accountable. Accountability
in short, means being answerable for the result. Accountability cannot be escaped; it arises from
responsibility.

DEPARTMENTALIZATION

Departmentation means “group of activities and employees into departments.” It means, dividing
the large and monolithic functional organization into smaller, and flexible administrative units.

There are several bases of Departmentation. Those are discussed below.

i) Departmentation by Functions
The enterprise may be divided into departments based on functions like production, purchasing,
sales, financing, personnel etc. This is the most popular basis of departmentation. If necessary, a
major function may be divided into sub-functions. For example, the activities in the production

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department may be classified into quality control, processing of materials, and repairs &
maintenance.

ii) Departmentation by Products

In product departmentation, every major product is organized as a separate department. Each
department looks after the production, sales, and financing of one product. Product
departmentation is useful when the expansion, diversification, manufacturing, and marketing
characteristics of each product are primarily significant.

iii) Departmentation by Territory

Territorial or geographical departmentation is specially useful to large -scale enterprises whose
activities are widely dispersed. Banks, insurance companies, transport companies, distribution
agencies etc., are some examples of such enterprises, where all the activities of a given area of
operations are grouped into zones, branches, divisions etc.

iv) Departmentation by Customers

In such method of departmentation, the activities are grouped according to the type of customers.
This type of departmentation is useful for the enterprises which sell a product or service to a
number of clearly defined customer groups. For instance, a large readymade garment store may
have a separate department each for men, women, and children. A bank may have separate loan
departments for large-scale and small- scale businessmen.

v) Departmentation by Process or Equipment

In such type or departmentation the activities are grouped based on production processes
involved or equipment used. This is generally used in manufacturing and distribution enterprises
and at lower levels of organization. For instance, a printing press may have composing, proof
reading, printing, and binding departments.

vi) Departmentation by Time and Numbers

Under this method the activities are grouped based on the time of their performance. For
instance, a factory operating 24 hours may have three departments for three shifts one for the
morning, the second for the day, and the third for the night. In the case of departmentation by
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numbers, the activities are grouped based on their performance by a certain number of persons.
For instance, in the army, the soldiers are grouped into squads, companies, battalions, regiments
and brigades based on the number prescribed for each unit.

SPAN OF CONTROL
Span of control refers to the number of subordinates who can be managed efficiently by a
superior. It also refers to the number of employees who report to one manager. It is the number
of direct repartees that a manager has and whose results he/she is accountable for.

Span of control is critical in understanding organizational design and the group dynamics
operating within an organization. Span of control may change from one department to another
within the same organization.

The span may be wide or narrow. A wide span of control exists when a manager has many
employees reporting to him. Such a structure provides more autonomy. A narrow span of control
exists when the number of direct reporters that a manager has is small. Narrow spans allow
managers to have more time with direct reports, and they tend to spark more professional growth
and advancement.

CENTRALIZATION AND DECENTRALIZATION

Centralization

It is the process of transferring and assigning decision-making authority to higher levels of an

organizational hierarchy. The span of control of top managers is relatively broad, and there are
relatively many tiers in the organization.

Advantages of Centralization
i) Provide Power and prestige for manager
ii) Promote uniformity of policies, practices and decisions

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iii) Minimal extensive controlling procedures and practices
iv) Minimize duplication of function

Disadvantages of Centralization
i) Neglected functions for mid. Level, and less motivated beside personnel.
ii) Nursing supervisor functions as a link officer between nursing director and first-line
management.

Decentralization

It is the process of transferring and assigning decision-making authority to lower levels of an

organizational hierarchy. The span of control of top managers is relatively small, and there are
relatively few tears in the organization, because there is more autonomy in the lower ranks.

Advantages of Decentralization
i) Raise morale and promote interpersonal relationships
ii) Relieve from the daily administration
iii) Bring decision-making close to action
iv) Develop Second-line managers
v) Promote employee’s enthusiasm and coordination
vi) Facilitate actions by lower-level managers

Disadvantages of Decentralization
i) Top-level administration may feel it would decrease their status
ii) Managers may not permit full and maximum utilization of highly qualified personnel
iii) Increased costs. It requires more managers and large staff
iv) It may lead to overlapping and duplication of effort

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