Organizing Function of Management

Organizing refers as arranging and structuring work to accomplish organizational goals.

It is an important process, during which managers design an organization’s structure.

Organizational structure is the formal arrangement of jobs within an organization.

In other words, organizing is establishing working relationships among employees to achieve goals.

Importance of Organizing

Organizing: Divides work to be done into specific jobs and departments. Assign tasks and responsibilities associated with individual

jobs. Co-ordinates diverse organizational tasks. Clusters(Group) jobs into units. Establishes relationships among individuals, groups and

departments. Establishes formal line of authority. Allocates and deploys(installs/arrange) organizational

resources. Creates environment for getting work done…for

accomplishing the goals effectively.

Principles of Organizing Principles are fundamental truth. They explain relationships and generalizations which are

universally applicable and practiced in an organization:

1. Principle of unity of goals: Organizing function should be directed towards achieving the goal effectively.

2. Principle of span of control: There should be limited number of subordinates under a superior. Optimal span of control can create a efficiency in goal achievement.

3. Chain of command: The line of authority from CEO to every subordinate position should be clearly defined and unbroken.

4. Principle of Unity of Command: Each subordinate should have only one boss. No person should report to more than one boss. Dual reporting could create confusion and conflict.

5. Principle of Delegation of Authority: Delegated authority should be adequate to accomplish expected results. Managers must themselves make decisions within their authority. Only exceptional matters should be referred to higher levels.

Principles of Organizing6. Principle of Parity of Authority and Responsibility: Authority should

be equal to responsibility to an individual within an organization.

7. Principle of Absoluteness of Responsibility: Superior should take responsibility of their subordinates positive and negative performance. Superiors cannot escape from the responsibility for the activities of subordinates.

8. Principle of Departmentation: Similar nature of work should be grouped and hand over. The activities, authorities and expected results from positions and people in departments should be clearly defined to effectively accomplish goals.

9. Principle of Flexibility: The organization structure should be flexible to adapt to changing environment.

10. Principle of Separation: Line and staff function should be separated.

Organizing Process1. Job Design: It is defining the contents of work. The tasks

required to achieve goals are identified. Activities are determined. Division of work is done.

2. Departmentalization: It is grouping of activities into departments and units. They can be production, marketing, finance, human resources etc.

3. Structure: A structure is created. It establishes reporting relationships, span of control and chain of command.

4. Authority-Responsibility relationships: It is assigning authority and responsibility among positions and people.

5. Coordination: It is the process of integrating the activities of various units and departments. Mechanisms are established to achieve unity of efforts.

Organizational Design When managers create or change the structure, they are engaged

in organizational design. Organizational Design is a process that involves decision about six

key elements:

1. Work Specializationo Work specialization refers to division of work activities into

separate job tasks. Individual employees specialize in doing part of an activity rather than the entire activity in order to increase work output. It is also known as division of labor.

o (Most managers today see work specialization as an important organizing mechanism because it helps employees to be more efficient.) …however, when it is carried to extremes, work specialization can lead to problems including boredom, fatigue, stress, poor quality, reduced performance, increased absenteeism, increased turnover.

Organizational Design2. Departmentalizationo It is grouping of activities into departments and units. They can

be production, marketing, finance, human resources etc. oWhat job tasks will be done by whom, common work activities

need to be grouped back together so work gets done in a coordinated and integrated way. “ How jobs are grouped together is called departmentalization”

3. Chain of CommandoThe chain of command is the line of authority extending from

upper organizational levels to lower levels, which clarifies who reports to whom.

oManagers need to consider it when organizing work because it helps employees with questions such as “Who do I report to?” and

o “Who do I go to if I have a problem?”

Organizational Design Cont…………………

o To understand the chain of command, we need to understand three other concepts: Authority, Responsibility and unity of command.

oAuthority: Authority refers to the rights inherent in a managerial position to tell people what to do and to expect them to do it. Managers in the chain of command have authority to do their job of coordinating and overseeing the work of others. Managers assign work to employees, those employees assume an obligation to perform any assigned duties.

o Responsibility: The obligation or expectation to perform is known as responsibility.

oUnity of command: Unity of command states that a person should report to only one manager. Without unity of command, conflicting demands from multiple bosses may create problem.

Organizational Design

4. Span of ControloHow many employees can a manager efficiently and effectively

manage?- that is what span of control is all about.oWider spans are more efficient terms of cost. However, at some

point wider spans may reduce effectiveness if employee performance worsens because managers no longer have the time to lead.

5. Centralization and DecentralizationoCentralization is the degree to which decision making takes place at upper

levels of the organization. If top managers make key decisions with little input form below, then the organization is centralized.

o If the middle and lower level employees provide input or actually make decision, the more decentralization there is.

oCentralization and Decentralization is relative, not absolute-that is an organization is never completely centralized or decentralized.

Organizational Design

6. FormalizationoFormalization refers to how standardized an organization’s job are and

the extent to which employee behavior is guided by rules and procedures.

o In highly formalized organizations, there are explicit(clear) job descriptions, numerous organizational rules, and clearly defined procedures covering work processes. Employees have little discretion(preference) over what’s done, when it’s done and how it is done. (e.g-bank)

oWhen formalization is low, employees have more discretion in how they do their work.

Two models of Organizational Design

The two models of organizational Designs are:

1. Mechanistic Organization

2. Organic Organization

3. Mechanistic Organization:oA mechanistic organization is a rigid and tightly controlled structure

characterized by high specialization, rigid departmentalization, narrow span of control, high formalization, a limited information network(mostly downward communication), and little participation in decision making by lower-level employees.

oMechanistic organizational structures strive for efficiency and rely heavily on rules, regulations, standardized tasks, and similar controls.

Two models of Organizational Design

2. Organic OrganizationoOrganic Organization is a organization having a structure that is

highly adaptive and flexible. Organic organizations may have specialized jobs but those jobs are not standardized and can change as needs require.

oAlso characterized by wide span of control, low formalization, free flow of information, decentralization, cross functional and hierarchical teams.

oWork is frequently organized around employee teams. oEmployees are highly trained and empowered to handle diverse

activities and problems, and they require minimal formal rules and little direct supervision.

Contingency Factors affecting Organizational Design(Mechanistic or Organic)

The organizational design/structure is depends on four contingency variables:

i. The organization’s strategy

ii. Size

iii. Technology

iv. Degree of Environmental uncertainty

i. The organization’s strategy and structure:o An organization’s structure should facilitate goal achievement. Because

goals are an important part of the organization’s strategies, it’s only logical that strategy and structure are closely linked.

oResearch has shown that certain structural designs work best with different organizational strategies.

o (for instance: the flexibility & free-flowing information of the organic structure works well when an organization is pursuing(following) meaningful and unique innovations. – Apple Inc.(USA)

o The mechanistic organization, with its efficiency, stability and tight controls works best for companies that want to tightly control costs.

Contingency Factors affecting Organizational Design(Mechanistic or Organic)

ii. Size and Structure

oThere is a considerable evidence that an organization’s size affects its structure.

oLarge organizations-typically considered to be those with more than 2000 employees-tend to have more specialization, departmentalization, centralization and rules and regulations than do small organizations.

oBig organization is a mechanistic organization.

Contingency Factors affecting Organizational Design(Mechanistic or Organic)

iii. Technology and Structureo Every organization uses some form of technology to convert its inputs

into outputs.

o For instance, workers at Whirlpool’s Manaus, Brazil facility build microwave ovens and air-conditioners on a standardized assembly line.

oDell computers(USA) produce custom design laptops for its individual customers.

oUnit production and process production is more effective in organic structure.

oMass production is more effective in mechanistic structure.

Contingency Factors affecting Organizational Design(Mechanistic or Organic)

iv. Environmental Uncertainty and StructureoSome organizations face stable and simple environments with little

uncertainty; other face dynamic and complex environments with a lot of uncertainty.

oManagers try to minimize environmental uncertainty by adjusting the organization’s structure.

o In stable and simple environments, mechanistic designs can be more effective.

oGreater the uncertainty, the more an organization needs the flexibility of an organic design.

Common Organizational Design:

1. Traditional Organizational Designs In designing a structure to support the efficient and effective accomplishment of

organizational goals, managers may choose to follow more traditional organizational designs. These designs- the simple structure, functional structure, and divisional structure- tend to be more mechanistic.

a. Simple structure: A simple structure is an organizational design with low departmentalization, wide span of control, authority centralized in single person, and little formalization.

o This structure is most commonly used by small business in which the owner and manager are one and the same.

o (Most organizations starts as entrepreneurial ventures with a simple structure consisting of owners and employees)

o As the organization grows, it generally reaches a point where it has to add employees. As number of employees rises, the structure tends to become more specialized and formalized. Rules and regulations are introduced, work become more specialized, departments are created, level of management are added, and the organization becomes increasingly bureaucratic.

Traditional Organizational Designb. Functional Structure: A functional structure is an organizational design that group similar or related occupational specialties' together. It’s the functional approach to departmentalization applied to entire organization.

For example : CG FOODS(WAI WAI) is organized around the functions of operations, finance, human resources, sales, marketing, product research and development.

c. Divisional Structure: The divisional structure is an organizational structure made up of separate business units or divisions. In this design, each unit or division has relatively limited autonomy(not 100%), with division manager responsible for performance and who has strategic and operational authority over his or her unit.

In divisional structures, however the parent corporation typically acts as an external overseer(supervisor) to co-ordinate and control the various divisions, and it often provides support services such as financial and legal services.

Common Organizational Design:

2.Contemporary Organizational DesignsManagers are finding that traditional designs are often aren’t appropriate for today’s increasingly dynamic and complex environment. Instead, organizations need to be lean, flexible and innovative; that is they need to be more organic.

a. Team Structures: A team structure is one in which the entire organization is made up of work

teams that do the organization’s work. In this structure, employee empowerment is crucial because there is no line of

managerial authority from top to bottom. Rather, employee teams design and do work in the way they think is best, but they are also responsible for all work performance results in their respective areas.

In large organizations, the team structure complements what is typically a functional or divisional structure. This allows the organization to have the efficiency of a bureaucracy while providing the flexibility that teams provide.

Contemporary Organizational Designs

b. Matrix and Project Structures

b.1. Matrix Structure In matrix structure, specialists from different functional departments

work on projects that are led by a project manager. One unique aspect of this design is that it creates a dual chain of

command in which employees have two managers-their functional area manager and their product or project manager-who share authority.

The project manager has authority over the functional members who are part of his or her project team in areas related to project’s goals. However, any decisions about the promotions, salary recommendations, and annual reviews typically remain the functional manager’s responsibility.

To work effectively both managers have to communicate regularly, coordinate work demands on employees and resolve conflicts together.

Contemporary Organizational Designs

b.2. Project Structure- An organizational structure in which employees continuously work on projects.Unlike a matrix structure, a project structure has no

formal departments where employees return at the completion of a project. Instead employees take their specific skills, abilities and experiences to other projects.

Project structures tend to be flexible organizational designs. There are no departmentalization or rigid organizational hierarchy to slow down making decisions or taking action.

Managers are facilitators, mentor and coaches, in this structure, helps in 0-

Contemporary Organizational Designsc. Boundary-less Organization Boundary-less organization is not limited by boundaries. It cuts across

all aspects of organization. It is not defined by predetermined vertical or horizontal structure. It is not bound by the chain of command and span of control.

It consists of empowered teams, there are no barriers to information flow.

The structure is relatively flatter and flexible. Computers link people. Globalization, competition, rapid technological change, innovation,

need to respond to dynamic changes in environment are the factors which contribute to the emergence of boundary-less organization.

Boundary less OrganizationTo minimize internal(horizontal boundaries)- work specialization and departmentalization….(vertical boundaries)- separate employees into organizational levels and hierarchies.

External- the boundaries that separate the organization from its customers, suppliers and other stake holders.

To minimize or eliminate these boundaries, managers might use virtual or network structured designs.

a. Virtual organization: An organization that consists of a small core of full-time employees and outside specialists temporarily hired as need to work on projects.

Internet link up partners(outside specialist) in virtual organization.

b. Network organization: An organization that uses its own employees to do work activities and networks of outside suppliers to provide other needed product components or work process.