Organisation (Unit 2)

Concept of Organizing
• According to Louis A. Allen, “ Organization 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 organizational objectives”.
Features of Organisation
• Organising is the basis function of management.
• Organising is based on objectives of an enterprise.
• Organisation connotes a structure of relationships
• Organisation is a process of identifying and grouping the activities.
 STEPS IN ORGANISING

Authority
Identification & Assignment of
Departmentation Responsibility
Division of Work Duties
Relationship
Significance of Organizing

1.Clear – cut Authority Relationship

2.Pattern of Communication
3. Balancing of Activities
4.Stimulating Creativity
5.Encouraging Growth
6.Making Use of technological Improvements
 Organisation Structure
1. An organization Structure denotes the authority and
responsibility relationship between the various positions in
the organization by showing who reports to whom.

Developing the organization Structure-

(i) The functions which are to be performed and,
(ii) The form of structure.
 Consideration in Designing an Organisation Structure

1.Objectives and Strategy

2. Environment
3. Technology
4. People
5. People
6. Job Design
7. Departmentation
8. Span of Control
 Principles Of Organisation
1. Principle of Objective
2. Principle of Division of Work
3. Principle of Unity of Command
4. Principle of Span of Control
5. Principle of Scalar Chain
6. Principle of Delegation
7. Principle of Absoluteness of Responsibility
8. Principle of Co- ordination
9. Principle of Flexibility
10.Principle of Efficiency
11.Principle of Continuity
12.Principle of Balance
13.Principle of Exception
 SPAN OF CONTROL
Span of Control or supervision means the number of workers
reporting directly to a supervisor.

It is necessary for effective coordination and for getting better

results.

If the span of control is higher, the organization structure of the

company will be flat.
 Factors Influencing Span of Control

1.Communication System
2.Nature of Work
3.Capability of Supervisors
4.Ability of Supervisors
5.Availability of time
6.Degree of Decentralization
7.Availability of Staff Assistance
Decentralization and Delegation
 Delegation

Meaning of Delegation of Authority

Louis A. Allen has defined delegation of Authority as, "Delegation is the
dynamics of management ; it is the process a manager follows in dividing
the work assigned to him so that he performs that part which only he,
because of his unique organizational placement, can perform and so that he
can effectively get others to help him with what remains.”

Elements of Delegation of Authority

i) Assignment of Responsibility
ii) Granting of Authority
iii)Accountability for Performance
 Types of Delegation of Authority

i) Written or Oral Delegation

ii) Delegation of General or Specific Authority
iii) Soft and Hard Delegation
iv) Lateral Delegation
v) Informal Delegation

Significance of Delegation
vi) Is an essential tool for effective organisation
vii)Is a tool whereby a manager can multiply himself
 Advantages of Delegation

i) Multiplication of the Executives capacity

ii) Speedy Decision- making
iii)Means of co-ordination
iv)Opportunity for Professional Training and Growth
v) Increasing the moral of employee
vi)Helping the Expansion of Business
 Principles of Delegation of Authority
1)Proper Planning
2)Parity of Authority and Responsibility
3)Clarification of Limits of Authority
4)Effective communication
5)Absoluteness of Accountability
6)Unity of Command
 Decentralization
According to Allen “Decentralization refers to the systematic effort to delegate to the
lowest levels all authority expect that which can only be exercised at central points”

Decentralization is an extension of delegation

Factors leading to decentralization

i) The size and complexity of the organization.
ii) Dispersal of operations.
iii) Degree of diversification.
iv) Availability of competent personnel.
v) The outlook of the top management.
vi) Nature of functions of the organization.
vii) Communication system.
viii)Planning and control procedures.
Formal and Informal Structure
Formal Organisation:
In every organisation, employees are guided by rules, policies,
and procedures, and the structure of jobs and positions of
employees are clearly defined for achieving smooth functioning
of the organisation. Such a structure is known as Formal
Organisation. In a formal organisation, the position,
responsibility, authority and accountability of each and every
employee is defined for achieving organisational goals. It is
stable, rigid and coordinates the effort of every department.
Informal Organisation:
Interaction amongst employees at the workplace gives rise to networks
of informal communication and employees cut the official channels
and form their own social groups, which are known as Informal
Organisations. Such informal organisations emerge from within the
formal organisation. It arises out of frequent contact of people with
each other based on common interests. It has no definite structure as it
comprises a network of social relationships. It has no specific direction
for the flow of information and is flexible. It is helpful in faster
communication and fulfils the social needs of employees at the
workplace.
 The structure of jobs and positions, which is The network of social relationships arising out
Meaning created by management is known as Formal of interaction among employees is known as
Organisation. Informal Organisation. 

It is formed deliberately as a part of the It is not formed deliberately and is a result of

Formation
organisation’s rules and policies. social interaction. 

Authority arises by virtue of position in

Authority Authority arises out of personal qualities.
management.

Behaviour Behaviour is prescribed by the managers. There is no set pattern for behaviour.

Communication takes place through formal Communication takes place through informal
Flow of Communication            
channels only. channels having no fixed path.

Nature It is rigid in nature. It is flexible in nature.

Person who has greater acceptance by the

Leadership Person with maximum authority is the leader.
group is the leader.

Flow of Authority Authority flows from top to bottom. Authority can flow in all the direction.

It is more stable as it exists till the survival of It is relatively less stable as employees can
Stability
the organisation. change their social group based on their desire.

It is created to work systematically and achieve It is created to provide social satisfaction to

Purpose
organisational goals. employees.
 Types of Authority Relationships

1.Line Authority
2.Staff Authority
3.Functional Authority
 Types Of Organisation based on Authority Relationship

1.Line organization
2.Line and Staff
3.Functional Organisation
Line organisation
• Line organization is the simplest framework
• Line organization approaches the vertical flow of the relationship.
• In line organization, authority flows from the top to the bottom
• It is also known as the chain of command or scalar principle

Advantages of a Line Organization

• Simple to work
• Economical and effective.
• It also allows quick decisions and efficient coordination.
• Conforms to the scalar principle of organization.
• Further, it promotes the unity of command.
• In a line organization, the responsibility for the performance of tasks is fixed upon definite
individuals. Therefore, there is accountability of delegated tasks.
• There is excellent discipline in a line organization due to unified control and undivided
loyalties.
• The overall cost of running the organization is low due to the non-involvement of staff
personnel.
• It is a stable form of organization.
Disadvantages of a Line Organization

• A line organization can suffer from a lack of specialization.

• These organizations can overburden a key man or a few key-men to the extent
of their breaking point..
• Such organizations usually suffer from a lack of expert advice.
• A line organization is usually rigid and inflexible.
• These organizations are based on the autocratic system of management
• The division of work is not based on any scientific plan but on the whims of
the manager.
• It might stop progress and prevent the unit to work effectively.
• Such organizations might also encourage nepotism or favoritism based on
relationship or friendship
Line and Staff organisation
• Line and staff organization is a modification of line organization
and it is more complex than line organization. 
• Specialized and supportive activities are attached to the line of
command by appointing staff supervisors and staff specialists.
• The power of command always remains with the line executives
and staff supervisors guide, advice and council the line executives.
• Personal Secretary to the Managing Director is a staff official.
Features of Line and Staff Organization
• Line and Staff Organization is a compromise of line organization. It is more complex than
line concern.
• Division of work and specialization takes place in line and staff organization.
• The whole organization is divided into different functional areas to which staff specialists are
attached.
• Efficiency can be achieved through the features of specialization.
• Power of command remains with the line executive and staff serves only as counselors.

Merits of Line and Staff Organization

• Relief to line of executives
• Expert advice
• Benefit of Specialization
• Better co-ordination
• Benefits of Research and Development
• Training
• Balanced decisions
• Unity of action
Demerits of Line and Staff Organization

• Lack of understanding
• Lack of sound advice
• Line and staff conflicts
• Costly
• Assumption of authority
• Staff steals the show
Line and Staff Organisation
Functional Structure
• A functional organizational structure organizes a company into different departments based
on areas of expertise.
• A company that has a functional structure tends to have the following three characteristics: a
top-down hierarchical structure, department heads who report to senior management and
employees who specialize in certain tasks.

Characteristics of a functional structure

• A functional organization is a vertical hierarchy.
• The company is divided into different functional departments with employees who specialize
in specific tasks.
• Functional departments usually operate because each group has its own independent vertical
management structure.
• Employees report to a manager who oversees their department.
• Employees within each department typically only communicate with each other, rather than
dealing with workers in other departments. 
• Managers typically report to another functional leadership role.
• Managers are responsible for coordinating with other managers of other departments.
Advantages of a functional structure

• Increased productivity
• Skill development
• Clarity
• Minimized cost of operation

Disadvantages of a functional structure

• Hindered decision-making
• Competition between departments
• Narrow scope
Functional Organisation Structure
Modern/ Emerging Organisation Structure (click on below link to study)
https://www.greycampus.com/blog/project-management/common-types-of-organizational-structures-in-
project-management