CHAPTER FOUR:

ORGANIZING 4.1 Concept of organizing and organization

Meaning and Definition:
The management process starts from planning; i.e., in planning, objectives that are going to be achieved are
identified / established and courses of action have been determined. Then, the manager continues his activities by
giving practical shape to the activities/works to be performed identifying the roles where by workers are supposed
to play, and making known to the group what their duties and responsibilities are therefore, to design and maintain
such systems of roles is the managerial function of organizing.

To begin with the definition of organizing, there is no universally accepted definition of organizing. Different
authors gave various but supplementary definitions. Among others the following are a few:

- It is the establishing of effective behavioral relationships among persons so that they may work together
efficiently and gain personal satisfaction in doing selected tasks under given environmental conditions for the
purpose of achieving some goals and objectives.

- It is one of the functions of management, the one concerned with choosing what tasks are to be done, who is
to do them, how the tasks are to be grouped, who is to report to whom and where decisions are to be made.

- It is the grouping of activities necessary to attain objectives, the assignment of each grouping to a manager
with authority to supervise it, and the provision of co-ordination vertically and horizontally in the enterprise
structure.

- It defines the part, which each member of an enterprise is expected to perform and the relation between such
members to the end that their consorted endeavor shall be most effective to the purpose of the enterprise.

- Organizing is the part of managing that involves establishing an intentional structure of roles for people to fill
in an organization.

Hence, it is a function of identifying, classifying, grouping, and assigning various activities and prescribing authority
relationships to create an organism or structure capable of accomplishing predetermined objectives.
Organizing involves,
i) The identification and classification of required activities necessary to attain objectives.
ii) The grouping of activities necessary to attain objectives.
iii) The assignment of each grouping to a manager with authority necessary to supervise it.
iv) The provision for co-ordination horizontally and vertically in the organizational structure.

Division of Labor/specialization/:
In small organizations, just having three or four employees, each of them do a certain job at different time; for
example a tea room having an owner manager and two waiters can make tea, wait on customers, treat them, collect
money and perform all other duties required in a business. But as the firm grows, people must be assigned specific
tasks in which they specialize. This process is called division of labor or specialization. It involves breaking down
of a task in to its most basic elements, training workers in performing specific duties, and sequencing activities so
that one person's effort build on another's.
1
Advantage:
- It enables a person performing a task to become highly proficient at it in relatively short time and these results
in increasing efficiency in productivity.
- It saves time that is always lost in changing from one job to another.
- There is less waste of materials in the learning process when division of labor is used.
Disadvantage:
- The boredom (boring) and fatigue caused by monotonous, repetitive tasks.
- The specialist lacks job enrichment

Coordination:
- It is the establishment of proper and adequate relationships between an employee and his work, one employee
to another or to the group, and one department or sub-department and another. Managers, to promote co-
ordination, in addition to other methods, use MBO program. This helps managers and subordinates to
approach and decide in common about the objectives to be achieved and the actions to be taken. Failure to
establish such relationships may result in different persons (or departments) pursuing different paths, thus
making difficult for the enterprise to achieve its goals.

Accomplishment of Objectives:-
The organization structure, the result of organizing, is bound together by the pursuit of specific and well-defined
objectives. This is not typical for organizing function; all managerial functions should bound together for the
achievement of predetermined objectives.

Formal Organization: The organizing function results in an intentional formal organization structure of roles in
a legally and formally organized enterprise.

Communication:
It is the transfer of information among people to achieve organizational goals. Successful communication is good
for business and for us too. Every organizing function should be able to create an organization, which has its own
channels and methods of communication.

Since management is concerned with working with people and unless there is common understanding between
people, goals cannot be achieved; effective communication is vital for management. Channels of communication
could be formal, informal, upward, downward or horizontal.

The process of Organizing

Organizing function can follow the following steps.
(1) Determine tasks /activities necessary to attain objectives
(2) Create jobs and define their duties and responsibilities.
(3) Group jobs in to practical units/departments based on similarities, importance, who will do the work, etc.
(4) Create authority/reporting relationships
(5) Delegate authority

4.2 Formal and Informal organizations & their relationships

2
 The design (framework) of an organization can be divided into two categories: The formal and informal
organization.
Formal Organization:
It is an organization, which is established with intentional structure of roles in a formally organized enterprise. It is
one, which is drafted by top management. It is the organization structure, which defines everything clearly, and
explicitly. It is consciously, deliberately, and rationally designed by management to achieve predetermined
objectives.

Thus, formal organization has the following important points:

 It is consciously brought in to existence for the achievement of predetermined objectives.
 Authority and responsibility are clearly defined.
 The line of communication is also formalized (It is shown in organization charts)
 The relationship of the superior and the subordinate is fixed. (it is deliberately impersonal it is bureaucratic in
nature and operated by the rules & regulations; personal issues are not entertained.)
 It exists in a written form

Informal Organization:
- It is a network of personal and social relations not established or required by the formal organization but
arising spontaneously as people associate with one another.
- It is undocumented and officially unrecognized relationship between members of an organization that
inevitably emerges out of the personal & group needs of employees. It is an organization, which consists of
small social groups and friendly associations with in the formal organization. It is genuine that whenever
formal organizations are formed, informal social groups are created within its framework. Such groups are
created on the basis of similarity of status, interests, beliefs, attitudes, back grounds, etc.

Such small groups are results of the need of people for social interaction, & for friendly associations. They
affect the formal organization positively or negatively, however, management neither creates nor abolishes
them. Therefore, managers should learn how to live with it, how to influence it, and how to direct its energy
and initiative towards constructive channels.

Managers, to deal with informal organizations the following general suggestions are helpful:
- Managers accept and understand the informal organizations
- Consider possible effects on informal organizations when they take any action.
- Integrate, as far as possible, the interests of informal groups with those of the formal organization.

4.3 Organizational Structure & Charts:

Organizational Structure: - can be defined as the arrangement and interrelationship of the component parts and
positions of a company. It is the established pattern of relationships among different components or parts of the
organization. There are different forms of organizational structure: - line / military, functional organization line &
staff.
Organizational Charts:- are diagrams of the organizational structure, showing the functions, departments, or
positions of the organization and how they are related.

3
Organizational Manual:- is the description of the organizational chart, and is designed to promote, understanding
of the basic organizational structure by means of descriptions of the various jobs that may be listed only by title on
the charts.

4.4 Departmentalization:
Departmentalization is a part of the organizing process. In the context of management, it means dividing and
grouping the activities and employees of an enterprise into various departments. All organizations divide their
overall operations in to sub activities and combine these sub activities in to working groups. This grouping
process of specialized activities in a logical manner is called Departmentalization. It implies the division of the
total work of an enterprise into individual functions and sub functions. Then, either on the basis of similarity of
work, or efficiency, these various functions or sub-function are grouped together into work units. The work units
so formed may b called departments, divisions, units, or any other name.
It results:
 In division of work
 In organizational units to be manageable size and
 Utilization of managerial ability based on specialization to secure maximum results.
The basic need of departmentalization arises from the limitation on the number of subordinates that can be directly
managed by a superior. If there is no departmentalization, it would seriously put limitations on the size of the
organization.

 Departmentalization makes organizations to expand to an indefinite degree.

 It also helps increasing efficiency of organization in the following ways:
 Specialization
 Fixation of responsibility
 Feeling of autonomy
 Development of management
 Facility in appraisal

The Bases of Departmentalization

The most common bases of departmentalization used by organizations are:
 Functional Departmentalization
 Product Departmentalization
 Geographic / Territorial Departmentalization
 Customer Departmentalization
 Process Departmentalization
 Matrix /project/ and task force

1. Functional Departmentalization:
Functions refer to the various responsibility areas of an organizational component. It is the process of grouping the
organization's activities in to units in logical manner on the basis of essential functions that must be performed to
attain organizational objectives/goals.
These functions include marketing, finance, operations, manufacturing personnel, engineering etc.

4
 CEO/President
General Manager

Marketing Finance Manufacturing Personnel

Advantages:- It is logical, scientific and time-tested method because it groups like or similar activities together
which facilitates specialization (Efficiency is fostered through specialization.)
- It makes supervision easier, since each manager is an expert in only a narrow range of skills.
- Tight control of all functional units is assured, because the top managers are responsible for the end results.
- It simplifies training.
Disadvantage:
- People in a functional department may lose sight of the overall operations of the business; it in turn invites
employees to de-emphasize the overall company objective.
- Workers may develop highly specialized skills, but not general managerial abilities. Consequently, functional
Departmentalization is not an ideal training ground for top level managers.
- Although there is strong relationship between within a function, co-ordination between functions is reduced.
- Sometimes conflict develops among departments as each unit competes for resources.
- The geographic area served; or the type of product or product line produced may require a different type of
Departmentalization.
- Responsibility for profit is at the top.
Despite its disadvantages, it is widely used by various managers.
2. Product Departmentalization
It is the grouping of activities on the basis of product or product line. It is adopted by (commonly used by)
manufacturers who produce and sell a number of product lines made up of several different items; such as drug,
food, clothing, machines, automobiles etc.
e.g. Product Departmentalization of an automobile management enterprise.
General Manager

Car Division Truck Division Bus. Division

Production Marketing

Finance Personnel

Advantage:
- It enables the enterprise to focus attention effort on product lines, making it easier for to management to see
the efficiency and effectiveness of production determining which product is profitable or not.
5
- It improves co-ordination between functions relating to a particular product.
- Furnishes measurable training ground for general managers.
- Facilitates use of specialized capital, facilities, skills and knowledge.
Disadvantages:
- Requires more persons with general manager abilities.
- There is an ever-present danger of duplication of activities.
- It presents increased problem of top management control.
3. Departmentation by Geographical Area/Territory
It is often referred to as area or territorial Departmentalization, and it groups business activities on the basis of
geographic region or territory, enabling a firm to adapt to local customs and laws and to survey customer more
quickly. It is especially attractive to large-scale firms or other enterprises whose activities are physically or
geographically dispersed.
President

Western Region Southern Region Central Region Eastern Region

Engineering Production Accounting Sales

Advantages:
- Results in great saving in time and money. The enterprise can benefit from lower freight, lower rents and lower
labor costs. Thus, it takes advantages of economics of local operations (places emphasis on local markets and
operations)
- Places responsibility at lower level (There will be quick decision.)
- Places measurable training ground for general managers.
- Better face to face communication with local interests.
Disadvantages:
- Requires more persons with general manager abilities /it is costly to implement./
- Duplication of effort
- Increase problem of top management control (This is because of having flat span of management.)
Sometimes, the decision to set up geographic departments is based on economic considerations; such as,
transportation costs for raw materials, for distribution, etc.
4. Customer Departmentalization:
It is the grouping of enterprise activities based on customers' interests. Companies that must provide special services
to different groups set up departments by types of customers, using customer departmentalization. For example, a
manufacturer may have both an industrial products division for its industrial customers and consumer products
division for other consumers. An airlines company may make departments its selling departments for travelling
agencies, government passengers, tourists and other customers. Normally, setting up departments by customers is
not a primary form of departmentalization. It is used instead within some other framework.

6
 General
Manager

Production Marketing Finance Personnel

Whole Sale Retail Installment Export

Advantages:
- Encourages concentration on customer needs
- Giving customers feeling that they have an understanding supplier
- Develops expertise in customer area.
Disadvantage:
- May be difficult to coordinate operations between competing customer demands.
- Requires managers and staff expert in customer's problems
• It may result in under utilization of resources in some departments.
- Customer groups may not always be clearly defined.
• There may be duplication of activities.

5. Process or Equipment Departmentalization

It is the grouping of enterprise activities according to the products' manufacturing process. This method of
departmentalization is logical and used when the machines or equipment used require special skill for operating
and are of large capacity which eliminate organizational diving or have technical facilities which strongly suggest
a concentrated location. For example, a textile factory. may be classified in to Spinning, Walling, processing, etc.
- Economic and
- Technological considerations are the foremost reasons for adopting process departmentalization.
- It is mostly found in production departments.

President

Production Manager

Spinning Dyeing Weaving Processing

Advantage: Disadvantage:
- Achieves economic advantage - Coordination of departments is difficult
- Uses specialized knowledge - Responsibility for profit is at the top
- Simplifies training - It is unsuitable for developing general managers
- uses specialized technology
7
6. Matrix Departmentalization
- 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 departmentalization in
the same organization structure.
President

Production Manager

Marketing Production Engineering Finance

Project A MarketingSpe Production Engineering

Manager cialist-1 Specialist-1 Specialist-1

Project B Marketing Production Engineering

Manager Specialist-2 Specialist-2 Specialist-2
Advantage Disadvantage
• Since there are a number of managers, there are • Conflict in organization authority exists (it lends
more channels of information itself to power struggle.
• It is oriented toward end results. (The project • Possibility of disunity of command exists
objectives are clear.) • It also /results in higher over head costs because
• Professional identification is maintained. more managerial positions are created.
• Resources are used efficiently because workers • Requires manager effective in human relations.
are assigned to different projects as needed and
groups or projects can share equipment.
 4.5 Span of Management (span of control)
It refers to the number of subordinates that a single manager can directly, immediately and effectively supervise. It
is related to the levels. We can have wide span, which is associated with few organizational levels; and a narrow
span which results in many levels.

8
 Organizations with wide span

Advantage: Disadvantage:
• Supervisors are forced to delegate • Tendency of overloaded superiors to become
• Clear policies must be made decision bottlenecks.
• Subordinates must be carefully selected • Dangers of superior's loses of control
• Requires exceptional quality of managers.

Organizations with narrow span

Advantages: Disadvantage:
• Close supervision • Superiors tend to get too much involved in subordinate's
• Close control work
• Fast communication between • Many levels of management
subordinates and superiors • High costs due to many levels
• Excessive distance between lowest level and top level.

4.6 Authority & Responsibility Relationships:

Authority is the right to command subordinates action. It is defined as the legitimate power a manager possesses
to act and make decisions in caring out responsibilities. Responsibility is the obligation of the manager to carry
out assigned duties.

Thus, the organization structure; the result of organizing, should consist of various positions arranged in a
hierarchy with a clear definition of authority and responsibility.

9
4.7 Line and Staff Relationships
The concept of line and staff is related to authority and positions/functions.

Line and staff authority

This is the relationship between different types of authority exercised by managers of an organization. These
three forms of authority are called line staff and functional authority.
Line authority: the authority of those managers directly responsible, throughout the organization chain of
command, for achieving organizational goals. It enables a manager to tell subordinates what to do. This
authority is represented by the chain of command, which links superiors and subordinates from top to bottom
in an organization. Both line and staff managers have line authority over their subordinates.
Staff authority: The authority of those groups of individuals who provide line managers with advice and
services. People in staff positions assist and advise line managers. They relieve some of the line managers'
burdens by giving them the information they need to make operational decisions. People in these positions
have the authority to offer advice and make recommendations; they have staff authority.
Functional Authority: The authority of staff department members to control the activities of workers of other
departments that are related to specific staff responsibilities. This authority is exercised over people or
activities in other departments. Usually limited in scope and duration; it is exercised one level below the
person wholes it.
Line and staff positions/functions:
To classify a position as line or staff, it is related to the degree to which the function in question contributes to
the direct achievement of organizational objectives. The line functions contribute directly to accomplishing to
firm's objectives, while staff functions facilitate the accomplishment of the major organizational objectives.
- The line functions of an organization are those functions that contribute directly to the creation and distribution
of the goods or services of the organization.
- People with line positions are responsible for physically producing the product or service and for selling it.
- Staffs people advice and assist line people. That is the only reason these positions exist.
- All staff positions are advisory, staff people may make recommendations, but line managers retain formal
authority and decide what to do with a staff person's advice.

Legal
President
Service

Research Finance Management Marketing Personnel

Development

Designing Production Training & Employee Health

Development Safety Section

Production
Workers
10