Topic 6-ORGANIZING

▪“ an organization is a process of identifying

and grouping the work to be performed,
defining and delegating responsibility and
authority and establishing relationship for the
purpose of enabling people to work most
effectively together in accomplishing
objectives.” - Allen
“organization involves the grouping of
activities necessary to accomplish goals and
plans, the assignment of these activities to
appropriate departments and the provision
for authority delegation and coordination.”-
Koontz and O’Donnell
▪“Organization is a process of defining and
grouping the activities of the enterprise and
establishing the authority relationship among
them.”-T. Haimann
“Organization is a form of every human
association for the attainment of a common
purpose.”-Mooney and Reily
“Organization is a system of cooperative
activities of two or more persons.”-Chester
Barnard
▪ It facilitates administration and management
▪ It helps in the growth and development of a firm
▪ It ensures optimum use of human resources
▪ It stimulates creativity and innovation
▪ It allows use of modern technology
▪ It facilitates coordination in the firm
▪ It promotes executive development
▪ It ensures cooperation among personnel
1. Principle of objective – objectives must be clearly defined
2. Principle of coordination-people working towards a common
objective must coordinate with each other
3. Principle of efficiency-ensure lowest possible cost of
production
4. Principle of unity of direction-there must be one superior and
one plan of action in gearing towards a direction
5. Principle of unity of command-every person should received a
command from one supervisor and must be accountable to him
6. Principle of specialization-job of the person must be confined
in one function
7. Scalar principle-line of authority shall be clear
8. Short chain of command-short chain of command
enable better communication
9. Authority and responsibility-people with authority shall
be willing to accept corresponding responsibility
10. Principle of Delegation-decision making shall be made
at the lowest competent level of mngt
11. Principle of balance-proper reporting and evaluations
shall be done
12. Principle of change-organizations shall be flexible and
capable of coping with the changes
▪The term organization
architecture refers to the
totality of a firm’s
organization, including formal
organization structure,
control systems, incentive
systems, organizational
culture, and people.
▪The location of decision-making
responsibilities in the firm, the formal
division of the organization into subunits,
and the establishment of integrating
mechanisms to coordinate the activities of
subunits.
▪the location of decision-making responsibilities in
the firm (centralized or decentralized);
▪the formal division of the organization into subunits
such as functions, product divisions, and national
operations
▪the establishment of integrating mechanisms to
coordinate the activities of subunits (such as cross-
functional teams).
▪Metrics used to measure the performance of
subunits and to judge how well managers are
running those subunits.

▪Devices used to encourage desired employee

behavior.
▪Values and assumptions that are shared among
the employees of an organization.
▪People in the organizations have their own
distinctive patterns of culture and subculture.
▪The employees of an organization, the strategy
used to recruit, compensate, motivate, and
retain those individuals, and the type of people
they are in terms of their skills, values, and
orientation.
▪They are the human capital
1.Vertical differentiation, which refers to
the location of decision-making
responsibilities within a structure (that is,
centralization or decentralization) and also
to the number of layers in a hierarchy (that is,
whether the organizational structure is tall or
flat).
2. Horizontal differentiation, which refers
to the formal division of the
organizationinto subunits.
3. The establishment of integrating
mechanisms, which are mechanisms for
coordinatingsubunits.
A. Centralizations vs. Decentralization
A firm’s vertical differentiation determines where in
its hierarchy the decision-making power is
concentrated.
▪Centralization is the concentration of decision-
making authority at a high level in a management
hierarchy.
▪Decentralization vests decision-making authority in
lower-level managers or other employees.
▪ Centralization can facilitate coordination
▪ centralization can help ensure that decisions are
consistent with organizational objectives.
▪ centralization can avoid duplication of activities by
various subunits within the organization.
▪ by concentrating power and authority in one individual or
a management team, centralization can give top-level
managers the means to bring about needed major
organizational changes
▪ top management can become overburdened when decision-
making authority is centralized.
▪ motivational research favors decentralization. Behavioral
scientists have long argued that people are willing to give more
to their jobs when they have a greater degree of individual
freedom and control over their work
▪ decentralization permits greater flexibility—more rapid
response to environmental changes.
▪ decentralization can result in better decision.
▪ decentralization can increase control.
▪Tall Hierarchies
– have many layers
of management
▪Flat Hierarchies
– have few layers
▪ The number of direct reports a manager has.
▪ The number of direct reports a manager can handle depends on
the nature of the work being supervised, how visible the
performance of subordinates is, and the extent of
decentralization within the organization.
▪ Generally if the work being performed by subordinates is
routine, if the performance of subordinates is visible and easy
to measure, and if the subordinates are empowered to make
many decisions by themselves, managers can operate with a
wide span of control.
1. there is a tendency for information to get accidentally distorted as
it passes through layers in a hierarchy
2. There is also the problem of deliberate distortion by midlevel
managers who are trying to curry favor with their superiors or
pursue some agenda of their own.
▪ example, the manager of a division might suppress bad information and exaggerate good
information in an attempt to window-dress the performance of his or her unit to higher-
level managers and win their approval.

3. they are expensive. The salaries and benefits of multiple layers of

midlevel managers can add up to significant overhead, which can
increase the cost structure of the firm;
1. There is a tendency for information to get accidentally distorted as
it passes through layers in a hierarchy
2. There is also the problem of deliberate distortion by midlevel
managers who are trying to curry favor with their superiors or
pursue some agenda of their own.
▪ example, the manager of a division might suppress bad information and exaggerate good
information in an attempt to window-dress the performance of his or her unit to higher-
level managers and win their approval.

3. They are expensive. The salaries and benefits of multiple layers of

midlevel managers can add up to significant overhead, which can
increase the cost structure of the firm;
A. Functional Structure
B. Multidivisional Structure
C. Geographic Structure
D. Matrix Structure
▪A structure that follows the obvious division of labor
within the firm, with different functions focusing on
different tasks.
▪Functions themselves can be and often are
subdivided into subunits
▪Horizontal differentiation within functions is
typically on the basis of similar tasks and processes
▪ A structure in which a firm is divided into different
divisions, each of which is responsible for a distinct
business area.
▪ Each division is set up as a self-contained, largely
autonomous entity with its own functions.
▪ Responsibility for operating decisions and business-level
strategy is typically decentralized to the divisions, which
are then held accountable for their performance.
▪ A structure in which a firm is divided into different units
on the basis of geography.
▪ An area may be a country (if the market is large enough)
or a group of countries. Each area division tends to be a
self-contained, largely autonomous entity
▪ Each may have its own set of functions (such as its own
production, marketing, R&D, and human resource
functions)
▪An organization with two overlapping
hierarchies.
▪A structure when a firm thinks that no
single structural design seems to solve all
of a firm’s problems