CHAPTER 4

ORGANIZING
LESSON 1
NATURE OF ORGANIZATION
DIFFERENTIATION OF THE
ORGANIZATION'S INTERNAL
ENVIRONMENT
 Differentiationin organizations involves division
of labor and specialization. These necessarily
result from the organization's composition-many
different work units with different kinds of tasks,
using different skills and work activities
coordinating with one another for a common
end.
 Division of labor involves assigning different
tasks to different people in the organization's
different work units. Related to it is
specialization, the process in which different
individuals and units perform different tasks. An
organization's overall work is complex and
would be too much for any individual, therefore,
the bigger the organization, the more work units
or work divisions and specializations are to be
expected.
INTEGRATION OF WORK UNITS
 Integration is another process in the organization's
internal environment. which involves the
collaboration and coordination of its different
work units or work divisions. Coordination refers
to the procedures that connect the work activities
of the different work divisions/units of the firm in
order to achieve its overall goal. Structural
mechanisms may be devised in order to increase
collaboration and coordination. The more highly
differentiated one's organization is, the greater the
need for integration among the different units.
LESSON 2
Types of Organization
Structures
 An organization structure is a system made up of
tasks to be accomplished, work movements
from one work level to other work levels in the
system, reporting relationships, and
communication passageways that unite the
work of different individual persons and groups.
The type of organizational structures include:
 a. vertical structure

 b. horizontal structure

 c. network structure
A. VERTICAL STRUCTURE
A vertical structure clears out issues related to
authority rights, responsibilities, and reporting
relationships. Authority rights refer to the
legitimate rights of individuals, appointed in
positions like president, vice president, manager,
and the like, to give orders to their subordinates,
who in turn, report to them what they have
done.
 Owners of private business companies are said to have
absolute authority, even if other persons are
appointed as managers in their companies. In
corporations, the owners are the stockholders and
they elect a board of directors to manage the
organization's activities. The board has a chairman
who acts as the leader, while the members act as the
corporation's authority figures, responsible for making
major decisions affecting their organizations, subject
to the corporation's constitution and by-law
provisions. Besides the chairman of the board, a chief
executive officer (CEO) is appointed to occupy the top
post in the organization pyramid and is personally
accountable to the members of the board and other
owners for the organizational performance.
 Below the top-level managers are the middle-
level managers in charge of departments who,
as earlier mentioned, report to them. Below the
middle-level managers are the lower-level
managers which include office managers, sales
managers, and supervisors who directly report
to the former. Employees under the lower-level
managers also have reporting relationships with
their respective department managers.
B. HORIZONTAL STRUCTURE
A horizontal structure refers to the
departmentalization of an organization
into smaller work units as tasks become
increasingly varied and numerous.
 Departments formed are of two types:
 Line departments - deal directly with the firm's
primary goods and services; responsible for
manufacturing, selling, and providing services to
clients
 Staff departments-support the activities of the
line departments by doing research, attending
to legal matters, performing public relations
duties, etc.
 Meanwhile, departmentalization may be done using
three approaches:
 Functional approach - where the subdivisions are
formed based on specialized activities such as
marketing, production, financial management, and
human resources management
 Divisional approach - where departments are formed
based on management of their products, customers,
or geographic areas covered
 Matrix approach is a hybrid form of
departmentalization where managers and staff
personnel report to the superiors, the functional
manager, and the divisional manager
 Finally,a network structure is a collection of
independent, usually single function
organizations/companies that work together in
order to produce a product or service. Such
network organizations are each capable of doing
their own specialized work activities
independently, like producing, distributing,
designing, etc., but are capable of working
effectively at the same time with other network
members. Often their communication is by
electronic means where sharing of information
is speedy. This results in their ability to respond
at once to their customers' demands.
LESSON 3
ORGANIZATION THEORIES AND
APPLICATIONS
 There are two main classifications of theories
regarding organizational design according to
Robbins and Coulter (2009): traditional and
modern. Traditional pertains to the usual or old-
fashioned ways, while modern refers to
contemporary or new design theories.
Traditional organizational design theories
include:
SIMPLE
 This organizational design has few departments,
wide spans of control, or a big number of
subordinates directly reporting to a manager:
has a centralized authority figure and has very
little formalization of work: usually used by
companies that start out as entrepreneurial
ventures. When applied, its strengths and
weaknesses are revealed.
SIMPLE ORGANIZATIONAL DESIGN
STRENGTHS WEAKNESSES
• Flexible • Risk that overdependence
• Fast decision making and with over-dependence on a
results single person
• Clear accountability • No longer appropriate as
the company grows