Unit IV Planning and organizing

Planning:
Planning means looking ahead and chalking out future
courses of action to be followed. It is a preparatory step.
It is a systematic activity which determines when, how
and who is going to perform a specific job. Planning is a
detailed programme regarding future courses of action.
 Planning is goal-oriented.
a. Planning is made to achieve desired objective of
business.
b. The goals established should general acceptance
otherwise individual efforts & energies will go
misguided and misdirected.
c. Planning identifies the action that would lead to
desired goals quickly & economically.
d. It provides sense of direction to various activities.
E.g. Maruti Udhyog is trying to capture once again
Indian Car Market by launching diesel models.
 Planning is looking ahead.
a. Planning is done for future.
b. It requires peeping in future, analyzing it and
predicting it.
c. Thus planning is based on forecasting.
d. A plan is a synthesis of forecast.
 e. It is a mental predisposition for things to happen in
future.
 Planning is an intellectual process.
a. Planning is a mental exercise involving creative
thinking, sound judgement and imagination.
b. It is not a mere guesswork but a rotational thinking.
c. A manager can prepare sound plans only if he has
sound judgement, foresight and imagination.
d. Planning is always based on goals, facts and
considered estimates.
 Planning involves choice & decision making.
a. Planning essentially involves choice among various
alternatives.
b. Therefore, if there is only one possible course of
action, there is no need planning because there is no
choice.
c. Thus, decision making is an integral part of planning.
d. A manager is surrounded by no. of alternatives. He
has to pick the best depending upon requirements &
resources of the enterprises.
 Planning is the primary function of management /
Primacy of Planning.
a. Planning lays foundation for other functions of
management.
 b. It serves as a guide for organizing, staffing, directing
and controlling.
c. All the functions of management are performed
within the framework of plans laid out.
d. Therefore planning is the basic or fundamental
function of management.
 Planning is a Continuous Process.
a. Planning is a never ending function due to the
dynamic business environment.
b. Plans are also prepared for specific period f time and
at the end of that period, plans are subjected to
revaluation and review in the light of new
requirements and changing conditions.
c. Planning never comes into end till the enterprise
exists issues, problems may keep cropping up and
they have to be tackled by planning effectively.
 Planning is all Pervasive.
a. It is required at all levels of management and in all
departments of enterprise.
b. Of course, the scope of planning may differ from one
level to another.
c. The top level may be more concerned about planning
the organization as a whole whereas the middle level
may be more specific in departmental plans and the
lower level plans implementation of the same.
 Planning is designed for efficiency.
a. Planning leads to accompishment of objectives at the
minimum possible cost.
b. It avoids wastage of resources and ensures adequate
and optimum utilization of resources.
c. A plan is worthless or useless if it does not value the
cost incurred on it.
d. Therefore planning must lead to saving of time, effort
and money.
e. Planning leads to proper utilization of men, money,
materials, methods and machines.
 Planning is Flexible.
a. Planning is done for the future.
b. Since future is unpredictable, planning must provide
enough room to cope with the changes in customer’s
demand, competition, govt. policies etc.
c. Under changed circumstances, the original plan of
action must be revised and updated to male it more
practical.
ADVANTAGES of planning;

1. Planning facilitates management by objectives.

a. Planning begins with determination of
objectives.
 b. It highlights the purposes for which various
activities are to be undertaken.
c. In fact, it makes objectives more clear and
specific.
d. Planning helps in focusing the attention of
employees on the objectives or goals of
enterprise.
e. Without planning an organization has no guide.
f. Planning compels manager to prepare a Blue-
print of the courses of action to be followed for
accomplishment of objectives.
g. Therefore, planning brings order and rationality
into the organization.
2. Planning minimizes uncertainties.
a. Business is full of uncertainties.
b. There are risks of various types due to
uncertainties.
c. Planning helps in reducing uncertainties of future
as it involves anticipation of future events.
d. Although future cannot be predicted with cent
percent accuracy but planning helps management
to anticipate future and prepare for risks by
necessary provisions to meet unexpected turn of
events.
e. Therefore with the help of planning,
uncertainties can be forecasted which helps in
preparing standbys as a result, uncertainties are
minimized to a great extent.
3. Planning facilitates co-ordination.
a. Planning revolves around organizational goals.
b. All activities are directed towards common
goals.
c. There is an integrated effort throughout the
enterprise in various departments and groups.
d. It avoids duplication of efforts. In other words, it
leads to better co-ordination.
e. It helps in finding out problems of work
performance and aims at rectifying the same.
4. Planning improves employee’s moral.
a. Planning creates an atmosphere of order and
discipline in organization.
b. Employees know in advance what is expected of
them and therefore conformity can be achieved
easily.
c. This encourages employees to show their best
and also earn reward for the same.
d. Planning creates a healthy attitude towards work
environment which helps in boosting employees
moral and efficiency.
5. Planning helps in achieving economies.
a. Effective planning secures economy since it
leads to orderly allocation ofresources to various
operations.
b. It also facilitates optimum utilization of
resources which brings economy in operations.
 c. It also avoids wastage of resources by selecting
most appropriate use that will contribute to the
objective of enterprise. For example, raw
materials can be purchased in bulk and
transportation cost can be minimized. At the
same time it ensures regular supply for the
production department, that is, overall efficiency.
6. Planning facilitates controlling.
a. Planning facilitates existence of certain planned
goals and standard of performance.
b. It provides basis of controlling.
c. We cannot think of an effective system of
controlling without existence of well thought out
plans.
d. Planning provides pre-determined goals against
which actual performance is compared.
e. In fact, planning and controlling are the two
sides of a same coin. If planning is root,
controlling is the fruit.
7. Planning provides competitive edge.
a. Planning provides competitive edge to the
enterprise over the others which do not have
effective planning. This is because of the fact
that planning may involve changing in work
methods, quality, quantity designs, extension of
work, redefining of goals, etc.
b. With the help of forecasting not only the
enterprise secures its future but at the same time
 it is able to estimate the future motives of it’s
competitor which helps in facing future
challenges.
c. Therefore, planning leads to best utilization of
possible resources, improves quality of
production and thus the competitive strength of
the enterprise is improved.
8. Planning encourages innovations.
a. In the process of planning, managers have the
opportunities of suggesting ways and means of
improving performance.
b. Planning is basically a decision making function
which involves creative thinking and
imagination that ultimately leads to innovation of
methods and operations for growth and
prosperity of the enterprise.
Disadvantages of planning:

 Rigidity
a. Planning has tendency to make administration
inflexible.
b. Planning implies prior determination of policies,
procedures and programmes and a strict adherence to
them in all circumstances.
c. There is no scope for individual freedom.
 d. The development of employees is highly doubted
because of which management might have faced lot
of difficulties in future.
e. Planning therefore introduces inelasticity and
discourages individual initiative and experimentation.
 Misdirected Planning
a. Planning may be used to serve individual interests
rather than the interest of the enterprise.
b. Attempts can be made to influence setting of
objectives, formulation of plans and programmes to
suit ones own requirement rather than that of whole
organization.
c. Machinery of planning can never be freed of bias.
Every planner has his own likes, dislikes,
preferences, attitudes and interests which is reflected
in planning.
 Time consuming
a. Planning is a time consuming process because it
involves collection of information, it’s analysis and
interpretation thereof. This entire process takes a lot
of time specially where there are a number of
alternatives available.
b. Therefore planning is not suitable during emergency
or crisis when quick decisions are required.
 Probability in planning
 a. Planning is based on forecasts which are mere
estimates about future.
b. These estimates may prove to be inexact due to the
uncertainty of future.
c. Any change in the anticipated situation may render
plans ineffective.
d. Plans do not always reflect real situations inspite of
the sophisticated techniques of forecasting because
future is unpredictable.
e. Thus, excessive reliance on plans may prove to be
fatal.
 False sense of security
a. Elaborate planning may create a false sense of
security to the effect that everything is taken for
granted.
b. Managers assume that as long as they work as per
plans, it is satisfactory.
c. Therefore they fail to take up timely actions and an
opportunity is lost.
d. Employees are more concerned about fulfillment of
plan performance rather than any kind of change.
 Expensive
a. Collection, analysis and evaluation of different
information, facts and alternatives involves a lot of
expense in terms of time, effort and money
 b. According to Koontz and O’Donell, ’ Expenses on
planning should never exceed the estimated benefits
from planning. ’
Types of Plan
Planning is one of the most important and the first
function of management. It is an activity that managers
of all levels have to perform. So according to the level of
management, the type of plan will differ. Let us see the
different types of plan in management.

Planning is a pervasive function of management, it is

extensive in its scope. So all managers across all levels
participate in planning. However, the plans made by the
top level manager will differ from the ones that lower
managers make.
Plans also differ from what they seek to achieve and what
methods will be used to achieve them. So let us look at
the types of plans that managers deal with.
Objectives
This is the first step in planning the action plan of the
organization. Objectives are the basics of every company
and the desired objective/result that the company plans on
achieving, so they are the endpoint of every planning
activity.
For example one of the objectives of an organization
could be to increase sales by 20%. So the manager will
plan all activities of the organization with this end
objective in mind. While framing the objectives of the
organization some points should be kept in mind.
 Objectives should be framed for a single activity in
mind.
 They should be result oriented. The objective must
not frame any actions
 Objectives should not be vague, they should be
quantitative and measurable.
 They should not be unrealistic. Objectives must be
achievable.
Strategy
This obviously is the next type of plan, the next step that
follows objectives. A strategy is a complete and all-
inclusive plan for achieving said objectives. A strategy is
a plan that has three specific dimensions
i. Establishing long-term objectives
ii. Selecting a specific course of action
iii. allocating the necessary resources needed for the
plan
Forming strategy is generally reserved for the top level of
management. It actually defines all future decisions and
the company’s long-term scope and general direction.
Policy
Policies are generic statements, which are basically a
guide to channelize energies towards a particular strategy.
It is an organization’s general way of understanding,
interpreting and implementing strategies. Like for
example, most companies have a return policy or
recruitment policy or pricing policy etc.
Policies are made across all levels of management, from
major policies at the top-most level to minor policies. The
managers need to form policies to help the employees
navigate a situation with predetermined decisions. They
also help employees to make decisions in unexpected
situations.
Procedure
Procedures are the next types of plan. They are a stepwise
guide for the routine to carry out the activities. These
stepwise sequences are to be followed by all the
employees so the activities can be fulfilled in an
organized manner.
The procedures are described in a chronological order. So
when the employees follow the instructions in the order
and completely, the success of the activity is pretty much
guaranteed.
Take for example the procedure of admission of a student
in a college. The procedure starts with filling out an
application form. It will be followed by a collection of
documents and sorting the applications accordingly.
Rules
Rules are very specific statements that define an action or
non-action. Also, rules allow for no flexibility at all, they
are final. All employees of the organization must
compulsorily follow and implement the rules. Not
following rules can have severe consequences.
Rules create an environment of discipline in the
organization. They guide the actions and the behaviour of
all the employees of the organization. The rule of “no
smoking” is one such example.
Program
Programmes are an in-depth statement that outlines a
company’s policies, rules, objectives, procedures etc.
These programmes are important in the implementation of
all types of plan. They create a link between the
company’s objectives, procedures and rules.
Primary programmes are made at the top level of
management. To support the primary program all
managers will make other programs at the middle and
lower levels of management.
Methods
Methods prescribe the ways in which in which specific
tasks of a procedure must be performed. Also, methods
are very specific and detailed instructions on how the
employees must perform every task of the planned
procedure. So managers form methods to formalize
routine jobs.
Methods are very important types of plan for an
organization. They help in the following ways
 give clear instructions to the employees, removes
any confusion
 Ensures uniformity in the actions of the employees
 Standardizes the routine jobs
 Acts as an overall guide for the employees and the
managers
Budget
A budget is a statement of expected results the managers
expect from the company. Budgets are also a quantitative
statement, so they are expressed in numerical terms. A
budget quantifies the forecast or future of the
organization.
There are many types of budgets that managers make.
There is the obvious financial budget, that forecasts the
profit of the company. Then there are operational budgets
generally prepared by lower-level managers. Cash
budgets monitor the cash inflows and outflows of the
company.
Planning approaches

Planning, by definition, is to "devise detailed methods for

doing, arranging and making something". For different
things different approaches should be adopted. For
instance, planning an engineering structure such as a
bridge is very different from planning a watershed
complex. Some useful approaches employed in watershed
planning are explained as follows:
Bottom-up approach
Many watershed projects have failed because farmers and
local communities were not involved in the planning
process. Watersheds in developing countries are heavily
populated by farmers. Therefore, any watershed plan will
not be successfully carried out without their support or
participation.
Several ways can be employed to involve farmers in the
planning process. For instance, existing farmers'
organizations can be included in the survey and planning
body. Local watershed committees can be organized for
planning and implementation purposes. Conducting
individual farm planning or group farm planning with the
farmers will obtain details on how farmers will use,
develop and protect their farms. Involving villagers and
communities for planning community forests, pasture,
roads, and other infrastructural needs are also scopes of
the bottom-up approach. During such planning processes
government policy and farmers' needs can be fully
discussed. For watershed plans to be useful and workable,
they should be well understood and accepted at grass-root
level.
Iterative approach
Planning is an iterative approach. Before a final plan is
prepared, many studies, assessments, alternative
considerations and revisions will have to be made.
Generally, a preliminary or interim report should be made
by gathering the results and reports of each team (see
examples given in Fig. 3). After receiving comments from
all the related sources, a review and revision period
begins. The process may need to be repeated several times
to find the best results.
Flexible approach
A final watershed plan is not like a blueprint of a bridge.
A watershed plan should be considered as a starting point
and should be kept under constant monitoring and
adjustment. There are many reasons. First, project life
may cover 10 years or so and many unpredictable things,
caused by nature or man made, may happen during the
period. New problems need new policies and techniques
to cope with them. Second, watershed management is a
complex task dealing with social, economical, cultural,
legal, institutional, and physical problems of a watershed.
Difficulties may arise during implementation and many
times the original strategies and goals need to be revised.
Therefore, learning by doing is a very important process
hence any such plan should be kept flexible.
Flexibility means leaving rooms for future adjustment,
modification, or revision. Consequently, a monitoring and
evaluation process should be built into the plan for this
purpose. This also means that the planned targets should
be progressive, i.e. smaller at the very beginning and
gradually expanding with the added experience.

Management by Objectives - Meaning, Need and its

Limitations
An effective management goes a long way in extracting
the best out of employees and make them work as a single
unit towards a common goal.
The term Management by Objectives was coined by Peter
Drucker in 1954.
What is Management by Objective ?
The process of setting objectives in the organization to
give a sense of direction to the employees is called as
Management by Objectives.
It refers to the process of setting goals for the employees
so that they know what they are supposed to do at the
workplace.
Management by Objectives defines roles and
responsibilities for the employees and help them chalk out
their future course of action in the organization.
Management by objectives guides the employees to
deliver their level best and achieve the targets within the
stipulated time frame.
Need for Management by Objectives (MBO)
 The Management by Objectives process helps the
employees to understand their duties at the
workplace.
 KRAs are designed for each employee as per their
interest, specialization and educational qualification.
 The employees are clear as to what is expected out
of them.
 Management by Objectives process leads to satisfied
employees. It avoids job mismatch and unnecessary
confusions later on.
 Employees in their own way contribute to the
achievement of the goals and objectives of the
organization. Every employee has his own role at the
workplace. Each one feels indispensable for the
organization and eventually develops a feeling of
loyalty towards the organization. They tend to stick
to the organization for a longer span of time and
contribute effectively. They enjoy at the workplace
and do not treat work as a burden.
 Management by Objectives ensures effective
communication amongst the employees. It leads to a
positive ambience at the workplace.
 Management by Objectives leads to well defined
hierarchies at the workplace. It ensures transparency
at all levels. A supervisor of any organization would
never directly interact with the Managing Director in
case of queries. He would first meet his reporting
boss who would then pass on the message to his
 senior and so on. Every one is clear about his
position in the organization.
 The MBO Process leads to highly motivated and
committed employees.
 The MBO Process sets a benchmark for every
employee. The superiors set targets for each of the
team members. Each employee is given a list of
specific tasks.
Limitations of Management by objectives Process
 It sometimes ignores the prevailing culture and
working conditions of the organization.
 More emphasis is being laid on targets and
objectives. It just expects the employees to achieve
their targets and meet the objectives of the
organization without bothering much about the
existing circumstances at the workplace. Employees
are just expected to perform and meet the
deadlines. The MBO Process sometimes do treat
individuals as mere machines.
 The MBO process increases comparisons between
individuals at the workplace. Employees tend to
depend on nasty politics and other unproductive
tasks to outshine their fellow workers. Employees do
only what their superiors ask them to do. Their work
 lacks innovation, creativity and sometimes also
becomes monotonous.

Steps in the Process of MBO (Management

by Objectives)
Process Of MBO: With the aim to achieve greater efficiency and performance,
employee’s motivation is really important to have and Management by Objectives
(MBO) is the best approach to do so.

This approach was proposed by Peter Drucker in the 1960s, and by definition, the
process of management by objectives show a personnel management system, where
the organization set, plan, monitor and achieve specific objectives with the mutual
cooperation of both high level and low-level employees.

For business passionate individuals, the concept of MBO may be clear, yet there is a
need to understand the process of management by objectives.

Management By Objectives Process

The process of MBO involves six key steps that incorporate managerial activities in such
a systematic way, which is directly influenced by efficient and effective achievement
individuals and organizational objectives. In case someone wants to analyze the
practical importance of Management by Objectives, then it is good to summarize all
the objectives of the organization together with individual goals.

The six steps involved in the process of MBO are determining organizational goals,
determining employees’ objectives, constantly monitoring progress and performance,
performance evaluation, providing feedback and performance appraisal. Moreover, all
these steps are briefly defined as follows.

1. Determining Organizational Goals

The entire development of an organization depends on the set goals. A goal is the most
critical and necessary factor behind the effectiveness and efficiency of an organization,
so it is important to effectively manage set goals either single or many different kinds.

Prior to start working on the set goals, the managers should determine organizational
goals with the aim to create potential management that must be capable of handling
different kinds of goals easily. Determining goals don’t mean creating goals, as the
preliminary goals are set by the top-level supervisors on the basis of in-depth analysis
and judgment about what should be accomplished and how to do so in a certain period.

2. Determining Employees’ Objectives

After determining the organizational goals, the next thing to do is to know the
individual’s goals or more clearly employees’ goals. It is the responsibility of the
manager to ask employees about what goals they can accomplish within a specific time
period and what resources will they use to achieve the goal.

Also, if needed, then managers and employees can classify the goals from the most
important to the least one in order to make the goal achieving process more easily and
in favor of the organization.

3. Constant Monitoring Progress and Performance

The process of MBO is not just set for providing additional effectiveness to managers
across the organization, but it is also equally important for constantly monitoring the
progress and performance of the employees. There are certain things stated below that
can help managers to monitor performance and progress.

 Checking less-effective or ineffective programs by performing a comparison of

performance with already prepared objectives.
 Using ZBB (Zero Based Budgeting)
 For measuring plans and individuals, implementing MBO concepts
 Defining short and long term plans and objectives
 Installing efficient and effective controls
 Eventually, composing the completely sound structure of the organization with all
things at appropriate places such as responsibilities, decision making and so on.

4. Performance Evaluation

As per the basic concept of MBO, the performance evaluation comes under the
responsibility of concerned managers and is made by their participation. Keep in the
mind, performance evaluation is one of the most important factors of the organization
that can help to operate certain objectives smoothly.

5. Providing Feedback

The psychologically influential factor of MBO is constantly providing feedback to

employees regarding their performance and individual goals so that they can monitor,
correct and extra improve their skills and mistakes.
Mostly, the feedback is provided in periodic meetings where supervisors and their
subordinates review the performance and progress towards the achievement of goals.
At one point, feedback helps individuals know their weaknesses. While on the other
hand, it also motivates already potential individuals to enhance and develop their
performance additionally.

6. The Performance Appraisal

Performance appraisals are the final step of the process of Management by Objectives.
By definition, a day by day review of the employee’s performance across the
organization can be called as performance appraisal. Performance appraisal is
associated with the term performance evaluation, but in some cases, both differ from
each other.

Management by Objectives (MBO): Benefits and Weakness!

MBO helps in implementing goal oriented management. It can be applied in various areas of
organisation such as performance appraisal, organisational development, long range planning,
integration of individual and organisational objectives and so on.

Benefits of MBO:

Benefits of MBO can be stated as follows:

1. Better Managing:

MBO results in improved and better managing. Better managing requires setting goals for each
and every activity and individual and ensuring that these are achieved. MBO not only helps in
setting objectives but also ensures balancing of objectives and resources. For establishing
objectives there is a need for better and result oriented planning. Management by objectives
forces managers to think about planning for results, rather than merely planning activities or
work. Managers will devise ways and means for achieving objectives. The objectives also act as
controls and performance standards. So MBO is helpful in improving management.

2. Clarifying Organisation:

MBO helps in clarifying organisational roles and structures. Responsibility and authority are
assigned as per the requirements of the tasks assigned. There is no use of fixing objectives
without delegating requisite authority. The positions should be built around the key results
expected of people occupying them. Implementation of MBO will help in spotting the
deficiencies in the organisation.
3. Encouraging Personal Commitment:

The main benefit of MBO is that it encourages personnel to commit themselves for the
achievement of specified objectives. In a normal course people are just doing the work assigned
to them. They follow the instructions given by the superiors and undertake their work as a
routine matter. In MBO the purpose of every person is clearly defined with his or her own
consent. People in the organisation have an opportunity to put their own ideas before superiors,
discuss the pros and cons of various suggestions and participate in setting the final objectives.
When a person is a party for setting objectives then he will make honest endeavor to achieve
them. He will feel committed to reach the goals decided with his consent. A feeling of
commitment brings enthusiasm and helps in reaching the goals.

4. Developing Controls:

MBO mechanism helps in devising effective controls. The need for setting controls is the setting
of standards and then finding out deviations if any. In MBO, verifiable goals are set and the
actual performance will help in finding out the deficiencies in results. Every person is clear about
what is expected from him and these standards act as clear cut controls. So controls can easily be
devised when MBO is followed.

Weaknesses of Management by Objectives:

Despite of its acceptability in recent times, MBO technique has not yet acquired a final shape.

This system suffers from a number of weaknesses which are discussed as under:

1. Failure to Teach MBO Philosophy:

The success of MBO will depend upon its proper understanding by managers. When managers
are clear about this concept only then they can explain to subordinates how it works, why it is
being done, what will be the expected results, how it will benefit participants, etc. This
philosophy is based on self direction and self control and aims to make managers professionals.

2. Failure to Give Guidelines to Goal setters:

If the goal setters are not given proper guidelines for deciding their objectives then MBO will not
be a success. The managers who will guide in goal setting should themselves understand the
major policies of the company and the role to be played by their activity. They should also know
planning premises and assumptions for the future. Failure to understand these vital aspects will
prove fatal for this system.

3. Difficulty in Setting Goals:

The main emphasis in MBO technique is on set ting objectives. The setting of objectives is not a
simple thing. It requires lot of information for arriving at the conclusions. The objectives should
be verifiable so that performance may be evaluated. Some objectives may not be verifiable,
precaution should be taken in defining such objectives. The objectives should not be set casually
otherwise MBO may prove liability for the business.

4. Emphasis on Short Term Objectives:

In most of the MBO programs there is a tendency to set short-term objectives. Managers are
inclined to set goals for a year or less and their thrust is to give undue importance to short term
goals at the cost of long term goals. They should achieve short term goals in such a way that they
help in the achievement of long term goals also. There may be a possibility that short term and
long term objectives may be incompatible because of specific problems. So proper emphasis
should be given to both short term and long term objectives.

5. Danger of Inflexibility:

There is a tendency to strict to the objectives even if there is a need for modification. Normally
objectives will cease to be meaningful if they are often changed, it will also be foolish to strive
for goals which have become obsolete due to revised corporate objectives or modified policies.

Organizing is the function of management which follows

planning. It is a function in which the synchronization and
combination of human, physical and financial resources
takes place. All the three resources are important to get
results. Therefore, organizational function helps in
achievement of results which in fact is important for the
functioning of a concern. According to Chester Barnard,
“Organizing is a function by which the concern is able to
define the role positions, the jobs related and the co-
ordination between authority and responsibility. Hence, a
manager always has to organize in order to get results.
A manager performs organizing function with the help of
following steps:-
1. Identification of activities - All the activities which
have to be performed in a concern have to be
identified first. For example, preparation of accounts,
 making sales, record keeping, quality control,
inventory control, etc. All these activities have to be
grouped and classified into units.
2. Departmentally organizing the activities - In this
step, the manager tries to combine and group similar
and related activities into units or departments. This
organization of dividing the whole concern into
independent units and departments is called
departmentation.
3. Classifying the authority - Once the departments are
made, the manager likes to classify the powers and its
extent to the managers. This activity of giving a rank
in order to the managerial positions is called
hierarchy. The top management is into formulation of
policies, the middle level management into
departmental supervision and lower level
management into supervision of foremen. The
clarification of authority help in bringing efficiency
in the running of a concern. This helps in achieving
efficiency in the running of a concern. This helps in
avoiding wastage of time, money, effort, in
avoidance of duplication or overlapping of efforts
and this helps in bringing smoothness in a concern’s
working.
4. Co-ordination between authority and
responsibility - Relationships are established among
various groups to enable smooth interaction toward
the achievment of the organizational goal. Each
 individual is made aware of his authority and he/she
knows whom they have to take orders from and to
whom they are accountable and to whom they have to
report. A clear organizational structure is drawn and
all the employees are made aware of it.
Importance of Organizing Function
 Specialization - Organizational structure is a network
of relationships in which the work is divided into units
and departments. This division of work is helping in
bringing specialization in various activities of concern.
 Well defined jobs - Organizational structure helps in
putting right men on right job which can be done by
selecting people for various departments according to
their qualifications, skill and experience. This is helping
in defining the jobs properly which clarifies the role of
every person.
 Clarifies authority - Organizational structure helps in
clarifying the role positions to every manager (status
quo). This can be done by clarifying the powers to every
manager and the way he has to exercise those powers
should be clarified so that misuse of powers do not take
place. Well defined jobs and responsibilities attached
helps in bringing efficiency into managers working. This
helps in increasing productivity.
 Co-ordination - Organization is a means of creating
co-ordination among different departments of the
enterprise. It creates clear cut relationships among
positions and ensure mutual co-operation among
individuals. Harmony of work is brought by higher level
managers exercising their authority over interconnected
activities of lower level manager.
Authority responsibility relationships can be fruitful only
when there is a formal relationship between the two. For
smooth running of an organization, the co-ordination
between authority- responsibility is very important. There
should be co-ordination between different relationships.
Clarity should be made for having an ultimate
responsibility attached to every authority. There is a
saying, “Authority without responsibility leads to
ineffective behaviour and responsibility without authority
makes person ineffective.” Therefore, co-ordination of
authority- responsibility is very important.
 Effective administration - The organization structure
is helpful in defining the jobs positions. The roles to be
performed by different managers are clarified.
Specialization is achieved through division of work. This
all leads to efficient and effective administration.
 Growth and diversification - A company’s growth is
totally dependant on how efficiently and smoothly a
concern works. Efficiency can be brought about by
clarifying the role positions to the managers, co-
ordination between authority and responsibility and
concentrating on specialization. In addition to this, a
company can diversify if its potential grow. This is
possible only when the organization structure is well-
defined. This is possible through a set of formal structure.
 Sense of security - Organizational structure clarifies
the job positions. The roles assigned to every manager is
clear. Co-ordination is possible. Therefore, clarity of
powers helps automatically in increasing mental
satisfaction and thereby a sense of security in a concern.
This is very important for job- satisfaction.
 Scope for new changes - Where the roles and
activities to be performed are clear and every person
gets independence in his working, this provides enough
space to a manager to develop his talents and flourish
his knowledge. A manager gets ready for taking
independent decisions which can be a road or path to
adoption of new techniques of production. This scope
for bringing new changes into the running of an
enterprise is possible only through a set of
organizational structure.
Organization:
Louis Allen, “Organization is the process of identifying
and grouping 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.” In the words of Allen, organization is an
instrument for achieving organizational goals. The
work of each and every person is defined and authority
and responsibility is fixed for accomplishing the same.
characteristics of organisation are studied as follows:
1. Division of Work:

Organisation deals with the whole task of business. The

total work of the enterprise is divided into activities and
functions. Various activities are assigned to different
persons for their efficient accomplishment. This brings in
division of labour. It is not that one person cannot carry
out many functions but specialisation in different
activities is necessary to improve one’s efficiency.
Organisation helps in dividing the work into related
activities so that they are assigned to different individuals.
2. Co-Ordination:

Co-ordination of various activities is as essential as their

division. It helps in integrating and harmonising various
activities. Co-ordination also avoids duplications and
delays. In fact, various functions in an organisation
depend upon one another and the performance of one
influences the other. Unless all of them are properly co-
ordinated, the performance of all segments is adversely
affected.
3. Common Objectives:

All organisational structure is a means towards the

achievement of enterprise goals. The goals of various
segments lead to the achievement of major business goals.
The organisational structure should build around common
and clear cut objectives. This will help in their proper
accomplishment.
4. Co-operative Relationship:

An organisation creates co-operative relationship among

various members of the group. An organisation cannot be
constituted by one person. It requires at least two or more
persons. Organisation is a system which helps in creating
meaningful relationship among persons. The relationship
should be both vertical and horizontal among members of
various departments. The structure should be designed
that it motivates people to perform their part of work
together.
5. Well-Defined Authority-Responsibility
Relationships:

An organisation consists of various positions arranged in

a hierarchy with well defined authority and responsibility.
There is always a central authority from which a chain of
authority relationship stretches throughout the
organisation. The hierarchy of positions defines the lines
of communication and pattern of relationships.

Process of Organizing

First, let us understand the concept of organizing.

Organizing essentially consists of establishing a division
of labor. The managers divide the work among
individuals and group of individuals. And then they
coordinate the activities of such individuals and groups to
extract the best outcome.
Organizing also involves delegating responsibility to the
employees along with the authority to successfully
accomplish these tasks and responsibilities. One major
aspect of organizing is delegating the correct amounts of
responsibilities and authority.
 Now, as one of the most important functions of
management, organizing follows a meticulous process.
The following are the steps in the process of
organizing,
1] Identifying the Work
The obvious first step in the process of organizing is to
identify the work that has to be done by the organization.
This is the ground level from which we will begin. So the
manager needs to identify the work and the tasks to be
done to achieve the goals of the organization.
Identification of the work helps avoid miscommunication,
overlapping of responsibilities and wastage of time and
effort.
2] Grouping of Work
For the sake of a smooth flow of work and smooth
functioning of the organization, similar tasks and
activities should be grouped together. Hence we create
departments within the company and divisions within
each department. Such an organization makes the
functioning of the company way more systematic.
Depending on the size of the organization and the volume
of work, an organization can have several department and
divisions. And every department has a manager
representing them at the top-level of the management.
In smaller organizations sometimes these departments are
clubbed together under one manager.
3] Establish Hierarchy
The next step in the process of organizing is to establish
the reporting relationships for all the individual
employees of the company. So a manager establishes the
vertical and horizontal relationships of the company.
This enables the evaluation and control over the
performances of all the employees in a timely manner. So
if rectifications need to be made, they can be made
immediately.
4] Delegation of Authority
Authority is basically the right an individual has to act
according to his wishes and extract obedience from the
others. So when a manager is assigned certain duties and
responsibilities, he must also be delegated authority to
carry out such duties effectively.
If we only assign the duties, but no authority he will not
be able to perform the tasks and activities that are
necessary. So we must always assign authority and clearly
specify the boundaries of the duties and the authority
which has been delegated.
5] Coordination
Finally, the manager must ensure that all activities carried
out by various employees and groups are well
coordinated. Otherwise, it may lead to conflicts between
employees, duplication of work and wastage of time and
efforts. He must ensure all the departments are carrying
out their specialized tasks and there is harmony in these
activities. The ultimate aim is to ensure that the goal of
the organization is fulfilled.

Principles of Organizing

The organizing process can be done efficiently if the

managers have certain guidelines so that they can take
decisions and can act. To organize in an effective manner,
the following principles of organization can be used by a
manager.
1. Principle of Specialization
According to the principle, the whole work of a
concern should be divided amongst the subordinates
on the basis of qualifications, abilities and skills. It is
through division of work specialization can be
achieved which results in effective organization.
2. Principle of Functional Definition
 According to this principle, all the functions in a
concern should be completely and clearly defined to
the managers and subordinates. This can be done by
clearly defining the duties, responsibilities, authority
and relationships of people towards each other.
Clarifications in authority-responsibility relationships
helps in achieving co-ordination and thereby
organization can take place effectively. For example,
the primary functions of production, marketing and
finance and the authority responsibility relationships
in these departments shouldbe clearly defined to
every person attached to that department.
Clarification in the authority-responsibility
relationship helps in efficient organization.
3. Principles of Span of Control/Supervision
According to this principle, span of control is a span
of supervision which depicts the number of
employees that can be handled and controlled
effectively by a single manager. According to this
principle, a manager should be able to handle what
number of employees under him should be decided.
This decision can be taken by choosing either froma
wide or narrow span. There are two types of span of
control:-
a. Wide span of control- It is one in which a
manager can supervise and control effectively a
 large group of persons at one time. The features
of this span are:-
i. Less overhead cost of supervision
ii. Prompt response from the employees
iii. Better communication
iv. Better supervision
v. Better co-ordination
vi. Suitable for repetitive jobs
According to this span, one manager can
effectively and efficiently handle a large number
of subordinates at one time.
b. Narrow span of control- According to this span,
the work and authority is divided amongst many
subordinates and a manager doesn't supervises
and control a very big group of people under
him. The manager according to a narrow span
supervises a selected number of employees at
one time. The features are:-
i. Work which requires tight control and
supervision, for example, handicrafts, ivory
work, etc. which requires craftsmanship,
there narrow span is more helpful.
ii. Co-ordination is difficult to be achieved.
iii. Communication gaps can come.
iv. Messages can be distorted.
 v. Specialization work can be achieved.
Factors influencing Span of Control
a. Managerial abilities- In the concerns where
managers are capable, qualified and
experienced, wide span of control is always
helpful.
b. Competence of subordinates- Where the
subordinates are capable and competent and
their understanding levels are proper, the
subordinates tend to very frequently visit the
superiors for solving their problems. In such
cases, the manager can handle large number of
employees. Hence wide span is suitable.
c. Nature of work- If the work is of repetitive
nature, wide span of supervision is more helpful.
On the other hand, if work requires mental skill
or craftsmanship, tight control and supervision
is required in which narrow span is more
helpful.
d. Delegation of authority- When the work is
delegated to lower levels in an efficient and
proper way, confusions are less and congeniality
of the environment can be maintained. In such
cases, wide span of control is suitable and the
 supervisors can manage and control large
number of sub- ordinates at one time.
e. Degree of decentralization- Decentralization is
done in order to achieve specialization in which
authority is shared by many people and
managers at different levels. In such cases, a tall
structure is helpful. There are certain concerns
where decentralization is done in very effective
way which results in direct and personal
communication between superiors and sub-
ordinates and there the superiors can manage
large number of subordinates very easily. In
such cases, wide span again helps.
2. Principle of Scalar Chain
Scalar chain is a chain of command or authority
which flows from top to bottom. With a chain of
authority available, wastages of resources are
minimized, communication is affected, overlapping
of work is avoided and easy organization takes place.
A scalar chain of command facilitates work flow in
an organization which helps in achievement of
effective results. As the authority flows from top to
bottom, it clarifies the authority positions to
managers at all level and that facilitates effective
organization.
3. Principle of Unity of Command
It implies one subordinate-one superior relationship.
Every subordinate is answerable and accountable to
one boss at one time. This helps in avoiding
communication gaps and feedback and response is
prompt. Unity of command also helps in effective
combination of resources, that is, physical, financial
resources which helps in easy co-ordination and,
therefore, effective organization.
Authority Flows from Top to
Bottom
 
Managing Director
↓
Marketing Manager
↓
Sales/ Media Manager
↓
Salesmen

According to the above diagram, the Managing

Director has got the highest level of authority. This
 authority is shared by the Marketing Manager who
shares his authority with the Sales Manager. From
this chain of hierarchy, the official chain of
communication becomes clear which is helpful in
achievement of results and which provides stability to
a concern. This scalar chain of command always flow
from top to bottom and it defines the authority
positions of different managers at different levels.

Formal and Informal Organization: Features,

Advantages and Disadvantages
Formal Organisation:
When the managers are carrying on organising
process then as a result of organising process an
organisational structure is created to achieve
systematic working and efficient utilization of
resources. This type of structure is known as formal
organisational structure.
Formal organisational structure clearly spells out the
job to be performed by each individual, the
authority, responsibility assigned to every individual,
the superior- subordinate relationship and the
designation of every individual in the organisation.
This structure is created intentionally by the
managers for achievement of organisational goal.
Features of Formal organisation:
(1) The formal organisational structure is created
intentionally by the process of organising.
(2) The purpose of formal organisation structure is
achievement of organisational goal.
(3) In formal organisational structure each
individual is assigned a specific job.
(4) In formal organisation every individual is
assigned a fixed authority or decision-making power.
(5) Formal organisational structure results in
creation of superior-subordinate relations.
(6) Formal organisational structure creates a scalar
chain of communication in the organisation.
Advantages of Formal Organisation:
1. Systematic Working:
Formal organisation structure results in systematic
and smooth functioning of an organisation.
2. Achievement of Organisational Objectives:
Formal organisational structure is established to
achieve organisational objectives.
3. No Overlapping of Work:
In formal organisation structure work is
systematically divided among various departments
and employees. So there is no chance of duplication
or overlapping of work.
4. Co-ordination:
Formal organisational structure results in
coordinating the activities of various departments.
5. Creation of Chain of Command:
Formal organisational structure clearly defines
superior subordinate relationship, i.e., who reports
to whom.
6. More Emphasis on Work:
Formal organisational structure lays more emphasis
on work than interpersonal relations.
Disadvantages of Formal Organisation:

1. Delay in Action:
While following scalar chain and chain of command
actions get delayed in formal structure.
2. Ignores Social Needs of Employees:
Formal organisational structure does not give
importance to psychological and social need of
employees which may lead to demotivation of
employees.
3. Emphasis on Work Only:
Formal organisational structure gives importance to
work only; it ignores human relations, creativity,
talents, etc.
Informal Organisation:
In the formal organisational structure individuals
are assigned various job positions. While working at
those job positions, the individuals interact with
each other and develop some social and friendly
groups in the organisation. This network of social
and friendly groups forms another structure in the
organisation which is called informal organisational
structure.
The informal organisational structure gets created
automatically and the main purpose of such
structure is getting psychological satisfaction. The
existence of informal structure depends upon the
formal structure because people working at different
job positions interact with each other to form
informal structure and the job positions are created
in formal structure. So, if there is no formal
structure, there will be no job position, there will be
no people working at job positions and there will be
no informal structure.
Features of informal organisation:
(1) Informal organisational structure gets created
automatically without any intended efforts of
managers.
(2) Informal organisational structure is formed by
the employees to get psychological satisfaction.
(3) Informal organisational structure does not follow
any fixed path of flow of authority or
communication.
(4) Source of information cannot be known under
informal structure as any person can communicate
with anyone in the organisation.
(5) The existence of informal organisational
structure depends on the formal organisation
structure.
Advantages of Informal Organisation:
1. Fast Communication:
Informal structure does not follow scalar chain so
there can be faster spread of communication.
2. Fulfills Social Needs:
Informal communication gives due importance to
psychological and social need of employees which
motivate the employees.
3. Correct Feedback:
Through informal structure the top level managers
can know the real feedback of employees on various
policies and plans.
Strategic Use of Informal Organisation. Informal
organisation can be used to get benefits in the formal
organisation in the following way:
1. The knowledge of informal group can be used to
gather support of employees and improve their
performance.
2. Through grapevine important information can be
transmitted quickly.
3. By cooperating with the informal groups the
managers can skillfully take the advantage of both
formal and informal organisations.
Disadvantages of Informal organisation:
1. Spread Rumours:
According to a survey 70% of information spread
through informal organisational structure are
rumors which may mislead the employees.
2. No Systematic Working:
Informal structure does not form a structure for
smooth working of an organisation.
3. May Bring Negative Results:
If informal organisation opposes the policies and
changes of management, then it becomes very
difficult to implement them in organisation.
4. More Emphasis to Individual Interest:
Informal structure gives more importance to
satisfaction of individual interest as compared to
organisational interest.

Line and Staff Organization

We have previously seen two other forms of organization –
line organization and functional organizational structure.
And both of these have their own set of drawbacks.

The line system focuses excessively on authority, and

the functional organization divides the firm
into departments. This is where we come up with a perfect
combination to avoid these limitations, i.e. the line and
staff organization structure.
In a line and staff organization structure, both the line
managers and the staff have their own important roles to
play. In this structure, the authority flows from the top
down.

The line manager is the one in charge. He is the one with

the authority to make all the important decisions of the
company. And he is also responsible for these decisions
and the performance of his employees.

The staff is the experts in this scenario. They have the

knowledge and expertise of their field and are there to
assist their line managers. They have an advisory role in
the firm.

But since they do not have authority over the line

managers, the line managers can choose to take their
advice or ignore it. So the main objective of the staff is to
come up with solutions to problems. They help the line
manager in attaining the company’s objectives and goals.
 (Source: YourArticleLibrary)

LINE-AND-STAFF CONFLICT
Due to different positions and types of authority
within a line-and-staff organization, conflict between
line and staff personnel is almost inevitable.
Although minimal conflict due to differences in
viewpoints is natural, conflict on the part of line and
staff personnel can disrupt an entire organization.
There are many reasons for conflict. Poor human
relations, overlapping authority and responsibility,
and misuse of staff personnel by top management
are all primary reasons for feelings of resentment
between line and staff personnel. This resentment
can result in various departments viewing the
organization from a narrow stance instead of looking
at the organization as a whole.
Fortunately, there are several ways to minimize
conflict. One way is to integrate line and staff
personnel into a work team. The success of the work
team depends on how well each group can work
together in efforts to increase productivity and
performance. Another solution is to ensure that the
areas of responsibility and authority of both line and
staff personnel are clearly defined. With clearly
defined lines of authority and responsibility, each
group may better understand their role in the
organization. A third way to minimize conflict is to
hold both line and staff personnel accountable for
the results of their own activities. In other words, line
personnel should not be entirely responsible for poor
performance resulting from staff personnel advice.
Line-and-staff organizations combine the direct
flow of authority present within a line organization
with staff departments that offer support and advice.
A clear chain of command is a consistent
characteristic among line-and-staff organizational
structures. Problems of conflict may arise, but
organizations that clearly delineate responsibility can
help minimize such conflict.

Functional Organizational Structure

Every company needs an organizational structure, it

basically defines the hierarchy of the company. In simple
words, it defines who works for whom and who reports to
who.

Without this structure, there would be chaos and

inefficiency. Now one of the most common forms of
formal organization is the functional organizational
structure.
In a functional organization structure, the entire
organization is divided into smaller groups or departments
based on specialized functions.

So for example in such an arrangement there will be

a finance department, an IT department, marketing
department etc. This allows for greater cohesiveness and
efficiency in the work of the employees.

Since the work is divided into smaller sectors, so is the

management. The management is also sub-divided
according to the type of work being done.

So every department has their own head or executive. And

the reporting structure can also differ from department to
department.

Advantages of Functional Organizational Structure

 The executive or the team leader has the knowledge
and experience of that particular field. For example,
the person heading the IT department will have the
education and skill necessary to shoulder this
responsibility and successfully run his team.
 Because the employee has expertise in that
particular field, the work is more efficient and precise.
 There are fewer mistakes. This also helps with
the motivation of the employees of the company.
 Since all team members come from similar
backgrounds it allows them to share ideas and come
up with solutions. There is a sharing of knowledge,
which is always beneficial.
 The employees also having a clear idea of the
hierarchy of the firm. They need not report or answer
to several managers.
 Also, the employees feel secure in their work. They
see that their work and efforts is not going unnoticed.
This sense of security helps them perform better.

Disadvantages of Functional Organizational

Structure
 The work can be quite one dimensional. After a
while, the employees may start feeling monotony or
 boredom. The lack of new challenges can make them
unenthusiastic for the job at hand.
 In this structure, the manager must take care of the
appraisal system. If the correct approach is not taken
then conflicts may arise between the employees
regarding promotions or appraisals.
 Also, this form of organization requires a high degree
of specialization which is difficult to establish
 If there is a necessary change of personnel it can
disrupt the whole system and its balance. Also, it is
quite a rigid structure, not leaving a lot of scope
for adaptation.
 In Functional Organizational Structure, the
employees never gain any knowledge or skills outside
their own department. This can cause difficulties in
inter-departmental communication.
Span of Management: Meaning, Factors and
Theory
Meaning of Span of Management:
Depending upon the complexity of organisational
activities and relationships amongst superiors and
subordinates, it becomes important the superiors
manage an optimum number of subordinates that
result in optimum organisational output. All the
subordinates cannot be managed by one superior.
There has to be a limit on the number of
subordinates who can be effectively managed by one
superior.
The number of subordinates that a superior can
effectively supervise is known as span of
management or span of control. In the 19th and
middle of 20th century, management writers
determined 5 or 6 as the optimum number that a
manager could effectively manage at the upper level.
Beyond this number, managers faced
problems like:
1. Overburdened with work.
2. Difficulty in coordinating the activities of large
number of people.
3. Difficulty in controlling.
Thus, optimum number of subordinates that a
manager could supervise was determinable but
today, it is not so. Exact number of employees that
managers can effectively supervise cannot be
defined. Span of management is situational in
nature.
Depending on the number of employees that
can be supervised or controlled by managers,
there can be two kinds of structures in the
organisation:
I. Tall structures, and 
II. Flat structures.
I. Tall structures:
These structures are found in classical bureaucratic
organisations. In this structure, a manager can
supervise less number of subordinates. He can,
therefore, exercise tight control over their activities.
This creates large number of levels in the
organisation. This is also known as narrow span of
control. A tall structure or a narrow span of control
appears like this.

Merits of a Tall Structure:

 Managers can closely supervise activities of the
subordinates.
2. There can be better communication amongst
superiors and subordinates.
3. It promotes personal relationships amongst
superiors and subordinates.
4. Control on subordinates can be tightened in a
narrow span.
Limitations of a Tall Structure:
1. It creates many levels in the organisation structure
which complicates co-ordination amongst levels.
2. More managers are needed to supervise the
subordinates. This increases the overhead
expenditure (salary etc.). It is, thus, a costly form of
structure.
3. Increasing gap between top managers and
workers slows the communication process.
Decision-making becomes difficult because of too
many levels.
5. Superiors perform routine jobs of supervising the
subordinates and have less time for strategic
matters.
6. Employees work under strict control of superiors.
Decision-making is primarily centralised. This
restricts employees’ creative and innovative abilities.
7. Strict control leads to low morale and job
satisfaction. This can affect productivity in the long-
run.
To overcome the limitations of a tall structure, many
organisations reduce the number of levels in the
hierarchy by downsizing the organisation.
Downsizing is “the process of significantly reducing
the layers of middle management, expanding spans
of control and shrinking the size of the work force.”
Many companies downsize their work force through
the process of restructuring. Restructuring is “the
process of making a major change in organisation
structure that often involves reducing management
levels and also possibly changing some major
components of the organisations through divestiture
and/or acquisition.”
“The most common and most serious symptom of
mal-organisation is multiplication of the number of
management levels. A basic rule of organisation is to
build the least possible number of management
levels and forge the shortest possible chains of
command.” — Peter F. Drucker
II. Flat Structures:
These structures have a wide span of control. When
superior supervises a larger number of subordinates,
flat structure is created with lesser number of
hierarchical levels. A departure was made from tall
structures to flat structures by James C. Worthy who
was a consultant in the L. Sears, Roebuck and
company.
A structure where span of control for each
managerial position is 4 appears as follows:

To illustrate, if organisations A and B, both have 256

workers and the span of control for each managerial
position is 2 for company A and 4 for company B,
there will be 9 levels in company A (requiring 128
supervisors at the lowest level, 64 at the next higher
level and so on) and 5 levels in company B. A narrow
span of control creates more levels in the
organisational hierarchy than the wide span of
control.
The levels in case of organisation B(5) where
span of control is 4 appears as follows:
(The span of 4 prevails for each functional area at
each level). For the sake of simplicity, the figure
represents the span for only one functional area and
one level.
Merits of a Flat Structure:
1. There is low cost as less number of managers can
supervise organisational activities.
The decision-making process is effective as superiors
delegate authority to subordinates. They are relieved
of routine matters and concentrate on strategic
matters. The decision-making is decentralised.
3. Subordinates perform the work efficiently since
they are considered worthy of doing so by the
superiors.
4. There is effective communication as the number
of levels is less.
5. It promotes innovative abilities of the top
management.
Limitations of a Flat Structure:
1. Superiors cannot closely supervise the activities of
employees.
Managers may find it difficult to co-ordinate the
activities of subordinates.
3. Subordinates have to be trained so that dilution of
control does not affect organisational productivity.
Both tall and flat structures have positive and
negative features and it is difficult to find the exact
number of subordinates that a manager can
effectively manage. Some management theorists like
David D. Van Fleet and Arthur G. Bedeian assert that
span of control and organisational efficiency are not
related and many empirical studies have proved that
span of control is situational and depends on a
variety of factors.
Some studies proved that flat structures produce
better results as decentralised decision making has
less control from the top, promotes initiative and
satisfaction at work. Large number of members in a
group can better solve the complex problems as
group decision making is based on greater skill
variety.
Other studies proved that people working in tall
structures produce better results as less number of
members in a group can come to consensus of
opinion and evaluate their decisions more
thoroughly. Group cohesiveness is high and, thus,
commitment to decisions is also high. Members feel
satisfied with their decisions and conflicts are
reduced.
Factors Affecting Span of Management:
The following factors help in determining the
suitable span of management:
Competence of managers:
If managers are competent in their jobs, they can
have a wide span of management. Competence of
managers is judged by their ability to make decisions
related to motivational plans, leadership styles,
communication channels and chains, techniques of
control etc. Managers who rank high on these
parameters can effectively supervise larger number
of subordinates.
2. Nature of work:
If employees perform similar and repetitive work,
managers can supervise large number of
subordinates and, thus, have a wide span of control.
Non-repetitive and challenging work requires
narrow span of control. Changes in the nature of
work also affects the span of management.
Frequent changes as a result of dynamic
environment support a narrow span as superiors
frequently have to direct the activities of
subordinates. Stability in the nature of work
supports a wide span of management as superiors’
directions are not frequently required to carry out
the work processes.
3. Assistance to managers:
f managers have access to technical or secretarial
assistance, a larger group of subordinates can be
managed. Span of control can, therefore, be wide.
Staff assistance can be useful for collecting and
processing information related to various decisions
and issuing orders to the subordinates. Managers
save time in communicating with subordinates,
direct the activities of larger number of subordinates
and focus on other strategic organisational matters.
4. Competence of subordinates:
If subordinates are competent to manage their jobs
without much assistance from the superiors, span of
control can be wide. Competent subordinates do not
require frequent directions from the superiors with
respect to various organisational activities. Superiors
can thus, manage a larger group of subordinates.
5. Plans and policies:
If plans clearly define the organisational/individual
goals and policies, superiors can supervise a larger
group of subordinates and have a wide span of
control. Clearly defined plans include well-
formulated policies procedures, methods etc.
Particularly, if standing plans are well defined,
subordinates know the broad guidelines within
which they have to make decisions in similar and
repetitive situations.
They do not approach the superiors every time they
face a similar problem-solving situations. Superiors
can, thus, manage a larger group of subordinates.
However, if most of the decisions are made by
resorting to single use plans (programmes, budgets,
projects etc.), managers have to be frequently
approached and the span can, thus, be narrow.
6. Organisational level:
The top executives look after important and
specialised activities and, therefore, the span is
narrow at the top level but at lower levels the span
can be wide, since supervisors are mainly concerned
with routine jobs. According to J.C. Worthy, a
manager can supervise as many as 20 subordinates
at the lower levels.
7. Authority-responsibility structure:
If authority-responsibility structure is well-defined
and understood, superiors can supervise larger
number of subordinates. People work within the
confines of their responsibility and take directions
from superiors only when required. Lack of clarity in
authority-responsibility structure will create
confusion in the organisation. Jobs and who will
perform which job, who is accountable to whom will
not be clear. In such a situation, managers cannot
supervise a large group of subordinates. The span of
management will, thus, be narrow.
8. System of control:
Effective techniques of control can enable the
manager to supervise larger number of subordinates.
Effective system of control promotes
decentralisation. Superiors do not actively involve in
the decision-making processes as decisions are taken
at the levels where they are required. There is
extensive delegation, clarity of jobs, authority-
responsibility relationships and freedom to take
decisions. The span of control can, thus, be wide.
9. Financial factors:
Both narrow and wide structures have financial
constraints. A narrow span requires more managers
and is, thus, a costly form of structure. Wide span,
on the other hand, may result into organisational
inefficiencies. Proper balance has to be maintained
 between the costs and benefits of the span that a
manager can effectively supervise.
These factors are situational in nature and the span
of management is also, thus, situational. Sometimes
it can be narrow and sometimes wide. For the same
organisation, it can be different for different
functional areas and different levels. The span is
usually narrow in the finance department and wide
in the marketing department for the same level. It
may be different in different organisations for the
same functional areas and levels.

Definition: The Span of Management refers to the

number of subordinates who report directly to a
manager.
Factors Determining Span of Management
The span of management can be determined on the
basis of a number of relationships that a manager
can manage. These are:

1. Capacity of Superior: Here the capacity means

the ability of a superior to comprehend the problems
quickly and gel up with the staff such that he gets
 respect from all. Also, the communication skills,
decision-making ability, controlling power, leadership
skills are important determinants of supervisory
capacity. Thus, a superior possessing such capacity
can manage more subordinates as compared to an
individual who lack these abilities.
2. Capacity of Subordinate: If the subordinate is
trained and efficient in discharging his functions
without much help from the superior, the
organization can have a wide span. This means a
superior can manage a large number of
subordinates as he will be required just to give the
broad guidelines and devote less time on each.
3. Nature of Work: If the subordinates are
required to do a routine job, with which they are well
versed, then the manager can have a wider span.
But, if the work is complex and the manager is
required to give directions, then the span has to be
narrower.Also, the change in the policies affects the
span of management. If the policies change
frequently, then the manager needs to devote more
time and hence the span would be narrow whereas
if the policies remain stable, then a manager can
focus on a large number of subordinates. Likewise,
policies technology also plays a crucial role in
determining the span.
4. Degree of Decentralization: If the manager
delegates authority to the subordinates then he is
required to give less attention to them. Thus, higher
the degree of decentralization, the wider is the span
of management. But in case, subordinates do not
have enough authority, then the manager is
frequently consulted for the clarifications, and as a
result superior spends a lot of time in this.
5. Planning: If the subordinates are well informed
about their job roles, then they will do their work
without consulting the manager again and again.
This is possible only because of the standing plans
that they follow in their repetitive decisions. Through
a proper plan, the burden of a manager reduces
manifold and can have a wider span of
management.
6. Staff Assistance: The use of staff assistance
can help the manager in reducing his workload by
performing certain managerial tasks such as
collecting information, processing communications
and issuing orders, on his behalf. By doing so, the
managers can save their time and the degree of
span can be increased
7. Supervision from Others: The classical
approach to the span of management, i.e., each
person should have a single supervisor is changing
these days. Now the subordinates are being
 supervised by other managers in the organization
such as staff personnel. This has helped the
manager to have a large number of subordinates
under him.
8. Communication Techniques: The mode of
communication also determines the span of
management. If in the manager is required to do a
face to face communication with each subordinate,
then more time will be consumed. As a result, the
manager cannot have a wider span. But in case, the
communication is in writing and is collected through
a staff personnel; the manager can save a lot of time
and can have many subordinates under him.
The span of management is also called as the span
of supervision or span of control, which influences
the complexity of the individual manager’s job and
determine the shape or configuration of the
organization.

Factors Influencing the Span of Supervision

There are a number of factors that influence
or determine the span of supervision in a
particular organization, the most important
of these are as follows:
1. The Capacity and Ability of the Executive:
The characteristics and abilities such as leadership,
administrative capabilities, ability to communicate,
to Judge, to listen, to guide and inspire, physical
vigour etc. differ from person to person. A person
having better abilities can manage effectively a large
number of subordinates as compared to the one who
has lesser capabilities.
2. Competence and Training of
Subordinates:
Subordinates who are skilled, efficient,
knowledgeable, trained and competent require less
supervision, and therefore, the supervisor may have
a wider span in such cases as compared to
inexperienced and untrained subordinates who
require greater supervision.
3. Nature of Work:
Nature and importance of work to be supervised is
another factor that influences the span of
supervision. The work involving routine, repetitive,
unskilled and standardized operations will not call
much attention and time on the part of the
supervisor. As such, the supervisors at the lower
levels of organization can supervise the work of a
large number of subordinates. On the other hand, at
higher levels of management, the work involves
complex and a variety of Jobs and as such the
number of subordinates that can be effectively
managed should be limited to a lesser number.
4. Time Available for Supervision:
The capacity of a person to supervise and control a
large number of persons is also limited on account of
time available at his disposal to supervise them. The
span of control would be generally narrow at the
higher levels of management because top managers
have to spend their major time on planning,
organizing, directing and controlling and the time
available at their disposal for supervision will be
lesser. At lower levels of management, this span
would obliviously be wide because they have to
devote lesser time on such other activities.
5. Degree of Decentralization and Extent of
Delegation:
If a manager clearly delegates authority to undertake
a well- defined task, a well trained subordinate can
do it with a minimum of supervisor’s time and
attention. As such, the span could be wide. On the
contrary, “if the subordinate’s task is not one he can
do, or if it is not clearly defined, or if he does not
have the authority to undertake it effectively, he will
either fail to perform it or take a disproportionate
amount of the manager’s time in supervising and
guiding his efforts.”
6. Effectiveness of Communication System:
The span of supervision is also influenced by the
effectiveness of the communication system in the
organization. Faulty communication puts a heavy
burden on manager’s time and reduces the span of
control. On the other hand, if the system of
communication is effective, larger number of
managerial levels will be preferred as the
information can be transmitted easily. Further, a
wide span is possible if a manager can communicate
effectively.
7. Quality of Planning:
If plans and policies are clear and easily
understandable, the task of supervision becomes
easier and the span of management can be wider.
Effective planning helps to reduce frequent calls on
the superior for explanation, instructions and
guidance and thereby saves in time available at the
disposal of the supervisor enabling him to have a
wider span. Ineffective plans, on the other hand,
impose limits on the span of management.
8. Degree of Physical Dispersion:
If all persons to be supervised are located at the
same place and within the direct supervision of the
manager, he can supervise relatively more people as
compared to the one who has to supervise people
located at different places.
9. Assistance of Experts:
The span of supervision may be wide where the
services of experts are available to the subordinate
on various aspects of work. In case such services are
not provided in the organization, the supervisor has
to spend a lot of time in providing assistance to the
workers himself and as such the span of control
would be narrow.
10. Control Mechanism:
The control procedures followed in an organization
also influence the span of control. The use of
objective standards enables a supervisor
‘management by exception’ by providing quick
information of deviations or variances. Control
through personal supervision favours narrow span
while control through objective standards and
reports favour wider span.
11. Dynamism or Rate of Change:
Certain enterprises change much more rapidly than
others. This rate of change determines the stability
of policies and practices of an organization. The span
of control tends to be narrow where the policies and
practices do not remain stable.
12. Need for Balance:
According to Koontz and O ‘Donnel, “There is a limit
in each managerial position to the number of
persons an individual can effectively manage, but the
exact number in each case will vary in accordance
with the effect of underlying variable and their
impact on the time requirements of effective
managing.”