UNIT 3

Organizing

The second function of management is organizing. After a manager has a plan in place, she can structure her teams and resources. This important step can profoundly affect an organization's success. The organizational structure influences employees' attitudes toward their work. A suitable organizational structure can minimize a business's costs, as well as maximize its efficiency, which increases its ability to compete in a global economy. Organizing or Organizing in management refers to the relationship between people, work and resources used to achieve the common objectives (goals).

Definition of Organizing According to Theo Haimann, "Organizing is the process of defining and grouping the activities of the enterprise and establishing the authority relationships among them." According to Louis Allen, "Organizing is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.

Steps in the Process of Organizing: Organizing is a step-by-step process. At each step, an important task is performed by the administrators working at the top-level of management. While organizing, the top managers carry out following important tasks:-

1. Fixing the objectives of the organization: At the top level, administrative management first fixes the common objectives of organization. At the middle level, executive management fix the departmental objectives. Lastly, at the lower level, supervisory management fix the day-to-day objectives. All the objectives of the organization must be specific and realistic. 2. Finding activities must for achieving objectives: After fixing the objectives, the top-level management prepares a list of different activities (or works) which are required to be carried out for achieving these objectives. This list is prepared at random without following any sequence or order. This is a very important step because it helps to avoid duplication, overlapping and wastage of efforts. 3. Grouping the similar activities: All similar or related activities having a common purpose are grouped together to make departments. For e.g. all activities or works which are directly or indirectly connected with purchasing are grouped together to make the Purchase Department. So various departments such as Purchase, Production, Marketing, Finance etc. are made. The grouping of similar activities leads to division of labour and specialization. 4. Defining responsibilities of each employee: The responsibilities (duties) of each employee are clearly defined. This will result in the selection of a right person for the right post / job. He / she will know exactly what to do and what not to do. Therefore, it will result in efficiency. 5. Delegating authority to employees: Each employee is delegated (surrender or given) authority. Without authority, the employees cannot carry out their responsibilities. Authority is the right to give orders and the power to get obedience. The authority given to an employee should be equal to the responsibility given to him. 6. Defining authority relationship: When two or more persons work together for a common goal, it becomes necessary to clearly define the authority relationship between them. Each person should know who is his superior, from who he should take orders, and to whom he will be answerable. Similarly, each superior should know what authority he has over his subordinates.

7. Providing employees all required resources: After defining the authority relationships, the employees are provided with all the material and financial resources, which are required for achieving the objectives of the organization. So in this step, the employees actually start working for a common goal.

8. Coordinating efforts of all to achieve goals: This is the last stage or step in the process of organization. Here, the efforts of all the individuals, groups, departments, etc. are brought together and co-coordinated towards the common objectives of the organization.

Classification of organizations: Organizations are basically classified on the basis of relationships. There are two types of organizations formed on the basis of relationships in an organization.

1. Formal Organization - Formal Organization is formed when two or more persons come together. They have a common objective or goal. They are willing to work together to achieve this similar objective. Formal Organization has its own rules and regulation. These rules must be followed by the members (employees and managers). A formal organization has a system of co-ordination. It also has a system of authority. It has a clear superiorsubordinate relationship. In a formal organization, the objectives are specific and well-

defined. All the members are given specific duties and responsibilities. Examples of formal organization are:- a company, a school, a college, a bank, etc.

2. Informal Organization - Informal Organization exists within the formal organization. An informal organization is a network of personal and social relationships. People working in a formal organization meet and interact regularly. They work, travel, and eat together. Therefore, they become good friends and companions. There are many groups of friends in a formal organization. These groups are called informal organization. An informal organization does not have its own rules and regulation. It has no system of co-ordination and authority. It doesn't have any superior-subordinate relationship nor any specific and

well-defined objectives. Here in informal organization, communication is done through the grapevine.

Centralization and Decentralization Definition Centralization Centralized organizational structures rely on one individual to make decisions and provide direction for the company. Small businesses often use this structure since the owner is responsible for the companys business operations. Advantages Centralized organizations can be extremely efficient regarding business decisions. Business owners typically develop the companys mission and vision, and set objectives for managers and employees to follow when achieving these goals. Disadvantages Centralized organizations can suffer from the negative effects of several layers of bureaucracy. These businesses often have multiple management layers stretching from the owner down to frontline operations. Business owners responsible for making every decision in the company may require more time to accomplish these tasks, which can result in sluggish business operations.

Decentralization Decentralized organizational structures often have several individuals responsible for making business decisions and running the business. Decentralized organizations rely on a team environment at different levels in the business. Individuals at each level in the business may have some autonomy to make business decisions. Advantages Decentralized organizations utilize individuals with a variety of expertise and knowledge for running various business operations. A broad-based management team helps to ensure the company has knowledgeable directors or managers to handle various types of business situations. Disadvantages Decentralized organizations can struggle with multiple individuals having different opinions on a particular business decision. As such, these businesses can face difficulties trying to get everyone on the same page when making decisions.

Departmentation: The process of grouping of activities into units for the purpose of administration is called departmentation. It can be defined "as the process by which activities or functions of enterprise are grouped homogeneously into different groups." The administrative units are called divisions, units or departments. The followings are the basis of departmentation: 1. Functional Departmentation: - This is the simplest form of departmentation when grouping of departments is done on the basis of functions such as production finance marketing sales purchase and personnel etc, it is known as functional departmentation. Further sub divisions of the functions may be formed like marketing can be divided in to advertisement sales and after sales service. So we can classify functions into two parts. Basic functions i.e. Production Marketing Finance and Personnel Secondary Functions: - These are further parts of basic functions according to the organizational needs or operations like Production: - Product planning, R&D, Quality control and material handling Functional departmentation is useful where there is production of single product or similar kind of product, for example TV, Computer monitor or TFT.

Advantages: Advantage of specialization Easy control over functions Pinpointing training needs of manager It is very simple process of grouping activities.

Disadvantages: Lack of responsibility for the end result Overspecialization or lack of general management

It leads to increase conflicts and coordination problems among departments.

2. Departmentation by Products: - In product departmentalization, departments are separated based on a type of product produced by the company. Here, every individual department is responsible for producing and selling the type of product assigned to them.

A good example of product departmentalization is witnessed in an automobile manufacturing company. In such a company, we generally see departments like a two-wheeler department, three-wheeler department, four-wheeler department, heavy motors department, etc., which manufacture vehicles such as motorcycles (bikes), auto-rickshaws, cars, buses and trucks, respectively. Here, inside an automobile company, all activities, which are directly or indirectly related to car manufacturing, are grouped together and assigned to four-wheeler or car department. CEO

Two wheeler department

Three wheeler department

Four wheeler department

Heavy motors department

Advantages It ensures better customer service Unprofitable products may be easily determined It assists in development of all around managerial talent Makes control effective It is flexible and new product line can be added easily. It is expensive as duplication of service functions occurs in various product divisions Customers and dealers have to deal with different persons for complaint and information of different products.

Disadvantages

3. Departmentation by Territories (Geographic Divisionalization) : - Like the products basis, geographical regions are adopted for main division as well as for subdivision purposes. When activities of an organization are physically dispersed in different locations territorial departmentation is adopted. Units that are located at different areas are made so many selfcontained divisions of the organization. Marketing activities are very often subdivided on the basis of geographical areas. This form of departmentation can be useful where business is on national or international level. For eg. Indian railways, insurance company use territorial departmentation.

Advantages Help to cater to the needs of local people more satisfactorily. It facilitates effective control Assists in development of all-round managerial skills Communication problem between head office and regional office due to lack of means of communication at some location Coordination between various divisions may become difficult. Distance between policy framers and executors It leads to duplication of activities which may cost higher.

Disadvantages

4. Departmentation by Customers: - When departments are formed to cater different kind of customers it is known as customer departmentation this basis of classification is widely followed in subdividing activities of the marketing department. When the products are offered to market through various channels and outlets, it has the special merit of supplying goods in accordance with the peculiar needs of customers. Customers may be classified according to buying capacity or nature like whole sale, retail and export or government or general public. Most departmental stores may attempt t reach customers preferring low price or higher price

Advantages It focused on customers who are ultimate suppliers of money Better service to customer having different needs and tastes Development in general managerial skills

Disadvantages Sales being the exclusive field of its application, co-ordination may appear difficult between sales function and other enterprise functions. Specialized sales staff may become idle with the downward movement of sales to any specified group of customers. 5. Departmentation by Process:- In process departmentalization, departments are separated based on their role in a production process. Best example of process departmentalization can be seen in a textile mill where we may have a spinning department, weaving department, dyeing department, printing department, etc. Here, inside a textile mill, all activities, which are directly or indirectly related with spinning are grouped together to make a spinning department.

Process departmentation

Spinning department

Weaving department

Dyeing department

Printing department

Advantages facilitates coordination It provides for more effective utilization of specializes equipment and special skills This type of Departmentation is simple and widely used.

Disadvantages It makes coordination more difficult. A breakdown in one process department may hinder the working of all the other process departments. Create conflict among the various departments. Profit responsibility cannot be assigned to process departments It may result in wastage and inefficiency.

6. Matrix organization structure: The matrix structure combines functional specialization with the focus of divisional structure (see Figure 3 ). This structure uses permanent cross-functional teams to integrate functional expertise with a divisional focus.

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. They also report to two bosses one within the functional group and the other within the team. This structure not only increases employee motivation, but it also allows technical and general management training across functional areas as well. Potential advantages include Advantages

Better cooperation and problem solving. Increased flexibility. Better customer service. Better performance accountability. Improved strategic management.

Disadvantages

The two-boss system is susceptible to power struggles, as functional supervisors and team leaders vie with one another to exercise authority. Members of the matrix may suffer task confusion when taking orders from more than one boss. Teams may develop strong team loyalties that cause a loss of focus on larger organization goals. Adding the team leaders, a crucial component, to a matrix structure can result in increased costs.

Other bases of departmentation: Departmentation by time: In time departmentalization, departments are separated based on the division of their working time or job shifts. For an example, departments can be made based on night shift, morning or regular shift, evening shift, etc. Network structure: The 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.