UNIT-3

ORGANIZING

1–1
 WHAT IS ORGANIZING?

It is the process of
defining the group
activities of the
enterprise and
establishing the
authority
relationship among
them.

11 - 2
 NATURE OF ORGANIZING
Common Objectives
Specialization (or)Division of Labour
Authority of structure (or)Chain of
Command
Group of persons
Co ordination
Communication
Environment
Rules and Regulations
 PROCESS OF ORGANIZING
Determination of activities

Group of activities

Assignment of Duties

Delegation of authority

Establishment of structural relationship

Co ordination activities

PURPOSE (OR)IMPORTANCE OF
ORGANIZING
• To facilitate administration

• To increase the efficiency of

management

• To facilitate growth and diversification

• To ensure optimum use of man and

material resources
• To facilitate co ordination and
communication
• To permit optimum use of technological
innovations.
• To stimulate creativity and initiative.
• To facilitate the development of
managerial ability.
 DEPARTMENTATION
• Grouping of activities in to departments or
other homogeneous unit is known as
departmentation.
• The process of departmentation takes place at
all levels in the organization
• At the top level ,the breakup of functions in to
activities is called Primary departmentation.
• Grouping activities in to separate units at the
middle level is called intermediate
departmentation.

• At the Lower level its called ultimate

Departmentation or secondary
departmentation.
 MERITS
• It suits well the small enterprises for creating
major departments.
• It promotes specialization.
• It facilitates inter-departmental co-ordination.
• Employees can develop skills in depth and
can progress within a department as they
master those skills.
 DEMERITS
• Lack of communication among the different
departments.
• Employees only concentrate their department
activities and its goal rather than
organizational goal.
 TYPES OF DEPARTMENTATION
• 1. Departmentation by Function
• 2. Departmentation by Products
• 3. Departmentation by Process
• 4. Departmentation by Territory/Geographic
• 5. Departmentation by Customers
• 6. Departmentation by time.
• 7. Departmentation by number
Departmentation by Function
 MERITS
• Advantage of specialisation
• Easy control over function
• It is very simple process of grouping activities
 DEMERITS
• Lack of responsibility for the end result
• Overspecialization
• Its leads to increase conflicts and co
ordination problems among departments.
Departmentation by Products
 MERITS
• Its ensures better customer service.
• Unprofitable products may be easily
determined.
• It is flexible and new product line can be
added easily
 DEMERITS
• It increases management cost.
• There are problems at the top of co-ordination
Departmentation by Process
 MERITS
• 1.It provides economy of operation
• 2. The benefits of specialization are available.
• 3. Efficient maintenance of equipment’s is
possible.
• 4. It simplifies supervision and plant layout.
 DEMERITS
• 1.There may be difficulties in coordinating the
activities of different departments
• 2. Due to specialized activity, the employee
mobility is reduced.
Departmentation by
Territory/Geographic
 MERITS
• Full attention can be paid to local customer
groups.
• It helps in reducing transportation and
distribution costs.
• It facilitates the expansion of business to
different regions
 DEMERITS
• It creates the problem of communication and
co-ordination between various regional
offices.
• The problem of top management control
becomes difficult.
Departmentation by Customers

CUSTOMER
DEPARTMENTATION

FOREIGN DOMESTIC
RETAIL
WHOLESALE
 MERITS
• Better service to customer having different
needs and tastes.
• Development in general managerial skills
 DEMERITS
• It may be difficult to maintain co-ordination
among the different customer departments.
 Departmentation by time

TIME DEPARTMENTATION

MORNING SHIFT EVENING SHIFT

NIGHT SHIFT
 MERITS
• It provide part time work for students
• It is possible to use processes that can not be
Interrupted .
• Service can be rendered around the clock
basis.
 DEMERITS
• Lack of supervision
• Increase of overtime rates
Departmentation by number

NUMBER DEPARTMENTATION

DIVISION A DIVISION B
DIVISION C
 MERITS

• It is very useful in lower level organisation

structure
• Millitary forces also use this method
 DEMERITS
• Its not used in higher level of the
organization structure
• In advanced technology world it requires more
specialized and different skills.
FORMAL AND INFORMAL
ORGANIZATION
 FORMAL ORGANIZATION
 Barnard defined formal organization as “a system of
consciously coordinated activities or forces of two or
more person”. A formal organization is deliberately
designed to achieve some particular objectives. It
refers to the structure of well-defined jobs, each
bearing a definite measure of authority, responsibility
and accountability.
 CHARACTERISTICS OF FORMAL
ORGANIZATION
Organization structure is laid down by
the top management to achieve
organizational goals.
Organization structure is based on
division of labour & specialization to
achieve efficiency in the operations.
Organization structure concentrates on the job to
be performed and not the individual who are to
perform jobs.

The organization does not take into consideration

the sentiments of organizational members.

.
• The Authority and responsibility relationship
created by organization structure are to be
honoured by everyone. The position in the
organization hierarchy determines the relative
status of the incumbent.
 ADVANTAGES OF FORMAL
ORGANIZATION
 They provide the basic structure of division of work and
responsibilities. Without such a structure it will be very
difficult for employees to agree between themselves on duties
and responsibilities of each, and such difficulties multiply in
geometric proportions with increasing size of the organization.

 It generates clarity on what support and input each employee

can expect from others, and in turn what is expected of him by
others.
It promotes discipline in the organization.

It makes it easier to review and revise

organization with changing requirements.
It provides a structure for laying down pay
scales and taking other decisions linked to
organizational levels.

It helps in other human resources development

activities such as recruitment, promotions,
career planning and development and
manpower planning.
 DISADVANTAGES OF FORMAL
ORGANIZATION
doesn't allow flexibility.
doesn't allow long term planning.
lesson the scope of creativity.
 INFORMAL ORGANIZATION
 Informal organization refers to the relationship
between people in the organization based on
personal attitudes, likes, dislikes, etc. these
relations are not developed according to procedures
and regulations laid down in the formal
organization structure. These groups may be based
on common taste, language, culture or some other
factor. They are not preplanned, but automatically
through continuous interaction between people.
 CHARACTERISTICS OF
INFORMAL ORGANIZATION
 Informal relations are unplanned.

 Formation of informal organization is a natural process.

 Informal organization reflects human relationships.

 Informal organizations are based on common tastes,

problems, language, religions, culture, etc.

 the membership of informal organization is voluntary. At the

same time a person may be a number of informal groups.
Thus, there can be overlapping in these groups.
 ADVANTAGES OF INFORMAL
ORGANIZATION
1. To employees

(i) Sense of belonging: In a formal organization,

there is lack of sense of belongingness and
personal satisfaction.

(ii) Value for emotional problems: In the daily work

routine there are many opportunities for tension
and frustration.
(iii) Aid on the job: In case of accidents or illness,
members of an informal group help one another.

(iv) Innovation and originality: By enabling members

to modify the job situation more to their liking, the
informal organization creates the necessary
environment for individual innovation and originality.
The individual can experiment with his ideas.
(v) Important channel of communication: News travels

quickly via informal groups. They are the clandestine

transmitters and receivers of information before it is officially
released.

(vi) Social control: Informal groups provide all its members a

set of norms or guides to correct behaviour. Members are
expected to conform to those norms.

(vii) Check on authority: Informal group forces the manager to

plan and act more carefully than he would otherwise.
Informal organization is a check and balance on unlimited
use of authority by a manager.
2. To management

(i) Less supervision: Informal group is self-policing.

This relieves the management of much of the
burden of supervision.

(ii) An aid to management: The information gives

the manager much feedback about employees and
their work experiences thereby increasing his
understanding of what he needs to do.
 DISADVANTAGES OF INFORMAL
ORGANIZATION
o Resistance to change: An informal organization is bound by
customs, conventions and culture.

o Role conflict and sub-optimization: in an informal

organization, everyone works towards the same objectives.
Members put their own group objectives ahead of organization's
objectives. Hence, the organization suffers.

o Rumour: An informal organization sometimes functions as a

carrier of rumour.

o Group think philosophy: Workers become loyal to their groups.

 DIFFERENCE BETWEEN FORMAL AND
INFORMAL ORGANIZATION
• 1. Meaning
Formal Organisation is formed when two or more persons
come together. They have a common objective or goal. They
are willing to work together to achieve this similar objective.
Informal Organisation exists within the formal organisation.
An informal organisation is a network of personal and social
relationships. People working in a formal organisation meet
and interact regularly.

• 2. Formed by Whom?
A formal organisation is formed by the top level management.
An informal organisation is formed by social forces within
the formal organisation.
• 3. Rules and Regulations
The members of a formal organisation have to follow certain rules
and regulations. These rules are available in writing (documented).
They are made by a formal authority (superiors). If the members
follow these rules properly, then they will be rewarded. However, if
they do not follow these rules, they will be punished.

The members of an informal organisation do not have to follow any

rules and regulations.

• 4. Duties and Responsibilities

In a formal organisation, the duties, responsibilities, authority and
accountability of each member is well-defined.

In an informal organisation, there are no fixed duties,

responsibilities, authority, accountability, etc. for the members.
• 5. Objectives or Goals
In a formal organisation, the objectives or goals are specific and
well-defined. The main objectives of a formal organisation are
productivity, growth, and expansion.
In an informal organisation, the objectives are not specific and well-
defined. The main objectives of an informal organisation are
friendship, security, common interest, individual and group
satisfaction, etc.
• 6. Stability
A formal organisation is stable.
An informal organisation is not stable
• 7. Channels of Communication
A formal organisation uses formal channels of communication.
An informal organisation uses informal channels of communication
(i.e. grapevine)
• 8. Organisation Chart
A formal organisation is shown on the organisation chart.

An informal organisation is not shown on the organisation chart.

• 9. Superior-Subordinate Relationship
In a formal organisation, there exist a superior-subordinate
relationship.

In an informal organisation, there is no such superior-subordinate

relationship.

• 10. Benefits for Members

The members of the formal organisation get financial benefits and
perks like wages or salaries, bonus, travelling allowances, health
insurance, etc.

The members of informal organisation get social and personal

benefits like friend circle, community, groups, etc.