Learning Unit 8

Organising

INTRODUCTION AND AIM OF THE UNIT

In learning unit 7, we discussed planning as the first important element of the manage-
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ment process. The structured grouping and combining of people and other resources,
and coordinating them in order to achieve organisational goals constitute the second
important element of management, namely organising, which we will now discuss.

41 STUDY CHAPTER 8 (sections 8.1–8.5) IN ITBM

Contents of this learning unit:

 Introduction to organising
 The importance of organising
 The fundamentals of organising
 Factors that influence organising and how organisations are designed
 Summary
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42 Learning objectives

When you have worked through learning unit 8, you should be able to

 analyse organising as a management task, including contemporary structures and de-

sign, demonstrating how this serves as a framework for the activities of the organisation
 explain the concepts of organising and organisational structure
 describe the importance of organising
 discuss the fundamentals of organising
 explain how an organisation evolves from a single-entrepreneur organisation into a
large organisation
 identify and explain the factors that influence organisational design

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KEY TERMS

702 importance of organising 708 mechanisms

703 structure 709 fundamentals of organising
704 specialisation 710 departmentalisation
705 responsibility and authority 711 centralised and decentralised
706 authority relations 712 span of control
707 informal organisation

Refer to the end of chapter 8 in the prescribed book to familiarise yourself with the key
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terms for this learning unit before continuing.

8.1 INTRODUCTION TO ORGANISING

Study section 8.1 in ITBM.

Structure
Organising refers to the establishment of a structure within which the organisation’s
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activities can be carried out. It includes the subdivision of the organisation into specific
divisions and departments. It also involves the allocation of tasks to various positions in
each department.

How the resources and activities of a business are organised will differ from one organ-
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isation to another, depending on a number of factors such as the size, strategies and
culture of the business. Take a simple example: Compare the organisational structure of
an entrepreneurial business such as a small catering company with that of a multinational
such as Sasol.

The catering company might consist of an entrepreneur, a chef and some casual staff
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(waiters/waitresses). The entrepreneur (owner) will probably assume the role of general
manager, responsible for marketing, costing and pricing, planning, scheduling and su-
pervising daily activities. The chef will be responsible for purchasing fresh produce and
preparing party platters and other meals, while the casual staff will be responsible for
preparing venues, serving guests and cleaning up after functions.

Although done very simply, we have applied the management task of organising to
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the catering company by dividing and allocating the total workload for the company to
different individuals. Each person knows what is expected of him or her and what tasks
to complete.

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In a very large organisation such as Sasol or Edcon the organising task is much more com-
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plex, with the total workload of the organisation distributed over various departments,
functional and product areas and even geographical regions.

8.2 THE IMPORTANCE OF ORGANISING

Study section 8.2 in ITBM.

Importance
It is imperative that you understand what is meant by organising and why it is important
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to an organisation. For an illustration of the importance of organising, read through the

case study below and then complete activity 8.1.

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722 Case study: Kalk Bay Fisheries

Kleinjan Jantjies works as a first-line manager at the I&J fish factory in Kalk Bay. He has
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been a recreational fisherman all his life. Each December vacation he and his two best
friends, Thabo and Lukas, fish up the West Coast from Kalk Bay to Saldanha, catching
mostly snoek and kabeljou and if they are really lucky, the occasional yellowtail. They usu-
ally spend the last few days of their vacation preparing their fish as pickled fish, smoked
snoek, snoek pâté and whole frozen line fish for the occasional braai.

For the three friends, fishing has always been just a social activity; however, following a
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particularly successful fishing season this December, Kleinjan suggests to his two friends
that they start a business from their hobby. Kleinjan would own 50% of the shares as
they would use his boat, and Thabo and Lukas would own 25% each. After a couple of
days of careful planning, the three friends agreed on what they wanted to achieve and
established their small business. Before establishing the business, Thabo worked as an
accountant and Lukas was in marketing.

A month after starting Kalk Bay Fisheries, things are not going too well. In terms of the
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actual fishing, things are going great. The three friends are catching a lot of fish and are
having a good time and their freezers are filling up fast. However, in terms of making a
profit and a success of the business, they are way behind in their plans. Their overeager-
ness to fish and enjoy the “good” side of the business means several things have not
happened, such as processing, packaging and distributing their catch, marketing their
products, and managing expenses and income (though there is of course no income yet).

Another problem is that the friends have started bickering among themselves about
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who should do what and who is actually in charge. A case of too many chiefs and too
few Indians, as the proverb goes ...

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Clearly the business lacks structure and organisation, which is having a negative impact
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on the fledgling enterprise. If things are not sorted out soon, Kalk Bay Fisheries might
find itself stranded out at sea with no life raft back to profitability.

Activity 8.1

As a management consultant to Kleinjan and his friends, explain the importance of or-
ganising their business activities.

Feedback:
43

Contact your e-tutor via myUnisa for the answer to this activity.

8.3 THE FUNDAMENTALS OF ORGANISING

Study section 8.3 in ITBM.

With an understanding of why organising is important, our attention now shifts to the
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fundamentals of organising. This is a very important section for you to study. How an
organisation is structured has an extremely powerful influence on the success of the
business. (The study of how organisations are structured and designed is covered in
great detail in the Unisa honours course on organisational change and renewal.) Building
an organisational structure revolves around five building blocks or the fundamentals of
organising, namely:

 designing jobs for employees (section 8.3.1)

 grouping employees into teams or departments based on what they have in com-
mon (section 8.3.2)
 establishing reporting lines (section 8.3.3)
 establishing authority relationships (section 8.3.4)
 establishing coordinating mechanisms (section 8.3.5)
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First you need to know the benefits and limitations of specialisation (see table 8.1 in the
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prescribed book). Then you need to know the various forms of departmentalisation.
Finally you need to understand the different authority relationships that exist within an
organisation.

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8.3.1 Specialisation
The need for specialisation always stems from growth in the business. Specialisation can
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lead to greater efficiency on the part of the worker. Specialisation, or the division of la-
bour, can be seen in the example of the small catering business. The business might have
been started by a housewife who made small party platters for friends and functions at
her husband’s place of work. As the popularity of her party platters increased, the total
workload became too much for her to handle on her own and she acquired the services
of a chef, so that she could focus on the marketing and management aspects of the busi-
ness. In so doing, the total workload was broken down into smaller, more specialised tasks.

While specialisation may result in a number of benefits for the organisation, research has
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shown that when an individual does a specialised task and can no longer see the whole
picture, it may lead to boredom and demotivation. This is particularly true of assembly-
line workers who do the same repetitive task over and over again. To mitigate these
negative effects, managers can apply the principles of job enrichment, job enlargement
and job rotation.

Activity 8.2

Refer back to the Kalk Bay Fisheries case study. Given the three friends’ different skills and
experience that they bring with them from their previous jobs, divide the total workload
among them using the principle of specialisation. Record this division of labour in the
three columns below. As you reflect on your work, keep in mind the following question:
Have I linked tasks/activities to specialised skills or knowledge?

Kleinjan Thabo Lukas

Feedback:
44

Contact your e-tutor via myUnisa for the answer to this activity.

8.3.2 Departmentalisation

Study section 8.3.2 in ITBM.

There is often a great deal of confusion about departmentalisation. When we talk about
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how a business is departmentalised, we always refer to the first management level just
below the chief executive. Note in figure 8.2 of your prescribed book the example of a
business departmentalised according to product, because the first two primary divisions
are product divisions (i.e. consumer goods and industrial goods). However, the next
level of management has been departmentalised according to function (i.e. marketing,

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human resources, finances, etc). So clearly an organisation with more than two levels of
management will usually be departmentalised in more than one way. Our main concern,
however, is primary departmentalisation.

736 An organisation can be designed according to the following:

 business function (figure 8.1)

 product (figure 8.2 as discussed above)
 location (figure 8.3)
 customer (figure 8.4)
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Sometimes none of these configurations may meet all the needs of a particular business.
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To overcome this, the matrix organisational structure has been created to incorporate
the advantages of both the structures discussed earlier. Pay attention to this (figure 8.5).

Activity 8.3

Refer back to the Kalk Bay Fisheries case study and the feedback from activity 8.2. Given
the manner in which the total workload has been divided in activity 8.2, what would be
the most appropriate way to departmentalise the business?

Feedback:
45

Contact your e-tutor via myUnisa for the answer to this activity.

Activity 8.4

The purpose of this activity is to illustrate how an organisation can be departmentalised

differently at different levels in the organisation.
Shoprite Holdings Ltd is one of the largest supermarket retailers in Africa with over 1 181
outlets in more than 17 African and other countries and employing almost 69 000 em-
ployees. Given that Shoprite is such a large, geographically dispersed organisation, how
do you think Shoprite is departmentalised at the first level of management, just below
the CEO? Try depicting this configuration graphically.

46 Feedback:

Contact your e-tutor via myUnisa for the answer to this activity.

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8.3.3 Span of management

Study section 8.3.3 in ITBM.

Another concept that you must understand in this section is span of management. Span
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of management refers to the number of subordinates who report directly to a manager.

See figure 8.6 in your prescribed book on how different spans of management can result
in very tall or very flat organisational structures. For example, an organisation such as
Unisa has quite a tall organisational structure with over nine levels of management. You
should also take time to familiarise yourself with some of the management implications
of having either a too narrow or a too flat span of management.

8.3.4 Responsibility and authority

Study section 8.3.4 in ITBM.

When you study authority relations, it is important first to understand the difference
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between responsibility and authority. These two concepts should always go hand in
hand. Unfortunately, in many South Africa organisations, people are given responsibility
(obligation to carry out a task) without the corresponding authority (right to give instruc-
tions and deploy resources) to carry out that responsibility and this can lead to a great
deal of frustration on the part of the subordinate who has been tasked with carrying out
certain activities.

Authority relations
In the discussion of authority, the terms “line authority” and “staff authority” require some
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clarification (see explanations given under section 8.3.4 and figure 8.7 in the prescribed
book).

Although the prescribed book describes only two authority relations, namely line authority
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and staff authority, some managers also have functional authority. This has to do with
direct authority relating to one’s own function in another department. The human resource
manager, for example, can instruct the production manager to abide by certain human
resource policies in the factory. In so doing, he or she would be exercising functional
authority. Think of line authority as the right to issue instructions down the line, that is
to immediate subordinates. You might ask yourself where line authority is indicated on
an organisational chart. Quite simply line authority is indicated by the vertical lines con-
necting the various levels of an organisational chart. Line authority nearly always flows
in a top-down manner from the most senior positions in the organisation to the lower
levels of management. Staff authority has to do with giving advice, without having the
authority to compel people to follow it. Staff authority does not necessarily flow only
down the organisational structure, but can flow upwards and horizontally as well. This

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type of authority is generally derived from what is known as expert power. The different
types of power are discussed in learning unit 9.

Centralised and decentralised authority

Note also the difference between centralised authority and decentralised authority. This
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has to do with the level at which decisions are made. The more people at the lower lev-
els are allowed to make decisions, the more decentralised decision-making is within an
organisation, and vice versa.

8.3.5 Coordination
In simple terms, coordination is the “glue” that keeps the various departments within an
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organisation together and deals with the interrelatedness of tasks and activities. With-
out coordination, people lose sight of the organisation’s overall goals and their part in
its efforts. An organisation with a high level of coordination will ensure that the goals
and objectives of the various departments are congruent with one another and are not
contradictory.

For example, what would happen if research conducted by the marketing department at
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BMW showed a greater market demand for the BMW 3 series and very little demand for
the BMW 5 series, while at the same time the production ratio at the BMW plant in Pretoria
was 80% for 5 series vehicles and 20% for 3 series vehicles? This would lead to a shortage
of the BMW 3 series and a surplus of the BMW 5 series. Similarly, in the case of Kalk Bay
Fisheries a lack of coordination between Lukas and Kleinjan could result in customers
being promised fresh kabeljou by Lukas (marketing) when all Kleinjan is catching is snoek.

Activity 8.5

It is important to realise that each of the management tasks of planning, organising,

leading and control have a direct impact on the success or failure of the business. Can
you think of some of the negative implications that the lack of coordination in the BMW
example might have on the business? When answering this question, remember that the
different functions within a business are inextricably linked to one another.

Feedback:
47

Contact your e-tutor via myUnisa for the answer to this activity.

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 8.4 FACTORS THAT INFLUENCE ORGANISING AND HOW
ORGANISATIONS ARE DESIGNED

Study section 8.5 in ITBM.

How organisations are structured is a function of a number of different factors. The main
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factors include the following:

 The stability of the business environment (section 8.5.1). Both the level of stability
and the rate of environmental change will influence how organisations are structured
and what form of departmentalisation the organisation adopts. One good example
of environmental instability in South Africa has been in the higher education envi-
ronment over the past five years, where the entire public higher education system
has been reconfigured through a series of mergers and rationalisation initiatives.
The merger between the old Unisa and former Technikon South Africa has had a
significant impact on how the new Unisa is structured in terms of its functional,
product and customer departmentalisation. This need to restructure the University
was brought about by external environmental change and instability.
 The strategy of a business (section 8.5.2). As the old adage or saying goes, “structure
follows strategy”. This is indeed true, since an organisation’s strategy has a direct
impact on how the business is structured. A renewed focus on technology might
result in a significantly greater allocation of resources to a business’s IT department.
Similarly, a business such as General Electric (GE) with a focus on product develop-
ment and innovation will allocate significant resources to its research and develop-
ment department.
 The size of the business (section 8.5.3). If you read the Kalk Bay Fisheries case study
at the beginning of this learning unit and completed activity 8.4, it should be clear
to you that the size of an organisation has a definite impact on how it is structured.
Small businesses are not organised in the same way as large, complex organisations
such as the Shoprite group. Historically, large businesses are often characterised by
many levels of management, a high degree of specialisation and extensive depart-
mentalisation; however, in recent years there has been a shift towards flatter and
leaner organisational structures. In this regard, see the Jack Welch extract at the end
of this learning unit.
 The competence of employees (section 8.5.4). How organisations are structured is
not only a function of the competence of staff, but also of the attitudes and beliefs
of top management.
 The organisational culture (section 8.5.5). The beliefs and values shared by the people
in a business influence how the organisation is structured. In this regard it will not
make sense for a business to be structured in a very tall bureaucratic manner when the
culture is characterised by innovativeness, teamwork and few rules and regulations.
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Make sure that you understand how each of these factors will influence the organisation
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structure.

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SUMMARY
By discussing the development of a structure or framework within which the tasks to
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be performed for the accomplishment of goals, and the resources necessary for this,
are allocated to particular individuals and departments, we were explaining the con-
cept of organising. In this learning unit we have also looked at the importance and the
fundamentals of organising. Finally, the factors which influence how organisations are
structured were discussed.

From here a manager has to take the lead to set the activities involved in planning, or-
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ganising and control in motion and see that plans are translated into action. We deal with
the third fundamental element of management, namely leadership, in learning unit 9.

BUSINESS IN CONTEXT
Refer to the recommended book entitled Business Cases, in particular case study num-
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ber 7 “Organising: The Nike Matrix”. This is not compulsory for you to do, but merely
a business-in-context addition to your learning of business management.

SELF-ASSESSMENT QUESTIONS

Read through the extract below from Jack Welch’s second book Winning and then
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answer the questions that follow.

In 2004, Clayton, Dublier & Rice purchased Culligan International, the water treatment
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and supply business with about 700 million in annual sales and about 5 000 employees
spread across 13 countries. One of CD&R’s partners, George Tamke, the former co-CEO of
Emerson Electric, was named chairman. George was well aware that Culligan had been
through 10 owners in the previous 15 years, but he could not believe the organisational
disarray that hit him when he walked in through the door. George found that many em-
ployees simply did not know where they fit in and whom they report to, who reported
to them and what results each person was responsible for.

Similarly, I just recently spoke with Dara Khosrowshahi, the new CEO at the online travel
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company Expedia. Dara also walked into an organisational chart quagmire when he arrived
on the job at the end of 2004. Expedia, less than ten years old and highly entrepreneurial,
had been growing so fast, and no one had taken the time to clarify reporting roles and
responsibilities. As his first priority Dara set out to fix that.

If you want to manage people effectively, help them by making sure that the organisa-
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tional chart leaves as little as possible to the imagination. It should paint a crystal-clear
picture of reporting relationships and make it patently obvious who is responsible for
what results. More importantly, it should be flat!

759 1 In both the CD&R and Expedia examples, what key principles of organising have the
organisations failed to apply successfully?

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760 2 Do you agree with Jack Welch’s statement that organisational structures should be
as flat as possible? Why do you agree, or why do you not agree?
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762 3 Which one of the following statements is wrong?

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764 a Responsibility and accountability are closely connected.

765 b Authority is granted to a manager by the enterprise.
766 c When a task is delegated, accountability is delegated simultaneously.
767 d According to the acceptance theory of authority, authority originates from the
lower levels.
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769 4 The human resource manager of an enterprise instructs one of his personnel officers
to perform a particular task. In the process he is exercising ... authority.
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771 a functional
772 b organisational
773 c staff
774 d line
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THE ANSWERS TO THE SELF-ASSESSMENT QUESTIONS

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777 Question 1

It seems both organisations have completely forgotten about authority relations in the
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organisation and establishing responsibility and authority to each post in the organisa-
tional structure. Staff members are unclear about which activities they are responsible
for and whom they should take orders from and give orders to. This can lead to great
confusion and result in work not being carried out. It is also clear that organisational charts,
indicating line and staff authority, have not been developed for the two organisations.

The organisational structure “quagmire” described by Jack Welch could also be as a result
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of a lack of coordination between individuals and departments in the organisation.

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781 Question 2

Although not covered in a great amount of detail in this module, Jack Welch’s comment
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that organisational structures should be flat alludes to the many contemporary approaches
to structuring organisations. Flatter organisational structures are indeed becoming more
prominent, as are matrix, team-based and virtual organisational structures. Flat organ-
isational structures are often a business’s response to the frustrations inherent in highly
bureaucratic structures, which include slow, centralised decision-making, an obsessive
concern with rules and a lack of innovativeness.

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784 Question 3

Contemporary organisational structures are covered in more detail in the second-year

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module General Management (MNG201). Option c is incorrect because a manager, in the

act of delegation, can transfer both his or her authority and responsibility to a subordi-
nate but never his or her accountability. This is the golden rule of delegation: whoever
delegates a task remains accountable for that task. See page 1 in your prescribed book
for a further explanation of authority and responsibility.

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Question 4
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Option d is correct. Line authority is the authority delegated down through the line
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of command, in this case from the human resource manager down to a personnel officer.

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