MODERN BUSINESS

PRACTICES

Prepared by DEEPALI MITTAL (SDJIC)

UNIT 3: ORGANIZING AND
ORGANIZATION STRUCTURE
(15%)
 INTRODUCTION
• Organizing is one of the fundamental functions of management, and
it plays a crucial role in achieving the goals and objectives of an
organization. Organizing involves structuring and arranging the
resources, both human and non-human, in a way that best supports
the accomplishment of organizational goals. Here's a more detailed
explanation of organizing in management
George Terry, “Organizing is the establishing of effective authority
relationships among selected work, persons, and work places in order for
the group to work together efficiently”.
Koontz and O’Donnell, ‘The establishment of authority relationships
with provision for co-ordination between them, both vertically and
horizontally in the enterprise structure.”
Chester Bernard, “Organization is a system of co-operative activities of
two or more persons.”
 NATURE/CHARATERISTICS
• Set up to Realize Objectives: The primary purpose of organizing an entity into
an organization is to achieve specific objectives or goals. These goals can vary
from profit generation to social impact based on the nature of the
organization.
• Cooperative Activity: An organization involves collective efforts and
collaboration among individuals who work together towards achieving
common goals. It emphasizes teamwork and coordination.
• Division into Departments: Organizations divide their operations into
specialized units or departments based on functions, products, services,
geography, or customers. This division helps streamline operations and
allocate resources effectively.
• Delegation of Authority and Responsibility: Authority and responsibility are
delegated from top management to lower levels in the organizational
hierarchy. Delegation empowers employees to make decisions and perform
tasks within their designated roles.
• Establishes Authority Relationships: Organizational structure defines the
hierarchical levels and the authority relationships within the organization. It
determines who reports to whom and who has decision-making power.
• Closely Linked with Planning: Organizing and planning are interdependent.
Planning sets the goals and strategies, and organizing provides the structure
and resources to execute those plans effectively.
• Flexibility: An organization needs to be adaptable and flexible to respond to
changes in the external environment, market conditions, or technological
advancements. Flexibility helps in staying competitive.
• Must be Stable: While organizations need to be flexible, they also need a level
of stability to maintain consistency and continuity in their operations,
processes, and relationships.
• Provision for Supervision and Control: Supervision and control are necessary
to monitor and evaluate performance, ensure observance to organizational
goals and policies, and make adjustments as needed to achieve objectives.
• Importance of Human Element: An organization's success is greatly
influenced by its people—their skills, knowledge, attitudes, and teamwork.
Recognizing and valuing the human element is crucial for achieving
organizational objectives.
PROCESS OF ORGANIZATION
DETERMINING THE OBJECTIVES

PREPARING A LIST OF ACTIVITIES

GROUPING OF ACTIVITES

DETERMINIG THE POSITIONS

DELEGATION OF AUTHORITY AND RESPONSIBILITY

ESTABLISHING THE INTER RELATIONSHIPS

Determining the Objectives:
• The organization process begins with defining the objectives or goals that the
organization aims to achieve. These objectives set the direction for the
organization and guide decision-making throughout the organizing process
Preparing a List of Activities:
• After establishing objectives, the next step involves identifying and listing all
the necessary activities and tasks that need to be performed to achieve those
objectives.
Grouping of Activities:
• Once the activities are identified, they are grouped together based on their
similarities, functions, or processes. Grouping helps in creating departments
or functional units within the organization.
 DEPARTMENTATION
• Departmentation, refers to the process of grouping activities, tasks, and people into
distinct units or departments based on certain criteria such as functions, products,
geography, customers, processes, or projects. It's a fundamental step in
organizational design aimed at enhancing efficiency, coordination, and overall
effectiveness within the organization.
• Example: A large retail company may have separate departments for marketing,
finance, operations, and human resources, each focusing on its specialized functions.
• Example: An international corporation may have separate departments for different
regions, such as North America, Europe, Asia-Pacific, each managing operations
within their respective regions.
• Example: A bank might have departments catering to individual customers,
businesses, and high-net-worth clients, each focused on the specific needs and
requirements of these customer segments.
Determining Positions:
• Positions or roles within the organization are determined based on the
grouped activities. This involves identifying the specific tasks, responsibilities,
and authority associated with each position.
Delegation of Authority and Responsibility:
• Delegation involves assigning authority and responsibility to individuals or
positions to carry out specific tasks. Authority empowers individuals to make
decisions, and responsibility makes them accountable for the outcomes of
those decisions.
Establishing the Interrelationships:
• It's crucial to establish clear communication and coordination channels among
positions and departments to ensure smooth operations and effective
collaboration.
 SPAN OF CONTROL
• Span of control, refers to the number of subordinates or employees that a
manager or supervisor can effectively and efficiently manage, guide, and oversee.

• Span of control is the number of subordinates who report directly to a manager

or leader.

• The more employees assigned to a manager, the wider their span of control.

• The term "span" implies the range or breadth of control a manager has within
an organizational structure.
 FACTORS AFFECTING THE SPAN OF CONTROL
• Time Devoted by Manager: The amount of time a manager can dedicate to
each subordinate influences the span of control. Managers with limited
time may have a narrower span.
• Training of Subordinates: Highly trained and self-sufficient subordinates
may require less direct supervision, allowing for a wider span.
• Effectiveness of Communication: Efficient communication methods and
tools can enable a manager to handle a broader span by facilitating
information flow and feedback.
• Degree of Decentralization: The level of decision-making authority
distributed to lower levels of the organization can impact the span of
control. Higher decentralization allows for a wider span.
• Capacity and Intelligence of Managers: Managers with strong
organizational and multitasking skills, as well as a high level of intelligence,
may be capable of handling a wider span.
• Nature of Work: The complexity and nature of tasks influence the span of
control. Complex or specialized tasks often require closer supervision
• Planning: Effective planning can impact the span of control. Well-defined
goals and objectives can lead to a more efficient distribution of tasks and
responsibilities.
• Dynamism of Business: In dynamic and rapidly changing industries, a
narrower span may be necessary to respond quickly to market shifts and
emerging challenges.
 CENTARLIZATION
• Centralization is an organizational structure and
management approach where decision-making
authority and control over key operations are
concentrated at the top or central level of an
organization. In a centralized structure, a small group
of top managers or a single individual holds the power
to make important decisions and set policies for the
entire organization or specific departments.
 DECENTRALIZATION
• Decentralization is an organizational structure and
management approach that distributes decision-
making authority and operational control across
multiple levels or units within an organization. In a
decentralized structure, authority is delegated to
various levels of management or to different
departments, allowing them to make decisions based
on their specific knowledge, expertise, and
understanding of local conditions.
 Feature Decentralization Centralization

Authority and decision-making are Authority and decision-making are

Decision Making distributed across various levels or units concentrated at the top or central level of
within an organization. the organization.

Local units or departments have more

Control is exercised by a single central
Control autonomy and control over their
entity or a few top-level individuals.
operations and decisions.

Communication can be more fluid and Communication is more structured and

Communication
informal between local units. flows through hierarchical channels.

Allows for quicker responses to local May lead to slower decision-making due
Flexibility
changes and challenges. to higher levels of approval.
 Local units are accountable for their Central entity holds accountability for
Accountability
decisions and outcomes. overall decisions and outcomes

Local units have the potential to

Innovation may be slower due to
Innovation innovate and adapt to specific
centralized decision-making.
circumstances.

Resource Sharing and

Local units can share resources and Resource sharing and allocation are
Allocation Decision
allocate them based on their needs. determined by the central entity.

Suitability Suitable for organizations that value Suitable for organizations where
autonomy and local adaptation uniformity and consistency are essential.

Franchise networks, organizations with Traditional bureaucratic organizations,

Examples
regional branches. highly regulated industries.
Case Study 1: Centralization - XYZ Electronics
Background: XYZ Electronics is a global electronics manufacturing company that produces a wide range
of consumer electronics, including smartphones, laptops, and home appliances. The company operates
in multiple countries and has a complex supply chain.
Centralization Scenario: In this case, XYZ Electronics has adopted a centralized organizational structure
and decision-making approach.
1. Centralized Decision-Making: All major decisions, including product design, pricing, and marketing
strategies, are made by the corporate headquarters located in the company's home country.
2. Uniform Standards: The company enforces uniform product standards, manufacturing processes, and
quality control measures across all its global production facilities. This ensures consistency and brand
reputation.
3. Resource Allocation: The corporate headquarters controls the allocation of resources, including
budgets for research and development, marketing campaigns, and new product launches.
4. Efficiency Focus: Centralization allows XYZ Electronics to achieve economies of scale by bulk
purchasing of components and materials, leading to cost savings.
5. Global Strategy: The company's global strategy is coordinated from the top, ensuring that all
subsidiaries align with the corporate goals and objectives.
Case Study 2: Decentralization - ABC Retail
Background: ABC Retail is a large retail chain with stores in various cities. They sell a diverse range of
products, including clothing, electronics, and home goods.
Decentralization Scenario: In this case, ABC Retail has embraced a decentralized approach to decision-
making.
1. Regional Autonomy: Each region or city where ABC Retail operates has its own management team
with decision-making authority for local operations, inventory management, and staffing.
2. Adaptation to Local Markets: Local management teams have the flexibility to adapt their product
offerings and marketing strategies to match the preferences and trends of the specific region.
3. Customer Engagement: Decentralization allows store managers to respond quickly to customer
feedback and market demands, enhancing customer satisfaction.
4. Employee Empowerment: Store managers have the authority to make hiring decisions, implement
local promotions, and manage day-to-day operations, fostering a sense of ownership.
5. Innovation: With regional autonomy, ABC Retail encourages local innovation and creativity, leading
to the introduction of unique products or services tailored to specific markets.
6. Faster Decision-Making: Decentralization enables quicker decision-making, as local managers can
respond swiftly to changing market conditions.
Both approaches have their advantages and
disadvantages, and the choice between
centralization and decentralization depends on
the company's goals, industry, competitive
environment, and other contextual factors.
THANK YOU!