SH1710

Organizing

I. Nature of Organizations

We can define term organization as a group of individuals who are interacting with each
other and contributing their efforts towards the attainment of certain goals or objectives. In
other words, organization may be defined as a cooperative and healthy relationship amongst
the groups, which is built by them through proper network of communication system with a
view to achieve their specific or common goals.

"Organizing" may be defined as a process made by any business firm for the purpose of
achieving its own goals or objectives in a smooth way. It is the process of ensuring healthy
relationship among the departments by the proper channel of communication so that the
personnel (employees) of every department can give their hundred percent contributions in
the accomplishment of desired goals.

Businesses, much like individuals, develop in their own way and at their own pace. Several
factors influence how a business develops, from the personality of its leaders to its chosen
industry to the economic climate. The results can range from a structured, vertical hierarchy
to a loose, horizontal free-form group. Businesses can develop from teams splitting off and
pursuing their goals or from individuals coming together for a common cause.

• Differentiation occurs in large companies when different departments, sections, or branch

offices create their own corporate culture within the parent company's overall structure.
For instance, the sales staff at a differentiated company will have a different approach to
their tasks than the accounting department. Companies also can be differentiated based
on product lines. A highly-differentiated brewery will have sections that brew pilsners,
lagers and ales, each with its own production, accounting, and marketing operations
while operating under the same corporate umbrella.

• Integration relates to how the different areas of the company coordinate their operations.
A highly-integrated company has strong connections between departments and product
lines, with each section working under a cohesive set of rules and strategies. Integrated
companies are highly vertical and hierarchical in nature. These companies operate from a
"top-down" mindset, where the management dictates the structure of each department
rather than allowing the individual departments to set their own agendas.

II. Types of Organization Structures

Organizations are set up in specific ways to accomplish different goals, and the structure of
an organization can help or hinder its progress toward accomplishing these goals.
Organizations large and small can achieve higher sales and other profit by properly matching
their needs with the structure they use to operate. There are three (3) main types of
organizational structure: functional, divisional, and matrix structure.

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• The vertical organization has a structure with power emanating from the top down.
There's a well-defined chain of command with a vertical organization, and the person at
the top of the organizational chart has the most power. Employees report to the person
directly above them in the organizational structure. Each person is responsible for a
specific area or set of duties.

• A horizontal organization has a less-defined chain of command. Employees across lines

have similar input into how the organization is run. Instead of each person having clearly
defined duties, employees may work in teams, with everyone on the team having input.
Employees may perform many different functions and may report to several supervisors,
rather than a single boss. Project managers or team leaders report to a team of
supervisors, with members of each team being essentially equal in terms of power.

• Functional structure is set up so that each portion of the organization is grouped

according to its purpose. In this type of organization, for example, there may be a
marketing department, a sales department and a production department. The functional
structure works very well for small businesses in which each department can rely on the
talent and knowledge of its workers and support itself. However, one (1) of the
drawbacks to a functional structure is that the coordination and communication between
departments can be restricted by the organizational boundaries of having the various
departments working separately.

• Divisional structure typically is used in larger companies that operate in a wide

geographic area or that have separate smaller organizations within the umbrella group to
cover different types of products or market areas. For example, the now-defunct
Tecumseh Products Company was organized divisionally--with a small engine division, a
compressor division, a parts division and divisions for each geographic area to handle
specific needs. The benefit of this structure is that needs can be met more rapidly and
more specifically; however, communication is inhibited because employees in different
divisions are not working together. Divisional structure is costly because of its size and
scope. Small businesses can use a divisional structure on a smaller scale, having different
offices in different parts of the city, for example, or assigning different sales teams to
handle different geographic areas.

• Matrix structure, a hybrid of divisional and functional structure. Typically used in large
multinational companies, the matrix structure allows for the benefits of functional and
divisional structures to exist in one organization. This can create power struggles because
most areas of the company will have a dual management--a functional manager and a
product or divisional manager working at the same level and covering some of the same
managerial territory.

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III. Organization Theories and Application

There are two (2) main classifications of theories regarding organizational design: the
traditional and modern.

• Traditional pertains to the usual or old-fashioned ways. This includes the following:

Simple organizational design has few departments, wide spans of control over a big
number of subordinates directly reporting to a manager; has a centralized authority figure
and has very little formalization of work; usually used by companies that start out as
entrepreneurial ventures.

Functional organizational design group together similar or related specialties, It is,

generally, functional departmentalization utilized and put into practice in the entire
organization. For example, a marketing firm that markets cars and related products like
tires, car batteries, and accessories.

Divisional organizational design is made up of separate business divisions or units, where

the patent corporation acts as oversee to coordinate and control the different divisions and
provide financial and legal support services.

• Meanwhile, modern organizational designs refer to contemporary or new design theories

which include the following:

Team organizational design which is made up of work groups or teams.

Matrix or project organizational design which refers to an organization where specialists

from different departments work on projects that are supervised by a project manager.
This design results in a double chain of command wherein workers have two (2)
managers: the functional area manager and the project manager – who share authority
over them.

Boundaryless organizational design is another design where the design is not defined or
limited.

IV. Delegation

Delegation is vital for the accomplishment of many organizational tasks. It occurs when someone
with authority confers upon another person the power to do a particular task. Delegation is
usually a one-way street – superiors delegate authority to subordinates. However, ultimate
responsibility for task completion usually remains the responsibility of the person who delegated
the authority to complete it. For example, if your boss delegates a task to you, s/he is likely still
ultimately responsible for making sure that task is accomplished.

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Steps in delegation include:

1. Identify the Key Task – The first critical step is to recognize and track all the main tasks that
the members of your group must accomplish. Develop a task list for your group. Define the
task and establish your goals for a project. Have a vision to carry through a project.

2. Delegate Each Task Appropriately – Review the list in order to identify the tasks that you
should do and those that can be delegated to the members of your group. Choose members
whose skills and personality styles match the assignment. Empower the members so as to
provide them an opportunity to grow and be challenged.

3. Explain Each Task to Your New Members – Define and clarify the nature of the task
delegated to your members. To ensure a collaborative approach, properly communicate to all
the members of your group as to what tasks and to whom it has been delegated. Be sure to
give specific directions and to make your expectations clear, for both quality and timeframe.
Explain to the members clearly as to why the task is important and how it contributes to the
organization as a whole.

4. Develop a Plan for Each Task Assigned – A sound plan is essential for the projects to
succeed. Good planning is a critical part of the delegation process. The plan should define
how the task will be accomplished; list the subtasks and their completion dates. Make sure
your members have all the necessary resources to complete the assigned task. Encourage
your members to take a lead in developing a plan.

5. Monitor the Progress – Review the progress of each task on a regular basis. Set checkpoints
for both short-range and long-range projects. Give members the freedom to perform and
avoid close supervision. Measure success by quantifiable criteria. Give praise and
constructive criticism where it is due. Look at a failed act of delegation as a learning
opportunity. Help your members to learn to grow through both their successes and their
failures.

V. Formal and Informal Organizations

When the managers are carrying on organizing process then as a result of organizing process
an organizational structure is created to achieve a systematic working and efficient utilization
of resources. This type of structure is known as a formal organizational structure.

Formal organizational structure clearly outlines 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 organization. This structure is
created intentionally by the managers for the achievement of organizational goal.

Features of Formal Organization:

• The formal organizational structure is created intentionally by the process of organizing.
• The purpose of the formal organizational structure is the achievement of organizational
goal.

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• In formal organizational structure each individual is assigned a specific job.

• In formal organizations, every individual is assigned a fixed authority or decision-making
power.
• Formal organizational structure results in the creation of superior-subordinate relations.
• Formal organizational structure creates a scalar chain of communication in the
organization.

Advantages of Formal Organization:

• Systematic Working – Formal organization structure results in the systematic and smooth
functioning of an organization.
• Achievement of Organizational Objectives – Formal organizational structure is
established to achieve organizational objectives.
• No Overlapping of Work – In formal organization structure, work is systematically
divided among various departments and employees. So there is no chance of duplication
or overlapping of work.
• Coordination – Formal organizational structure results in coordinating the activities of
various departments.
• Creation of Chain of Command – Formal organizational structure clearly defines the
superior-subordinate relationship, i.e., who reports to whom.
• More Emphasis on Work - Formal organizational structure lays more emphasis on work
than interpersonal relations.

Disadvantages of Formal Organization:

• Delay in Action – While following scalar chain and chain of command actions get
delayed in a formal structure.
• Ignores Social Needs of Employees – Formal organizational structure does not give
importance to the psychological and social need of employees, which may lead to
demotivation of employees.
• Emphasis on Work Only – Formal organizational structure gives importance to work
only; it ignores human relations, creativity, talents, etc.

In formal organizational 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 organization. This network of social and friendly groups
forms another structure in the organization which is called informal organizational structure.

The informal organizational 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 a 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 Organization:

• Informal organizational structure gets created automatically without any intended efforts of
managers.

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• The informal organizational structure is formed by the employees to get psychological

satisfaction.
• The informal organizational structure does not follow any fixed path of flow of authority or
communication.
• Source of information cannot be known under informal structure as any person can
communicate with anyone in the organization.
• The existence of informal organizational structure depends on the formal organization
structure.

Advantages of Informal Organization:

• Fast Communication – Informal structure does not follow scalar chain so there can be faster
spread of communication.
• Fulfills Social Needs – Informal communication gives due importance to the psychological
and social need of employees which motivate the employees.
• 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 Organization – Informal organization can be used to get benefits in
the formal organization in the following way:
o The knowledge of informal group can be used to gather the support of employees and
improve their performance.
o Through grapevine important information can be transmitted quickly.
o By cooperating with the informal groups, the managers can skilfully take the advantage
of both formal and informal organizations.

Disadvantages of Informal Organization:

• Spread Rumours – According to a survey 70% of information spread through the informal
organizational structure are rumors which may mislead the employees.
• No Systematic Working – Informal structure does not form a structure for the smooth
working of an organization.
• May Bring Negative Results – If informal organization opposes the policies and changes of
management, then it becomes very difficult to implement in an organization.
• More Emphasis to Individual Interest – Informal structure gives more importance to
satisfaction of individual interest as compared to organizational interest.

References:
Delegation in management: definition & explanation. (n.d.). In Study.com. Retrieved from
http://study.com/academy/lesson/delegation-in-management-definition-lesson-quiz.html
Five steps to effective delegation working with your colony. (n.d.). Retrieved from
http://www.akpsi.org/document.doc?id=410
Formal and informal organization: Features, advantages and disadvantages. (n.d.). Retrieved from
http://www.yourarticlelibrary.com/organization/formal-and-informal-organization-features-advantages-
and-disadvantages/8654/
Hanks, G. (2016). What is differentiation & integration in organization development?. In Small Business. Retrieved
from http://smallbusiness.chron.com/differentiation-integration-organization-development-70838.html
Writing. A. (n.d.). Types of organizations. Retrieved from http://smallbusiness.chron.com/different-types-
organizational-structure-723.html

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