Organizing Function

Organizing Function
 Organizing Defined
 Formal & Informal Organizations
 Importance of Organizing
 The Organizing Process
 Organizational Concepts
 Division of Labor & Specialization
 Centralization & Decentralization
 Delegation of Authority
 Span of Management
 Organizational Structure
2

Organizing…
2.1 Overview
Definition:
Arranging and structuring work to accomplish
organizational goals.
Involves various sub functions
 Identification of activities
 Grouping of activities in to self contained jobs
 Assignment of jobs to individuals/departments
 Delegation of authority
 Establish coordination of activities

Organizing…
Organizing is thus the basic
process of combining and
integrating Human, physical and
financial resources in productive
interrelationships for the
achievement of enterprise
objectives

2.2 The difference between formal
and Informal Organization
Formal Organizations: A formal organization is logical
distribution of resources to achieve the company goal in a
most efficient manner
Characteristics
 Group of people with common objective
 Clear set of Objectives
 Has rule and regulation
 Authority is exercised-superior &subordinate
 Assigned duties and responsibilities
 Can be illustrated using organizational chart

Importance:
 Provide company structure
 Clarity of chain of command
 Discipline
 Easier organizational development
 Easier decision making
 Easier coordination between departments

Limitation:
 Limited flexibility
 Slow in processing-decision making, problem
detection

Informal Organizations: Exist within the formal
organization
Characteristics
 Based on social interaction
 No objectives
 Has no rule and regulation
 No authority- superior &subordinate
 Can not be illustrated using organizational chart

Importance:
 Create a better total system
 Lighter work load for management
 Work group satisfaction
 Safety valve for emotions
 Cohesiveness
 Fill up gap in management – eg.lubricate
communication
 Encourage cooperation

Limitations:
 Resistant to change
 Role conflict-pursuit for group satisfaction VS formal
organizational objectives
 Rumor-bad mouthing

2.3 Importance of Organizing
The stage at which we develop
 Organizational Structure - formal arrangement of jobs
 Organizational Chart – visual presentation of the org.
structure
 Organizational Design – process of creating the org.
structure; make decision on
 Work specialization
 Departmentalization
 Chain of command
 Span of control
 Centralization and decentralization
 formalization

2.4 The organizing process
There are various steps of organizing process:-
 Identification of Tasks: - All the relevant activities
and tasks are identified
 Grouping Jobs: grouping of the related jobs.
departments and divisions
 Assigning Work: - appoint suitable persons for the
various tasks.
 Delegation of authority: -. Assigning work and
delegation goes parallel to each other.
 Coordination: - coordination among departments,
divisions, individuals

Major Organizational Concepts
 This presentation covers the following topics
 Division of labor and Specialization
 Departmentation
 Centralization and Decentralization
 Delegation of Authority
 Span of Management
 Organization Structure
13

Objectives
 After this presentation you would be able to understand:
 The concepts of organizing;
 Briefly define the major organizational concepts;
 Advantages and disadvantages of;
 Division of labor and Specialization
 Departmentation
 Centralization and Decentralization
 Delegation of Authority
 Span of Management
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1. Division of Labor and Specialization
Division of Labor
 Tasks split into component
 Task of organizing broken down and divided
in to smaller component
 Training workers in performing specific
duties.
Advantages Division of Labor
 It enables efficiency and
productivity increases
 Decreased transfer time .
 Less wastage of materials.
 Ease of supervision.
 It decrease training cost.
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Division of Labor
Disadvantages of Division of Labor
• Boredom(monotony) and fatigue caused
monotonous and repetitive tasks
• Specialization would result in workers are having
limited knowledge.
• Creates communication barriers
• It lose sight of the company's mission
• Specialization leads to time oriented confusion
• Different specialists often formulate rules, policies,
and procedures that conflict with those of other
operational units
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2. Departmentation
 What is Departmentation?
 What are the basis for Departmentation?
 Adv. And Disadv. Of different Departmentation
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Department:
-distinct area for the performance of specified
activities.
Departmentation:
-means for the accomplishment of objectives.
-process of grouping specialized activities in a
logical manner.
-group activities in to manageable unites.

Types of Departmentation
Functional Geographic
customer
based
Product
Combined
Process
April 9,2014
18
Departmentation

Functional Departmentation
 It is grouping based on similarity of:-
 Expertise
 Skill
 Work activities.
• It is most common in business organization.
• It asks the question “what does the
enterprise/organization do” what kind of activities.
19

Cont`d
April 9,2014 20
Figure 1. functional Departmentation
President
Vice
president
loans
Vice
president
investment
Vice
president
marketing
Vice
president
operations

Functional Departmentation
advantage disadvantage
 Avoid overlap basic business
activities
 Provide chance for
occupational specialization
 Linea clearly drawn between
functional areas
 Promote communication
between department
 Create strong team sprit in
one department.
 De-emphasis of over all company
objectives- narrowmindness may
develop
 Over specialize and narrow
viewpoints of key personnel
 Reduce coordination and
communication between
functions
 Decisions are concentrated at the
top management, creating delay.
 Limits development of General
Managers
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Geographic Departmentation
 it Groups activities on the basis of geographic or territory.
 It is also known as Territorial Departmentation.
 Is common in enterprise that operate over wide geographic
areas.
 It is attractive to large -scale firms or other enterprises
whose activities are physically or geographically dispersed.
 It works best when:-
Different laws,
Different currencies,
Different languages and
Different traditions exist and have a direct on the ways in
which business activities must be conducted
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Cont.
President
Manager
Region 1
Manager
Region 2
Manager
Region 3
Vice
President
April 9,2014 23
Figure 2 Geographic Departmentation

Geographic Departmentation
Advantage Disadvantage
 Local employment opportunity
 Customer good will, awareness
of local feeling and desire.
 Create conducive environment
to develop general manager
 Facilitate decision making
 Provide high level of service
 Requires more persons with
general manager abilities
 Duplicate staffs, services , or
effort
 Tends to make maintenance of
economical central services
difficult.
 Increase problem of top
management control.
 It is costly to host many
dispersed departments.
 Create a gap to communicate
with different geographic
departments.
April 9,2014 24

Customer based Departmentation
 Customer oriented
 Grouping of activities around customers
 reflects a primary interest in customers
 helps organizations meet the special and widely varying
needs of customers .
 Eg. It can be used in medical institutions such as
hospitals and clinics –emergency services , out patient
services ,x-rays etc.
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Figure 3. Customer Departmentation
April 9,2014 26
President
Business
Customers
General
public
Vice president
marketing

Customer based Departmentation
Advantage Disadvantage
 Encourages concentration on
customer needs
 Gives customers the feeling
that they have an
understanding supplier
 Develops expertness in
customer area
 Create team sprit of workers in
a particular group
 May be difficult to coordinate
operation between competing
customer demands
 Requires managers and experts
in customers` problems
 Customer groups may not
always be clearly defined
 The possibility of
underemployment of facilities
and labor specialized workers in
customer groups
 Higher competition among
employees may deter overall
organization performance.
April 9,2014 27

Product Departmentation
 Grouping and arrangement of activities based on
products or product groups.
 Focuses on an organization's particular products
e.g. Textile products-Nylon products, woolen products ,
silk products, cotton products etc.
April 9,2014 28

Cont`d
April 9,2014 29
Figure 3 . Product Departmentation
President
Product
A
Product
B
Product
C
Product
D
Vice president
Production

Product Departmentation
Advantage Disadvantage
 Places attention and effort on
product line
 Facilitates use of specialized
skill, capital facilitates and
knowledge
 Permits growth and diversity of
products and services
 Places responsibility for profits
at the division level
 Furnishes measurable training
ground for general managers
 Requires more persons with
general manager abilities
 Tends to make maintenance of
economic central services
difficult
 Presents increased problem of
top management control
April 9,2014 30

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.
e.g. involves several sequential processes :poling
(removing bark from logs);
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Figure 4 Process Departmentation
April 9,2014 32
General
Manager
New product
Development
Process
Order
fulfillment
process
Customer and
account
management
Process

Process Departmentation…
Advantages Disadvantage
 Achieves economic advantage
 Use specialized technology
 Simplifies training
 Coordination of department is
difficult
 Responsibility for profit is at the
top
 Is unsuitable for developing
general managers.
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Centralization & Decentralization
 Centralization:
 Power and authority are systematically retained by top
manager
 The participation of lower - level managers in decision-making
is very low
 Decentralization:
 Power and authority are systematically dispersed
 It tends to disperse decision making authority in an organized
structure
 Power is pushed downwards and lower level managers
April 9,2014 34

Centralization & Decentralization…
More Centralization More decentralization
 Environment is stable.
 Lower-level managers are not as capable or
experienced at making decisions as upper-
level managers.
 Lower-level managers do not want a say in
decisions.
 Decisions are relatively minor.
 Organization is facing a crisis or the risk of
company failure.
 Company is large.
 Effective implementation of company
 strategies depends on managers retaining
 say over what happens.
 Environment is complex, uncertain.
 Lower-level managers are capable
and experienced at making decisions.
 Lower-level managers want a voice in
decisions.
 Decisions are significant.
 Corporate culture is open to allowing
 managers a say in what happens.
 Company is geographically dispersed.
 Effective implementation of company
strategies depends on managers
having involvement and flexibility to
make decisions.
April 9,2014 35

Centralization vs. Decentralization
Centralization Decentralization
 Authority in the hands of one or
few members of Orgn.
 Authority dispersed to many
hands.
April 9,2014 36
• less important decision made at
lower level.
• small the number the decision at
lower level.
• Less flexible to interpret policy at
lower level.
• High subordinate to consult the
superior
• More important decision made at
lower level.
• large the number the decision at
lower level.
• more flexible to interpret policy at
lower level.
• less subordinate to consult the
superior
centralization decentralization

Delegation of Authority
 Authority:
 The right to command resources
 legitimate right to give order
 The right to make decisions, carry out actions
 A formal right of a superior to command Another
 early management writer, Chester Barnard, proposed
another perspective on authority. This view, called the
acceptance theory of authority, says that “Authority
comes from the willingness of subordinates to
accept it.”
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Acceptance theory of Authority
April 9,2014 38

Delegation of Authority …
Barnard contended that subordinates will accept orders
only if the following conditions are satisfied:
1. They understand the order.
2. They feel the order is consistent with the organization’s
purpose.
3. The order does not conflict with their personal beliefs.
4. They are able to perform the task as directed
April 9,2014 39

Factors Determining Delegation
 The history and culture of the organization
 The nature of the decision
 Availability and ability of managers(lower level managers)
 Management philosophy
 Size and character of the organization
 Geographic dispersion of operations
 Environmental uncertainty
April 9,2014 40

Importance of Delegation
 It relieves the manager from his/her heavy workload
 It leads to better decision
 It speedup decision-making
 It helps subordinates to retain and builds moral
 It encourages the development of professional managers
 It helps to create the organization structure
April 9,2014 41

Barriers to Delegation
 Belief in the fallacy expressed in the advice “If you want it done
right, do it yourself”
 Lack of confidence and trust in lower-level employees
 Low self-confidence
 Fear of being called lazy
 Vague job definition
 Fear of competition from those below
 Reluctance to take the risks involved in depending on others
 Lack of controls that provide early warning of problems with
delegated duties
 Poor example set by bosses who do not delegate
April 9,2014 42

Overcoming the Barriers in Delegation
 Managers to give their subordinates real freedom to
accomplish delegated tasks.
 Give training for subordinates
 Improved communication b/n managers and
subordinates
April 9,2014 43

Authority
 The power or right to give orders, make decisions, and
enforce obedience;
 Importance :
 Accountability
 Guidance
 Career Path
 Communication
April 9,2014 44

Types of Authority
 Line Authority:
It is the relationship between superior and subordinates.
It is a direct supervisory relationship
It flows down ward in an organization.
 Staff Authority:
 Authority for managers to provide advice or technical assistance.
 Does not provide direct control over subordinate and other
departments.
 Functional Authority:
 Authority over specific activities undertaken by personal in another
department.
April 9,2014 45

president
R &D Legal
Personnel Finance
Marketing
sales
Accounting Budget Advertising
April 9,2014 46
Functional Authority:

Delegation:
 Is the transfer of formal authority to another person.
 It occur for two purpose:-
A. When mangers are absent:
B. When managers /organizations/need to develop
their subordinates and facilitate the decision making
process:
April 9,2014 47

Steps for Delegation
Assignment of tasks:
-identify the kinds of tasks to be performed by subordinates.
Delegation of Authority:
-to carry authority give necessary authority
Acceptance of Responsibility:
-make them responsible to perform the task to the maximum
ability
Creation of responsibility:
-regard to the task assigned and authority delegated having an
answer for the action taken
April 9,2014 48

Unity of command
 States an employee should have one and only one
immediate manager
 It decrease dissatisfaction (for the manager)
 The employee not to be puzzled to give priority
April 9,2014 49

Span of Management
 Is the number of subordinates the manager should have
to direct.
General guide line that affect span of control:
1. Complexity of subordinates jobs
2. The variety of subordinates work
3. The ability and training of the subordinates.
4. The ability of the manager.
April 9,2014 50

Span of Management…
variables degree Span of
control
degree Span of
control
Complexity of
job
high narrow low wide
Variety of job high narrow low wide
Ability and
training
high wide low narrow
Ability of
manager
high wide low narrow
April 9,2014 51

Figure 4.11 wide and Narrow of
control
April 9,2014 52
president
V. President
mkt.
V. President
Prod.
V. President
personnel
Manager
manufacturing
Manager quality
control
Supervis
or I
Supervis
or II
A B C D E
Wide
span of
control
Narrow
span of
control

April 9,2014 53

2.5 Organizational Structure
What is Organizational Structure?
A system of tasks, workflow, reporting relationship
and common channels that links together diverse
individuals and groups.
Can be differentiated as
 Vertical Differentiation
 Horizontal Differentiation

Organizational Structure…
Vertical Differentiation
Tall Organization
 has many layers and narrow
span of control.
 Are more expensive than
because of the number of
managers involved.
 Foster more communication
problems as many people are
involved.
Flat Organization
 has few layers and wide span
of control.
 Lead higher levels of
employee morale and
productivities.
 Create more administrative
responsibilities for the
relatively few managers.
 Creat more supervisory
responsibility for managers
due to wider spans of control.

Organizational Structure…
Horizontal Differentiation
Functional Structure
 People with similar skills and perform similar tasks are
grouped together in to formal unit.
 Members work in their functional area of expertise.
 Functional structure is the simplest and least
expensive in organization design.
 It provides facilities like communication and
coordination among the line managers

Organizational Structure…

Organizational Structure…
Functional Structure
Advantages
 Brings efficiency through specialization
 It is simplest and less expensive.
 To improve development of functional expertise.
 Economic of scale.
 High quality technical problem solving

Organizational Structure…
Functional Structure
Disadvantages
 Sense of cooperation and common purpose break
down.
 Narrow view of performance objective
 It limits internal development of general managers.
 Poor delegation of authority.
 It involves inadequate planning for products and
markets.

Organizational Structure…
Divisional Organizational Structure
 Group together people, who work on the same product
or process, serve similar customers and or are located
in the same area or geographic regions.
 Common in a complex organization

Organizational Structure…

Organizational Structure…
Advantages of Divisional Structure
 It focuses on coordination and necessary authority
 clearly defined roles in an each division.
 It places strategy development and implementation in
closer proximity to the division’s unique environment.
 It sharply focuses accountability for performance.

Organizational Structure…
 It retains functional specialization within each
division.
 It is good training ground for strategic managers.
 It creates career development opportunities for
managers.
 It allows new businesses added to new products easily.

Organizational Structure…
Disadvantages
 It fosters potentially dysfunctional competition for
corporate level resources
 It consists of problem with the extent of authority given
to division managers.
 There is potential for the policy inconsistencies
between divisions.
 It has problems of arriving at a method to distribute
corporate overhead costs that is acceptable to different
division managers with profit responsibility.

Organizational structure…
 It is costly due to each division requires functional
specialists who must be paid high salaries because
these managers are highly qualified.
 Duplication of staff services, facilities and personnel in
each division in an organization.
 It requires an elaborate, headquarters driven control
system.
 Divisional structure is not suitable to small firms.

Organizational Structure…
Matrix Organizational Structure
 In matrix structure, functional and product forms are
combined simultaneously at the same level of the
organization.
 It is the most complex of all designs due to it
depends upon both vertical and horizontal flow of
authority and communication.

Organizational Structure…
Advantages
 It accommodates a wide variety of project oriented
business activity.
 It provides good training ground for strategic
managers.
 It maximizes efficient use of functional managers.
 It fosters creativity and multiple sources of diversity.
 It is broader middle management exposure to
strategic issues for the business.

Organizational structure
 Its project objectives are very clear in an organization.
 It is to be effective structure for planning, training,
responsibilities and clear mutual
 Understanding of roles mutual trust and confidence.
 It is very useful to external environment especially it’s
technological and market aspects is very complex and
changeable

Organizational Structure…
Disadvantage
 It acts as dial accountability which can create
confusion and contradictory policies.
 Necessitates tremendous horizontal and vertical
coordination.
 It produce conflicts revolving around duties, authority
and resource allocation.