CHAPTER 5
ORGANIZING
6–1
Chapter Objectives
• After the end of the chapter you are be able to
• Introduce the meaning of organizing.
• Present the characteristics of organizing.
• Discuss the nature and purpose of organizing.
• Present the principles of organization.
• Understand Departmentation
• Discuss types of organization.
• Understand span of control.
• Understand delegation of authority.
6–2
What Is Organizing?
Organizing
Arranging the activities of the enterprise in such a
way that they systematically contribute to the
enterprise’s goals.
Must decide;
How to divide the work/division of
labour?
Who does what/specialization?
Who reports to whom/chain of
command?
How to coord. organs activities..
6–3
Steps in the process of organizing
The process of organizing consists of the following steps:
1. Determination/consideration of plans & goals/objectives
2. Determining the activities to be performed to achieve the
objectives of the organization
This is identifying/ knowing all jobs that are going to be
performed. i.e. creating a list of tasks to be accomplished.
3. Grouping and sub-dividing the activities
Division of work creates the need for coordination.
In order to provide a smooth flow of work, all closely related
and similar activities must be grouped together.
6–4
- This step requires managers to perform three
activities.
Examine each activity identified to determine its
nature (marketing, finance, etc..)
Group activities into related areas
Establish basic department design for organization
structure.
- After classifying and grouping tasks into related
work units comes departmentalization.
Copyright © 2004 Prentice Hall. All rights reserved. 6–5
Cont…
4. Assign work & delegate appropriate authority
Activities that are departmentalized has to be
assigned to individuals by giving appropriate
authority to accomplish the tasks.
5. Design a hierarchy of relationship (designing
both vertical & horizontal relationship of the
organization)
Vertical structure: results in decision making
hierarchy showing who is in charge of each task. 6–6
• Vertical structure creates the chain of command or
hierarchy of decision making levels in the company.
Horizontal structuring: has two important effects.
1. It defines the working relationships between operating
departments
2. It makes the final decision on the span of control (the
number of subordinates under the direction) of each
manager.
6–7
Organizational Structure
• Organizational structure is shown usually by an
organization chart.
• It represents basic framework of the organization.
• It tells us;
The chain of command - who reports to whom
Span of control - how many subordinates work
for each manager
6–8
Cont…
Types of authority and relationship
1. Line authority
2. functional authority
3. staff authority
How the company is structured – e.g. by function,
customer or product
The hierarchy of decision making – where the decision
maker is located
6–9
Departmentalization
• Process of dividing work activities into units within the
organization--- Departementation
• Example: Business activities can be divided into different
functions like
Manufacturing department
Sales department
Purchasing department
Accounting department
Human resource department
6–10
6–11
6–12
Cont…
• The aim of departmentalization is to take advantages of
division of labor and specialization.
• The main bases of departmentalization are
Function
location or Geography
Product
Customer and
process.
6–13
Types of Departmentalization
1. Functional departmentalization
2. Geographic departmentalization
3. Product departmentalization
4. Customer departmentalization and
5. Process departmentation
6. Multiple departmentation
Copyright © 2004 Prentice Hall. All rights reserved. 6–14
1. Functional Departementation
This is the simplest and most commonly used base
form of departmentation.
Activities are grouped based on similarity in function
or content.
It is common for business firms.
Within each department individuals perform
specialized jobs.
Copyright © 2004 Prentice Hall. All rights reserved. 6–15
Example of Functional Departementation
6–16
2. Geographic Departmentalization
It is also called location departmentalization or
departmentalization by territory.
It is established when a company has different
branches that are geographically dispersed.
The operations are similar from region to region.
6–17
6–18
3. Product Departmentation
It is grouping on the bases of products (goods/ services).
Such kind of departmentalization is best to large and
multiple product organizations.
6–19
Another Examples are...
Textile products - Nylon products, woolen
products, silk products, cotton products.
Petroleum refining - kerosene, diesel.
Electronics - Radios, TVs, Computers
Copyright © 2004 Prentice Hall. All rights reserved. 6–20
4. Customer Departmentation
It is grouping of tasks based on the type of customers
served.
Customers are the key to the way activities are
grouped.
Such forms of departmentalization are more common
in banking, book publishing and food industry.
6–21
6–22
5. Departmentation by Process
It is appropriate when departmentalization by production
is inflow.
Under it activities are grouped on the basis of various
manufacturing process.
6–23
6. Multiple/Matrix
Departmentation
It is the combination of two or more departments
discussed above.
It helps to divide work exhaustively.
It is also a way of combining jobs into
departments.
E.g. matrix organizations
Copyright © 2004 Prentice Hall. All rights reserved. 6–24
Matrix Organizations
They are also called grid organizations or project/
product management.
They are combining functional and project or
product patterns of departmentalization in the
same organization.
They are common in engineering and R& D, and
also in product-marketing organization.
6–25
• Typical problems of matrix organizations are
Conflict exists between functional and project
managers due to competition for limited resources
Role conflict, role ambiguity & role overload may result
Imbalance of authority and power, and may result in
inefficiencies
Managers protect themselves against blame by putting
everything in writing which increases administration
cost because of potential conflicts
Requires many time-consuming meetings
6–26
Guidelines to effective matrix organizations
Define the objectives of the task/ project clearly
Clarify the roles, responsibilities and authority of
managers and team members
Ensure influence based on knowledge and information
rather than rank
Balance the power of functional and project managers
Select experienced manager who can provide leadership
Undertake organization and team development
Install appropriate cost, time and quality control that
report deviations from standards in timely manner
Reward project managers and team members fairly
6–27
Major Concepts of Organizing
some major organizational concepts and principles that
managers must be familiar are
Authority
Power
Delegation
Span of control and
Centralization Vs decentralization
6–28
Authority
Authority is described as institutional power.
It is the right to act, or to give order/ command, or deploy
resources in an organization.
It represents legitimate exercise of power in the organization
structure.
Without authority a manager cannot perform tasks with
confidence and show results.
The source of authority is the position that an individual has
in the organization. 6–29
Essential features of authority
It is the relationship between two individuals -
one superior and the other subordinate.
It is the right to act.
It is the power to make decisions and seeing
that they are carried out.
It is used to achieve organizational goals.
6–30
Difference between authority & power
6–31
Types of authority
1. Line authority
is the r/ship between superior and subordinates.
It enables managers to tell subordinates what to do.
It is represented by the chain of command.
It flows downward in an organization.
6–32
2. Staff authority
Staff authority is the right to give advice.
It is advisory in nature
people in the staff position assist and advise the line
manager.
e.g. legal service; public Relation service, IT assistants,
personnel service, psychiatrist.
It is an advisory authority for manager.
Advisory authority doesn’t provide any basis for direct
control over subordinates or activities of other
departments. 6–33
3. Functional authority
It is an authority exercised or the right to control
activities in other departments.
It is an authority delegated to an individual or
department over specific activities undertaken
by personnel in other departments.
Functional authority is usually limited in scope
and duration.
6–34
Line and staff departments
Line departments
Line departments are departments established to
meet the major objectives of the organization.
They are headed by line managers.
Line managers exercise line authority.
6–35
Staff departments
Staff departments are supporting staff.
provide assistance to the line departments and to each
other.
play vital role in the success of a company.
created on the basis of the special needs of the
organization.
includes: Public Relations; legal service; personnel
service; and computer service.
6–36
General Manager
Legal service PR service
Marketing Production Personnel Financial
Mgr. Mgr Mgr Mgr
Indicates line authority
Indicates functional authority
6–37
Delegation
Delegation is authorizing subordinates to act in a certain
manner independently.
It is a concept describing the passing of formal authority
to another person.
It is delivering the right to act; to make decision; to
requisition resources; & to perform other tasks in order to
fulfill jobs responsibility.
Delegation is a two side relationship, i.e. the assigner
and assignee.
6–38
It is an act of trust; an expression of confidence;
requires necessary skills & strength, and requisite
application and dedication to duties.
Delegation occurs for two purposes
1. When managers are absent from their jobs -
Subordinates act on behalf & exercise authority.
2. To develop subordinates and facilitate decision making
process
6–39
Process of delegation
Steps in Delegation are...
1. Assignments of tasks: Kinds of tasks to be performed
by subordinate are identified and assigned to the
subordinate
2. Delegation of authority: A subordinate to carry out the
activity, the necessary authority should be given by the
manager. A guideline for authority is that “no more no
less”. i.e. It has to be adequate to complete the task.
6–40
3. Acceptance of responsibility: When subordinates
are assigned with duties and delegated authority,
then they will be responsible or obliged to perform
the tasks to the maximum ability they can perform.
4. Creation of accountability: When subordinates
are assigned for certain tasks and are delegated a
certain authority, and then they will be accountable
for the actions taken.
6–41
Span of control
Span of management/ control refers to the number of
subordinates that single manager can effectively
supervise or should have to direct.
There is no correct number for the span of control or
there is no exact formula to determine the span of
control.
It varies from one situation to another.
6–42
Factors that influence spans of control of a manager
are;
1. The ability & the experience of a manager;
2. The complexity & variety of the subordinates’ work
3. The qualification of the manager and subordinates;
4. Growth in competence and experience in personnel
5. The company’s philosophy towards centralization or
decentralization in decision making.
6–43
THE END !!!!!!
6–44
