Organising:

Organising is a “process of defining the essential relationships among people, tasks

and activities in such a way that all the organisation’s resources are integrated and
coordinated to accomplish its objectives efficiently and effectively”.
Organising essentially implies a process which coordinates human efforts, assembles
resources and integrates both into a unified whole to be utilised for achieving specified
objectives.

Steps in the Process of Organising

Organising involves a series of steps that need to be taken in order to achieve the
desired goal.
The process of organising involves the following steps:

(i) Determination of Objectives:

Every organisation is established for some objective or goal. Various tasks are
determined to achieve this goal. For example, if the organisation is established to
export goods, it determines the nature and type of goods to be exported, sources
from where raw material will be obtained, countries where goods will be exported, co-
ordinate with foreign buyers etc. Determining the workload of the organisation is the
first step in the process of organising.

(ii) Division of Activities: Since one person cannot manage all the
activities, total task is broken into smaller units and assigned to members. Work is
assigned according to qualification and ability of every person.
Division of work leads to specialisation which has the following benefits:
(a) Greater output:
Adam Smith illustrated a study where one person could manufacture 20 pins a day if
he worked alone. Production of pin was broken into sub-activities where each person
carried out the following specialised tasks: Drawing out the wire – straightening the
wire – cutting the wire – grinding the point – polishing it – putting the pin head and
so on. It was observed that as against 20 pins produced by one person in a day,
division of work and its specialisation enabled 10 people to produce 48, 000 pins in a
day — watch the wonders of specialisation!
(b) Efficiency:
Performing the same task over and over again increases skill and efficiency of the
workers.
(c) Facilitates training of less-skilled workers:
Since the complex task is broken into smaller units, less-skilled workers can be trained
to carry out those activities.

(iii) Grouping of Activities:

After the work is assigned to people, those performing similar activities are grouped
in one department. Various departments like sales, finance, accounting etc. are filled
with people having different skills and expertise but performing similar activities.
Grouping of activities into departments is called departmentalisation and every
department is governed by a set of rules, procedures and standards.

(iv) Define Authority and Responsibility:

Every department is headed by a person responsible for its effective functioning.
Departmental heads are appointed to carry out the activities of their respective
departments. It is ensured that competence of departmental head matches job
requirements of the department.
Every head has authority to get the work done from his departmental members. He
delegates responsibility and authority to members of his department. This creates a
structure of relationships where every individual knows his superiors and subordinates
and their reporting relationships.

(v) Co-Ordination of Activities:

When departments work for their objectives, there may develop inter- departmental
conflicts which can obstruct the achievement of organisational goals. For example,
finance department wants to cut the costs but the marketing department needs
additional funds to market its products; this conflict can be resolved through co-
ordination so that all departments share the common resources optimally. Work can
be coordinated by defining relationships amongst various departments and people
working at different positions.

(vi) Reviewing and Re-organising:

There is constant appraisal of the organising process so that changes in the structure
can be made consequent to changes in the environmental factors. Constant appraisal
and re-organisation is an integral part of the organising process.
Importance of Organising:
Organising is important for the following reasons:

(i) Facilitates Administration:

Top managers cannot perform all the organisational tasks as they will be
overburdened to concentrate on strategic matters. It is essential that part of the
workload is shared by middle and lower level managers. Top executives will be relieved
of managing routine affairs and concentrate on effective administration.
The basic elements of organising (division of work, grouping of activities, distribution
of authority and coordination) facilitate better administration by the top management.

(ii) Growth and Diversification:

A well-organised institution is adaptive to change and responsive to growth and
diversification. It can multiply its operations.

(iii) Creates Synergies:

Division of work provides the benefits of synergies, that is, total task achieved by a
group of people is more than the sum total of their individual achievements.
People coordinate their tasks in the same and different departments. This gives the
benefit of ‘one plus one makes eleven.’

(iv) Establishes Accountability:

When every person knows his superiors and subordinates, the organisation can
function efficiently. Establishing limitations in the area of operations defines people’s
accountability to their immediate boss which gears the organisation towards its
broader goals.

(v) Optimum Use of Technology:

It is the age of technological developments. Organisations not having well- developed
technology will not be able to compete in the market. Well-organised structures enable
the organisations to optimally use and update their technology and remain competitive
in the dynamic market conditions.
(vi) Facilitates Communication:
Communication is the essence of organisation. Efficiency of organisation depends
upon how well organisational members communicate with each other. A well-designed
system of communication (vertical and horizontal) is facilitated through effective
organising efforts of top executives.

(vii) Facilitates Creativity:

Creativity means creating something new. It develops new ways of doing the things.
A sound organisation enables the top management to improve the ways of doing
things by delegating routine affairs to people down the scalar chain. It creates a sense
of achievement amongst managers that provides moral boost for further creative
thinking.

(viii) Improves Inter-personal Relationships:

A sound organisation structure ensures that workload is divided into well-defined jobs
and assigned to people according to their abilities and skills. Placing the right person
at the right job ensures job satisfaction and morale boost of employees. This improves
inter-personal relationships amongst people working in the organisation.

(ix) Facilitates Coordination:

Well-defined objectives and plans can fail if organisational activities are not
coordinated in a unified direction. A well designed organisation structure promotes
order and system in its activities. It coordinates work of people at different levels in
different departments.

People work along pre-defined dimensions and harmonies individual goals with
organisational goals, internal organisational environment with the external
environment and financial resources with non-financial resources.

(x) Facilitates Teamwork:

Though people are responsible for specific tasks assigned to them, they work
collectively as a team and optimise the use of scarce organisational resources to
achieve the organisational goals. Organisation, thus, facilitates teamwork. Rather
than viewing organisational goals from personal perspectives, they view them from
group perspectives. Organisational goals satisfy individual goals.
(xi) Facilitates Control:
Organisation provides sound direction to activities and ensures that people work
according to plans. This facilitates control and promotes organisational goals.
Objectives are determined and regular feedback ensures conformance of actual
performance to targeted performance.

(xii) Increase in Output:

Sound organisation divides activities into various departments (production, marketing
etc.). These departments specialise in their tasks and increase organisational output.
Specialisation is an important contribution of organisation that promotes higher
output.

(xiii) Optimum Allocation of Resources:

Organising promotes optimum allocation of resources. Resources are allocated over
different departments (production, marketing, personnel etc.) in the order of priority.
People are assigned jobs they are best suited for. All activities are assigned to all
people in the organisation. There is no duplication of work.
Organising, thus, avoids overlapping of activities to ensure that collectively, people
working in different departments perform activities that contribute to organisational
goals.

Types of Organizations:
Organizational structure - Organizational structure is a system used to define a
hierarchy within an organization. It identifies each job, its function and where it reports
to within the organization. This structure is developed to establish how an organization
operates and assists an organization in obtaining its goals to allow for future growth.
The structure is illustrated using an organizational chart.
Organizational structure aligns and relates parts of an organization, so it can achieve
its maximum performance. The structure chosen affects an organization's success in
carrying out its strategy and objectives.
Background
Organizational structure is the method by which work flows through an organization.
It allows groups to work together within their individual functions to manage tasks.
Traditional organizational structures tend to be more formalized—with employees
grouped by function (such as finance or operations), region or product line. Less
traditional structures are more loosely woven and flexible, with the ability to respond
quickly to changing business environments.
Organizational structures have evolved since the 1800s. In the Industrial Revolution,
individuals were organized to add parts to the manufacture of the product moving
down the assembly line. Frederick Taylor's scientific management theory optimized
the way tasks were performed, so workers performed only one task in the most
efficient way. In the 20th century, General Motors pioneered a revolutionary
organizational design in which each major division made its own cars.
Key Elements of Organizational Structures
Five elements create an organizational structure:
Job Design, Departmentation, Delegation, Span of Control and Chain of Command.
These elements comprise an organizational chart and create the organizational
structure itself.
"Departmentation" refers to the way an organization structures its jobs to
coordinate work.
"Span of control" means the number of individuals who report to a manager. "Chain
of command" refers to a line of authority.
The company's strategy of managerial centralization or decentralization also influences
organizational structures. "Centralization," the degree to which decision-making
authority is restricted to higher levels of management, typically leads to a pyramid
structure. Centralization is generally recommended when conflicting goals and
strategies among operating units create a need for a uniform policy.
"Decentralization," the degree to which lower levels of the hierarchy have decision-
making authority, typically leads to a leaner, flatter organization. Decentralization is
recommended when conflicting strategies, uncertainty or complexity require local
adaptability and decision-making.

Types of Organizational Structures

Organizational structures have evolved from rigid, vertically integrated, hierarchical,
autocratic structures to relatively boundary-less, empowered, networked
organizations designed to respond quickly to customer needs with customized
products and services.
Today, organizations are usually structured vertically, vertically and horizontally, or
with open boundaries. Specific types of structures within each of these categories are
the following:
• Vertical—functional and divisional.
• Vertical and horizontal—matrix.
• Boundary-less (also referred to as "open boundary")—modular, virtual and
cellular.
VERTICAL STRUCTURES (FUNCTIONAL AND DIVISIONAL)

Two main types of vertical structure exist - functional and divisional.

The functional structure divides work and employees by specialization. It is a

hierarchical, usually vertically integrated, structure. It emphasizes standardization in
organization and processes for specialized employees in relatively narrow jobs.

This traditional type of organization forms departments such as production, sales,

research and development, accounting, HR, and marketing. Each department has a
separate function and specializes in that area. For example, all HR professionals are
part of the same function and report to a senior leader of HR. The same reporting
process would be true for other functions, such as finance or operations.

In functional structures, employees report directly to managers within their functional

areas who in turn report to a chief officer of the organization. Management from above
must centrally coordinate the specialized departments.

A functional organizational chart might look something like this:

Advantages of a functional structure include the following:

• The organization develops experts in its respective areas.

• Individuals perform only tasks in which they are most proficient.
• This form is logical and easy to understand.

Disadvantages center on coordination or lack thereof:

• People are in specialized "silos" and often fail to coordinate or communicate

with other departments.
• Cross-functional activity is more difficult to promote.
• The structure tends to be resistant to change.

This structure works best for organizations that remain centralized (i.e., a majority of
the decision-making occurs at higher levels of the organization) because there are few
shared concerns or objectives between functional areas (e.g., marketing, production,
purchasing, IT). Given the centralized decision-making, the organization can take
advantage of economies of scale in that there are likely centralized purchasing
functions.
An appropriate management system to coordinate the departments is essential. The
management system may be a special leader, like a vice president, a computer system
or some other format.

Also a vertical arrangement, a divisional structure most often divides work and
employees by output, although a divisional structure could be divided by another
variable such as market or region. For example, a business that sells men's, women's
and children's clothing through retail, e-commerce and catalog sales in the Northeast,
Southeast and Southwest could be using a divisional structure in one of three ways:

• Product—men's wear, women's wear and children's clothing.

• Market—retail store, e-commerce and catalog.
• Region—Northeast, Southeast and Southwest.

A divisional organizational structure might look like this:

The advantages of this type of structure are the following:

• It provides more focus and flexibility on each division's core competency.

• It allows the divisions to focus on producing specialized products while also
using knowledge gained from related divisions.
• It allows for more coordination than the functional structure.
• Decision-making authority pushed to lower levels of the organization enables
faster, customized decisions.

The disadvantages of this structure include the following:

• It can result in a loss of efficiency and a duplication of effort because each

division needs to acquire the same resources.
• Each division often has its own research and development, marketing, and
other units that could otherwise be helping each other.
• Employees with similar technical career paths have less interaction.
• Divisions may be competing for the same customers.
 • Each division often buys similar supplies in smaller quantities and may pay more
per item.

This type of structure is helpful when the product base expands in quantity or
complexity. But when competition among divisions becomes significant, the
organization is not adapting quickly enough, or when economies of scale are lacking,
the organization may require a more sophisticated matrix structure.

MATRIX ORGANIZATIONAL STRUCTURES

A matrix structure combines the functional and divisional structures to create a dual-
command situation. In a matrix structure, an employee reports to two managers who
are jointly responsible for the employee's performance. Typically, one manager works
in an administrative function, such as finance, HR, information technology, sales or
marketing, and the other works in a business unit related to a product, service,
customer or geography.

A typical matrix organizational structure might look like this:

Advantages of the matrix structure include the following:

• It creates a functional and divisional partnership and focuses on the work more
than on the people.
• It minimizes costs by sharing key people.
• It creates a better balance between time of completion and cost.
• It provides a better overview of a product that is manufactured in several areas
or sold by various subsidiaries in different markets.

Disadvantages of matrix organizations include the following:

 • Responsibilities may be unclear, thus complicating governance and control.
• Reporting to more than one manager at a time can be confusing for the
employee and supervisors.
• The dual chain of command requires cooperation between two direct
supervisors to determine an employee's work priorities, work assignments and
performance standards.
• When the function leader and the product leader make conflicting demands on
the employee, the employee's stress level increases, and performance may
decrease.
• Employees spend more time in meetings and coordinating with other
employees.

These disadvantages can be exacerbated if the matrix goes beyond two-dimensional

(e.g., employees report to two managers) to multidimensional (e.g., employees report
to three or more managers).

Matrix structures are common in heavily project-driven organizations, such as

construction companies. These structures have grown out of project structures in
which employees from different functions formed teams until completing a project,
and then reverted to their own functions. In a matrix organization, each project
manager reports directly to the vice president and the general manager. Each project
is, in essence, a mini profit center, and therefore, general managers usually make
business decisions.

The matrix-structured organization also provides greater visibility, stronger

governance and more control in large, complex companies. It is also well suited for
development of business areas and coordination of complex processes with strong
dependencies.

Matrix structures pose difficult challenges for professionals charged with ensuring
equity and fairness across the organization. Managers working in matrix structures
should be prepared to intervene via communication and training if the structure
compromises these objectives. Furthermore, leadership should monitor relationships
between managers who share direct reports. These relationships between an
employee's managers are crucial to the success of a matrix structure.

OPEN BOUNDARY STRUCTURES (HOLLOW, MODULAR VIRTUAL AND

LEARNING)

More recent trends in structural forms remove the traditional boundaries of an

organization. Typical internal and external barriers and organizational boxes are
eliminated, and all organizational units are effectively and flexibly connected. Teams
replace departments, and the organization and suppliers work as closely together as
parts of one company. The hierarchy is flat; status and rank are minimal. Everyone—
including top management, managers and employees—participates in the decision-
making process. The use of 360-degree feedback performance appraisals is common
as well.
Advantages of boundary-less organizations include the following:

• Ability to leverage all employees' talents.

• Faster response to market changes.
• Enhanced cooperation and information sharing among functions, divisions and
staff.

Disadvantages include the following:

• Difficulty in overcoming silos inside the organization.

• Lack of strong leadership and common vision.
• Time-consuming processes.
• The possibility of employees being adversely affected by efficiency efforts.
• The possibility of organizations abandoning change if restructuring does not
improve effectiveness quickly.

Boundary-less organizational structures can be created in varied forms, including

hollow, modular and virtual organizations.

Hollow organizations. Hollow structures divide work and employees by core and
noncore competencies. Hollow structures are an outsourcing model in which the
organization maintains its core processes internally but outsources noncore processes.
Hollow structures are most effective when the industry is price competitive and choices
for outsourcing exist. An example of a hollow structure is a sports organization that
has its HR functions (e.g., payroll and benefits) handled by outside organizations.

Advantages of this type of structure include the following:

• Minimizing overhead.
• Enabling the organization to focus on its core product and eliminating the need
to develop expertise in noncore functions.

Disadvantages include:

• Loss of control over functions that affect employees regularly.

• Restriction by certain industries (e.g., health care) on the extent of outsourcing.
• Lack of competitive outsourcing options.

Modular organizations. Modular structures differ from hollow organizations in that

components of a product are outsourced. Modular structures may keep a core part of
the product in-house and outsource noncore portions of the product. Networks are
added or subtracted as needs change. For a modular structure to be an option, the
product must be able to be broken into chunks. For example, computer manufacturer
Dell buys parts from various suppliers and assembles them at one central location.
Suppliers at one end and customers at the other become part of the organization; the
organization shares information and innovations with all. Customization of products
and services results from flexibility, creativity, teamwork and responsiveness. Business
decisions are made at corporate, divisional, project and individual team member
levels.

Advantages include the following:

• Minimizing the specialization and specialists needed.

• Minimizing overhead.
• Enabling the company to outsource parts supply and coordinate the assembly
of quality products.

Disadvantages include

concerns about the actions of suppliers outside the control of the core management
company. Risk occurs if the partner organization removes itself form the quality check
on the end product or if the outsourced organization uses a second outsourced
organization. Examples of supplier concerns include the following:

• Suppliers, or subcontractors, must have access to—and safeguard—most, if not

all, of the core company's data and trade secrets.
• Suppliers could suddenly raise prices on or cease production of key parts.
• Knowing where one organization ends and another begins may become
difficult.

Virtual organizations. A virtual organization (sometimes called a network structure)

is cooperation among companies, institutions or individuals delivering a product or
service under a common business understanding. Organizations form partnerships
with others—often competitors—that complement each other. The collaborating units
present themselves as a unified organization.

The advantages of virtual structures include the following:

• Contributions from each part of the unit.

• Elimination of physical boundaries.
• Responsiveness to a rapidly changing environment.
• Lower or nonexistent organizational overhead.
• Allows companies to be more flexible and agile.
• Give more power to all employees to collaborate, take initiative, and make
decisions.
• Helps employees and stakeholders understand workflows and processes.

The disadvantages of virtual organizations include the following:

• Potential lack of trust between organizations.

• Potential lack of organizational identification among employees.
• Need for increased communication.
• Can quickly become overly complex when dealing with lots of offsite processes.
• Can make it more difficult for employees to know who has final say.
Virtual structures are collaborative and created to respond to an exceptional and often
temporary marketing opportunity. An example of a virtual structure is an
environmental conservancy in which multiple organizations supply a virtual
organization with employees to save, for example, a his toric site, possibly with the
intent of economic gain for the partners.

Understanding the organizational environment is crucial in open boundary models. For

example, some industries cannot outsource noncore processes due to government
regulation. (For example, health insurance organizations may be unable to outsource
Medicare processes). Or, in some cases, outsourcing may have to be negotiated with
a union.

The key to effective boundary-less organizations is placing adaptable employees at all

levels. Management must give up traditional autocratic control to coach employees
toward creativity and the achievement of organizational goals. Employees must apply
initiative and creativity to benefit the organization, and reward systems should
recognize such employees.

Learning organizations. A learning organization is one whose design actively seeks

to acquire knowledge and change behavior as a result of the newly acquired
knowledge. In learning organizations, experimenting, learning new things, and
reflecting on new knowledge are the norms. At the same time, there are many
procedures and systems in place that facilitate learning at all organization levels.

The advantages of learning organizations include the following:

▪ Open communication and information sharing.

▪ Innovativeness
▪ Ability to adapt to rapid change.
▪ Strong organizational performance.
▪ Competitive advantage.

The disadvantages of learning organizations include the following:

▪ Power difference is ignored.

▪ Process of implementing will be complicated and take longer.
▪ Fear of employee participation in organizational decisions.
▪ Breaking of existing organizational rules.

Delegation of Authority:
Manager alone cannot perform all the tasks assigned to him. In order to meet the
targets, the manager should delegate authority. Delegation of Authority means
division of authority and powers downwards to the subordinate. Delegation is about
entrusting someone else to do parts of your job. Delegation of authority can be
defined as subdivision and sub-allocation of powers to the subordinates in order to
achieve effective results.
Elements of Delegation

1. Authority - in context of a business organization, authority can be defined as

the power and right of a person to use and allocate the resources efficiently,
to take decisions and to give orders so as to achieve the organizational
objectives.

Authority must be well-defined. All people who have the authority should know
what is the scope of their authority is and they shouldn’t misutilize it. Authority
is the right to give commands, orders and get the things done. The top level
management has greatest authority.

Authority always flows from top to bottom. It explains how a superior

gets work done from his subordinate by clearly explaining what is expected of
him and how he should go about it.

Authority should be accompanied with an equal amount of responsibility.

Delegating the authority to someone else doesn’t imply escaping from
accountability. Accountability still rest with the person having the utmost
authority.

2. Responsibility - is the duty of the person to complete the task assigned to

him.

A person who is given the responsibility should ensure that he accomplishes

the tasks assigned to him. If the tasks for which he was held responsible are
not completed, then he should not give explanations or excuses. Responsibility
without adequate authority leads to discontent and dissatisfaction among the
person.

Responsibility flows from bottom to top. The middle level and lower level
management holds more responsibility. The person held responsible for a job
is answerable for it. If he performs the tasks assigned as expected, he is bound
for praises. While if he doesn’t accomplish tasks assigned as expected, then
also he is answerable for that.

3. Accountability - means giving explanations for any variance in the actual

performance from the expectations set.

Accountability can not be delegated. For example, if ’A’ is given a task with
sufficient authority, and ’A’ delegates this task to B and asks him to ensure that
task is done well, responsibility rest with ’B’, but accountability still rest with ’A’.

The top level management is most accountable. Being accountable means

being innovative as the person will think beyond his scope of job.
Accountability, in short, means being answerable for the end result.
Accountability can’t be escaped. It arises from responsibility.
Features of Delegation: Delegation has the following features:

1. Delegation is a process: Managers delegate tasks to subordinates in a

sequential orders of steps.

2. On-going process: Delegation is a continuous process. Managers continue to

delegate tasks to their subordinates and get them delegated by their superiors
to acheive the organisational goals.

3. It is an art, not science: Delegating tasks to subordinates does not necessarily

mean that subordinates will perform those tasks well. There is no cause and
effect relationship between the task assigned to subordinates and their actual
performance. Delegation is, thus, not a science. It is the art of how well and what
the manager delegates to his subordinates. Delegation is, thus, an art.

4. Delegation of authority and not accountability: Managers can only delegate

work and authority to perform that work to the subordinates. Delegation does not
mean that managers are not accountable to their superiors for the part of task
assigned to subordinates. They remain accountable for the tasks assigned to
subordinates and are answerable to their superiors for its performance.

5. Necessary organisational activity: Managers cannot avoid delegation. They

cannot perform all the tasks themselves. They have to learn the art of delegation,
that is, how to delegate and what to delegate. Companies' performance is judged
by how good their managers are getting the work done through others by the
process of delegation.

6. It has different forms: Delegation can take different forms. It can be downward,
upward or lateral.

The process of delegation involves the following steps:

1. Determining the goals: The manager establishes the goal or the objective of
the position/post so that the person concerned knows what is expected of him. If
delegation is to be initiated in the sales department, the objective should be
made clear, say sales promotion or sales retention.

2. Define responsibility: Once requirement of the job is defined, the responsibility

of individuals is determined in terms of tasks assigned to them. This helps in
knowing who are their bosses and who are the subordinates to whom they can
issue instructions.

3. Define authority: The job having been assigned, authoriy should be given so
that people can efficiently discharge the responsibilities related to that job.

4. Motivation of subordinates: The duty of manager does not end by delegating

the authority and responsibilities to subordinates. He makes sure that
subordinates willingly contribute to the job assigned so that organisational goals
are optimally achieved. Managers motivate the subordinates to do their work
with zeal and enthusiasm. They use financial and non-financial (participative
decision-making, recognition etc.) incentives to motivate the subordinates.
The need for acceptance and recognition are important motivators that boost
Employees’ morale to perform the delegated tasks. As Rensis Likert puts it, "the
desire for recognition or ego satisfaction is central to other incentives in motivating
people."

5. Holding accountability: Whatever the nature and extent of delegation, manager

constantly observes the activities of subordinates to review their progress and
provide guidance whenever necessary. He holds them accountable for the work
assigned but remains ultimately accountable or responsible to his superiors for
completion of each task and its coordination with the overall organisational work.

6. Training of subordinates: Despite giving the authority commensurate with

responsibility subordinates may not be able to effectively carry out the delegated
tasks. Managers, therefore organise training programmes to enhance their
knowledge on the subject.

7. Establishing Control: Specific standards of performance are framed and

communicated to subordinates to enable them to asses their performance against
standards, self-control their activities and coordinate them with overall goals of
the organisation.

Forms of Delegation

Delegation can take three forms:

1. Top to bottom delegation: The process of delegation described above where

superiors delegate part of their workload to subordinates is top to bottom
delegation.

2. Bottom to top delegation: This form of delegation recognises the importance

of informal groups in the formal organisation structures. The force of attraction of
group members is so strong that if it comes to observing the superior of group
members, they choose the latter. Managers, in such cases, have to be careful in
issuing orders and directions to subordinates to carry out the delegated tasks.
They motivate subordinates as members of the group and not as individual
members. According to Allen, "to the extent that the manager convinces the
members of the group that their needs, his own, and those of the company
coincide, he can motivate them to produce according to the standards he sets."

3. Lateral delegation: When managers delegate duties to subordinates in the

hierarchy subordinates further delegate the tasks informally to people at the same
level in other units. For example, if general manager of sales department asks
sales managers to compile the figures of sales and sales personnel for the moth
of January, the sales manager will seek the assistance of finance manager and
personnel manager, Thus, authority and responsibility delegated t o the sales
manager is shared by him with managers of other departments working at the
same level. This is a form of lateral delegation. Peer groups in this case come
together and carry out the task as a team.

Importance of Delegation:

Delegation is unavoidable. Managers have to be skilled in the art of delegation. It is

because of the following advantages of delegation:

1. Relief to top managers: Delegation relieves top managers of the burden to

carry out every activity on their own. By delegating routine activities to lower levels,
top managers concentrate on important policy matters and increase efficiency
of the organisation.

2. Development of managers: The more the managers delegate authority and

responsibility to subordinates, more are the tasks and responsibilities they accept
from their superiors. By delegating routine jobs down the hierarchy, they can
take more challenging projects and expand their skills and knowledge as
competent managers.

3. Development of subordinates: When routine and innovative tasks are

delegated to subordinates, their skill in handling the delegated tasks increases.
Training facilities can also be provided to develop them as potential managers.

4. Better decision-making: Through delegation, decisions relating to routine

matters are taken by those who are closest to the decision-making situation.
This increases the quality of decisions.

5. Faster decisions: Not only are the decisions effective, they are also taken quickly
as subordinates have the authority to do the jobs assigned to them without going
to superiors every time they face a problem. They have the authority to solve the
problems on their own.

6. Specialisation: Division of work into sub-units and delegation of responsibilities

according to skill, knowledge and competence of subordinates enhances
specialisation on the job and results in greater and better output. "Delegation
provides a way to break down the responsibilities of a manager and assign
them across several subordinate managers based on their specialised
capability."

7. Job satisfaction: Delegation provides job satisfaction to subordinates and

motivates them to perform better when they achieve the delegated standards of
performance.

8. Promotes inter-personal relationships: Delegation increases interaction of

managers with their subordinates and promotes healthy relationships amongst
them.
Principles of Delegation

The following principles make the process of delegation effective:

1. Authority, responsibility and accountability: These are the elements of

delegation that make it effective process.

2. Parity of authority and responsibility: Though authority exactly equal to

responsibility cannot be delegated, it must be commensurate with the responsibility
so that delegates can give instructions to their subordinates for getting the work
done. Authority without responsibility and responsibility without authority have no
meaning.

3. Scalar chain: Every member should know his position in the scalar chain to
know his superiors who have the power to delegate duties to him and his
subordinates to whom he can delegate the duties. The responsibility can be
assigned if every person knows his position in the hierarchy.

4. Completeness of delegation: No part of the total work (except the one which
is reserved by managers) should be left out from being delegated. If so done,
gaps would arise in respect of the work not so assigned and the work will not be
completed properly.

5. Unity of command: Every individual should have one boss to whom he should
report. If people have more than one boss, they develop the tendency of shifting
the blame of their non-achievements to their bosses. For example, if a person
cannot accomplish the task assigned to him by boss. A, he may say that he was
busy carrying out instructions of boss B and vice versa while it may not actually
be so. He, thus, avoids responsibility of carrying out the assigned tasks.

6. Absoluteness of responsibility: Though the task and authority to carry out that
task is delegated to subordinates, the delegator continues to remain responsible
for the tasks of his subordinates to his superiors. If the district manager cannot
achieve the sales target of say, 1,000 units of product A in one month, the branch
manager (delegator) remains responsible to the General Manager of sales
department.

7. Delegation by results: Managers should first determine the objectives of

delegation, that is what they want their subordinates to do and then delegate the
tasks along with authority to them. If the production manager want to increase
production of Northern Branch by 1,000 units per month he should delegate this
task to his branch manager, Northern Region. The branch manager will carry out
the tasks when things are clear to him.

8. Delegate within defined limits: Managers cannot delegate what they are
themselves not authorised to do. If a manager, for example, does not have authority
to raise funds from financial market without sanction of top managers, he cannot
delegate this task to his subordinates.

Relationship between Authority and Responsibility

Authority is the legal right of person or superior to command his subordinates while
accountability is the obligation of individual to carry out his duties as per standards of
performance Authority flows from the superiors to subordinates, in which orders and
instructions are given to subordinates to complete the task.

It is only through authority, a manager exercises control. In a way through exercising

the control the superior is demanding accountability from subordinates.

If the marketing manager directs the sales supervisor for 50 units of sale to be
undertaken in a month. If the above standards are not accomplished, it is the
marketing manager who will be accountable to the chief executive officer. Therefore,
we can say that authority flows from top to bottom and responsibility flows from
bottom to top.

Accountability is a result of responsibility and responsibility is result of authority.

Therefore, for every authority an equal accountability is attached.

Differences between Authority and Responsibility

Authority Responsibility

It is the legal right of a It is the obligation of subordinate to

person or a superior to perform the work assigned to him.
command his
subordinates.

Authority is attached to Responsibility arises out of superior-

the position of a superior subordinate relationship in which
in concern. subordinate agrees to carry out duty
given to him.

Authority can be Responsibility cannot be shifted and

delegated by a superior to is absolute
a subordinate

It flows from top to It flows from bottom to top.

bottom.

Barriers to Delegation

Though delegation enhances efficiency of the organisation by dividing work amongst

organisational members (according to their capabilities), it is not free from obstacles.
Various barriers to delegation can be grouped in three main headings. These are:

1. Barriers related to superiors or delegator

2. Barriers related to subordinates or delegatee
3. Barriers related to organisation

I. Barriers Related to Superiors

Despite knowing how important it is to delegate, superiors sometimes do not delegate

work to subordinates. This is because of the following reasons:

1. Wanting to do things personally: Some managers do not delegate because

they feel they can do the work better than others. Since ultimate responsibility is
that of the delegator, they prefer doing the work themselves rather than getting it
done through others.

2. Insecurity: If managers feel that subordinates perform better than them, they
avoid delegation. The exposure of their inabilities to take decisions creates a
feeling of insecurity and, therefore, they fear to delegate.

3. Retention of power: Some managers like to take added responsibility, make

their importance felt by everyone in the organisation and want the subordinates
to come to them to get their problems solved. Their desire to retain power and
dominate is a hindrance to the effective delegation process.

4. Lack of confidence in subordinates: The reward for risk is return. Unless

managers assume risk of subordinates not performing well, they cannot contribute
to the development of skilled managers in future. A manager who does not take
risk in his subordinates and lacks confidence in them will not be able to delegate
effectively.

5. Unwillingness to set standards of control: Having delegated the duties,

managers remain accountable for overall performance of the work. They supervise
the activities of subordinates and ensure that actual performance is according to
planned performance. A manager who fails to establish standards of control
will not be able to effectively delegate duties to subordinates.

II. Barriers Related to Subordinates

Subordinates may also present the following barriers to effective delegation:

1. Lack of confidence: Some subordinates do not want to take responsibility for

the fear of not being able to perform well. They lack confidence and do not want
to take any risk. They prefer to depend on their bosses to make decisions.

2. Fear of making mistakes: Some subordinates fear that if they make mistakes
in carrying out the delegated responsibilities, their superiors will criticise and
insult them in front of others. This fear dissuades them from taking added
responsibility.

3. Lack of incentives: Motivation, through financial and non-financial incentives,

makes delegation effective. Subordinates are reluctant to accept delegation in
the absence of incentives.

4. Absence of access to various resources: If subordinates do not have access

to resources (financial and non-financial) to carry out their work, they will not
accept delegation of responsibilities. This happens when there is delegation of
responsibility without commensurate authority.

5. Convenience: Sometimes subordinates prefer the work done by superiors rather

than assuming responsibility for the same, for the sake of convenience. They
simply want their bosses to make the decisions.

III. Barrier Related to Organisation

The barriers related to organisation structure are as follows:

1. Size of the organisation: A small-sized organisation will not have too many
jobs to delegate to subordinates.

2. No precedence of delegation: Merely because organisations have not earlier

been following the practice of delegation sometimes makes them continue with
the practice of not delegating the jobs.

3. Degree of centralisation or decentralisation: Efficient delegation is affected

by the degree to which organisation distributes the decision-making power to
various organisational units. A highly centralised organisation is obstructive to
the process of effective delegation.

Ways to Overcome Barriers to Delegation

Barriers to delegation can be overcome through the following measures:

1. Accept the need for delegation: When superiors are reluctant to delegate
because they want to do everything themselves rather than allowing subordinates
to do, they should realise the need for delegation. In fact, more the delegation,
more successful will be an organisation.

2. Develop confidence in subordinates: Rather than feeling that, subordinates

are not capable of accepting responsibilities so that delegator does not take the
risk of delegation, the delegator should understand that a man learns through
mistakes and if he commits mistakes, he shall try to find out solutions to the
problem also. If subordinates make mistakes, superiors should guide them rather
than not delegating at all.

3. Communication: Where delegation becomes ineffective because subordinates

do not have the information for making decisions, an effective system of
communication should be developed so that information flows freely from superiors
to subordinates.

4. Motivation: Subordinates should be motivated to accept the responsibilities by

providing financial and non-financial rewards like recognition, status etc.

5. Develop an effective system of control: Since ultimate responsibility for the

work assigned is that of the delegator, he must ensure that subordinates perform
well by setting reasonable standards of dividing the workload into sub-units and
assigning each sub-unit to person most suitable for performing them.

6. Choose the right person for the right job: Lack of confidence in subordinates
should be overcome by dividing the workload into sub-units and assigning each
sub-unit to person most suitable for performing them.

7. Freedom to subordinates: When managers accept the need for delegation to

subordinates they must also give freedom to make decisions with respect to the
delegated tasks. Rather than not delegating at all or delegating less responsibility,
for the fear of subordinates making mistakes, managers must give the
subordinates authority to find solutions to their problems and learn not to make
mistakes in future.

8. Clarity of tasks: The responsibilities or the tasks delegated to subordinates

must be clearly defined in terms of results expected out of those tasks. Knowing
what is exactly expected of them will enable the subordinates perform the
delegated tasks better.

9. Matching the job with the abilities of the subordinates: 'Round pegs in the
round holes shall make delegation effective as the right job will be given to the
right person.

10. Open communication: Though delegatee are given the authority to solve
problems related to the assigned tasks, yet, they should be allowed to freely
discuss the problems with their delegators.

11. Monitoring the critical deviations: Subordinates may make mistakes,

however efficiently they are at work. The superiors should overlook minor deviations
with respect to the delegated tasks and pinpoint only major deviations in the tasks
assigned. This promotes better response and a sense of responsibility amongst
the employees.

12. Develop trust and confidence in subordinates: Delegation should be a

continuous process. Managers should appreciate the work of subordinates when
they perform well. They should delegate them more tasks and express trust and
confidence in them. This will boost their morale to perform better in future.

Centralisation and Decentralisation

Centralisation and decentralisation help to coordinate organisational activities. While
delegation refers to assigning responsibility and authority to people from one level in
the organisational hierarchy to the other, centralisation and decentralisation refer to
the extreme to which authority and responsibility are passed to people at lower levels.
If authority to make decisions is retained at top levels, the organisation is said to be
centralised; if the decision-making authority is distributed widely throughout the
organisation and lower level managers have the authority to use financial and non-
financial resources, the organisation is said to be decentralised.

To begin with, the authority is retained at the top. As the organisation size increases,
the scope of authority gets narrow at top levels and gets distributed to lower-level
managers.

To what extent it flows down the level depends on the degree to which the
organisation is
decentralised.

Centralisation is "the extent to which power and authority are retained at the top
organisational levels" and decentralisation is "the extent to which power and authority
are delegated to lower level."
No organisation can be completely centralised or decentralised. In a completely
centralised organisation, all decisions will be taken by top managers and there will be
no subordinate managers. In a completely decentralised organisation, authority to
make decisions is delegated to lower-level managers and, therefore will be no top
managers. Both the structures cannot co-exist.

Complete centralisation or decentralisation, thus, does not exist. Overall planning and
organising are initiated by top managers and some authority is decentralised to
operating units to carry out the work within the overall policy framework.
All successful companies delegate authority to lower-level managers, though, the
extent to which it is delegated depends upon different factors.

Decentralisation:
Decentralisation is passing of authority to make decisions to the lowest possible level
in the organisational hierarchy. Decentralisation is delegation of authority to the
maximum possible extent. As Allen puts it, "Decentralisation refers to the systematic
effort to delegate to the lowest levels all authority except that which can only be
exercised at central points. Decentralisation is essential but how much should the
managers decentralise depends on various factors like size of the company
(decentralised decision-making authority increases with increases in size of
organisation), cost control (when companies want to maintain strict
cost control, decision-making authority is centralised), desire of managers (if
managers desire to take all decisions on their own, the organisation tends to be
centralised), functional areas (decisions related to finance and personnel are generally
centralised and those related to production or marketing are decentralised), ability of
subordinates (if subordinates are inspiring and hard-working, decision-making
authority can be decentralised.)
Importance of Decentralisation
Decentralisation is important because of the following reasons:

1. Reduction in the burden of top managers: Managers who look after both
strategic and routine matters often become so involved in handling routine
problems that they do not have time to look after strategic issues of the
organisation. The time, they should, on strategic planning is often not spent.
Through decentralisation, routine decisions can be delegated down the scalar
chain and important decisions can be retained at the top.

2. Development of subordinates: One learns through mistakes. If top executives

do not delegate authority to subordinates for the fear that subordinates will make
mistakes, they will not be able to develop potential managers. The subordinates
should be allowed to make mistake and also rectify them so that they learn not to
repeat them in future. This is possible only in the decentralisaed organisation.

3. Faster decisions: In a decentralised organisation, people do not have to

approach the higher authorities every time they face a problem. As they are
closer to the problem area they can make decisions related to that problem. The
decisions are, thus, faster and better.

4. Promotes diversification: If top managers retain authority to make every

decision, they will be able to look after limited lines of products only.
Decentralisation enables them search new markets. They can diversify into new
markets and add new products to the existing line of products.

5. Promotes motivation: Rather than offering financial rewards to motivate

subordinates improve their performance, allowing them to make decisions in
their respective areas in specialisation serves as a better motivational force.
Thus, decentralisation motivates managers to promote the efficiency of workers
resulting in higher production and sales.

6. Flexibility: A decentralised organisation is more flexible as managers at different

levels can change their policies according to changes in environment.

7. Better communication: A decentralised organisation has less levels in the

scalar chain. Communication amongst people at different levels is faster and
efficient. Cases of information distortions (due to increased levels) are reduced.
8. Control: Managers at different levels lay standards of performance for their
respective units and exercise control on those activities. This facilitates the
process of control.

Limitations of Decentralisation
Decentralisation suffers from the following limitations:

1. Coordination: Managers find it difficult to coordinate the organisational activities

where there is high degree of decentralisation.
2. Control: Difficulty in coordination also makes it difficult for top managers to
control the organisational activities.

3. Costly: Though useful, it is expensive since each department manages activities

in its own way. There is duplication of efforts and physical facilities in the
organisation.

4. Adaptability: In the fast changing environment, unless strategic decisions are

centralised different units will react to changes differently and working of the
organisation will become difficult.

5. Lack of uniformity: A highly decentralised organisation lacks the advantage of

uniform policies followed by all the organisational units. Each unit formulates its
own policies. The policies are more uniformly followed in a centralised
organisation.

6. Ability of lower-level managers: In a decentralised organisation, decisions

are taken by managers of different units at their respective levels. If lower level
managers are not competent and skilled to make decision, efficiency of a
decentralised organisation will get reduced.

Factors Affecting Decentralisation

The factors affecting decentralisation can be classified into two categories:

• External factors affecting decentralisation
• Internal factors affecting decentralisation

• External Factors Affecting Decentralisation

The factors external to the organisation are:

1. Environment: If firms are operating in an environment where customers and

suppliers are dispersed, competition is not intense, markets provide wide area
for company to penetrate into (by adding new products to its products line), there
is need for the organisation to decentralise.

2. Regulation of the Government: If the Government lays strict policies and

procedures for the business firms, managers cannot take the risk of delegating
decision-making powers to people at lower levels. They have the fear of being
penalised for not observing the rules. The tendency to decentralise in such cases
is low.

3. Market features: If firms operate in a market, where homogeneous products are

produced for all the firms, the power to make decisions can be decentralised to
lower-level managers.

4. Bargaining with trade unions: If trade unions agree to bargain with lower level
managers for their rights, decision-making power can be decentralised but if
trade unions bargain only with top management, the organisation tends to be
more centralised.

• Internal Factors Affecting Decentralisation

The factors internal to the organisation which affect decentralisation are as follows:

1. Size of the company: As size of company increases, it becomes difficult for

managers to take decisions single handedly. Decision-making will be time
consuming. Therefore, with increase in size of the firms, the decision-making power
is delegated to functional managers and lower-level managers.
This increases efficiency of the organisation since top executives concentrate on
strategic matters and routine matters can be managed at the lower levels.

2. Cost control: Decisions which require huge amount of funds, for example, the
decision to buy a plant or machine, are normally taken by top executives and
decisions where financial outlay is not too large can be taken at lower levels.
Thus, where firms want to maintain strict cost control over activities of the
organisation, the degree of decentralisation is less. To maintain financial control,
organisations can frame a policy that spending money up to a given limit per
month on petty items is left at the discretion of lower-level managers but expenditure
beyond this limit has to be sanctioned by top managers.

3. Philosophy of management: Management philosophy refers to management's

desire to centralise or decentralise. Some managers prefer to retain power and
authority to make decisions and, therefore, believe in centralisation of authority.
Others, who want the decisions to be taken at lower levels, decentralise the
decision-making authority.

4. History of the enterprise: Enterprises which have always worked as centralised

organisations continue to do so in future also. Past precedents are followed in
future and are not easily changed unless a strong desire or outside influence is
created within or outside the organisation.

5. Functional areas: Some degree of centralisation or decentralisation is essential

in every functional area. However, some areas like finance and personnel tend to
be more centralised while others as production and sales tend to be more
decentralised.

6. Ability of subordinates: If lower-level managers are inspiring and innovative,

decision-making power can be given to them. There is greater tendency for
decentralisation in such enterprises.

7. Growth rate of enterprise: Top managers of a growing enterprise in terms of

financial and physical parameters spend more time on important and strategic
organisational matters. Thus, there is greater tendency for decentralisation.

8. Communication system: An effective communication system helps to

coordinate diverse organisational activities. An organisation whose
communication system is based on modern management information systems
can be decentralised.

9. Control system: An effective system of control where regular appraisal of actual

performance against planned performance is done facilitates decentralisation.

Span of Control
Definition: A span of control, also known as a span of management, is a resource
management term and refers to the number of employees who report to a manager.
A span of control means a manageable number of employees that a manager can
control. The bigger the staff, the bigger the span of control.
In the past, managers used to have, on average, four employees to supervise. Later,
it increased to over ten employees per manager due to the introduction of
information technology that made monitoring and controlling easier.
Now organizations can monitor more staff with fewer managers and lower costs.
These days, due to the adoption of modern organizational concepts, teams are
multidisciplinary with experts from different departments and reporting to different
supervisors, making the concept of a span of control less important.

Factors Affecting Span of Control

Many factors affect the span of control; some of them are given below.

1. Geographic Location: If the team is spread out in different geographic

locations, managers will find it difficult to manage their subordinates, and the
management span will be small.

2. Skills of Managers: A skilful manager can manage more subordinates, so

they will have a bigger span of management.

3. Employees’ Skills: If subordinates are skilful, they will require less

supervision, and managing them will be easier. Hence, the span of control will
be larger for managers.

4. Task Assignment: If the assigned tasks are repetitive and similar, the staff
will be experienced and require less supervision and control. Hence, the span
of control will be bigger.

5. Managers’ Responsibilities: If managers have other organizational

responsibilities apart from managing the team, their span of management will
be smaller.
Types of Span of Control
An organization can have two types of a span of control depending on its structure.

1. Wide Span of Control

Organizations with flat structures will have few hierarchical levels and a wide span of
control. Here, supervisors supervise many employees. As there are fewer
hierarchical levels, it has a lower cost and is very flexible in adapting to changes.
The main advantage of this span of control is cost advantage, reduced planning
time, and well-trained subordinates.
The main disadvantage of this type of control is employee management if the
amount of employees is large. Also, sometimes a large number of employees causes
confusion and makes management difficult.
2. Narrow Span of Control
Organizations with many hierarchical levels will have a narrow span of control. Here,
managers supervise fewer employees. A narrow span of control is useful with
complex work requirements where constant managerial support is needed.
The main advantage of this control is easy supervision, management, and effective
planning and decision-making.
The main disadvantage of this span of control is its cost. More managers mean more
cost. Also, more hierarchical levels cause delays in communication.
Factors Affecting Span of Management

1. Adequate Supervision
The managers’ span should be determined to achieve adequate supervision.
The employees who need more guidance can be placed under a narrow span.

2. Nature and Complexity

A narrow span is suitable when the nature of work is complex and needs
more focused supervision. In contrast, a wide span is suitable for repetitive
work that is less complex.

3. Organizational Planning
The span of management is one of the critical factors of corporate planning.
It clarifies the reporting relationships among superiors and subordinates in
the organization.

4. Degree of Centralisation
The degree of centralization and decentralization impacts the span of
management. As centralized organizations have a narrow span of
management and vice versa.

5. Geographic Proximity
The scattered organization results in a narrow span as supervision is required
at every location. Whereas the organization situated at a single premise can
use a wide span of management.
6. Stability
The organizations running for a long term generally have a wide span, as
their goals are clearly defined, and the nature of work is known to all.

7. Effective Communication
A specified span of control can result in effective communication in the
organization. It reduces confusion, and communication takes place through a
proper channel.

8. Qualification of Manager
The span of control largely depends on the capability of the manager or
superior. If the superior is more qualified, he can handle more numbers
subordinated under him. Whereas, if he is less capable, he can only supervise
a few subordinates under him.

9. Delegation of Authority
Appropriate delegation of authority may be achieved by defining the number
of subordinates at each management level.