Chapter Four

Organizing

1. What is organizing?
2. Formal and informal organization
3. Planning and organizing
4. The importance of organizing
5. The organizing process
6. Departmentalization
7. Major concepts of organizing
8. Principles of organizing

1
 Without people organizations are simply empty buildings and
unused equipment.
No single organizational structure can be effective in all
situations.
– A structure suitable to one organization may be ineffective to another
because two different organizations cannot have the same people,
resources or objectives.
– Organizations those do not revise their structures periodically to meet
the ongoing global competition will face extinction.
– Organizations should continuously adapt the challenges of competition.
• Planning process already determines
– what and how to do,
– what actions to be taken to accomplish predetermined objectives,
– how long it will take and where it will take.
• After planning comes organizing and organizing is highly related
with planning.
2
What is organizing?
• Grouping the work of organization and assigning workers to carry out
the work with the provision of appropriate authority are undertaken
in the organizing function.
• In organizing, managers must match
– the work,
– the workers, and
– the resources necessary to carry out the work.
• Organizing are boldly exploring new approaches to
– designing work,
– linking jobs, and
– coordinating activities.
– i.e. changing the ways jobs, businesses & relationship between businesses
are structured.
• Organization is the process of
– defining and grouping activities and
– establishing the authority relationship among them. 3
In performing organizing function,
– the manager differentiates and integrates activities
of an organization.
• Differentiation means
– the process of departmentalization or segmentation
of activities on the basis of some homogeneity; or
– segmentation of the organizational system into
subsystems.
• Integration is
– the process of achieving unity of effort among
different departments, or various subsystems while
achieving the stated goals.
4
Organizing is
• deciding how best to group organizational activities & resources.
• the identification, classification and grouping of tasks that are
necessary to achieve objectives and assigning of work to
individuals and designing hierarchy of decision making
relationship.
• dividing duties of an organization into specific tasks or jobs;
determining appropriate bases for departmentalization jobs;
delegating authority; and deciding the optimal number of jobs in
particular department.
Organizing is the process of
– identifying and grouping tasks to be preformed
– assigning responsibility and delegating authority, and
– establishing relationships to enable work efficiently & effectively in the
accomplishment of objectives.
5
 Organizing function has four distinctive activities/
components
1. It determines work activities to be done to accomplish
organizational objectives
2. It classifies types of work needed and groups the work into
manageable work units.
3. It assigns work to individuals and delegates the appropriate
authority
4. It designs a hierarchy of decision making relationships.
• The main objectives of organizing is
– Determining what kind of activities should be performed to
materialize objectives
– Classifying those activities and grouping them based on certain
criteria
– Assigning the work to individuals and delegating authority
– Creating hierarchy of decision making 6
Elements of organizing
• There are 6 building blocks that managers can use in
constructing an organization.
1. designing jobs DGEDCD
2. grouping jobs
3. establishing reporting relationships between jobs
4. distributing authority among jobs
5. coordinating activities between jobs &
6. differentiating between jobs
• Managers should understand the basic building blocks of
organization structure and recognize that part of organizing
function is knowing how best to assemble these building
blocks in to an effective overall structure for the firm.

7
Designing jobs
– The logical starting point and the first building block i.e.
designing jobs for people within the organization.
– is the determination of an individual’s work-related
responsibilities.
– The natural starting point for designing jobs is determining
the level of desired specialization.
– Job design is a fundamental corner stone of organizing.
Job specialization
– is the degree to which the overall task of the organization
is broken dawn & divided in to smaller component parts.
– evolves from the concept of division of labor
– Specialization taken too far results in boredom and lower
self esteem
8
 To counter or minimize problems (limitations) associated with
specialization, the 5 alternative approaches are:
1. Job rotation REECW
2. Job enlargement
3. Job enrichment the
4. Job characteristics approach and
5. the work team
• They are structural techniques.
Job rotation
• is an alternative to job specialization that involves systematically moving
employees from one job to another. i.e. moving from job to job.
Job enlargement
• is an alternative to job specialization that involves increasing the total
number of tasks workers perform.
Job enrichment
• is an alternative to job specialization that evolves increasing both the
number of tasks the workers does and the control the worker has over the
job. 9
Job characteristics approach
– is an alternative to job specialization that suggests that jobs should be diagnosed and
improved along five core dimensions, taking into account both the work system and
employee preference.
– the five core dimensions
• skill variety
– the number of tasks a person does a job
• task identity
– the extent to which the worker does a complete or identifiable portion of the total job.
• task significance
– the perceived importance of the task
• autonomy
– the degree of control the worker has how the work is performed,
• feed back
– the extent to which the worker knows how well the job is being performed.
Work teams
– is an alternative to job specialization that allows an entire group to design the work
system it will use to perform an interrelated set of tasks.
– Under this arrangement, a group is given responsibility for designing the work system to
be used in performing an interrelated set of jobs.
– In a work team the group itself decides how jobs will be allocated
10
Formal Vs informal organization
• Organizations can be classified into formal and informal types.
• Formal organization
– an organization that is deliberately and rationally designed/ created and approved
by management through organizing process to achieve organizational goals/
objectives.
– a system of well-defined jobs, each bearing a definite measure of authority,
responsibility, and accountability.
• Common characteristics of formal organization are
– Consciously designed
• Formal organization are purposefully designed and established to attain certain end results.
– Based on delegated authority
• In a formal organization each employee has delimited authority; therefore, there is superior-
subordinate relationship.
– Organizational chart is drawn
• Organizational chart shows jobs and departments and it is the most tangible depiction of an
organizational structure.
– Deliberately impersonal
• Positions in an organization are not personal properties. They are always open to some one
who fit the position. People who meet the requirements of the job can fulfill the position.
11
Informal organization
– refers to people in-group associations, but these associations are not
specified in the structure of the formal organization.
– a network of social relationships that arise between people working
together.
– are not included or established deliberately/ officially in the formal
organization channel but formed adjacent to the formal organization.
– always exist in the formal organization; nothing can destroy/ vanish it; it can
not be avoided.
– are formed following the core behavior and the interaction dynamism.
– are natural grouping of people in the work situation based on their
behavioral patterns; interests; beliefs; objectives; etc..
– No conscious attempt is made to create it.
– are established as a result of the social needs of belongingness – the need of
people to associate with others.
– are inherent characteristics of any organization.
– may affect formal organizations positively or negatively.
• Managers should recognize that it exists in a formal organization; and should try to
use it for the benefit of the formal organization 12
• Reasons for the formation of informal organization are
– Mutual benefit
• Members of an organization have their own personal interests that tied them to their
colleagues so as to meet these interests. Hence the communality of people interest in
the formal organizations leads to the formation of informal organization. MFNPA
– Friendship
• Members of an organization establish friendship among themselves due to different
reasons. This friendship among the members paves the way for the formation of
informal organization.
– The need to fulfill social needs
• A need to be the member of a society put the workers in the organization together.
Therefore, one of the mechanisms through which people in the organization meet
their social needs is being the member of informal organization.
– Physical work condition
• People working in the same unit are closely related. Hence, working in proximity/ near
by or together is one of the reasons for the formation of informal organization.
– Administrative practice
• Some managers encourage while others suppress the formation of informal
organization. Thus the type of management entertained by managers is the result for
the establishment of informal organization.
13
Characteristics of Informal organization
Informal organization has the following characteristics
– Group norms
• This is the core behavior among the workers in the informal organization. There are agreements/ rules and
regulations which may not be written that govern the behavior of members. The members act accordingly
with out showing any deviation.
– Group cohesiveness
• Members of the informal organizations are basically stickiness together/ having strong relationships. The
more the group stick together the more they will be successful in attaining the objectives.
– Group leadership
• Members in the informal organization select someone as a leader who is highly articulate, and such people
are conventional leaders. It is having informal leader and s/he is the most active one among the others.
– Communication network
• Communication network outside the formal communication channel established by the organization; it is
also called grapevine.
– Lifespan and purpose
• Informal organizations have short life span in comparison with formal organization. Therefore they cease to
exist when the members meet their interests and re-established when another need arises.
– Existence of informal organizations in a formal organization
• The divergent nature of people’s interest, their feeling, tradition, attitude, etc, lead to the formation of
different informal organizations into a big formal organization
– Informal organizations gradually con develop to formal organization
• Informal organizations gradually emerged as formal organization.
14
Advantages and disadvantages of informal organizations
Advantages
• They are additional assets for the formal organization.
– If informal organizations are properly associated to the formal organization, they are additional
assets for the formal organization because they may come up with innovative ideas to promote
the work of the organizations.
• They are useful channels of communication.
– In the informal organization information can easily and rapidly reach the members of the
organization through their informal ways of communication.
• They provide satisfaction and stability in the organization
– When workers are given opportunity to establish the informal organizations, they entertain
their idea that leads them to be satisfied and stable in the organization.
• Their existence alerts managers to plan and act accordingly than otherwise .
– A manager becomes watchful more than any other time when there are informal organizations
to check whether they are out of line or not. If the activities of informal organization seem
against the interest of the formal organization, necessary measures be taken to normalize or
reverse the condition.
• They inform managers sensitive issues that would be embarrassing if formally released.
– Some information may destruct the normal organizational climate if formally released. In such
cases, informal organizations informally disseminate the information to the groups endurance
and then the manager also becomes aware of the consequences if formally communicated.
15
Disadvantages
• Resistance to change
– There is often a tendency to resist changes. Especially when informal
organizations filled with elderly and senior members, they promote old
fashion which hinders change and development in the organization.
• Role conflict
– Bothe types of organizations have their own objectives. And these objectives
will not be the same and this may arises role conflict in the organization.
• Rumor
– Managers may not equally release information to the members of the
organization. When there is too much secrecy or ambiguous situations exist
informal organizations disseminate distorted information.
• Conformity/ compliance
– Some leaders of informal organizations may have hidden motto or promote
destructive actions, hence such leaders may use the members as an
instrumental to create challenge to the leaders of formal organization.
Accordingly, when different clicks are misguided, they hinder the attainment
of objectives of the formal organization
16
The importance of organizing
• The purpose of organization function is to achieve coordinated effort through the design of a structure
of task and authority relationships.
• Effective organization contributes greatly to:
• Facilitate administration
– If the organization is not well designed, it makes management difficult and ineffective.
– In a poorly organized firm, works will be overlapped and important work may be subordinated or may be overlooked
totally.
– Sound organization allows management to relate resource flow continually to overall objectives; provides an
appropriate platform where management can perform the functions of planning, directing, controlling, etc, in a
smooth way.
• Facilitate growth and diversification
– Sound organization permits organizational elaboration/ expansion.
– Under the functional organization, growth and diversification of activities is facilitated by clear division of work;
proper delegation of authority; etc.
• Permits optimum use of resources
– Sound organization structure permits optimum use of technical and human resources.
– The organization takes into account the latest technological improvement and incorporates it in carrying out
organizational activities.
– The right persons are placed in the right positions on the bases of their knowledge and experience.
• Stimulates creativity
– Specialization provides individuals with well defined duties; clear lines of authority and responsibility.
– Where there is no sound organization, work is divided by force and aggressiveness affecting the moral of the
employees seriously.
– Sound organizational structure enables managers to turn over routine and repetitive jobs to supporting positions
and concentrate on important issues where they can exploit their potential better. 17
The organizing process
• Organization is one of the important functions of management
and refers to certain dynamic aspects like
– what tasks are to be done;
– who are to do them;
– how the tasks are grouped;
– who is to report to whom; and
– where the decisions have to be made.
• Organizing process allows organizations to organize their
activities. It has five steps
Step 1. Consider plans and goals
Step 2. Determine the work activities necessary to accomplish
objectives
Step 3. Classifying and grouping activities
Step 4. Assign work and delegate appropriate authority
Step 5. Design a hierarchy of relationships 18
Step 1. Consider plans and goals
– Organizing process should consider this step before attempting to perform
other steps.
– Plans and their goals/ objectives/ mission / vision affect organizing and the
results of the organization.
– Plans dictate the purposes and activities that the organization will have.
– Organization is formed to achieve the goals already formulated during
planning process.
– Organizing will create new structure, relationship and modify the existing
ones.
Step 2. Determine the work activities necessary to accomplish objectives
– This is identifying/ knowing all works/ activities necessary that are going to
be performed.
• Creating a list of tasks to be accomplished beginning with those ongoing tasks and
end with the unique tasks.
– Ones the manager knows what tasks should be performed, and then the
next is to classify and group these activities into manageable work units
based on certain criteria.
19
Step 3. Classifying and grouping activities
– To provide a smooth flow of work, all closely related and similar
activities must be grouped together.
– This step requires managers to perform three activities.
• Examine each activity identified to determine its nature (marketing,
Production, finance, etc…)
• Group activities into related areas
• Establish basic department design for organization structure.
– Work that is similar /homogeneous in nature is grouped/ placed
together to achieve organizational objectives.
– Grouping similar activities is based on the concept of division of
labor and specialization.
• Division of labor is a breaking down the work into its basic components/
basic activities, assigning them to individuals/ specialists and performing
the job more efficiently and effectively.
– After classifying and grouping tasks into related work units comes
departmentalization. 20
Step 4. Assign work and delegate appropriate authority
– Activities that are departmentalized has to be assigned to
individuals by giving appropriate authority to accomplish the tasks.
– This step is based on the principle of the functional definition
• i.e. the activity performed by each unit determines the amount of authority
the manager needs to be able to function. The authority should be
equivalent to the responsibility of the unit.
– This principle in business means that the activities determine the
type and quality of authority necessary.
– Authority doesn’t come first; assignment of activities establishes the
basis for authority.
– In establishing departments the nature, purpose, tasks and
performance of the department helps to determine the bases for
authority,
• i.e. the nature, purpose, tasks and expectation dictate the amount and type
of authority the manager needs to be able to function.
– The authority should be equivalent to the responsibility of the unit.
21
Step 5. Design a hierarchy of relationships
– This step requires the determination of both vertical
and horizontal operating relationships of the
organization as a whole.
• Vertical structuring of the organization results in decision
making hierarchy/ level showing who is in charge of each
task.
– The levels create the chain of command or hierarchy of decision
making levels in the company.
• Horizontal structuring has two important effects.
– It defines the working relationships between operating
departments
– It makes the final decision on the span of control –(the number of
subordinates under the direction) of each manager.
– The result of this step is to complete organizational
structure. 22
Organizational structure
• Organizing process is an ongoing and should not be viewed as a onetime process. It
results organization structure and organization chart.
• Organizational structure
– apportionment of responsibility and authority among the members of an
organization
– The arrangement of the work of an organization into different functional roles
and management roles.
– shows the authority and responsibility relationship between the various
positions of the organization by showing who reports to whom.
– is shown usually by an organization chart.
• Organization chart
– a job task pyramid
– A chart showing the interrelationships of positions within an organization in
terms of authority and responsibility.
– A chart outlining the relationships between the direct functions, responsibilities
and titles in an organization and often the people who actually perform them.
– This is an important guide to the workings of the formal organization.
23
• Organization chart
– Depicts/ represents basic framework of the organization
and tells us:
• who reports to whom – the chain of command
• how many subordinates work for each manager – span of control
• channel of communication – solid line indicates official
communication
• how the company is structured – e.g. by function, customer or
product
• the work being done in each job – the levels on the box
• the hierarchy of decision making – where the decision maker is
located
• when the existing structure is formulated - how current the
present organization structure is
• types of authority and relationship – solid line connect line of
authority; doted lines show staff and functional authority
24
Importance of organizing process
It creates/ enables
– A clarified work environment:
• enables each individual and different unit to know their
responsibilities and authority, channels of communication
– A coordinated environment:
• The interrelationship of various units will be developed;
• guidelines for interaction among personnel will be defined;
• the principle of unity of direction should be achieved.
• These create a coordinated effort among parts of an organization
and avoid the possible confusion that hinders the organization
performance.
– Formal decision structure:
• Through organization chart, the formal superior-subordinate
relationship has been developed.
• This allows the orderly relation through the hierarchy for decision
making and communication.
25
Departmentalization
• Groups, departments and divisions are formed on the basic objectives of the
organization.
• Departmentalization
– is the process of grouping/ combining jobs/ activities into groups or manageable units.
• A manager must have basis for combining jobs. Whatsoever ways employed by a
manager to group activities, they should ensure the most effective and efficient use of
resources so as to attain the desired objectives.
• The main basis for departmentalization are
– Function
– Geography or location/ territory
– Product
– Customer FGPCP
– process
• Types of departmentalization / departments are
– Functional departmentalization
– Geographic departmentalization
– Product departmentalization
– Customer departmentalization
– Process departmentalization and
– Multiple departmentalization 26
Functional departmentalization
• The common form where activities are grouped based on similarity in
function or content.
• It is grouping jobs according to the functions of an organization. It is
common for business firms.
• Within each department individuals perform specialized jobs.

General Manager

Marketing Production Finance Personnel R&D

The basic aim of fictionalization is to simplify complexity by grouping all the work to be
done into major functional departments.

27
Advantages and disadvantages
• Advantages
– It promotes specialization and organizational efficiency.
• It makes use of the benefits of specialization, i.e. departments are
logically setup that consists of experts in particular fields
– Avoid overlap performing basic businesses
– It provides chance for occupational specialization
• because people with specialization work gather in one department
– It provides unity of direction.
• Among members of the department there is job interrelation.
– Lines can clearly be drawn between the functional areas
– It facilitates staffing and training.
• If there are highly qualified staffs in a department other workers will be
initiated or encouraged to fill the position.
– It promotes communication within departments
– Create strong team sprit among people working in one
department
28
• Disadvantages
– It has problems of horizontal coordination.
• It is very difficult to achieve coordination between and among functions because workers in one
department are hardly concerned in what happens in other departments.
– The tendency of “empire building”.
• In order to become more important unnecessary rivalry/ unhealthy competition will occur between/
among departments.
– It frustrates the development of managerial talents from the organization as a whole to
top managerial position.
• There is a tendency for the manager who comes to the position of organization’s to favor the workers in his
department.
– It lets organizational objectives take a back seat to departmental objectives
– Identify and focuses on departmental problems and objectives; and ignores
organizational issues and objectives
– Create communication barrier among people with different specialization (people in
different department)
– Narrows the understanding of employees about the organization at large
– Department managers can not develop general managerial skills to take up higher
managerial position
– Lack of understanding of interrelationship and dependency between all functions
– Lack of generalism and internal destructive competition among different departments
reduces the success of the entire organization
29
Geographic departmentalization
• Departmentalization by geographic area
• is also known as departmentalization by territory or location
departmentalization.
• is grouping of jobs/ activities on the bases of geographic areas.
• is established when accompany has different branches that are
geographically dispersed.

General Manager

Region one Region two Region three

The operations are similar from region to region.

30
Advantages and Disadvantage
Advantages
– provides a training ground for new managers,
• i.e. place managers out of territory and then asses their progress.
– enables the firm to develop local market areas and adjust quickly to local
customers’ needs
– helps the company to reach close to raw materials.
– saves a substantial amount of transport costs.
– provides chance to local people employment opportunity.
– Create customers good will and awareness of local feeling and desire.
– Creates conducive environment to develop general managers.
– Facilitate decision making
– can provide a high level of service as local employees know the local
culture and language.
– enables managers to consider an integrated view of the total organization
as a whole rather than restricting their interest to their respective function
or product. 31
Disadvantage
– Duplication of effort
– The necessity of having a relatively large number of
managers
– Difficulties in maintaining consistent adherence to company
policy and practices
– Creates serious problems of coordination and control.
– may create gaps between head offices and branch offices.
– costly to host many geographically dispersed departments.
– can create gaps to communication between departments
located in different areas.
• The problem of distance makes communication difficult.
A company that uses territory as basis for departmentalization
often needs a large head quarter’s staffs to control dispersed
operation. 32
Product departmentalization
• is product based departmentalization
• is grouping on the bases of products (goods/ services).
• is best to large and multiple product organizations. All activities needed to
produce and market are usually under a single manager.
• allows workers to identify with a particular product and develop team sprit.
• The product structure is organized according to organizational output.

General Manager

Shoe Dep’t Clothing Dep’t Cosmetic Dep’t

33
Advantages and disadvantages
• Advantages
– It results in high product visibility.
– It facilitates innovation; and also enhances specialization of
production.
– Stem from the need to create relatively independent division
– Each division have resources and types jobs necessary to be in
business
– Each division has its appropriate personnel
• Disadvantages
– Employees’ insecurity during time of turmoil.
– Pressure for highly qualified managerial resources.
– It results in poor coordination across the product lines.
– Duplication of efforts among divisions
34
Customer based departmentalization
– is grouping of tasks based on the type of customers served.
– Grouping activities reflecting the primary interest of customers
– Customers are the key to the way activities are grouped.
– Such organization helps managers to satisfy the customer’s requirements more
conveniently and successfully.
– Business owners and managers often arrange activities on the bases to cater/
serve the requirements of clearly defined customer groups.
– Customers are highly respected and their interest is served in a better way.
– Such forms of departmentalization are more common in banking, book publishing
and food industry

General Manager

Women shoe Men shoe Kids shoe

35
Advantages and disadvantages
• Advantages
– Customers’ interest and priority is respected; and widely varied customers will be satisfied.
– Address special and widely needs of customers for clearly defined services
– Helps to meet customers’ special needs by setting up separate departments
– Indicate the willingness to understand the business of its clients
– Workers are identified with a particular group of customers that create team sprit
• Disadvantages
– It is almost impossible to consider all the customers, b/se of their interests, habits and
customs.
– In the period of no or little demand for goods and services of an organization, some
sections may not be profitable.
– There is a problem of duplication of resources
– Creates difficulty in coordination between departments
– High competition among departments may deter/prevent or discourage the overall
organizational performance
– Requires manager and staff specialists similar with the customers’ situation
– Differentiation among the various customer groups might be difficult
– Possibility of underemployment of facilities and labor-specialized workers in customer
groups
36
Departmentalization by process
– It is appropriate when departmentalization by
production is inflow.
– activities are grouped on the basis of various
manufacturing process.

General Manager

Drilling Grinding Welding Assembling Finishing

37
Advantages and disadvantages
• Advantages
– It is appropriate for organizing certain types of work.
– It helps to group production facilities.
– It puts full responsibility of completing each stage of
the job.
• Disadvantages
– Failure in one of the process may adversely/badly
affect the whole job.
– Profit responsibility can not be assigned to
departmentalization by process.
– Due to a sub specialization, a worker can not be
shifted to another departments/ it restricts flexibility.
38
Multiple bases for departmentalization
– is the combination of two or more departments
discussed above.
– helps to divide work exhaustively/ in detail.
– is also a way of combining jobs into departments.
– E.g. matrix organizations
Matrix organization
– also called grid organizations or project management.
– are combining functional and project or product patterns
of departmentalization in the same organization.
– are common in engineering and R& D, and also in
product-marketing organization.

39
Limitations of matrix organizations
• Typical problems of matrix organizations are
– Conflict exists between functional and project managers due to competition for
limited resources and encountering of roles of ambiguity
– Role conflict, role ambiguity and role overload may result
– Imbalance of authority and power, and may result inefficiencies
– Managers protect themselves against blame by putting everything in writing which
increases administration cost because of potential conflicts
– Requires many time-consuming meetings
• Guidelines to make matrix management effective
1. Define the objectives of the task/ project clearly
2. Clarify the roles, responsibilities & authority of managers & team members
3. Ensure influence based on knowledge and information rather than rank
4. Balance the power of functional and project managers
5. Select experienced manager who can provide leadership
6. Undertake organization and team development
7. Install appropriate cost, time and quality control that report deviations from
standards in timely manner
8. Reward project managers and team members fairly 40
Major concepts of organizing
• In the process of management conceptualization and
application of certain major organizational concepts
are necessary.
• Some major organizational concepts and principles
that managers must be familiar are
– Authority
– Power
– Delegation
– Accountability
– Unity of Command
– Span of control; and
– Centralization Vs Decentralization
41
Authority
• All managers in an organization have authority. They have different authorities based
on the management position they occupy.
• Authority
• is the right to act, or to issue order or command, or deploy resources in an
organization.
• is the right to give order to organization members.
• is described as institutional power.
• represents legitimate exercise of power in the organization structure.
• The source of authority is the position that an individual has in the organization
• Without authority a manager may not be able to perform the tasks with confidence
and show results.
• A person who occupies the position has formal authority as long as s/he remains on
the position.
• The essential features of authority are:
–It is the relationship between two individuals, i.e. superior and subordinate.
–It is the right to act.
–It is the power to make decisions and seeing that they are carried out.
–It is used to achieve organizational goals.
42
Types of authority
• The process of accomplishing organizational
objectives through people
– entails the establishment of relationship among the
members of the organization and different
hierarchies of the management.
– This again results the presence of the three distinct
types of authority in business organization, namely
1. Linear authority Authority
2. staff authority L S F
3. functional authority

43
Line authority
• is the relationship between superior and subordinates.
• is directed supervisory relationship.
• enables the manager to tell subordinates what to do.
• Line managers authority over their subordinates.
• is represented by the chain of command which links superiors
and subordinates form top to bottom in an organization.
• extends all the way to the lowest level in an organization
– it flows downward in an organization.
– E.g. the general manager has line authority over the marketing
manager, production manager, finance manager, personnel
manager…
• A manager supervising employees or other managers has line
authority.
44
Staff authority
• is the right to give advice.
• is advisory in nature.
– people in the staff position assist and advise the line manager.
– relive the line manager’s burden by giving them information needed
to make operational decisions.
• People in these positions have the authority to offer advice and
recommendations.
– E.g. legal service exercises staff authority by advising general manager
of the organization; public Relation service exercises staff authority by
releasing information about the organization on the behalf of the
general manager or other managers.
• It is an advisory authority for the staff to provide advice or
technical assistance for manager.
• Advisory authority doesn’t provide any basis for direct control over
subordinates or activities of other departments. 45
Functional authority
– is an authority exercised over activities in other departments.
– is the right to control activities of other departments as they are related to
specific staff responsibilities.
– is an authority delegated to an individual or department over specific activities
undertaken by personnel in other departments.
– is usually limited in scope and duration.
– is exercised one level below the person who has it.
• In case, the general manager doesn’t have the skills and knowledge to handle a given
problem or situation, s/he gives the authority to those who have the expertise.

General Manager

Legal service PR service

Marketing Mgr. Production Mgr. Personnel Mgr. Financial Mgr.

Indicates line authority functional authority

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Line and staff departments
• Line departments
– Departments are normally designated as line departments.
– are departments established to meet the major objectives of the
organization.
– are headed by line managers. Line managers exercise line authority.
• Staff departments
– Staff departments provide assistance to the line departments
and to each other.
– are viewed as making money indirectly for the company
through advice, service and assistance.
– are created on the basis of the special needs of the
organization.
– play vital role in the success of a company. include: PRs; legal
service; personnel service; and computer service
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• Power
– is ability to exert influence on others, or the ability to do something.
– ability to influence the behavior of subordinates.
– is the ability to exert influence in the organization
– having power can multiply managers’ effectiveness to influence
people beyond what they can attain through formal authority alone.
– Authority is positional—it will be there when the incumbent leaves;
and, it is part of the power.
– Power is personal; it exists because of the person.
– A person does not need to be a manager to have power.
– Some administrative assistants of top managers have considerable
power, but no authority.
– Managers can acquire power from several different sources.
• The source of power can be
– competency, expertise, position, knowledge, skills, charisma and ability to
reward and punish.
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Sources / types of Power
• Legitimate or Position Power
– Holding a managerial position with its accompanying authority provides a
manager with a power base.
– The manager has the right to use this legitimate power because of the position.
– The higher a manager sits in the organization hierarchy, the greater is the
perceived power (or, power thought by the subordinates to exist—whether or
not it really does). Vice presidents wield or can wield a lot of power.
• Coercive Power
– Coercive power is dependent on fear.
– A person reacts to this power out of the fear of the negative results that
may happen if one fails to comply.
– Managers, because of their position, have the ability to punish by assigning
unpleasant or boring work, withholding raises or promotions, and
suspending or dismissing an employee.
• Reward Power
– The opposite of coercive power, reward power comes from the ability to
promise or grant rewards.
– Managers have the ability to decide on raises, promotions, favorable
performance appraisals, and preferred work shifts.
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• Referent Power
– Referent power is based on the kind of personality or charisma an
individual has and how others perceive it.
– A manager who is admired by others—the latter perhaps
demonstrating this admiration by their desire to identify with or
emulate the manager—has referent power.
– The manager can use this power effectively to motivate and lead
others.
• Expert Power
– Persons who have demonstrated their superior skills and knowledge
possess expert power.
– They know what to do and how to do it.
– Others hope to stay on this expert’s good side to be able to benefit
from his or her expertise.
– A seasoned manager exercises power with newcomers.
– Knowledge of budgets, systems, or company culture that others need
provides a basis for the manager’s power
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The relationship between power and authority
– Authority is the power that has been legitimized by the
organization where as Power is ability to exert influence
on others, or the ability to do something.
– Like authority, power is institutionalized and impersonal.
– In organizations, it is necessary to keep a balance
between power and authority.
• In some cases a manager may have the authority (the right to
do something), but may lack the power (ability to do
something) and vice versa.
– Power without authority is an abused and authority
without power is totally meaningless.
– Failure to equate power and authority at all organization
levels may lead to disastrous consequence.
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Unit of command
– is a principle describing that each person within an organization
should take orders from and reports to only one person.
– is a guiding principle to develop operating relationships.
Delegation
– describes the transfer of formal authority to another person.
– is authorizing subordinates to act in a certain manner independently.
– Is passing of formal authority to another person, i.e. passing
authority downward to subordinates.
– Every manager must delegate tasks/ duties to subordinates since
management means getting work done through others.
– helps managers to concentrate their efforts on core managerial tasks.
– is a two side relationship, i.e. the assigner and assignee.
– It is an act of trust; an expression of confidence; requires necessary
skills & strength.

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• Delegation occurs for two purposes
– When managers are absent from their jobs
• Subordinates act on behalf and exercise authority.
– To develop subordinates and facilitate decision making process
Process of delegation
Steps for delegation are
• Assignments of tasks
– Kinds of tasks to be performed by subordinate are identified and assigned.
• Delegation of authority
– for a subordinate to carry out the activity, the necessary and adequate authority should be
given by the manager. “no more no less authority”.
• Acceptance of responsibility
– When subordinates are assigned with duties and delegated authority, then they will be
responsible to perform the tasks to the maximum ability they can perform.
– Responsibility is an obligation to carry out ones assigned duties to the best of one’s ability.
– It is not delegated by the manager to the subordinate. The employee is obliged when the
assignment is accepted.
• Creation of accountability
– When subordinates are assigned for certain tasks and delegated a certain authority, and
then they will be accountable for the actions taken.
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• While delegating, a manager must consider the following issues.
1. Analyze how the manager spends his/her time.
• This enables to list out the duties that the manager undertakes.
2. Determine the tasks that can be assigned.
• All duties of the manager cannot be delegated
3. Decide by whom the tasks can be handled among the subordinates.
4. Delegate the authority and create the responsibility.
5. Control whether the delegated subordinates are performing the tasks
to the expected standard or not.
• In delegation, managers are required to think the principle of
parity that states “authority and responsibility must coincide”;
i.e. responsibility created should be equivalent to the authority
granted.
• If employees are without authority, they cannot perform tasks
as expected; therefore, it creates frustration and anxiety. if
delegated more authority, they will interfere/ hinder others job.
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Accountability
• Having answer to someone/ somebody for your action.
– Answer for the actions taken with regard to the tasks
assigned and authority delegated.
• means taking the consequence - either credit or blame.
• If one accepts assignments and authority, s/he is
accountable (answerable) for the actions taken.
• A manager is accountable for the use of his/her
authority and performance and the performances and
actions of subordinates.
Responsibility
– duty to perform
– Authority without responsibility is dangerous and
responsibility without authority is an empty vessel. 55
Span of control/ management
– refers to the number of subordinates that single manager can
effectively supervise or should have to direct.
– Manager cannot supervise unlimited number of employees. There
should be a limited capacity to control the work of different
subordinates.
– The manager’s ability to supervise a large number of subordinates is
constrained by knowledge, experience, time, energy, etc.
– to overcome the limitation, every manager has to delegate work to
subordinates.
– There is no correct number for the span of control or there is no exact
formula to determine the span of control. It varies from one situation
to another.
– The variation at different organizational levels results from
• complexity & diversity of jobs;
• the need for personal interaction;
• leadership philosophies, etc.. 56
• Span of control determined for each manager based on
1. the complexity and variety of the subordinates’ work.
2. the ability and training of the subordinates
3. the ability of the manager and
4. the company philosophy for centralization and
decentralization of decision making
• As a general rule
– The more complex a subordinate’s job, the fewer will be the
manager’s number of subordinates.
– The more routine the work of subordinates, the grater will
be the number of subordinates that can be effectively
directed and controlled.
• Organizations have a narrow span of control at the top
and wider span at the lower levels.
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• Factors those influence spans of control of a manager are
1. the ability & the experience of a manager;
2. the complexity & variety of the subordinates’ work
3. the qualification of the manager and subordinates;
4. growth in competence and experience in personnel
5. the company’s philosophy towards centralization or
centralization in decision making.
• If the manager has
– Too many people to supervise,
• the subordinates will be frustrated by their ability to get immediate
assistance from their boss; time & other resources could be wasted;
plans, decisions & actions be delayed or made without proper control or
safeguard.
– Too few people to supervise,
• the subordinates could become overloaded or over supervised; and
frustrated & dissatisfied.
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Centralization Vs decentralization
• Both centralization and decentralization refers to the nature of
authority within an organization structure.
• are merely the results of circumstances. Absolute centralization or
decentralization is impossible in practice.
Centralization
– is a systematic & consistent reservation of authority at central point
within the organization.
– is the concentration of authority for decision making within the hands of
one or few.
• In centralization
– Little delegation of authority
– Rules, power & discretion are concentrated at the top level
– Control & decision making reside at the top level of management
• The more highly centralized the organization, the more control
and decision making will be exercised at the top. 59
• Factors forcing managers to reserve authority and centralize
decision making power are
– To facilitate personal leadership
• Centralization generally works well in the early stages of organizational growth.
• is essential in case of small organizations to survive in a highly competitive
world.
– To provide for integration
• It keeps all parts of the organization moving together harmoniously toward a
common goal.
• It assures uniformity of standards and policies among organizational units.
• The manager acts like a unifying force and provides direction to the activities.
• Duplication of effort and activity are also avoided.
• Under centralization the organization moves as a unit.
– To handle emergencies
• Centralization is highly suitable in the time of emergency.
– The resources & information can be mobilized quickly.
• Centralization of decision making ensures prompt action necessary to meet the
emergencies.
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Limitations of Centralization
It makes
• difficult for managers to process the bundles of data in time and
take decision in an appropriate manner
• the manager burdened with a great amount of detailed &
exhaustive work
• managers to work painfully long hours
• forces top management to posses a broad view they may have
beyond their capacity
• the vast amount of power given to a few people may be abused
• the organization is highly vulnerable to what happens to its dynamic
and talented top management people
• It floods communication lines to a few individuals at the top of the
organization. As a result the speed of communication upward and
decision processes are slow.
• It kills the initiative; self reliance and judgment of lower level
personnel.
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Decentralization
• is a systematic effort to delegate to the lowest levels all authority except that which can
be exercised at central point.
• It is pushing down of authority and power of decision making to the lower levels of
organization
• dispersal of authority for decision making down the organization structure into the
hands of many.
• The centers of decision making are also dispersed throughout the organization.
• The essence of decentralization is the transfer of authority from a higher level to the
lower level.
• Nowadays decentralization has become to be the fundamental principle of democratic
management
• Some suggestions to identify the degree of decentralization in a company
– The greater the number of decisions made at the lower level of management, the more the
company is decentralized.
– The more important the decisions made at the lower level, the greater the decentralization.
– The more flexible the interpretation of the company policy at the lower levels, the greater the
degree of decentralization.
– The more widely dispersed the operations of the company geographically, the greater the degree
of decentralization.
– The less the subordinate has to refer to his/her manager prior to decision, the greater the
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decentralization.
Advantages and disadvantages of decentralization
• Decentralization is extremely beneficial but also dangerous unless it is carefully
constructed and constantly monitored.
Advantages
• It reduces the work load on overburdened manager.
• It brings the decision making process closer to the scene of the action.
• It facilitates product diversification, i.e. it treats each product lines as separate and
important.
• It gives individuals an opportunity to learn by doing.
• It facilitates effective control. i.e. it often results in improved controls and performance
measurements.
• It ensures participative management.
Disadvantages
• Conflict
– Decentralization puts increased pressure on each heads to realize profit at any cost.
– To meet this each deviate or veer away form corporate objective. i.e. leads to competition that may
ultimately result in bitter individual rivalries.
• Cost or duplication
– Decentralization results in duplication of staff effort.
– To be independent, each division should have access to purchasing, personnel, etc. hence each carry
a large group of specialists at numerous cost. 63
Relationship of centralization and span of control
• Centralization or decentralization in decision
making influences the span of control.
• Decentralized decision making means the span of
control should be wider for each manager;
– i.e. decision making is forced down to subordinates,
thus freeing up a manager’s time and commitments.
• Centralized decision making results in narrower
span of control and higher levels of management.
• Top managers make the majority of decisions and
closely supervise their subordinates and delegate
little.
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Principles of organizing
1. The principle of objectives
2. The principle of specialization
3. The principle of coordination
4. The principle of authority
5. The principle of responsibility
6. The principle of span of control
7. The principle of balance
8. The principle of correspondence
9. The principle of continuity
10.The principle of definition
11.The principle of exception
12.The principle of delegation
13.The principle of scalar principles/ chain of command
14.The principle of unity of command
15.The principle of efficiency
16.The principle of simplicity
17.The principle of flexibility
18.The principle of unity of direction
19.The principle of personal ability 65
• The principle of objectives
– Every organization should be geared to the achievement of the organizational
objectives.
• The principle of specialization
– The activities of every member as far as possible should be confined to the
performance of a single function.
• The principle of coordination
– The purpose of organization by itself is to facilitate coordination; unity of effort.
• The principle of authority
– There should be a clear line of authority to every individual in the group.
• The principle of responsibility
– The responsibility of the superior for the acts of the subordinate is absolute.
The superior should be held responsible for the act of his subordinates.
• The principle of span of control
– No one should supervise more than five or, at most, six direct subordinates
whose work interlocks.
• The principle of correspondence
– In every position, the responsibility and the authority should correspond.66
• The principle of balance
–The various units of an organization should be kept in balance. Such as in the size of
various departments; between centralization and decentralization; between the principles
of span of control and the chain of command; and among all types of factors such as
human, technical and financial.
• The principle of continuity
–Re-organizing is a continuous process. In every undertaking specific stipulation should be made for
it.
• The principle of definition
–The content of each position, the duties involved, the authority & responsibility contemplated and
the relationships with other positions should be clearly defined in writing and published to all
concerned.
• exception
–Top managers have limited time. Only exceptionally complex problems should be referred. The
subordinates should deal with routine matters. This enables tops to devote time on more important
and crucial issues.
• delegation
–Authority should be delegated properly to the lower levels. The authority delegated should be equal
to responsibility. Each manager must have enough authority to accomplish the task assigned to him.
• scalar principles/ chain of command
–The line of authority from the top to the first-line at the bottom must be clearly defined.
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• unity of command
– Each subordinate should have one superior whose command to be obeyed. Dual
subordination should be avoided. Because it causes uneasiness, disorder, indiscipline, and
undermining authority.
• efficiency
– The organization’s structure should enable the firm to function efficiently and accomplish
objectives with the lowest cost.
• simplicity
– The organization’s structure should be as simple as possible and the organizational levels as
far as possible should be minimum. A large number of levels mean difficulty of effective
communication and coordination.
• flexibility
– The organization should be flexible, be adaptable to the changing circumstances and permit
expansion and replacement without dislocation and disruption of the basic design.
• unity of direction
– There should be one head and one plan for a group of activities having the same objectives.
It facilitates unification and coordination of activities at various levels.
• personal ability
– Since people constitute an organization, there is need for proper selection, placement, and
training of staff. Moreover, the organization structure must ensure optimum use of human
resources and encourage management development programs.  68
Thank you!!!

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