ORGANIZING

Unit - 3
 DEFINITION

1.Organizing is the act of rearranging elements following one

or more rules
2.Anything is commonly considered organized when it looks
like everything has a correct order or placement. But it's only
ultimately organized if any element has no difference on time
taken to find it. In that sense, organizing can also be defined
as to place different objects in logical arrangement for better
searching
 HISTORY

Historically, humanity has always tried to organize itself. The

organizing of information can be seen since the time humans
began to write.

Writing ideas in a book, as opposed to verbally

communicating with someone, and more specifically
cataloging ideas and thoughts, is also an attempt to organize
information.
 NATURE OF ORGANIZATION

The following are the important characteristics of organization

1:Division of work or specialization

The entire philosophy of organization depends on the concept of

specialization. In specialization, various activities are assigned to different
people who are specialists in that area. Specialization improves efficiency.
Thus, organization helps in division of work and assigning duties to
different people.
2:ORIENTATION TOWARDS GOALS

Every organization has its own purposes and objectives. Organizing is the function
employed to achieve the overall goals of the organization. Organization harmonies
the individual goals of the employees with overall objectives of the firm.

3: COMPOSITION OF INDIVIDUALS AND GROUPS

Individuals form a group and the groups form an organization. Thus, organization
is the composition of individual and groups. Individuals are grouped into
departments and their work is coordinated and directed towards organizational
goals

4:DIFFERENTIATED FUNCTIONS
The organization divides the entire work and assigns the tasks to individuals in
order to achieve the organizational objectives; each one has to perform a different
task and tasks of one individual must be coordinated with the tasks of others.
5: CONTINOUS PROCESS

The organization divides the entire work and assigns the tasks to individuals in
order to achieve the organizational objectives; each one has to perform a
different task and tasks of one individual must be coordinated with the task.

6. Communication

7. Coordination

8. Rules and regulations

9. People

10. Environment
 PURPOSE OF ORGANIZATION

1:Helps to achieve organizational goal

Organization is employed to achieve the overall objectives of business
firms. Organization focuses attention of individuals objectives towards
overall objectives.
2:Optimum use of resources
To make optimum use of resources such as men, material, money,
machine and method, it is necessary to design an organization
properly. Work should be divided and right people should be given
right jobs to reduce the wastage of resources in an organization.
3:To perform managerial function
Planning, Organizing, Staffing, Directing and Controlling cannot be implemented without
proper organization.
4:Facilitates growth and diversification continuity
A good organization structure is essential for expanding business activity. Organization
structure determines the input resources needed for expansion of a business activity
similarly organization is essential for product diversification such as establishing a new
product line
5:Human treatment of employees
Organization has to operate for the betterment of employees an must not encourage
monotony of work due to higher degree of specialization. Now, organization has adapted
the modern concept of systems approach based on human relations and it discards the
traditional productivity and specialization approach.
6. Stimulates Creativity
 Importance of organizing

Organizations are often troubled by how to organize, particularly when a

new strategy is developed

Changing market conditions or new technology requires change

Organizations seek efficiencies through improvements in organizing

 Process of organising
1.Determining the activities to be performed
The first step in the organising process is to identify the activities required for the
accomplishment of organisational objectives. For this purpose the total work has
to be divided into number of functions and sub functions. For example, in a
manufacturing concern, the activities may be divided into purchase, production,
sales, storage, advertising, accounting etc.
2.Grouping of activities:
Once the activities are identified they are grouped into departments and division
on the basis of their similarity and relatedness. Identical or closely related
activities are grouped in one department.
Each department is placed under the charge of a departmental manager. For
example, purchasing and assembling function is grouped under one department.
3.Assignment of duties:
After grouping activities into manageable units, each group of activities is
assigned to particular position. While assigning duties qualifications, experience
and aptitude of people should be duly considered. Right man should be selected
for each job and proper physical environment should be provided for efficient
performance of jobs.
4.Delegation of Authority:
Appropriate amount of authority is delegated to each individual for enabling him
to perform the duties assigned. For example, the purchase manager is given
authority to purchase goods and pay for them.

5.Defining authority relationships:

After granting authority, relationships between different members of the
organisation are created.
Each and every individual should know who is his boss, from whom he has to take
orders and to whom he will be answerable. Similarly he must know who are his
subordinates to whom he can issue orders.
Thus, the process of organising consists of defining the individual tasks, grouping
and classification of tasks, the delegation of authority for their accomplishment
and the specification of authority relationships between managers.
 Formal and Informal Organisation

Formal Organization
Formal organisation is deliberately and consciously created for the
accomplishment of the enterprise objectives. It provides for official
relationships between the individuals. The communication channel in a
formal organisation is also formal or official. It has well-established rules
and procedures.

Informal Organization
Informal organisation arises from the personal and social relations of
people. It is not formally designed. It is developed spontaneously out of
interactions between persons. It is influenced by personal 40
 Organizing
1:Structure
2:Work specialization
3:Chain of command
4:Authority, responsibility, and accountability
5:Delegation
6:Types of authority (and responsibility)
7: Span of management
8:Tall versus flat structure
9:Centralization, decentralization, and formalization
10:Departmentalization
 Organizational Structure
Structure
The framework in which the organization defines how tasks are divided, resources
are deployed, and departments are coordinated
a:A set of formal tasks assigned to individuals and departments
b:Formal reporting relationships, including lines of authority, decision responsibility,
number of hierarchical levels and span of managers control.
c:The design of systems to ensure effective coordination of employees across
departments
Patterns of organization structure are,
Line Organization
Functional organization
Line and staff organization
Project organization
Matrix organization
Committee organization
Free form organization
Task force organization
Line organisation:
Line organisation is the oldest type of organisation. It is also known as scalar or
military organisation. In this type of organisation, there is a vertical line of
authority running from the top to bottom of organisation.
Advantages:
1. It is very simple to establish and can be easily understood by employees.
2. The authority and responsibility of each position is clearly defined. Each
individuals knows to whom he is responsible.
3. It facilitates prompt decisions and speedy action is possible.
4. There is unity of command and each executive has full control over his
subordinates.
5. It is very economical.
Limitations:
1. There is lack of specialization
2. Key executives are over burdened with administrative work.
3. It may result in autocratic control.
4. Line organisation may lack stability and continuity.
5. Thus line organisation is suitable for small concerns employing few persons and
carrying on routine work.
Functional Organisation:
Functional organisation is based on the concept of Functional Foremanship
developed by F.W.Taylor. Under functional organisation, the organisation is
divided into a number of functional areas. Each function is managed by an
expert in that area. Every functional area serves all other areas in the
organisation.
Advantages:
1. Functional organisation promotes division of work which leads specialization.
2. Every functional head looks after only one function, therefore, burden on top
executives is reduced. 3. Control becomes more effective.
4. Recruitment, selection and training of managers is simplified because, each
individual is required to have knowledge of one functional area only.
Disadvantages:
1.Aperson may be accountable to several superiors. In the absence of unity of
command, responsibility for results cannot be fixed easily.
2. There are many cross-relationships which create confusion.
3. Decision-making process in functional organisation is slow.
4. Executives at the lower level do not get opportunity of all round experience.
Line and Staff Organisation:
Line and staff organisation is a combination of line and functional
structures. Under it, line authority flows in a vertical line in the same
manner as in the line organisation. In addition, staff specialists are
attached to line positions to advise them on important matters.
Advantages:
1. Staff specialists carryout detailed investigation and supply needed
information to line executives. Therefore, the burden of line executives is
reduced.
2. Staff specialists provide adequate information and expert advice. As a
result line executive can take better decisions.
3.As every executives concentrates in one field, he acquires valuable
experience.
4. Line and staff organisation is comparatively more flexible.
Disadvantages:
1. Conflicts often arise between line managers and staff specialists.
2. In actual practice, it is often very difficult to define clearly the authority
relationships between line and staff officials. In the absence of clear
allocation of duties, coordination becomes difficult.
Committee Organisation:
A committee is a group of persons formed to discuss and deliberate on
problems and to recommend or decide solutions. Its area of operation is
determined by its constitution. It may be authorized to deal with all or specific
activities. Members of the committee have authority to go into
details of the problems. A committee may be constituted at any level of
organisation and its members may be drawn from various departments.
Advantages:
1. Committees decisions are more balanced, logical and objective.
2. Committees ensure effective co-ordination among different departments.
3. By allowing the people to participate in the decision making process, committee
help to improve the loyalty and commitment of employees.
4. It avoids conflicts among group members.
5. By serving on various committees, managers acquire valuable experience.
Disadvantages:
1.Committee meetings are a costly affair both in terms of money and time.
2.The functioning of committee is slow and it cannot take quick decisions.
3.A committee decision is not necessarily the best decision but merely on
acceptable one.
 Organisation Charts and Manuals

It is essential for efficient management that all members of the organisation

clearly understand their authority relationships. Organisation Charts and
Manuals are useful means or providing information about organisational
relationships.
Meaning of organisation Chart:
An organisation chart is a graphical presentation of the various positions in the
enterprise and the formal relationships among them. An organisation Chart
shows graphically the managerial positions and interrelationships in an
enterprise. It is a blue print of the companys organisation structure.
According to George Terry - an organisational chart is a diagrammatical form,
which shows important aspects of an organisation including the major
functions and their respective relationships, the channels of supervision, and
the relative authority of each employee who is in-charge of each respective
function.
Types of organisation Charts:
There are several kinds of organisation charts, important among them are
given below:
1.Vertical Chart
2. Horizontal Chart

1.Vertical Charts:
It shows the organisation structure in the form of a pyramid. The lines of
command proceeding from top to bottom in vertical lines.
The highest position or person is placed at the top and after that the next
highest up to the lowest level. Vertical Chart is the most widely used chart.
2. Horizontal Chart
In a horizontal chart the pyramid lies horizontally instead of standing
vertically. The highest position is shown at the extreme left and lowest
position at the extreme right.
In between each successive subordinate position extend from left to right.
Therefore, it may be called left to right chart.
Advantages and uses of organisation charts:
1.An organisation chart shows clearly the various positions in the organisation and
how they relate to one another.
2.It provides clear understanding of jobs and objectives.
3.It shows at a glance the line of authority and responsibility, from it individuals
can identify the limits of their authority.
4.It serves as a blue print of the organisation and helps to clarify assignment of
duties.
5. It provides a basis of planning organisational change.
6.It provides guidance to outsiders as to whom they should contact.
Limitations of organisation Charts:
Organisation Charts suffers from the following weakness:
1.Organisation chart shows only the formal relationships and fails to reveal the
informal relations existing in the organisation.
2.It shows a static state of affairs and does not represent flexibility which exists
in a dynamic organisation.
3.It introduces bureaucratic rigidity in the formal relationships.
4.Very often organisation charts show relationships which are supposed to exist
rather than what actually exist in the organisation.
Organisational Manual:
An organisational Manual is wider in scope and contents than the organisation
Chart. It describes elements of the structure outline in the chart.
An organisation Manual is a small handbook or booklet containing detailed
information about the objectives, policies, procedures, rules etc. of the
enterprise. It contains job contents in terms of duties and responsibilities.
Advantages of Manuals:
1.An organisation Manual contains, in writing, all important matters regarding the
internal structure of the enterprise.
2.It contains rules and regulations as well instructions and standard procedures in a
written form.
3.It is useful in the training of new employees.
Drawbacks of Manuals:
1.Preparation of Manual is an expensive and time-consuming process. Therefore,
small enterprises cannot afford to have manuals.
2.Manuals may create rigidity in the organisaion. There is a little scope for
individual initiative and direction.
3.Manuals may put on record those relationships which should not be exposed.
 Delegation of Authority
Meaning:
No individual can perform all the activities by himself. Therefore, the total
work of an organisation is divided among different persons. Every
individual is given some authority so that he can accomplish his task.
Every manager shares his authority with his subordinates because he
alone cannot exercise all the authority himself.

Definition:
The process of delegation involves the determination of results expected,
the assignment of tasks, the delegation of authority for the
accomplishment of these tasks and the execution of responsibility for their
accomplishment Konntz and ODonnell.
Delegation means assigning work to others and giving them authority to
do it F.G.More.
 Nature / Characteristics
1.Delegation takes place when a superior grants some discretion to a subordinate.
The subordinated by the superior.

2.A manager cannot delegate authority which he himself does not posses.
Moreover, he cannot delegate the entire authority to his subordinates because
if he delegates all his authority, he passes his position to the subordinates.

3.Generally authority regarding routine decisions and for execution of policies is

delegated to subordinates. A manager retains the authority to take policy
decisions and to exercise control over the activities of subordinates.

4. The extent of authority which is delegated depends upon several factors e.g. the
ability of the executive to delegate, the ability of the subordinates to accept
delegation, the philosophy of management, the confidence of the superior in
his subordinates, etc.,

5.Delegation does not imply reduction in the authority of a manager. He can

reduce, enhance or take back the delegated authority.
6. Delegation may be specific or general, written or implied, formal or informal.
Delegation may be downward, upward or side-wards but downward delegation
is the most common type of delegation in practice.

7.Delegation does not mean abdication of responsibility. No manager can escape

from his obligation by delegating authority to subordinates. Therefore, he must
provide a means of checking upon the work that is done for him to ensure that
it is done as he wishes.

8.Delegation is an art because

(a) it is creative
(b) it is practice based
(c) it is result-oriented
(d) it involves use of personal skills and
(e) it is a personalized process.
Steps/Process of Delegation:
The process of delegation involves the following steps:
1.Determination of results expected:
First of all, a manager has to define the results he wants to obtain from
his subordinates for the achievement of organisational objectives.
2.Assignment of duties:
Duties should be assigned according to the qualifications, experience and
aptitude of the subordinates.
3.Granting of authority:
Assignment of duties is meaningless unless adequate authority is given to
subordinates. By granting authority, subordinates are permitted to use
resources, to take decisions and to exercise discretion.
4.Creating accountability for performance:
The subordinates to whom authority is delegated must be made
answerable for the proper performance of assigned duties and for the
exercise of the delegated authority. Asubordinate is not answerable for
the task which is not assigned to him.
 MERITS AND DEMERITS
Advantages / Benefits / Merits of delegation :
The advantages of delegation of authority in an organisation may be stated as
follows:
1.Vital for every organisation Delegation of authority is important for every
organisation. No individual, in any organisation, can perform all the tasks by
himself. He needs the support of a team of individuals. The task of sharing the
work and accomplishing the same is done through the process of delegation.
2.Relief to Managers The manager of each department is able to divide the
entire work of his department among his subordinates. The manager, thus, is
able to concentrate on more important duties. The routine work is being
attended by his subordinates.
3. Specialisation The every division of the work of a business enterprise into
production, marketing,finance, personnel, etc., is to derive the benefits of
specialisation. Each of these divisions is looked after by a manager. For
example in the marketing department, different individuals may specialise in
different marketing activities like advertising, sales promotion, packing,
gathering market news and so on. Each such individual will work under the
control of the Marketing Manager.
4. Prompt Decisions Delegation of authority to subordinates enables them to
make decisions within the scope of their authority. For example, a foreman
has the authority to make certain decisions within his level of authority. It is,
therefore, not necessary to refer every matter to the superior and to await his
decisions.

5.Improvement of Job Satisfaction Asubordinate showing good results should

definitely be rewarded. The reward may come to him in the form of tangible
or intangible benefits. Such a person, therefore, is bound to have a higher
level of job satisfaction.

6.Scope for business expansion- As the subordinates of the organisation are well
versed in performing their tasks the business can successfully undertake
expansion or diversification activities.
Demerits of Delegation
1. Desire of domination :
Some managers have the desire for domination. They have a feeling that
delegation of authority to subordinates would result in loss of control. Such
managers want their subordinates to come to them always for getting
approval.
2. Lack at confidence in subordinates :
Sometimes a manager may think that his subordinate may take a bad decision
and a result his department may have to suffer. Because of such a fear he may
show hesitation.
3. Fear of criticism :
A subordinate may not accept authority for the fear of being criticised if he
fails to performs to the expected level.
4. Lack of incentives :
Suitable incentives must be provided to encourage those subordinates who
prove their mettle Lack of incentives is another reason why subordinates do
not show any preference for authority.
5. Lack of resources :
6.Absence of proper control system :
 PRINCIPLES OF DELEGATION
The following are the important principles of delegation of authority:
1.Delegation by results expected - Before delegating authority to his
subordinates, the superior must be clear about the tasks that he wants them
to perform so as to realise the expected results.

2.Absoluteness of Responsibility A superior can delegate only authority and

not responsibility. For the performance of work by his subordinates the
superior is responsible to his own superior. For example, the Sales Manager of
a concern is responsible, for the performance of the salesmen working under
him, to the General Manager.

3. Parity between Authority and Responsibility There should always be parity

between authority and responsibility, i.e. one must be equal to the other. If
authority given to a subordinate is more than his responsibility, there may be a
tendency to misuse the authority . On the other hand, if responsibility is more
than the authority, the subordinate will not be able to perform the task. It is,
therefore, necessary that both should be equal.
4. Unity of Command- This principle says that a subordinate should be
assigned duty or responsibility by one superior only. He is also
accountable to that superior alone. For example a salesman has to carry
out the orders of the sales manager under whom he works. If two
managers command a subordinate, he would not know whose orders he
should carry out.

5. Well defined limits of authority The subordinate should know the limits of
his authority. While delegating authority to his subordinate, the superior
must tell him what he could and could not do.
 Centralisation and Decentralisation

Centralisation and Decentralization are opposite terms. They refer to the

location of decision-making authority in an organisation.
Centralisation implies the concentration of authority at the top level of the
organisation while Decentralization means dispersal of authority throughout
the organisation.

According to Louis A. Allen, Centralisation is the systematic and consistent

reservation of authority at central points within an organisation.
Decentralisation applies to the systematic delegation of authority in an
organisation context. Decentralisation refers to the systematic effort to
delegate to the lowest levels all authority except that which can only be
exercised at central points.
Merits / Advantages of Centralisation:
1.Effective utilization of talents of the top Leader.
2.All parts move together. A unifying force that integrates all operations.
3.A strong co-ordinated top management team is developed.
4. Uniformity of policy and plans.
5.Best-arrangement to tackle emergencies. Resources and information can
be mobilized quickly and
Effectively. 6. Duplication of functions and facilities are minimized.

Demerits / Disadvantages of Centralisation:

1. Delays in decision-making and Communication.
2. Centralized power and authority may be abused.
3. Inhibits development of lower level people.
4. Low motivation and morale of lower level people.
5. Fortunes of the enterprise depend on the health and vitality of top
executives.
 DECENTRALISATION
Decentralised organisation can be explained by the following chart
Decentralisation refers to the systematic effort to delegate to the lowest levels
of authority except that which can only be exercised at central points.
Decentralisation is much more than delegation.

Delegation means transfer of authority from one individual to another. But

decentralisation implies diffusion of authority throughout the organisation.

Advantages of Decentralisation
1. Motivation of subordinates
Decentralisation helps to improve the job satisfaction and morale of lower level
manager by satisfying their needs for independence participation and status. It
also fosters team spirit and group cohesiveness among the subordinates.
2. Effective communication
Under decentralisation the span of management is wider and there are
fewer levels of organisation.
Therefore communication system becomes more effective. Intimate
relationships between superior and subordinates can be developed.

3. Executive development
When authority is decentralised subordinates get the opportunity of
exercising their own judgement. They learn how to decide and develop
managerial skills. As a result the problem in succession is overcome and
the continuity and growth of organisation are ensured. There is better
utilisation of lower level executives.
Differences between Centralisation and Decentralisation:
 Authority and responsibility
Authority may be defined as the legitimate right to give orders and to get orders
obeyed. It denotes certain rights granted to a position in an organisation.
Sources of authority
Formal authority Theory
Acceptance authority Theory
Competence authority Theory
Types of Authority
Line Authority Relationship
Staff authority Relationship
Functional Authority
Responsibility
It refers to the mental and physical activities which must be performed to carry
out a task or duty. That means every person who performs efforts as an
assigned task has responsibility.
Accountability means that those with authority and responsibility must report and
justify task outcomes to those above them in the chain of command.
 Line authority managers have the formal power to direct and control immediate
subordinates. The superior issues orders and is responsible for the resultthe
subordinate obeys and is responsible only for executing the order according to
instructions.
Functional authority is where managers have formal power over a specific subset
of activities. For instance, the Production Manager may have the line authority to
decide whether and when a new machine is needed but the Controller demands
that a Capital Expenditure Proposal is submitted first, showing that the investment
will have a yield of at least x%; or, a legal department may have functional
authority to interfere in any activity that could have legal consequences. This
authority would not be functional but it would rather be staff authority if such
interference is "advice" rather than "order".

Staff authority is granted to staff specialists in their areas of expertise. It is not a

real authority in the sense that a staff manager does not order or instruct but
simply advises, recommends, and counsels in the staff specialists' area of expertise
and is responsible only for the quality of the advice (to be in line with the
respective professional standards etc.) It is a communication relationship with
management. It has an influence that derives indirectly from line authority at a
higher level.
 Span of Management
Also known as span of control and span of supervision
Refers to the number of subordinates who directly report to a manager.

Factors influencing larger span of management.

Nature of work
Type of technology
Degree of decentralization
Quality of planning
Ability of a manager
Staff assistance
Time available for supervision
Geographical dispersion of subordinates
Work performed by subordinates is stable and routine.
Subordinates perform similar work tasks.
Subordinates are concentrated in a single location.
Subordinates are highly trained and need little direction in performing tasks.
Rules and procedures defining task activities are available.
Support systems and personnel are available for the managers.
Little time is required in non-supervisory activities such as coordination with other
departments or planning.
Managers' personal preferences and styles favour a large span
 Tall versus flat structure

Tall - A management structure characterized by an overall

narrow span of management and a relatively large number of
hierarchical levels. Tight control. Reduced communication
overhead.

Flat - A management structure characterized by a wide span

of control and relatively few hierarchical levels. Loose control.
Facilitates delegation
 Departmentation
The basis on which individuals are grouped into departments and departments into total
organizations.
Approach options include;
Functional - by common skills and work tasks
Divisional - common product, program or geographical location
Matrix - combination of Functional and Divisional
Team - to accomplish specific tasks
Network - departments are independent providing functions for a central core breaker.

Types
Departmentation by Functions
Products
Territory
Customers
Process or Equipment
Time and Numbers.
 Groups in organisation
A group consists of two or more persons who are interesting
with one other in such a manner that each person influences
and is influenced by others

Types
Formal and informal groups
Primary and secondary groups
Membership and reference groups
In-groups and out- groups