Lara Thea Lara Endaya

Reporter
 Content

I. Objectives
II. Introduction to Organization
III. Formal Organizations
IV. Informal Organizations
V. Span of Control
 Content

VI. Unity of Command

VII. Centralization
VIII. Decentralization
 Objectives

• Defined Organization as defined by some theorists;

• Differentiated formal and informal organizations, their features,
structures, types, kinds, advantages, and disadvantages;
• Understood span of control, its types, advantages, and
disadvantages, and factors affecting it;
• Described unity of command; and
• Distinguished centralization from decentralization, and its
implications
 Introduction to Organization

• Organization is the backbone of management. Organization

facilitates attainment of the objectives of the enterprise.
Organization facilitates the optimum use of resources and
developments.
• Organizing means bringing together the necessary men,
machines, materials and money for the achievement of
common objectives. It is concerned with the grouping of
activities, allocation of work and assignment of duties and
responsibilities among various individuals in the concern.
 Introduction to Organization

• Organization is simply people working together for a common

goal. It is a group of people assembling or congregating at one
place and contributes their efforts to achieve a common goal.
• Organization is a framework for the fulfilment of common aims.
 Introduction to Organization

• According to Talcott Parsons:

“Organization is defined as a social unit which is deliberately
constructed and reconstructed to seek specific goals.”

• According to Chaster I. Barnard:

“Organization is a system of consciously coordinated activities of
two or more persons.
 Introduction to Organization

• According to Max Weber:

“Organization is defined as a corporate group. A corporate group
is a social relation which is either closed or limits the admission of
outsiders by rules… its order is enforced by the actions of specific
individuals whose regular function this is.”
 Formal Organization

• A formal organization is defined as an organization that has set

rules and regulations.
• There is a definite hierarchical structure in this organization. A
formal organization is formed to achieve the existing long-term
goals of the organization.
• The formal organization has its own distinguishing
characteristics. Some of them include having well-structured
rules, hierarchical structure, definite policies, and objectives,
etc.
 Formal Organization

• Formal organizational structure clearly spells out the job to be

performed by each individual, the authority, responsibility
assigned to every individual, the superior- subordinate
relationship and the designation of every individual in the
organization. This structure is created intentionally by the
managers for achievement of organizational goal.
 Features of Formal Organization

• Definite Interrelationship: A formal organization has a definite and

mutual relationship among the employees. Every employee knows
who has to report to whom. Through this hierarchical structure, a
definite relationship is established among the employees.

• Rules and Regulations: A formal organization has rules and

regulations that have to be followed by all the employees. The goals
are achieved efficiently if one follows the rules and regulations.
 Features of Formal Organization

• Division of Work: There are different departments working in the

organization. Thus, the division of work is done for working smoothly
and swiftly.

• Stability: A formal organization is stable in its work. It is deliberately

made, and several rules are set to achieve the organization's
objectives.
 Types of Formal Organization Structure

• Line Organization
• Line and Staff Organization
• Functional Organization
• Project Management Organization
• Matrix Organization
 Advantages of Formal Organization

1. Systematic Working:
Formal organization structure results in systematic and
smooth functioning of an organization.
2. Achievement of Organizational Objectives:
Formal organizational structure is established to
achieve organizational objectives.
 Advantages of Formal Organization

3. No Overlapping of Work:
In formal organization structure work is systematically
divided among various departments and employees. So
there is no chance of duplication or overlapping of work.
4. Coordination:
Formal organizational structure results in coordinating
the activities of various departments.
 Advantages of Formal Organization

5. Creation of Chain of Command:

Formal organizational structure clearly defines superior
subordinate relationship, i.e., who reports to whom.
6. More Emphasis on Work:
Formal organizational structure lays more emphasis on
work than interpersonal relations.
 Disadvantages of Formal Organization

1. Delay in Action:
While following scalar chain and chain of command actions get
delayed in formal structure.
2. Ignores Social Needs of Employees:
Formal organizational structure does not give importance to
psychological and social need of employees which may lead to
demotivation of employees.
3. Emphasis on Work Only:
Formal organizational structure gives importance to work only; it
ignores human relations, creativity, talents, etc.
 Informal Organization

• An informal organization is formed within the formal

organization.
• It is defined as an organization that majorly focuses
on building social relationships.
• It aims to generate harmony among people and work
together to achieve the goals.
 Features of Informal Organization

1. No Rules and Regulations: An informal organization has no rules or

regulations. It is spontaneously made based on the personal interactions
of people. Thus, no rules are set up during the establishment of the
organization.
2. Communication: An informal organization has independent channels of
communication. There is no official way of passing on information.
However, the person with the lowest rank can be in direct contact with the
person of the highest rank. Thus, grapevine communication is followed in
an informal organization.
3. No Stability: There is no stability in an informal organization. An individual
can be a member of another organization or group, which makes this
organization unstable.
 Kinds of Informal Organization

• Vertical Organization
• Horizontal Organization
• Mixed Organization
 Advantages of Informal Organization

1. Fast Communication:
Informal structure does not follow scalar chain so there can be
faster spread of communication.
2. Fulfills Social Needs:
Informal communication gives due importance to psychological
and social need of employees which motivate the employees.
3. Correct Feedback:
Through informal structure the top level managers can know
the real feedback of employees on various policies and plans.
 Advantages of Informal Organization

Strategic Use of Informal Organization:

1. The knowledge of informal group can be used to gather support of

employees and improve their performance.
2. Through grapevine important information can be transmitted
quickly.
3. By cooperating with the informal groups the managers can
skillfully take the advantage of both formal and informal
organizations.
 Disadvantages of Informal Organization

1. Spread Rumors:
According to a survey 70% of information spread through
informal organizational structure are rumors which may mislead
the employees.
2. No Systematic Working:
Informal structure does not form a structure for smooth working
of an organization.
 Disadvantages of Informal Organization

3. May Bring Negative Results:

If informal organization opposes the policies and changes of
management, then it becomes very difficult to implement them
in organization.
4. More Emphasis to Individual Interest:
Informal structure gives more importance to satisfaction of
individual interest as compared to organizational interest.
 Formal vs. Informal Organization

BASIS FOR COMPARISON FORMAL ORGANIZATION INFORMAL ORGANIZATION

Meaning An organization type in which the job of An organization formed within the
each member is clearly defined, whose formal organization as a network of
authority, responsibility and interpersonal relationship, when
accountability are fixed is formal people interact with each other, is
organization. known as informal communication.
Creation Deliberately by top management. Spontaneously by members.
Purpose To fulfill, the ultimate objective of the To satisfy their social and
organization. psychological needs.
Nature Stable, it continues for a long time. Not stable
Communication Official communication Grapevine
Control mechanism Rules and Regulations Norms, values and beliefs
Focus on Work performance Interpersonal relationship
Authority Members are bound by hierarchical All members are equal.
structure.
Size Large Small
 Span of Control

• Span of Control is the number of persons who

report to a supervisor.
• It has two important implications:
 First, it is influential in determining the
complexity of individual manager's jobs; all
things equal, it is easier to manage six persons
rather than ten.
 Second, the span of control determines the
shape, or configuration of the organization,
the fewer the number of people reporting to a
supervisor, the larger the number of managers
required.
 Span of Control

Narrow Span Wide Span

The firm with narrow span of control has less The firm with wide span of control has more
number of subordinates reporting directly to the number of subordinates reporting directly to the
manager. manager.
The firm with narrow span ten to have narrow The firm with narrow span ten to have wide
structures i.e. more levels of management. structures i.e. fewer levels of management.
It allows more employee autonomy in decision
It allows less employee autonomy in decision making.
making as compared to wide span of control. Thus, it results into better employee morale and
increased motivation.
It is appropriate to handle unstructured and highly It is appropriate to handle structured and routine
technical tasks. tasks.
Narrow Span of Control

A narrow span of control implies that the

structure is a tall structure, meaning there
many levels of management within the
organization.
 Advantages of Narrow Span of Control

1. The manager can supervisor

each of his subordinates intimately.
2. The nature of work is usually
complicated.
3. Effective communication between
the subordinates and their manager.
4. More layers in the hierarchy of
management.
 Disadvantages of Narrow Span of Control

1. Too much control over employees

might hamper their original talent
and creativity.
2. Extended hierarchy of control
results in a long time in decision-
making.
3. Narrow span of controlling
prevents cross-functional problem-
solving.
Wide Span of Control

A wide span of control implies that

the structure is a flat structure,
meaning there are fewer layers of
management or authority.
 Advantages of Wide Span of Control

1. In a wide span of control,

subordinates are more
independent.
2. Fewer layers in the
hierarchy of management.
3. The nature of work is
repetitive.
4. Less direct communication
between subordinates and
managers.
 Disadvantages of Wide Span of Control

1. Ineffective management.
2. Increased workload on managers.
3. The roles of team members are
not clearly defined.
4. Less communication between
managers and subordinates
reduces the control of the
manager.
 Factors Affecting Span of Control

1. Type of work to be managed

If all the subordinates are doing the same job at the same time,
then it is easy for a manager or superior to manage all
employees at the same time.
2. Geographical distribution
If the branches of business are located at
far geographic locations, then it becomes difficult for a manager
to manage all the executives working at all the branches.
 Factors Affecting Span of Control

3. Administrative tasks performed by a manager

The span of control of a manager reduces if he is required to
complete several administrative tasks daily.
4. The capability of the Manager
An experienced manager with a good understanding of the work
and having good relationships with employees can manage a
higher number of employees. Whereas, an inexperienced
manager with limited skills can handle a few employees.
 Factors Affecting Span of Control

5. Capabilities of employees
The span of control of a manager not only depends on the
capabilities of a manager but also depends on the capabilities of
employees to be managed.
6. Responsibility for other tasks
The span of control of a manager will reduce if he has duties of
different jobs on his shoulders. That means he will be able to
dedicate a limited time to manage his subordinates.
 Factors Affecting Span of Control

7. Manager’s value addition

A manager who is also providing training and skill development
classes will need a small span of control as compared to the
manager who is exclusively managing his subordinates.
8. Type of business
Different types of business processes can reduce the span of
control of a manager.
Unity of Command

• Unity of command is the concept

that a subordinate should report
to only one superior and receive
only one set of direction from
one superior at one time.
• Through departmentalization,
management can ensure unity of
command, and when it is
coupled with effective span of
control, the organization
becomes more productive.
Centralization

• Centralization refers to the process

in which activities involving planning
and decision-making within
an organization are concentrated
to a specific leader or location.
• Under centralization, the important
and key decisions are taken by the
top management and the other
levels are into implementations as
per the directions of top level.
 Implications of Centralization

1. Reservation of decision making power at top level.

2. Reservation of operating authority with the middle level
managers.
3. Reservation of operation at lower level at the directions of
the top level.
Decentralization

• Decentralization is a systematic
delegation of authority at
all levels of management and in
all of the organization.
• It describes the way in which
power to take decisions is
allocated among various levels in
the organizational hierarchy.
 Implications of Decentralization

1. There is less burden on the Chief Executive as in the case of

centralization.
2. In decentralization, the subordinates get a chance to decide and act
independently which develops skills and capabilities. This way the
organization is able to process reserve of talents in it.
3. In decentralization, diversification and horizontal can be easily
implanted.
4. In decentralization, concern diversification of activities can place
effectively since there is more scope for creating new departments.
Therefore, diversification growth is of a degree.
 Implications of Decentralization

5. In decentralization structure, operations can be coordinated at divisional

level which is not possible in the centralization set up.
6. In the case of decentralization structure, there is greater motivation and
morale of the employees since they get more independence to act and
decide.
7. In a decentralization structure, co-ordination to some extent is difficult to
maintain as there are lot many department divisions and authority is
delegated to maximum possible extent, i.e., to the bottom most level
delegation reaches.
 Centralization vs. Decentralization

Centralization and decentralization are the categories by which

the pattern of authority-relationships becomes clear. The degree
of centralization and decentralization can be affected by many
factors like nature of operation, volume of profits, number of
departments, size of a concern, etc. The larger the size of a
concern, a decentralization set up is suitable in it.
Thank you!