Fundamentals of organizing (Principles of Management)

Definitions of ORGANIZING
and ORGANIZING SKILL
Organizing – is the process of establishing
orderly uses for resources within the
management system.
Organizing Skill – is the ability to establish
orderly uses for resources within the
management system.
Organization – refers to the result of the
organizing process.

The Importance of
Organizing
 It is the primary mechanism managers use
to activate plans.
 It creates and maintains relationships
between all organizational resources.
 Helps managers minimize costly weakness.

Three Primary
Responsibilities
First:
The department should periodically formulate
reorganization plans that make the
management system more effective and
efficient.
Second:
The department should foster and support an
advantageous organizational climate within the
management system.
Third:
The department should develop plans to improve
managerial skills to fit current management
system needs.

FIGURE 11.1
Keys to organization: Fayol’s guidlines
1. Judiciously prepare and execute the operating plan.
2. Organize the human and material facets so that they are consistent with objectives,
resources and requirements of the concern.
3. Establish a single competent, energetic guiding authority (formal management
structure).
4. Coordinate all activities and efforts.
5. Formulate clear, distinct and precise decisions.
6. Arrange for efficient selection so that each departments is headed by a competent,
energetic manager, and all employees are placed where they can render the greatest
duties.
7. Define duties.
8. Encourage initiative and responsibility.
9. Offer fair and suitable rewards for services rendered.
10. Make use of sanctions against faults and errors.
11. Maintain discipline.
12. Ensure that individual interests are consistent with the general interests of the
organization.
13. Recognize the unity of command.
14. Promote both material and human coordination.
15. Institute and effect controls.
16. Avoid regulations, red tape, and paper work.

The Organizing Process
Step 1:
Reflect on Plans
and Objectives
Step 2:
Establish major
tasks
Step 3:
Divide major task
into subtasks
Step 4:
Allocate resources
and directives for
subtasks
Step 5:
Evaluate results of
organizing survey
feedback
FIGURE 11.2

Classical Organizing Theory
 Classical organizing theory comprises the
cumulative insights of early management
writers on how organizational resources can
best be used to enhance goal attainment.

Three major
components of classical
organizing theory

Weber’s Bureaucratic
Model
- Max Weber’s most notable contribution to
classical organizing theory
Bureaucracy – to label the management system
that includes three primary components:
 detailed procedures and rules
 A clearly outlined organizational hierarchy
 Impersonal relationships among organization members
Caution: a bureaucracy is not an end itself, but
rather means to the end of management system
goal attainment.

Weber’s Bureaucratic
Model
Main criticism: They give short shrift to the human
variable within organizations.
- It is recognized today that the bureaucratic
approach without an appropriate emphasis on
the human variable is almost certainly a formula
for organizational failure.
Another criticism: Bureaucracy may negatively
influence organizational effectiveness.

Division of Labor
- The assignment of various portions of a particular
task among a number of organization members.
Importance:
Individuals specialize in doing part of a task
rather than the entire task.

Advantage and
disadvantage of Division of
Labor
 Advantages:
When workers specialize in a particular task,
their skill in performing that task will increase.
Workers who have one job and one place in
which to do it do not lose valuable time
changing tools or locations.
When workers concentrate with only one job,
they naturally try to make the job easier and
more efficient.

 Division of labor creates a situation in which
workers need only to know how to perform their
part of the work, task rather than the entire
process for producing the end product.
 Disadvantages:
 Division of labor focuses solely on efficiency and
economic benefit and overlooks the human
variable in organizations.
 Work that is extremely specialized tends to be
boring and therefore will eventually cause
production rates to go down as workers become
resentful of being treated like machines.

Division of Labor and
Coordination
Coordination –” the orderly arrangement of
group effort to provide unity of action in the
pursuit of a common purpose.” Mooney
- Coordination is a means for achieving any
and all organizational objectives.
- It involves encouraging the completion of
individual portions of a task in a
synchronized order that is appropriate for
the overall task.

Follett’s guidelines on
Coordination
 First, Follett said that coordination can be
attained with the least difficulty through direct
horizontal relationships and personal
communications.
 Second, Follett suggested that coordination be a
discussion topic throughout the planning
process.
 Third, maintaining coordination is a continuing
process an should be treated as such. Managers
cannot assume that because their management
system shows coordination today, it will show
coordination tomorrow.

Follett’s guidelines on
Coordination
 Follett also noted that coordination can be
achieved only through purposeful management
actions--It cannot be left into chance.
 She stressed the importance of the human
element and advised that the communication
process is an essential consideration in any
attempt to encourage coordination.

Structure
Structure
- refers to the designated relationships among
resources of the management system.
Purpose: to facilitate the use of each resource,
individually and collectively, as the
management system attempts to attain its
objectives.
 Two basic types of structure:
Formal Structure – the relationships among
organizational resources as outlined by management.
- represented primarily by the organization
chart.

Informal Structure – the patterns of relationships that
develop because of the informal activities of
organization members.
 An organization’s informal structure is the
system or network of interpersonal relationships
that exist within , but is not usually identical to
the organizations formal structure.
 Organization structure is represented primarily
by means of a graphic illustration called an
organization chart.

Organization Chart
 Constructed in pyramid form.
 The relative positioning of individuals within
boxes on the chart indicates broad working
relationships, and lines between boxes designate
formal lines of communication between
individuals.
 Also communicate to outsider the complexity of
the organization.

Two Primary Dimensions of
Structure
1. Vertical Dimensioning
 Refers to the extent to which an organization uses
vertical levels to separate job responsibilities.
 Directly related to the concept of Scalar Relationships
- the chain of command.
○ Related to unity of command – The management
principle that recommends that an individual have only
one boss.

 Span of Management
(span of control, span of authority, span of
supervision, and span of responsibility)
- The number of individuals a manager supervises. The
more individuals a manager supervises, the greater
the span of management.
- Has a significant effect on how well managers carry
out their responsibilities.
Central Concern : to determine how many individuals a
manager can supervise effectively.

Designing Span of
Management
 Similarity of Functions - the degree to which
activities performed by supervised individuals
are similar of dissimilar.
 Geographic Continuity - the degree to which
subordinate are physically separated.
 Complexity of Functions - the degree to which
workers’ activities are difficult and involved.

 Coordination - the amount of time managers
must spend synchronizing activities of their
subordinates with the activities of other workers.
 Planning – The amount of time managers must
spend developing management system objective
and plans and integrating them with the
activities of their subordinates.

TABLE 11.1 Major Factors That Influence
the Span of Management
Factor
Factor Has Tendency to
Increase Span of
Management When --
Factor Has Tendency to
Decrease Span of
Management When --
1. Similarity of Functions
1. Subordinates have
similar functions
different functions
2. Geographic contiguity
2. Subordinates are
physically close
2. Subordinates are
physically distant
3. Complexity of functions
simple tasks
complex tasks
4. Coordination
4. Work of subordinates
needs little coordination
4. Work of subordinates
needs much coordination
5. Planning
5. Manager spends little
time planning
5. Manager spends much
time planning

Graicunas and Span of
Management
 V.A. Graicunas – Developed formula for
determining the number of possible relationships
between in manager and subordinates when the
number of subordinates is known.
 Graicunas Formula:
C = total no. of possible relationships between
manager and subordinates
n = is the known number of subordinates

Height of Organization
Chart
 Directly influenced by the span of
management
 Organization Charts with little height are
usually referred to as flat, while those with
much height are usually referred to as tall.

Top
Manager 1 2
1 2 3 4 5 6 1 2 3 1 2 3
Top
Manager
HEIGHT
HEIGHT
ORGANIZATION CHART
A
ORGANIZATION CHART
B
FIGURE 11.3

2. Horizontal Dimensioning
- refers to the extent to which firms use lateral
subdivisions or specialties within an
organization.
- to build organizations horizontally, organizations
establish departments.
Department – is a unique group of resources
established by management to perform some
organizational task.
Departmentalizing – is the process of establishing
departments within the management system.

 Department Based on Function
 The most widely used basis for establishing
departments within the formal structure is the type of
work functions (activities) being performed with the
system.
 Functions are typically divided into the major
categories of marketing, production and finance.
 This structure allows for consistent marketing
messages throughout the company.
 This structure may implicitly impose functional
standardization that may not optimize the needs of
the organization’s various products and services.

CEO
Vice President
Of
Finance
Vice President
of Research and
Development
(R&D)
Vice President
of
Marketing
FIGURE 11.4
Department by function at Sony

 Department based on Products or Service
 Departmentalizes resources according to products or
service being offered.
 Primary advantage: the ability to focus the
organizations efforts on each of the firm’s products or
services
 Primary Disadvantage: The different units may result
in some duplication of efforts, which may lead to
higher costs.

CEO
Vice President
Of
Financial
Services
Vice President
Of
Entertainment
Vice President
Of
Electronics
FIGURE 11.5
Departments by product at Sony

 Departments based on Geography
 Departmentalizes according to the places where the
work is being done or the geographic markets on
which the management system is focusing.
 As market areas and work locations expand, the
physical distances between places can make the
management task extremely cumbersome. To
minimize this problem, resources can be
departmentalized according to the territory.
 Primary Advantage: It helps the organization to focus
equally on the organization’s various geographic
locations.
 Primary disadvantage: Lack of focus on products and
services

CEO
Vice President
Of
Europe
Vice President
Of
North America
Vice President
Of
Asia
FIGURE 11.6
Departments by geography at Sony

 Departments based on customer
 Establish departments in response to the
organization’s major customers.
 Assumes that major customers can be identified and
divided into logical categories.
 Primary advantage: The firm focuses explicitly on its
customers.
 Primary Disadvantage: This structure may also create
redundancies and increased costs.

CEO
Vice President
Of
Movie
Distributors
Vice President
Of
Music Retailers
Vice President
Of
Electronics
Retailers
FIGURE 11.7
Departments by customer at Sony

 Departments by Matrix
 One in which a project manager(s) borrows workers
from various parts of the organization to complete
some specific project.
 Also called project organizations.
 Primary advantage: It allows the organization to focus
in various projects simultaneously.
 Primary disadvantage: The matrix structure can be
confusing, and employees may not be able to
effectively cope with two bosses.

Vice President of
Marketing
Vice President of
Research and
Development
(R&D)
Vice President of
Finance
PlayStation III
Marketing
Support Staff
R&D Support
Staff
Finance Support
Staff
Spiderman III
Marketing
Support Staff
R&D Support
Staff
Finance Support
Staff
Finance Support
Staff
R&D Support
Staff
Marketing
Support Staff
Portable Digital
Music Player
CEO
FIGURE 11.8
Matrix departments at Sony

TABLE 11.2 Advantages and Disadvantages of Departmentalization
Modes
Departmentalization Advantages Disadvantages
Functional •Power of functional
heads promotes
consistency
•Relatively easy to
assign blame or credit
to the performance of
a function
•May prove difficult to
coordinate between
various functions
•Difficult to assign credit
or blame when product
performs well or poorly
Product •Allows managers to
focus on the products
sold by the company
•Relatively easy to
assign credit or blame
on the performance
of the product
•Focus on product may
force managers to miss
differences in customers
or geographic regions
•May be difficult to
coordinate across
products

Departmentali-
zation
Advantages Disadvantages
Geographic •Managers can focus on the
various regions (and their
differences) served by the
company
•Allows firms to develop human
resources by rotating managers
across different regions
coordinate between
various regions
assign credit or blame
based on the performance
of a particular product
Customer •Allows manager to focus on
and cater the most important
customers
•Relatively easy to assign blame
or credit regarding customer
relationships
coordinate across various
customers
•May introduce
complexities as customers
span different products and
geographic areas
Matrix •Allows firm to pool human
resources for both short-term
and long-term projects
•Allows firm to maintain
•Difficult for employees to
understand power
structure within the firm
•Difficult for employees to

Responsibility
 Is the obligation to perform assigned activities.
 It is the self-assumed commitment to handle a
job to the best of one’s ability.
 The act of accepting the job means that the
person is obligated to a superior to see that job
activities are successfully completed.

The Job Description
 A list of specific activities that must be performed by
whoever holds the position.
 A clear job description can help employees to become
successful by focusing their efforts on the issues that
are important for their position.
 When properly designed:
○ Job descriptions communicate job content to
employees.
○ Establish performance levels that employees must
maintain.
○ Act as a guide that employees should follow to help the
organization reach its objectives.

 Job activities are delegated by management to
enhance the accomplishment of management system
objectives.
 A sound organizing strategy delineates specific job
activities for every individual in the organization.
 Note: that as objectives and other conditions within
the management system change, so will individual job
activities.

Three areas related to
Responsibility
 Dividing Job Activities
 One person cannot be responsible for performing all
of the activities that takes place within an
organization.
 Functional Similarity Method
○ according to many management theorist, the most basic
method of dividing job activities.
○ the method suggests that management should take four
basic interrelated steps to divide job activities in the
following sequence:

 Functional Similarity and Responsibility
o Additional guides can be used to supplement
the functional similarity method:
○ First: Overlapping responsibility should be
avoided when making job activity divisions.
Overlapping responsibility – refers to a
situation in which more than one individual is
responsible for the same activity.
○ Second: Responsibility gaps should be avoided.
Responsibility gap – exist when certain tasks
are not included in the responsibility area of
any individual organization member.

 Third: management should avoid creating job
activities for accomplishing tasks that do not enhance
goal attainment. Organization member should be
obligated to perform only those activities that lead to
goal attainment.
 When two (or more) employees are uncertain as to
who is responsible for a task, four outcomes are
possible:
1. One of the two may perform the job. The other may
either forget to or choose not to do the job – and
neither of these is a desirable outcome for product
quality control.

2. Both employees may perform the job. At the least, this
situation results in duplicated effort, which dampens
employee morale. At worst, one employee may
diminish the value of the other employees’ work,
resulting in a decrement in product quality.
3. Neither employee may perform the job because each
assumed the other will do it.
4. The employees may spend valuable time negotiating
each aspect and face of the job to carefully mesh
their job responsibilities, thus minimizing both
duplication of effort and responsibility gaps. Though
time consuming, this is actually the most desirable
option in terms of product quality.

 Clarifying Job Activities of Managers:
 Is even more important than dividing the job activities
of non – managers because managers affect greater
portions of resources within the management system.
 One process used to clarify management job activities,
“Enables each manager to actively participate with his
or her superiors, peers, and subordinates in
systematically describing the managerial job to be
done and then clarifying a role each manager place
and relationship to his or her workgroup and to the
organization.

 Management Responsibility Guide
○ A specific tool developed to implement this
interaction process.
○ This guide helps management to describe the
various responsibility relationships that exist in
the organization and to summarize how the
responsibilities of various managers relate to
one another.
 Responsible managers
 Managers can be describe as responsible if they
perform the activities they are obligated to perform.
 Responsible managers are a prerequisite for
management system success.

Authority
 The right to perform or command.
 It allows its holder to act in certain designated
ways and to directly influence the actions of
others through orders.
 It also allows its holder to allocate the
organization’s resources to achieve
organizational objectives.
 Authority on the Job

Acceptance of the Authority
 Those positioned toward the top of the chart more
authority than those position toward the bottom.
 Chester Barnard writes that the exercise of
authority is determined less by formal organizational
decree that by acceptance among those under the
authority.
 Authority exacts obedience only when it’s
accepted.
 Authority is the character of communication by
which an order is accepted by an individual as
governing the actions that individual takes within
the system.

 Barnard’s Conditions:
1. The individual can understand the order being
communicated.
2. The individual believes the order is consistent with
the purpose of the organization.
3. The individual sees the order as compatible with his
or her personal interest.
4. The individual is mentally and physically able to
comply the order.
Note: The fewer of these four conditions that are
present, the lower the probability that authority will
be accepted and obedience be exacted.

 Barnard maintains that more and more of a
manager’s commands will be accepted over the
long term if:
1. The manager uses formal channels of
communication and these are familiar to all
organization members.
2. Each organization members has an assigned
formal communication channel through which
orders are received.
3. The line of communication between manager
and subordinates is as direct as possible.

4. The complete chain of commands is used to
issue orders.
5. The manager possesses adequate
communication skills.
6. The manager uses formal communication lines
only for organizational business.
7. A command is authenticated as coming from a
manager.

Types of Authority
 Line and Staff Authority
 Line authority
○ The most fundamental authority within an
organization, deflects its existing superior –
subordinate relationships.
○ Pertains to matters directly involving
management system production, sales, and
finance, and as a result the attainment of
objectives.
 Staff Authority
○ Consists of the right to advise or assist those
who possess line authority as well as other staff
personnel.

○ Enables those responsible for improving the
effectiveness of line personnel to perform their
requires task.
 To ensure that line and staff personnel do work
together productively, management must make sure
both groups understand the organizational mission,
have specific objectives, and realize that they are
partners in helping the organization reach its
objectives.
 Size – The most significant factor in determining
whether an organization will have staff personnel.
○ The larger the organization, the greater the need and
ability to employ staff personnel.

Roles of Staff Manager
Harold Stieglitz
1. The advisory or counselling role – Staff personnel
use their professional expertise to solve
organizational problems.
2. The service role – Staff personnel provide services
that can more efficiently and effectively be
provided by a single centralized staff group than by
many individuals scattered throughout the
organization.
3. The control role – Staff personnel help establish a
mechanism for evaluating the effectiveness of the
organizational plans.

Conflict in Line – Staff
Relationships
 From the viewpoint of line personnel, conflict is
created because staff personnel tend to assume
line authority, do not give sound advice, steal
credit for success, fail to keep line personnel
informed of their activities and do not see the
whole picture.
 From the viewpoint of the Staff personnel,
conflict is created because line personnel do not
make proper use of staff personnel, resist new
ideas, and refuse to give staff personnel enough
authority to do their jobs.

• Functional Authority
―Consist of the right to give orders within a segment of
organization in which this right is normally not
existing.
―Usually assigned to individuals to complement the line
of staff authority they already possess.
―Generally covers only specific task areas and is
operational only for designated amounts of time.
―Accountability – Refers to the management
philosophy whereby individuals are held liable, or
accountable, for how well they use the authority and
live up to their responsibility of performing
predetermined activities.

Delegation
 Is the actual process of assigning job activities
and corresponding authority to specific
individuals within the organization.
 Steps in Delegation Process (Newman and
Warren)
1. Assigning specific duties to the individual.
2. Granting appropriate authority to the
subordinate.
3. Creating the obligation for the subordinate to
perform the duties assigned.

TABLE 12.3 Guidelines for Making Delegation Effective
•Give employees freedom to pursue tasks in their own way.
•Establish mutually agreed-upon results and performance standards for
delegated tasks,
•Encourage employees to take an active role in defining, and
communicating progress on tasks.
•Entrust employees with completion of whole projects or tasks whenever
possible.
•Explain the relevance of delegated tasks to larger projects or to
department or organization goals.
•Give employees the authority necessary to accomplish tasks.
•Allow employees access to all information, people, and departments
necessary to perform delegated tasks.
•Provide training and guidance necessary for employees to complete
delegated tasks satisfactory.
•When possible, delegate tasks on the basis of employee interests.

 Obstacles to the Delegation Process
1. Obstacles related to the supervisor
2. Obstacles relate to the subordinates
3. Obstacles related to the organization
 Elimination of Obstacles to the Delegation
Process
 Importance:
○ To enhance employees’ confidence.
○ To improve subordinate involvement and interest
○ More free time for the supervisor to accomplish
task
○ As the organization gets larger, assistance from
subordinates in completing tasks the manager
simply wouldn’t have time for.

 What can Managers do to eliminate obstacles to the
Delegation Process?
○ They must continually strive to uncover any
obstacles to delegation.
○ They should approach taking action to eliminate
these obstacles with the understanding that
they may be deeply ingrained and therefore
require much time and effort to overcome.
○ They could build subordinate confidence in the
use of delegated authority, minimizing the
impact of delegated authority on established
working relationship, and helping delegates
cope with problem whenever necessary.

 Centralization and Decentralization
 Used to describe the general degree to which
delegation exists within an organization.
 Centralization implies that a minimal number
of job activities and a minimal amount of
authority have been delegated to subordinates
by management, whereas Decentralization
implies the opposite.

Decentralizing an
organization: a contingency
viewpoint
 The appropriate degree of decentralization for
an organization depends on the unique situation
of that organization.
 Some specific questions managers can use to
determine the amount of decentralization
appropriate for a situation are as follows:
1. What is the present size of the organization?
2. Where are the organization’s customers
located?

3. How homogenous is the organization’s product
line?
4. Where are the organizational suppliers?
5. Are quick decisions need in the organization?
6. Is creativity a desirable feature of the
organization?

Decentralization at Massey –
Ferguson: A classic example from
the world of Management
 Guidelines for Decentralization:
1. The competence to make decisions must be
possessed by the person to whom authority is
delegated.
2. Adequate and reliable information pertinent to
the decision is required by the person making
the decision.
3. If a decision affects more than one unit of the
enterprise, the authority to make the decision
must rest with the manager accountable for the
most units affected by the decision.

 Delegation as a frame of mind – The company’s
organization manual indicates that the
delegation is not delegation in name only but a
frame of mind that includes both what a
supervisor says to subordinate and the way the
supervisor acts toward them.
 Complementing Centralization –
Decentralization is complemented by
centralization.

 Management Responsibilities
1. Responsibility for determining the overall
objective of the enterprise.
2. Responsibility for formulating the policies that
guide the enterprise.
3. Final responsibility for control of the business
within the total range of the objectives and
policies, including control over any changes in
the nature of the business.
4. Responsibility for product design where a
product decision affects more than one area of
accountability.

5. Responsibility for planning for achievement of
overall objective and for measuring actual
performance against those plans.
6. Final approval of corporate plans or budgets.
7. Decision’s pertaining to availability and
application of general company funds.
8. Responsibility for capital investment plans.

Fundamentals of organizing (Principles of Management)

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