Chapter Five

Organizing
 5.1 Definition of Organizing
Organizing is arranging the activities of the
organization in a manner that systematically
contribute to the organization’s goals.

Organizing deals with:

 How to divide the work
 Who does what?
 Who reports to whom?
 How to coordinate organization’s activities
 5.2 Purpose of Organizing
 Coordinating diverse organizational tasks
 Establishing relationships
 Establishing formal lines of authority
 Allocating and deploying organizational resource
 Assuring more efficient use of the organization’s
resources
 Improving employee understanding of job duties
and responsibilities
 Providing a sense of direction for each of the
organization’s functional areas
 5.3 Steps of organizing process
1. Determining the activities to be performed
2. Identification of major functions to which
these activities relate.
3. Grouping and sub-dividing the activities
4. Establishing relationship among individuals
and groups- an important aspect of the
organizing process
Note! The end result of an organizing process
is an organization.
 5.4 Formal and Informal
Organization
 Formal Organization
 is the intentional, deliberate or rational structures of roles in a
formally organized enterprise.
 characterized by well-defined:
 authority
 reporting relationships,
 job titles,
 Policies and procedures,
 specific job duties and
a host of other factors necessary to accomplish its
respective goals.
 Represented by organization chart
Informal Organization
 A network of personal and social
relationships that arises spontaneously as
people associate with one another in a
work environment.
 develops within the formal organization
 has a structure which is loosely designed,
highly flexible and spontaneous
 5.5 Basic Elements/Fundamental of
Organizing

 Division of labor/work specialization

 Chain of command
 Span of control/management ( supervision)
 Centralization and decentralization
 Delegation of authority

 Departmentalization
 5.5.1 Division of Labor/Specialization

Division of labor- the degree in which tasks

in the organization are subdivided into
separate jobs
 Division of labor:
 Makes efficient use of employee skills
 Increases employee skills through
repetition
 Allows use of specialized equipment
 5.5.2 Chain of Command

 An unbroken line of authority that links all

individuals in the organization and specifies
who report to whom
 It is associated with two underlying principles:
1. Unity of command- each employee is held
accountable to only one supervisor
2. The scalar principle- refers to a clearly defined
line of authority in the organization that
includes all employees
 5.5.3 Span of Control/Management (Supervision)

 refers to the number of employees reporting to a

supervisor
 Two types:
1. Narrow span of control -The manager
supervises a small number of workers
- many levels – tall organization
2. Wide span of control- The manager supervises
a large number of workers
- few levels – flat organization
5.5.4 Centralization and Decentralization
Centralization and Decentralization-
pertain to the hierarchical level at which
decisions are made
 Centralization- decision making
authority is concentrated at the top of the
organization
 Decentralization- decision making
authority is delegated to the lower level of
the organization
 5.5.5 Delegation of Authority
Process of assigning work from a top organizational level/
superior to a lower one/subordinate, and giving that person
the authority to accomplish them
Main principles of delegation:
 Responsibility can not be delegated
 Authority and responsibility should be in equal
proportion.
The delegation process:
1. Allocation of duties
2. Delegation of authority.
3. Assignment of responsibility
4. Creation of accountability.
 Delegation of Authority Cont’d
Authority : The legitimate right to make
decisions and to tell other people what to do
 flow downward from Higher to Lower level
Responsibility: The obligation involved when
one accepts an assignment
 it may be continued or it may be terminated
with the accomplishment of a single action.
 5.5.6 Departmentalization

The basis on which jobs are grouped into

departments and departments into total
organization
 The combination of jobs is based on the
degree of similarity among the jobs within
the department
 Based on the criteria up on which
departmentalization is undertaken different
types organization structures are identified
 5.6 Concept of Organizational Structure
 Organization structure - formal system of task and
reporting relationships showing how workers use resources
 Depicted by organization chart
 Organization chart: refers to a line diagram that
depicts the broad outlines of an organization’s structure
 Provide four major pieces of information about an
organization structure: Task, Subdivisions, Level of
management, Lines of authority
Organizational design - The process by which
managers make specific choices that result in a particular
kind of organizational structure.
 5.6.1 Organization Design
Two generic models of organizational design: Mechanistic &
Organic
Mechanistic Organic
- High specialization - Cross-functional teams
- Rigid departmentalization - Flexible departmentalization
- Clear chain of command - Free flow of information
- Narrow span of control - Wide span of control
- Centralization - Decentralization
- High formalization - Low formalization
- a limited information net work
- little participation in decision
making
5.6.2 Factors Affecting Organizational
Structure
Factors Affecting Organizational Structure Cont’d
 The environment: The quicker the environment
changes, the more problems face managers.
• Structure must be more flexible when
environmental change is rapid.
– Usually need to decentralize authority.
 Strategy: Different strategies require the use of
different structures.
• A differentiation strategy needs a flexible

structure,
• low cost may need a more formal structure.

• Increased vertical integration or diversification

also requires a more flexible structure

 Factors Affecting Organizational Structure Cont’d
 Technology: The combination of skills, knowledge, tools and
equipment used in the organization.
Technology can be measured by:
 Task Variety: new problems a manager encounters.
 Task Analyzability: programmed solutions available to a
manager to solve problems.
 High task variety and low analyzability present many unique
problems to managers.
– Flexible structure works best in these conditions.
 Low task variety and high analyzability allow managers to
rely on established procedures
Factors Affecting Organizational Structure Cont’d
 Technology and people
 Small Batch Technology: produces small quantities of
one-of-a-kind products.
 Based on the skills of the workers, needs a flexible structure
 Mass Production Technology: automated machines
make high volumes of standard products.
 Workers perform repetitive tasks so a formal structure works
well.
 Continuous Process Technology: totally
mechanized systems of automatic machines.
• Workers must watch for unexpected problems and react
quickly. A flexible structure is needed here.
Factors Affecting Organizational Structure Cont’d
 Human Resources:
 Higher skilled workers who need to
work in teams usually need a more
flexible structure
Therefore, Managers must take into
account all four factors (environment,
strategy, technology and human
resources) when designing the structure
of the organization.
 5.6.3 Types of Organization Structure
 Line Structure
 Line and Staff /Horizontal Structure
 Functional structure
 Divisional structure
 Matrix organization structure
 Network organization structure
A)Line Structure
 Is the oldest and simplest of structures
 Has direct authority flowing vertically from the
top
 generally found in small organizations because
support staff is needed once they begin to
grow.
B) Line and Staff /Horizontal Structure

 Has line authority similar to line structure

 Specialized staff activities are added that
support line activities
 Line employees are directly concerned with
the organization’s primary objectives
 Staff employees support the line employees
C) Functional Structure
• An organizational form in which the major functions
of the firm, such as production, marketing, R&D, and
accounting, are grouped internally.
 Functional Structure Cont’d
Advantages:
 Economies of scale can be realized
 Effective monitoring of the environment
 Performance standards better maintained
 Greater opportunity for specialized training and skill development
 Technical specialists are relatively free of administrative work
 Decision making and lines of communication are simple and clearly
understood
Disadvantages:
– Impeded communication and coordination due to differences in
values and orientations
– May lead to short-term thinking (functions vs. organization as a
whole)
– Difficult to establish uniform performance standards
 D) The Divisional Structure
Departmentalization that groups units around products,
customers, or geographic regions.
 Divisions create smaller, manageable parts of a firm.
 Divisions develop a business-level strategy to compete.
 A division has marketing, finance, and other functions.
 Functional managers report to divisional managers who then report to
corporate management.
– Product structure: divisions created according to the
type of product or service.
– Geographic structure: divisions based on the area of a
country or world served.
– Market structure: divisions based on the types of
customers served.
Divisional Structure Cont’d
Divisional Structure Cont’d
Advantages of Divisional Organizations:
1.Information needs are managed more easily
2.People have a full-time commitment to a particular
product line
3.Task responsibilities are clear
4.People receive broader training

Disadvantages
– Can be very expensive
– Can be dysfunctional competition among divisions
– Differences in image and quality may occur across
divisions
– Can focus on short-term performance
 E) The Matrix Organization Structure

 An organizational structure that

simultaneously groups people and resources
by function and product
 Results in a complex network of superior-
subordinate reporting relationships
 The structure is very flexible and can respond
rapidly to the need for change.
 Each employee has two bosses (functional
manager and product manager)
Matrix Organization Structure Cont’d
 Matrix Organization Structure Cont’d
 Advantages of a Matrix:
 Better inter functional cooperation in operations and
problem solving.
 Increased flexibility to meet changing demands.
 Better customer service
 Better performance accountability
 Improved decision making
Disadvantages of a Matrix:
 It increases role of ambiguity, stress, and anxiety
because people are assigned to more than one
department.
 Violates the principle of unity of command
F) Network Organization Structure
A collection of independent, mostly
single-function firms that collaborate on a
good or service
 a whole series of strategic alliances.
Strategic alliance:
• a formal agreement committing two or
more firms to exchange resources to
produce a good
 5.7 Coordination
5.7.1 Techniques of Effective Coordination
 Direct supervision
 Standardization
 Mutual adjustment
 Coordination by plan
Coordination Cont’d
 Direct Supervision
 One individual (typically a manager) gives
specific orders to others and thereby
coordinates their work
 Standardization
 Establishing common routines and procedures
that apply uniformly to everyone.
Various Types of Standardization:

Standardization of work- every work

process follows a predefined path and a set of
rules
Standardization of outputs- the work is
coordinated by the imposition of standard
performance measures or specifications
concerning the outputs of the work
Standardization of skills- the work is
coordinated by the internalization by
individuals of standard skills and knowledge,
usually before they begin to do the work
Coordination Cont’d
 Mutual adjustment
 In mutual adjustment, individuals coordinate
their own work, by communicating informally
with each other.
 Coordination by plan
 Interdependent units are required to meet
deadlines and objectives that contribute to a
common goal
The End !