Chapter 5

Organizing
 Definition
 Organizing is arranging the activities of the
organization in a manner that systematically
contribute to the organization’s goals.

Organizing deals with:

 How to divide the work
 Who does what?
 Who reports to whom?
 How to coordinate organization’s activities.
Purpose of Organizing
 Coordinating diverse organizational tasks
 Establishing relationships
 Establishing formal lines of authority
 Allocating and deploying organizational resource
 Assuring more efficient use of the organization’s
resources
 Improving employee understanding of job duties and
responsibilities
 Providing a sense of direction for each of the
organization’s functional areas
 Steps of organizing process
1. Determining the activities to be performed
2. Identification of major functions to which these
activities relate.
3. Grouping and sub-dividing the activities
4. Establishing relationship among individuals and
groups- an important aspect of the organizing
process
Note! The end result of an organizing process is an
organization.
Formal and Informal organization
Formal organization
 is the intentional, deliberate or rational structures of
roles in a formally organized enterprise.
 characterized by well-defined
 authority
 reporting relationships,
 job titles,
 Policies and procedures,
 specific job duties and
 a host of other factors necessary to accomplish its
respective goals.
 Represented by organization chart
 Informal organization

 A network of personal and social relationships

that arises spontaneously as people associate with
one another in a work environment.
 develops within the formal organization
 has a structure which is loosely designed, highly
flexible and spontaneous
Basic Elements/Fundamental of organizing

 Division of labor/work specialization

 Chain of command

 Span of control/management ( supervision)

 Centralization and decentralization

 Delegation of authority

 Departmentalization
 Division of labor/specialization
 Division of labor- the degree in which tasks in the
organization are subdivided into separate jobs
 Division of labor:
 Makes efficient use of employee skills
 Increases employee skills through repetition
 Less between-job downtime increases productivity
 Allows use of specialized equipment
 Chain of command
 An unbroken line of authority that links all
individuals in the organization and specifies who
report to whom
 It is associated with two underlying principles:
1. Unity of command- each employee is held accountable
to only one supervisor
2. The scalar principle- refers to a clearly defined line of
authority in the organization that includes all employees
Span of control/management (supervision)
 refers to the number of employees reporting to a
supervisor
 Two types:

1. Narrow span of control -The manager

supervises a small number of workers
- many levels – tall organization
2. Wide span of control- The manager
supervises a large number of workers
- few levels – flat organization
 Centralization and Decentralization
 Centralization and decentralization- pertain to the
hierarchical level at which decisions are made
 Centralization- decision making authority is
concentrated at the top of the organization
 Decentralization- decision making authority is
delegated to the lower level of the organization
 Delegation of authority
 Process off assigning work from a top organizational
level/ superior to a lower one/subordinate, and giving
that person the authority to accomplish them
 Main principles of delegation:
 Responsibility can not be delegated
 Authority and responsibility should be in equal proportion.
The delegation process:
1. Allocation of duties
2. Delegation of authority.
3. Assignment of responsibility
4. Creation of accountability.
Delegation of authority Cont’d
 Authority : The legitimate right to make decisions and
to tell other people what to do
 flow downward from Higher to Lower level
 Authority relations in an organization:
1. The line authority - presents levels of hierarchy, superior-
subordinate relationships, and provides the framework for the
organization
 the relationship is showed by a solid line in the organizational chart
2. Staff authority- has no command, personnel have only the right
to advise, assist, support those in the line authority in the
performance of their duties.
 the relationship is showed by a dotted line in the organizational chart.
 Delegation of authority Cont’d

Responsibility: The obligation involved when one

accepts an assignment
 it may be continued or it may be terminated with
the accomplishment of a single action.
Accountability: subordinates must be held
answerable to their carried out duties
 It moves in an upward direction
 Departmentalization
 The basis on which jobs are grouped into
departments and departments into total
organization
 The combination of jobs is based on the degree of
similarity among the jobs within the department
 Based on the criteria up on which
departmentalization is undertaken different types
organization structures are identified
 Organization structure
 Organization structure - formal system of task and
reporting relationships showing how workers use resources
 Depicted by organization chart
 Organization chart: refers to a line diagram that depicts
the broad outlines of an organization’s structure
 Provide four major pieces of information about an organization
structure: Task, Subdivisions, Level of management, Lines of
authority
 Organizational design - The process by which
managers make specific choices that result in a particular
kind of organizational structure.
Organization Design
Two generic models of organizational design: mechanistic
& organic
Mechanistic Organic
- High specialization - Cross-functional teams
- Rigid departmentalization - Flexible
departmentalization
- Clear chain of command - Free flow of information
- Narrow span of control - Wide span of control
- Centralization - Decentralization
- High formalization - Low formalization
- a limited information net work
- little participation in decision
making
Factors Affecting Organizational Structure
Factors Affecting Organizational Structure Cont’d

 The environment: The quicker the environment

changes, the more problems face managers.
• Structure must be more flexible when
environmental change is rapid.
– Usually need to decentralize authority.
 Strategy: Different strategies require the use of
different structures.
• A differentiation strategy needs a flexible
structure,
• low cost may need a more formal structure.
• Increased vertical integration or
diversification also requires a more flexible
structure
Factors Affecting Organizational Structure Cont’d

Technology: The combination of skills, knowledge, tools

and equipment used in the organization.
Technology can be measured by:
 Task Variety: new problems a manager encounters.
 Task Analyzability: programmed solutions available
to a manager to solve problems.
 High task variety and low analyzability present

many unique problems to managers.

– Flexible structure works best in these conditions.
 Low task variety and high analyzability allow

managers to rely on established procedures

Factors Affecting Organizational Structure Cont’d

Technology and people

 Small Batch Technology: produces small
quantities of one-of-a-kind products.
 Based on the skills of the workers, needs a flexible
structure
 Mass Production Technology: automated
machines make high volumes of standard products.
 Workers perform repetitive tasks so a formal structure
works well.
 Continuous Process Technology: totally
mechanized systems of automatic machines.
• Workers must watch for unexpected problems and react
quickly. A flexible structure is needed here.
 Factors Affecting Organizational Structure Cont’d

 Human Resources:
 Higher skilled workers who need to work in
teams usually need a more flexible structure

 Managers must take into account all four factors

(environment, strategy, technology and human
resources) when designing the structure of the
organization.
 Types of Organization Structure

 Line Structure
 Line and Staff /Horizontal Structure
 Functional structure
 Divisional structure
 Matrix organization structure
 Network organization structure
 Virtual organization structure
 Learning organization structure
 Line Structure

 Is the oldest and simplest of structures

 Has direct authority flowing vertically from
the top
 generally found in small organizations
because support staff is needed once they
begin to grow.
 Line and Staff /Horizontal Structure

 Has line authority similar to line structure

 Specialized staff activities are added that
support line activities
 Line employees are directly concerned
with the organization’s primary objectives
 Staff employees support the line employees
 Functional Structure
 An organizational form in which the major
functions of the firm, such as production, marketing,
R&D, and accounting, are grouped internally.
 Functional Structure Cont’d
Advantages:
 Economies of scale can be realized
 Effective monitoring of the environment
 Performance standards better maintained
 Greater opportunity for specialized training and skill development
 Technical specialists are relatively free of administrative work
 Decision making and lines of communication are simple and
clearly understood
Disadvantages:
– Impeded communication and coordination due to differences in values
and orientations
– May lead to short-term thinking (functions vs. organization as a
whole)
– Difficult to establish uniform performance standards
 The Divisional Structure
 Departmentalization that groups units around products,
customers, or geographic regions.
 Divisions create smaller, manageable parts of a firm.
 Divisions develop a business-level strategy to
compete.
 A division has marketing, finance, and other
functions.
 Functional managers report to divisional managers
who then report to corporate management.
– Product structure: divisions created according to the
type of product or service.
– Geographic structure: divisions based on the area of a
country or world served.
– Market structure: divisions based on the types of
customers served.
Divisional Structure Cont’d
 Divisional Structure Cont’d
Advantages of Divisional Organizations:
1.Information needs are managed more easily
2.People have a full-time commitment to a
particular product line
3.Task responsibilities are clear
4.People receive broader training
Disadvantages
– Can be very expensive
– Can be dysfunctional competition among divisions
– Differences in image and quality may occur across
divisions
– Can focus on short-term performance
 The Matrix Organization Structure
 An organizational structure that
simultaneously groups people and resources
by function and product
 Results in a complex network of superior-
subordinate reporting relationships
 The structure is very flexible and can
respond rapidly to the need for change.
 Each employee has two bosses (functional
manager and product manager)
Matrix Organization Structure Cont’d
 Matrix Organization Structure Cont’d
 Advantages of a Matrix:
 Better inter functional cooperation in operations and
problem solving.
 Increased flexibility to meet changing demands.
 Better customer service
 Better performance accountability
 Improved decision making
Disadvantages of a Matrix:
 It increases role of ambiguity, stress, and anxiety because
people are assigned to more than one department.
 Violates the principle of unity of command
 Network Organization structure
 A collection of independent, mostly single-
function firms that collaborate on a good or service
 a whole series of strategic alliances.

 Strategic alliance:
• a formal agreement committing two or more firms
to exchange resources to produce a good
Chapter 1, Nancy Langton and Stephen P. Robbins, Fundamentals of Organizational Behaviour, Third Canadian Edition 1-
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Copyright © 2007 Pearson Education Canada
 Modular Organization
 An organization in which non-vital
functions are outsourced, which uses the
knowledge and expertise of outside
suppliers while retaining strategic control.
 Pros and Cons of Modular Structures:
Chapter 1, Nancy Langton and Stephen P. Robbins, Fundamentals of Organizational Behaviour, Third Canadian Edition 1-
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Copyright © 2007 Pearson Education Canada
 Virtual Organization
 A continually evolving network of independent
companies that are linked together to share skills,
costs, and access to one another’s markets
 Pros and Cons of Virtual Structures
Chapter 1, Nancy Langton and Stephen P. Robbins, Fundamentals of Organizational Behaviour, Third Canadian Edition 1-
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Copyright © 2007 Pearson Education Canada
 Learning organization structure
 is an organization structure in which organizations developed
the capacity to continuously learn, adapt and change.
 employees practice knowledge management by continually
acquiring and sharing new knowledge and are willing to apply
that knowledge in making decisions or performing their work.
Advantages: -
 Employees are continuously sharing and applying knowledge.
 Abilities to learn can be a source of sustainable competitive
advantage.
Disadvantages: -
 Getting employees to share what they know can be difficult.
 Collaboration conflicts can arise.
 Coordination Mechanisms
 Direct supervision
 Standardization
 Mutual adjustment
 Directly supervision

 One individual (typically a manager) gives

specific orders to others and thereby
coordinates their work
 Standardization
 Various types of standardization:
 Standardization of work- every work process
follows a predefined path and a set of rules
 Standardization of outputs- the work is coordinated
by the imposition of standard performance measures or
specifications concerning the outputs of the work
 Standardization of skills- the work is coordinated by
the internalization by individuals of standard skills and
knowledge, usually before they begin to do the work
 Mutual adjustment

 in mutual adjustment, individuals coordinate

their own work, by communicating informally
with each other.