University of Dar es

Salaam
Business School

LE 201
Principles & Practices of
Management

20.01.2011 UDSM/UDBS 2010 1

 Topic 5

Organizing

20.01.2011 UDSM/UDBS 2010 2

 Introduction
 After organizational objectives have been
determined and the plan has been
prepared, the next step in the
management process is to organize the
activities to execute the plan and to attain
the objectives of the enterprise.
 Sound organizing contributes greatly to the
continuity and success of the enterprise.

20.01.2011 UDSM/UDBS 2010 3

 Meaning
 Organizing can formally be defined as the
process of arranging people and physical
resources into a structured grouping to carry
out plans to accomplish organizational
objectives.
 Organizing entails identification of different
activities and classifying them into sections
or departments and assigning such tasks to
individuals.
20.01.2011 UDSM/UDBS 2010 4
 Meaning
 The end result of the organizing process is
an organization i.e. a whole consisting of
unified parts acting in harmony to execute
tasks to achieve goals, both effectively and
efficiently.
 If the organizing process is not conducted
well, the results may yield confusion,
frustration, loss of efficiency and limited
effectiveness.

20.01.2011 UDSM/UDBS 2010 5

 The Organizing Process
 Organizing, being a process, consists of
the following:
a) Review of organization’s objectives

and plans
b) Determine work activities

c) Grouping activities into manageable

units
d) Assign activities and delegate

authority
e) Design of a hierarchy of relationships

20.01.2011 UDSM/UDBS 2010 6

Principles Elements of Organizing
 Effective organizing depends on the
mastery of several important aspects:
work specialization, chain of command
(scalar chain), delegation, span of control,
and centralization versus decentralization.
 Many of these concepts are based on the
principles developed by the classical
management thinkers like Fredrick Taylor,
Henri Fayol and Max Weber some of which
are described here below.
20.01.2011 UDSM/UDBS 2010 7
 Span of Management
 The term, span of management or span of
control or span of supervision is used to
denote the number of subordinates which
should be put under one superior.
 The span of control principle requires the
number of subordinates reporting to a
superior to be as small as possible so that
efficiency can be achieved.

20.01.2011 UDSM/UDBS 2010 8

 Span of Management
 The span of management depends on the
situations under which the manager
operates and such a situation is influenced
by the several factor including the
following:
a) Capacity of the supervisor

b) Capacity of subordinates

c) Nature of the work

d) Degree of decentralization

20.01.2011 UDSM/UDBS 2010 9

 Span of Management
e) The degree of planning
f) Communication Techniques
 Note that the span of management may
differ from one department to another
within the same organization.

20.01.2011 UDSM/UDBS 2010 10

 Centralization vs. Decentralization
 The general pattern of authority throughout
an organization determines the extent to
which that organization is centralized or
decentralized.
 A centralized organization systematically
works to concentrate authority at the upper
levels.
 In a decentralized organization,
management consciously attempts to spread
authority to the lower organization levels.
20.01.2011 UDSM/UDBS 2010 11
 Centralization vs.
Decentralization
 Several factors may influence the extent to
which an organization is centralized or
decentralized, including the following:
a) The level of complexity and stability of

the external environment in which the

organization operates 
b) The nature of decisions themselves

c) The abilities of low-level managers

20.01.2011 UDSM/UDBS 2010 12

 Centralization vs. Decentralization
 In principle, every organization must assess
its own situation and then choose the level of
centralization/decentralization that works
best.
 Centralization is normally associated with a
number of benefits to the organization:
i. Opportunity for personal leadership
ii. Quick decision-making, especially in cases of
emergencies.
iii. Easier communication and control
20.01.2011 UDSM/UDBS 2010 13
 Centralization vs. Decentralization
iv. Uniformity in actions through out the
organization
v. Reduces wastage by avoiding
duplication.
 Decentralization offers the following
benefits:
i. Reduces burden of the top management
so that it can pay attention on strategic
issues
ii. It motivates lower-level managers
20.01.2011 UDSM/UDBS 2010 14
Centralization vs. Decentralization
iii. It facilitates development of managers
as they get opportunities to shoulder
more responsibilities.
iv. It pinpoints accurately the results to be
achieved by each unit of the
organization.

20.01.2011 UDSM/UDBS 2010 15

 Delegation of Authority
 Delegation refers to the downward transfer of
authority from a superior (manager) to a
subordinate.
 Delegation leads to empowerment, which allows
people do their jobs in the best ways.
 Delegation is normally done for the following
purposes:
i. To free the manager from routine activities so
that s/he can concentrate on strategic tasks;


20.01.2011 UDSM/UDBS 2010 16

 Delegation of Authority
i. To effectively utilize skills and abilities of
subordinates;
ii. It helps subordinates to grow and
develop by letting them learn by doing.
 Supervisors may be reluctant to delegate for
the reasons given below:
i. Lack of trust of one’s subordinates i.e.
fearing that they are the ones who can
do the job right;

20.01.2011 UDSM/UDBS 2010 17

 Delegation of Authority
iii. They fear having the subordinate look too
good;
iv. They are too much attracted to power i.e.
some supervisors get satisfaction from
having the power;
v. They have negative opinion about the
employee’s abilities based on one
occurrence;
vi. Some supervisors think that to set a good
example they must look busy;
20.01.2011 UDSM/UDBS 2010 18
Formal & Informal Organizations
 Formal organizational structures are
deliberately designed to achieve some
particular organizational goals.
 The formal authority comes directly from the
position i.e. an individual retains formal authority so
long as he/she occupies the position.
 Besides the formally established organization
structure, people tend to create relationships
independent of the formal relationships,
which are referred to as informal
organizations.
20.01.2011 UDSM/UDBS 2010 19
Formal & Informal Organizations
 Informal organization refers to the natural
grouping of people on the basis of some
similarity in an organization.
 Informal organizations have the following
distinguishing characteristics:
i. They are a natural outcome at the
workplace i.e. they are not designed.
ii. They are created on the basis of similarity
among members i.e. sex, place of origin,
profession, etc.

20.01.2011 UDSM/UDBS 2010 20

Formal & Informal Organizations
iii. Membership is voluntary and a person may
become a member of several groups at a
time.
iv. Members behaviour is coordinated and
controlled by group norms.

20.01.2011 UDSM/UDBS 2010 21

 Managerial Challenges of Informal
Organizations
 Though are useful in maintaining company-
wide information flow, informal organizations
pose several challenges to managers of
organizations. These include:
a) Resistance to change

b) Role conflict

c) Generation of rumour

d) Social cost

20.01.2011 UDSM/UDBS 2010 22

Design of Organization Structure
 Organizing is the process through which
managers create an organizational
structure.
 Organizational structure is a formal
framework by which jobs within the
organization are divided, grouped and
coordinated.
 It is a pattern of relationships among
various activities, job positions and people
in the organization.
20.01.2011 UDSM/UDBS 2010 23
 Design of Organization Structure
 Organizational structure denotes the set of formal
tasks assigned to individuals and the formal
reporting relationships, including lines of
authority, decision responsibility, number of
hierarchical levels and span of managerial control.
 The organizational structure is visually
represented by an organizational chart also called
organgram.

20.01.2011 UDSM/UDBS 2010 24

 Features of a Good
Organization Structure
 There is no one best way of designing and
organizational structure.
 The good one is that which meets the demands
of the environment, organizational goals and
strategy.
 For a manager to design an organizational
structure that meets the demands of various
factors the considerations given below must
be taken into account:
20.01.2011 UDSM/UDBS 2010 25
 Features of a Good Organization
Structure
a) Simplicity: Avoidance of too many levels, too
many communication channels, multiplicity of
commands, etc.
b) Flexibility: An organizational structure should
be flexible enough so that changes can be
incorporated whenever needs arise.
c) Clear line of authority: There should be clear
line of authority flowing from the top to bottom
or in horizontal direction.

20.01.2011 UDSM/UDBS 2010 26

 Features of a Good Organization
Structure
d) Application of ultimate responsibility: The
manager should be ultimately responsible for
performance of the total work.
e) Unity of direction and command: There should
be only one plan of action for the entire
organization or organizational unit and a person
should receive orders and instructions from one
superior only.
f) Economy: There should be a balance between
the cost of creating a department and contribution.
20.01.2011 UDSM/UDBS 2010 27
 Bases of Organizational Design
(Departmentation)
 Managers must make choices about how to
group people together to perform their
work.
 Departmentalization is the process by
which work or individuals are grouped into
manageable units.
 Below are five traditional methods for
grouping work activities.
20.01.2011 UDSM/UDBS 2010 28
 Bases of Organizational Design
(Departmentation)
a) Functional structure: Grouping positions
into work units based on similar activities,
skills, expertise, and resources.
 Production, marketing, finance, and

human resources are common groupings

within a functional structure.

20.01.2011 UDSM/UDBS 2010 29

 Bases of Organizational Design
(Departmentation)

CEO

Director Director Director Director

Operations Marketing Finance HRM

Plant Plant Regional Regional

Manager Manager Manager Manager

Functional structure
20.01.2011 UDSM/UDBS 2010 30
 Bases of Organizational Design
(Departmentation)
b) Divisional Structures: Is an
organizational structure made up of semi-
autonomous business units or divisions.
 Each division has some sort of autonomy
with managers having strategic and
operational authority over their units.
 Divisions are created in five ways; these are
grouping by products, geography, markets
(customers), teams and networking.
20.01.2011 UDSM/UDBS 2010 31
 Bases of Organizational Design
(Departmentation)
i. Product structure: The departments
are grouped on the basis of products or
product lines.
 For instance, dairy farms may be
structured around product groups such
as milk, beef, hides, etc.

20.01.2011 UDSM/UDBS 2010 32

 Bases of Organizational Design
(Departmentation)

CEO

Manager
Manager Manager
Hides
Milk Beef

Product Structures
20.01.2011 UDSM/UDBS 2010 33
 Bases of Organizational Design
(Departmentation)
ii. Process structure: Departments are
grouped on the basis of the processes the
product or service passes through.
 For instance a textile may be structured
around processes such as spinning,
dyeing, weaving, garments, etc.

20.01.2011 UDSM/UDBS 2010 34

 Bases of Organizational Design
(Departmentation)

Process structure

20.01.2011 UDSM/UDBS 2010 35

 Bases of Organizational Design
(Departmentation)
iii. Territorial structure: Departments are
grouped on the basis of geographical
location.
 Geographical organization structure is

applicable to organizations, which operate

over a wide geographical area.
 E.g., TANESCO has its operations

departmentalized by zones such as North,

South, Southern Highlands, Coast, etc.
20.01.2011 UDSM/UDBS 2010 36
 Bases of Organizational Design
(Departmentation)

Territorial structure
20.01.2011 UDSM/UDBS 2010 37
 Bases of Organizational Design
(Departmentation)
iii. Customer structure: Departments are
grouped on the basis of a common set of
needs of specific customers.
 For instance, a plumbing firm may group its
work according to whether it is serving private
sector, public sector, government, or not-for-
profit organizations.
 Customers are the key to the way activities are
grouped.
20.01.2011 UDSM/UDBS 2010 38
 Bases of Organizational Design
(Departmentation)

Customer structure
20.01.2011 UDSM/UDBS 2010 39
 Modern Organizational Design
 In addition to the above described types of
organizational structure, modern
organizations may choose to adopt the
following:
i. Matrix structure: This combines
functional specialization with divisional
structures.
 This structure uses permanent cross-

functional teams to integrate functional

expertise with a divisional focus.
20.01.2011 UDSM/UDBS 2010 40
 Modern Organizational Design
 Employees in a matrix structure belong to
at least two formal groups at the same
time—a functional group and a product,
program, or project team i.e. reporting to
two bosses—one within the functional
group and the other within the team.

20.01.2011 UDSM/UDBS 2010 41

 Modern Organizational Design

20.01.2011 UDSM/UDBS 2010 42

 Modern Organizational Design
ii. Team structure: This organizes separate
functions into a group based on one
overall objective.
 These cross-functional teams are

composed of members from different

departments who work together as
needed to solve problems and explore
opportunities.
 The intent is to create a more effective

relationship for solving ongoing problems.

20.01.2011 UDSM/UDBS 2010 43
Modern Organizational Design

Team structure
20.01.2011 UDSM/UDBS 2010 44
 Modern Organizational Design
iii. Network structure: Relies on other
organizations to perform critical functions
on a contractual basis.
 In other words, managers can contract out

specific work to specialists.

 This approach provides flexibility and

reduces overhead because the size of staff

and operations can be reduced.

20.01.2011 UDSM/UDBS 2010 45

 Modern Organizational Design

Network structure
20.01.2011 UDSM/UDBS 2010 46