Introduction to Management

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Chapter 3

Chap 3 Mgmnt by Yohannes A@UU

Organizing

1
Yohannes Abera(MBA 2023
Meaning:-
The word ‘Organization’ is derived from the
word ‘organism’ which means an organized

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body with connected interdependent parts
sharing common life.

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• Organization as a human body.(Body parts)
Eg. hands, feet, eyes, ears, nose, fingers,
mouth, etc
• Organization consists different departments.
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Definitions:-
" Organizing involves the establishment of an
international structure of roles through
determination and enumeration of the

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activities required to achieve the goals of an
enterprise and each part of it; the grouping of

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these activities, the assignment of such groups
of activities to the manager, the delegation of
authority to carry them out and procession for
coordination of authority and informational
relationship, horizontally and vertically, in the 3
organization structure".
Definitions Organization cont’d
“Organization is a harmonious adjustment of

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specialized parts for the accomplishment of

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some common purpose or purposes". Haney

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Organization Cont’d
The functions of organization includes :-
determination of activities,

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grouping of activities,

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allotment of duties to specified persons,
delegation of authority,
defining relationships and the co-ordination
of various activities.
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Definitions cont’d
Synopsis
• Organization is derived from the term

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organism

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• Organization is the detailed arrangement of
tasks and people
• Organizing is the process of arranging people,
tasks, and materials.
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Nature and Importance of Organizing
• The functions of management are sitting over
the strong organizational set up

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• Organization is the foundation of
management.

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• With out management the function of
management cannot succeed.
• Organization supplies the human and material
resources and helps to achieve the objectives
of business. 7
Nature and Importance of Organizing cont’d

• The organization provides the means or

techniques with strong efforts for more

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production and effective completion of the
work.

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• Organization increases the creativity and
promptness in the completion of work by
assigning fixed duties to every person.

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 Characteristics of an organization
• Division of Labor
• Co-ordination

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• Objectives.
• Authority-Responsibility

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• Communication
Organization creates the relation between
top level executives and lower level staff
members. 9
The Importance of Organizing
• Facilitate administration
• Facilitates growth and diversification

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• Increases the efficiency of
management

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• Improves the efficiency and quality of
work through synergism
• Encourage creativity and initiative

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The Importance of Organizing cont’d
• Establishes lines of authority /Vertical
Division of Labor/

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• Improves communication
• Facilitates training and development of

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managerial personnel
• Prevents the growth of secret, influence and
corruption

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 Types of Organization
• Reading: page 35 of the module./classification
bases/
Ownership

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Objective

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Activity
Authority and responsibility
Relationship with each other(Formal and
informal)
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Definitions
Definitions:
Formal Organization (Page 35 Module)

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Informal organization(Page 36)

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 Characteristics of Formal
Organization
• It is properly planned and deliberately

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impersonal
• It is based on delegated authority and unity of

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command
• The responsibility and accountability at all
levels of organization are clearly defined.

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 Advantages of Formal Organization

• Overlapping of responsibility is easily avoided.

• Shifting responsibility is very difficult.

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• A sense of security arises from classification of

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the task
• There is no chance for favoritism in evaluation
and placement of the employee.
• It makes the organization less dependent on
one man.
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Disadvantages of Formal Organization
• In certain cases, the formal organization may
reduce the spirit of initiative of employees.

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• Sometimes authority is used for the sake of
convenience of the employee without

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considering the need for using the authority.
• It does not consider the sentiments and values
of the employees in the social organization.
• It may reduce the speed of information
communication. 16
Characteristics of Informal Organization
• It arises without any external causes, i.e.
voluntarily.

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• It is a social structure formed to meet
personal needs.

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• It has no place in the organization chart.
• It acts as an agency of social control.
• It can be found on all levels of organization
within the managerial hierarchy.
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Characteristics of Informal Organization
Cont’d
• Its rules and traditions are not written but are
commonly followed.

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• It develops from habits, conduct, customs and

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behavior of social groups.
• It is one of the parts of the total organization.
• There is no structure and definiteness to the
informal organization.
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The advantages of Informal Organization
• It fills up the gaps and deficiency of the formal
organization.
• It gives satisfaction to the workers and

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maintains the stability of work

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• It is a useful channel of communication.
• Its presence encourages the executives to plan
to work correctly and act accordingly.
• It also fills up the gaps among the abilities of
the managers.
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The Disadvantages of Informal Organization
• It has the nature of upsetting the morality of
the workers.

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• It indirectly reduces the efforts of management
to promote greater productivity.

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• It spreads rumors among the workers regarding
the functioning of the organization
unnecessarily.
• It acts according to mob psychology
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 Process of Organization
• As a process organizing deals with the
following activities.

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• Identification or determination of activities
• Grouping of Activities/Departmentalization

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• Allotment of Duties to Specified Persons
• Delegation of Authority
• Defining Relationship
• Co-ordination of Various Activities
•  21
 Departmentalization
Key elements of organizing
Definition:-"Departmentation is a process of

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dividing the large monolithic functional
organization into small and flexible

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administrative units”. Koontz & O'Donnell

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 Departmnetation cont’d

• Departmentation is a part of the organizing

process.

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• Departmentation involves the grouping of
common activities

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• Departmentation is an essential activity in the
modern business world

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Fig: functional departmentation in a hospital

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It’s contribution to the organization
• Departmentation increases the operating
efficiency of the employees.
• There is a fixation of responsibilities to

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various executives of the organization.
• The departmental heads (managers) are

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given certain powers and are allowed to
make their own decisions.
• The workings of the various departments are
evaluated by the top management and the
departments which are not managed 25

properly are identified.

 Departmentation cont’d
• Departmentation gives other advantages
also such as:

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facilitating budget preparation,
effective control of expenditure,

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 attaining specialization, and
better co-ordination among the
managerial personnel, etc.

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 Factors to be considered in
Departmentation
• Specification

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• Control
• Co-ordination

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• Securing Attention
• Recognition of Local Conditions
• Economy

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 Bases or Patterns or Types of
Departmentation
Bases of Departmentation are
• Departmentation by functions

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• Departmentation by products or service

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• Departmentation by regions (area or location)
or territory
• Departmentation by customers

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 Bases or Patterns or Types of
Departmentation Cont’d
• Departmentation by process

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• Departmentation by time
• Departmentation by numbers

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• Departmentation by marketing channels
Advantages and disadvantages
(Page 42-47 Module)
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 Span of Management
Span refers to number of subordinates under
a supervisor

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• Span may be narrow or wider
• Narrow span leads towards taller

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organization structure

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 Fig. Wide Vs Narrow Span of Control

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 Span of Management Cont’d
• Wider span leads towards flatter organization
structure

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• The size of subordinates under a supervisor

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affects the success of an organization and the
responsibilities
• Both span of controls have advantages and
disadvantages (Page 48-50)
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 Factors affecting Span of Control

• Subordinates Training or Quality of Subordinates

• Clarity of Delegation of Authority

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• Clarity of Plans

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• Use of Objective Standards
• Rate of Change
• Relationships required between supervisor and
subordinates
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Factors affecting Span of Control Cont’d
• Variety of Tasks
• Proximity

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• Communication Techniques
• Complexity of Jobs

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• Quality of a Manager
Ref Page 50-51(Module)

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 Delegation of authority - meaning and
importance
• Authority is the power to make decisions
which guides the action of others.

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• Types of authority:

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1. Line authority
2. Staff authority
3. Functional authority

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Delegation of Authority Cont’d
Definitions:-

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1. According to Henri Fayol, “Authority is the
right to give orders and the power to

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exact obedience.”
2. Koontz and O’Donnell, “Authority is the
power to command others to act or not
to act in a manner deemed by the
possessor of the authority to further
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enterprises or departmental purposes.”
Delegation of Authority Cont’d
Definitions:-
• According to Louis A. Allen, “Delegation is

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the dynamic of management, it is the

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process a manager follows in dividing the
work assigned to him so that he perform
that part which only he, because of his
unique organizational placement, can
perform effectively and so that he can get
other to help them with what remains.” 37
Delegation of Authority Cont’d
• A manager gains authority from two
sources:

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• The formal authority granted in a job
description, and

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• The willingness of employees to accept
the manager’s legitimate authority.
• Authority is positional, power is personal.
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Delegation of Authority Cont’d
• The types and sources of power are:
legitimate power (position)

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coercive power (position or resource

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ownership)
reward power (resource ownership)
referent power (charismatic or personality
characteristics), and
expert power (Knowledge). 39
 Delegation of Authority Cont’d
• Delegation of authority contributes to the
creation of an organization.

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• Delegation of authority provides the
following benefits.

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Delegation allows for promptness in
action.
It enables managers to perform higher-
level work
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 Benefits Cont’d
It can be a training experience for
supportive staff

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It can result in better decisions.
It can improve morale.

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The expansion and diversification of
business activities is possible.
 Saving of time and reduction of work
load.
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Limitation of Delegation of Authority

1. Control at the top may be more difficult

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2. A manager may over time lose touch with
what is really happening in the organization

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 The Steps of the Delegation process and
Factors that affect delegation of Authority
• The superior delegates less important
activities and retain important once.

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• Delegation follows some steps like:-
Establishment of definite goals

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Analyze how time is spent
Decide which task can be delegated and the
expected results.
Decide who should get the assignment.
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Delegation Follows Some Steps like Cont’d
Create an obligation (responsibility).
Establish a feedback system.

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Reward effective delegation.
Follow unity-of-command and chain-of-

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command principles as you delegate
Every superior is expected to delegate part
of his duties and responsibility to his
subordinates.
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 Personal Attitudes of Superiors
• Receptiveness
• Avoidance of Risk
• Willingness to Let Decision Making Authority

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Go.

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• Autocratic Attitude.
• Perfectionism
• Unwillingness to let others Make Mistakes
• Willingness to Trust Subordinates/ Confidence
in Subordinates. 45
• Inability of the supervisor
 Attitudes of Subordinates
• Love of spoon-feeding.
• Fear of criticism.

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• Lack of information or resource
• Lack of self-confidence.

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• Too much workload
• Inadequate incentives.
• Fear of failure.

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 Some concepts under delegation of
authority
• The prerequisite for successful delegation
( reference Page 58 of the module)
The five practical guidelines of delegation are:

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1. Define assignments and delegate authority

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in the light of results expected.
2. Select the person in the light of the job to be
done.

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The Five Practical Guidelines of Delegation Cont’d

3. Maintain open lines of communication to

avoid misunderstanding among and
between organizational members.

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4. Establish proper controls because

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responsibility cannot be abandoned by the
superior
5. Reward effective delegation and successful
assumption of authority.
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 Common Faults in Delegation

Close Supervision
Lack of Direction

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Lack of accountability

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 Principles of Delegation
oDelegation has to be based on results
expected.

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oNon-delegation of responsibility.
oAuthority and responsibility should

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commensurate with each other.
oUnity of command.
oDefinition of limitations of authority.
oThe scalar principle/chain of command
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 Guidelines and Principles to obtain
the desired degree of decentralization

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• Centralization is the act of concentrating the
decision making right at one point.

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• Decentralization is the act of transferring
decision making right down wards through
the hierarchy of an organization

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 Guide lines to be followed by top level
managers
• understand decentralization which does not
mean independence

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• establish policies to guide decision making
along desired courses

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• delegate authority to the right person or
subordinate
• accompany delegation by controls designed to
ensure that delegated authority is used
properly 52
 Guide lines to be followed by top level
managers Cont’d
• realize that knowing the mere fact of
delegation is not enough to ensure

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decentralization

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• make sure that a system of verifiable objective
is established
• provide a statement of each manager’s duties
and of the responsibility and the degree of
authority delegated to that manager
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The Operation principles of Organizing
• The Scalar or Chain-of Command Principle
• The Unity-of-Objective Principle.

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• The Adequacy-of Authority or the Parity

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Principle
• The Responsibility-for-Results Principle
• The Accountability Principle.
• The Division of Work Principle.
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The Operation principles of Organizing
• The Unity-of-Command Principle.
• Principle of Definition.

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• Principle of Efficiency
• Principle of Uniformity and Balance

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(Equilibrium).
• Principle of Continuity and Flexibility
• Principle of Joint Decision
References page 63 and 64 of the Module
The End 55