Sixth/ Seventh Semester B.

E (All branches)
Essentials of Management
HSS-302/401
Functions of Management

Learning Objectives
What is Management

Planning as a Function of Management

Organizing as a Function of Management

Staffing as a Function of Management

Directing as a Function of Management

Controlling as a Function of Management

Summary

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 Organizing as a Function of Management

Learning Objectives

What is Organizing

Nature of Organizing

Components of Organizing

Steps of Organizing

Benefits of Organizing

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 Organizing as a Function of Management

What is Organizing?

Organizing involves:

• Identification and classification of the

required activities

• Grouping of activities necessary to attain

objectives

• Assignment of each grouping to a

manager with authority and the provision
of coordination

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 Organizing as a Function of Management

Nature of Organizing

Composition of
Individuals &
Differentiated Groups
Functions Division of Work
Intangible

& Specialization

Continuity

Management is the art of getting things done through others.

Orientation

Towards Goals Purposeful

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 Organizing as a Function of Management

Components of Organizing
Division of Labour
Assigning responsibility for each
activity to an individual / group. It
Division becomes Specialization when the
of Labour responsibility for a specific task lies
with a designated expert in that field.

Delegation of Authority
Process managers use delegation to
transfer authority to positions below
them. Organizations today tend to
Span of Components of Delegation of encourage delegation from highest to
lowest possible levels. It improves
Control Organizing Authority
flexibility.
Departmentation
It is the basis on which individuals are
grouped into departments and
departments into total organizations.

Span of Control
Departmentation It refers to the number of subordinates
a supervisor has.Factors that affect
span of control are Geographical
Location, Capability of workers, and
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 Organizing as Function of Management

Steps in Organizing Process

Building relationship
between authority and
responsibility

Classification of the
Organizinzing the authority
activities

Identification of activities of
the organization

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 Organizing
BUSINESS NETWORK as Function of Management

Benefits of Organizing

Optimum utilization
of Resources

Facilitates Growth &

Helps to achieve
Diversification
organizational
goals

Planning, Staffing, Directing and

Controlling cannot be implemented
without proper organization

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Nature and purpose of Organizing
• Verifiable objectives

• A clear idea of the major duties and activities

involved

• An understood area of discretion or authority

so that the person filling the role knows that
he can do to accomplish goals

• Organization implies a formalized,

intentional internal structure of roles and
positions.

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Urwick’s 10 principles of
Organization
• Principle of Unity and objective: Organization structure is effective if it facilitates the
contribution of individuals in the attainment of enterprise objectives.

• Principle of efficiency: Organization is efficient if it facilitates accomplishment of

objectives at minimum costs.

• Principle of specialization: Employee should be allotted a function suited to his aptitude

and skills (one group one function)

• Principle of coordination: Built in procedures for coordination between the roles of

various sections.

• Principle of authority: Clear line of authority from the supreme to the lowest managerial
line.
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Urwick’s 10 principles of
Organization
• Principle of delegation: Authority must be delegated as much as down in the
organizations. Decisions must be made at the lowest competent level.

• Unity of command: Each person should be accountable to a single supervisor.

• Span of management: No superior at higher level must have more than six immediate
subordinates.

• Principle of exception: Higher management should deal with exceptionally complex

problems. All the routine matters should be dealt with lower level managers.

• Principle of flexibility: Organizational structure should be adaptable to changes in

nature of business and technology, and proceedures.

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Formal and informal organization

• Formal organization means the intentional

structure of roles in a formally organized
enterprise.

• Informal organization is a network of personal

and social relations not established/required by
the formal organization but arising
spontaneously as people associate with one
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Formal and informal organization

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Formal and informal organization

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Formal and informal organization

Formal organization Informal organization

1. Designed and created by the top 1. Comes up on its own
management
2. Not a planned one, it is created
2. Planned one spontaneously
3. Authority and responsibility are fixed 3. Authority is generally based on personal
and defined acceptance.
4. Requires an office to function 4. Functions through people.
5. Is rigid, definite, and has a written 5. Is flexible and has no such fixed Rigid,
constitution written constitution.

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Tall and flat organizations

• Tall structures have many levels

of authority and narrow spans of
control

• Flat structures have fewer levels

and wide spans of control

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Tall and flat organizations

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Span of control

• Refers to the number of subordinates who report

directly to an executive or supervisor

• The differences in the span of control have direct

implications on the shape of the organization

• Organizations must find the optimal span of control

to be effective
– Narrow enough to permit managers to
maintain control over subordinates
– Wide enough so that the possibility of
micromanaging is minimized

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Factors effecting span of control

• The optimal span of control is dependent on the following factors

– Subordinates training: Well trained subordinate requires less time of supervisor. In
this case a broader span is feasible
– Delegation of authority: If manager clearly delegates the authority, then a
subordinate can get it done with a minimum superiors time and attention.
– Planning: Clear policies to guide decisions for the subordinates result in fewer
dependencies on superiors time
– Rate of change: Dynamic industry calls for narrow span, if stable business, broader
span

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Factors effecting span of control

• The optimal span of control is dependent on the following factors

– Communication techniques: Broader span is feasible if the manager can
communicate effectively.
– Kind of activity: If the activities are highly important and complicated, then small
span is recommended.
– Kind of organization: Centralized organization requires narrow span. Decentralized
organization decisions are made at lower level and there is freedom of action.
– Organizational level: If delegation of authority done at lower level, then we can
have a wider span of control.

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Patterns of departmentation

1. Departmentation by Simple numbers

2. Departmentation by Time

3. Departmentation by Enterprise functions

4. Departmentation by Territory/Geography

5. Departmentation by Product

6. Process/Equipment Departmentation

7. Customer Departmentation

8. Matrix Departmentation

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Departmentation by numbers

• This is structural departmentation include

– grouping all persons who are to perform
the same duties and functions and putting
them together under the supervision of a
manager.
• Age old method and rapidly falling into
disuse: Construction, Old armies

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Departmentation by numbers

• Reasons for the decline:

1. The technology is advancing very fast,
demanding more specialized and
different skills.
2. Groups composed of specialized
personnel are more frequently more
efficient than merely based on numbers.

• It is useful only at the lowest level of the organization structure.

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Departmentation by time

• Suitable for lower level of the

organization

• Oldest form structuring organization

• Grouping of activities according to basis

of time

• The use of shifts is common in many

enterprise because normal workloads
become insufficient and ineffective

• E.g.: Hospital, Production facilities

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Advantages

• Services offered 24X7 instead of 8 hrs shift

• Process need not be interrupted which needs a

continuous cycle of operation

• Expensive capital equipment can be used more

than 8hrs/day

• Students attending classes during the day’s time

can work in night shift to sustain their living.

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Limitations

• Supervising during night shift becomes

difficult

• There is fatigue factor, since it is difficult for

most employees to change their biological
clock

• Having several shifts may cause problems

with coordination and communication

• Payment of overtime can increase the cost

of production or services rendered.

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Functional departmentation

• The most widely used form of

departmentation

• Groups activities by function—the jobs to be

done.

• Consistent with the idea of specialization and

division of work, activities that are alike or
similar are placed together in one department
and under a single chain of command.

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Functional departmentation

• Functional departmentation also

facilitates coordination since a supervisor
is in charge of one major area of activity.

• It is easier to achieve coordination this

way than to have the same functions
performed in different departments
under different supervisors.

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Functional departmentation

Strengths Weakness
• Allows economies of scale within • Slow response time to
functional departments environmental changes
• Enables in-depth knowledge and • May cause decisions to pile on top,
skill development hierarchy overload
• Enables organization to accomplish • Leads to poor horizontal
functional goals coordination among departments
• Is best with only one or a few • Results in less innovation
products • Involves restricted view of
organizational goals

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Geographical departmentation

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Geographical departmentation

• Grouping activities on the basis of

territory. If an organization's customers
are geographically dispersed, it can
group jobs based on geography.

• For example, Coca-Cola has reflected

the company’s operation in two broad
geographic areas – the North American
sector and the international sector,
which includes the Pacific Rim, Europe,
Africa and Latin America groups.
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Geographical departmentation

Advantages Limitations

• Places responsibility at the lower levels. • Requires more persons with G.M
• Places emphasis on local markets & local abilities.
problems. • Tends to make maintenance of
• Improves co-ordination in a region. economic central services difficult.
• Takes advantages of economies of local • Increases problem of top management
operation. control.
• Better face to face communication with
local interests.
• Furnishes measurable training ground
for general managers.

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Departmentation by process/
equipment

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Departmentation by customer

• Customer departmentalization - Grouping activities on the basis of common customers

or types of customers.
• The assumption is that customers in each department have a common set of problems
and needs that can best be met by specialists.

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Product/ Service departmentation

• E.g.: A food product company may choose to divide its operations into a frozen food
department, a dairy products department, a produce department, and the like.
• Product departmentation can also be a useful guide for grouping activities in service
businesses.

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Matrix structure departmentation

• A matrix structure is a type of

departmentalization that superimposes
a horizontal set of divisional reporting
relationships onto a hierarchical
functional structure.

• The essence of a matrix organization is

the combination of functional and
product or project patterns of
Departmentation in the same
organization structure.
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Matrix structure departmentation

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Matrix structure departmentation

Advantages:
• Oriented towards end results
• Professional identification is maintained
• Pinpoints product profit responsibility

Disadvantages:
• Unity of command is violated
• Conflict in organization authority exists
• Requires manager effective in human relations
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Line organization Structure

• It is the oldest type of organization. This is

known by different names, i.e, military,
vertical, scalar departmental organization.

• The persons having greater decision making

authority are placed at the top and those
having the least decision –making authority
are at the bottom. In between there are
other levels of management such as
intermediate or supervisory.

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Line & Staff organization
• A line and staff organization is one where
specialist advisers, in the form of functional
managers, assist the line managers in the
performance of their responsibilities.
• Line executives have direct control over the
sub-ordinates under them. Staff executives
have no such authority. Rather, they are
meant to aid and advise the line managers at
the same level.
• Line and staff functions frequently overlap.
Most staff executives may also
simultaneously be line and functional
executives.

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Delegation of Authority

• Authority: right to give orders.

• “Rightful legal power to request subordinates

to do certain thing or to refrain from doing
so, and if he doesn’t follow these instructions
the manager is in a position, if need be, to
take disciplinary action, even to discharge the
subordinate.”

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Delegation of Authority

• Responsibility: Duty or
responsibility is used in many
senses. It means obligation,
liability, or activity or
accountability.

• “It may be defined as the

obligation of a subordinate, to
whom a supervisor has assigned a
task, to perform the service
required.”
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Delegation of Authority

• Delegation: “The entire process of

delegation involves the determination
of results expected, the assignment of
tasks, the delegation of authority for
accomplishment of these tasks and
creating the obligation for the
subordinate to carry out the task

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Delegation of Authority

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Principles of Delegation

1. Delegation to go by results expected: Before

assigning duties and delegating the authority to
his subordinates, the manager should be clear in
his mind as to what he expects from them.
2. Responsibility is absolute: A manager can
delegate only authority not responsibility.
Responsibility is never delegated.
3. Select appropriate sub ordinate for delegation:
4. Authority to match responsibility and vice
versa: Just as an ill-equipped soldier can’t fight a
battle successfully, similarly an inadequate
unauthorized subordinate can’t succeed in
accomplishing the assigned task.

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Process of Delegation

Creating the obligation for the subordinate

to perform the duties assigned

The delegation of authority for

The assignment of tasks accomplishing these tasks
to persons in a position

The determination of results expected

from persons in a position

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 Why managers do not delegate…?

1. None better than I

2. I will be exposed
3. The company can’t do without me
4. I am the master
5. Why take the risk
6. None of the subordinates is capable
7. What if he proves better than me

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 DECENTRALIZATION OF
AUTHORITY
• Decentralization is the tendency to disperse
decision making authority in an organized
structure.
• It is a fundamental aspect of delegation; to the
extent the authority is not delegated, it is
centralized.
• It requires careful selection of which decisions to
push down into the structure and which to hold
near the top, specific policy making to guide the
decision making.
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 Benefits of decentralization
1. Relieves top management of the burden of decision making
2. Encourages decision making and assumption of authority and
responsibility
3. Gives manager more freedom and independence in decision making
4. Promotes establishment and use of broad controls which may increase
motivation
5. Makes comparison of performance of different organizational units
possible
6. Facilitates setting up of profit centers
7. Facilitates product diversifications
8. Promotes development of general managers
9. Aids in adaptation to a fast changing environment

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 LIMITATIONS OF
DECENTRALIZATION
1. Limited by the availability of qualified managers
2. Involves considerable expense for training managers
3. Makes it more difficult to have a uniform policy
4. Increases complexity of coordination of
decentralized organizational units
5. Result in loss of some control by upper level
managers
6. Limited by inadequate control techniques
7. Constrained by inadequate planning and control
systems
8. Limited by external forces

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 CENTRALIZATION OF AUTHORITY

• Includes withholding the authority by few

persons at central points.
• Definition by Louis Allen : centralization is the
systematic and consistent reservation of
authority at central points in the organization.

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 Benefits of Centralization
1. Top management can take vital decisions affecting
the entire organizations
2. Having a uniform policy and coordination of all
activities are possible
3. High-level people in the organization can take more
effective and intelligent decisions
4. Crises and emergency situations can be secured
5. Duplication of effort can be avoided
6. Control and communication becomes easier.

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 Limitations of Centralization

1. Decisions are not taken by the people who

face situations and problems in their area.
2. Lower and middle level management will not
have interest and initiative in the job.
3. Top management unnecessarily has to waste a
lot of time and energy on unimportant and
routine matters.
4. It hampers effective communication

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 Authority & Responsibility
Authority is the power or right to give Responsibility is the state or fact of
orders, make decisions, and enforce having a duty to deal with something,
obedience. or of having control over someone.

It is power. It is a duty.

Here, orders and commands play a Here, duties and obedience play a vital
vital role. role.

It stays for a longer period as It gets completed with the completion

compared to responsibility. of the task so it has a shorter period.

It flows downwards. It flows upwards.

It can be delegated to others. It cannot be delegated.

The right of a manager to command The obligation of a subordinate to

his subordinates. complete an assigned work.

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 1. How does informal organization support the formal organization?
Go through the slides on formal and informal organizations and
answer.

2. Neha runs a factory wherein she manufactures shoes. The business

have been doing well and she intends to expand by diversifying into
leather bags as well as western formal wear thereby making her
company a complete provider of corporate wear. This will enable her to
market her business unit as the one stop for working women.

Which type of structure would you recommend for her expanded

organization and why? Draw the recommended organization structure.

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• A company X Ltd. Manufacturing cosmetics, which has enjoyed a
prominent position in business, has grown in size. Its business was very
good till 1991. But after that, new liberalized environment has seen entry
of many MNCs in the sector. With the result, the market share of X Ltd.
Has declined. The company had followed a very centralized business
model, with Directors and divisional heads making even minor decisions.
Before 1991, this business model had served the company very well as
consumers had no choice. But now the company is under pressure to
reform.
• a) What organization structure changes should the company bring about
in order to retain its market share?
• b) How will the changes suggested by you help the firm? Keep in mind that
the sector in which the company is FMCG.

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 Brian has worked for XYZ Company for a number of years and for the last four
years he has been General Foreman in charge of assembly departments. His
department has been rated high always in respect of efficiency and cost schedules.
He is personally respected by his subordinate foremen and by staff personnel.
A week ago a new Supervisor Eshwar was transferred into assembly department
from another department whose operations were discontinued. Eshwar had been a
General Foreman in the other department and carried the same title in his new
assignment. When the Plant Manager introduced Eshwar to Brian and his
subordinate foremen he made no mention of Eshwar’s specific duties. However in
an earlier conversations in his office the Manager informed Eshwar that he would
be responsible for the sub assembly areas while Brian would be responsible for the
final assembly lines. The manager did not mention the details of the assignment to
Brian because he had another 10 General Foremen reporting to him and was hard
pressed for time. He assumed that the two men could work things without difficulty
and in any event he planned to review their respective areas of responsibilities at
the end of the week.

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The day after his transfer into the area Eshwar began making changes in the existing
system and giving instructions to various supervisors in the sub assembly areas in order to
implement changes he felt were desirable. The supervisors reacted with dissatisfaction to
the proposed change and immediately went to Brian to ask what was going on and who in
charge of the department. Brian could not furnish any specific information but told
supervisors to do as Eshwar instructed until he could discuss the matter with the plant
manager.
1. What did Plant Manager do what was incorrect. How can he correct the situation?
Discuss this with respect to principles of delegation
2. What was the reason for the inefficiency of the Plant Manager?
3. When Eshwar received his assignment did he handle the situation correctly?
4. Do you think that Brian did the right thing in having the men do as Eshwar had
instructed? Should Brian talk to Eshwar before discussing the matter with the
Manager?
5. Overall what kinds of reasons may be involved in the Plant Managers decision to
assign an additional general foreman in the assembly department? Should the reason
be communicated to the supervisors in the area?

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 Daewoo case Study

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Daewoo case study
Daewoo was founded in 1967 by its hardworking, relentlessly driven chairman
Kim Woo-Choong. After its initial success in exporting textiles, the company
expanded into trade, autos, machinery, consumer electronics, construction,
heavy shipping, computers, telephones, and financial services, becoming
Korea's fourth largest business group. it became a textile supplier for Sears,
Christian Dior, Calvin Klein, and London Fog. it also engaged in a joint venture
with General Motors (GM) to build the Le Mans car. However, labor and other
problems limited car shipments. Chairman Kim's philosophy of hard work and
the value placed in people were important factors in the firm's success.
However, in the late 1980s and early 1990s, the company faced several
problems. For one, Kim was concerned that, with the increasing prosperity of
Koreans, the work force might lose the spirit of hard work. Moreover, there was
growing discontent among younger workers and decreasing motivation. Through
Kim's hands-off approach to managing, some of the companies in the Daewoo
group went out of control. For example, in the unprofitable heavy shipping unit,
he noticed many unnecessary expenses. The elimination of company-sponsored
barbershops saved the company $8 million a year. In general, Daewoo's work
force was young and well educated. In contrast to similar positions in many other
Korean companies, top positions at
Daewoo were occupied by managers with no family ties. Although Daewoo was a major
company with its 91,000 employees, it was not dominant in any one industry. The strategy of
being a supplier for major companies, such as Caterpillar, GM, and Boeing, may have led to
opportunities being bypassed for becoming a major marketer of its own brands. Now in the
1990s, Kim was also looking at opportunities in Europe; for example, he formed a joint venture
with a distribution company in France. The massive restructuring had already shown some
positive effects. Kim sold some steel, financial, and real estate units. The hands-off managerial
style had been replaced by a hands-on style, resulting in re-centralization. Managers were
“retired” or otherwise let go. Thousands of positions were also eliminated.
Things were looking better in 1991. The company lost money in 1988 and 1989 but made
some profit in 1990 partly because of the sale of some major assets. The joint venture with GM
registered a healthy growth. The company was also optimistic about the future of the new
compact car Espero. Still, Daewoo had to cope with its labor costs and Japanese competition.

What looked good in the early 1990s dramatically changed in the latter part of that decade and
especially in the years 2000 to 2002. In 2000, Ford planned to buy Daewoo Motor for some
$7billion. However, the deal fell apart later that year. Moreover, the company went bankrupt in
November 2000. Chairman Kim mysteriously disappeared. He liked to think big, and he also
left behind the company with big debts. Several billion dollars were also unaccounted for. With
Ford out of the picture, GM entered seriously into negotiations with Daewoo, which was once
Korea’s second biggest car maker. On April 30, 2002, GM agreed to buy the bankrupt
company, which was renamed as GM-Daewoo. What is in it if for GM? The acquisition is a key
component of its global strategy. On the other hand, restructuring Daewoo is going to be a
formidable task. The brand image has to be restored and the Korean market share of 10
percent (which was 37 percent in 1998) has to be improved. The product line also has to be
reviewed and complemented with new models. Moreover, GM-Daewoo can expect difficulties
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with Korea’s aggressive unions.
1. What are the advantages and disadvantages of a hands-off,
decentralized management approach?

2. What were some of the controllable and uncontrollable factors

in this case? How should Mr.Kim have responded to those
factors?

3. How can Daewoo stay competitive with the Japanese?

4. What do you think of Daewoo’s expansion into Europe? What

are the advantages and risks for the company?

5. Why do you think GM acquired the company, while Ford did

not?

6. What problems can GM-Daewoo expect in the future?

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