Unit III
Organizing
[Link] Topics
1 Concept, Importance, Principles
2 Different Organization Models-line and staff
3 Elements of Organisation-
3.1
Departmentation-need, Different Basis
3.2 &
Centralization and Decentralization of Authority
3.3
3.4 Delegation of Authority-Elements, Steps, Barriers
3.5 Span of Management; Concept and Determining factors
1.1 Concept:
This is the second main function of management. Organizing focuses on arrangement,
coordination and control of activities within the organisation. It involves division or work
through which it can create specialization.
Koontz and O’Donnell defined organising as, “the establishment of authority relationships
with the provision for co-ordination between them both vertically and horizontally in the
enterprise structure.”
G R Terry defines, “Organising is the establishment of effective behavioural relationships
among persons so that they may work together efficiently and gain personal satisfaction
in doing selected task under given environmental conditions for the purpose of achieving
some goal or objective.”
In precise we can say that, Organisation is a structure and systematic arrangement of
activities by which a mutual and harmonized relationship between the work and workers
is established and the objectives of the enterprise is achieved through delegation of
authority and responsibility.
1.2 Importance of Organisation:
Without a sound organisational structure the success of an enterprise is not possible. It
also ensures continuity and stability. The importance of organisational structure has been
discussed below:
a) It is the foundation of a business
b) It establishes co-ordination and discipline and communication
c) It ensures optimum utilisation of resources
d) It helps to prevents malpractices
e) It advances specialization through division of work
f) It improves relationships
g) It facilitates efficient control
h) It encourages creativity
i) It ensures effective management
1.3 Principles of Organisation:
The organising activities can be carried out effectively with adherence of the following
principles:
i. Principle of objectives
ii. Principle of division of work
iii. Principle of delegation of authority and responsibility
iv. Principle of unity of command
v. Principle of unity of direction
vi. Principle of balance
vii. Principle of span of control
viii. Principle of scalar chain
ix. Principle of flexibility and continuity
x. Principle of co-operation
xi. Principle of simplicity
xii. Principle of exception
2 Different Organisational Model:
Organisational structure is nothing but hierarchy arrangement which represents allocation
of authority and responsibility.
Line organisation
Staff organisation
Line and staff organisation
Formal organisation
Informal organisation
2.1 Line Organisation-
It follows the scalar principle, i;e the line of authority flows from top level to lower level
of the organisation. It is a disciplined and too much formal structure. There is tendency
of autocracy.
Feature of line organisation:
Scalar chain of authority
Unity of command
Work load on managers
Flow of communication
Limited span of control
Merits of line organisation:
Simplicity
Clear cut responsibility
Quick decision
Maintenance of discipline
Demerits of line organisation:
Lack of specialization
Existence of Autocracy
Overload work for managers
Less flexibility
2.2 Staff Organisation:
This structure follows principle of specialization. The expert personnel who are employed
in advisory functions are called staff officer. They advise managers as and when required
and bear no liability.
Features of staff organisation-
Specialization
Narrowed down unity of command
Complex organisational structure
Advisory function
Merits of staff organisation-
Expertise advice
Prompt decision making
Flexible mode
standardization
Demerits of staff organisation-
Complex relationship
Conflict in authority distribution
Poor discipline
Delayed decision
2.3 Line and Staff Organisation:
In this organisational structure there are departmental heads in each department who
performs routine job which is operated on the basis of scalar principle. On the other
side expert staff are employed for special functions. Structure is shown below-
Features of line and staff organisation-
Service of both the organisational structure
Applicable for big enterprise
Management by exception
Merits of line and staff organisation-
Flexible
Planned specialization
Promote creativity
Lesser workload on line personnel
Demerits of line and staff organisation-
Complex mixed structure
Conflict between two structure
Costly affair
Avoidance of responsibility
2.4 Functional Organisation-
It is based on F.W Taylor’s functional foremanship. It can be classified into two head; i)
Planning view point, ii) Operational view point. The diagram is given for better
understanding-
It ensures specialization by maintaining functions, also focusses on sub-goals. Its
functions are based on line and staff organisation. This structure is not applicable for small
enterprises.
2.5 Project Organisation-
In this structure departments are created under each project head or job. Once the job is
completed, the departments got eliminated. Graphical structure is given below-
It’s a short time structure having a specified objective and high degree of independence.
Sometimes this structure lacks co-ordination because of the complex nature.
2.6 Matrix or Grid Organisation-
It is the combination of functional and product wise. Devis and Lawrence showed-
Matrix organisation= Matrix structure + Matrix system + Matrix culture + Matrix behaviour
It follows dual line of command with open communication and flexibility. But as two dual
structure exists together conflicts and confusion are very common problem to be faced.
Because of the same reason there is a lack of co-ordination among the employees. The
concept will be clearer by seeing the diagram given below-
2.7 Formal organisation-
It means a structured and planned system of well-defined authority, responsibility and
accountability, which are goal oriented. Some features are discussed below:
Consists formal group
Follows pre-defined communication network
Well defined relationships
Emphasize on rules, discipline and control
Activities are designed consciously, rationally and they are well coordinated
Lack of freedom
Ignorance of social relations
2.8 Informal organisation-
It arises out of personal and social need, emotions and attitudes. To overcome the
limitations of formal structure, informal organisation came into existence. To understand
the concept better features are given below:
Consist informal group
Grapevine or unstructured communications
Emphasize on People
For relationships and activities, no well-defined planning is required
Existence of both cohesion and conflicts
Lack of leadership
3 Elements of organisation:
Departmentalization
Centralization
Decentralization
Delegation of authority
Span of control
3.1 Departmentalization:
Grouping of different activities of an organisation under separate heads.
As per James & Stonier – ‘Departmentalization is the grouping of work functions in such
a manner so that similar activities occur together.’
Bases of departmentation-
- By functions
- By products
- By customers
- By geographic or territorial
- By processes or equipment
Need of departmentalization-
- For specialization
- For departmental autonomy
- For managerial appraisal
- For fixation of authority and responsibility
- For effective control
- For man power development
Departmentation by Functions:
Here grouping of activities happen on the basis of functions to be performed i;e purchase,
production, marketing etc.
Advantages:
Simple and logical arrangement of activities
Promotes occupational specialization as experts are being employed for a
particular job
Facilitates co-ordination within the function that ensures uniformity of performance
Emphasizes optimum utilisation of resources that leads to economies in the
organisation
Disadvantages:
Develop function-oriented business where less emphasize given on objectives of
the organisation as a whole
Poor inter-department co-ordination that leads to conflicts among managers
Delay in decision making
Ineffective control because of the difficulty in evaluating the performance of the
departments
Less flexible due to too much specialization and centralization
Departmentation by Product:
Here grouping of activities happen on the basis of products.
Below mentioned diagram will make it easy to understand.
Advantages:
Facilitates co-ordination between different functions relating to a particular
product
Encourage decentralization of authorities
Flexible structure for product expansion, diversification and product elimination
(non-profitable)
Facilitates decentralization that ensure quick decision making
Disadvantages:
Costly, both in terms of operation and marketing
Less emphasize on optimum utilization of resources that leads to idle capacity
Departmental goals override overall enterprise goal
Departmentation by Territories:
Here grouping of activities happen on the basis of territories (or geographical location).
Advantages:
Increase local sales as it can collect information about a particular region
effectively
Promoting zone-wise coordination
Achieve localized economies as goods are produced and distributed globally
instead of producing at distant place
Facilitates expansion of business to different region
Disadvantages:
Increases the difficulty of headquarter control
Problem of communication and co-ordination among different branches
Departmentation by Customer or Market:
Here grouping of activities happen according to the type of customers or markets.
Advantages:
Widely varied needs of customers can be served efficiently
Offers specialised services to every customer group
Formulates customer-oriented policies
Disadvantages:
Highly expensive
Difficulty to maintain co-ordination among different customer-based departments
Under utilisation of resources
Departmentation by Process or Equipment:
Here grouping of activities happen on the basis of production process. Widely used by
manufacturing industries i;e oil refineries, cement, engineering tools etc.
Advantages:
Process happens in logical sequence
Division of work and specialization are being maintained in process
Effective utilisation of man power and equipment leads to economical production
Disadvantages:
High cost
Ineffective coordination of process
3.2 Centralisation of authority:
Centralisatiom means concentration of power at one point of the organisation. We can
also say that it is a system of reservation of authority at the central point of the
organisation. Under this structure top level management are given the power of decision
making.
Henry Fayol opined, “Everything that goes to reduce the importance of a subordinate’s
role is centralization.”
One example of centralization has given below-
Advantages:
Ensures Standardisation of methods
Facilitates reduction is cost
Eliminates duplication of work
Disadvantages:
Lack of departmental secrecy
Delay in execution of decision
Cannot foster departmental loyalty
3.3 Decentralization of authority:
Decentralization means delegation of power of decision making from top level
management to middle or lower level management. It is the fundamental of democratic
management.
Henry Fayol opined, “Everything that goes to increase the importance of a subordinate’s
role is decentralization.”
Advantages:
Maintain of departmental secrecy
Very quick in execution of decision
Foster departmental loyalty
Disadvantages:
Cannot enjoy Standardisation of methods
cannot reduce cost of operation
Entails duplication of work
3.4 Delegation of authority:
It is a process of assigning the authority to subordinates. It enables the subordinates
to perform their duties efficiently and effectively.
The power of delegation can be understand by the picture-
Elements:
Steps
Barriers
On the part of the Superior
a. Fear of loss of power
b. Fear of being exposed
c. Lack of confidence in subordinates
d. Passion for dominance
On the part of the Subordinate
a. Fear of criticism
b. Lack of self-confidence
c. Lack of experience
d. Lack of incentives
e. Overload of work
3.5 Span of Control / Span of Management:
Concept
Span of control means the number of subordinates whose work can be manage by a
supervisor at a time.
It is very important and difficult to determine that how many subordinates can be
managed by one superior.
As per L. Urwick, ideal number of subordinates for all superior should be 4 and for
lower level, it may vary from 8 to 12.
According to J C Worthy, manager may manage 20-30 subordinates.
J H Healey found in servey that 1-24 executives reports to presidents and 26 out of
100 presidents had 6 or less subordinates.
French management consultant V.A. Graicunas has developed a model establishing
the relationship between superiors and subordinates.
Direct single relationship= n
Direct group relationship= n (2n-1 – 1)
Cross relationship= n(n-1)
Total relationship= n ( + n-1) or n[2 + (n-1)]
Determining factors
1. Nature of work to be performe
2. Extent of delegation of authority
3. Abilities of the superior
4. Effectiveness of communication system
5. Capacity of the subordinates
6. Location of operation