THEORIES OF MANAGEMENT

Organizing the Business:

By: Andrew Kiggundu

The objective and purpose of this essay is to critically discuss the
organizational structure, evaluate the factors that affect choice of an
organizational structure, examine the different types of organizational
charts, and finally discuss the organizing function of management and its
various characteristics, elements and importance. According to
wikipeadia.org Organizational structures developed from the ancient times of
early man hunters and fruit collectors in tribes through highly royal and
clerical power structures to industrialization and today's post
industrial structures. Early management theorists such as Taylor, Fayol, and
Weber all saw a company’s orgisational structure as crucial to its effectiveness
and efficiency. When the rebellion began that came to be known as human
relations school of management, there was still no denial of the need for an
organizational structure but rather one by which the needs, knowledge, and
opinions of workers were given greater recognition.

An organizational structure is a system of hierarchy that outlines different

positions, responsibility and Authority within an organization. A successful
organizational structure determines the flow of information, responsibilities
and authority of each position aimed at achieving the overall organization
objectives. It is a visual representation of how an enterprise is shaped. An
organizational structure is either based on a centralized or decentralized
system. A centralized structure is where decision making authority is
concentrated with top management and distributed down the chain of
command. Organizations with a centralized management structure tend to be
heavily Bureaucratic, for example the military has a highly centralized
structure with a well defined strict hierarchy positions, responsibilities and
Authority. A decentralized organizational structure is one in which some
decision making authority is entrusted with lower management and further
down to workers. Decentralized structures are popular with many technology
startups. There are three main types of organizational structure that include
functional structure, divisional or multidivisional structure and matrix
structure.

Functional Structure breaks up the enterprise based on the responsibilities,

roles and specialization of its workers. To foster efficiency, this structure
brakes down its workforce into different departments such as sales
department, marketing department, production department, operations
department. This type of structure is especially common with small and
medium size enterprises.

Divisional or Multidivisional Structure is popular among large or multinational

corporations with many subsidiaries. The enterprise structures its workforce
based on its various product lines as each product line operates its own
company. A great example of corporations with this structure is Unilever Plc,
Johnson & Johnson, Tata Group.
Matrix Structure is a combination of both functional and divisional structures.
It is usually adopted by large multinational companies. In this structure
employee’s work under different superiors, divisions and departments, for
example an employee may have duties and responsibilities in both sales of one
product line and production department of another product line.

Choosing an appropriate organizational structure requires business owners and

managers to take into consideration several factors that can determine the
success or failure of the enterprise. For example, an organization that has a
large workforce working on different projects may benefit from a decentralized
structure to foster quick decision without needing upper management approval.
Understanding which factors influence an organizational structure is
fundamental to choosing a structure aligned with the objectives and goals of the
enterprise as explained below

Factors Affecting Organizational Structure

Technology: The type and scale of technology employed for production of goods
and services will affect the organization structure. An organization using
sophisticated mass production technology will likely adopt a less mechanistic
or bureaucratic organizational structure based on decentralized leadership.
Such organizations operate in dynamic environments as customer desires keep
changing so there is need for quick flow of information and action.  An example
of an industry functioning in a dynamic environment is electronics as
technology keeps changing hence creating competitive pressures. As technology
changes, so do the desires of consumers. A slight failure to innovate newer
technologies according to customer tastes and preferences can quickly set the
company on the back foot hugely affecting its market share. Organizations that
employ small scale production technology on another hand operate in relatively
stable environments as customers' needs are well understood and likely will
remain consistent for a relatively long time. Such organizations will likely adopt
a mechanistic or bureaucratic organizational structure with a high degree of
specialization, standardization and a well defined hierarchy of authority.
Examples of such organizations include manufacturers of basic goods, plastics,
cleaning detergents and toiletries.

Scale of operations and size of the organization: Size of the enterprise will also
determine its adopted organizational structure. Large enterprises with mass
production capacities such as Unilever Plc, Johnson & Johnson, Tata Group
have increased job specialization, standardization and decentralization of
Authority. Smaller organizations have a smaller degree of specialization as
employees may be called upon to carry out increased overlapping
responsibilities without necessarily having to hire more workers. The Aston
Group conducted research on organizations of different sizes and made
conclusions that as an enterprise increase in size, the need for job
specialization, standardization and decentralization also increases.
Objectives and strategy of the enterprise: Every organization has its own
strategy for achieving its objectives. An organizational structure and strategy
for achieving its goals should be closely interlinked. Organizations such as
Apple Inc, Google LLC, adopted an innovation strategy that constantly requires
the development and introduction of major new products and services for their
customers. Such enterprises with an innovative strategy consequently adopt an
organic organization structure with decentralized leadership to enhance quick
decision making. On the other hand companies that deal with basic products
such as Wal-Mart Inc could adopt a mechanistic or bureaucratic strategy with
centralized leadership, extensive work specialization and standardization.

Environment: The car manufacturing industry does not face a highly volatile,
complex and dynamic environment. Until recently the automobile industry has
only faced two substantial environmental changes and that is the introduction
of electric car technology with zero carbon emissions and the introduction of
autonomous car technology. The car market fluctuates a bit here and there,
but basically manufacturers make cars and sell them. Such organizations have
for so long adopted a mechanistic organizational structure as they face less
fluidity.  When an organization operates in a highly fluid environment such as
technology and internet-based firms, they require a high degree of flexibility
and adaptability to such dynamic and volatile environments, hence adopting
an organic or loose organizational structure to foster quick decision making.

Nature of activities: The Organizational structure of a technology company will

be significantly different to that of a military organization because they
participate in different activities daily. A technology firm will adopt a
decentralized leadership structure to enhance faster decision making while
Governmental organizations such as the military will adopt a bureaucratic
organizational structure with strict observance of the Hierarchy of Authority,
highly Centralized leadership and well defined responsibilities for each
employee.

People: An Organizational structure defines work, duties, and responsibilities

and groups them into departments and directs people to run those
departments. People assigned different jobs, work and responsibilities must
possess the necessary skill, knowledge and efficiency or competency to
accomplish these objectives. Management philosophies and attitudes can also
impact on the nature of the organizational structure in an enterprise.
Organizational charts are crucial to the performance of every organization as
they Improve coordination and communication across departmental teams,
Improve team responsiveness, define a clear business structure/ leadership,
hierarchies and Authority, duties and responsibilities and overall help assimilate
new staff into the workplace.

An organizational chart refers to a diagram that visually displays a firm’s

internal structure and official chain of command by detailing job positions
according to rank (power, Authority and status) and their reporting
relationships.

Organization charts can be divided into: master charts which typically display
the whole formal organizational structure, and supplementary charts which
display duties, authority and reporting relationships within units or
departments of an organization. There are different types of organizational
charts as explained below

Vertical or Top to Bottom charts: In this chart superior management is

shown at the top and subordinate management in successive lower positions.
The supreme authority such as the company’s Board of directors is shown at
the top while lowest authority at the bottom.  Vertical charts are helpful for
staff of an organization to understand who they report to and the
responsibilities every member carries. The vertical organizational structure is a
strict hierarchical structure with decision making emanating from the top to
the bottom. The vertical chart is shown in the Diagram below

Drawing Extracted from yourarticlelibrary.com

Horizontal or Left to Right: In this chart the highest positions/ top
management who enjoy the highest authority and status within the
organization are put on the left side and those with diminishing authority and
status move towards the right. The flow of authority and status from higher to
lower level management is represented by movement from left to right as
illustrated in the diagram below

Drawing Extracted from yourarticlelibrary.com

Circular charts: In circular charts the supreme highest authority is

represented at the centre of the circle surrounded by a series of outwardly
corresponding circles representing middle and lower level management
respectively. The higher the position of authority, the nearer it is to the centre
and the lesser the position of authority, the further it is from the center. The
organization is drawn from the center outwards. This is shown in the diagram
below. Drawing Extracted from unicaf.org
Organizing as a function is the backbone to management because without
efficient organizing management can perform its objectives smoothly.

Organizing is simply the process of defining and grouping activities, and

establishing authority, responsibility and reporting relationships among them
to attain organizational objectives. Nature of the organizing function can be
understood in reference to the following characteristics

Organizing is a basic function or a sub-process of management. Organizing is a

crucial element in the main process of management. Organizing is done in
relation to all other functions of management. The organizing function follows
the function of planning and the other functions of management follow the
organizing function such as staffing, directing, controlling, and coordinating.

Organizing is a continuous process. An organization is a group of people with

various positions working together to achieve the continuous goals and targets
of that enterprise. There is need to constantly organize as more activities,
goals, objectives and functions keep coming up or reshuffled within the
organization. Organizing is a never ending process as an organization is a
dynamic enterprise.

Organizing is Goal-oriented. Every organization has its own set of goals, targets
and objectives. Organizing is the function of management employed to
harmonize and achieve the overall objectives of the organization.

Organizing is a function of all managers. The Organizing function is performed

at all levels of management within the organization. For example top
management may be involved in organizing the necessary physical resources
while lower management may be concerned with organizing the day today
activities performed by workers.

Organizing involves coordination in order to correlate and harmonize both

physical and human capital to foster smooth operations within the
organization.

Organizing establishes authority- responsibility relationship among the

organizational members. Through organizing there is a clearly defined
structure and hierarchy of authority and responsibilities within the
organization workforce.

Organizing is a group effort as it requires the participation of various

enterprise employees with different responsibilities and authority in order to
achieve the common objectives of an enterprise.
Each of the common elements of the organizing function represents a
critical component of an effective structure as discussed below

Activities/ job Design. Job design is the process of organizing work into the
tasks, activities and responsibilities required to perform a particular job to
achieve a particular objective. There are several different approaches to job
design that include, job rotation which refers to moving workers from one job
to another, job enlargement which gives employees more tasks and duties to
accomplish, job enrichment where a job is designed to have more interesting
and challenging tasks consequently increasing skill variety and more pay for
involved workers, job characteristics which provides a set of implementing
principles for enriching jobs in organizational settings. These all foster
effectiveness and efficiency, productivity and cater for individual needs

Authority and reporting relationships: Chain of command is the hierarchy of

authority, power and responsibilities exercised and assigned from top high
level management to every employee at every level of the enterprise. Chain of
command dictates who reports to whom and who is accountable to whom.
Through Authority managers are able to delegate work. There are three steps in
the delegation process that include assigning responsibility or duties which
means the manger will give workers tasks to do, then workers is given the
authority to execute those tasks, and lastly, accountability is established by
workers accepting responsibility to complete the tasks at hand. 

Coordination: Coordination ensures that different departments and teams at

every level of the organization work in harmony. Coordination brings unity of
action among workers, teams, and departments for a common objective.

Environment: An environment is composed of all the outside factors that

influence and impact the operation of an organization. The enterprise must act,
react or adapt to the environment to maintain its operations. The external
environment can be broken down into two types which include the
micro environment which consists of the factors that directly impact the
operation of an organization such as customers, suppliers, financiers and
public perception. The macro environment on the other hand consists of
general factors that a business typically may have no control over but should
find ways to adapt such as social-cultural factors, political factors, interest
rates and taxes and so on.

Objectives and plans: Organization’s objectives are goals or outcomes that it

wants or desires to achieve. Objectives define the mechanisms, plan and
techniques that an organization will use to achieve its measurable targets
which provide direction to its human capital.
The function of organizing has a number of importances as discussed
below
Organizing enables the smooth functioning of different departments through
defining their duties and authority relationships in the organizational
structure. Organizing enables management to direct, coordinate and control
the various activities of the organization.
Organizing ensures effective and efficient utilization of enterprise resources.
Through organizing, roles and responsibilities of each employee are clearly
defined and the necessary resources put in place hence leading to efficient
utilization of both human and physical resources of the organization.

Organizing promotes effective communication as it is a crucial means of

coordination and communication within and among multiple departments of
the organization. It specifies the flow of information among different employees
and departments of the enterprise.
Organizations can easily meet the challenges and can expand their activities
in a planned manner by putting their resources to optimum use hence
fostering growth of n enterprise. Without proper organizing the organization is
sunk in chaos.
Under organizing all the enterprise activities are subdivided into various jobs
where competent individuals are selected and appointed who become experts at
a particular job hence creating the benefits of specialization.

Organizing creates an effective administration. The process of organizing

creates a clear structure of authority and responsibility where everybody knows
their roles and to whom they are accountable to.

Organizing also fosters employee development. This is true especially in a

highly decentralized organizational structure where lower management and
employees are involved in the decision making process of the organization
which boosts a sense of responsibility among workers, and boosts workers’
motivation to achieve enterprise goals and targets.
 CONCLUSION
Managers of organizations from the smallest sole proprietorship to the largest
multi-national corporations must make crucial and imperative decisions about
delegation of responsibility and authority when organizing activities within the
organization. The decision of how to best divide manpower to increase an
organization’s efficiency and effectiveness is often the starting point for more
complicated decisions that lead to the creation of formal organizational charts.
Organizations that embrace functional, multidivisional and matrix structures
of leadership often have reporting relationships with considerable
complexity. Finally every organization needs a leadership structure in order to
function smoothly. Organizational structures can be used by any enterprise if
the structure fits into the nature and the maturity of the organization. Use of
the right structure is key to the success of the enterprise as adopting the
wrong structure could prove catastrophic for the enterprise leading to poor
communication, poor production and poor customer service consequently
impacting on the company’s market share or leading to total company failure
In most cases companies’ progress from one structure to another is based on
production capacity, technology and size manpower. A company may start off
with a bureaucratic structure and evolve to a matrix structure.
.
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