Unit 6 FUNDAMENTALS OF ORGANIZING

Concept of organizing function:

Organizing can be broadly defined as the process of identifying, grouping and establishing orderly use of
resources within the management system. It is the process of dividing and designing the jobs setting the
proper job relation grouping the jobs to make the departments, assigning them to employees, properly
allocating the resources and coordinating the efforts within the organizational members. Without
effective organization, none of other functions of management can be performed properly. Principles of
organizing: Some of the widely practiced principles are as follows:
1. Objective: An objective is an end or goal to be achieved. The goals and objectives must be clearly
defined for the entire organization for each department and even for each position in the organization
structure. Once the objectives have been clearly defined, organizing function become easier.
2. Division of work: The concept of division of work is based on the principle of specialization and
efficiency. Specialization helps to break down overall task of organization ad divide it into the smaller
component parts. Greater output can be obtained when each person concentrates on doing the thing for
which he/she is best qualified.
3. Span of control: Span of control represents a numerical limit of subordinates to be supervised or
controlled by a manger. It is believed that organizational efficiency is increased by limiting the span of
control at any point in the hierarchy to a small number.
4. Scalar Chain: The chain of supervisors ranging from the top management to the lowest rank managers
should be clearly defined. The chain of command should be short and clear which makes decision making
and communication more effective.
5. Unity of Command: In organizing activities, it is better when an employee receives orders from only
one supervisor. Direction from several superiors may result in confusion, chaos, conflict and indiscipline.
6. Responsibility: Once authority is given, managers have to be responsible for their actions. They are
also responsible for the action of their subordinates.
7. Efficiency: The organization structure should enable to function efficiently and accomplish
organizational goals/ objectives with the lowest possible cost. Hence it should ensure optimum utilization
of all resources.
8. Simplicity: The organization should be kept as simple as possible. A complex organization means
difficulty of communication and coordination.
9. Flexibility: Since, external environment always changes, it is necessary to cope up with the changing
environment. Organizational structure should be flexible enough to cope up with the changes in the
external environment.
10. Balance: There should be a reasonable balance in the size of various departments and between
centralization and decentralization. Imbalances creates problem to achieve its goals for an organization in
an effective and efficient way.
Approaches to organizing:
1.Classical Approach: F.W. Taylor, Henry Fayol, and Max Weber, were major contributors to the classic
approach to organizational design. Though, their prescriptions and approaches to organizing are different,
they all advocate “universal principles” of organizing. They attempt to specify the “one best way” to
organizing. ==> F.W. Taylor believed that the key to organizing is to scientifically design the job.
Taylor’s ideas on organizing are as follows:
a. Scientific approach to work by determining optimal workload laid by breaking down the job into
smaller components.
b. Incentive for reward by designing incentive system in which the workers receive more pay for more
output.
c. Separation of planning from performance by dividing work between management and workers.
==> Max Weber is remembered for his work on bureaucracy. The bureaucratic organization has to the
following components:
a. Hierarchy: Jobs are highly specialized and arranged in a hierarchy.
b. Rules and regulations: All tasks are performed according to predetermined rules and procedures.
c. Authority levels: Employees exercise authority in performing their jobs.
d. Impersonality: Impersonality in performing the task is extremely important.
e. Technical qualification and career orientation: Employment and promotion are based on technical
qualification and achievement. Therefore, seniority is the main factor in promotion. ==> Similarly, Henry
Fayol main principles of organizing are:
a. Unity of command
b. Scalar chain
c. Authority and responsibility
d. Unity of Direction
2.Behavioral Approach: Behavioral approach to organizing focuses on employee behavior. It points out
the people deserve to be the central focus of any organized activity. The following persons are the major
contributors in the development of behavioral approach: a. Elton Mayo’s human relations approach
highlighted the” people side” of an organization. Behavioral science theories of management include
Maslow’s hierarchy of needs, two-factor theory, Theory X & Theory Y, Theory Z, and theory of
participative management.
2.Contingency Approach: Systems and contingency approaches have some common viewpoints on
organizing. The contingency approach to organizing is logical. Management should decide what the
organization is to do before deciding on the structure.

Process of structuring an organization:

The processes of structuring an organization are as follows
: i) Study of Jobs: The first step in the process of organizing structure involves study of jobs and elements
to perform activities.
ii) Grouping of Jobs (Departmentalization): Once a number of jobs are identified, it is necessary to group
them according to the functional requirement. Some jobs may belong to production department, while the
others may belong to marketing department.
iii) Division of Labor: Once jobs are grouped, they are performed with the help of labor. The division of
labor helps to maximize outputs and machines.
iv) Deciding on organization design: Organizations follow different structures. Some organizations follow
a mechanic design whereas others follow a organic design.
v) Coordination of activities: Although activities are grouped and work is divided accordingly, it is
essential to establish coordination of these activities. The role of a leader or supervisor is vital to
coordinate activities.

Departmentalization:
Departmentalization is the process by which jobs are grouped and allocated in different departments to
different groups according to the need of the organization. In this process jobs are grouped according to
some logical arrangement on the basis of functions, products or geographical requirements. The
importance of departmentalization can be explained from the following points:
1. It provides the advantages of specialization of work.
2. It helps in fixing the responsibility.
3. It facilitates the development of managers.
4. It makes easy administrative and financial control.
Types of Deparmentalization
1. Departmentalization by Function: A function is a group of people, working together, who possess
similar skills or use the same kind of knowledge, tools, or techniques, to perform their jobs. Employees
who perform similar kinds of work are grouped together into one function unit is called department.
Advantages:
• It encourages professional identity and clarifies career paths among managers.
 • In this structure, there is possibility of direct supervision.
• Under the structure, it is easy to develop a pool qualified managers to take future responsibility.
Disadvantages:
• Since all employees focus on a single unit’s goal, they may be less concerned about the organizational
goals.
• Divisional managers are more concerned with their routine activities rate rather than total issues of the
firm.
2. Departmentalization by Product: These types of departmentalization are suited to large enterprise
manufacturing a variety of products. All functions relating to one product or product line are brought
together under one department or division. Each division looks after the production, marketing, finance
and personnel functions of one product.
Advantages:
• It would be easy to group all jobs for a product that make easy coordination and integration within a
product department.
• Managers of concerned product department can make prompt decision.
• Divisional performance can be controlled and evaluated without much difficulty.
• Healthy competition among the division of resources can enhance effectiveness.
Disadvantages:
• People working in one department care only one product and regard less about problems of rest of the
organization
• When organization employs different specialists in different departments, the operation costs will rise.
• Because of too many divisions, such structure may create complexity.
3. Departmentalization by Customer/Client: Under this structure, work activities are organized around
specific customers. The main focus of this form of departmentalization is to serve different types of
clients or customers effectively. Therefore, emphasis is give to customers’ types and needs.
Advantages:
• Mainly concentrates on business areas such as product or services or clients
.• Related products or clients can be added without additional need for learning.
• Easy to measure performance of staff on the basis of product or client.
• It helps managers to concentrate on different strategies to expand its customers.
Disadvantages:
• The main problem with this structure is that it duplicates and under uses resources.
• It tends to reduce cooperation across groups.
• With this structure, there will be too many divisions and therefore, complexity will rise.
4. Departmentalization by Territory: Departmentalization can also be done on the basis of territory or
geographic locations. It is useful to a large scale enterprise whose activities are widely geographically
dispersed. Banks, insurance companies, etc. generally adopt this type of Departmentalization.
Advantages:
• This structure makes easy to serve unique customers and is locally responsive.
• In-depth knowledge of specific region/country.
• Increases accountability by region.
Disadvantages:
• Often difficult for cross-regional coordination.
• Duplication of resources and functions across region.
5. Departmentation by process: This method of Departmentation is implemented in such organization,
where production activities need some distinct processes. Specially, this method is used in large scale
manufacturing concern such as textiles, cements, chemicals, medicines etc.
Advantages: • Authorities, duties and responsibilities are clearly defined.
• Efficiency and effectiveness can be achieved in resource use
• Able to adapt in dynamic environment.
Disadvantages:
• Mostly suitable for manufacturing organization only.
• Duplication of effort leads to inefficiency and high cost.
• There is lack of coordination among processes.
6. Departmentation by Time: Departmentation can also be done on the basis of time. For the organization
having the nature of providing 24 hours services, it becomes suitable to establish different departments on
the basis of time. Generally, hospitals, hotels, telecommunication, electricity and other public utility
companies which work around the clock are made departments on the basis of time, such as day, evening
and nigh shift.
Advantages:
• Optimum utilization of available resources becomes possible.
• Those employees who cannot work in day time can get opportunity to work in evening or nigh time and
vice-versa.
• Because of its flexibility, it can respond easily to environment.
Disadvantages:
• Large volumes of activities are needed.
• Since, payment for overtime services is needed, cost of production increase
.• Lack of coordination among departments.

Delegation of Authority
: Delegation of authority is one vital organization process. Delegation means assigning of duty or task
with necessary authority by superior to subordinates. In other words, Delegation is the transfer of
authority to subordinates to enable them to make decisions and use resources.

Features of Delegation of Authority:

i) Assigning responsibility: It creates responsibility on the part of the receiver to perform the
assigned duty.
ii) Granting authority: It grants sufficient authority to accomplish the given assignment.
iii) Creation of accountability: Accountability is a system making people answerable towards
those who delegate them authority in the management hierarchy.
Advantages of Delegation of Authority:
i) It reduces the workload to top management.
ii) It can concentrate on important and strategic issues.
iii) It leads to better decisions, because the decision maker is close to place of
action and has a clearer view of facts.
iv) It is an important method of developing managers and staffs in decision making.

Barriers of Delegation of Authority:

a) Employees may try to avoid or not to accept additional responsibilities.
b) The delegation process is hindered because some managers lack confidence and trust in lower
level employees.
c) The fear of competition from lower level is also a barrier to effective delegation.
Centralization:
When top-management retains power and authority without delegating to the subordinates in planning
and decision-making matters, it is called centralization.
Advantages
1. Chief executives enjoy power and prestige.
2. Uniformity of policies, practices and decisions are fostered.
3. Duplication of functions is minimized.
4. A strong coordinated team of top management is developed.
5. Full utilization of the main office facilities is realized.
Disadvantages
1. Work load to the top management.
2. Rising inequality in the distribution of authority
. 3. Less opportunity for development for middle and lower level managers.
4. Close supervision de-motivate educated and trained managers.

Decentralization:
It means the decentralization of power of decision making to the level where the work is to be performed.
In other words, It is the systematic distribution of authority to the lowest levels of the organization.
Advantages
1. Encourage other managers to make decision and take authority and responsibility.
2. Motivates employees at work.
3. Develops skills of managers and ensures their growth.
4. Coordination of activities can be increased.
Disadvantages
1. Difficult to have uniform policy and procedures.
2. Loss of power in certain cases by the top management
3. Chances of misuse when managers are not skilled and qualified.
4. Increase cost in training and development of new managers.

Types of modern organizational structures:

1.Matrix structure:
A matrix organizational structure is a hybrid structure that combines elements of both hierarchical and flat
structures. In a matrix structure, employees report to both a functional manager and a project manager.
The matrix structure is often used in organizations that have to manage multiple projects simultaneously,
and where there is a need for specialized expertise from different functional areas. This structure allows
for increased flexibility and responsiveness to changing project needs and can also help to foster a strong
sense of teamwork and collaboration among employees. However, the matrix structure can also be
complex and difficult to manage, and can lead to confusion and conflict over roles and responsibilities.
Effective communication and strong leadership are crucial for making a matrix structure work.

2.Team structure:
A team-based organizational structure is a type of organizational structure in which the organization is
divided into small, cross-functional teams. Each team is responsible for a specific aspect of the
organization's operations and is empowered to make decisions and take actions to achieve specific goals
or objectives. Team-based structures can be found in a variety of different types of organizations,
including manufacturing, service, and knowledge-based companies. Some advantages of team-based
structures include: Increased flexibility and adaptability: Teams are able to respond quickly to changing
conditions and opportunities, and can make decisions and take actions more quickly than a more
hierarchical organization. Improved communication and collaboration: Teams are able to share
information and ideas more easily, which can lead to increased creativity and innovation. Greater
employee engagement and motivation: Team members often feel a greater sense of ownership and
responsibility for their work, which can lead to increased engagement and motivation. Better decision-
making: Team members bring different perspectives and skills to the table, which can lead to better
decision-making. However, team-based structures can also be challenging to manage and may lead
to issues such as poor communication, lack of accountability, and conflicts over roles and responsibilities.
Effective leadership, clear communication, and strong teamwork are crucial for making a team-based
structure work.
3.Network structure:
A network organizational structure is a type of organizational structure in which an organization forms
partnerships and alliances with other organizations to achieve a common goal or objective. In a network
structure, organizations work together in a decentralized and loosely-coupled way, with each organization
retaining its own autonomy and decision-making authority. Network structures are often used in
industries where innovation and collaboration are important, such as technology, research, and
development. They can also be found in industries that have high levels of interdependence, such as
supply chain management, logistics, and transportation. Some advantages of network structures include:
Greater flexibility and adaptability: Organizations can respond quickly to changing market conditions and
opportunities by forming new partnerships and alliances. Increased access to resources: Organizations can
leverage the resources of their partners to achieve their goals more effectively. Improved innovation and
creativity: Organizations can share knowledge and ideas with their partners, which can lead to increased
innovation and creativity. Greater access to new markets: Organizations can enter new markets more
easily by forming partnerships with local organizations. However, network structures can also be difficult
to manage, and may lead to issues such as lack of coordination, lack of accountability, and conflicts over
roles and responsibilities. Effective communication, strong leadership and clear agreements with partners
are crucial for making a network structure work