Organisation

An organization is a group of people with a

defined relationship in which they work together to achieve
the goals of that organization.
Characteristics of an Organisation

Clear Structure:

A well-organized entity has a clearly defined

structure that outlines roles, responsibilities, and reporting
lines. It establishes a hierarchy and establishes the flow of
information and decision-making.
Characteristics of an Organisation

Division of Labor:

Organization involves dividing tasks and

responsibilities among individuals or teams based on their
skills and expertise. This division of labor ensures that each
person focuses on their specific area of competence, leading
to increased efficiency and productivity.
Characteristics of an Organisation

Coordination and Communication:

Effective organization requires
seamless coordination and communication between different
departments, teams, and individuals. It ensures that everyone
is on the same page, working towards shared goals, and
exchanging relevant information in a timely manner.
Characteristics of an Organisation

Specialization:

The organization allows individuals to specialize

in their respective areas, leveraging their expertise to deliver
high-quality results. This enhances efficiency and encourages
professional growth enabling companies to tap into the full
potential of their workforce.
Characteristics of an Organisation
Standardization:
Organized entities often establish
standardized procedures and policies. This ensures
consistency and uniformity in operations, leading to improved
quality control, reduced errors, and better customer
experiences.
Characteristics of an Organisation

Flexibility and Adaptability:

While the organization provides

structure, it also allows for flexibility and adaptability to
changing circumstances. A well-organized entity can adjust its
strategies, processes, and resources to respond to market
dynamics and evolving business needs.
Principles of Organising

Objectives:

The objectives of the enterprise influence the

organisation structure and hence the objectives of the
enterprise should first be clearly defined. Then every part of
the organisation should be geared to the achievement of
these objectives.
Principles of Organising
Span of Control:
As there is a limit to the number of persons
that can be supervised effectively by one boss, the span of
control should be as far as possible, the minimum. That
means, an executive should he asked to supervise a
reasonable number of subordinates only say six.
Principles of Organising

Management by Exception Principle:

As the executives at the higher levels have limited time, only
exceptionally complex problems should be referred to them
and routine matters should be dealt with by the subordinates
at lower levels. This will enable the executives at higher levels
to devote time to more important and crucial issues.
Principles of Organising
Scalar Principle:

This principle is sometimes known as the

“chain of command”. The line of authority from the chief
executive at the top to the first-line supervisor at the bottom
must be clearly defined.
Principles of Organising
Delegation:

Proper authority should be delegated at the lower levels

of organisation also. The authority delegated should be equal to
responsibility, i.e., each manager should have enough authority to
accomplish the task assigned to him. Inadequate delegation often
results into multiplication of staff and service activities.
Types of Organisation and their Structure

There are two broad categories of organisation, which are:

1. Formal Organisation

2. Informal Organisation
1. Formal Organisation

Formal organisation is that type of organisation

structure where the authority and responsibility are clearly
defined. The organisation structure has a defined delegation
of authority and roles and responsibilities for the members.
1. Formal Organisation
• The formal organisation has predefined policies, rules,
schedules, procedures and programs. The decision making
activity in a formal organisation is mostly based on
predefined policies.

• Formal organisation structure is created by the management

with the objective of attaining the organisational goals.
1. Formal Organisation
There are several types of formal organisation based on their structure,
which are discussed as follows:
A. Line Organisation
B. Line and Staff Organisation
C. Functional Organisation
D. Project Organisation
E. Matrix Organisation
A. Line Organisation

Line organisation is the simplest organisation

structure and it also happens to be the oldest organisation
structure. It is also known as Scalar or military or
departmental type of organisation.
Advantages of Line organisation

1. Simple structure and easy to run

2. Instructions and hierarchy clearly defined

3. Rapid decision making

4. Responsibility fixed at each level of the organisation

Disadvantages of Line organisation

1. It is rigid in nature

2. It has a tendency to become dictatorial

3. Each department will be busy with their work instead of

focusing on the overall development of the organisation
B. Line and Staff Organisation

Line and staff organisation is an improved

version of the line organisation. In line and staff organisation,
the functional specialists are added in line. The staff is for
assisting the line members in achieving the target effectively.
Advantages of Line and Staff organisation

1. Easy decision making as work is divided.

2. Greater coordination between line and staff workers.

3. Provides workers the opportunity for growth.

Disadvantages of Line and Staff Organisation

1. Conflict may arise between line and staff members due to

the improper distribution of authority.

2. Staff members provide suggestions to the line members

and decision is taken by line members, it makes the staff
members feel ignored.
C. Functional Organisation

Functional organisation structure is the type

of organisation where the task of managing and directing the
employees is arranged as per the function they specialise. In a
functional organisation, there are three types of members,
line members, staff members and functional members.
Advantages of Functional organisation

1. Manager has to perform a limited number of tasks which

improves the accuracy of the work.

2. Improvement in product quality due to involvement of

specialists.
Disadvantages of Functional organisation

1. It is difficult to achieve coordination among workers as

there is no one to manage them directly.

2. Conflicts may arise due to the members having equal

positions.
D. Project Organisation

A project organisation is a temporary form of

organisation structure that is formed to manage projects for a
specific period of time. This form of organisation has
specialists from different departments who are brought
together for developing a new product.
Advantages of Project organisation

1. The presence of many specialists from different

departments increases the coordination among the
members.

2. Each individual has a different set of responsibilities which

improves control of the process.
Disadvantages of Project Organization

1. There can be a delay in completion of the project.

2. Project managers may find it difficult to judge the

performance of different specialists.
E. Matrix Organisation:

Matrix organisation is the latest form of

organisation that is a combination of functional and project
organisation. In such organisations there are two lines of
authority, the functional part of the organisation and project
management part of the organisation and they have vertical
and horizontal flow of authority, respectively.
Advantages of Matrix Organisation

1. Since the matrix organisation is a combination of functional

and project management teams, there is an improved
coordination between the vertical and horizontal functions.

2. Employees are motivated as everyone will be working

towards one project.
Disadvantages of Matrix Organisation

1. Due to the presence of vertical and horizontal

communication, there will be increased cost and
paperwork.

2. Having multiple supervisors for the workers leads to

confusion and difficulty in control.
2. Informal Organisation

Informal organisations are those types of

organisations which do not have a defined hierarchy of
authority and responsibility. In such organisations, the
relationship between employees is formed based on common
interests, preferences and prejudices.
Departmentalisation

The horizontal differentiation of

tasks or activities into discrete segments is called
departmentalisation. As noted earlier, departmentalisation is
one important step of building an organisation. The aim is to
take advantage of the division of labour and specialisation up
to a certain limit.
Types of departmentalization
Function:

Organizations that form departments by function

separate employees based on the type or subject of work they
perform. This allows professionals with similar areas of expertise
to communicate and collaborate with each other. Three common
types of function departments are production, marketing and
finance.
Pros and Cons
Pros
• Provides benefits of specialization and economies of scale.
• Effective resource utilization.
• Employees’ efficiency and overall productivity are enhanced.
Cons
• There can be delays in decision-making.
• May repetitive tasks increase boredom among employees.
• It does not promote creativity and innovation.
Types of departmentalization
Process:
Process departmentalization groups people by where in
the production process their work usually occurs. For example, a
toy company may have a department for ordering the raw
materials, one for building toys and a third department for
transporting them. Process departmentalization is common
among production companies.
Pros and Cons
Pros
• The quality of the product can be improved.
• A suitable method for manufacturing organizations.
• Ensures effective utilization of specialized skills and equipment.
Cons
• This method is not suitable, especially in service organizations where
the process is not clearly identifiable.
• All departments are dependent on each other and delay or mistakes
in one department will affect the whole process.
Types of departmentalization
Product:

Some companies with more than one product may sort

their departments by the item that teams work on. For example,
an ice cream company may have separate departments for their
popsicles, ice cream sandwiches and take-home ice cream cartons.
Larger companies often have more products, so they're more likely
to use this type of departmentalization.
Pros and Cons
Pros
• Product quality can be enhanced.
• An effective method for large companies having different lines of products.
• Increased customer satisfaction, increased sales, and profitability of the
firm.
Cons
• There can be less effective coordination when departmental managers give
more focus on their department rather than the whole company’s goals.
• There is a chance of conflict between various departments.
Types of departmentalization
Market:
Market departmentalization is when an organization
forms its departments based on what market it's targeting.
Markets are large groups of customers that may have unique
needs. For example, a life insurance company may have
departments for insuring large companies, nonprofit organizations
and individuals.
Types of departmentalization
Customer:
If a company has a particular customer that gives them
a lot of business, they can create a department specifically for that
customer. For example, if a canned beans production company
sells to five major grocery stores, they may have a department for
each store. This is a common type of organizational structure for
contracting and some production companies.
Pros and Cons
Pros
• Suitable option for organizations dealing with diverse customers.
• Customers can be treated well as their needs and wants can be easily
recognized.
• A stronger relationship can be maintained between customers and
the company.
Cons
• There can be problems with maintaining proper coordination.
• It may be difficult to serve customers when their needs belong to two
or more departments.
Types of departmentalization

Location:
Location departmentalization creates groups based
on a general geographical area. This area can either be the
location of the company or of their clients. For example, a
telemarketing company can make departments depending on
which state their telemarketers target.
Pros and Cons
Pros
• Local customers are better served hence their satisfaction is
increased.
• Suitable for organizations having operations in different areas or
locations.
• It is an adaptable method to environmental changes.
Cons
• It requires high administrative costs to successfully run this method.
• There can be problems of integration among different regional
departments.
Types of combined departmentalization
Divisional:

Divisional departmentalization separates a company into

several divisions. These divisions then have several identical
departments. For example, a greeting card company may have divisions
for its Northeast, Midwest and Western customers. Then, each division
has departments based on function for production, marketing and
finance.
Types of combined departmentalization
Multiple:
A multiple departmentalization system organizes a company into
separate divisions, but these divisions have different sub-departments.
For example, a technology company can create large divisions for
production, marketing, finance and transportation. The marketing division
may then create smaller departments by product, while the production
department uses the process departmentalization type.
Types of combined departmentalization
Matrix:

A matrix, or project, departmentalization structure

combines aspects of both the division and multiple models.
There are large departments that create smaller departments
based on projects. These project departments then form
smaller, identical departments based on a project's need.
Span of Management

“Span of Management” is also referred to as span of

control, span of supervision, span of authority or span of
responsibility.
Span of Management
Determination of an appropriate span of
management is important for two reasons. First, span of
management affects the efficient utilisation of managers and the
effective performance of their subordinates. Too wide a span may
mean that managers are overstraining themselves and that their
subordinates are receiving too little guidance or control.
Span of Management

Lyndall Urwick suggests that no executive

should attempt to supervise directly the work of more than fi
ve, or at the most six direct subordinates whose work
interlocks. According to Hamilton, the ideal number of
subordinates is 3 to 6.
Span of Management

Some experts (e.g., J.C. Worthy10) believe that

a manager can effectively manage as many as 20
subordinates. Ernest Dale, in his study of 100 large companies
has found that the median number of executives reporting to
company presidents is 8 and in some cases there are as many
as 20 or more.
Factors affecting the Span of Management

1. Ability of the Manager Some managers whose span of

knowledge, time, energy, attention and personality is greater
than those of others are more capable than others.
Factors affecting the Span of Management

2. Ability of the Employees If the employees are competent

and possess the necessary skill and motivation to perform the
task assigned, less attention from the manager is required and
a larger span of management can be used.
Factors affecting the Span of Management

3. Type of Work If employees are doing similar jobs; the span

of management can be larger. If their jobs are quite different,
a small span may be necessary.
Factors affecting the Span of Management

4. Well-defined Authority and Responsibility If the authority

and responsibility of each employee are properly defined and
if there are clear policies and procedures, they need not make
frequent calls on their supervisors for guidance and
instructions.
Delegation
Delegation is a concept of management
leadership that requires superiors to determine what tasks
they should do themselves and what jobs they can delegate to
their subordinates. It involves shifting responsibility to
associates allowing them to make decisions of their own
accord, with minimal intervention.
Types of delegation
There are four types of delegation:

• General or specific delegation

• Top to bottom or bottom to top

• Formal or informal delegation

• Lateral delegation
General or specific delegation

General delegation: Under general delegation, subordinates

usually perform general managerial functions like planning,
coordinating, directing, etc. The assistants perform these tasks
with the necessary authority to achieve the objective.
Top to bottom or bottom to top delegation

Top to bottom delegation: Top to bottom is a process where

superiors assign tasks to their subordinates to decrease their
own workload and increase efficiency.
Bottom to top delegation: Under bottom to top delegation,
institutions acknowledge the value of informal groups inside
institutions.
Formal or Informal delegation

• Formal delegation: Formal delegations are delegations that

are a part of an organisation’s structure.

• Informal delegation: Informal delegations depend on

circumstances. They have no relation to the formal
delegation assigned to them.
Lateral delegation

When a task is delegated to a subordinate by a

superior, the subordinate may require assistance from others
to complete the task.
Authority
1. “Authority is the right to give order and the power to exact
obedience”. -Henri Fayol

2. “Authority is the power to command, to act or not to act in

a manner deemed by the possessor of the authority to
further enterprise or departmental performance”. -Koontz
and O’Donnell
The Characteristics of Authority

1. Basis of Getting Things Done:

Authority gives a right to do things in an organisation

and affect the behaviour of other workers of the organisation.

2. Legitimacy:

Authority implies a legal right (within the organisation

itself) available to superiors.
The Characteristics of Authority
3. Decision-Making:

Decision-making is a pre-requisite of an authority. The manager can

command his subordinates to act or not to act.

4. Implementation:

Implementation influences the personality factors of the manager, who

is empowered to use authority.
Responsibility

“Responsibility is an obligation of an individual

to perform assigned duties to the best of his ability under the
direction of his leader.”
Responsibility

Theo Haimann, “Responsibility is the obligation

of a subordinate to perform the duty as required by his
superior”.
Responsibility

As per McFarland, responsibility means, “the duties and

activities assigned to a position or an executive”.
Characteristics of Responsibility
1. Its importance lies in the creation of the obligation to
perform the work.
2. It arises from the superior-subordinate relationship.
3. Unlike Authority, it flows from bottom to top.
4. It is always in the form of a continuing obligation.
5. No one can delegate responsibility.
Accountability

Accountability is an assurance that an individual or

organization is evaluated on its performance or behavior
related to something for which it is responsible.
Benefits of Accountability

1. Accountability promotes operational excellence. When

employees understand that their work is being looked at and
evaluated, they are more likely to put forth stronger effort as
it is understood that what they do matters.
Types of Accountability

The concept of accountability runs throughout all

industries, sectors, companies, and professions. Here is an
overview of where accountability is most prevalent in the
business sector.
Corporate Accountability
At its most prosaic, accountability is about numbers.
Every public company must publish a financial report quarterly and
annually detailing its income and expenses. An
independent auditor reviewing a company's financial statements is
responsible for obtaining reasonable assurance that the financial
statements are free from any material misstatements caused by
error or fraud. This auditor is holding the company accountable for
its reporting.
Political Accountability
Political accountability can relate to political
contributions and how candidates use resources. For example, the
non-partisan Center for Political Accountability and the Wharton
School at the University of Pennsylvania publish a joint annual
index rating the disclosure and oversight policies of major public
corporations regarding their donations to political causes and
candidates.
Government Accountability
The role of corporate cash is only one of the global issues regarding
government accountability. For instance, USAID, the federal agency that
administers civilian foreign aid, measures government accountability by the
following key factors:
• A free and fair political justice system
• The protection of human rights
• A vibrant civil society
• Public confidence in the police and courts, and security sector reform
Benefits of Accountability

2. Accountability safeguards company resources. It is not

limited to just doing your job; it is the practice of being honest
and responsible for your actions in all situations.
Benefits of Accountability

3. Accountability yields more accurate results. Companies with

a standard of accountability will have boundaries of
acceptable deviation.
Benefits of Accountability

4. Accountability builds external investor trust. An investor's

confidence in a company is only driven so far based off of the
prospect of financial success.
Power
Power is easy to feel but difficult to define. It is the
potential ability of a person or group to influence another
person or group. It is the ability to get things done the way
one wants them to be done. Both formal and informal groups
and individuals may have power; it does not need an official
position or the backing of an institution to have power.
Sources of Power in Management
John R. P. French and Bertram Raven identified five bases or
sources of power: legitimate, reward, coercive, expert and referent
power.

Legitimate Power: A person’s position within organization provides

him with legitimate power. The organization gives managers the
power to direct the activities of their subordinates.
Sources of Power in Management

Reward Power: This type of power is the extent to which one

person has control over rewards that are valued by another.
Sources of Power in Management

Coercive Power: People have, coercive power if they have

control over some form of punishment such as threat of
dismissal, suspension, demotion or other method of
embarrassment for the people.
Sources of Power in Management

Expert Power: It is more of personal power than

organizational power. Expert power is that influence which
one wields as a result of one’s experience, special skill or
knowledge.
Sources of Power in Management

Referent Power: Referent power comes from being trusted and

respected. We can gain referent power when others trust what we do
and respect us for how we handle situations. For example, the Human
Resource Associate who is known for ensuring employees are treated
fairly and coming to the rescue of those who are not.
Centralization

Centralization is a form of organizational structure

where the decision making capability rests with the top
management. A couple of hand-picked members are entitled
to create strategies, determine the goals and objectives based
on which an organisation will function.
Advantages of Centralization

• The organization can strictly enforce uniformity of

procedures and policies.

• It can help in the elimination of overlapping or duplicate

activities and save costs.
Advantages of Centralization

• The organization has a better chance of utilizing the

potential of its outstanding employees.

• It offers a better control over the activities of the

organization by ensuring consistency in operations and
uniformity in decision-making.
Decentralization
• Decentralization is another form of organizational structure
that functions by delegating decision-making capabilities to
multiple teams across geographies.

• In such an organization, most of the planning, strategy and

decision to implement them are taken by the people in the
middle and lower level of management.
Advantages of Decentralization

• Faster decision-making and better quality of decisions

• Improves the effectivity of managers.

• Offers a democratic environment where employees can have

a say in their governance.
Advantages of Decentralization
• Provides good exposure to mid and lower-level managers
and creates a pool of promotable manpower with
managerial skills.

• Since managers can see the results of their own actions, they
are more driven and have improved morales.
Factors determining decentralization are:

• The size and complexity of the organization.

• Dispersal of operations.
• Degree of diversification.
• Availability of competent personnel.
• The outlook of the top management.
• Nature of functions of the organization.
• Communication system.
• Planning and control procedures.