ORGANIZATION

It is a rational coordination of the activities of a

number of people for the achievement of some
common explicit goals, through division of labor and
function and through a hierarchy of responsibility
and authority.

They involve a significant amount of conscious

planning, coordination and deliberate structuring.
MEANING AND NATURE
• Consciousness, co-ordination, deliberate structuring
• Objectives
• Positions and jobs
• Responsibilities and authority
• Relationship

2 meanings- Organization-group/Institute
Organizing-Process
 CHARACTERISTICS
Every organization
1. Made of group of people
2. Common goals
3. Vertical and horizontal relationship
4. Authority or chain of command
5. Dynamic
 Importance/Purpose of organizing

 Facilitates administration
 Help optimum utilization of resources
 Facilitate co-ordination and direction
 Facilitate growth and diversification
 Stimulate creativity
 Enlarge abilities of employees
Process of organizing
• 7 steps
1. Consideration of objectives
2. Deciding organizational boundaries
3. Grouping of activities into depts.
4. Analysing inter-dept relations ad deciding key depts.
5. Determining levels at which various type of decisions are to be
made
6. Determining span of mgmnt
7. Setting up co-ordination mechanism
 SPAN OF MANAGEMENT
 Also referred as span of control
 This indicates the number of subordinates who report directly to a manager
 This determines the effective utilization of the managers and also the
effective performance of their subordinates
 If the span is wider then the manager gets over strained and the subordinates
won’t get the proper guidance
 If the span is narrow then the manager is underutilized and the subordinates
feel perturbed due to over control
 If the span is narrow then the organization structure becomes tall that leads
to communication problem cost problems.
 If the span is wide then it becomes a flat organization
 Principles of organization
Objectives Authority
Specialization Efficiency
Span of Control Simplicity
Exception Flexibility
Scalar principle Balance
Unity of command Unity of direction
Delegation Personal ability
Responsibility Acceptability
 Types of Organization
Formal organization: This is the intentional structure of
roles in a formally organized enterprise. But even though
the relationship is formal the individual interests and talents
will be recognized but in a channeled way.

Informal Organization: A network of interpersonal relationships

that arise when people associate with each other.
Basic elements of formal organizations
Centralization and decentralization.

Delegation of authority.

Span of control ( supervision).

Division of service.

Departmentation.
1. Centralization and decentralization:
I.e., the level at which most of the decisions are made within the
organization.

Centralization
Concentration of decision-making and action at high-level
management.

Decentralization
Consistent delegation (handing over, passing on) of authority
(power) to the lower levels where the work is performed
CENTRALIZATION
Advantages
1. Provide Power and prestige for manager.
2. Promote uniformity of policies, practices and decisions.
3. Minimize duplication of function.
Disadvantages
1. Neglected functions for mid. Level, and less motivated
personnel.
2. Gap between decision making and action at ground level
Decentralization
• Golden calf
• Greater no of decisions
• More important decisions
• Superior forgoes control
 Advantages of Decentralization
Reduces communication and red tape problem
Permits quick and better decision making
Relieves top management of some burden
Gives managers more autonomy
Develops competition within organization
Ensures development of employees
Provides for product diversification
Provides for development of more managers
Improves flexibility
 DECENTRALIZATION:
Advantages:
• Raise morale and promote interpersonal relationships.
• Relieve from the daily administration.
• Bring decision-making close to action.
• Promote employee’s enthusiasm and coordination.
• Facilitate actions by lower-level managers.
• Improves coordination, especially for services.
 Limitations of Decentralization
Difficult to have uniform policy
Increases complexity of coordination
May be limited due to non availability of managers
Training expenses go up
May result in loss of power by upper level managers
 Limitations of Decentralization
• Top-level administration may feel it would decrease their status.
• Managers may not permit full and maximum utilization of
highly qualified personnel.
• Increased costs. It requires more managers and large staff.
• It may lead to overlapping and duplication of effort.
• It may lead to lack of uniformity and lowering of standards in
decision-making.
•Emergency decision may not be possible.
Authority

• It is the right of superior to issue commands to subordinates

• Authority cannot be delegated
 Responsibility
It is the obligation of a subordinate to obey the commands
of superior
It is two dimensions - for and to
Responsibility for is the obligation of a subordinate to
obey the commands of superior
Responsibility to is the accountability to his superiors
Responsibility cannot be delegated
2 parts- operating responsibility & ultimate responsibility
While the subordinate has operating responsibility, the
superior has the ultimate responsibility
Types of Authority
1. Line Authority
2. Staff Authority
3. Functional Authority
 Decentralization of authority
It is the tendency to disperse decision making authority in
an organized structure
It is very important for the organization to decide the
amount of decision making authority in hands of different
top officers
In centralized set up few people take all decisions while in
decentralized set up it gets delegated
 Authority vs Power
It is the institutionalized right
to control subordinates
It rests with the chair or
position
It is delegated by superior
It is well defined and finite
It forms basis of formal
organization
It is the ability of the person to
influence others
It rests with the individual
It is earned by the individual
through his efforts
It is undefined and infinite
It serves as the basis for
informal organization
Power may exceed authority
 Delegation vs Decentralization
Delegation is a process while Decentralization is the end
result
In delegation the superior continues to be responsible for
the delegated work while in Decentralization, he is relieved
from such responsibility
 Committees
It is a group of people who have been formally assigned some task
or some problem for their decision and implementation
Committees can be broadly classified as Advisory OR Executive
committee and Standing or Ad-Hoc Committee
Advisory committee is vested with only staff authority
Advisory committee can only give advice and cannot enforce the
implementation
The executive committee is vested with line authority they not
only take decisions but also enforce its implementation
 Advantages
Improves coordination as different people form a committee
Helps people to share their knowledge and experience
It is a way of training and developing the personnel
Drawbacks
 It is seen as a way of postponing the matter
 Members in the committee hesitate to take responsibility and involve
themselves in it
 Very difficult to maintain secrecy
 As the chairman changes the responsibility will go to permanent secretary
who may not get the same response from members
 Decisions are taken with compromise
 Departmentation
The horizontal differentiation of tasks or activities
into discrete segments is known as Departmentation
There is no best single form of departmentation
that is applicable to all organizations or to all
situations
There are several bases for departmentation.
 Departmentation
• 1. Departmentation by functions
•2. Departmentation by products
•3. Departmentation by regions or territory
•4. Departmentation by time
•5. Departmentation by process
 1. Departmentation by functions
Grouping of activities according to the functions of an enterprise,
such as production, selling and financing
But many organization even without the above functions can be
divided based on other functions
This provides for coordination among various aspects of the
organization
 Advantages
It is a simple form of grouping activities
Provides for excellence in performance through occupational specialization
Maintains power and prestige of major functions
Leads to improved planning and control of key functions
Simplifies training to various functions
 Drawbacks
It is difficult to relate one’s own task to whole task
The overall development of the manager is not possible
Unsuitable for very large companies spread over the globe
Interpretations conflict with each manager as everyone
describe in their own sense
Narrows viewpoints of key personnel
Slow adaptation to environmental change
Difficult to judge the worth of each department
 2. Departmentation by products
Grouping activities based on products or product lines

Suitable for large organizations

This is evident when an organization is diversified and each

product need different raw materials, technology,
marketing methods.
 Advantages
Places attention to product lines
Helps management to compare between the products and act accordingly
Promotes excellence through specialization
Relieves top management of operating task responsibility
Places importance of profit at the functional level
Limitations

Need people with greater ability of handling, results in duplication of staff and facilities
Under-utilization of facility in one product line while the other product line may be dearth
of facilities
Increased expenditure
3. Departmentation by regions or territory
Most suitable for such organizations which are
dispersed over the globe
Many government organization prefer this type as
they can provide similar and adoptive services to the
regions.
 Merits
Places responsibility even at the lower level
Emphasizes local markets and problems
Can take locational advantages like availability of raw material
It affords top management training
Can invest in a region with better profit

Demerits
Gives rise to duplication of various activities
Increases problem for top management to exercise control
Unity of direction may be lost as each territory looks after their
own interests forgetting the organizational interests.
 4. Departmentation by time
One of the oldest method of departmentation
Generally used at lower levels like shifts in working
Advantages
Services will be rendered beyond 8 hour shift
Continuing cycle processes can be used
Better utilization of the equipment
Encourages employees get higher degrees
Limitations
Accidents will be carried from one shift to another that affects the product line
Supervision may not be done properly in night shifts
People tend to pass the work to next shift
Difficult to measure the performance of a particular department
May lead to communication problems if the previous shift’s worker has not conveyed
the problem properly
 5. Departmentation by process
Departmentation done on the basis of some process or
technologies involved
This type of structure varies from organization to
organization as the nature of industry changes
Ex: Fruit industry, automobile industry, chemical industry
Here the work will be done in one place due to specialized
equipment
 Merits and demerits
Merits
Optimum utilization of machines
Increases the efficiency of departments

Demerits are:
If the process is sequential delay in one process affects the
other
Not easy to measure the performance of each process
 Matrix organization
Also known as grid organization
It is the combination of functional and product patterns of
departmentation
Here the functional departments are permanent while the
project departments are created as and when required
The members of the project team will be chosen from
functional departments and as soon as the project is
completed they revert back to their original functional
group
 Benefits
Improves communication and coordination
Oriented towards end results
Responsibility increases for each member as they become part of the project
team
This helps the employees’ self development

Drawbacks
People know that their work in the project is temporary. Hence they may
show less interest in projects
Conflict in organization authority exists
Disunity of command may exist as project members will be under two
superiors, one from functional group and the other in project group