INTRODUCTION

Organizing is the second important function of management. It is aimed at creating,

maintaining and modifying a formal organization structure. An organization structure is a base
for implementing plan into action. The design of a formal organization structure depends on
organizing theories. This chapter is divided into two parts; the first part of the chapter
describes the key aspects relating to preparation of organization structure, while the later
part explains different organizing theories, including classical organizing theories, neoclassical
organizing theories. and modern theories.

In today's dynamic age, everything in business is changing rapidly. What was ideal yesterday
is outdated today; what is the best today will be thrown away tomorrow. The three aspects
of management that have experienced tremendous reforms are organization design, directing
task and style, and HR policies and practices. Every business unit needs to maintain
reasonable pace with the drastically and rapidly transforming global business management
philosophy and practice.

The need of restructuring, suitability of classical principles, new forms and their suitability,
managerial behavior, key considerations (factors), the need for freedom, and the right type
of organization climate are some focal areas relevant to organization design. Management
experts emphasize on converting a strict hierarchical structure into a family-like structure, a
home-like organization design. They overweigh on the role of key position holder in creating
work design and internal culture.

Organizing, the second function of management, concerns with formulation of a formulation

organization structure by establishing formal authority relationships among people.
Organization structure is a basic framework - made of men, tasks, authority, responsibility,
roles, statuses, communication, etc. that facilitates the manager in making decisions.
Organization structure is a complex network of interrelated or interconnected parts that
provides a base for implementation of plans and other related activities. Every business
enterprise attempt to formulate a suitable structure of organization for effective achievement
of desired goals. Both organizing and organization are closely related terms. Organizing is a
process and organization is a structure; organization is the end result of the organizing
process. Let us define both terms.

DEFINITIONS OF ORGANIZING
Organizing and organization are closely related terms, but literally both are different. The
term organizing can be defined as:

1. Lyndall F. Urwick: "Organizing is, a process of dividing up of the activities, which are
necessary to any purpose, and arranging in a group, which are assigned to individual."

2. Louis Allen: "Organizing is the process of identifying and grouping of the work to be
performed, defining and delegating responsibility and authority, and establishing relationships
for the purpose of enabling the people to work most effectively together in accomplishment
of objectives.

3. George R. Terry: "Organizing is establishing of effective authority relationships among

selected works, persons, and work places in order to make the group work together efficiently.
With reference to the organizing process, in a comprehensive manner, the term can be defined
an organizing is a systematic process of
(1) dividing work into activities,
(2) grouping these activities, the basis of specialization,
(3) assigning activities and delegating authority to the people,
(4) defining and establishing relationships among groups and departments, and
(5) harmonizing and coordinating efforts of the people to achieve desired results effectively.

Organizing involves systematically arranging of activities. Thus, it can be defined as:

• To organize means to harmonize, coordinate or to arrange activities in a logical and
orderly manner. It is a process of prescribing formal relationships among people and
or positions to achieve goals

Characteristics of Organizing
Proper analysis of the definitions reveals the following characteristics of organizing:

1. Organizing is a process. It consists of steps to be followed to prepare a structure of

the organization
2. It is a goal-oriented process
3. It includes groupings of activities and dividing of work and assigning of responsibility
and delegating of authority
4. It is aimed at creation of a structure, framework or set-up that facilities managerial
actions
5. It is an act of establishing formal relationships and defining status and positions of
each of the employees
6. It attempts to coordinate and integrate activities of the business unit
7. It involves prescribing of a stable structure of organization
8. Human being is in the center of organizing
9. It can be applied to the whole organization or part thereof
10. Organizing process ends with preparation of organization chart – a graphical
representation of organization structure

DEFINITIONS OF ORGANIZATION
Organization is the end result of the organizing process. Organization is a formal structure
that depicts formal relationships, positions, Statuses among people in it. Let us examine the
definitions of organization:

1. John Pfifner and Frank E Sherwood: "Organization is essentially a matter of relationships

of man-to-man., job-to-Job, and department-to-department."

2. W.J. Duncan: An organization 1s a collection of interacting and interdependent individuals

who work toward common goals and whose relationships are determined accordingly to a
certain structure.

3. Chester Bernard: Organization is a system of consciously coordinated activities or forces

of two or more persons."
4. Stan Kossen: "An organization is a group of individuals coordinated into different levels of
authority and segments of specialization or the purpose of achieving the goals and objectives
of the organization."

Based on above definitions, we can define the term as: Organization is a structure,
(mechanism, set-up, arrangement of framework) made of men, tasks, authority, and
responsibility to facilitate coordination necessary to achieve specific purposes. It is essentially
a matter of formal relationships among people, jobs, and departments. The formal
relationships are presented in the form of an organization chart.

Characteristics of an Organization
We can generalize organization in terms of some common characteristics. Main characteristics
of organization have been listed below:

1. Structure or Framework: Organization is a basic framework or structure made of men,

tasks, authority-responsibility, roles-statuses, communication, and so forth - that facilitates
managerial decisions and actions.

2. Division of Work: Division of work is the essence of an organization. Work is divided into
activities and tasks. Departments and divisions are created to facilitate performance of work
effectively.

3. Roles, Positions, and Status: An organization prescribes roles, positions and status of
members working in it. People in an organization have different, higher or lower. Positions
and statuses as per the roles they perform and responsibilities they carry. At any position,
except extreme top and extreme bottom, a person is both a superior to his subordinate(s)
and a subordinate to his superior.

4. Two or more persons: Organization is a form of human association of two or more persons
working together.

5. Common Goals: The organization is created to achieve some common goals. The structure
facilitates smooth achievement or goals.

6. Presentation: Organization structure is presented in the form of an organization chart, a

graphical presentation of formal relationships among people working in the organization.

7. Multipurpose: An organization is a multipurpose structure. It helps in coordinating efforts,

executing plan, maintaining order, facilitating communication, and so forth.

8. Cooperative Efforts: Organization structure permits members in it to work in a cooperative

manner, smoothly without any friction. Members combine their efforts for common goals. An
organization is a coordinating device.

9. Base for Communication: An organization prescribes communication pattern – both

horizontal and vertical directions. The superior and the subordinate communicate through
prescribed channel to perform their respective jobs.

10. Only Formal Relationships: An organization defines or prescribes only formal relationships
among members. It cannot determine informal relationships.

11. Formal Provisions (Rules and Regulations): An organization prescribes rules and
regulations that members have to observe while performing the work and dealing with others.
ORGANISING PROCESS
Organizing is a process of combining and coordinating efforts of people in an effective manner.

Organizing process consists of a sequence of steps to be followed to prepare a formal

organization structure. The process shows how an organization structure is created; how
many and what types of steps/stages are followed. The process depends on a variety of
variables, like size of the organization, objectives, type of people, type of work, etc. Ideally,
the organizing process contains seven steps, as depicted in (Figure 9).

1. Specifying of Objectives
Organization is a deliberate and conscious creation of structure for a specific purpose. The
organization process starts with specification of objectives. A manager who is in charge of
formulation of the organization structure needs to have knowledge of the objectives to be
achieved. He must know the long-term and the short-term objectives as well as individual,
departmental, and general objectives. Clarity of objectives gives the direction to work.

2. Enumerating of Activities (or Determining Work and Activities Performed)

The next step is to prepare a list of activities required to achieve these objectives. An
organization is created to coordinate activities. So, it is essential to 1dentify the work-related
activities. A list of activities is prepared comprising of main functions of the organization.
For example. Production activities, marketing activities, personnel activities, and financial
activities are main activities of business enterprise. While determining activities to be
performed, care should be taken so that the list of activities becomes exhaustive or complete.
Similarity, there should be clear and precise definition of each activity

3. Classifying or grouping or Activities

In the third stage of the organizing process, the activities listed are classified or grouped on
the basis of specialization (1.e., on the basis of nature). Grouping of activities is based on
similarity, functions, and common purpose. The group of activities is also called a Junction,
each function comprises of similar activities. For example, marketing function consists of only
marketing activities. While classifying the activities, human and material resources should
also be considered. Similar activities are grouped into a section, division, or department.

For example, activities related to marketing (function) are grouped into marketing
department. Likewise, activities related to human resources are grouped under personnel
department. Hence, similar activities are performed only in a particular department under a
specific function. The manager should be careful to avoid unnecessary duplication or repetition
of activities in more than one group.
 Step1: Specifying objectives

Step 2: Enumerating activities

Step 3: Classifying or grouping of activities

Step 4: Assigning of Responsibilities

Step 5: Delegating Authority

Step 6: Establishing Interrelationships

Step 7: Preparing organizational charts and manuals

4. Assigning of Responsibility (or Fitting Individual with Function)

Responsibility is an obligation of a subordinate to perform the duty, as insisted by the
superior: Once departments or groups are prepared, the next step is to assign each
department (or a group of activities) to a person,

Example: assigning responsibility. Thus, a person is fitted with a function. A qualified and
experienced person is assigned the duty of performing each group of activities. Therefore. job
is assigned and responsibility is created. Moreover, designation is also defined, and role and
position (status) are clarified. As a result of assignment of job, various positions come into
existence, like marketing manager. sales officer, Financial manager, and so forth.

5. Delegating of Authority
When assignment of tasks is over, respective superiors delegate authority to different position
holders to enable them to carry out activities. This is a vital step Delegation of authority
creates various levels and positions. In fact, assignment of duties and delegation of authority
go hand-to-hand. Delegation refers to granting or offering of a legitimate power to
subordinates to enable them to take decisions independently. It is an authorization to make
decision, to order, or to command the people working under him. While delegating authority,
care should be taken that there is a balance between responsibility and authority. Authority
must be equal to responsibility.

6. Establishing Interrelationships
This step concerned with establishing relationships among various position holders. These
relationships are established in both directions-horizontally and vertically. At this stage, the
relationship and line of authority between the superior and subordinate is made clear.
Statuses are fixed to facilitate higher and lower positions. The entire network 1s defined in
terms of functions, positions, levels, communication, and interrelationships among various
positions.
7. Preparing Organization Chart and Manuals
The structure so prepared is now depicted in the form of a chart or diagram that shows various
relations, positions, and levels in the organization. An organization chart can be defined as:
A diagrammatic presentation of formal relationships among people in the organization. The
chart shows details regarding number and type of functions, levels of management, various
positions and designations, direction of communication, and so forth. The chart is prepared
either on function basis or job title basis.

Generally, two types of charts are prepared, a master chart and a supplementary chart. A
master organization chart 1s also known as the grand chart or general chart. It shows a
general picture of the organization structure, consisting of all functions, levels, and people.
Supplementary chart, on the other hand, shows detailed relationships within a specific
function or area, for example, Supplementary organization chart of marketing department
shows only marketing activities and various position holders. Organization chart can be
prepared in three forms- vertical chart, horizontal chart, and circular chart. Among the three,
vertical chart is the most popular and widely used. Organization chart is a useful tool for many
purposes.

Along with the organization chart, organization manual is also prepared to guide the
interrelations. An organization manual is a small booklet that describes objectives, authority,
and responsibility of each of the positions. It also explains the nature of work, powers,
position, status, etc., of each position holder.

NEED OR SIGNIFICANCE OF (FORMAL) ORGANIZATION STRUCTURE

In order to put the plan into action, a manager needs a formal structure of the organization.
Every business unit - irrespective of the objectives to be achieved, type and nature of work
to be performed, and size of operations to be carried out - needs a formal organization
structure. It facilitates establishing formal relations among employees and defining statuses
and positions. It also helps in carrying out work effectively and efficiently as multiple activities
are grouped into classes. A Suitable organization is a tool for achieving a better coordination
and integration among various activities. Authority delegation and responsibility assignment
are vital tasks of the organizing process. A proper organization helps in establishing effective
authority relationships

Every company tries to create the most suitable structure of organization to direct efforts
effectively towards achievement of goals. About the significance of organization, the American
industrialist Andrew Carnegies said: "Take away our factories, take away trade, revenues of
transportation, our money, and leave nothing to us, but our organization, and in four years,
we shall have established ourselves." The following points elaborate the significance of an
Organizing.

1. Tool for Management Action

Organization is a tool for managerial action. It facilitates direction, coordination, and control.
Organization structure is a base to implement managerial plans effectively. lt helps decision-
making and actions.
2. Achievement of Objectives
Efficiently Organization is the basic requirement for achieving objectives with minimum
wastage and within limit of given resources and time. It avoids wastage of actions,
overlapping, and duplication of efforts. It provides a base for implementing and operating of
various activities effectively. The formal structure facilitates implementation of the plan, and
directing and controlling of actions. A business unit can, thus, achieve its objectives in the
most efficient and effective manner.

3. Provision for all Activities

Organization ensures that all required activities have been identified and accounted for. It
minimizes the possibility of missing or overlapping of important activities.

4. Benefit of Specialization
Organization helps in reaping the benefits of specialization. Capable and qualified persons
perform the specialized activities of the departments they are expert of and trained for. Such
arrangement leads to overall efficiency.

5. Effective Assignment of Work and Delegation of Authority

Proper assignment of Job and delegation of authority are key aspects for smooth functioning
of operations. Suitable Organization serves as the base for effective assignment of work and
delegation of authority.

6. Clarity and Reduced Conflict

A good organization always clarifies the status of different position holders, management
levels, degree of authority and responsibility, and relations. High degree of clarity and
precision prevents or minimizes possibility of conflict.

7. Promotion of Healthy Relations

Healthy relations with employees ensure smooth and undisruptive functioning of business
operations. A proper organization structure leads to improved industrial relations. It prevents
unexpected events, like strike, lockout, etc. Sound organization helps in maintaining healthy
relations.

8. Promoting Creativity
A suitable structure stimulates creativity in a well-defined area of work. Everyone tries to
evolve superior way of working. An organization places people where they actually required
and where they fit best. Each employee gets a chance to utilize his maximum potentials.

9. Optimum Use of Resources

A suitable organization ensures effective use of valuable resources. It helps people to enlarge
their capabilities. Due to specialization, they perform those work in which they are proficient.
It maximizes the contribution of each of the individuals and leads to a better utilization of
resources.
10. Better coordination
Coordination is the soul of management. Since performance is based on coordinated efforts
of various departments, right coordination is inevitable. A good organization facilitates and
promotes better coordination. It leads to an effective arrangement of duties and
responsibilities, which lead to a better coordination at all levels.

11. Reputation and Goodwill in the Market

An effective organization can contribute in establishing and maintaining reputation and
goodwill in the market. A company, by the virtue of good reputation, can transact with
others at profitable and favorable terms and conditions.

12. Facility for Expansion, Development and Diversification A sound organization can
facilitate further expansion, development, and diversification of the business. Opportunities
can be seized quickly and exploited fully, leading to expansion and development.

13. Flexibility and Balancing

Organization enables management to adopt changes emerging from dynamic business
environment. It helps in adjusting with changing requirements. A capable organization can
absorb major strokes and restore comfortable state on a continuous basis.

14. Employees' Satisfaction and High Morale

Organization is a base for job satisfaction. Since every employee 1s assigned the task of his
interest and ability, there 1s well-defined area of work, clarity in superior-subordinate
relationships, smooth flow of communication, and desired level of flexibility, it leads to job
satisfaction. And, job satisfaction further promotes employee’s loyalty and morale. High
morale leads to improvement in work performance and relations.

15. Base for Other Managerial Functions

An appropriate organization structure is also 1seful in carrying out other functions of
management like planning, staffing, directing (motivation, leadership. communication and
supervision), and controlling.

GULDING PRINCIPLES FOR EFFECTIVE ORGANIZING

Principles for effective organizing are facts, standards, or criteria to be observed while
designing organization structure. They are inputs to the organization structure. Principles of
organizing affect structure as well as organizing process. They provide guideline or direction
to create an effective organization structure. While designing a good organization structure,
a manager must observe these principles; when organization structure is based on these
principles, it tends to be a good organization. Henri Fayol, in his Administrative
Management, has evoked fourteen principles of management; the same can be applied to
organizing too. Koontz and O Donnell" also stated, more or less, similar principles.
Main principles have been listed below:
1. Principle of Unity of Objectives
2. Principle of Organizational Efficiency
3. Principle of Span of Control
4. Principle of Scalar Chain
5, Principle of Delegation
6. Principle of Parity between Authority and Responsibility
7. Principle of Absoluteness of Responsibility
8. Principle of Simplicity
9. Principle of Authority Level
10. Principle of Unity of Command
11. Principle of Departmentation
12. Principle of Balance
13. Principle of Flexibility and Simplicity
14. Principle of Continuity/Stability
15. Principle of Leadership Facilitation

Principles of Effective Organizing and Features (or Qualities) of Good Organization

Features or qualities of a good organization are the same as guiding principles for effective
organizing; the principles should be observed while designing a good organization structure.
Principles are inputs (as they are to be observed while designating organization structure)
and qualities are resulting outputs that organization bears or is expected to bear. Adding a
prefix principle of to any quality (or feature) of a good organization becomes principle of
organizing. For example, 'simplicity is a quality of a good organization while 'principle of
simplicity' is a principle of organizing. Qualities or features of a good organization have been
discussed in the succeeding part.