Management Theory and

Practice
Chapter 5- Organizing
Organizational structure
Authority and Responsibility
Change Management

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 Organizing
 The word ‘organize’ means placement of
ideas, objects or people in a correct order so
that they are easily available whenever
required.

 In management, it represents all those

activities that result in the formal
assignment of tasks, authority &
responsibility to groups and individuals.
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 Organizing
 It involves:

 Classification of work
 Designing of different work units
 Assigning different tasks.
 Establishing co-ordination and
relationship amongst the different units
and positions.
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Organizing Process
 Step I: Review of Strategic and Operational Plans

 Step II: Determination of the activities to be

performed to implement the Plans
 Step III: Creation of a job

 Step IV: Departmentalization

 Step V: Organization Structure

 Step VI: Determination of Authority

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Organization
 Organization involves two or more people with
ideas and resources, working together in a
structured, formal environment to achieve
common goals.

 It is a social and managerial system with a

clearly defined boundary, which pursues
collective goals through planning, hiring the
human resources, directing their effort and
controlling the performance.

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Discussion Questions

 Differentiate b/n structure & management

 What are the bases to form organizational

structure?
 What is an organizational chart?

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1. Organizational Structure

 Organizational structure is a formal pattern of

interaction and coordination designed by
management to link the task of individuals and
groups to achieve organizational goal.
 It is used as a tool for creating a relationship
among the various functions, which make up the
organization.

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Cont’d…

 Organizational structures are: -

 It is a purposive creation.
 Structures should be understood easily.
 Structures tend to be relatively permanent, with
continuous, gradual change, with major changes
occurring at strategic time.
 Structure has two dimensions, one horizontal and
the other vertical.
 Organizational structure is a means to a given end.
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Departmentation
 A department is a distinct area or a
branch of the organization which
handles tasks of similar nature.

 The process of grouping of activities into

units for the purpose of administration is
called departmentalization.

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Types/Basis of Departmentation
 Departmentalization by Function
 Departmentalization by Product
 Departmentalization by Geographical
Regions
 Departmentalization by Process
 Departmentalization by Customer Group
 Matrix Organization
 Virtual Organization
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 A. Departmentalization by
Function

 This structure is based

on occupational
specialization.
 Finance, manufacturing,
marketing, accounts,
research etc.
 It leads to efficiency and
economy.

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B. Departmentalization by
Product
 This form assembles different activities of
an organization in accordance with
different product types that it
manufactures.
 This form of departmentalization enables
organizations to focus on different
products simultaneously which sell a large
number of products simultaneously.
 Eg: Cosmetics, Clothing etc
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 C. Departmentalization by
Geographical Regions
 In this design, the
corporate house or group
is divided into different
divisions/ territory.

 These divisions are

relatively autonomous.

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Cont’d…
 Divisional departmentalization is grouping of
activities in area wise (geographical location)
and each area is in charge of a single
person.
 This method of departmentalization may be
suitable for large companies that distribute
on a massive scale nationally.
 It is difficult for them to co ordinate all
regions from the head quarter, because each
region has distinct needs, tastes and
facilities.
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D. Departmentalization by
Process

 Activities are grouped on the basis of

different steps involved in the process of
manufacturing.

 Eg. Bottling, capping, labeling, filling

etc.

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E. Departmentalization by
Customer Group
 Some organizations serve different
market segments by offering different
types of products.
 These markets or customers can be
served effectively with different
channels.
 This forms of departmentalization
groups jobs on the basis of a common
set of needs or problems of specific
customers
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 F. Matrix Organization

 This structure
utilises both
the functional
and divisional
chains of
command
simultaneously
in the same
part of the
organisation.
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 Cont’d…
 This structure assigns specialists from
different functional units to work together
on a project as a cross functional team.
 The team is led by a project manager.
 Project managers have the authority over
activities geared towards achieving
organizational goals while functional
managers have authority over tasks
related to their department.
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 G. Virtual Organization
 This comprises of a
group of independent
people or
organizations that
come together to
execute a project and
then disperse.
 This is made possible
by telecommuting and
customer organization
linkages.
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Cont’d…

 Virtual organizations appear for the

execution of tasks and disband after the
successful execution of the task.
 The only disadvantage is that the focus
is specific on the task and there is little
sense of belongingness and ownership.

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Span of Management
 Span of management refers to the
number of people who are supervised by
a single manager effectively.
 It also shows the number of people who
report directly to a single manager.
 A manager’s ability to supervise a large
number of subordinates depends upon
different factors like knowledge, time,
energy etc.

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Cont’d…
A wide span of control
Results in a large number of workers
reporting to one supervisor.
a manager who has a relatively large
number of immediate subordinates usually
results in few organization levels and a
"flattening out" of the structure.

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Cont’d…

A narrow span
result in small number of subordinates
results "tall organizational structure" i.e.
one with relatively many levels.

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Factors to be considered in determining the
span of control
 in order to determine the span of control
under a manager these common factors
should be considered.
 Nature of the work
 if the subordinates are involved in
performing the same or similar activities,
then it is possible for the manager to
supervise more subordinates.
 In addition, if the work is standardized, the
span of management may be increased.
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Cont’d…
 Capacity of the manager (supervisor)
 Capacity of the employees
 if the subordinates are well trained and
developed and experienced with the
principle of division of labor
(specialization) the manager can
supervise large number of employees.

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Cont’d…
 Geographical closeness to
subordinates
 located in one area _ a single manager
can manage more people
 Availability of time for supervision
 if the manager spend too much time in
planning and organizing, then he will not
be having enough time to supervise
large number of employees under him. 31
2. Authority and Responsibility
The types of authority that commonly exist in a
formal organization are:
Line authority: - is a form of authority in which
individuals in management positions have the formal
power to direct and control immediate subordinates. It
is represented by the chain of command, which links
superiors and subordinates.
Staff authority: - Staff authority is the
authority/rights to advise recommend and counsel in
the staff specialists, areas of expertise.
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Authority and Power: Source of Power
Authority Power
 Right to do something  Ability to do something
 Legitimate power given by an  Derived from many
organization to members formal and informal
holding position sources

 Narrow them, authority is one  Broad concept which

of the major sources of power creates action when
authority fails to achieve
results.
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Some of the sources of power are:
 Legitimate Power: - which is derived from a
person's official position in an organization or
person's position in the organizational hierarchy.
 Coercive power: - which is derived from a
person's ability to create fear in another individual
and is based on the individual's expectation that
punishment will be received for not agreeing or
complying with the superior's commands or
beliefs.
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Cont’d…
 Reward power: -is the opposite of coercive
power in that it is derived from the ability to grant
rewards for compliance with the superior's
wishes.
 Expert power: - is derived from the perception
of belief of an individual that the superior
possesses outstanding skill, knowledge and
expertise in certain areas.

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Cont’d…

 Referent power: - is based on the

identification of an individual with a leader
who is held in high esteem.

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 Delegation of Authority
 Delegation is the assignment of authority to
others in order to carry out certain tasks.
 It is a delivery by one individual to another of the
right to act, to make decisions, and to request
resources and to perform other tasks in order to
fulfill job responsibilities.
 Two side relationship - the superior must be
willing to sacrifice a portion of his authority and
the subordinate must be prepared to shoulder
additional responsibilities.
 Managers may not delegate b/c of ; Desire to do
things personally
 Fear of being exposed, desire to dominate,
unwillingness to accept risk……
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 The Process of Delegation
 The process of delegation consists three steps
1. Allocation of work duties to subordinates
clearly state what the subordinates are
supposed to do- allocation of task among
subordinates must be fair and balanced
2. Delegation of authority and extent of
delegation: give authority to subordinates
related to the task allocated
3. Creation of obligation –personal concern
for the task
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Cont’d…
Advantage of delegation
 Reduce burden on the manager
 Subordinate will get a chance to
participate in managerial issues
 Leads to better decision
 Speed up decision making

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Cont’d…
Disadvantage of delegation
Control at the top may more difficult-
difficult to identify problem areas
Lose touch on what really happening in
the organization – decisions may pas with
out the knowledge of the top managers

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Centralization and Decentralization

 The concept of centralization and

decentralization is more
connected with decision making
and authority.

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Centralization
 Is the systematic and consistent reservation of
authority at central points within the organization.
 The authority to take for most decision is
concentrated at the top of the managerial hierarchy.
 In centralization little delegation of authority is the
rule; power and discretion are concentrated at the
top level.
 Centralization is usually adopted by small scale
organizations
 but as the organization becomes more complex in
terms of increasing size, diversification of activity etc.
then there will be a need to move the decision
making centers to the operating levels.
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Decentralization
 Decentralization is an extension of the
concept delegation and cannot exist
unless authority is delegated.
 Refers to the degree to which authority
is delegated to the lower level.
 The centers of decision-making are
dispersed throughout the organization.
 Absolute centralization (pure centralization)
is not practical except in very small firms.

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Factors determining the degree of
decentralization of authority
i. Costliness of the decision
ii. Desire for uniformity of policy
iii. Size and characteristics of the
organization
iv. History of culture of the organization
v. Management philosophy
vi. Desire for independence
vii.Availability of managers – shortage
leads to centralization
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Cont’d…
viii.Control techniques
ix. Decentralized performance – dispersed
over geographical area
x. Business dynamics : the pace of change
xi. Environmental influence – gov’t control,
tax policies…..

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Cont’d…
 ADVANTAGES OF DECENTRALIZATION
 Reduce the workload on overburdened
executives
 Decentralization creates a room for
developing general managers
 Helpful in adaptation to fast changing
environment
 It is a motivational method
 It helps for making quick decision on the
spot
 It facilitates diversification and expansion

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Cont’d…
 DISADVANTAGES OF DECENTRALIZATION
 It results in duplication of effort and
resources.
 It allows lack of uniformity of standards
among organizational units
 Creates problem of coordination among
different departments and units
 increases the chances that the lower level
manager will take undesirable action
 Difficult to control from the head office

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 3. Organizational Change
Unplanned
Planned Change
Change - change
- change resulting
that is imposed on
from a deliberate
the organization and
decision to alter
is often unforeseen
the organization

Managers must be
prepared to handle both
 Steps in the planned change Process
Recognize the need
for change
Diagnose and
plan change
Manage the
transition

Measure results to
Maintain change
 Pressures for Change

Life-Cycle
Aspirations
Forces

Growing
Technological
International
Advances
Interdependence
Pressure for
Change
Introduction
or Removal of Changes in
Government Demographics
Regulations
Shifting Political
Changes in
Dynamics
Societal Values
 Resistance to Change

Effort to block new

ways of doing things
Four Factors

Different Low tolerance

Lack of assessments for change
understan Self-interest
ding
Cont’d…
Some people resist the change due to;
Lack of understanding – Communicate
clearly what the change entails.
Different assessments – Include
potential or actual resisters in the
decision-making process.
Self-interest-Reason with resistors,
transfer/coerce them
Low tolerance for change – Offer or
assure support for the resistors during the
learning process.
Cont’d…
People resist the change due to;
Fear of the unknown
Fear of loss
Fear of failure
Disruption of interpersonal relationships
Personality conflicts
Politics
Cultural assumptions and values
Minimizing Resistance to Change
Communication

Coercion Training
Minimizing
Resistance
to Change Employee
Negotiation
Involvement

Stress
Management
Leading Organizational Change
 The manager of the organization can lead the
change through taking the following measures;
 Establish a Sense of Urgency
 Form a Powerful Guiding Coalition
 Develop a Compelling Vision and Strategy
 Communicate Widely
 Empower Others to Act on the Vision
 Generate Short-term Wins
 Consolidate Gains and Create Greater Change
 Institutionalize Changes in the Organizational Culture
Leader Strategies to Overcome
Resistance
 Demonstrate the Need for the Change
 It must be tied to the mission,
somehow.
 It it’s budget driven, that must be
acknowledged honestly.
 It should, in most cases, undergo an
extensive review after implemented
Any Questions

?
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