Chapter 5

Organizing
Learning Objectives:
 At the end of the discussion, the following objectives will be
accomplished:
 Explain the importance of organizing for the business;
 Understand how organizing function relates to using various
resources in order to accomplish strategic goals;
 Know the advantages and disadvantages of centralization and
decentralization;
 Describe how the organization provides for accountability through
authority and responsibility;
 Demonstrate stability to delegate responsibility; and
 Develop procedures for efficient workflow.
Definition of Organizing
 Organizing is a managerial function that usually comes after
planning, and it is viewed as the second step in the
management cycle.
 It is viewed as the second step in the management cycle.
 The concern of organizing as a management function is to
put together all the necessary resources and devise a design
so that individuals may end up accomplishing their activities
in the most effective and efficient manner.
 The main intentions of organizing covers the determination of the
tasks to be done in order to fulfill objectives, division of tasks into
specific jobs, grouping jobs into departments, detailing, reporting
and authority relationships, delegating the authority necessary for
task accomplishment, and allocating and deploying resources in a
coordinated fashion.
Definition of Organizing
 Organizing plays a significant role in the management process.
 Once plans are organized the manager’s task and responsibility is to see
that they are implemented.
 Given a well defined mission, core values, objectives, and strategy, the
role of organizing is to start the process of carrying out the plan by
defining jobs and working relationships.
 The organizing function of management affects almost all levels of an
organization’s operations.
 It determines who is to do what, who is in charge of whom, and how
different people and parts of the organization link to and to their work
with one another.
 It is also vital for the management of any organization to be properly
trained and well-acquainted in all functions of the organization.
Definition of Organizing
 Organizing is the process of arranging and structuring work to
accomplish an organization’s goal.
 Organizing is the process of identifying and grouping the activities
required to attain the objectives, delegating authority, creating
responsibilities and establishing relationship for people to work
effectively.
 According to Haimann, “Organizing is the process of defining and
grouping the activities of the enterprise and establishing the authority
relationships among them”.
 According to Chester Bernard, “Organization is the system of
consciously coordinated activities or forces of two or more persons”
IMPORTANCE OF ORGANIZING:
 Organizing is pooling of human, physical and/or financial resources so as
to achieve the objectives taking into account the organizational structure and
environment.
 It sets the systematic utilization through delegating and harmonizing tasks.
 Organizing translate plans into reality by decisive development of resources
inside a decision-making structure know as organizational structure.
 Plans direct organizing and convey where organization is heading and how to
go there.
 In order to be well organized, one has to identify what is the proper time to do the
task and then afterwards schedule the preferential task for that particular time.
 A plan of action should be readied for what task to be done, at what time and
how much budget.
 This would assist in doing a task efficiently and effectively.
 Both planning and organizing make ready an organization for meeting
future difficulties.
NATURE OF ORGANIZING:
 Communication:
 Every organization have free flow of communication.
 These channels of communication are necessary for mutual understanding and
cooperation among members of an organization.
 Co-ordination:
 Diverse efforts of various functional departments are integrated towards the common goal
through the process of coordination.
 Environment:
 No organization works in a vacuum. Social, political, economic and legal factors exert
influence on the environment.
 Beside it is influenced by internal factors like materials, machines, level of technology,
economic measures, HR, etc.
 Rules and regulations:
 Every organization is governed by a set of rules and regulations for orderly functioning of
people.
PURPOSE OF ORGANIZING:
 To facilitate organization:
 Helps to earn highest profit.
 A properly designed organization facilitates both management and
operation of enterprise.
 Increase efficiency of management:
 A good organization will extract efficient work from an organization.
 Eliminates redundancy and motivates every employee.
 To facilitate growth and diversification:
 Growth deals with expanding the scale of operation.
 Diversification means start of production of new type of products.
PURPOSE OF ORGANIZING:
 Optimistic use of resources:
 Detailed job specifications are prepared in order to match the job with
the men.
 Right persons are placed in right job.
 Facilitate coordination and communication:
 Grouping of activity.
 Permit optimum use of technological innovations:
 Modifying authority relationship in wake of new developments.
 Provides adequate scope for innovation.
PURPOSE OF ORGANIZING:
 Stimulate creativity and initiative:
 Provides the opportunity for the employees to show their hidden
talent
 Facilitate the development of managerial ability:
 Trained to acquire a wide and variety experience in diverse
activities through job rotation.
Process of Organizing
 Thefollowing are the five steps that have to be
consecutively reiterated in order to ensure that
organizing is as efficient as possible
 (1) Examine plans and objectives
 (2) Determine Major Tasks essential to fulfill objectives
 (3) Dividing major tasks into subtasks
 (4) Allocating resources and directives for subtasks
 (5) Evaluating Results of Organizing Strategy
Process of Organizing – continuation…
 (1) Examine plans and objectives
 Management must take to initiate the organizing process by reflecting on
the organization’s plans and objectives.
 Objectives are the particular activities that must be terminated to fulfil
goals
 On the other hands, plans mold the activities necessary to reach these
goals.
 (2) Determine Major Tasks essential to fulfill objectives
 Management must shortlist and decomposes all major tasks or jobs to be
done within the realization of organizational goals.
 For some managers this task may appear engulfing or overwhelming.
 (3) Dividing major tasks into subtasks
 Major jobs may be divided into manageable work units.
 Management can categorized group activities in accordance to
various models of departmentalization like functional, divisional,
matrix, team or virtual.
Process of Organizing – continuation…
 (4) Allocating resources and directives for subtasks
 This step supply sufficient resources for the staff to realize the
tasks.
 Management also assigns the prescribed activities to definite
individuals.
 In addition, each individual must be given authority to execute the
assigned tasks.
 (5) Evaluating Results of Organizing Strategy
 Fifth step is in many perspectives, the most significant.
 The feedback gathered provides information on how well the
strategy is attaining the goals.
 The key is to keep learning from the mistakes and to continuously
polish the process.
The Organizational Chart
 It is a diagram that visualizes the vertical structure of an organization.
 It shows the connections and relative ranks of its parts and position/jobs.
 It is also concerned with relationships among tasks and the authority to
do the tasks.
 There are eight kinds of relationships can be envisioned in an organization
chart:
 The division or specialization of labor
 Relative authority
 Departmentalization
 Span of control
 The levels of management
 Coordination centers
 Formal communication channels
 Decision responsibilities.
The Organizational Chart – continuation…
An organizational chart of a company usually illustrates the managers and
subordinates who make up an organizations.
It also demonstrates the relationships between the organization’s staff members
which can be one of the following:
 Line is a direct relationship between superior and subordinates
 Lateral is relationship between different departments on the same
hierarchical level
 Staff is relationship between a managerial assistant and other areas.
 The assistant will be able to offer advice to a line manager.
 However, they have no authority over the line manager action.

 Functional is relationship between specialist positions and other areas.

 The specialist will normally have authority to assert that line manager executes any of their
instructions.
The Organizational Chart – continuation…
 In many big companies the organization chart can be sizeable and unimaginably
complex.
 Sometimes, it is decomposed into smaller charts for each individual department within
the organization.
 Organization charts have significant weaknesses that should be of interest to management
developing and using them:
 They may imply a formality that doesn’t exist.
 They may not be consonance with reality.
 Their usual top-down perspective often minimizes the role of clients, front-line managers and
employees without management responsibilities.
 They fail to consider the informal structure and informal communication.
 They often imply that a pyramidal structure is the best or sole way to organize.
 They fail to direct the possible power and authority of staff positions equated with line positions.
 It only shows “formal relationships” and tells nothing of the pattern of human (social)
relationships which develop.
 It shows nothing about the managerial style adopted.
FORMAL AND INFORMAL
ORGANIZATION
ORGANIZATION:
Organization is defined as the place
where, process of arranging and structuring
work to accomplish a goal happens.
FORMAL ORGANIZATION:
 The formal organization refers to the structure of jobs and positions with
clearly defined functions and relationships as prescribed by the top
management
PRESIDENT

Vice President Vice President

Vice President
Marketing Manufacturing
Finance

Sale Manager Plant Manager

Division A Electronic
Controller Components

Sales Manager
Division B
Plant Manager
FORMAL ORGANIZATION:
 Itcan also be defined as system of well defined jobs
with a prescribed pattern of communication,
coordination and delegation of authority.
 According to Louis Allen, Formal organization is a
system of well – defined jobs, each bearing a definite
measure of authority, responsibility and accountability.
 In formal organization everybody is assigned a certain
responsibility for the performance of the given task and
given the required amount of authority for carrying it
out.
CHARACTERISTICS OF FORMAL ORGANIZATION:
 Flexible and properly planned.
 It is based on principle of division of labor and efficiency in
operation.
 Concentrates more on the performance of jobs but not on the
individuals performing the jobs.
 Flow of organization structure is usually framed.
 Coordination and control among members of organization are well
specified.
 Responsibility and accountability are clearly defined.
 Unity of command is normally maintained.
ADVANTAGES OF FORMAL ORGANIZATION:
 Conflicts among workers is eliminated.
 Overlapping of responsibility is avoided.
 More stability is ensured in organization.
 A sense of security arises from classification of the task.
 Motivates every employee for their personal as well as
organization goal.
INFORMAL ORGANIZATION:
 An informal organization is an organization which is not established
by any formal authority, but arises from the personal and social
relations of the people.
 Informal organization refers to the relationship between people in
the organization based on personal attitudes, emotions, prejudices,
likes, dislikes etc.
 It arises naturally on the basis of friendship or some common
interest which may or may not be related with work.
 Generally large formal groups give rise to small informal or social
groups. These groups may be based on same taste, language, culture
or some other factor.
 E.g. People of common language forming group, association of people.
CHARACTERISTICS OF INFORMAL ORGANIZATION:

 Arisesvoluntarily.
 Created based on the similarity among the
members (age, native, etc.)
 Has no place in organization structure.
 A person may become a member of several
informal organizations at same time.
 Rules and regulations are not written, but are
followed.
ADVANTAGES OF INFORMAL ORGANIZATION:
 As it gives satisfaction, motivates the workers and maintains
the stability of the work.
 Fills up the gap in an organization.
 Effective channel of communication.
DISADVANTAGES OF INFORMAL ORGANIZATION:
 May be a hurdle in achieving the objective of an
organization.
 Indirectlyreduces effort of management to promote greater
productivity.
 Easily spreads rumor.
 Formal Organization Informal organization
Formal organization is established with the explicit aim of Informal organization spring on its own. Its goals are ill
achieving well-defined goals defined and intangible
Formal organization is bound together by authority
Informal organization is characterized by a generalized sort of
relationships among members. A hierarchical structure is
power relationships. Power in informal organization has
created, constituting top, middle and supervisory
bases other than rational legal right.
management.
Formal organization recognizes certain tasks and activities
Informal organization does not have any well-defined tasks.
which are to be carried out to achieve its goals.
The roles and relationships of people in formal organization In informal organization the relationships among people are
are impersonally defined interpersonal.
In formal organization, much emphasis is placed on Informal organization is characterized by relative freedom,
efficiency, discipline, conformity, consistency and control. spontaneity, homeliness and warmth.
In formal organization, the social and psychological needs
In informal organization the socio psychological need,
and interests of members of the organization follows certain
interests and aspirations of members get priority
pre-determined patterns and path.
The communication system in formal organization follows In informal organization, the communication pattern in
certain pre-determined patterns and paths haphazard, intricate and natural.
Formal organization is relatively slow to respond and adapt to Informal organization is dynamic and very vigilant. It is
changing situations and realities. sensitive to its surroundings.
Organizational
Structure
Organizational Structure
 Division of Labor
 Departmentalization
 Functional Departmentalization
 Divisional
 Matrix
 Team
 Network
 Boundaryless Structure
 Chain of Command
 Span of Management
 Degree of Centralization
 Formalization
 Informal Structure
Division of labor
 It is the separation of a work process into a number of tasks, with each task
performed by a separate person or group of persons.
 It is most often applied to systems of mass production and is one of the basic
organizing principles of the assembly line.
 As division of labor increases productivity, it also means that it's cheaper
to produce a good. In turn, this translates to cheaper products.
 If labor is divided between five people who specialize in their task, it becomes
quicker and more efficient. In turn, the number of goods produced increases.
 The concept and implementation of division of labour has been observed
in ancient Sumerian (Mesopotamian) culture, where assignment of jobs in
some cities coincided with an increase in trade and economic
interdependence.
 Division of labor generally also increases both producer and individual worker
productivity.
Departmentalization
 It is the categorizing of jobs under the supervision of a sole manager, based on
some logistic basis, for the purpose of planning, coordination and control.
 The following are several manners to departmentalize, each with its own
significant advantages and disadvantages:
 Formal Departmentalization, which includes grouping of parallel jobs into their
own function, like accounting, sales, human resource, information system, and
engineering.
 Divisions may also be made by occupational groupings.
Advantages:
 Easy Communication and sharing of information with each other who are considered
specialists in their own field;
 Quick and effective decisions in solving problems because of having the same
perspective.
Departmentalization – continuation…
 Make it easier for people in the same discipline to improve their skills and abilities from one
another’s experiences and thereby enhances individual and organizational performance;
 Facilitatesease in monitoring performance evaluation for supervisor, because they usually
possess high levels of skill in the particular functions;
 Allows performance evaluation for group members to monitor and control one another’s
behavior and performance levels;
 Create teamwork that encourages high performance;
 Creates a career ladder based on superior performance through promotions.
Disadvantages:
 Resultsin limited outlook because of the destructiveness of each department; foreseeing the
changing needs of consumers may become hard;
 Reduced cooperation and communication may happen because of the many layers of hierarchy;
 Servingneeds of different regions by only a single functional department becomes difficult as
companies grow and expand their operations.
 Figure 1. Functional Structure
President

VP Operation VP Marketing VP Finance Director

Human
Resource

Plant Plant Regional Regional Accounting

Manager Manager Sales Sales Department
Manager Manager Manager

Department Department District District

Manager Manager Manager Manager Supervisor Supervisor

Supervisor Supervisor Supervisor Supervisor

Source: www.cliftnotes.com
 Divisional is the grouping od common product, market (customers) or
geographical location.
 By segmenting according to the different products, the different
customers served the different geographical locations, in which the
entity operates, it will not be difficult to monitor all the company’s
products and activities.
 Product Division is product departmentalization, which considers
organizing around an enterprise’s product portfolio. Each product division
contains the functions necessary to that service the specific goods or
services it produces.
 Market Division functions into divisions that can be receptive to the needs
of specific types of customers.
 Geographic Division services customers according to different geographic
areas like regional, national or international level.
Advantages:
 Quality products and customer service having focused their activities on a
specific kind of goods, service, or customer
 Facilitates communication that resulted in improved decision making, which
led to increasing performance.
 Customized management and problem solving like in geographic structure
which placed managers proximate to the sense of operation than our
managers at central headquarters; regional managers are well positioned to be
responsive to local situations such as the needs of regional customers and to
fluctuations in resources.
 Facilitates teamwork among employees and be able to combine their skills
and knowledge and brainstorm creative and innovative ideas for products or
improved customer.
 Having obtain a common identity and strategy to solving problems, their
bonding heightens, and the results id better decision making.
Advantages: continuation…
 Easy for organization to evaluate and reward the performance of each
divisions and their managers and to give corresponding rewards in a
manner related to their performance.
 Regional operations can be evaluated toward another by corporate
managers which could facilitate sharing of ideas between regions and
looking ways to better performance.
 Having developed personal relations with clients, regional managers and
employees will find it natural to give customized service.
 Close recognition by managers with division employees can increase the
latter commitment, loyalty, and job satisfaction.
Disadvantages:
 Each division operates with its own set of functions so it would
entail high operating and managing costs for the organization.
 Divisional structures with more managers and more levels of
management hierarchy, poor communication may arise during
coordination of their activities.
 Conflicts among divisions may arise as they compete for
organizational resources and may even address their objectives at
the expense of organizational ones.
 Figure 2. Divisional Structure – Disney in the Early 1990s
Source: www.cliftnotes.com Chief Executive Officer

Consumer
Attractions Studios Products

Motion Television Animation Disney

Pictures Channel

Walt Disney Magic Tokyo

World Euro Disney
Kingdom Disneyland

Magic kingdom Epcot Disney MGM

Florida Center Studios

Disney Disney Disney Disney

Licensing Publishing
Catalog Stores Music Software
Matrix
 It is a mix functional divisional and is used by highly technical
organizational for projects with specific time frame.
 It is a complex from which simultaneously categorized employees in
two ways:
 By the function of which they are a member, and
 By the product team on which they are currently working.
 Employees are supervised by both their regular supervisor and their
current manager.
 In practice the individual member of the organization has two bosses:
 Functional boss
 Product boss
Matrix - Advantages
 Itsupports the development of specialized technical expertise
while spreading out this expertise to the most appropriate
operational areas.
 It eases speedy product development.
 Maximizes communication and corporation between team
members.
 Ease innovation and creativity.
 Facilitates solving problems through team brainstorming.
 Provides a work setting that empowers each employee for their
work activities.
Matrix - Disadvantages
 Increase role conflict and vulnerable to rule ambiguity due
to the demands on a two-boss employee relations.
 High levels of works stress because of role conflict and
ambiguity.
 Limited opportunities for promotion having lateral (team to
team) and not vertical for upper management positions.
 Violates unityof commands because the employees have
two bosses simultaneously for period of time.
 Some employees may not have a strong commitment to
temporary assignment.
Matrix – continuation…
Figure 3. Metrix Structure

Chief Executive Officer

Vice President Vice President Vice President Vice President

Finance Engineering Manufacturing Manufacturing

Chief Executive
Officer

Chief Executive
Officer

Chief Executive
Officer
Source: www.cliftnotes.com
Team
 Is one of the recent organizational structures developed in the 20th century.
 It is created usually for the purpose of accomplishing specific task.
 The creation of teams is mostly temporary in nature
 For larger bureaucratic organizations they can benefit from flexibility nature of teams;
 Thus actively use teams to perform task.
Figure 4. Team Structure

Plant Manager

New Product Manufacturing Sales Human Resource Diversity Task

Development Manager Manager Manager
Team Force

Employee Employee Employee

Subordinates Subordinates Subordinates

Source: www.clifnotes.com
Network
 Is another timely and modern structure.
 Big businesses become too risky and difficult to manage. This is the reason why big
outsource business function that can be done better and lesser in cost.
 Basically, managers in network structures consume most of their time coordinating
and controlling external relations, usually via electronic ways.

Figure 5. Network Structure

Management Accounts Receivable
Information and Billing

Company
Core

Security Benefit
Administration

Source: www.cliftnotes.com
Boundaryless Structure
 The most advance idea in toddy's organizational
structure is the concept of boundarylessness.
 This is a mix of team and network structures, plus
being temporary in nature.
 A company under this kind of structure works hand in
hand with suppliers by giving technical support, leasing
their equipment, and giving advice.
 Itimproves low-cost focused strategy
Virtual is a special type of boundaryless organization
 It works in a network of external alliances, using internet.
 Basically the core of the organization can be small but still the
company can market leader globally in its niche.
Chain of Command
The continuous line of authority that extends from upper level of
organization to lowest level of organization and clarifies who reports
to whom
 Authority is the formal and legal rights inherent in a managerial position to
tell people what to do and expect them to do it.
 Three basic significant principles in organizational authority are:
 Authority is based on position in the organization and individuals in the
same position have the same authority
 Authority is approved by subordinates, so they comply with any orders
because they believe in the managers’ legitimate authority.
 Authority emanates down the vertical hierarchy, so position at the top
level has more formal authority than those at the lower level
Chain of Command – continuation…
Types of Authority
 Line Authority, gives individuals in management positions the formal
power to direct and govern immediate subordinates with consulting
others.
 Staff Authority, is granted to staff specialist in their ares of expertise,
limited than line authority and includes the right to advise, service,
recommend, and counsel in the staff specialists’ area of expertise.
 Functional Authority, is delegated to individuals in management
positions to have formal power over a specific subset of activities
undertaken by personnel in the department.
 A legal department for example may have functional authority to
intercede in any activity that could have legal consequences and
implications.
Chain of Command – continuation…
Delegation of Authority
 Delegation is the downward shift of authority and responsibility
from a manager to a subordinate.
 Delegation separates the manager from the dictate of exigency.
 Delegation separates the manager to use his time on high priority
activities.
 In order to successfully delegate authority and responsibilities,
manager must bear in mind the following steps:
 Distinctively assigned tasks to individuals in the team
 Give members appropriate degree of authority to do assigned
tasks
 Generate acceptance of responsibility from team members
 Establish accountability
Chain of Command – continuation…
 Delegation Needs planning which needs time to do. Other
managers prefer to do the task themselves than take the initial
step of training someone to the assignment.
 These managers outlook the time they would have saved
in the long run and the improved process that could be
attained through delegation.
 Lack of confidence by managers in their subordinates’
competences.
 Insecurity of managers about their worth in the
organization.
 Dual accountability of managers.
Chain of Command – continuation…
Other Key Principles and Concept in Delegation of Authority
 Exceptional Principle – someone must be in charge.
 A person higher in the organization handles exceptions to the usual.
 The most exceptional, rare, or unusual decisions end up at the top management level
because no one lower in rank inside the organization has the authority to handle them.
 Scalar Chain of Command – the formal distribution of organizational authority is in a
hierarchical manner,
 so the higher the position one has in an organization, the more authority one has.
 Parity Principle – delegated authority must equate responsibility.
 With responsibility for completing a job goes the authority to accomplish the job.
 Unity Principle – realistically speaking, no one in an organization can report to more than
one supervisor.
 Employees should not have to determine which of their supervisors to satisfy because of the
impossibility of carrying out all the instruction given them.
Span of Management
 Also known as span of control, is a very important concept of organizing
function of management.
 It refers to the number of subordinates that can be handled effectively by a
superior in an organization.
 It signifies how the relations are planned between superior and subordinates in
an organization.
 Factors influencing wider span of control are:
 Work performed by subordinates is uniform and monotonous;
 Subordinates perform standardized work tasks;
 Subordinates are fixed in a single place;
 Subordinates are highly skilled and necessitate little direction in doing tasks;
 Rules and procedures describing task activities are obtainable;
 Support systems and personnel are sufficient for the managers; and
 Little time is imperative in non-supervisory activities like coordination with other functional
departments in the organization.
Degree of Centralization
 Authority is said to be centralized when solely managers at the top level
of an organization can make significant decisions.
 Centralization is the location of decision making authority near top hierarchy
levels of the organization
 Centralization is fit when close control of organizational operation is significant to
its success.
 Using centralization, more managers are needed, and the organization may
responds slowly to changes in the environment because of slow communications
through the hierarchy.
 Authority is decentralized when managers throughout the hierarchy are
allowed to make significant decisions.
 Decentralization is the location of decision making authority near lower
organizational level
 Decentralization is fit when initiative and quick responsiveness to the environment
are necessary.
Degree of Centralization – continuation…
 The following are possible determinants of the extent
of centralization or decentralization of the firm:
 The external environment of the organization – the complex and
unpredictable environment necessities low level management to make
significant decisions.
 The nature of the decision – the riskier and the more significant the
decision, it is better to be centralized.
 The abilities of low-level managers – managers must have high
decision-making skills to practice decentralization.
 Managerial traditions of the organization – whatever is the tradition
in terms of decision making since the start, the firm may just
continue.
Formalization
 Is the extent to which there are standardized rules and procedures
controlling the activities of employees in the organization.
 The more an organization can depend on formalization to detail
imperative behaviors, the less it necessitates using direct supervision
from the hierarchy.
 Although some rules are essential to the smooth operation of an
organization, excessive formalization can give rise to a number of
issues:
 Repress or limit employee creativity and lessen flexibly to respond
in critical and new situation;
 Strict observance of rules without thinking about their outcomes
can diminish the quality of decision making; and
 Difficult for an organization to modify and create new rules.
Informal Structure
 Informal structure has no documental rules, is changeable in form and scope is
not easy to distinguish, and has unclear or unknown membership policies.
 For management, the informal structure may be an advantage or disadvantage.
 One of the disadvantageous qualities includes the ability to maintain company-wide
information flow
 Disadvantageous qualities of informal structure reflect the positive qualities in several
manner:
 The more sensational rumor, the more likely is the informal structure to re say it,
outspread it and make it into the “truth”.
 Management may not determine what information is coming through the informal
structure.
 Employees may spoil a great part of time cherishing and partaking in the informal
structure.
 Lastly, informal structure can discriminate new employees, good performers, and
change agents even if how hard the effort of the formal structure making them a part of
the organization.
Informal Structure – continuation…
 Informal group
 Members of organization may create an informal groupings based on similarities of
their interests and hobbies like playing any games, forming union, discussing
everyday work challenges or eating together during lunch.
 Other join informal group just because they wanted to be accepted as coworkers.
 This group may continue for a few hours, for a day or two or for several years.

 The grapevine
 It is an informal communication network within the organization.
 Most of the time, it is more speedy to use it than the organization’s formal channels
of communication
 Formal communication follows the pattern of the chain of command while
information transmitted through the grapevine is multidirectional across
organizational structure.
 Grapevine information maybe important or of no significance at all; highly precise
or completely twisted; and very intellectual to pure gossip
 Management must try to tune into it rather than extinguish it.
Organizational Design
 It is the generation or modification of an organization structure
to reflect efforts in responding to environmental changes both
internal and external and ensuring collaboration.
 There are two basic forms of organizational structure,
mechanistic and organic.
 Mechanistic – it is based on formal authority which is carefully
outlined and accurately followed.
 The following are main characteristics of an organization using this
structure:
 Clearly particular tasks;
 Accurate description of the rights and obligations of members;
 Accurately described line and staff positions with formal relations between the
two; and
 Formal communication throughout the organizations structure.
Organizational Design – continuation…
 Organic Structure – it is based on knowledge-based authority. It is less
formal in nature and the lines of authority and may change depending on the
circumstances.
 It works better in a dynamic environment because of being flexible.
 This structure does not depend heavily on documented rules and procedures so
it can develop new ones as the need arises.
 The following are main characteristics of an organization using this
structure, namely:
 Roles that are not elaborately defined;
 Tasks that are continually reassigned;
 Minimal dependence on formal authority;
 Decentralized control;
 Expedite decision-making; and
 Informal patterns of both delegation and communication.
Organizational Life Cycle
 Like human beings, most organizations follow certain stages known as life cycle; with features and
connotations on the firm structure:
 Birth
 The stage is the beginning or founding of a firm.
 It does not have formal structure or delegation of authority
 The founder rules the organization.
 Youth
 The organization is trying to grow on this stage.
 The focus is how to expand the firm through attending to customer needs.
 The organization is becoming more organic trying to formalize its structure and delegating authority.
 Midlife
 At the height of its success, an organization in its midlife is larger with more complex and formal
structure.
 Additional levels are evident in the chain of command and founder may find it difficult to remain in
supervision. As the organization matures, it becomes more mechanistic in structure.
 Maturity
 Organization in this stage are slowly moving to bankruptcy with decline in sales and reduced profits.
 Firms however, may start modifying strategies necessary to revitalize.
Factors Affecting Organizational Designed Decisions
 Strategy - Managers organize in order to accomplish the objectives of the organization
for which they work
 Thus, strategy of the firm affects organizing decisions.
 Changes in strategy frequently necessitate changes in the way the enterprise is organized.
 Size – small organizations follow the organic structure.
 As the organization grows there is already the need for formal work assignments and
delegation of authority
 Environmental Conditions – generally dynamic environments call for organizing decisions
that lead to less formalization and centralization in the organizational structure to give way to
continuous proactive improvement and updating.
 While organizations that operate in stable environments needs to use mechanistic structure
for their advantages.
 Technology – advancement in technology creates competitive pressures for all organizations,
although it basically results in efficiency
 The desires of customers refashion with changes in technology
That’s all…thank you…

End…