CHAPTER FIVE

THE ORGANIZING FUNCTION

Concept of organizing and organization

What to do and how to do have already been determined in the planning process. The result of a
good planning process is a detailed program of what actions are to be taken to accomplish
predetermined objectives, how long it will take, and where it will take place. The next task becomes
that of organizing.
Organizing is the process of identifying and grouping tasks to be performed, assigning responsibility,
delegating authority and establishing relationships for the purpose of enabling to work most
effectively together in the accomplishment of objectives. Organizing is a detailed arrangement of
work and working conditions in order to perform the assigned activities in an effective manner.
Organizing is a management function that involves arranging human and non-human resources to
help attain organizational objectives. It is the management function that establishes relationship
between activity and authority Put more specifically, the organizing function has the following four
distinct activities:
 It determines what work activities are to be done to accomplish organizational objectives
 It classifies the types of work needed and groups them into manageable way
 It assigns the grouped work to individuals and hand over appropriate responsibility
 It designs a hierarchy of decision making relationships
The end result of an organizing process is an organization. Organization - is the total system of social
and cultural relationship among peoples who are joined together to achieve some specific common
objectives. It is a whole consisting of unified parts (a system) acting in harmony to execute tasks to
achieve goals effectively and efficiently.

The Organizing Process

The organizing process has the following steps.
1. Identification of objectives
This is to understand clearly the objectives of the organization, i.e. to reconsider the objectives
established during planning and identify the specific objectives to be pursued.
2. Identification of the specific activities needed to accomplish objectives
Knowing the objectives clearly makes the identification of activities needed clear and simple. Here we
ask what work activities are necessary to accomplish the identified organizational objectives. Creating a
list of tasks to be accomplished begins if we identify clearly what objective is to be accomplished or met.
This identification of specific activities needed is called division of labor.
3. Grouping of activities necessary to attain objectives
The series number of activities listed and/or identified must be grouped together. That is, this involves
grouping together of activities in accordance with similarities (homogeneity) of the activities,
interdependence, job characteristics or any other grouping criteria, and this result in departments and the
process is called Departmentation. for example sales, advertising, packaging and shipping can be
considered marketing related activities. Thus, they are grouped under the marketing heading. Machining,
grinding, assembly and inspection are manufacturing processes; they can be grouped under production.
Personnel related activities include recruiting, hiring, training, and compensation; they are grouped under
human resources.

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 Grouping of similar activities is based on the concept of division of labor and specialization.
4. Assigning group of activities (work) and delegate the appropriate authority
Management has identified activities necessary to achieve objectives, has classified and grouped these
activities into major operational areas and has selected a departmental structure. The activities now must
be assigned to individuals who are simultaneously given the appropriate authority to accomplish task.
5. Provision for coordination/Design a hierarchy of relationships
This step requires the determination of both vertical and horizontal operating relationships of the
organization as a whole. The vertical structuring of the organization results in a decision-making
hierarchy showing who is in charge of each task, of each specialty area, and the organization as a whole.
Levels of management are established from bottom to top in the organization. These levels create the
chain of command, or hierarchy of decision-making levels, in the company.
Importance of Organizing
a. Organizing promotes collaboration and negotiation among individuals in a group. Thus, it improves
communication within the organization.
b. Organizing sets clear-cut lines of authority and responsibility for each individuals or departments. It helps
employees to know their responsibilities and concentrate on the key tasks at hand. It specifies who is
responsible for what.
c. Organizing improves the directing and controlling functions of managers. It enables management to
effectively control the work and workers.
d. Permit optimum use of resource-Organizing develops maximum use of time, human, and material
resources. It also enables for proper work assignment for individuals in pursuit of common goal.
e. Organizing enables the organization to maintain its activities coordinated so that the efforts of managers
and employees can be well integrated and directed towards an end; i.e. to accomplish organizational goal.

Types of Organizations: Formal and Informal Organization

There are two types of organizations: Formal and informal
1. Formal organization - is the intentional, deliberate or rational structures of roles in a formally
organized enterprise. It is characterized by well-defined authority - reporting relationships, job titles,
policies, procedures, specific job duties and a host of other factors necessary to accomplish its respective
goals. It is represented by a printed chart that appears in organizational manuals and other formal
company documents called organization chart. Organization chart is a diagram of formal relationship
which shows how departments are tied together along the principal lines of authority. Formal
organization has consciously designed durable and inflexible structure. Formal organization may have
legal personality.
2. Informal organization - is a network of personal and social relationships that arises spontaneously as
people associate with one another in a work environment. It is an unofficial network of personal and
social relations developed as a result of association or working together. E.g. the Chess group, the
Morning Coffee group, the Bowling team, etc. It operates outside formal authority relationships. It
doesn’t have legal personality. Informal organization develops within the formal organization. It is
composed of all the informal groupings of people with in a formal organization (it is not only the
domain of workers; managers form informal groups that cut across departmental lines). Informal
organization has a structure which is loosely designed, highly flexible and spontaneous. In such an
organization, the pattern of information flow, the exact nature of relationships among the members, and

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the goals of the organization are unspecified. However, to identify the existence of informal
organizations and their composition we can use two tools: a Sociogram and an Interaction Chart.

A Sociogram is a diagram of group attraction. The Sociogram is developed through a process asking
members whom they like or dislike and with whom they wish to work or not to work. It is based on the
belief that group interactions are the result of people's feelings of like and dislike for another.

An Interaction Chart is a diagram that shows the informal interactions people have with one another.
For any specific person, the chart can show with whom the person spends the most time and with whom
the person communicates informally.

Types of Groups in the Informal Organization

The informal organization is often looked at as groups of people. Informal groups may be described as
horizontal, vertical, or mixed. These titles indicate whether the group members come from the same or
different levels of formal organization.
Horizontal Groups:-Include persons whose positions are on the same level of the organization i.e. they
are groups that are formed by peers. The groups can consist of all the members in the same work areas or
membership developed across departmental lines. Members may be all management or non-management
personnel. Horizontal groups are the common kind of informal groups by virtue of the ease of
accessibility. Membership in a horizontal group is usually mutually beneficial to individuals - “You help
me and I will help you”. People in the same or related work areas often share the same problems,
interests, and concerns.
Vertical Groups:-Include people on different levels of the formal organization’s hierarchy.These people
always come together within the same department (work areas). A vertical group can consist of a
supervisor and one or more of his/her employees. It may also be formed through skip - level
relationships - a top-level manager may associate with a first level manager. Their relationships can be
the result of outside interests or various employment relationships.
Mixed Group:-It is a combination of two or more persons whose positions are on different levels of the
formal organization and in different work areas. E.g. a Vice-President may develop a close relationship
with the director of computer services in order to get preferential treatment. A production manager may
cultivate an informal, social relationship with the director of maintenance for the same reason. Mixed
groups often form because of common bonds outside work.

Why people form informal groups?/reasons for the formation

of informal organization
1. Need for satisfaction
People have needs that in some cases are not met through the formal organization. The
opportunity to fulfill security, affiliation, esteem, and sometimes self-actualization needs can encourage
people to look out and join others in an informal group. They provide the opportunity to satisfy needs.
2. Proximity and interaction
A common reason people join groups is that they work near one another. This can be either through
working in close proximity physically or because of frequent interaction. Horizontal informal groups are
prime examples of this.

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 3. Similarity
People may join informal groups because they are attracted to other people who are similar to themselves.
Several persons with the same attitudes or beliefs may join one group. Other factors or similarity can be
personality, race, sex, economic position, age, educational background etc. In informal
group/organization one is not limited to one informal organization because there may exist still
unsatisfied needs by involving in one/two informal organization.

The Impact of Informal Organization on the Formal Organization

The groups that compose the informal organization can affect the formal organization negatively and
positively.

The Negative Impacts

i. Resistance to change: The informal organization can resist change. In an effort to protect its values and
beliefs, the informal group can place roadblocks in the path to any modifications in the work
environment. The informal group shows its resistance through hampering its implementation.
ii. Conflict: In an attempt to satisfy the informal group, the employee may come in conflict with the
formal organization. E.g. The Company may allow 10 minutes for coffee break; however, the informal
group may extend it to 30 minutes for the employee’s social satisfaction. There, the employee’s social
satisfaction is in conflict with the employer’s need for productivity.

iii. Rumor: The informal communication system - the grapevine - can create and process false information
or rumors. The creation of rumors can upset the balance of the work environment.
iv. Pressure to conform: The norms that the informal groups develop act as a strong inducement toward
conformity. The more cohesive the group, the more accepted are the behavioral standards. Non-
conforming in the person’s reference group can result in gentle verbal reminders from the group but can
escheat to harassment – ostracism.

The Positive Impacts

Despite the possibility of these problems, informal groups do have the potential to be helpful to
managers.
i. Makes the total system effective: If the informal organization blends well with the formal system, the
organization can function more effectively. The ability of the informal group to provide flexibility and
instantaneous reactions will polish the plans and procedures developed through the formal organization.
ii. Provides support to management: The informal organization can provide support to the individual
manager. It can fill in gaps in the manger’s knowledge through advice or through performing the work,
for example, budgeting and scheduling. By performing effectively and positively, it can build a
cooperative environment. This, in turn, can mean more delegation to the employees and less time spent
by the manager controlling employee behavior.
iii. Provides a useful communication channel: The informal organization provides employees with the
opportunity for social information, for discussing their work, and for understanding what is happening in
the work environment.
iv. Encourages better management: Managers should be aware of the power of the informal organization
in what is actually a check and balance system. Planned changes should be made with an awareness of
the ability of the informal group to make the plan successful or unsuccessful.

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v. Provides stability in the environment: The informal organization can provide acceptance and
belonging. This feeling of being wanted by the group can encourage employees to remain into
environment, thus reducing turnover. Additionally, the informal organization provides a place for a
person to vent frustrations. Being able to discuss them in a supportive environment may receive
emotional pressures.
Organizational structure
Organizational structure is the structural framework for carrying out the functions of planning, decision-
making, controlling, communication, motivation, etc. Organizational structure is the formal pattern of
interactions and coordination designed by a manager to link the tasks of individuals and groups in
achieving organizational goals. The word “formal” in this content refers to the fact that organization
structures typically are created by management for specific purposes related to achieving organizational
goals, and, hence, are official, or formal outcomes of the organizing function. Organization structure is
the arrangement and interrelationship of the component parts, and positions of an organization. The
process of developing an organization structure is referred to as organization design.
The formal structure of an organization is of two-dimensional: The horizontal dimension and vertical
dimension. The horizontal dimension identifies departments, units, and divisions on the same level of a
management. Whereas the vertical dimension refers to the authority relationships between superiors and
subordinates and it also identifies who is responsible and accountable for whom. One aid to visualizing
organization structure is the organization charts.

Organizational Chart
It is the means through which we depict the organization structure. Organization chart is a line diagram
that depicts the broad outlines of an organization’s structure. It shows the flow of authority,
responsibility, and communication among the various departments which are located at different levels of
the hierarchy. An organization chart is a visual representation of the way in which an entire organization
and each of its components fit together
The organization chart can tell us:
1. Who reports to whom (chain of command)
2. The number of managerial levels
3. How many subordinates work for each manager (the span of control)
4. Channel of official communication through the solid lines that connect each job (box)
5. How the organization is structured-by function, territory, customer, etc.
6. The work being done in each job- the labels on the boxes
7. The hierarchy of decision making- where a decision maker for a problem is located
8. How current the present organization is (if a date is on the chart)
9. Type of authority relationships- line authority, staff authority, and functional authority

Figure 4.1:Example of an organization chart

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 Division of labor
The degree to which the grand task of the organization is broken down and divided into smaller
component parts is referred to as division of labor. Division of labor is performed in light of
organizational objectives. It begins by determining (sub tasks) called jobs that are necessary to
accomplish the identified objectives. These sub tasks could include ongoing tasks which are part of the
regular routine for running any business such as hiring and record keeping or tasks unique to the nature of
the business; such as assembling, machining, storing, inspecting, selling, advertising, computer
programming.
After determining the sub-tasks, sub-tasks will be defined by enumerating the activities that each
individual sub-tasks would entail in terms of what the incipient sub task performer is expected to do. This
is called job description. Job description is an account of activities what the sub-task performer is
expected to perform and the associated authority and responsibility relationships among jobs. The sub-
task assigned to the sub task performer is called job. Thus by doing so individuals specialize in doing part
of the task rather than the entire task, i.e. division of labor in effect is the assignment of various portion of
a particular task among organizational members.
In short, division of labor involves:
 Breaking down a task into its most basic elements
 Training workers in performing specific duties
 Sequencing activities so that one person's efforts build on another's

Advantages of Division of Labor Disadvantages of Division of Labor

 It enables a person performing a task to  Boredom and fatigue caused by monotonous,
become highly proficient in a relatively repetitive tasks because the work becomes less
short time; as a result efficiency and challenging.
productivity increases.
 Decreased transfer time. It saves the time  Specialization would result in workers' having
that is always lost in changing from one job limited knowledge.
to another.
 Less wastage of materials in the learning  Creates communication barriers. Specialists
process including time. develop their own language and customs, which
can hamper communication across departments.
 Ease of supervision. When employees are  Specialization sometimes causes workers to
performing similar simplified tasks it will think more in terms of their department or
require the superior to have a narrow range function instead of the company. Becoming
of skills to effectively oversee subordinates. engrossed in their own tasks, they lose sight of
the company's mission.
 Training is more easier with specialization  Specialization leads to time-oriented confusion.
and takes shorter period. Plus, it decreases Production department, for instance, are
training cost. commonly short-run oriented; research and
development departments are concerned with
the long term. Consequently, production
departments typically evaluate their
performance in the short run, where as R&D
efforts may go unrecognized for several years.
 Different specialties often formulate rules,
policies, and procedures that conflict with those
of other operational units.

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 Departmentation: Meaning and Bases
Meaning: All organizations, regardless of their size or mission, divide their overall operations into sub-
activities and then combine these sub-activities into working groups. This process of grouping
specialized activities in a logical manner is called Departmentation.
Department - is a distinct area, division, or branch of an organization over which a manager has
authority for the performance of specified activities. It is a unit formulated as a result of the
Departmentation process. The physical and mental limitations of individual managers to effectively
oversee and coordinate activities beyond a given limit partly justify the need for departmentation.
Departmentation is not an end in itself but is simply a method of arranging activities to facilitate the
accomplishment of objectives.

Bases for Departmentation

Since organizations are different in their activities, objectives and areas in which they operate, there are
different bases for departmentation. The most common bases are function, territory, product, customer,
and process

I. Departmentation by Territory/ Geography

Groups activities on the basis of geographic region or territory. Is common in enterprises that operate
over wide geographic areas i.e. it is attractive to large-scale firms or other enterprises whose activities are
physically or geographically dispersed. The logic is that all activities in a particular area or region should
be assigned to a manager. This individual would be in charge of all operations in that geographic area.
Can be used by business, government, NGOs, or other enterprises. Geographic departmentalization
works best when different laws, currencies, languages and traditions exist and have a direct impact on the
ways in which business activities must be conducted.

Advantages Disadvantages
1. Places emphasis on local markets and problems; 1. Requires more persons with general manager
better face to face communication with local abilities
interests or allows the company to address needs
or characteristics of consumers that are
particular to that area.
2. Encourages local participation in decision- 2. Duplicates staffs, services, or effort.
making
3. Improves coordination of activities in a region 3. Tends to make maintenance of economical central
services difficult and may require services such as
personnel or purchasing at the regional level
4. Takes advantage of economies of local 4. Increases problem of top management control
operations
5. Furnishes measurable training ground for
general managers. Managers are responsible for
the activities in that geographic area. Decision
concerning that region will be made of that level
and not forwarded up the chain of command.
6. Encourages decentralized decision-making

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 II. Departmentation by Function
It is the grouping of activities together in accordance with the functions of an enterprise - on the basis of
similarity of expertise, skills or work activities. In other words, jobs that call for certain skills or the use
of similar working methods will be put together. It is probably the most common base for
departmentation and is present in almost every enterprise at some level in the organization structure. It
asks the question “what does the enterprise/organization do” what kind of activities. E.g. Human
resources, production, marketing, finance, etc.
Advantages: Disadvantages
1. It is a logical reflection of functions. 1. De-emphasis of overall company objectives -
narrow minuends may develop. Identification
with the department and its objective is often
stronger than identification with the
organization and its objectives.
2. It maintains power and prestige of major 2. Over specializes and narrow viewpoints of key
functions of the organizations. Assigns personnel.
responsibility of each function to the head
of that function by providing individual
status and prestige to major functional
areas.
3. It follows principle of occupational 3. Reduce coordination and communication
specialization, thereby promoting efficiency between (among) functions.
in the utilization of people. Simplifies to fill
vacant positions.
4. It simplifies training. Train functional 4. Decisions are concentrated at the top
specialists by indicating special abilities management, creating delay.
required.
5. Provides unity of command for closely 5. Limits development of general managers.
related activities.
6. Managers have an easier time coordinating
and planning because all the jobs that report
to them are similar in content.
7. Promotes specialization and operational
efficiency. Because closely related activities
and employees are grouped together,
functional departmentation permits effective
economies of scale.

III. Departmentation by Product (Line)

It is the grouping and arrangement of activities around products or product groups. Departmentation by
product should be considered when attention, energy and efforts need to be focused on an organization’s
particular products. This can be true if each product requires a unique strategy or product process or
distribution system or capital sources. This approach works well for an enterprise which engaged in very
different types of products. E.g. Textile products - Nylon products, woolen products, silk products, cotton
products. Petroleum refining - kerosene, diesel. Electronics - Radios, TVs, Computers

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 Advantages Disadvantages
1. Places attention and effort on product line 1. Requires more persons with general manager
abilities
2. Facilitates use of specialized skill, capital 2. Tends to make maintenance of economical central
facilities and knowledge services difficult - duplication of business functions
within each product line. Each needs marketing,
personnel, finance, and production operations,
which may be so specialized they are unable to
serve more than one product line or division.
3. Permits growth and diversity of products and 3. Presents increased problem of top management
services control
4. Places responsibility for profits at the division
level
5. Furnishes measurable training ground for
general managers

IV. Departmentation by Customer

It is a grouping of activities around customers. This grouping reflects a primary interest in customers.
Customers are the key to the way activities are grouped when each of the different things an enterprise
does for them is managed by one department head. This makes economic sense when the customers are
distinct enough in their demands, preferences, and needs. It helps organizations meet the special and
widely varying needs of customers. It can be used in medical institutions such as hospitals and clinics -
emergency services, outpatient services, inpatient services, x-rays; retail stores- men's clothing, women's
clothing, children's clothing.

Advantages Disadvantages
1. Encourages concentration on customer needs 1. May be difficult to coordinate operation between
competing customer demands
2. Gives customers the feeling that they have an 2. Requires managers and experts in customers’
understanding supplier problems
3. Develops expertness in customer area 3. Customer groups may not always be clearly
defined
4. The possibility of underemployment of facilities
and labor specialized workers in customer groups

V. Departmentation by Process
Manufacturing firms often group activities around a process or type of equipment. This is when special
skill is needed to operate different machines. Making plywood, for example, involves several sequential
processes: poling (removing bark from logs); sawing logs in to 8’ lengths, heating; veneer stripping and
stamping veneer sheets in to 4' segments; drying and grading according to quality; gluing plies together;
finishing and bundling.

Advantages Disadvantages
1. Achieves economic advantage 1. Coordination of departments is difficult
2. Uses specialized technology 2. Responsibility for profit is at the top
Simplifies training 3. Is unsuitable for developing general mangers

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 VI. Matrix Departmentation
It is an organizational arrangement that developed because of the need for quick completion of highly
technical projects that required significant contributions by two or more functional groups. It begins with
functional stricture and then another structure organized by product or by client /customer or by project is
overlaid upon the original
structure. The result is that employees are assigned to a basic functional department
and, at the same time, they are assigned to work on a particular product/project or for a particular
customer/client. The essence of matrix organization normally is the combining of functional and product
departmentation in the same organization structure.

Advantage Disadvantage
1. Since there are a number of managers, 1. Conflict in organization authority exists (it
there are more channels of information lends it self to power struggle.
2. It is oriented toward end results. (The 2. Possibility of disunity of command exists
project objectives are clear.)
3. Professional identification is maintained. 3. It also /results in higher over head costs
because more managerial positions are
created.
4. Resources are used efficiently because 5. Requires manager effective in human
workers are assigned to different projects relations
as needed and groups or projects can share
equipment.

Span of Management

Meaning: The term span of management is also referred to as a span of control, span of supervision, span
of authority or span of responsibility.
Span of management - refers to the number of subordinates who report directly to a manger, or the
number of subordinates who will be directly supervised by a manager. This varies from one situation to
another. There is no magical number for the span of control. There are various factors affecting the span
of management. Based on the number of subordinates who should report to a manager or the number of
subordinates that a superior should supervise, we can have Wide span of management and Narrow span
of management.

i. Narrow Span of Management

This means superior controls few numbers of subordinates or few subordinates report to a superior. When
there is narrow span of management in an organization, we get:
1. Tall organization structure with many levels of supervision between top management and the lowest
organizational level.
2. More communication between superiors and subordinates.
3. Managers are underutilized and their subordinates are over controlled.
4. More trained managerial personnel and centralized authority.

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 Advantages Disadvantages
1. Close supervision and control 1. Superiors tend to get too involved in the
subordinates work
2. Fast communication between subordinates and 2. The problem of setting more trained managerial
superiors. personnel
3. Easy to coordinate and control activities. 3. Excessive distance between lowest level and top
level management. This kills intuitive for top-
level positions.
4. High costs due to many levels

ii. Wide Span of Management

This means many subordinates report to a superior or a superior supervises many subordinates.
If the span of management is wide, we get:
1. A flat organization structure with fewer management levels between top and lower level
2. Many number of subordinates and decentralized authority
3. Managers are overstrained and their subordinates receive too little guidance and controlFewer
hierarchal level

Advantages Disadvantages
1. Superiors are forced to delegate 1. Tendency of overloaded superiors to become
decision bottle necks
2. It initiates the development of clear polices 2. Danger of superior’s loss of control
3. Require exceptional quality of mangers

Span of Control Vs Levels of Management: If one wants to reduce the number of hierarchical levels in an
organization, the only way to do so without reducing the number of employees at the bottom is to
increase spans of control.

Relationship of centralization, decentralization to span of control

The company’s philosophy of centralization or decentralization in decision-making can influence the
span of control of subordinate managers. A philosophy of decentralized decision-making generally
means that the span of management should be wider for each manager. This is so because decision-
making is forced down to subordinates, thus feeling up a manager’s time commitments. This situation
also generally means fewer level of management in an organization.

Conversely, a philosophy of centralized decision-making should result in a narrower span of control and
more levels of management. If it is the philosophy of the company to have managers make the majority
of decisions, the mangers will closely supervise their subordinates and delegate little. Contacts with
subordinates should increase in number and in length, thus narrowing the span of control.

Factors Determining an Effective Span of Management

The principle of span of a management states that there is no any specific number of subordinates to be
supervised by a manager. Rather, it states, there are factors that affect the span of management. Some
are:

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1. Ability of the manger: The ability of the manager (supervisor) who is responsible for supervising
subordinates affects the span of a management. If the manager is well trained and highly capable,
receives assistance in performing her/his supervisory activities, doesn’t have many additional non-
supervisory activities to perform, and if that manager defines tasks and responsibilities to subordinates
clearly, the appropriate span can be relatively broad (wide).
2. Manager’s personality: if managers strongly need to share power, they may prefer a wider span
of control. Some managers develop reputation as empire builders and attempt to increase their spans.
3. The abilities of subordinates: The amount of training, experience, and ability that subordinates
have is directly related to a manager’s span of control. Knowledgeable subordinates who work well on
their own require less supervision than inexperienced, poorly trained workers do. Well - trained
subordinates require not only less of their manager’s time but also fewer contracts with them.
4. Motivation and commitment: motivated employees take initiative and responsibility, utilize and
develop their skills committed to their job, devote more time and effort and needs less of their
supervisor’s time.
5. Need for autonomy: subordinates with high need for autonomy prefer to make decisions by
themselves (wider span) and vise versa is true for those who take every problem to their superior for
decision-making.
6. Type of work: Routines and simplicity of work. Managers supervising people with simple and
repetitive jobs are able to manage more immediate subordinates than are those who supervise people with
complex, non-repetitive tasks.
7. Geographic dispersion of subordinates: Normally, there is an inverse relationship between a
manager’s span of control and the geographic dispersion of his/her subordinates. For example, a sales
manager whose sales people are scattered over a wide geographic region cannot supervise as many
subordinates as a manager can whose subordinates are in one building. This is especially true when the
manger and subordinates must meet on a regular basis.

8. The availability of information and control systems: If there are sophisticated information and
control systems, well-defined policies and plans, the manager can supervise many subordinates and hence
the span will be wide.
9. Levels of management: The size of the most effective span differs by organizational level. At the
top level of management the span is narrow, because.
 The nature of their work they deal with: general/broad policy control rather than direct supervision.
 At the middle level of management the span is wider than top level management, because they
involve in policy supervision and much more direct, personal contract with subordinates than top-level
managers.
 At the lower level of management the span is wide, because as managers of operating employees,
supervisors frequently supervise work that is not complex and that rarely requires policy decisions.
Instead, they will usually rely on rules and procedures to help them solve the daily problems that arise.
10. Economic Factor: Narrow spans of management require not only more supervisors (and their
services) but also the added expense of executive offices, secretaries and fringe benefits. However,
the wide spans of a management require few supervisors with their accessories. So, organizations
should take cost into consideration. There are two major reasons why the choice of appropriate span is
important.

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A. Span of management affects the efficient utilization of managers and the effective performance of
their subordinates. Too wide a span may mean that managers are overextending themselves and that
their subordinates are receiving too little guidance or control. Too narrow a span of management may
mean that managers are underutilized.
B. There is a relationship between span of management throughout the organization and the organization
structure. A narrow span of management results in a "tall" organizational structure with many
supervisory levels between top management and the lowest level. A wide span for the same number of
employees means fewer management levels between the top and bottom.
The concept of an "optimal" span of management is the one that is neither too broad nor too narrow. The
concept of an optimal span of management suggested that spans could be too broad or too narrow in
specific instances. The wider the span of management, the less direct supervision there is; the narrower
the span, the greater the number of managers and, therefore, the higher the cost in salaries.

Authority and power: source of power

Authority - is the right to commit resources (that is, to make decisions that commit an organization’s
resources), or the legal (legitimate) right to give orders (to tell someone to do or not to do something)
authority is the right to make decisions, carry out actions, and direct others in matters related to the duties
and goals of a position. It is the formal right of a superior to command and compel his subordinates to
perform a certain act. All managers in an organization have authority. It provides the means of command.
Generally, level of authority varies with levels of management. Higher-level managers have greater
authority, with ultimate power resting at the top. Authority decreases all the way to the bottom of the
chart, where positions have little or none. Authority is vested in a manager because of the position he/she
occupies in the organization, that is why we say, “authority comes with the territory.”

When an organization gives one of its members authority, or the legitimate right to use power over
others, it carries with it the burden of responsibility. Responsibility means being held accountable for
attainment of the organization’s goal. Authority is derived from the person’s official position in the
organization. The person who occupies the position has its formal authority as long as he/she remains in
the position. As the job changes in scope and complexity, so should the amount and kind of formal
authority possessed. Even though a manager has formal or legitimate authority, it is wise to remember
that the willingness of employees to accept the legitimate authority is a key to effective management.

Types of authority
In an organization different types of authority are created by the relationships between individuals and
between departments. There are three types of authority.
i. Line Authority
Line authority defines the relationship between superior and subordinate. It is a direct supervisory
relationship. It exists in all organizations as an uninterrupted score or series of steps.
In line authority a superior exercises direct command over a subordinate. Line authority is represented by
the standard chain of command that starts with the most superiors and extends down through the various
levels in the hierarchy to the point where basic activities of the organization are carried out.
ii. Staff Authority - is advisory in nature.

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The function of people in a pure staff capacity is to give advice, expertise, technical assistance, and
support to help line managers to work more effectively in accomplishing objectives. Advisory authority
doesn’t provide any basis for direct control over the subordinates or activities of other departments with
whom they consult (Within the staff manager’s own department, s/he exercises line authority over the
department’s subordinates).
E.g. Personnel, research and development, legal, plant maintenance, compost quality control, etc.
 Staff authority is advisory and normally flows upward.
Line and Staff Departments: line and staff authority are concepts that describe the authority granted to
managers. Line and staff departments have different roles or positions within the organization structure.
Line departments, headed by line managers, are the departments established to meet the major
objectives of the organization. Departments normally designated as line departments include production,
marketing, and finance. In functioning with employees and departments under their control, line
managers exercise line authority.
Staff departments provide assistance to the line departments and to each other. They can be viewed as
making money indirectly for the company through advice, service and assistance. Staff departments are
created on the basis of the special needs of the organization. As an organization develops, its need for
expert, timely, ongoing advice becomes critical. Examples could be legal, personnel, computer service,
etc.
iii. Functional Authority
It is the right which is delegated to an individual or a department to control specified process, practices,
or provinces or other matters relating to activities undertaken by persons in other departments. If the
principle of unity of command were followed without exception, authority over these activities would be
exercised only by their line superiors, but numerous reasons - including a lack of specialized knowledge,
lack of abilities to supervise processes, and danger of diverse interpretations of policies - explain why
they occasionally are not allowed to exercise this authority. It is delegated by their common superior to a
staff specialist or to a manager in another department.

Functional authority is not restricted to managers of a particular type of department. It may be exercised
by line, derive or staff department heads, more often the latter two, because they are usually composed of
specialists whose knowledge becomes the basis for functional controls.
Example:
1. The Finance Manager can give direct command to the marketing manager of the same level about
financial affairs.
2. The Legal Advisor can give direct command to others concerning the legal affairs of the
organization.
3. The Personnel Manager can give direct command to others regarding recruitment, selection,
performance appraisal systems

Benefits of Staff managers

1. Staff managers provide advice for line managers, i.e. the advice of well-qualified specialists in
various areas of an organization’s operations can scarcely be overestimated, especially as operations
become more complex.
2. These specialists may be allowed to the time to think, to gather data, and analyze, when their
superiors, busy managing operations, cannot do so.

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 As problems become more complex, staff analysis and advice becomes an urgent necessity.
Conflict between Staff and Line Managers
For several reasons there is a conflict between line and staff managers. Some are:
1. Demographic factor: There is a general premise that staff mangers are younger, well educated,
firmly attached to their profession than their organization and want more money, power and prestige.
The older line officers dislike or receiving what they regarded as instructions from someone so much
younger than themselves.
2. Threats to Authority: Line managers consider staff managers as potential threats to their authority,
particularly if staff managers exercise functional authority.
3. Dependence on knowledge: Line managers feel discomfort and get frustrated when they
progressively depend on the advice of staff managers; i.e. they fell that they are less important to the
organization.
4. Staff managers may exceed their authority and attempt to give direct command to the line
managers.
5. Staff managers may attempt to take credit for ideas implemented by line managers; conversely,
line managers may not acknowledge the role of staff managers.
6. Staff departments are organizationally placed in a relatively high position to top management.

Resolving Conflict
The line - staff problem is not only one of the most difficult that organizations face but also the source of
an extra ordinarily large amount of inefficiency, solving this problem requires great managerial skill,
careful attention to principles and patient teaching of personal. Some ways of resolving the conflict
include:
1. Understanding authority relationships: Managers must understand the nature of authority
relationships if they want to solve the problems of line and staff. Line means making decisions and
acting on them. Staff relationship, on the other hand, implies the right to assist and counsel. In short the
line may “tell”, but the staff must “sell” (its recommendations).
2. Making line listen to staff: Although line-staff friction may stem from ineptness or
overzealousness on the part of staff people, trouble also arises when line executives too carefully guard
their authority and resent the very assistance they need. Line manager should be encouraged or required
to consult with staff. Enterprises would do well to adopt the practice of compulsory staff assistance
where in the line must listen to staff.
3. Keeping staff informed: Common criticisms of staff are that specialists operate in a vacuum, fail
to appreciate the complexity of the line manager’s job, or overlook important facts in making
recommendations. Specialists should take care that their recommendations deal only with part of a
problem. Many critics arise because staff assistants are not kept informed on matters in their field. Even
the best assistant cannot advise properly in such cases. If line managers fail to inform their staff of
decisions affecting its work or if they don’t pave the way through announcements and requests for
cooperation - for staff to obtain the requisite information on specific problems the staff cannot function as
intended.
4. Requiring completed staff work: Completed staff work implies presentation of a recommendation
based up on full consideration of a problem, clearance with persons importantly affected, suggestions
about avoiding any difficulties involved, and often, preparation of the paper work - letters, directives, job

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descriptions, job specifications so that a manager can accept or reject a proposal without further study,
long conferences, or unnecessary work.
5. Clear areas of responsibility and accountability for results.

Power
Power is the capacity to affect the behavior of others, in other words, power is the ability of individuals or
groups to induce or influence the beliefs or actions of other persons or groups. It is a resource or
patronage an individual has at his/her disposal to stage-manage others towards a wanted behavior. Having
power can increase the effectiveness of a manager by enabling the manager to influence people to what is
wanted. Leaders in organizations typically rely on some or all of five major types of power: legitimate,
reward, coercive, expert and referent.
1. Legitimate power/position power refers to the power a leader possesses as a result of occupying a
particular position or role in the organization, i.e. it is a power that stems from a position’s placement
in the managerial hierarchy. It corresponds to authority. Legitimate power exists when a subordinate
or the influenced acknowledges that the influencer has a “right” or is lawfully entitled to influence
within certain bounds. It is related to the position, rather than to the person personality, so it is clearly
a function of the leader's position in the organization and is completely independent of any of the
leader's personal characteristics. Thus, the higher a manager is in the organizational hierarchy, the
greater is the “perceived power” thought by subordinates.
2. Reward Power refers to the leader's capacity to give or withhold rewards for followers. It is based on
the capacity to control and provide valued rewards to others. Rewards that may be under the control
of individual manager include salary increases /pay raises, bonus, interesting projects, promotion
recommendations, a better office, support for training programs, assignments with high responsibility
in the organization, recognition, positive feedback etc. Purchasing agents, with little position power;
might be able to exercise considerable influence by their ability to expedite or delay a much-needed
spare part. Or University professors have considerable reward power; they can grant or withhold high
grades. The greater a managers control over valued rewards, the greater the manager's reward power
and the more power to influence.
3. Coercive Power is a power based on fear. It is the negative side of reward power. Coercive power is
the ability to coerce or punish the influences/followers when they do not engage in desired behaviors.
Forms of coercion or punishment include criticisms, terminations, reprimands, suspensions, warning
letters that go into an individual’s personnel file, negative performance appraisals, demotions and
withheld pay raises; (punishment may range from loss of a minor privilege to loss of one's job).
Coercive power is usually used to maintain a minimum standard performance or conformity among
subordinates. The greater the freedom to punish others, the greater a manager’s coercive power. And
the more coercive power a manager uses, the more resentment and opposition s/he faces from
subordinates.
4. Expert Power refers to power that a leader possesses as a result of his or her knowledge and
expertise regarding the tasks to be performed by subordinates. It is power based on the possession of
expertise, knowledge, skill or information. To the extent that a leader possesses expertise and
information that is needed or desired by others, the leader has expert power. Physicians, lawyers, and
university professors may have considerable influence on others because they are respected for their
special knowledge. A manger who is capable of achieving an important methodological break

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 through that no other companies dreamed of and a secretary who knows how to unrevealed or reveal
bureaucratic red tape all have expert power over anyone who needs that information.
5. Referent Power / Charismatic Power is power that results from being admired, personally
identified with or liked by others. When we admire people, want to be like them, or feel friendship
toward them, we more willingly follow their directions and exhibit loyalty toward them. For example,
a Movie Star, a Great Athlete, a Great Football Player, a Musician or a Military Hero might possess
considerable referent power. The strength of referent power is directly related to such factors as the
amount of prestige and admiration the influence confers up on the influencer. The more that a leader
is able to cultivate the liking, identification, and admiration of others, the greater the referent power.
The more power a leader has at his/her disposal, the more likely that s/he will be successful in
influencing followers to do the work assigned to them except coercive power.

Delegation of Authority, Centralization and

Decentralization

Delegation of Authority - is the downward pushing of authority from superiors to subordinates to make
decision within their area of responsibilities. It is the process of allocating tasks to subordinates, giving
them adequate authority to carry out those assignments, and making them obligated to complete the tasks
satisfactory. Delegation is a concept describing the passing of formal authority to another person. It is the
assignment of part of a manager’s work to others, along with both the responsibility and authority
necessary to achieve expected results.

Delegation is necessary for an organization to exist. Just no one person in an enterprise can do all the
tasks necessary for accomplishing a group purpose, so is it impossible, as an enterprise grows, for one
person exercise all the authority for making decisions.

In delegating authority a manager doesn’t surrender his power because he does not permanently dispose
of it; delegated authority can always be regained. This is called recovery of delegated authority.
Reorganization inevitably involves some recovery and redelegation of authority. In a shuffle in an
organization, rights are recovered by the responsive head of the firm or a department and then redelegated
to managers of new or modified departments.

The Process of Delegation

Delegation of authority has the following steps:
1. Assignment of tasks
Specific tasks or duties that are to be undertaken are identified by the manager for assignment to the
subordinate. The subordinate is then approached with the assignment (task).
2. Delegation of authority
In order for the subordinate to complete the duties or tasks, the authority necessary to do them should be
delegated by the manager to the subordinate. A guideline for authority is that it be adequate to complete
the task - no more and no less.
3. Acceptance of responsibility

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Dispensability is the obligation to carryout one’s assigned duties to the best of one’s ability. It is the
obligation created when someone accepts task assignments together with the appropriate authority.
Responsibility is not delegated by a manager to an employee, but the employee becomes obligated when
the assignment is accepted. The employee is the receiver of the assigned duties and the delegated
authority; these confer responsibility as well.

4. Creation of accountability
Accountability is having to answer to someone for your results or actions. It means taking the
consequences - either credit or blame. It is the requirement to provide satisfactory reasons for significant
deviations from duties or expected results. When the subordinate accepts the assignment and the
authority, s/he will be held accountable or answerable for actions taken. A manager is accountable for
the use of his/her authority and performance. The manager is also accountable for the performance and
actions of subordinates. The manager should take the time to think through what is being assigned and to
confer the authority necessary to achieve results. The subordinate, in accepting the assignment becomes
obligated (responsible) to perform, knowing that s/he is accountable (answerable) for the results.

Importance of Delegation
1. It relieves the manager from his/her heavy workload: Delegation frees a manager from some time
consuming duties that can be adequately handled by subordinates and lets the manager devote more time
to problems requiring his/her full attention (lets the manager concentrate on strategic issues). Enables
managers to perform higher level work.
2. It leads to better decisions: Since subordinates are closer to real “firing line” activities and
problems than superiors, they have more realistic information and better understanding. The realistic
information that subordinates have may lead them to make better decisions.
3. It speedup decision-making: Decisions made by lower level managers usually are timelier than
those that go through several layers of management.
4. It helps subordinates to train and builds moral: Subordinate managers can reach their full potential
only if given the chance to make decisions and to assume responsibility for them.
5. It encourages the development of professional managers: Had there not been any delegation,
professional managers wouldn’t have been produced.
6. It helps to create the organization structure: If there were no delegation of authority is an
organization, there would exist only the president/CEO/ top-level manager. And an individual cannot
create an organization.

Factors Determining Delegation

Managers cannot ordinarily be for or against decentralization of authority. They may prefer to delegate
authority, or they may like to make all the decisions. Some factors that affect the degree of centralization
or decentralization- delegation of authority- are:
1. The history and culture of the organization: Whether authority will be decentralized frequently
depends upon the way the business (organization) has been built. Those enterprises that, in the main,
expand from within show a marked tendency to keep authority centralized. On the other hand, enterprises
that result from mergers and consolidations are likely to show, at least first, a definite tendency to retain
decentralized authority. In other words, organizations which were centralized or decentralized at their

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establishment tend to centralize and decentralize authority to repeat what they have done before. When
centralized organization is changed into decentralization and the vice versa people feel discomfort.
2. The nature of the decision: The costlier and the riskier the decision is, the more centralized the
authority will be. Cost may be reckoned directly in birr and cents or in such intangibles as the company’s
reputation, its competitive position or employee morale. The fact that the cost of mistake affects the
decentralization isn’t necessarily based on the assumption that top managers make fewer mistakes than
subordinates. They may make fewer mistakes, since they are probably better trained and in possession of
more facts, but the controlling reason is the weight of responsibility. Delegating authority is not
delegating responsibility; therefore, managers typically prefer not to delegate authority for crucial
decisions.
3. Availability and ability of managers (Lower level managers): A real shortage of managers
would limit decentralization of authority, since in order to delegate, superiors must have quantified
managers to whom to give authority. In addition to the availability of lower level managers, the quality of
the existing lower level managers (subordinates) has impact on centralization or decentralization. Hence,
the competency to carry out and exercise the delegated authority has some effects. Some managers lack
confidence in their subordinate or fear the consequences or criticism of having subordinates make bad
decisions.
4. Management philosophy: The willingness of managers to delegate authority and limit the degree
of decentralization or the desire to do the job by herself/himself. The character and philosophy of top
executives have an important influence on the extent to which authority is decentralized. Sometimes top
managers are despotic, tolerating no interference with the authority they jealously hoard. At other times,
top managers keep authority not merry to gratify a desire for status or power but because they simply
cannot give up the activities and authorities they enjoyed.
5. Size and character of the organization: The larger the organization, the more decisions to be
made, and the more places in which they must be made, the more difficult it is to coordinate them. These
complexities of organization may require policy questions to be passed up the line and discussed not only
with many managers in the chain of command but also with many managers at each level, since
horizontal agreement may be as necessary as vertical clearance.
Slow decisions - show because of the number of specialists and managers who must be consulted - are
costly. To minimize the cost, authority should be decentralized wherever feasible. Also important in
determining size is the character of a unit. For decentralization to be thoroughly effective, a unit must
possess a certain economic and managerial self-sufficiency.
6. Geographic dispersion of operations: Geographic dispersion of operations makes
decentralization more necessary because top executives frequently find it impossible to keep abreast of
the details of what is going on at various locations. Moreover, managers on site may be in a better
position to assess local situations and make appropriate decisions.
7. Environmental uncertainty: Environmental uncertainty tends to produce a need for more
decentralization. In this case, the fast pace of change interferes with top management’s ability to assess
situations with the speed necessary to make timely decisions.
Problems in Effective Delegation
Despite of the advantages, many managers are reluctant to delegate authority and many subordinates are
reluctant to accept it. Both these barriers hinder effective delegation.
Reluctance to delegate/Problems from Managers

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There are a number of reasons that managers commonly offer to explain why they do not delegate. Some
are:
1. Fear of loss of power - Some managers fear when they delegate authority because they expect
that they will be substituted/replaced by their subordinates if subordinates have got the experience and
skill of decision-making.
2. “I can do it better myself” fallacy: Some managers have an inflated worth of themselves and
think that they do everything better than their subordinates.
3. Lack of confidence in subordinates: The perception of managers that my subordinates just are
not capable enough. When managers delegate authority to their subordinates they do also delegate
responsibility. That is, managers are accountable for the actions of their subordinates and may fear the
blame if subordinates fail, if subordinates lack knowledge and skill.
4. Fear of being exposed: Some managers fear that their subordinates do too good job as compared
with themselves i.e. feel threatened that competent subordinates may perform too well and possibly make
the manager look poor by comparison.

5. Difficulty in briefing: Many times managers are reluctant to delegate authority if they conclude
that the time for briefing is more than the time for decision-making or if they believe they lack the time to
train subordinates. “It takes too much time to explain what I want done”.

Reluctance to Accept Delegation/problems from subordinates

1. Fear of failure and criticism: Subordinates who fear criticism or dissemble for mistake are
frequently reactant to accept delegation. The solution for this problem can be teaching subordinates
when they make mistakes than criticizing or dismissing.
2. Subordinate may believe that the delegation increases the risk of making mistakes but
doesn’t provide adequate rewards for assuming greater responsibility: Lack of incentive or reward
for assuming a greater workload. Accepting delegation frequently means that they will have to work
harder under greater pressure. Without appropriate compensation subordinates may be unwilling to do
so.
3. Lack of adequate information and resources: If subordinate managers think that they don’t
have enough factual information on which to base a decision or other resources necessary to carry out the
assigned duties, they tend to decline/reject accepting authority delegated.
4. If subordinates are already overworked
5. Lack of self-confidence
6. Believing / Thinking that decision-making is the boss’s job.

Overcoming the barriers in effective delegation

The most basic prerequisite to effective delegation is the willingness of managers to give their
subordinates real freedom to accomplish delegated tasks. Managers have to accept the fact that there are
usually several ways to solve a problem and that subordinates may legitimately choose a path differently
from their own. And, subordinates will make errors in carrying out their tasks. But they must be allowed
to develop their own solutions to problems and learn from their mistakes. The solution to subordinates
mistake is not for the manager to delegate less, but to train or otherwise support subordinate more.

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Improved communication between managers and subordinates will increase mutual understanding and
thus help to make delegation more effective. Managers who know the abilities of their subordinates can
more realistically decide which tasks can be delegated to whom. Subordinates who are encouraged to use
their abilities and who feel their managers will “back them up” will in turn be more accepting of
responsibility

Centralization and Decentralization

The terms centralization and decentralization refer to a philosophy of organization and management that
focuses on either the selective concentration (centralization) or the dispersal (decentralization) of
authority within an organization structure. Centralization or decentralization is a relative concept when
applied to organizations. They are tendencies of delegation of authority.
Centralization - is the extent to which power and authority are systematically retained by top managers.
If an organization is centralized:
- Decision-making power remains at the top
- The participation of lower-level managers in decision-making is very low

Decentralization - is the extent to which power and authority are systematically dispersed / delegated
throughout the organization to middle and lower level managers. It is the tendency to disperse decision-
making authority in an organized structure.
 In a decentralized organization decision-making power is pushed downwards and lower-level
managers actively participate in decision-making process. That is, they are not only called for
implementation but also for decision-making.

Centralization and decentralization are not opposites rather they are tendencies/proportions in delegation
of authority. If they were opposites, there could be absolute centralization or absolute decentralization,
but there is no absolute centralization or absolute decentralization. There could be absolute centralization
of authority in one person. But that implies no subordinate managers and therefore no structured
organization. Some decentralization exists in all organization, on the other hand, there cannot be absolute
decentralization, for if managers should delegate all their authority, their status as mangers would cease,
their position would be eliminated, and there would, again, be no organization. Centralization and
decentralization are tendencies; they are qualities like “hot” and “cold”.

 Centralization and decentralization form a continuum with many possible degrees of delegation of
power and authority in between.

When decentralization is greater:

1. The greater is the number of decisions made at lower level of the organization
2. The more functions are affected by decisions made at lower levels
3. The less a subordinate has to refer to his/her manager prior to a decision and the less checking
required as decisions are made at the lower level.

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