Mekelle University

College of Business and Economics

Chapter Four
Organizing
 Overview
 Concept of Organizing: (Definition, Nature /Characteristics,
Importance, Organizing Process, & Organizing Principles,
 Types of Organizing: (Formal and Informal organizations)
 Major Elements of Organizing Function:
• Division of Labor,
• Span of management,
• Departmentalization,
• Authority,
• Delegation,
• Centralization and Decentralization, &
• Coordination,
 Organizational Structure
 Organizational Chart
Concept of Organizing
 Organizing - is a management function that involves
arranging human and non-human (physical) resources to
help attain organizational objectives.
 It is the part of managing that involves establishing an
intentional structure of roles for people to fill in an
organization.
 Organizing- is the process of defining the essential
relationships among people, task, & activities in such a way
that all the organization’s resources are integrated.
 The end result of an organizing process is an organization.
 Organization - is a whole consisting of unified parts
( system) acting in harmony to execute tasks to achieve goals
effectively and efficiently.
 Nature /Characteristics in Organizing
A. Division of Labor/specialization/-breaking down of a task,
B. Coordination- Individual---Group---Organizational goal,
C. Accomplishment of Objectives:- all its parts should bound
together to achieve well defined objectives.
D. Authority & Responsibility Relationships:
 Authority –is a legitimate power a manager possesses to act and
make decisions, &
 Responsibility- is the obligation of the manager to carry out
assigned duties,
E. Formal Organization- intentional organizational structure,
F. Communication- transfer of information among people to
achieve organizational goals.
 Channels of communication could be: formal, informal,
upward, downward or horizontal.
 Importance of Organizing
 Organizing promotes collaboration and coordination among
individuals in a group. Thus, it improves communication within
the organization.
 Organizing sets clear-cut lines of authority and responsibility for
each individuals or department’s.
 It helps employees to know their responsibilities and concentrate
on the key tasks at hand.
 Organizing improves the directing and controlling functions of
managers.
 Organizing develops maximum use of time, human, and material
resources.
 It also enables for proper work assignment for individuals in
pursuit of common goal.
 Organizing- enables organization’s maintain their activities
coordinated organizational goal towards an end.
 The Organizing Process
The organizing process has the following steps.
1. Identification of objectives- (reconsider )
2. Identification of the specific activities needed to
accomplish objectives,
3. Grouping of activities necessary to attain
objectives- “depart mentation”
 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,
5. Design a hierarchy of relationships/ Provision for
coordination,
 Principles of Organization Design
(Principles of Organizing)
Peter Ducker identified7 principles:
Clarity:
Economy: -
Direction of Vision:-
Understanding one’s own task and the common
task: -
Decision making: -
Stability & adaptability: -
Perpetuation & Self-renewal: -
 Formal and Informal organizations
The design (framework) of an organization can be divided into two
categories
1. Formal organization- is the intentional, or rational structure 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.
 It has consciously designed durable and inflexible structure.
2. Informal organization
 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.
 Such small groups are created on the basis of similarity of status,
interests, beliefs, attitudes, back grounds, etc.
 It operates outside formal authority relationships & it doesn’t have
legal personality.
 Informal organization develops within the formal organization &
management neither can create nor abolish them.
Why people form informal groups?
• Need for satisfaction,
• Proximity and interaction, &
• Similarity…..etc
 Major Elements of Organizing Function
1. Division of Labor- is the degree to which grand task of an
organization is broken down and divided into smaller
component parts.
• Job specialization/Job Enlargement/Job rotation……..
Advantage:
 Enables to perform a task in highly proficient way,
 Saves time that is always lost in changing from one job to another,
 There is less waste of resources in the learning process….
Disadvantage:
 The boredom and fatigue caused by monotonous, repetitive tasks.
 The specialist lacks job enrichment.
2. Span of Management (Span of Control)-
 It is also referred to as a span of control, span of supervision,
span of authority or span of responsibility.
 It is defined as the number of subordinates who report directly to
a given manager.
Types of Span of Management; there are two major types;
A. Wide Span of Management-
• It is a flat organization structure characterized by an overall broad
span of control, horizontal dispersion and fewer hierarchical
levels.
B. Narrow Span of Management-
• It is a tall organization structure characterized by narrow span of
management a relatively large number of hierarchical levels.
Selecting appropriate span offers an opportunity to increase
organizational performance.
3. Departmentalization-
• It is the process of grouping specialized activities in a logical
manner.
• It means dividing and grouping the activities and employees of an
enterprise into various departments.
Department - is a distinct area, division, or branch of an organization
over which a manager has authority for the performance of specified
activities.
Bases for Departmentation
 Functional Departmentalization-
 Product Departmentalization-
 Customer Departmentalization-
 Territorial/Geographical Departmentation-
 Other Types of Departmentalization – (departmentalization by
time, by process & by size of work)
A. Functional Depart mentation- are also common for small organizations.
B. Product Depart mentation-
C. Customer Depart mentation-
D. Territorial/Geographical Depart mentation-
4. Authority-
 Authority- is the organization’s legitimized power that is linked to
each position within the organization.
 Authority- involves the right to command, to perform, to make
decision, and the expand resources.
(Authority Vs Power/ Delegation Vs Decentralization)
Types of Authority
There are at least three different types of authority relations:
• Line authority- is the most fundamental type of authority that
defines relationship between superior and subordinates. In line
authority a superior exercises direct command over a subordinate.
• Staff authority- Staff units an auxiliary role and located outside the
organizational chain of command. It can be giving advice, expertise,
technical assistance, and support to help line managers.
• Functional authority- It is the right to control specified process,
practices, or provinces or other matters relating to activities
undertaken by persons in other departments. “limited authority”
5. Delegation- Why delegation is important?
 It is the act of assigning formal authority and responsibility
for completion of specific activities to a subordinate.
 Management is all about getting works done through people.
Thus, delegation lies at the heart of the managerial task.
Elements of the delegation process involves three essential
elements: (Responsibility-Authority-Accountability)
 Identify and assigning responsibilities - supervisors must
clearly indicate what subordinates are expected to do.
 Granting authority – (parity principle, states that
responsibility and authority must be equal).
 Accountability - is ‘follow-up part of delegation’
It shows whether the delegated authority was exercised properly
or not.
Problems of Delegation
A Variety of obstacles hinder effective delegation such as:
• Supervisor (superior), Subordinates & the Organization
characteristics or culture.
6. Centralization and Decentralization - this concept refers to
the degree to which authority is disbursed throughout the
organization.
 Absolute centralization or decentralization seldom exists in an
organization.
A. 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.
B. 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.
Factors that Influence Decentralization Decision:
• External factors- Generally speaking, the more spread out a
firm’s buyers or suppliers are, as the firms product line grows
more diversified & a volatile competitive environment a more
decentralized structure is desirable.
• Internal factors- As an organization gets larger, concern for
strict cost control, standardized policy, there is likely to be a
greater degree of centralization.
7. Coordination-
 It is the orderly arrangement of group effort to prove unity of
action in the pursuit of a common purpose.
 It is the process of integrating activities of individuals and
units in to a concerted effort that works toward a common
aim.
 If resources are not coordinated, it becomes haphazard,
disjointed, and less effective.
 Coordination rests on three notion, “group effort,” “Unity of
action,” and common purpose.”
 Types of Organizational Structure
A) Line Organization: - this is the simplest type of organization
where the authority is embedded in the hierarchical structure.
 It clearly identifies authority, responsibility, and accountability at
each level. Thus, the decision making process is easier and
quicker.
 It is especially useful when the company is small in size and the
employees have sense of belongingness.
B) Line and staff Organization-
 These types of organizations, the staff specialists are added to the
line, giving the line the advantages of specialists.
 Staff is basically advisor in nature and usually doesn’t possess any
command authority over line managers. “Conflict ”
C) Functional Organization- a functional manager can make
decision and issue order to the person in divisions other than his
own, with a right to enforce his advice. Ex- quality control,
safety….etc
 Functional Organization: (enhances greater degree of
specialization, operational efficiency & quality of the product,
and it relives the line executive from excessive burden of
work and responsibilities).
D) Matrix Organization - “multiple command system”.
• Combines functional and project-based structures creating a
dual authority system.
• It is often an efficient means for bringing together the diverse
specialization skills required to solve complex problems.
Organizational Chart
 The outcome of a firm’s organizing effort can be depicted on an
organization chart.
 Organizational chart - is a simple drawing of lines and boxes that
show how the firm is organized.
 It- is a visual representation of the way in which an entire
organization and each of its components fit together.
 It shows the flow of authority, responsibility, and communication
among the various departments which are located at different
levels of the hierarchy.
 Boxes - represent the firm’s activities and the people who
perform these activities.
 Lines - indicate the relationships among them.
 Number of horizontal rows of boxes - is an indication of how
many levels of management an organization has.
Organizational Chart
Thank You