Organizing Function of Management
Organizing refers as arranging and structuring
work to accomplish organizational goals.
It is an important process, during which
managers design an organization’s structure.
Organizational
structure
is
the
formal
arrangement of jobs within an organization.
In other words, organizing is establishing
working relationships among employees to
achieve goals.
Importance of Organizing
Organizing:
 Divides work to be done into specific jobs and departments.
 Assign tasks and responsibilities associated with individual
jobs.
 Co-ordinates diverse organizational tasks.
 Clusters(Group) jobs into units.
 Establishes relationships among individuals, groups and
departments.
 Establishes formal line of authority.
 Allocates and deploys(installs/arrange) organizational
resources.
 Creates
environment for getting work
done…for
accomplishing the goals effectively.
Principles of Organizing
 Principles are fundamental truth. They explain relationships and generalizations
which are universally applicable and practiced in an organization:
1.
Principle of unity of goals: Organizing function should be directed
towards achieving the goal effectively.
2.
Principle of span of control: There should be limited number of
subordinates under a superior. Optimal span of control can create
a efficiency in goal achievement.
3.
Chain of command: The line of authority from CEO to every
subordinate position should be clearly defined and unbroken.
4.
Principle of Unity of Command: Each subordinate should have
only one boss. No person should report to more than one boss.
Dual reporting could create confusion and conflict.
5.
Principle of Delegation of Authority: Delegated authority should be
adequate to accomplish expected results. Managers must
themselves make decisions within their authority. Only exceptional
matters should be referred to higher levels.
Principles of Organizing
6. Principle of Parity of Authority and Responsibility: Authority should
be equal to responsibility to an individual within an organization.
7. Principle of Absoluteness of Responsibility: Superior should take
responsibility of their subordinates positive and negative
performance. Superiors cannot escape from the responsibility for
the activities of subordinates.
8. Principle of Departmentation: Similar nature of work should be
grouped and hand over. The activities, authorities and expected
results from positions and people in departments should be clearly
defined to effectively accomplish goals.
9. Principle of Flexibility: The organization structure should be
flexible to adapt to changing environment.
10. Principle of Separation: Line and staff function should be
separated.
Organizing Process
1. Job Design: It is defining the contents of work. The tasks
required to achieve goals are identified. Activities are
determined. Division of work is done.
2. Departmentalization: It is grouping of activities into
departments and units. They can be production, marketing,
finance, human resources etc.
3. Structure: A structure is created. It establishes reporting
relationships, span of control and chain of command.
4. Authority-Responsibility relationships: It is assigning
authority and responsibility among positions and people.
5. Coordination: It is the process of integrating the activities
of various units and departments. Mechanisms are
established to achieve unity of efforts.
Organizational Design
 When managers create or change the structure, they are engaged
in organizational design.
 Organizational Design is a process that involves decision about six
key elements:
1. Work Specialization
o Work specialization refers to division of work activities into
separate job tasks. Individual employees specialize in doing part of
an activity rather than the entire activity in order to increase work
output. It is also known as division of labor.
o (Most managers today see work specialization as an important
organizing mechanism because it helps employees to be more
efficient.) …however, when it is carried to extremes, work
specialization can lead to problems including boredom, fatigue,
stress, poor quality, reduced performance, increased absenteeism,
increased turnover.
Organizational Design
2. Departmentalization
o It is grouping of activities into departments and units. They can
be production, marketing, finance, human resources etc.
o What job tasks will be done by whom, common work activities
need to be grouped back together so work gets done in a
coordinated and integrated way. “ How jobs are grouped together
is called departmentalization”
3. Chain of Command
o The chain of command is the line of authority extending from
upper organizational levels to lower levels, which clarifies who
reports to whom.
o Managers need to consider it when organizing work because it
helps employees with questions such as “Who do I report to?” and
o “Who do I go to if I have a problem?”
Organizational Design
 Cont…………………
o To understand the
chain of command, we need to understand
three other concepts: Authority, Responsibility and unity of
command.
o Authority: Authority refers to the rights inherent in a managerial position to
tell people what to do and to expect them to do it. Managers in the chain of
command have authority to do their job of coordinating and overseeing the
work of others. Managers assign work to employees, those employees
assume an obligation to perform any assigned duties.
o Responsibility: The obligation or expectation to perform is known as
responsibility.
o Unity of command: Unity of command states that a person should report
to only one manager. Without unity of command, conflicting demands from
multiple bosses may create problem.
Organizational Design
4. Span of Control
o How many employees can a manager efficiently and effectively
manage?- that is what span of control is all about.
o Wider spans are more efficient terms of cost. However, at some
point wider spans may reduce effectiveness if employee
performance worsens because managers no longer have the time
to lead.
5. Centralization and Decentralization
o Centralization is the degree to which decision making takes place at upper
levels of the organization. If top managers make key decisions with little
input form below, then the organization is centralized.
o If the middle and lower level employees provide input or actually make
decision, the more decentralization there is.
o Centralization and Decentralization is relative, not absolute-that is an
organization is never completely centralized or decentralized.
Organizational Design
6. Formalization
o Formalization refers to how standardized an organization’s job are and
the extent to which employee behavior is guided by rules and
procedures.
o In highly formalized organizations, there are explicit(clear) job
descriptions, numerous organizational rules, and clearly defined
procedures covering work processes. Employees have little
discretion(preference) over what’s done, when it’s done and how it is
done. (e.g-bank)
o When formalization is low, employees have more discretion in how they
do their work.
Two models of Organizational Design
 The two models of organizational Designs are:
1. Mechanistic Organization
2. Organic Organization
1. Mechanistic Organization:
o A mechanistic organization is a rigid and tightly controlled structure
characterized by high specialization, rigid departmentalization, narrow
span of control, high formalization, a limited information
network(mostly downward communication), and little participation in
decision making by lower-level employees.
o Mechanistic organizational structures strive for efficiency and rely
heavily on rules, regulations, standardized tasks, and similar controls.
Two models of Organizational Design
2. Organic Organization
o Organic Organization is a organization having a structure that is
highly adaptive and flexible. Organic organizations may have
specialized jobs but those jobs are not standardized and can change
as needs require.
o Also characterized by wide span of control, low formalization, free
flow of information, decentralization, cross functional and hierarchical
teams.
o Work is frequently organized around employee teams.
o Employees are highly trained and empowered to handle diverse
activities and problems, and they require minimal formal rules and
little direct supervision.
Contingency Factors affecting
Organizational Design(Mechanistic or Organic)
 The organizational design/structure is depends on four contingency variables:
i.
The organization’s strategy
ii.
Size
iii.
Technology
iv.
Degree of Environmental uncertainty
i. The organization’s strategy and structure:
o An organization’s structure should facilitate goal achievement. Because
goals are an important part of the organization’s strategies, it’s only logical
that strategy and structure are closely linked.
o Research has shown that certain structural designs work best with different
organizational strategies.
o (for instance: the flexibility & free-flowing information of the organic
structure works well when an organization is pursuing(following) meaningful
and unique innovations. – Apple Inc.(USA)
o The mechanistic organization, with its efficiency, stability and tight controls
works best for companies that want to tightly control costs.
Contingency Factors affecting
Organizational Design(Mechanistic or Organic)
ii. Size and Structure
o There is a considerable evidence that an organization’s size
affects its structure.
o Large organizations-typically considered to be those with more
than 2000 employees-tend to have more specialization,
departmentalization, centralization and rules and regulations than
do small organizations.
o Big organization is a mechanistic organization.
Contingency Factors affecting
Organizational Design(Mechanistic or Organic)
iii. Technology and Structure
o Every organization uses some form of technology to convert its inputs
into outputs.
o For instance, workers at Whirlpool’s Manaus, Brazil facility build
microwave ovens and air-conditioners on a standardized assembly line.
o Dell computers(USA) produce custom design laptops for its individual
customers.
o Unit production and process production is more effective in organic
structure.
o Mass production is more effective in mechanistic structure.
Contingency Factors affecting
Organizational Design(Mechanistic or Organic)
iv. Environmental Uncertainty and Structure
o Some organizations face stable and simple environments with little
uncertainty; other face dynamic and complex environments with a lot
of uncertainty.
o Managers try to minimize environmental uncertainty by adjusting the
organization’s structure.
o In stable and simple environments, mechanistic designs can be
more effective.
o Greater the uncertainty, the more an organization needs the flexibility
of an organic design.
Common Organizational Design:
1. Traditional Organizational Designs
 In designing a structure to support the efficient and effective accomplishment of
organizational goals, managers may choose to follow more traditional
organizational designs. These designs- the simple structure, functional structure,
and divisional structure- tend to be more mechanistic.
a. Simple structure: A simple structure is an organizational design with low
departmentalization, wide span of control, authority centralized in single
person, and little formalization.
o
This structure is most commonly used by small business in which the owner
and manager are one and the same.
o (Most organizations starts as entrepreneurial ventures with a simple structure
consisting of owners and employees)
o As the organization grows, it generally reaches a point where it has to add
employees. As number of employees rises, the structure tends to become more
specialized and formalized. Rules and regulations are introduced, work become
more specialized, departments are created, level of management are added, and
the organization becomes increasingly bureaucratic.
Traditional Organizational Design
b. Functional Structure: A functional structure is an organizational
design that group similar or related occupational specialties' together. It’s
the functional approach to departmentalization applied to entire
organization.
For example : CG FOODS(WAI WAI) is organized around the functions of
operations, finance, human resources, sales, marketing, product research
and development.
c. Divisional Structure: The divisional structure is an organizational
structure made up of separate business units or divisions. In this design,
each unit or division has relatively limited autonomy(not 100%), with
division manager responsible for performance and who has strategic and
operational authority over his or her unit.
In divisional structures, however the parent corporation typically acts as
an external overseer(supervisor) to co-ordinate and control the various
divisions, and it often provides support services such as financial and
legal services.
Common Organizational Design:
2.Contemporary Organizational Designs
Managers are finding that traditional designs are often aren’t appropriate for
today’s increasingly dynamic and complex environment. Instead, organizations
need to be lean, flexible and innovative; that is they need to be more organic.
a. Team Structures:
 A team structure is one in which the entire organization is made up of work
teams that do the organization’s work.
 In this structure, employee empowerment is crucial because there is no line of
managerial authority from top to bottom. Rather, employee teams design and
do work in the way they think is best, but they are also responsible for all work
performance results in their respective areas.
 In large organizations, the team structure complements what is typically a
functional or divisional structure. This allows the organization to have the
efficiency of a bureaucracy while providing the flexibility that teams provide.
Contemporary Organizational Designs
b. Matrix and Project Structures
b.1. Matrix Structure
 In matrix structure, specialists from different functional departments
work on projects that are led by a project manager.
 One unique aspect of this design is that it creates a dual chain of
command in which employees have two managers-their functional area
manager and their product or project manager-who share authority.
 The project manager has authority over the functional members who are
part of his or her project team in areas related to project’s goals.
However, any decisions about the promotions, salary recommendations,
and annual reviews typically remain the functional manager’s
responsibility.
 To work effectively both managers have to communicate regularly,
coordinate work demands on employees and resolve conflicts together.
Contemporary Organizational Designs
b.2. Project Structure- An organizational structure in which
employees continuously work on projects.
 Unlike a matrix structure, a project structure has no
formal departments where employees return at the
completion of a project. Instead employees take their
specific skills, abilities and experiences to other projects.
 Project structures tend to be flexible organizational
designs. There are no departmentalization or rigid
organizational hierarchy to slow down making decisions
or taking action.
 Managers are facilitators, mentor and coaches, in this structure,
helps in 0-
Contemporary Organizational Designs
c. Boundary-less Organization
 Boundary-less organization is not limited by boundaries. It cuts across
all aspects of organization. It is not defined by predetermined vertical
or horizontal structure. It is not bound by the chain of command and
span of control.
 It consists of empowered teams, there are no barriers to information
flow.
 The structure is relatively flatter and flexible.
 Computers link people.
 Globalization, competition, rapid technological change, innovation,
need to respond to dynamic changes in environment are the factors
which contribute to the emergence of boundary-less organization.
Boundary less Organization
To minimize internal(horizontal boundaries)- work specialization and
departmentalization….(vertical
boundaries)separate
employees
into
organizational levels and hierarchies.
External- the boundaries that separate the organization from its customers,
suppliers and other stake holders.
To minimize or eliminate these boundaries, managers might use virtual or
network structured designs.
a. Virtual organization: An organization that consists of a small core of full-time
employees and outside specialists temporarily hired as need to work on projects.
Internet link up partners(outside specialist) in virtual organization.
b. Network organization: An organization that uses its own employees to do work
activities and networks of outside suppliers to provide other needed product
components or work process.