Week 3 - Organizational Structure

UU-MAN-1110 -MW Management
Week 3 – Topic Overview
Organizational Structure
Learning Objectives
At the end of Week 3, you should be able to:
1. Define organizing as a management function

2. Understand the characteristics and the importance of organizing
3. Understand issues like work specialization, departmentalization, chain of command, span of
control centralized vs decentralized as well as mechanistic vs organic structures.
4. Explain the differences between line, functional, and line staff structures
5. Explain the difference between formal and informal structures
6. Describe the principles and the types of organizing.
Week 3– Topic Overview 1 | Page

Table of Contents
1. Introduction .................................................................................................................................... 3
2. Functions of Organization .............................................................................................................. 3
3. Characteristics of Organization ...................................................................................................... 4
4. Importance of Organization ............................................................................................................... 6
5. Work Specialization ........................................................................................................................... 8
6. Departmentalization........................................................................................................................ 9
7. Chain of Command....................................................................................................................... 10
8. Span of Control ............................................................................................................................. 13
8.1 Centralization and Decentralization ........................................................................................... 14
9. Formalization ................................................................................................................................ 16
10. Mechanistic and Organic Structures ......................................................................................... 16
11. Principles of Organization ........................................................................................................ 18
12. Formal and Informal Hierarchical Structures ........................................................................... 22
13. Types of Organization............................................................................................................... 22
13.1 Line Organization..................................................................................................................... 23
13.2 Functional Organization ........................................................................................................... 24
13.3. Line and Staff Organization .................................................................................................... 26
14. Types of Staff ............................................................................................................................ 27
References ............................................................................................................................................ 28

1. Introduction
The organization is a mechanism or structure which helps the activities to be performed effectively.
The organization is established to achieve business objectives. The business objectives may differ from
one business to another. Whatever may be the business objectives, there is a need for an organization.
The word 'Organization' is derived from the Greek word 'Organismos' which means an organized body
with connected interdependent parts sharing a common life. When a group of persons working together
to achieve a common goal, the problems such as who decides what issues, who does what work and
what action should be taken based on certain conditions may arise. The organization is the detailed
arrangement of work and working conditions in order to perform the assigned activities effectively.
The organization can be compared to a human body. The human body consists of hands, feet, eyes,
ears, nose, fingers, mouth, etc. These parts are
performing their work independently, and at the same
time, one part cannot be a substitute for another. The
same principles can be identified in the organization
also. The organization consists of different
departments. Each department performs its work
independently and cannot be a substitute for another.
2. Functions of Organization
From the above definitions, it is understood that the functions of an organization include the
determination of activities, a grouping of activities, allotment of duties to specified persons, a
delegation of authority, defining relationships and the coordination of various activities (Miyake and
Friedman, 2012).
1. Determination of activities: It includes the' deciding and division of various activities

required to achieve the objectives of the organization. The entire work is divided into various
parts, and again, each part is subdivided into various sub-parts. For example, the purchase work
may be divided into the requisition of items, placing of an order, storage, and so on.
2. Grouping of activities: The next function of the organization is that the identical activities
are grouped under one individual or a department. The activities of sales such as canvassing,
advertisements, and debt collection activities are grouped under one department, i.e., the sales
department.

3. Allotment of duties to specified persons: To ensure effective performance, the grouped

activities are allotted to specified persons. In other words, the purchasing activities are assigned
to the Purchase Manager; the production activities are assigned to the Production Manager; the
sales activities are assigned to the Sales Manager and the like. Besides, adequate staff members
are appointed under the specified persons. The specified persons are specialized in their
respective fields. If there is any need, appropriate training would be provided to such persons.
4. Delegation of authority: A delegation of authority follows the assignment of duties or

allotment of duties to specified persons. It will be challenging for a person to perform the duties
effectively if there is no authority to do it. While delegating authority, responsibilities are also
fixed. Thus, the Production Manager may be delegated with authority to produce the goods and
fixed with the responsibility of producing quality goods.
5. Defining relationship: When a group of persons is working together for a common goal, it
becomes necessary to define the relationship among them in clear terms. If it is done, each
person will know who his boss, from whom he must receive orders and to whom he is
answerable is. In another sense, each boss should know what authority he has and over which
person.
6. Coordination of various activities: The Chief Managerial Staff should coordinate the
delegated authority and responsibility. The reason is that there must be a separate and
responsible person to see whether all the activities are going on to accomplish the objectives
of the organization or not.
3. Characteristics of Organization
The organization is the pioneering step of management. The functions of management are sitting over
the strong organizational setup. A palace may be constructed only when a very strong foundation is
laid. The same principle is followed here. The organization is the foundation of management. Without
organization, the functions of management such as planning, organizing, staffing, directing,
coordinating, and controlling cannot succeed. The organization supplies the human and material
resources and helps to achieve the objectives of the business. The organization provides the means or
techniques with strong efforts for more production and effective completion of the work. The
organization increases the certainty and promptness in the completion of work by assigning fixed
duties to every person. Whenever the duties are fixed, it automatically develops team spirit towards

the realization of common goals. Initially, the entire work of the enterprise can be divided into various
parts and then linked with all the parts as and when the need arises to achieve the main objectives. The
authority relationship of organizational structure gives the connection between various parts of the
organization. The relationship may operate upward, downward, and sidewise of the organization
(Roberts, 1990; Wilson et al., 2004).
1. Division of labor: The entire work can be divided into many parts for the effective
performance of the work. Each part of work may be completed by one person or a group of
persons — however, all the parts of the work being done to achieve the main objective of the
organization. The work is assigned to a person who is specialized in that work. If there is a
proper division of labor, no person will be allowed to do anything according to his way unless
and otherwise, he is not well equipped. The division of labor results in the creation of
specialized persons because a person does the same work again arid. No waste of time, energy,
and resources are some of the advantages of the division of labor. In addition to this, the
division of labor results in the increase of quality output and quantity of product without any
additional capital.
2. Coordination: Different persons are assigned different works in one organization. However,
all the work are performed to achieve the objectives. It implies that there is a need for
coordination among the workers in an organization. Every department or section of the
organization should have a relationship with each other, to get mutual cooperation.
3. Objectives: The objectives of the organization should be defined clearly. The objectives
cannot be achieved without the existence of a good organizational structure. In turn, the
organization cannot exist without objectives for a long period.
4. Authority-responsibility structure: An organization means an arrangement of the position

of executives by adopting a rank system. In other words, a subordinate has one boss, and a
superior has control over the subordinate specifically. The position of each of the executives is
defined regarding the extent of authority and responsibility vested in him to discharge the
duties.
5. Communication: Every organization has its communication system and its methods. The
success of management depends upon an effective system of communication. The reason is
that every person working in an organization should know the techniques of communication
and the importance of communication. The channels of communication may be divided into

formal, informal, downward, and upward or horizontal.
4. Importance of Organization
The organization creates a relationship between top-level executives and lower-level staff members.
The top-level executives perform functions, like planning, organizing, staffing, directing, and
controlling the lower-level people. The actual work is completed at the lower level of the organization.
In this way, the organization maintains the relationship with each other in an enterprise (Chan, 2002;
Simonin, 1997).
1. Facilitate administration: The administration aims at earning the highest profit by utilizing
the available resources properly. There is planning, policymaking, direction, and coordination
at the administration level to achieve the objectives. Besides, the administration classifies the
activities of the business department-wise and appoints the officers, assistants, supervisors, and
executives to facilitate the achievement of objectives. There should be an effective
administration to achieve the objectives of the business. Duplication of work, wrong planning,
inefficient personnel, lack of motivation, improper allocation of duties and responsibilities,
absence of coordination, communication gap, and improper instructions are the ingredients of
ineffective administration. This ineffective administration can be removed by having a sound
organization. Allen observes that "A properly designed and balanced organization facilitates
both management and operation of the enterprise. The small organization may not only
discourage but also actually preclude effective administration.”
2. Increases the efficiency of management: Under good organization, there is a chance of

exhausting the worker's ability in full and utilization of resources effectively. Confusion, delay,
and duplication of work are avoided in good organization. It automatically motivates the
employees who are working in an organization and increases the efficiency of management.
3. Facilitates growth and diversification: The structure of the company depends upon the
structure of the organization. The structure of the company can be changed whenever growth
and expansion activities are carried out. The growth of business means an increase in the scale
of operation, and diversification means starting of production of a new type of product.
Changes in the organization may result in the appointment of additional staff members,
decentralization of authority and responsibility, the raising of additional capital, identification
of the consumer's satisfaction and preferences, expansion of sales promotion activities and the

like.
4. Ensures optimum utilization of material resources and human efforts: Division of work
and specialization are the tools used to achieve the objective of optimum utilization of material,
resources, and human efforts. Right man, right time and the right job can also be applied to
them. A good organization increases the efforts of the employees and the working facilities.
5. Adoption of new technology: The effectiveness of an enterprise is measured by the reaction

of staff members to the adoption of new technology. In the scientific world, there are a lot of
innovations and inventions identified in the area of production, distribution, and personnel
management. If the enterprise adopts the new technology, the maximum benefits can be
obtained in any field or activity. A flexible organizational structure is needed to adopt new
technology.
6. Places proportionate importance on the various activities of the enterprise:

Organization classifies the entire business activities into departments. Each department is
receiving attention according to the importance it has in the achievement of business objectives.
Money and effort are spent in proportion to the contribution made by every department. It does
not mean that less important department activities are neglected. It means that due importance
is given to each department according to its contribution to the achievement of the objectives.
7. Encourages creativity and initiative: A sound organizational structure will allow the staff
to show their hidden talents, which will help the enterprise to achieve the business goals and
earn higher profits. Clear distribution of authority and responsibility, the incentive offered for
specialized work and freedom given to personal work, increase the spirit of constructive and
creative approach in management.
8. Facilitates coordination: The activities of different departments are grouped to achieve the
business objectives. Each department performs its function in a closely related manner and not
as competitors.
9. Facilitates training and development of managerial personnel: A sound organization

provides training to new staff members before placement and gives refresher training to the
existing staff members to improve their efficiency. The training may be given within the
company or outside the company according to the training facilities available. Nowadays,
training institutes give training to needy persons with the help of different experts from various

fields. These training institutes are collecting data directly from the field used in training.
10. Prevents the growth of secret, influence, and corruption: Sound organization develops
the morale, honesty, devotion t9 duty, and loyalty of business organizations. Normally, this
help removes corruption, secret, and influence. Only an unsound organization develops secrets,
influence, and corruption.
5. Work Specialization
At the Wilson Sporting Goods factory in Ada, Ohio, 150 workers (with an average tenure exceeding
20 years) make every football used in the National Football League and most of those used in the
college and high school football games. To meet daily output goals, the workers specialize in job tasks
such as molding, stitching and sewing, lacing, and so forth. (Peterson, 2010). This is an example of
work specialization, which is dividing work activities into separate job tasks. Individual employees
“specialize” in doing part of an activity rather than the entire activity in order to increase work output.
It’s also known as division of labor, a concept we introduced in the management history module.
Work specialization makes efficient use of the diversity of skills that workers have. In most
organizations, some tasks require highly developed skills; others can be performed by employees with
lower skill levels. If all workers were engaged in all the steps of, say, a manufacturing process, all
would need the skills necessary to perform both the most demanding and the least demanding jobs.
Thus, except when performing the most highly skilled or highly sophisticated tasks, employees would
be working below their skill levels. In addition, skilled workers are paid more than unskilled workers,
and, because wages tend to reflect the highest level of skill, all workers would be paid at highly skilled
rates to do easy tasks—an inefficient use of resources. This concept explains why you rarely find a
cardiac surgeon closing up a patient after surgery. Instead, doctors doing their residencies in open-
heart surgery and learning the skill usually stitch and staple the patient after the surgeon has finished
the surgery.
Early proponents of work specialization believed that it could lead to great increases in productivity.
At the beginning of the twentieth century, that generalization was reasonable.
Because specialization was not widely practiced, its introduction almost always generated higher
productivity. At some point, the human diseconomies from the division of labor—boredom, fatigue,
stress, low productivity, poor quality, increased absenteeism, and high turnover—exceed the economic

advantages. (Humphrey et al.2007)
TODAY’S VIEW. Most managers today continue to see work specialization as important
because it helps employees be more efficient. For example, McDonald’s uses high work specialization
to get its products made and delivered to customers efficiently and quickly— that’s why it’s called
“fast” food. One person takes orders at the drive-through window, others cook and assemble the
hamburgers, another works the fryer, another gets the drinks, another bags orders, and so forth. Such
single-minded focus on maximizing efficiency has contributed to increasing productivity. In fact, at
many McDonald’s, you’ll see a clock that times how long it takes employees to fill the order; look
closer and you’ll probably see posted somewhere an order fulfillment time goal. At some point,
however, work specialization no longer leads to productivity. That’s why companies such as Avery-
Dennison, Ford, Australia, Hallmark, and American Express use minimal work specialization and
instead give employees a broad range of tasks to do.
6. Departmentalization
Does your college have a department of student services or financial aid department? Are you taking
this course through a management department? After deciding what job tasks will be done by whom,
common work activities need to be grouped back together so work gets done in a coordinated and
integrated way. How jobs are grouped together is called departmentalization. Five common forms of
departmentalization are used, although an organization may develop its own unique classification. (For
instance, a hotel might have departments such as front desk operations, sales and catering,
housekeeping and laundry, and Maintenance.
TODAY’S VIEW. Most large organizations continue to use combinations of most or all of these
types of departmentalization. For example, a major Japanese electronics firm organizes its divisions
along functional lines, its manufacturing units around processes, its sales units around seven
geographic regions, and its sales regions into four customer groupings. Black & Decker organizes its
divisions along functional lines, its manufacturing units around processes, its sales around geographic
regions, and its sales regions around customer groupings.
One popular departmentalization trend is the increasing use of customer departmentalization. Because
getting and keeping customers is essential for success, this approach works well because it emphasizes
monitoring and responding to changes in customers’ needs.

Another popular trend is the use of teams, especially as work tasks have become more complex and
diverse skills are needed to accomplish those tasks. One specific type of team that more organizations
are using is a cross-functional team, which is a work team composed of individuals from various
functional specialties. For instance, at Ford’s material planning and logistics division, a cross-
functional team of employees from the company’s finance, purchasing, engineering, and quality
control areas, along with representatives from outside logistics suppliers, has developed several work
improvement ideas ( Drickhamer, 2002 Dec).
7. Chain of Command
Suppose you were at work and had a problem with some issue that
came up. What would you do? Who would you go to help you
resolve that issue? People need to know who their boss is. That’s what the chain of command is all
about. The chain of command is the line of authority extending from upper organizational levels to
lower levels, which clarifies who reports to whom. Managers need to consider it when organizing work
because it helps employees with questions such as “Whom do I report to?” or “Who do I go to if I have
a problem?” To understand the chain of command, you have to understand three other important
concepts: authority, responsibility, and unity of command. Let’s look first at authority.
AUTHORITY. Authority was a major concept discussed by the early management writers; they
viewed it as the glue that held an organization together. Authority refers to the rights inherent in a
managerial position to tell people what to do and to expect them to do it ( Kahn & Kram,1994)
Managers in the chain of command had the authority to do their job of coordinating and overseeing
the work of others. Authority could be delegated downward to lower-level managers, giving them
certain rights while also prescribing certain limits within which to operate. These writers emphasized
that authority was related to one’s position within an organization and had nothing to do with the
personal characteristics of an individual manager. They assumed that the rights and power inherent in
one’s formal organizational position were the sole source of influence and that if an order was given,
it would be obeyed.
Another early management writer, Chester Barnard, proposed another perspective on authority. This
view, called the acceptance theory of authority, says that authority comes from the willingness of
subordinates to accept it. ( If an employee didn’t accept a manager’s order, there was no authority.
Barnard contended that subordinates will accept orders only if the following conditions are satisfied:

1. They understand the order.

2. They feel the order is consistent with the organization’s purpose.
3. The order does not conflict with their personal beliefs.
4. They are able to perform the task as directed.
Barnard’s view of authority seems to make sense, especially when it comes to an employee’s ability
to do what he or she is being told to do. For instance, if my manager (my department chair) came into
my classroom and told me to do open-heart surgery on one of my students, the traditional view of
authority said that I would have to follow that order. Barnard’s view would say, instead, that I would
talk to my manager about my lack of education and experience to do what he’s asked me to do and
that it’s probably not in the best interests of the student (or our department) for me to follow that order.
Yes, this is an extreme—and highly unrealistic—example. However, it does point out that simply
viewing a manager’s authority as total control over what an employee does or doesn’t do is unrealistic
also, except in certain circumstances like the military where soldiers are expected to follow their
commander’s orders. However, do understand that Barnard believed most employees would do what
their managers asked them to do if they were able to do so ( Barnard, 1968).
The early management writers also distinguished between two forms of authority: line authority and
staff authority. Line authority entitles a manager to direct the work of an employee. It is the employer-
employee authority relationship that extends from the top of the organization to the lowest echelon,
according to the chain of command. As a link in the chain of command, a manager with line authority
has the right to direct the work of employees and to make certain decisions without consulting anyone.
Of course, in the chain of command, every manager is also subject to the authority or direction of his
or her superior.
Keep in mind that sometimes the term line is used to differentiate line managers from staff managers.
In this context, the line refers to managers whose organizational function contributes directly to the
achievement of organizational objectives. In a manufacturing firm, line managers are typically in the
production and sales functions, whereas managers in human resources and payroll are considered staff
managers with staff authority. Whether a manager’s function is classified as line or staff depends on
the organization’s objectives. For example, at Staff Builders, a supplier of temporary employees,
interviewers have a line function. Similarly, at the payroll firm of ADP, payroll is a line function.
As organizations get larger and more complex, line managers find that they do not have the time,
expertise, or resources to get their jobs done effectively. In response, they create staff authority

functions to support, assist, advise, and generally reduce some of their informational burdens. For
instance, a hospital administrator who cannot effectively handle the purchasing of all the supplies the
hospital needs creates a purchasing department, which is a staff function. Of course, the head of the
purchasing department has line authority over the purchasing agents who work for him. The hospital
administrator might also find that she is overburdened and needs an assistant, a position that would be
classified as a staff position.
RESPONSIBILITY. When managers use their authority to assign work to employees, those
employees take on an obligation to perform those assigned duties. This obligation or expectation to
perform is known as responsibility. And employees should be held accountable for their performance!
Assigning work authority without responsibility and accountability can create opportunities for abuse.
Likewise, no one should be held responsible or accountable for work tasks over which he or she has
no authority to complete those tasks.
UNITY OF COMMAND. Finally, the unity of command principle (one of Fayol’s 14

management principles) states that a person should report to only one manager. Without unity of
command, conflicting demands from multiple bosses may create problems as it did for Damian Birkel,
a merchandising manager in the Fuller Brands division of CPAC, Inc. He found himself reporting to
two bosses—one in charge of the department-store business and the other in charge of discount chains.
Birkel tried to minimize the conflict by making a combined to-do list that he would update and change
as work tasks changed (Gunn, 2003)
TODAY’S VIEW. Although early management theorists (Fayol, Weber, Taylor, Barnard, and
others) believed that chain of command, authority (line and staff), responsibility, and unity of
command were essential, times have changed (Ashkenas, 2007). Those elements are far less important
today.
For example, at the Michelin plant in Tours, France, managers have replaced the top-down chain of
command with “birdhouse” meetings, in which employees meet for five minutes at regular intervals
throughout the day at a column on the shop floor and study simple tables and charts to identify
production bottlenecks. Instead of being bosses, shop managers are enablers (Morais, 2007).
Information technology also has made such concepts less relevant today. Employees can access
information that used to be available only to managers in a matter of a few seconds. It also means that
employees can communicate with anyone else in the organization without going through the chain of
command. Also, many employees, especially in organizations where work revolves around projects,

find themselves reporting to more than one boss, thus violating the unity of command principle.
However, such arrangements can and do work if communication, conflict, and other issues are
managed well by all involved parties.
8. Span of Control
How many employees can a manager efficiently and effectively manage? That’s what the span of
control is all about. The traditional view was that managers could not—and should not— directly
supervise more than five or six subordinates. Determining the span of control is important because, to
a large degree, it determines the number of levels and managers in an organization—an important
consideration in how efficient an organization will be. All other things being equal, the wider or larger
the span, the more efficient an organization is. Here’s why.
Assume two organizations, both of which have approximately 4,100 employees. If one organization
has a span of four and the other a span of eight, the organization with the wider span will have two
fewer levels and approximately 800 fewer managers. At an average manager’s salary of $42,000 a
year, the organization with the wider span would save over $33 million a year! Obviously, wider spans
are more efficient in terms of cost. However, at some point, wider spans may reduce effectiveness if
employee performance worsens because managers no longer have the time to lead effectively.
TODAY’S VIEW. The contemporary view of the span of control recognizes that there is no
magic number. Many factors influence the number of employees that a manager can efficiently and
effectively manage. These factors include the skills and abilities of the manager and the employees
and the characteristics of the work being done. For instance, managers with well-trained and
experienced employees can function well with a wider span. Other contingency variables that
determine the appropriate span include the similarity and the complexity of employee tasks, the
physical proximity of subordinates, the degree to which standardized procedures are in place, the
sophistication of the organization’s information system, the strength of the organization’s culture, and
the preferred style of the manager (Van Fleet, 1993).
The trend in recent years has been toward larger spans of control, which is consistent with managers’
efforts to speed up decision-making, increase flexibility, get closer to customers, empower employees,
and reduce costs. According to Anders, (2008).
Managers are beginning to recognize that they can handle a wider span when employees know their
jobs well and when those employees understand organizational processes. For instance, at PepsiCo’s

Gamesa cookie plant in Mexico, 56 employees now report to each manager. However, to ensure that
performance doesn’t suffer because of these wider spans, employees were thoroughly briefed on
company goals and processes. Also, new pay systems reward quality, service, productivity, and
teamwork.
8.1 Centralization and Decentralization
One of the questions that need to be answered when

organizing is “At what organizational level are decisions
made?” Centralization is the degree to which decision-
making takes place at the upper levels of the organization. If top managers make key decisions with
little input from below, then the organization is more centralized. On the other hand, the more that
lower-level employees provide input or actually make decisions, the more decentralization there is.
Keep in mind that centralization-decentralization is not an either-or concept. The decision is relative,
not absolute—that is, an organization is never completely centralized or decentralized.
Early management writers proposed that the degree of centralization in an organization depended on
the situation (Fayol, 1949). Their goal was the optimum and efficient use of employees. Traditional
organizations were structured in a pyramid, with power and authority concentrated near the top of the
organization. Given this structure, historically centralized decisions were the most prominent, but
organizations today have become more complex and responsive to dynamic changes in their
environments. According to Zabojnik,(2002), as such, many managers believe that decisions need to
be made by those individuals closest to the problems, regardless of their organizational level.
In fact, the trend over the past several decades—at least in U.S. and Canadian organizations— has
been a movement toward more decentralization in organizations. Figure 3.1, lists some of the factors
that affect an organization’s use of centralization or decentralization.
TODAY’S VIEW. Kenis & Knoke (2002) state that, managers today, often choose the amount
of centralization or decentralization that will allow them to best implement their decisions and achieve
organizational goals. What works in one organization, however, won’t necessarily work in another, so
managers must determine the appropriate amount of decentralization for each organization and work
units within it.

More Centralization More Decentralization

• Environment is stable. • Environment is complex and uncertain.
• Lower-level managers are not as capable • Lower-level managers are capable and
or experienced at making decisions. experienced at making decisions.
as upper-level managers. • Lower-level managers want a voice in
decisions.
• Lower-level managers do not want a say in decisions. • Decisions are significant.
• Decisions are relatively minor. • Corporate culture is open to allowing
managers
• Organization is facing a crisis or the risk of company failure. a say in what happens.
• Company is large. • Company is geographically dispersed.
• Effective implementation of company strategies depends • Effective implementation of company
strategies
on managers retaining a say over what happens. depends on managers having involvement
and flexibility to make decisions.
Figure 3.1 Centralization or Decentralization (Robbins & Coulter, 2012, p.272)
As organizations have become more flexible and responsive to environmental trends, there’s been a
distinct shift toward decentralized decision-making. (Amar et al.2009). This trend, also known as
employee empowerment, gives employees more authority (power) to make decisions. In large
companies especially, lower-level managers are “closer to the action” and typically have more detailed
knowledge about problems and how best to solve them than do top managers. For instance, at Terex
Corporation, CEO Ron Defeo, a big proponent of decentralized management, tells his managers, “You
gotta run the company you’re given.” And they have! The company generated revenues of over $4
billion in 2009 with about 16,000 employees worldwide and a small corporate headquarters staff
(Siekman, 2004, pp. 128). Another example can be seen at the General Cable plant in Piedras Negras,
Coahuila, Mexico, where employees are responsible for managing nearly 6,000 active raw material
SKUs (stock-keeping units) in inventory and on the plant floor. And company managers continue to
look for ways to place more responsibility in the hands of workers (Cable, 2010, p. 31).

9. Formalization
Formalization refers to how standardized an organization’s jobs are and the extent to which employee
behavior is guided by rules and procedures. In highly formalized organizations, there are explicit job
descriptions, numerous organizational rules, and clearly defined procedures covering work processes.
Employees have little discretion over what’s done, when it’s done, and how it’s done. However, where
formalization is low, employees have more discretion in how they do their work.
TODAY’S VIEW. Although some formalization is necessary for consistency and control, many
organizations today rely less on strict rules and standardization to guide and regulate employee
behavior. For instance, consider the following situation:
A customer comes into a branch of a large national drug store and drops off a roll of
film for same-day development 37 minutes after the store policy cut-off time. Although
the sales clerk knows he’s supposed to follow rules, he also knows he could get the film
developed with no problem and wants to accommodate the customer. So he accepts the
film, violating policy, hoping that his manager won’t find out (Morrison, 2006, p. 5-28.).
Has this employee done something wrong? He did “break” the rule. But by “breaking” the rule, he
actually brought in revenue and provided good customer service.
Considering there are numerous situations where rules may be too restrictive, many organizations have
allowed employees some latitude, giving them sufficient autonomy to make those decisions that they
feel are best under the circumstances. It doesn’t mean throwing out all organizational rules because
there will be rules that are important for employees to follow—and these rules should be explained so
employees understand why it’s important to adhere to them. But for other rules, employees may be
given some leeway (Morrison, 2006, p. 5-28.).
10. Mechanistic and Organic Structures
Stocking extra swimsuits in retail stores near water parks seems to make sense, right? And if size 11
women’s shoes have been big sellers in Chicago, then stocking more size 11s seems to be a no-brainer.
After suffering through 16 months of declining same-store sales, Macy’s CEO Terry Lundgren decided
it was time to restructure the organization to make sure that these types of smart retail decisions are
made (Boyle, 2009, p.13).

Mechanistic Organic
• High specialization • Cross-functional teams
• Rigid departmentalization • Cross-hierarchical teams
• Clear chain of command • Free flow of information
• Narrow spans of control • Wide spans of control
• Centralization • Decentralization
• High formalization • Low formalization
Figure 3.2 Mechanistic Vs Organic Organizations (Robbins & Coulter, 2012, p.274)
He’s making the company both more centralized and more locally focused. Although that may seem a
contradiction, the redesign seems to be working. Lundgren centralized Macy’s purchasing, planning,
and marketing operations from seven regional offices to one office at headquarters in New York. He
also replaced regional merchandise managers with more local managers— each responsible for a dozen
stores—who spend more time figuring out what’s selling. Designing (or redesigning) an organizational
structure that works is important. Basic organizational design revolves around two organizational
forms that are described in Figure 3.2
The mechanistic organization (or bureaucracy) was the natural result of combining the six elements
of structure. Adhering to the chain-of-command principle ensured the existence of a formal hierarchy
of authority, with each person controlled and supervised by one superior. Keeping the span of control
small at increasingly higher levels in the organization created tall, impersonal structures. As the
distance between the top and the bottom of the organization expanded, top management would
increasingly impose rules and regulations.
Because top managers couldn’t control lower-level activities through direct observation and ensure the
use of standard practices, they substituted rules and regulations. The early management writers’ belief
in a high degree of work specialization created jobs that were simple, routine, and standardized. Further
specialization through the use of departmentalization increased impersonality and the need for multiple
layers of management to coordinate the specialized departments.
The organic organization is a highly adaptive form that is as loose and flexible as the mechanistic
organization is rigid and stable. Rather than having standardized jobs and regulations, the organic

organization’s loose structure allows it to change rapidly as required (Dougherty, 2001, p.612-631).
It has the division of labor, but the jobs people do are not standardized. Employees tend to be
professionals who are technically proficient and trained to handle diverse problems. They need few
formal rules and little direct supervision because their training has instilled in their standards of
professional conduct. For instance, a petroleum engineer doesn’t need to follow specific procedures
on how to locate oil sources miles offshore. The engineer can solve most problems alone or after
conferring with colleagues. Professional standards guide his or her behavior. The organic organization
is low in centralization so that the professional can respond quickly to problems and because top-level
managers cannot be expected to possess the expertise to make necessary decisions.
11. Principles of Organization
The work can be completed in time whenever a technique or a principle is adopted. So, the success or
failure of an organization depends upon the principles to be followed in the organization. The
principles of the organization may be termed as a tool used by the organization. Some experts like
Taylor, Fayol, and Urwick have given the principles of organization. They are briefly discussed below
(Child, 2005; Parrish, 2010):
1. Principle of definition: It is necessary to define and fix the duties, responsibilities, and
authority of each worker. In addition to that, the organizational relationship of each worker
with others should be clearly defined in the corporate setup.
2. Principle of objective: The activities at all levels of the organization structure should be
geared to achieve the main objectives of the organization. The activities of the different
departments or sections may be different in nature and approach, but these should be
concentrated only on achieving the main objectives.
3. Principle of specialization or division of work: Division of work means that the entire
activities of the organization are suitably grouped into departments or sections. The
departments or sections may be further divided into several such units to ensure maximum
efficiency. This will help to fix up the right man for the right job and reduce the waste of time
and resources. The work is assigned to each person according to his educational qualification,
experience, skill, and interests. He should be mentally and physically fit for performing the
work assigned to him. The required training may be provided to needy persons. It will result in
attaining specialization in work or area.

4. Principle of coordination: The objectives of the organization may be achieved quickly

whenever coordination exists among the workers. At the same time, each work can be done
effectively by having co-ordination. The final objective of all organizations is to get smooth
and effective coordination.
5. Principle of authority: When many persons are working together in one place, there will
be a difference in power and authority. Of these persons, some will rule, and others will be
ruled. Normally, maximum powers are vested with the top executives of the organization.
These senior members should delegate their authority to their subordinates based on their
ability. In certain cases, the subordinates are motivated through the delegation of authority, and
they perform the work efficiently with responsibility.
6. Principle of responsibility: Each person is responsible for the work completed by him.
Authority is delegated from the top level to the bottom level of the organization. However, the
responsibility can be delegated to some extent. While delegating authority, there is no need for
delegation of responsibility. So, the responsibility of the junior staff members should be clearly
defined.
7. Principle of explanation: While allocating duties to the persons, the extent of liabilities of
the person would be clearly explained to the concerned person. It will enable the person to
accept the authority and discharge his duties.
8. Principle of efficiency: Each work can be completed efficiently wherever the climate or the
organizational structure facilitates the completion of work. The work should be completed with
minimum members, in less time, with minimum resources and within the right time.
9. Principle of uniformity: The organization should make the work distribution in such a
manner that there should be equal status and equal authority and powers among the same line
officers. It will avoid the problems of dual subordination or conflicts in the organizational
setup. Besides, it increases coordination among the officers.
10. Principle of correspondence: Authority and responsibility should be in parity with each
other. If it is not so, the work cannot be effectively discharged by any officer, whatever his
ability may be. At the same time, if authority alone is delegated without responsibility, the
authority may be misused. In another sense, if responsibility is delegated without authority, it
is a dangerous one.

11. Principle of unity of command: This is also sometimes called the principle of
responsibility. The organizational setup should be arranged in such a way that a subordinate
should receive instruction or direction from one authority or boss. If there is no unity of
command in any organizational setup, the subordinate may neglect his duties. It will result in
the non-completion of any work. In the absence of unity of command, there is no guidance
available to the subordinates, and there is no controlling power for the top executives of the
organization. Further, some subordinates will have to do more work, and some others will not
do any work at all.
12. Principle of balance: Several units are functioning separately under one organizational
setup. The work of one unit might have been commenced after the completion of the work by
another unit. So, it is essential that the sequence of work should be arranged scientifically.
13. Principle of equilibrium balance: The expansion of business activities requires some
changes in the organization. In certain periods, some sections or departments are overloaded,
and some departments are underloaded. During this period, due weight should be given based
on the new workload. The overloaded sections or departments can be further divided into
subsections or sub-departments. It would entail effective control over all the organizational
activities.
14. Principle of continuity: It is essential that there should be a re-operation of objectives,

re-adjustment of plants, and provision of opportunities for the development of future
management. This process is taken over by every organization periodically.
15. Principle of the span of control: This is also called the span of management or the span
of supervision or levels of the organization. This principle is based on the principle of
relationship. The span of control refers to the maximum number of members effectively
supervised by a single individual. The number of members may be increased or decreased
according to the nature of work done by the subordinate or the ability of the supervisor. In the
administration area, under one executive, nearly four or five subordinates may work. In the
lower level or the factory level, under one supervision, twenty or twenty-five workers may
work. The span of control enables the smooth functioning of the organization.
16. Principle of leadership facilitation: The organizational setup may be arranged in such a
way that the persons with leadership qualities are appointed to key positions. Leadership
qualities are honesty, devotion, enthusiasm, and inspiration.

17. Principle of exception: The junior officers are disturbed by the seniors only when the work
is not done according to the plans laid down. It automatically reduces the work of middle-level
officers and top-level officers. So, the high-level officers may use the time gained by a
reduction in workload for framing the policies and chalking out the plans of the organization.
18. Principle of flexibility: The organizational setup should be flexible to adjust to the
changing environment of business. The organization should avoid complicated procedures and
permit the expansion or contraction of business activities.
19. The scalar principle: This is also called the chain of command or line of authority.
Normally, the line of authority flows from the top level to the bottom level. It also establishes
a line of communication. Every person should know who is his superior and to whom he is
answerable.
20. Principle of simplicity and homogeneity: The organization structure should be simple. It
is necessary to understand a person who is working in the same organization. If the organization
structure becomes a complex one, junior officers do not understand the level and the extent of
responsibility for an activity. The simplicity of the organizational structure enables the staff
members to maintain equality and homogeneity. If equality and homogeneity are maintained
in one organization, it is possible to determine whether the staff members discharge their duties
to realize the objective of the organization.
21. Principle of Unity of Direction: This is also called the principle of coordination. The
major plan is divided into sub-plans in a good organizational setup. Each sub-plan is taken up
by a group or department. All the groups or departments are requested to cooperate to attain
the main objectives or in implementing a major plan of the organization.
22. Principle of collective decisions: In the business organization, there is several decisions
taken by the officers to run the business. If a complicated problem arises, more than one
member examines the problems and takes the decisions. Whenever the decision is taken jointly,
the decision gives the benefit for a long period, and the decision is based on various aspects of
the organizational setup.

12. Formal and Informal Hierarchical Structures
For most aspects of management and organization studies, ‘hierarchy’ has been interpreted largely as
formal hierarchy and used almost synonymously with the organization; organization means hierarchy,
and hierarchy means organization. According to Weber (1921/1980, p. 124), ‘hierarchy’ can be
understood as the vertical formal integration of official positions within one explicit organizational
structure whereby each position or office is under the control and supervision of a higher one.
Following this tradition, formal hierarchical order can be defined as an official system of unequal
person-independent roles and positions which are linked via lines of top-down command and control
(Laumann et al., 1971; Mousnier, 1973). In a formal hierarchy, the official roles and positions of all
members of the system are clearly defined and demarcated from each other; social relationships within
organizations are institutionalized and legitimized first and foremost, if not exclusively, as hierarchical
relations (Zeitlin, 1974, p. 1090).
However, people can be in vertical social relationships not only via anonymous or official rule systems
but also via unofficial mechanisms. These mechanisms can be found particularly in the realm of social
guidelines and interaction (e.g. norms and values, verbal or non-verbal attitudes and behaviors,
communication and discourses) and are therefore highly person-dependent processes (Zenger,
Lazzarini, & Poppo, 2001, p. 2). According to such an understanding, informal hierarchy can be
defined (and identified) as person-dependent social relationships of dominance and subordination
which emerge from social interaction and become persistent over time through repeated social
processes (especially routine behavior).
13.Types of Organization
The organization is designed based on principles of division of labor and span of management. The
success of the organization depends upon the experience and competence of the officers of the
organization. There is a necessity of chalking out the line of authority among the people who are
working in an organization to achieve the desired results. Besides, it involves the determination of
duties among the officers and combining the activities of all officers to get the desired results.
According to Kimball and Kimball, "The problem of an organization is to select and combine the
efforts of men of proper characteristics to produce the desired results." Nature, scale, and size of the

business are the normal factors that determine forms of internal organization. The following some of
the common types of organizations find a place in the structure of the internal organization (Diefenbach
and Sillince, 2011):
1. Line, Military, or Scalar organization.
2. Functional organization.
3. Line and staff organization.
A brief explanation of the above types of organizations is given below:
13.1 Line Organization
Line organization is the simplest and oldest type of organization followed in an organization. Underline
organization; each department is generally a completely self-contained unit. A separate person will
look after the activities of the department, and he has full control over the department. There are certain
powers that will be given to line executives to take decisions whenever a need arises. He communicates
his decision and orders to his subordinates.
The subordinates, in turn, can communicate them to those who are immediately under them. Such
decision-making authority is to flow from the top management level to the bottom. The top
management people have greater decision-making authority than bottom-level executives. It should be
noted that in this type of organization, an executive is independent of other executives of the same
level (say departmental heads). In other words, the same-level executives do not give or receive any
orders amongst themselves. However, they receive orders from their immediate boss (general
manager) and give orders to their subordinates.
Hence, it is known that all the departmental heads are responsible for the general manager. The general
manager, in turn, is responsible to the board of directors. The board of directors is responsible to the
shareholders who are the owners. This type of organization is followed in the army on the same pattern.
So, it is called a military organization. Under this type of organization, the line of authority flows from
the top to bottom vertically. So, it is called a line organization.

Figure 3.3 Example of a line organization
13.2 Functional Organization
Underline organization; a single person oversees all the activities of the concerned department. Here,
the person in charge finds it difficult to supervise all the activities efficiently. The reason is that the
person does not have enough capacity and required training. To overcome the limitations of line
organization, F.W. Taylor proposed a new type of organization called the functional organization.
Under a functional organization, various specialists are selected for various functions performed in an
organization. These specialists will attend to the work which is common to different functions of
various departments. Workers, under functional organization, receive instructions from various
specialists. The specialists are working at the supervision level. Thus, workers are accountable not
only to one specialist but also to the specialist from whom instructions are received. Taylor advocated
this organization as a point of the scheme of scientific management. Directions of work should be
decided by functions and not by mere authority. The need for functional organization arises out of:
(i) The complexity of modern and large-scale organizations;

(ii) A desire to use the specialization in full and;
(iii) To avoid the workload of line managers with complex problems and decision-making.

13.2.1. Characteristics of Functional Organization
1. The work is divided according to specified functions.

2. Authority is given to a specialist to give orders and instructions about a specific function.
3. The functional authority has the right and power to give command throughout the line
concerning his specified area.
4. The decision is taken only after making consultations with the functional authority relating
to his functional area.
5. The executives and supervisors discharge the responsibilities of functional authority.
Figure 3.4 Example of a functional organization
1. Route clerk: He is a technical expert. He fixes the route through which each work should
travel up to the stage of completion.
2. Instruction card clerk: He is expected to draft instructions to workers based on the route
fixed by the route clerk. These instructions are written on a separate card.
3. Time and cost clerk: This clerk fixes the standard time for each work and the cost incurred
for each work. He gives instructions to the workers to record the time spent by the workers and
the actual cost incurred for completion with standard time- and cost.

4. Gang boss: This worker is expected to see the various machines and materials kept ready
for workers to perform the work.
5. Speed Boss: He advises the worker to complete the work within the standard time,
considering the speed of the machines. Besides, the speed boss sees whether each work is
completed in time or not.
6. Inspector: The Inspector checks the quality of each work and certifies it as standard. The
accuracy of work is checked concerning the specification.
7. Repair boss: His work starts only after the actual work is performed by the workers. He is
concerned with the upkeep of machines and other equipment. It means that the responsibility
of the repair boss is the maintenance of machines.
8. Disciplinarian: He implements the rules and regulations of the entire organization. He is a

peacemaker in the organization. He also checks whether each work is performed systematically
and perfectly.
The route clerk, the instructions clerk, and the time and cost clerk work in the planning department.
The gang boss, speed boss, inspector, and repair boss belong in the factory section of the organization.
The disciplinarian is not a staff of any section, but he is responsible for the workers' conduct.
13.3. Line and Staff Organization
There are some advantages and disadvantages both in the line organization and functional
organization. To reap the advantages of both line organization and functional organization, a new type
of organization is developed, i.e., line and staff organization. Underline, and staff organization, the
disadvantages of line organization and functional organization, may be avoided to some extent. The
line officers have the authority to take decisions and implement them to achieve the objectives of the
organization. The line officers may be assisted by the staff officers while framing the policies and
plans and taking decisions. In the fast-developing industrial world, line officers are not able to acquire
technical knowledge. For example, while taking decisions regarding production, technical knowledge
is needed to take correct decisions. This type of gap may be bridged with the help of staff officers. The
staff officers may be experts in a field. Then, the line officers can get expert advice from the staff
officers before taking the final decisions. According to Allen, "Staff refers to those elements of the

organization which provide advice and service to the line." The authority flows from the top level to
the lower level of the organization through the line officers while the staff officers attached to the
various departments advise the departments. The staff officers do not have any authority to control
anybody in the organization. Besides, the staff officers are not able to compel the line officers to follow
the advice given to them. Each department is headed by a line officer who exercises full authority
regarding the planning, implementation, and control of workers under him with the help of staff
officers. There is no connection between workers and the staff officers of any department. The workers
get instructions only from the line officers. Hence, the unity of command and specialization are
followed in this organization.
14.Types of Staff
1. Personal staff: Personal staff means a person who

assists another person in the performance of work
effectively. Under such circumstances, the work of line
officers could not be delegated to others. This type of person is appointed at the top level of
the organization. The personal staff officers do not supervise the subordinates of line officers.
2. Specialized staff: The specialized staff officers render service to the line officers at all levels
of the organization. The specialized staff officers offer advice with some limited provisions.
The management imposes these provisions.
3. General Staff Assistant: General staff assistants are a group of persons who are rendering
service as advisors to top management in specific matters. The primary feature of the general
staff is that they advise on the overall plans and policies of the organization. However, they are
not specialized in any area.

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Week 3 - Organizational Structure

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UU-MAN-1110 -MW Management

Week 3 – Topic Overview

1. Define organizing as a management function

Week 3– Topic Overview 1 | Page

2. Functions of Organization .............................................................................................................. 3

3. Characteristics of Organization ...................................................................................................... 4

4. Importance of Organization ............................................................................................................... 6

5. Work Specialization ........................................................................................................................... 8

8. Span of Control ............................................................................................................................. 13

8.1 Centralization and Decentralization ........................................................................................... 14

10. Mechanistic and Organic Structures ......................................................................................... 16

11. Principles of Organization ........................................................................................................ 18

12. Formal and Informal Hierarchical Structures ........................................................................... 22

13. Types of Organization............................................................................................................... 22

13.1 Line Organization..................................................................................................................... 23

13.2 Functional Organization ........................................................................................................... 24

13.3. Line and Staff Organization .................................................................................................... 26

14. Types of Staff ............................................................................................................................ 27

Week 3– Topic Overview 2 | Page

1. Determination of activities: It includes the' deciding and division of various activities

Week 3– Topic Overview 3 | Page

3. Allotment of duties to specified persons: To ensure effective performance, the grouped

4. Delegation of authority: A delegation of authority follows the assignment of duties or

Week 3– Topic Overview 4 | Page

4. Authority-responsibility structure: An organization means an arrangement of the position

Week 3– Topic Overview 5 | Page

formal, informal, downward, and upward or horizontal.

2. Increases the efficiency of management: Under good organization, there is a chance of

Week 3– Topic Overview 6 | Page

5. Adoption of new technology: The effectiveness of an enterprise is measured by the reaction

6. Places proportionate importance on the various activities of the enterprise:

9. Facilitates training and development of managerial personnel: A sound organization

Week 3– Topic Overview 7 | Page

Week 3– Topic Overview 8 | Page

advantages. (Humphrey et al.2007)

Week 3– Topic Overview 9 | Page

Week 3– Topic Overview 10 | Page

1. They understand the order.

Week 3– Topic Overview 11 | Page

UNITY OF COMMAND. Finally, the unity of command principle (one of Fayol’s 14

Week 3– Topic Overview 12 | Page

Week 3– Topic Overview 13 | Page

8.1 Centralization and Decentralization

One of the questions that need to be answered when

Week 3– Topic Overview 14 | Page

More Centralization More Decentralization

Figure 3.1 Centralization or Decentralization (Robbins & Coulter, 2012, p.272)

Week 3– Topic Overview 15 | Page

10. Mechanistic and Organic Structures

Week 3– Topic Overview 16 | Page

Week 3– Topic Overview 17 | Page

11. Principles of Organization

Week 3– Topic Overview 18 | Page

4. Principle of coordination: The objectives of the organization may be achieved quickly

Week 3– Topic Overview 19 | Page

14. Principle of continuity: It is essential that there should be a re-operation of objectives,

Week 3– Topic Overview 20 | Page

Week 3– Topic Overview 21 | Page

12. Formal and Informal Hierarchical Structures

Week 3– Topic Overview 22 | Page

1. Line, Military, or Scalar organization.

3. Line and staff organization.

A brief explanation of the above types of organizations is given below:

13.1 Line Organization