Organization

It is a social unit of people that is structured and

managed to meet a need or to pursue collective goals.
All organization have a management structure that
determines relationships between the different
departments and assigns roles, responsibility and
authority to carry out different tasks.
 Definition of Organizing
• According to Jones, George and Hill (2000)- “Organizing is the
process by which managers establish the structure of working
relationships among employees to allow them to achieve
organizational goal efficiently and effectively.’’
 Importance of Organization
• Facility of Administration:- The work of management proceeds smoothly
only if it is well defined, systematic and certain and appropriate
functional groups are provided to help the manager to manage.
• Specialization:- It allocates different functions among different
individuals on the basis of their qualification and talents.
• Growth:- A sound organization provides the framework within which a
company grows.
• Creativity:- A sound organization enhance independent creative thinking
and initiative by providing well- defined area of work.
 Process of Organizing
1. Identification of activities
2. Grouping of activities
3. Accumulation of resources
4. Defining hierarchy of positions
5. Assignment of jobs
6. Establishing authority and responsibility relationship
7. Evaluation of performance
 Identification of Activities

• Enterprise must perform different activities to achieve definite

objectives.
• It is one of important component of organizing
• The activities of enterprise depend on its nature and size.
 Grouping of Activities
• Identified activities must be classified on the basis of common
nature and should be put at one group or subgroup.
• Involves creating departments and sections for specific works such
as production, marketing, finance, human resources etc.
• Department may be sub divided into sections and individual jobs.
• It is helpful to maintain coordination and exercise control over
activities.
 Accumulation of Resources
• Resources are essential for smooth functioning of an enterprise. 
• Resources involve manpower, materials, machines, money,
technology etc.
• Availability of needed resources facilitate for uniform and smooth
performance of the enterprise which if supportive to produce
quality products and to provide quality service in time.
 Defining Hierarchy of Position
• Hierarchy of authority is formed on the basis of degree of
responsibility and accountability.
• It clarifies the role of each individual from top to the subordinate
level.
• Higher level job needs more skill, experience and responsibility.
• Chain of command is implemented to see the progress of work of
respective subordinates.
 Assignment of jobs
• Total works of an enterprise is divided into small units on the basis
of their common nature.
• Each work is assigned to different individuals on the basis of their
skill, ability and experience.
• Assignment of right jobs to the right persons develops the practice
of specialization and efficiency among them.
• Minimizes wastage of materials, breakdown of machines and
equipments and supervision cost.
 Establishing Authority and Responsibility Relationship
• For systematic functioning of managerial function it is essential to
establish authority and responsibility relationship of all the
employees from top level to subordinate levels.
• Job responsibility should be given to the employees on the basis of
their skill and efficiency.
• Proper authority should be given on the basis of level of
responsibility.
 Evaluation of Performance
•  Organizing involves evaluation of actual performance achieved within
stipulated time.
• After implementation of plan it is essential to evaluate actual work
completed.
• Facilitates to compare actual work completed with planned estimation
and to take corrective measures if actual work completed it not in
accordance of planned work.
• It is helpful to meet determined objectives within time defined
 Principle of Organizing
1. Specialization
2. Unity of direction
3. Chain of command
4. Unity of command
5. Parity between authority and responsibility
6. Span of control
7. Departmentalization
 Specialization
According to this principle the
employees are divided according to
their specialization and skills. Each
employee is different from one
another, the level of expertise is
different, So if we divided the
employee according to their
knowledge, skills and specialization it
will enhance their efficiency and
increased productivity.
 Unity of direction
This principle states ‘One Head one Plan’
according to this principle management is
all about focus and unity. All employee
deliver the same activity that can be linked
with same objective. Employee should
work as a team and have to be a common
goal.
 Chain of command
The chain of command is the line of
authority extending from upper
organizational levels to lower levels,
which clarifies who report to whom.
There are three element of chain of
command a)Authority b)Responsibility
c)Unity of command.
 Parity between authority and responsibility

According to Henri Fayol in order to get things

done in an organization management have to
give authority to employee. Authority refers
to the right of superiors to get exactness from
their subordinates whereas responsibility
means obligation for the performance of the
job assigned. Of course authority comes
responsibility, The responsibility can be traced
through the performance of the employee.
Therefore authority and responsibility are two
side of one coin.
 Unity of command

According to this principle an

individual employee should receive
order from one manager and that the
employee is answerable to that
manager. Receiving order more than
from one manager leads confusion
and it may create conflict in an
organization.
 Span of control
Span of control is the number of
subordinate for whom a manager is
directly responsible. According to
this principle no superior should
have more than six immediate
subordinate whose work is
interrelated. It determine the
number of levels and managers in
an organization. The wider or larger
the span, the more efficient it is.
 Departmentalization
Departmentalization involves dividing an organization into different
departments, which perform tasks according to the departments
specializations in the organization. There are five types of
departmentalization:-
1. Functional Departmentalization
2. Geographical Departmentalization
3. Product Departmentalization
4. Process Departmentalization
5. Customer Departmentalization
 Designing Organizational Structure
1. Line organisation
2. Line and staff organisation
3. Functional organisation
4. Matrix organisation
5. Network structure
6. Boundary less organisation
7. Divisional Structure
8. Flat Organizational Chart
 Line Organization
Line Organization:- Line Organisation represents a direct vertical
relationship through which authority flows. This form is also
knows as Chain of Command and Scalar Principle. In such kind of
Organisation, authority and responsibility flow in an unbroken
straight line from top to bottom. For example Army, Police,
Political Party follow line organization structure.
Line Organization
Line Authority
Chain of command
President

Vice President

Director

Manager

Employee
 Merits of Line Organization

• Simplest- It is the most simple and oldest method of administration.

• Unity of Command- In these organizations, superior-subordinate relationship is
maintained and scalar chain of command flows from top to bottom.
• Better discipline- The control is unified and concentrates on one person and therefore,
he can independently make decisions of his own. Unified control ensures better
discipline.
• Fixed responsibility- In this type of organization, every line executive has got fixed
authority, power and fixed responsibility attached to every authority.
• Flexibility- There is a co-ordination between the top most authority and bottom line
authority. Since the authority relationships are clear, line officials are independent and
can flexibly take the decision. This flexibility gives satisfaction of line executives.
• Prompt decision- Due to the factors of fixed responsibility and unity of command, the
officials can take prompt decision.
 Demerits of Line Organization

• Over reliance- The line executive’s decisions are implemented to the bottom. This results in over-
relying on the line officials.
• Lack of specialization- A line organization flows in a scalar chain from top to bottom and there is no
scope for specialized functions. For example, expert advices whatever decisions are taken by line
managers are implemented in the same way.
• Inadequate communication- The policies and strategies which are framed by the top authority are
carried out in the same way. This leaves no scope for communication from the other end. The
complaints and suggestions of lower authority are not communicated back to the top authority. So
there is one way communication.
• Lack of Co-ordination- Whatever decisions are taken by the line officials, in certain situations wrong
decisions, are carried down and implemented in the same way. Therefore, the degree of effective co-
ordination is less.
• Authority leadership- The line officials have tendency to misuse their authority positions. This leads
to autocratic leadership and monopoly in the concern.
 Line & Staff Organization
In this kind of organisation, Line officers and staff officers work
together. Line officers plan & execute the work whereas staff
officers play advisory role. In this type of organisation two type of
authority is flow and principle of unity of command is followed.
 The power of command always remains with the line executives
and staff supervisors guide, advice and council the line executives.
For example, Personal Secretary to the Managing Director is a staff
official.
 Line & Staff Organization
Board of Directors

President

Executive Vice-
V.P V.P President V.P Public V.P
Finance Marketing Relation Technology
Group Vice- V.P Procure
V.P
President & Supply
Manufacturing

Division Vice-
President
Line Organization
Staff Organization Primary Operative
Performance
 Merits of Line and Staff Organization

• Relief to line of executives- In a line and staff organization, the advice and counseling which is provided
to the line executives divides the work between the two. The line executive can concentrate on the
execution of plans and they get relieved of dividing their attention to many areas.
• Expert advice- The line and staff organization facilitates expert advice to the line executive at the time
of need. The planning and investigation which is related to different matters can be done by the staff
specialist and line officers can concentrate on execution of plans.
• Benefit of Specialization- Line and staff through division of whole concern into two types of authority
divides the enterprise into parts and functional areas. This way every officer or official can concentrate
in its own area.
• Better co-ordination- Line and staff organization through specialization is able to provide better decision
making and concentration remains in few hands. This feature helps in bringing co-ordination in work as
every official is concentrating in their own area.
 Demerits of Line and Staff Organization

• Lack of understanding- In a line and staff organization, there are two authority flowing at one time.
This results in the confusion between the two. As a result, the workers are not able to understand as
to who is their commanding authority. Hence the problem of understanding can be a hurdle in
effective running.
• Lack of sound advice- The line official get used to the expertise advice of the staff. At times the staff
specialist also provide wrong decisions which the line executive have to consider. This can affect the
efficient running of the enterprise.
• Line and staff conflicts- Line and staff are two authorities which are flowing at the same time. The
factors of designations, status influence sentiments which are related to their relation, can pose a
distress on the minds of the employees. This leads to minimizing of co-ordination which hampers a
concern’s working.
• Costly- In line and staff concern, the concerns have to maintain the high remuneration of staff
specialist. This proves to be costly for a concern with limited finance.
 Functional Organisation
In functional organisation is common type of organisational
structure in which the organisation is divided into smaller groups
based on specialized functional area, such as IT, finance or
marketing. These kind of organisation is also called
Departmentalization.
 Functional Organisation
Board of Director

Production Marketing Human Information

Purchasing
Resource Technology

Staff Staff Staff Staff Staff

 Merits of Functional Organization

• Specialization- Better division of labour takes place which results in specialization of

function and it’s consequent benefit.
• Effective Control- Management control is simplified as the mental functions are separated
from manual functions. Checks and balances keep the authority within certain limits.
Specialists may be asked to judge the performance of various sections.
• Efficiency- Greater efficiency is achieved because of every function performing a limited
number of functions.
• Economy- Specialization compiled with standardization facilitates maximum production
and economical costs.
• Expansion- Expert knowledge of functional manager facilitates better control and
supervision.
 Demerits of Functional Organization
• Confusion- The functional system is quite complicated to put into operation,
especially when it is carried out at low levels. Therefore, co-ordination becomes
difficult.
• Lack of Co-ordination- Disciplinary control becomes weak as a worker is commanded
not by one person but a large number of people. Thus, there is no unity of command.
• Difficulty in fixing responsibility- Because of multiple authority, it is difficult to fix
responsibility.
• Conflicts- There may be conflicts among the supervisory staff of equal ranks. They
may not agree on certain issues.
• Costly-  Maintenance of specialist’s staff of the highest order is expensive for a
concern.
 Matrix Organisation
The matrix organizational structure is a combination of two or more
types of organizational structures. A matrix organisational structure is
a company structure in which the reporting relationships are set up as
a grid or matrix rather than in traditional hierarchy. In other words,
employee have dual reporting relationship generally to both a
functional manager and a product manager.
For example, a project or task team established to develop a new
product might include engineers and design specialists as well as
those with marketing, financial, personnel and production skills.
 Matrix Organisation

Management

Research Production Sales Finance

Product A

Product B

Product C
 Merits of Matrix Organization

• One of the biggest pros of using a matrix organizational structure

is that it allows the sharing of highly skilled resources between
functional units and projects.
• Communications are open, which helps knowledge move
throughout the organization with less obstruction.
• This structure can create a great opportunities for employees who
are looking to widen their experience and skill sets
 Demerits of Matrix Organization

• There can be some confusion when a team member is subject to two

managers. That can also create unnecessary conflict. This is especially
true if both managers have equal authority.
• Team members can feel the strain of working in a matrix organizational
structure, in that their workload can be heavy.
• Finally, there’s the overall expense of the matrix organizational structure.
This goes beyond having multiple managers but also the added expense
of keeping on resources that might not be used all the time.
 Network Structure
A network organization is one in which companies outsource their
major business functions in order to focus more on what they are
in business to do. The network structure is a newer type of
organizational structure often viewed as less hierarchical (i.e.,
more flat), more decentralized, and more flexible than other
structures. In this structure, managers coordinate and control
relations that are both internal and external to the firm
 Network Structure

Sales Manufacturing

CORE

Purchasing Production
 Merits of Network Organization

• Communication is less siloed and flows freely, possibly opening up

more opportunities for innovation.
• Because the network structure is decentralized, it has fewer tiers
in its organizational makeup, a wider span of control, and a
bottom-up flow of decision making and ideas.
 Demerits of Network Organization

• On the other hand, this more fluid structure can lead to a more
complex set of relationships in the organization. For example, lines
of accountability may be less clear, and reliance on external
vendors can be quite high. These potentially unpredictable
variables essentially reduce the core company’s control over its
operational success.
 Boundaryless Organization
A boundaryless organization is one in which its design is not defined by, or
limited to, the horizontal, vertical, or external boundaries imposed by a
predefined structure. In other words it is an unstructured design. This
structure is much more flexible because there is no boundaries to deal with
such as chain of command, departmentalization, and organizational
hierarchy. Instead of having departments, companies have used the team
approach. In order to eliminate boundaries managers may use virtual,
modular, or network organizational structures. This term is coined by former
GE Chairman Jack Welch because he wanted to eliminate vertical and
horizontal boundaries within GE and break down external barrier between
the company and its customer and supplier.
 Divisional Structure
• A divisional organizational chart reflects a company organized
along a product line or specific geogrophy. For example, in a car
company the divisions may represent SUVs, sedans, and electric
cars. Each division than has it own functional structure like IT and
marketing.
 Flat Organizational Chart

• A flat organization structure will show few or no levels of

management between executives and all other employees. This
type of structure empowers self-management and greater
decision making ability for every employee. It's most often
employed by smaller businesses, but it's not unheard of it even at
larger companies.
 Centralization
Centralization is the process where power and authority are
retained at the top level management. In the other word it is the
process in which the activity of an organization, particularly
regarding planning and decision making become concentrated
with in a particular location or group, keeping all the important
decision-making power within head office or the centre of the
organization.
 Advantage of Centralization
• Responsibility and duties are well defined.
• Decision making is very direct and clear.
• Unity in action
• Improved quality of work
• Better coordination
 Disadvantage of Centralization
• Delay in work
• No Loyalty
• No secrecy
• Remote Control
Centralization
 Decentralization
Decentralization is the process where power and authority are
delegated to lower level. In the other word it is the transfer of
decision making power and assignment of accountability and
responsibility for result.
 Advantage of Decentralization
• Reduce the burden from top level management
• Facilitates diversification:- according to product, market, activity.
• Executive Development
• Motivation
• Quick decision making
 Disadvantage of Decentralization
• Problem in coordination
• More financial burden
• Require qualified employee
• Lack of uniform policy
Decentralization
 Centralization v/s Decentralization
1. To maintain the authority and power
regarding making decision and
planning with top level management.
2. Vertical and formal flow of
communication is flow.
3. Decision making process is slow.
4. In centralization, company are
usually large.
5. In centralization, environment of
organisation is stable.
1. The distribution of power,
accountability and responsibility to
different level of department.
2. Open and free flow of
communication is there
3. Decision making process is faster.
4. In Decentralization generally the
company is scattered.
5. In decentralization, environment of
company is mostly uncertain and
complex.
 Delegation
According to O.S Hinner delegation is when one person gives
another person the right to perform work on his behalf and the
second person accepts a corresponding duty or obligation to do the
work. Delegation is downward transfer of formal authority from
superior to subordinate. Delegation of authority is a person to
person relationship requiring trust, commitment and contract
between supervisor and employee. Good delegation save time,
groom and develop people but poor delegation leads frustration,
confusion, demotivation.