ORGANISING:

BUILDING A DYANAMIC
ORGANISATION
BAF 121
Introduction
The managerial function of organizing may be understood as “defining and grouping the activities of an
enterprise and establishing authority, responsibility and relationships among them”. It results in the
creation of a structure most appropriate for the achievement of organization’s objectives.

Organising in management refers to the relationship between people, work and resources used to achieve
the common objectives or goals.

To organise is to harmonise, coordinate or arrange in a logical and orderly manner. Each member in the
organisation is assigned a specific responsibility or duty to perform and is granted the corresponding
authority to perform his duty.

Organising involves identification and grouping the activities to be performed and dividing them among
the individuals and creating authority and responsibility relationships among them for the
accomplishment of organisational objectives.
In performing the organising function, the manager defines, departmentalises and assigns activities so
that they can be most effectively executed.

An organizational structure consists of activities such as task allocation, coordination and supervision,
which are directed towards the achievement of organizational aims.
Nature of organizing
Common objectives: There are various parts of an organization with different functions to perform
but all move in the direction of achieving a general objective.

Division of work: under division of work, the entire work of business is divided into many
departments. Each individual has to do the same work repeatedly which gradually makes that person
an expert.

Co-ordination: it is in the nature of an organization to establish coordination among different works,

departments and posts in the enterprise.

Well-defined authority and responsibility: it is clearly specified as to what will be the authority and
responsibility of every post. In other words, every individual working in the organization is given
some authority for the efficient work performance and it is also decided simultaneously as to what
will be the responsibility of that individual in case of unsatisfactory work performance.

Organization is a structure of relationship: Relationship between persons working on different posts

in the organization is decided. In other words, it is decided as to who will be the superior and who
will be the subordinate. Everybody is somebody's superior and somebody's subordinate.
Process of Organizing
The steps in the process of organization are explained below:
Fixing the objectives of the organization
At the top level, management first fixes the common objectives of organisation. At the middle
level, managers fix the departmental objectives. Lastly, at the lower level, supervisory managers
fix the day-to-day objectives. All the objectives of the organisation must be specific and realistic.

Identification of activities for achieving objectives

Top-level management prepares a list of different activities (or works) which are required to be
carried out for achieving these objectives. This is a very important step because it helps to avoid
duplication and wastage of efforts.

Grouping similar activities

All similar or related activities having a common purpose are grouped together to make
departments. For e.g. all activities or works which are directly connected with procurement are
grouped together to make the Procurement department. So, various departments such as
Procurement, Production, Marketing, Finance, etc. are made. The grouping of similar activities
leads to division of labour and specialisation
Defining responsibilities of each employee
The responsibilities (duties) of each employee are clearly defined. This will result in the selection of a right person
for the right post/job. He/she will know exactly what to do and what not to do which result in efficiency.

Delegating authority to employees

Each employee is delegated or given authority. Without authority, the employees cannot carry out their
responsibilities. Authority is the right to give orders and the power to get obedience. The authority given to an
employee should be equal to the responsibility given to him.

Defining authority relationship

When two or more persons work together for a common goal, it becomes necessary to clearly define the authority
relationship between them. Each person should know who is his superior, from whom he should take orders and to
whom he will be answerable? Similarly, each superior should know what authority he has over his subordinates.

Providing employees all required resources

After defining the authority relationships, the employees are provided with the needed materials and financial
resources which are required for achieving the objectives of the organisation. The employees actually start working
for a common goal.

Coordinating efforts of all to achieve goals

This is the last stage or step in the process of organisation. Here, the efforts of all the individuals, groups,
departments, etc. are brought together and coordinated towards the common objectives of the organisation.
Fundamental Principles of Organising
The organization chart of any company, therefore, enables one to understand easily three
classical principles of organizing, namely, chain command, unity of command and span of control

Chain of command (Principle of scalar chain or line of authority)

The arrangement of various positions in an orderly way from the top to the lowest level is
termed as scalar chain or chain of command. This scalar chain is established on account of
assignment of work and delegation of authority from higher to lower level.

Every employee is attached to the scalar chain in the relationship of superior and subordinate.
The chain of command exists wherever an individual is made subordinate to another. It has been
recognized that the only way to structure unified systems involving large number of people is
through a chain of command.

In addition to defining different degrees of authority of people, Chain of Command also suggests
the routes through which information flows within an organization. This chain promote smooth
communication between superior and subordinate and facilitates effective decision-making,
Unity of command
This principle implies oneness of command and single source of authority over a subordinate.
According to this principle at the time of designing a structure of an organization, the rule of one
subordinate and one superior should be followed. It suggests that an individual must have a
reporting relationship to a single superior. He/she should get orders and instructions regarding the
work only from one superior.

In addition, if the efforts of subordinates are to be effectively coordinated, it is necessary that they
must have a reporting relationship with only one superior. Unity of command principle avoids the
confusion as to who should report to whom and who should issue orders to whom.

Span of management/Span of control

Span of management refers to the number of subordinates that report directly to a manager. This
principle refers to the number of subordinates to be placed under the command of the manager
whose work he can manage efficiently. It recognizes that there is a limit in each managerial position
of the number of subordinates individual manger can mange at a time.

Lyndall Urwick found “the ideal number of subordinates for all superior positions to be four and at
the lower level of the organization, the number may be eight or twelve”.
Organisational Structure and Chart/Departmentation
Organisations are in different sizes and may be producing single product or multiple
products. May be operating in small geographic area or different areas in the world. To
cope with these varied objectives, strategies and situations, managers adopt different
design/models of organisational structure.

Departmentation is the process of dividing the organization’s overall task into

manageable subunits. The subunits are often referred to as departments, divisions or
sections.
The process of creation of such sub-units to facilitate the performance of activities is
known as departmentation.
Various types of departmentation are as follows:
1. Departmentation by function
2. Departmentation by product
3. Departmentation by Regions or Territories/ Areas
4. Departmentation by Customers
5. Matrix Departmentation
Functional Departmentation
This is the most simple form of departmentation. Functional departmentation is
the process of creating organizational units on the basis of the firm’s major
activities. It involves grouping employees according to the broad tasks they
perform.

Normally separate departments are created for all the key activities of the
business. For example, in a manufacturing company, the activities essential to the
existence of the company relate to production, marketing human resources and
finance. In a transport company, the key areas may be operations, sales and
finance.

If the organization is large or as the organization grows, major departments can be

subdivided. These sub divisions or departments are called derivative departments.
The essential idea is to take advantage of specialization
Merits of Departmentation by Function
• Easy control over functions and makes supervision easier, since each manager has to
be an expert in only his or her functional area of operation.
• It is very simple process of grouping activities.
• It makes efficient use of specialized resources and skills
• It fosters development of expertise in specialized areas.

Demerits of Departmentation by Function

• Overspecialization or lack of general management.
• Decision-making becomes slow as the functional managers have to get the approval
of top management.
• It is also difficult to determine accountability in a functional structure. If a product
fails, the question as to who is responsible cannot be easily answered.
• Functional managers tend to develop narrow perspective and loose sight of the
bigger picture.
• Members of each department feel isolated from those in other departments.
Product Departmentation
Product departmentation is the process of grouping activities by product line. Tasks can
also be grouped according to a specific product or service, thus placing all activities
related to the product or the service under one manager.

Each major product area in the corporation is under the authority of a senior manager
who is a specialist in and is responsible for everything related to the product line.

Under product departmentation, a single manager, often referred to as the product

manager, is delegated authority over all activities required to produce and market that
product.

The focus in the product departmentation, therefore, shifts on to the product and all the
activities related to the production and marketing of the product. Basic products or
services become the primary or major departments in the product departmentation. It
makes supervision easier, since each manager has to be an expert in only his or her
functional area of operation.
Merits of Departmentation by Product
• It ensures better customer service.
• Unprofitable products may be easily determined.
• It assists in development of all around managerial talent.
• Makes control effective.
• New product line can be added easily.

Demerits of Departmentation by Product

• It is expensive as duplication of service functions occurs in various product
divisions.
• Customers and dealers have to deal with different persons for complaints and
information of different products.
• Requires adequate availability of persons with general management abilities as
more and more departments are created for the various products
Departmentation by Customers
An enterprise may be divided into a number of departments on the basis of the customers that it
serves. For instance, commercial banks organize their activities around customer groups to cater
for their specific needs. As such, we find separate departments or divisions for agricultural,
industrial and merchant banking operations.

Similarly, we find an air-conditioning company organizing its business around domestic and
industrial air-conditioning units

Merits of Departmentation by Customer

• Promotes specialization
• Better service to customers
• Helps to earn goodwill

Demerits of Departmentation by Customer

• Under utilization of resources
• Duplication of activities
• Lack of co-ordination
Departmentation by Regions or Territories/ Areas
Under this method, activities are grouped area wise and assigned to the concerned area managers. It
is especially useful for large scale enterprises, which are geographically spread out. They can divide
their activities into zones, divisions and branches. Many multinational companies organize their
global activities with regional headquarters in different regions of the world.

Merits of Departmentation by Areas

• Exploitation of local control markets
• Effective control
• Effective co-ordination
• Opportunities for managers to improve their skills
• Suitable for large scale operations

Demerits of Departmentation by Areas

• Increase in overhead costs
• Duplication of activities
• Requires more persons with general managements abilities
• Increases problem of top management control because of the distance between the corporate
headquarters and the regional officers.
Matrix Departmentation
The matrix structure is a hybrid organization form, containing the characteristics of both
project/product and functional structures.
This structure allows operational responsibilities to be divided into two parts. One part contains all
the responsibilities associated with the management of a business/product and it is given to a
product manger”. The other part contains all the responsibilities related to the management of
resources needed to get the job done. The person responsible for these is the “functional manager”
or “resource manager” in charge of the functions like production, marketing, finance, personnel and
so on.

The matrix is built around a cooperative relationship between the project/product manager and the
functional/resource manager. The overall responsibility for the project lies with project manager.

Thus, project staff members in a matrix structure have a dual responsibility. The people who work in
the project are responsible to the project manager as well as their functional head from whom they
are drawn.
The matrix may be temporary or permanent. In construction and turnkey activities, project is
disbanded after the execution, whereas it may take a permanent form in the case of consumer goods
company.
Merits of Matrix Departmentation
• Efficiently manage large, complex tasks
• Effectively carry out large, complex task
• Specialized knowledge is available to all projects or products on an equal basis.
• Knowledge and experience can be transferred from one project to another;

Demerits of Matrix Departmentation

• Requires high levels of coordination
• Conflict between bosses
• Requires high levels of management skills
• Matrix entails wide use of group decision making and this at times delay
decision making
• Matrix structure may be expensive. The dual chain of command may cause
management costs to double.
Significance of Organizing
• Increase in managerial efficiency
A good and balanced organization helps the managers to increase their efficiency. Managers, through the
medium of organization, make a proper distribution of the work among different people according to their
ability.

• Proper utilization of resources

Through the medium of organization optimum utilization of all the available human and material resources of
an enterprise becomes possible. Work is allotted to every individual according to his/her ability and capacity
and conditions are created to enable him to utilize his/her ability to the maximum extent.

• Facilitates co-ordination In order to attain successfully the objectives of the organization.

Under organization the division of work is made in such a manner as to make all the activities complementary
to each other increasing their interdependence. Interdependence gives rise to the establishment of relations
which, in turn, increases co-ordination.

• Increase in specialization
Under organization the whole work is divided into different parts. Competent persons are appointed to handle
all the sub-works and by handling a particular work repeatedly they become specialists. This enables them to
have maximum work performance in the minimum time while the organization gets the benefit of
specialization.
• Helpful in expansion
A good organization helps the enterprise in facing competition. When an enterprise starts
making available good quality product at cheap rates, it increases the demand for its products. In
order to meet the increasing demand for its products, an organization has to expand its business.

• Facilitates attainment of objectives through proper co-ordination of all activities.

• Eliminates over lapping and duplication of work.

• Facilitates easier and better communication at all levels of the organizational hierarchy.

• Permits effective delegation and decentralization.

• Creates clear cut lines of authority and responsibility in an organization