CH- 11 ORGANIZING

• 11.1 Meaning of Organization

• 11.2 Elements of Organization

• 11.3 Role of Organization

• 11.4 Process of Organizing

• 11.5 Principles of Organizing

• 11.6 Organization Structure

• 11.6.1 Developing the Organization Structure

• 11.6.2 Considerations in Designing an Organization Structure

• 11.7 Division of Labour and Specialization

• 11.8 Organizational Organograms

• 11.9 Traditional Structures

• 11.9.1 Line Organization

• 11.9.2 Line and Staff Organization

 INTRODUCTION
• Louis Allen, “Organization is the process of identifying and grouping work to be performed, defining and delegating responsibility and
authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing
objectives.” In the words of Allen, organization is an instrument for achieving organizational goals. The work of each and every
person is defined and authority and responsibility is fixed for accomplishing the same.

• Koontz and O’Donnell, ‘The establishment of authority relationships with provision for co-ordination between them, both vertically
and horizontally in the enterprise structure.” These authors view organization as a coordinating point among various persons in the
business.

• Oliver Sheldon, “Organization is the process so combining the work which individuals or groups have to perform with the facil ities
necessary for its execution, that the duties so performed provide the best channels for the efficient, systematic, positive a nd coordinated
application of the available effort”. Organization helps in efficient utilization of resources by dividing the duties of various persons.

• Thus, organization refers to the relationship between the various factors present in a given endeavour. Factory organization concerns itself
primarily with the internal relationships within the factory such as responsibilities of personnel, arrangement and grouping of machines and
material control. From the standpoint of the enterprise as a whole, organization is the structural relationship between the v arious factors in
the enterprise. All factors of production are coordinated in order to achieve organizational objectives.
ELEMENTS OF ORGANIZATION

DEPARTMENTALIZ
ATION AND
COMPARTMENTS

WORK CHAIN OF
SPECIALIZATION COMMAND

ELEMENTS OF
ORGANIZATION

FORMALIZATION
SPAN OF CONTROL
OF EVENTS

CENTRALIZATION
AND
DECENTRA LIZATIO
N
 ROLE OF ORGANIZATION

Facilitating
Encouraging
Management Job Satisfaction
Efficiency
Action

Optimum Use
of
Communication
Organizational
Resources
PROCESS OF ORGANIZATION
PRINCIPLES OF ORGANIZATION
 ORGANIZATION STRUCTURE
• An organizational structure is defined as “a system used to define a hierarchy within an organization. It identifies each
job, its function and where it reports to within the organization.” A structure is then developed to establish how the
organization operates to execute its goals.

TRADITIONAL FUNCTIONAL DIVISIONAL MATRIX FLATARCHY

1.Functional- The functional structure is based on an organization being divided up into smaller groups with specific tasks or
roles. For example, a company could have a group working in information technology, another in marketing and another in
finance. Each department has a manager or director who answers to an executive a level up in the hierarchy who may oversee
multiple departments. One such example is a director of marketing who supervises the marketing department and answers to a
vice president who is in charge of the marketing, finance and IT divisions.
2.Divisional- Larger companies that operate across several horizontal objectives sometimes use a divisional organizational
structure. This structure allows for much more autonomy among groups within the organization. For e.g. GE has many different
divisions including aviation, transportation, currents, digital and renewable energy, among others.

Under this structure, each division essentially operates as its own company, controlling its own resources and how much money
it spends on certain projects or aspects of the division.
3.Matrix- A hybrid organizational structure, the matrix structure is a blend of the functional organizational

structure and the projectized organizational structure. In the matrix structure, employees may report to two or more
bosses depending on the situation or project. For example, under normal functional circumstances, an engineer at a large
engineering firm could work for one boss, but a new project may arise where that engineer’s expertise is needed. For the
duration of that project, the employee would also report to that project’s manager, as well as his or her boss for all other daily
tasks.
4. Flatarchy- While the previous three types of organizational structures may work for some organizations,

another hybrid organizational structure may be better for start-ups or small companies.

Blending a functional structure and a flat structure results in a flatarchy organizational structure, which allows for more
decision making among the levels of an organization and, overall, flattens out the vertical appearance of a hierarchy.

The best example of this structure within a company is if the organization has an internal incubator or innovation program.
Within this system, the company can operate in an existing structure, but employees at any level are encouraged to suggest
ideas and run with them, potentially creating new flat teams.
DEVELOPING THE ORGANIZATION STRUCTURE

Establish Rules
for Operation

DEVELOPING
Outline Your THE Distribute the
Governance Plan Work
ORGANIZATION
STRUCTURE

Make Evolve your

Communication organizational
Easy Among structure over
Divisions time
CONSIDERATIONS IN DESIGNING THE
ORGANIZATION STRUCTURE
Strategy

Environmental Factors

Company Size

Company Age

Structural Designs

Specialisation
 DIVISION OF LABOUR AND SPECIALIZATION

• The concept of division of labour was explained by Adam Smith using the example of a pin making factory. He pointed out that a worker will be
able to make 20 pins a day if he were to do all the tasks of pin production himself. According to Adam Smith, “Wealth of nations”, the economic
growth (i.e. the increase in the value of goods produced in a country in a year) of a county lies in the concept of division of labour. Under this
regime, each worker becomes an expert in one isolated area of production, thus increasing his efficiency. The fact that labourers do not have to
switch tasks during the say further saves time and money. Of course, this exactly allowed Victorian factories (UK) to grow throughout the
nineteenth century and develop themselves and their country simultaneously.

PROS CONS

Lower average cost of production Dependency on the whole labour force is

increased
Automation Possibility of increased unemployment

Workers become very skilful and Boredom and alienation due to repetitive
effective task
Saves Time
 ORGANIZATIONAL ORGANOGRAM
• Organogram shows the correlation among organizational unit in the form of graphics and it provides great convenience
for people to view detailed information on organizational units as well as the associated position and personnel.

Purposes of Creating an Organogram

a. Displays function division.

b. Allows people to know whether right and responsibility are set properly or not.

c. Assist people in finding if there is someone undertaking relevant work and staying idle.

d. Help managers to identify if some talented workers haven’t been able to draw out the best in themselves.
 TRADITIONAL STRUCTURE
• Traditional organization represent the organizational structure in a business is hierarchical, meaning power flows vertically
and upward, and employees are departmentalized. All employees follow a chain of command. It is classified as:

LINE

TRADITIONAL
ORGANIZATION

LINE AND STAFF FUNCTIONAL

1. Line Organization- In the theory of management literature, a line organization is defined as that organization, in
which line-authority responsibility relationship is found excluding any other type of relationship. This type of
organization presumably first originated in the military. Hence, this type of organization is historically also called as
the “military organization”.

Features of Line Organization

a. A line organization is governed by the following principles-
i. The scalar chain principle (or the line of command)

ii. Unity of command,

iii. Span of management, according to which principle, the number of subordinates, under one superior, is kept limited; in
view of the managerial competence, of that particular superior.

b. In a line organization, there is no scope for managerial specialisation whatsoever- Each manager, located at a particular
point in management hierarchy, is supposed to undertake all functions, pertaining to his area of functioning i.e. each manager
would look after production, finance, marketing and other functions within his area of authority. Hence, such a type of
organization is suited only where routine type of business is conducted-not requiring much of specialization.
2. Functional Organization- A functional organization is one, in which all business work is divided among various
activities or functions; and each of the function is entrusted to a specialist. Each such specialist is known as a
functional specialist, by virtue of, his expertise in the function entrusted to him; and the authority possessed and
enjoyed by each specialist is known as his functional authority.
A functional organization is regulated by the ‘multiple-command-system’ (i.e. an absolute violation of the unity of command);
as each subordinate in the organization is subject to multiple orders by different functional specialists – each one of the latter
commanding the former pertaining to the area of his specialisation.
3. Line and Staff Organization- Line organization is an over-simplification of the pattern of organizational structure.
Likewise, a functional organization, making for a multiple command system, creates so many complexities of superior-
subordinate relationships; that a smooth functioning of the organization is often not met with, in realty. There is thus, a
need for a developing a typical organizational structure, which combines the happy features of these two types of
organizations into such a system, that the organizational structure is one of the ‘practical-type’ conductive to operational
efficiency. Line and staff type of organization is one structure, designed by organizational experts; which seeks to combine the
positive side of both-line and functional organizational, in a unique manner.
Line and staff organization are one, in which there is basic departmentation for primary business functions, operated on the
concept of the scalar chain; and there is a provision for specialised activities performed through staff officers, the latter acting
ordinarily in an advisory capacity.