CHAPTER THREE

ORGANIZING FUNCTION

AND

ORGANIZATION
 Definitions of Organizing

Organizing is the process “of identifying and grouping

tasks to be performed, assigning responsibilities and
delegating authority and establishing relationships for
the purpose of enabling workers to work most effectively
together in the accomplishments of objectives”

The organizing function involves the following

sub functions:

Identification of activities required for the
achievement of objectives and
implementation of plans.
 Definitions of Organizing contin….

Grouping of activities based on similarity of

jobs so as to create self-contained jobs.
Assignment of jobs to employees.
Delegation of authority so as to enable them to
perform their jobs and to command the
resources needed for their performance.
Establishment of a net-work of coordinating
relationships
Steps in organizing process

Fig 3.1 steps in organizing process

 Steps in organizing process

1. Reviewing of objectives to be accomplished

2. Determining tasks necessary to accomplish objectives

3. Grouping of activities according to their similarities to form department

4. Assigning work and delegating authorities

5. Hierarchical relationship development

 Classification of Organization
1. Formal and informal Organizations
A. Formal Organization:- It is the official organizational
structure created by management. Organizations
formed this purposefully. The formal organization
represents the classification of activities within the
enterprise, indicates who reports to whom and explains
the vertical journal of communication
B. Informal Organization:- It is the network of personnel
and social relationships that arises spontaneously as
people associate with one another or grouping to one
another in a work environment which mostly based on
their behavioral patterns, interests, beliefs, objective
etc.
 Classification of Organization…

A. Characteristics of formal organization

The important characteristics of a formal
organization are given below
it is properly planned
It is based on delegated authority.
it is deliberately impersonal
The responsibility and accountability at all levels of
organization should be clearly defined.
organizational charts are usually drawn
unity of command is normally maintained
It provides for division of labor
 Classification of Organization…

Advantages of formal organization Disadvantages of formal organization

1. The definite boundaries of each worker 1. In certain cases, the formal
are clearly fixed. it automatically organization may reduce the spirit of
reduces conflict among the workers. imitative.
The entire building is kept under
2. Sometimes authority is used for the
control
sake of convenience of the employee
2. Overlapping of responsibility is easily
without considering the need for
avoided. The gaps between the
using the authority.
responsibilities of the employees are
filled up. 3. It does not consider the sentiments
3. A sense of security arises from and values of the employees in the
classification of the task. social organization
4. There is no chance for favoritism in 4. The formal organization may reduce
evaluation and placement of the the speed of informal communication
employee. 5. It creates the problems of
5. It makes the origination less dependent coordination.
on one man Keith Davis observes that
formal organization is and should be
our paramount organization type as a
general rule. .
 Classification of Organization…
B. Informal organization
 Informal organization is an organizational
structure which establishes the relationship on
the basis of the likes and dislikes of officers
without considering the rules, regulations and
procedures.
 These types of relationships are not recognized by
officers but only felt, the friendship.
 Mutual understanding and confidence are some of the
reasons for existing informal organization, for example,
a salesman receives orders or instructions directly
from the sales manager instead of this supervisor.
 Classification of Organization…

• Characteristics of Informal organization

Informal organization arises without any external cause i.e.
voluntarily.
 It is a social structure formed to meet personal needs.
Informal organization has no place in the organization chart
It acts as an agency of social control.
Informal organization can be found on all levels of
organization within the managerial hierarchy.
The rules and traditions of informal organization are not
written but are commonly followed.
Informal organization develops from habits, conduct,
customers and behavior of social groups.
 Classification of Organization…

 Informal organization is one of the parts of total organization

 There is no structure and definiteness to the informal organization
 Group norms-are unwritten laws that govern the behavior of members
of the informal organization
 Group cohesiveness:- the members of informal organization are stick
together
 Group leader ship:- informal organization has a leader , i.e., the
informal leader, this person is the most active one from among the
other
 Communication net worked. The organization has communicated net
work called grapevine.
 Don't have boundary: - informal organization cut across the entire
formal organization without following chain of command so managers
can also be members of the informal group
 Classification of Organization…
Advantages of informal Disadvantages of informal
organization organization
• It fills up the gaps and deficiency of • It has the nature of upsetting
the formal organization the morality of the workers.
• Informal organization gives • It acts according to mob
satisfaction to the workers and
psychology.
maintains the stability of the work.
• It is a useful channel of • Informal organization indirectly
communication reduces the efforts of
• The presence of informal organization management to promote
encourages the executives to plan the greater productivity.
work correctly and act accordingly.
• It spreads rumor among the
• The informal organization also fills up
the gaps among the abilities of the
workers regarding the
managers. functioning of the organization
unnecessarily.
 Classification of Organization…

3. Impacts of the informal organization:- The

informal organization can affect the organization
positively or negatively.

a) Positive impacts
 Support management:- sometimes in providing
advices, generate new ideas
 Classification of Organization…

 Creates stability in the work environment since workers

have their own group to satisfy their needs they tend to
work for long period of time in the organization.
 Informal groups increasing starlet decreasing turnover.
 Provides channels of communication:-

1. Negative impact
Creates Conflicts with bosses or coworkers
Change resistance:
 Organization Chart
Organization Chart is graphic illustration of the
organization’s management hierarchy and
departments and their working relationships.
Organizational chart remains useful because it
provides different important information
regarding;
 Who reports to whom that is, chain of command.
 Span of control which is the number of
subordinates does a manager have
 Channels of formal communication shown by
solid lines that connect each job (box)
 Limitation of Organizational Chart
 Bases of departmentalization by function,
customer, or product, geographical etc
 Activities in each position- The labels in boxes describe
each individual ‘s activities
 The hierarchy of decision making - where the decision
maker for a problem is located

Organizational chart has these limitations

Informal communication channel
Informal relationship among workers
 Degree of authority holds by individuals
 Departmentalization
Departmentalization:- It is a grouping of
related activities into units. After reviewing
the plans. Usually, the first step in the
organizing process is departmentalization

[Link] of Departmentalization
Functional departmentalization
Product Departmentalization
Customer Departmentalization
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 Bases of Departmentalization

Functional departmentalization Product Departmentalization

 Functional departmentalization  product departmentalization
involves organizing departments involves organizing departments
around essential input activities, around products or services.
Such as production, marketing  Companies with multiple
and finance, which are products commonly use product
managerial or technological departmentalization.
functions.  Each department may become
 The advantage of this type of self-contained company, making
grouping is obtaining efficiencies and selling its own products.
from consolidating similar  For instance, major department
specialties and people with stores are structured around
common skills, knowledge and product groups such as home
orientations together in accessories, appliances,
common
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units. women's clothing, men's
 Customer Departmentalization
 Customer departmentalization involves organizing
departments around needs of different types of
customers.
 It is grouping of activities and responsibilities in
departments based on the needs of specific customer
groups.
 For instance, a plumbing firm may group its work
according to whether it is serving private sector, public
sector, government, or not-for-profit organizations.

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 Customer Departmentalization …
Disadvantages
Advantages
 Encourages concentration on  May be difficult to coordinate
customer needs. operations between
 Giving customers feeling that competing customer demands
they have an understanding  Require managers and staff
suppliers expert in customers problem
 Develops expertise in  Customer groups may not
customer area. always be clearly defined

A current departmentalization trend is to structure work according to

customer, using cross-functional teams. This group is chosen from
different functions to work together across various departments to
interdependently create new products or services
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 Bases of Departmentalization …

Territory (Geographic) Departmentalization Departmentalization by process

1. Involves grouping of activities 1. These process groups jobs
and responsibilities according on the basis of product or
to territory. customer flow.
2. All activities in a geographic 2. Each process requires
area are assigned to a particular skills and offers a
basis for homogeneous
particular manager. E.g. categorizing of work
3. Merck, a major pharmaceutical activities.
company, has its domestic 3. A patient preparing for an
sales departmentalized by operation would first engage
regions such as Northeast, in preliminary diagnostic
Southeast, Midwest, tests, then go through the
Southwest, and Northwest. admitting process, undergo a
procedure in surgery
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Advantages Disadvantages
• Achieves economic advantage • Coordination of department is difficult
• uses specialized knowledge • responsibility for profit is at the top
• simplifies training uses • it is unsuitable for developing general
specialized technology managers

Matrix departmentalization
• This is departmentalization that combines the functional
and product structures. With matrix departmentalization,
the employee works for a functional department and is
also assigned to one or more products or projects.
Advantages; Disadvantage:
• Since there are a number of managers, there • Conflict in organization authority exists(it lend itself
to power struggle)
are more channels of information
• possibility of disunity of command exists
• It is oriented toward end results (the project • it also result in higher overhead costs because
objective are clear) more managerial positions are created
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• Professional identification is maintained • requires manager effective in human relations
 Fig 3.3 Departmentation
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 Span of management (span of control)

• Span of control refers to the number of

employees reporting to manager, in other
words, the number of subordinates a
manager directly supervises. No fixed
number of subordinates is there to be
supervised by a single manger; the number
depends on different actions which include
perplexity.
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1. Complexity and variety of subordinates job:- If
subordinates are dealing with complex and many jobs, they
will contact with managers frequently to get more assistance,
so for manger to give assistance to subordinates they need to
lead only few subordinates
2. Ability and competence of mangers:- If mangers are capable
of grasping problems easily and finding solutions for problems
quickly then can supervise more number of subordinates.
3. Managers willingness to delegate authority:- If mangers are
permissible or willing to delegate authority, they can mange
or supervise many number of subordinate
4. The geographic location of organizational departments:- If
the departments are located in one-area mangers can control
many number of subordinates otherwise few subordinates
are advised.
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 Wide and narrow spans of control

• Based on the numbers of subordinates

supervised by managers in organizational
departments, span of control can be classified in
two

1. Wide span of control

It is a span of control which is associated with few
organizational levels.
It results in a flat organization structure.
The numbers of subordinates are many in wide span of
control.
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 Wide span of control

• Advantages • Disadvantages
Supervisors are  Tendency of overloaded
forced to delegate superiors to becomes
Clear policies must be decision bottle necks
made  Dangers of superior’s
Subordinates must be losses control
carefully selected  Requires exceptional
quality of managers

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10/10/2025 Fig 3.4 wide span of control
 2. A narrow span of control:-

• It is associated with many organizational level.

• This spans of control result in a tall organizational
structure.
Advantages Disadvantages
• Close supervision • Superiors tend to get too
• close control much involved in
subordinate work
• fast communication
• many levels of management
between
subordinates and • high costs due to many levels
superiors • excessive distance between
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10/10/2025 Fig 3.5 narrow span of control
1. Authority:
Is the formal and legitimate right of a manger to make
decisions, give orders, and allocate resources.
Is the right to command.
2. Formalization is the degree to which tasks are
standardized and rules and regulations govern
employee behavior.
3. Source of authority
Comes with the territory, “making that authority is legal
right of manager because of the position he or she
occupies in the organization.
The person who occupies a position has his/her formal
authority as long as he or she remains in that position as
the job changes in scope and complexity
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 Types of authority
1. Line authority
Defines the relationship between superior
and subordinates.
Any manager who supervises operating
employees or other manger has line authority.
It allows mangers to give direct orders,
evaluate the actions, reward and punish
employees.

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10/10/2025 Fig 4.6 Line Authority Chain
 Authority …
2. Staff authority
It is the authority to serve in an advisory capacity
Managers who provide advice or technical assistance are
granted advisory authority.
This staff or advisory authority provides no basis for direct
control over the subordinates or activities of other
departments; however, within the staff managers own
department, he or she can exercise line authority
Staff authority is more limited authority to advice.
It is authority that is based on expertise and which usually
involves advising line managers.
Staff members are advisers and counselors who aid line
departments in making decisions but do not have the
authority to make final decisions
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 Fig 3.7 Staff Authority
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 Authority …
3. Functional authority
Is an authority which permits staff managers
make decision on specific activities performed by
employees within other departments.
Staff departments often use functional authority
to control their procedures in other
departments.
Is the right of staff personnel to issue orders to
line personnel in established areas of
responsibility?
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 Responsibility and Accountability

1. Responsibility;
Equally important to authority is the idea that
when an employee is given responsibility for a
job, he or she must also be given the degree of
authority necessary to carry it out.
Thus, for effective delegation, the authority
granted to an employee must equal the assigned
responsibility.
Upon accepting the delegated task, the employee
has incurred an obligation to perform the assigned
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2. Responsibility
It is the obligation to do assigned tasks.
The individual employee is responsible for being proficient at
his or her job.
The supervisor is responsible for what employees do or fail to
do, as well as for the resources under their control.
Thus, responsibility is an integral part of a supervisor's
authority.
Responsibilities fall into two categories: individual and
organizational.
Employees have individual responsibilities to be proficient in
their job.
They are responsible for their actions. Nobody gives or
delegates individual responsibilities.
 Employees assume them when they accept a position in the
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[Link]
It is answering for the result of one's actions
or omissions.
It is the reckoning, wherein one answers for
his or her actions and accepts the
consequences, good or bad.
Accountability establishes reasons, motives
and importance for actions in the eyes of
managers and employees alike.
Accountability is the final act in the
establishment of one's credibility.
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 Power
Power is ability to exert influence in the
organization.
Power is the ability to exert influence in the
organization beyond authority, which is derived
from position.
In addition to authority; supervisors have more
personal sources of power to draw upon for
getting things done.
Everyone has power in one form or another and it
is by exercising this power that organizations get
things accomplished
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 Power contin…
[Link] power is derived from top management
and is delegated down the chain of command.

[Link] power is derived from the follower

based on the individual behavior.
A person does not need to be manager to have
power.
Some administrative assistants of top managers
have considerable power, but no authority.
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Manager can a acquire power from several different
sources, based on these sources power can be:
[Link] or position power:- The power
possessed by manger and derived from the
positions they occupy in the formal organization
[Link] power- The power that comes from the
ability to promise or grant rewards. Mangers have
the ability to decide on raises, promotion favorable
performance appraisals, and preferred work shifts
 Reward power results in people doing what is asked
because they desire positive benefits or rewards.
 Rewards can be anything a person values (praise,
raises, and promotions)
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[Link] power – is a power which enables mangers to
force individuals to attain their work assignments or to
punish those workers who failed
Coercive power is the threat of sanctions.
The punishment may include; demotion, terminating
employment etc
[Link] (charismatic) power – is the power that is
based on the kind of personality or charisma.
Referent power refers to a person who has desirable
resources or personal traits.
It results in admiration and the desire to emulate
[Link] Power- is power derived from an individual’s
knowledge and expertise.
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 Sources of Power
Reward
Reward
Power
Power

Legitimate
Legitimate Coercive
Coercive
Power
Power Power
Power

Enable
Enablemanagers
managersto tobe
be
leaders
leaders&&influence
influence
subordinates
subordinatestoto
achieve
achievegoals
goals

Expert
Expert Referent
Referent
Power
Power
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Fig 3.9 Source of Power Power
Power
 Delegation, centralization and
decentralization

• Delegation is the process of assigning

authority and creating obligation to
accomplish objectives.
• Delegation is the down ward transfer
of formal authority from one person
to another
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Process of Delegation
Delegation- involves some activities which include
1. Assignment of Tasks- identifying tasks to be performed and assign the
tasks to subordinates.

2. Delegation of Authority- Once tasks are assigned, employees

should be given as much authority as possible
3. Creation of Obligation- Managers has to create accountability
with subordinates for fair use of authority
4. Establishment of Control System- The fourth step in
delegation process is establishing adequate control system for
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evaluating performance of his subordinates.
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Fig 4.10 Steps in Delegating
Merits of delegation
 It freed managers from routine activities and enables
them to focus on critical ones.
 It acts as a tool of development and motivation of
employees.
 It is means of pushing down decision to lower level
so decisions are likely to be timelier as well as
realistic.
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Obstacles to Delegations
 Managers believe that they can do better decisions

 Managers are afraid of losing importance

 Some managers do not know how or what

to delegate
 Subordinates lack confidence in their
activities etc.
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 Centralization and decentralization

1. Centralization is a philosophy of
management that focuses on
systematical retaining of authority in
the hand of higher level managers. I.e.
it is the degree to which decision-
making is concentrated in top
management's hands
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2. Decentralization is a philosophy of
management that focuses on systematical
delegation of authority to middle and lower
level managers If authority is decentralized:
 Greater number of decision will be made at
lower level
 Generally; tall organization structures are
more of centralized.
 Flat organizations Structures are more of
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 Groups and committees

Group is a social unit consisting of

two or more interdependent, interactive
individuals who are striving to attain
common goals.

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Types of groups
 Formal groups are groups established by an
organization, their membership and structure are
formed by the management of the organization
 Formal groups are or may be classified as follows

I. Task group/work group consists of people with

different skill for performance of a common task.
II. Command group consists of managers and their
employees formed due to authority and responsibility
relationship.
III. Mediating group a group formed to resolve conflict that
may arise between departments and individuals.
IV. Policy making group:- a group established to formulate
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operating policy
 Committees
Committee is a group of members that represents
functional areas of expertise.
– It is best example of formal group
– The primary function of committee is to make or
suggest decisions on problems at hands
Types of committee
Generally committees can be ad hoc or standing
1. Adhoc committees: - Are those formed for a particular
purpose. If the objectives have been met, they are disbanded
(dispersed).
2. Standing committee- Are permanent in nature. They are not
disbanded. In large organizations they often take the form of
•
finance committees and personnel committee.
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