MODULE 4 – ORGANIZING 49

MODULE 4 – ORGANIZING

INTRODUCTION

Organizing is the management function that follows the planning process. It is the
process of establishing orderly uses of all resources within the organization's
management system. It is a function in which human, physical, financial and information
resources are synchronized and combined to achieve results. Moreover, this
management function is essential because it facilitates administration as well as the
functioning of the organization.
This module will present the different types of organizations structure, the organizational
chart and its purpose as well as the importance of organization.

LEARNING OUTCOMES:

After reading this module, the learner should be able to:

1. Define organization and realize its importance;

2. Explain the classifications and types of organizations structure;
3. Differentiate the types of organizational chart and state it’s purpose in
organization;
4. Analyze the purpose of reorganization, departmentation

TIME:

The time allotted for this module is 6 hours.

LEARNER DESCRIPTION

The participants in this module are BSA and BSBA students

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MODULE CONTENTS:

LESSON 4.1: Organizing: Its definition and nature

Organizing is a broad term that can be interpreted differently by any management

theorist. Some believe that this includes the behavior of all the members of the
group. Others argue that this is the ultimate structure of social and cultural
relationship. Generally, most managers agree that the terms imply a formalized
arrangement of deliberate systems, functions and positions.
In the words of Louis A. Allen, “Organization is the process of identifying and
grouping of the works to be performed, defining and delegating responsibility and
authority and establishing relationships for the purpose of enabling people to work
most efficiently”.

What is organization?

Organization is a social unit of people that is structured and managed to meet a need or
to pursue collective goals. All organizations have a management structure that
determines relationships between the different activities and the members, and
subdivides and assigns roles, responsibilities, and authority to carry out different tasks.
Organizations are open systems--they affect and are affected by their environment.

Nature of Organizing

Effectiveness and efficiency of every personnel are highly important in business

organization in order to achieved its goals, but it could be only done if they know
their roles, duties and responsibilities. It is now therefore the function of managers to
define and delegate responsibilities to the right person who are capable of doing the
necessary tasks.

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Process of organizing

Organizing, like planning, is a process that needs to be carefully worked out and
implemented. This process involves determining what work is needed, assigning those
tasks and organizing them in a decision-making framework (organizational structure). If
this process is not well conducted, the results may include confusion, frustration, loss of
efficiency and limited effectiveness.. The process of organising consists of the following
five steps.

 Identification of activities – Each organization exists for fulfilling a specific

purpose. This purpose identifies the activities which are performed by the
organization. For example, in a manufacturing organization, production of the

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goods and their selling are the major activities in addition to the routine activities.
And these activities are in variance with the activities of a service organization or
an organization involved in the trading activities. Hence the identification of the
various activities of the organization is an important step in the organizing
function.

 Grouping of activities – Once the activities have been identified, then there is a
necessity that they are grouped. The activities are grouped in various ways. The
activities which are similar in nature can be grouped as one and a separate
department can be created. For example, activities related to the purchasing,
production, marketing, and accounting and finance can be grouped respectively
under purchase, production, marketing, and finance departments etc. Further in
each department the activities can be further subdivided into various specific
jobs.

 Assignment of responsibilities – Having completed the exercise of identifying,

grouping and classifying of all activities into specific jobs, the individual
employees comes into picture since the employees are to be assign with the
responsibilities to take care of activities related to the specific jobs.

 Granting authority – On the basis of specific responsibilities given to individual

employees, they are to be provided with the necessary authority for the
discharge of the assigned responsibilities in order to ensure their effective
performance and in turn the performance of the organization.

 Establishing relationship – This is a very important part of the organizing function

since each employee in the organisation is to know as to whom to report and
which are the employee who are to work with him. This establishes a structure of
relationships in the organization which helps to ensure that the organization has
clear relationships. This structure of relationships also facilitates the delegation.

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References:

Juneja, P ( 2020). Management function of management. Retrieved from: https: // www.

managementstudyguide.com/organizing_function.htm

Satyendra (2015). Organizing – A Management Function. Retrieved from:

https://www.ispatguru.com/organizing-a-management-function/

Organization. Retrieved from: http://www.businessdictionary. com/definition/

organization.html

Organization image ( 2018).Retrieved from: https://images.app.google/

fE8r3dYKwGKHUGtf6

Organization image Retrieved from:https://images.app.goo.gl/qRmhn9nag7gLD6un6

Organizing. Retrieved from: https://courses.lumenlearning.com/wmopen-introbusiness/

chapter/ organizing/

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LESSON 4.2: Classification and Types of Organizational Structure

Classification of Organization

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

1. Formal Organization - This is one which refers to a structure of well defined

jobs each bearing a measure of authority and responsibility. It is a conscious
determination by which people accomplish goals by adhering to the norms laid
down by the structure. This kind of organization is an arbitrary set up in which
each person is responsible for his performance. Formal organization has a formal
set up to achieve pre- determined goals.
2. Informal Organization - It refers to a network of personal and social
relationships which spontaneously originates within the formal set up. Informal
organizations develop relationships which are built on likes, dislikes, feelings and
emotions. Therefore, the network of social groups based on friendships can be
called as informal organizations. There is no conscious effort made to have
informal organization. It emerges from the formal organization and it is not based
on any rules and regulations as in case of formal organization.

Relationship between Formal and Informal Organizations

For a concerns working both formal and informal organization are important. Formal
organization originates from the set organizational structure and informal organization
originates from formal organization. For an efficient organization, both formal and
informal organizations are required. They are the two phase of a same concern.

Formal organization can work independently. But informal organization depends totally
upon the formal organization.

Formal and informal organization helps in bringing efficient working organization and
smoothness in a concern. Within the formal organization, the members undertake the
assigned duties in co-operation with each other. They interact and communicate
amongst themselves. Therefore, both formal and informal organizations are important.

Organization Structure
1. Line organization
This is the simplest form of structure and refers to a direct straight-line
responsibility and control from the top management to the middle management
and to the lower level. It acquired this name because there are direct single lines
of authority and responsibility between the manager and his subordinates. It is
the oldest form of organization structure based on the classical principle of the
Scalar Chain. In this form of structure, authority passes responsibility-directly to
his immediate superior.

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Merits of Line Organization

1. Simplest- It is the most simple and oldest method of administration.

2. Unity of Command- In these organizations, superior-subordinate relationship is
maintained and scalar chain of command flows from top to bottom.
3. Better discipline- The control is unified and concentrates on one person and
therefore, he can independently make decisions of his own. Unified control
ensures better discipline.
4. Fixed responsibility- In this type of organization, every line executive has got
fixed authority, power and fixed responsibility attached to every authority.
5. Flexibility- There is a co-ordination between the top most authority and bottom
line authority. Since the authority relationships are clear, line officials are
independent and can flexibly take the decision. This flexibility gives satisfaction of
line executives.
6. Prompt decision- Due to the factors of fixed responsibility and unity of
command, the officials can take prompt decision.

Demerits of Line Organization

1. Over reliance- The line executive’s decisions are implemented to the bottom.
This results in over-relying on the line officials.
2. Lack of specialization- A line organization flows in a scalar chain from top to
bottom and there is no scope for specialized functions. For example, expert
advices whatever decisions are taken by line managers are implemented in the
same way.
3. Inadequate communication- The policies and strategies which are framed by
the top authority are carried out in the same way. This leaves no scope for
communication from the other end. The complaints and suggestions of lower
authority are not communicated back to the top authority. So there is one way
communication.

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4. Lack of Co-ordination- Whatever decisions are taken by the line officials, in

certain situations wrong decisions, are carried down and implemented in the
same way. Therefore, the degree of effective co-ordination is less.
5. Authority leadership- The line officials have tendency to misuse their authority
positions. This leads to autocratic leadership and monopoly in the concern.

2. Line and staff organization

This is done with the assistance of expert specialists. Business leaders have
recognized-as their companies are expanding from simple to complex organizations-
that a small number of managers can not personally assume direct responsibility for
all functions, such as research , planning, distribution, public relations , industrial
relations and many other business activities. Therefore, one option toward
reorganization as a company expands in size and complexity is to appoint assistants
to managers. Specific advisory responsibility is delegated to these assistants.

Merits of Line and Staff Organization

1. Relief to line of executives- In a line and staff organization, the advice and
counselling which is provided to the line executives divides the work between the
two. The line executive can concentrate on the execution of plans and they get
relieved of dividing their attention to many areas.
2. Expert advice- The line and staff organization facilitates expert advice to the line
executive at the time of need. The planning and investigation which is related to
different matters can be done by the staff specialist and line officers can
concentrate on execution of plans.

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3. Benefit of Specialization- Line and staff through division of whole concern into
two types of authority divides the enterprise into parts and functional areas. This
way every officer or official can concentrate in its own area.
4. Better co-ordination- Line and staff organization through specialization is able
to provide better decision making and concentration remains in few hands. This
feature helps in bringing co-ordination in work as every official is concentrating in
their own area.
5. Benefits of Research and Development- Through the advice of specialized
staff, the line executives, the line executives get time to execute plans by taking
productive decisions which are helpful for a concern. This gives a wide scope to
the line executive to bring innovations and go for research work in those areas.
This is possible due to the presence of staff specialists.
6. Training- Due to the presence of staff specialists and their expert advice serves
as ground for training to line officials. Line executives can give due concentration
to their decision making. This in itself is a training ground for them.
7. Balanced decisions- The factor of specialization which is achieved by line staff
helps in bringing co-ordination. This relationship automatically ends up the line
official to take better and balanced decision.
8. Unity of action- Unity of action is a result of unified control. Control and its
effectivity take place when co-ordination is present in the concern. In the line and
staff authority all the officials have got independence to make decisions. This
serves as effective control in the whole enterprise.

Demerits of Line and Staff Organization

1. Lack of understanding- In a line and staff organization, there are two authority
flowing at one time. This results in the confusion between the two. As a result,
the workers are not able to understand as to who is their commanding authority.
Hence the problem of understanding can be a hurdle in effective running.
2. Lack of sound advice- The line official get used to the expertise advice of the
staff. At times the staff specialist also provide wrong decisions which the line
executive have to consider. This can affect the efficient running of the enterprise.
3. Line and staff conflicts- Line and staff are two authorities which are flowing at
the same time. The factors of designations, status influence sentiments which
are related to their relation, can pose a distress on the minds of the employees.
This leads to minimizing of co-ordination which hampers a concern’s working.
4. Costly- In line and staff concern, the concerns have to maintain the high
remuneration of staff specialist. This proves to be costly for a concern with limited
finance.
5. Assumption of authority- The power of concern is with the line official but the
staff dislikes it as they are the one more in mental work.
6. Staff steals the show- In a line and staff concern, the higher returns are
considered to be a product of staff advice and counseling. The line officials feel
dissatisfied and a feeling of distress enters a concern. The satisfaction of line
officials is very important for effective results.

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3. Functional Organization

It makes use of the pure services of experts or specialists. It was quite natural that
the development of staff departments and positions led to an attempt at complete
reorganization on a functional basis. This removed the staff specialist from his
"assisting" capacity and gave him the purest authority and responsibility for the
supervision and administration of the task, replacing the operational foreman.

 Gang boss prepares for the production and the worker has to approach him for
direction in this area.
 The Speed boss is assigned with the responsibilities of introducing men and
getting the set standards of production.
 The Inspector is in charge of checking the quality of work.
 The Repair boss takes care of the equipment and tool repairs.
 The job of Order-of-Work Clerk is to plan and schedule order.
 The Instruction Card Clerk determines the best way to do the job.
 The information relating to cost and production is maintained by the Time and
Cost Clerk. The Personnel Activities are handled by the Shop Disciplinarian

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Merits of Functional Organization

1. Specialization- Better division of labour takes place which results in

specialization of function and it’s consequent benefit.
2. Effective Control- Management control is simplified as the mental functions are
separated from manual functions. Checks and balances keep the authority within
certain limits. Specialists may be asked to judge the performance of various
sections.
3. Efficiency- Greater efficiency is achieved because of every function performing
a limited number of functions.
4. Economy- Specialization compiled with standardization facilitates maximum
production and economical costs.
5. Expansion- Expert knowledge of functional manager facilitates better control
and supervision.

Demerits of Functional Organization

1. Confusion- The functional system is quite complicated to put into operation,

especially when it is carried out at low levels. Therefore, co-ordination becomes
difficult.
2. Lack of Co-ordination- Disciplinary control becomes weak as a worker is
commanded not by one person but a large number of people. Thus, there is no
unity of command.
3. Difficulty in fixing responsibility- Because of multiple authority, it is difficult to
fix responsibility.
4. Conflicts- There may be conflicts among the supervisory staff of equal ranks.
They may not agree on certain issues.
5. Costly- Maintenance of specialist’s staff of the highest order is expensive for a
concern.

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Activity 4.2.1:

Direction: Research for one organizational chart of certain company you are
familiar with and examine the type of organization they have.

References:

Classification of Organizational Structure.Retrieved from: https://www. management

studyguide.com/organizations_classification.htm

Juneja, P (2020). Line structure. Retrieved from: https://www.managementstudyguide

.com/line_organization.htm

Line and Staff organization image. Retrieved from: https://images. app.goo.gl/

CNSM562shemfkBUX9

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LESSON 4.3: Organization Chart

The organization chart is a diagram graphically showing the relationship of one official
to another, or to others, of a company. It is also used to show the relationship between
one department and another, or between one department and another, or between one
organization and another.

Importance of Organizational Chart

Business leaders use the organizational chart in several instances, such as for
presentations, to justify adding or reducing headcount, and to determine where an
employee might have the opportunity to shift job roles.

For the new hire, the organization chart can be a lifeline, helping them to learn names and
titles and to better understand where they fit into the overall corporate structure. New hires
get names thrown at them constantly and the org chart can be a great resource to find out
who all those people actually are. Any employee, in fact, can benefit from having their co-
workers names, photos, and professional and personal profiles at their fingertips.

Types of Organization Chart

1. Master Chart or Chart of Authority.

The master chart shows the entire organizational structure. It is a master plan of the
principal departments, with lines of authority and responsibility and the mutual
relationships of all departments or major components.

2. Functional Chart.
The functional chart shows at a glance the functions and activities of the positions
and/or departments. It shows the major responsibilities of departments or positions.
Listed below each job title are brief statements of the responsibilities.

3. Personnel Chart.
The personnel chart shows the departments in the same relative manner as the
functional chart. But instead of listing the functions, the titles of the positions of the
names of persons are indicated. The chart also shows the class titles of all
positions in the department together with their locations in the organization.

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Activity 4.3.1:
Groupings:
Direction: From your group in business proposal, choose members whom will be
fitted in positions that you need in your organization. Make your own organizational
chart and make a short description on how do you choose such member.

References:
Rules in Formatting Organizational Chart. Retrieved from: https://www.smartdraw.com
/organizational-chart/organizational-chart-rules.htm

What is an organizational chart? Retrieved from: https://pingboard.com/org-charts

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LESSON 4.4: Reorganization, Departmentation and Delegation in Organization

Reorganization

Reorganization, or business restructuring, is a process where a company does an

overhaul of its current strategy, setup, and operations. Typically, businesses go through
reorganization when they have financial troubles, new owners or staff, or a structural
change
Departmentation

Departmentation results from the grouping of work, the desire to obtain organization
units of manageable size, and to utilize managerial ability An organization structure and
design are shaped significantly by the departmentation followed.
Delegation

Delegation is the process of entrusting and transferring responsibility and authority by

the top management to the lowest level. The elements of delegation are the following:
1. Responsibility

This is the work or duty assigned to a particular position. Responsibility involves mental
and physical activities which must be performed to carry out a task or duty. This can be
delegated.

2. Authority -It refers to the power or the right to be obeyed. It is also the sum of the
powers and rights entrusted to make possible the performance, of

3. Accountability This is the answerability of the obligation to perform the delegated

responsibility and to exercise the authority for the proper performance of the work.
Accountability cannot be delegated. Accountability is given to the person who accepts
the responsibility and is accountable only to the .extent that he is given the authority to
perform. Each person can be accountable to only one person, his immediate boss. The
superior can only exact responsibility to the extent that standards of performance are
defined.
References:
Gray, R. (2019).Are you thinking of business reorganization. Retrieved from:
https://www.patriotsoftware.com/blog/accounting/business-reorganization-types/

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ONLINE READING MATERIALS:

 Read Chapter 4 of Management for Filipinos: Priniciples and Application by Conrado

Inigo Jr.

ONLINE VIDEO LINKS AND MATERIALS:

 Watch the online video lecture of the course instructor uploaded at NEO LMS
and to the class shared Google drive (if applicable).
 Watch a Youtube Video by Taylor Kyle about Organizing as Management
Function available at https://www.youtube.com/watch?v=3yVsOSbbPhc

TEST YOUR KNOWLEDGE:

UPDATING…

MODULE REFERENCES:
Conrado, I (2017). of Management for Filipinos: Priniciples and Application

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