Management & Entrepreneurship

(Course Code:10AL51)

Department of IEM
JSS Academy of Technical Education, Bengaluru-560060
Principles of Management

CHAPTER 3: ORGANIZING AND STAFFING

 Outline
ORGANIZING

• Nature and purpose of organization

• Principles of organization
• Types of organization
• Departmentalization
• Committees
• Centralization Vs Decentralization - authority
• Responsibility
• Span of control – MBO and MBE (Meaning Only)
 Outline
STAFFING

• Nature and importance of staffing

• Process of Selection & Recruitment (in brief).

Introduction

The basic concepts of organization design formulated by early management

writers, such as Henri Fayol and Max Weber.

• Henri Fayol -14 Principles of Management and Weber's – Bureaucracy.

• They offered structural principles for managers to follow.

 Organization

MEN

MONEY MACHINE

MARKET MATERIALS

METHODS
Definition
Definition

• Organizing is arranging and structuring work to accomplish organizational

goals.

• The process of arranging people and resources to work together to

accomplish the goal.

• Systematic arrangement of activities.

• Organizing in management refers to the relationship between people, work

and resources used to achieve the common objectives.
Definition

Organizing is a process of

• Identifying the activities to be performed.

• Grouping the activities into work units.

• Assigning tasks to the various job position/specialization.

• Defining rules.

• Establishing the relationship of authority and responsibility among individuals.

Organizing viewed in relationship with the other management functions
Characteristics of Organizations

Distinct Deliberate
Purpose Structure

People
1. Consider Plans & Goals

Purposes
Plans &
Goals
Activities
2. Determine Work Activities

Production Delivery
Selling
Training Maintaining Personnel

Accounting Recruitment Advertising

Compensating Purchasing

Budgeting Quality Control

 3. Classify & Group Activities

HUMAN
MARKETING OPERATIONS FINANCE
RESOURCES

>Recruitment
>Selling >Production >Accounting
>Training
>Advertising >Purchasing >Budgeting
>Maintaining
>Delivery >Quality control >Compensating
personnel
Purposes of Organizing

• Divides work to be done into specific jobs and departments.

• Assigns tasks and responsibilities associated with individual jobs.

• Coordinates diverse organizational tasks.

• Clusters jobs into units.

• Establishes relationships among individuals, groups, and departments.

• Establishes formal lines of authority.

• Allocates and deploys organizational resources.

Process of Organizing
Nature of Organization

1. Organization is always related to certain objectives.

2. An organization implies a group of people.

3. Communication is the nervous system of organization.

4. Organization is a continuous process.

5. Organization implies a structure of relationship

6. Organization involves a network of authority and responsibility relationship.

The Changing Organization

Traditional New Organization

Stable, Inflexible, Job-focused.
Dynamic, Flexible, Skills-focused.

Work is defined in terms of tasks to be

Work is defined by job positions.
done.
Individual-oriented. Team-oriented.
Permanent jobs. Temporary jobs.
Command-oriented. Involvement-oriented.
Employees participate in decision
Managers always make decisions.
making.
Work at organizational facility during specific
Work anywhere, anytime.
hours.
Hierarchical relationships. Lateral and networked relationships.
Relatively homogeneous workforce. Diverse workforce.
Organizational Structure
Organizational Structure

• Organizational structure is the formal arrangement of jobs within an

organization.

• This structure, which can be shown visually in an organizational chart.

• Organization structure explains the position and official relationship between

various individuals in the organization.

Organizational structure
Organizational structure

• When managers create or change the structure they’re engaged in organizational design.

• Organizational design is a process that involves decisions about six key elements:

1. Work specialization

2. Departmentalization

3. Chain of command

4. Span of control

5. Centralization and decentralization

6. Formalization
Organizational structure

1. Work Specialization

• Dividing work activities into separate job tasks.

Example: Sporting Goods factory

To meet daily output goals, the workers specialize in job tasks such as molding,
stitching and sewing, lacing, and so forth.

• Individual employees “specialize” in doing part of an activity rather than the

entire activity in order to increase work output. (Division of labour).
Organizational structure

Work Specialization
Organizational structure

2. Departmentalization

• How jobs are grouped together is called departmentalization.

Example: A hotel might have departments such as front desk operations, sales
and catering, housekeeping and laundry, and maintenance.

• Five common forms of departmentalization are used, although an

organization may develop its own unique classification.
The Five Common Forms of Departmentalization
The Five Common Forms of Departmentalization
The Five Common Forms of Departmentalization
The Five Common Forms of Departmentalization
The Five Common Forms of Departmentalization
The Five Common Forms of Departmentalization
Divisional structures based on product, geography, customer, and process
Different forms of Departmentalization in a single company
Organizational structure

3. Chain of Command

The chain of command is the line of authority extending from

upper organizational levels to lower levels.

E.g.: who reports to whom.

To understand the chain of command, three other important concepts to be

understood:
1. Authority
2. Responsibility
3. Unity of command
Organizational structure
3. Chain of Command
1. Authority:
Refers to the rights inherent in a managerial position to tell people what to do and
to expect them to do it.

2. Responsibility:
The obligation or expectation to perform the assigned task/work is known as
responsibility.

3. Unity of command:
Principle states that a person should report to only one manager.
Chain of Command and Line Authority
Organizational structure

4. Span of Control

The number of employees a manager can efficiently and effectively manage.

Example:
Assume two organizations, both of which have approximately 4,100 employees.

• if one organization has a span of four and the other a span of eight.
• The organization with the wider span will have two fewer levels and approx.
800 fewer managers.
Organizational structure

4. Span of Control
Organizational structure

4. Span of Control

Cost: At an average manager’s salary of $42,000 a year, the organization with

the wider span would save over $33 million a year (42%).

(+) Wider spans are more efficient in terms of cost.

(-) Wider spans may reduce effectiveness if employee performance worsens

because managers no longer have time to lead effectively.

Organizational structure

Narrow span of control Wide span of control

Organizational structure

5. Centralization and Decentralization

Centralization is the degree to which decision making takes place at upper

levels of the organization.

• If top managers make key decisions with little input from below, then the
organization is more centralized.

• If lower-level employees provide input or actually make decisions, then the

organization is decentralized.
Organizational structure

5. Centralization and Decentralization

• Degree of centralization in an organization depends on the situation.

• Earlier the goal was the optimum and efficient use of employees.

• Traditional organizations were structured in a pyramid.

• Today organizations have become more complex and responsive to

dynamic changes in their environments.

• Many managers believe that decisions need to be made by those individuals closest to
the problems, regardless of their organizational level.
Organizational structure

Centralization Decentralization

Top mgt to take

Decision
Dept- Dept-
Exercise of Control 1 2
over

Departments and
Divisions
Dept-3
 Centralization v/s Decentralization

Centralization Decentralization

Environment is stable. Environment is complex, uncertain.

Lower-level managers are not as experienced Lower-level managers are capable and
at making decisions as upper-level managers. experienced at making decisions.

Decisions are relatively minor. Decisions are significant.

Organization is facing a crisis / the risk of Corporate culture is open, allowing managers a
company failure. say in what happens.

Company is large. Company is geographically dispersed.

Effective implementation of company Effective implementation of company strategies
strategies depends on managers retaining say depends on managers having involvement and
over what happens. flexibility to make decisions.
Organizational structure

6. Formalization

Formalization refers to how standardized an organization’s jobs are and

the extent to which employee behaviour is guided by rules and procedures.

In highly formalized organizations,

• There are clear job descriptions.
• Numerous organizational rules.
• Clearly defined procedures and work processes.
 Formal vs Informal Organizations

FORMAL INFORMAL

• Have planned structure • Not formally planned

• Deliberate attempts to create • Arise spontaneously as a result of

patterned relationships interactions

• Usually shown by a chart • Not depicted in a chart

• Advocated by traditional theory • Stressed by human relation theory

Principles of Organization
Principles of Organization

The principles are guidelines for planning organization structure.

1. Objectives 8. Responsibility

2. Specialization 9. Authority

3. Span of control 10. Efficiency

4. Exception 11. Simplicity

5. Scalar principle / Chain of command 12. Flexibility

6. Unity of command 13. Balance

7. Delegation 14. Unity of direction

15. Personal abilities
Types of Organization
Types of Organization

1. Military or Line

2. Functional

3. Line and Staff

4. Project

5. Matrix

6. Committee

7. Free-Form
Types of Organization

Military or Line Organisation

• Vertical line of authority.

• Greater decision making authority - placed at the top.

• Lesser decision making authority - placed at the bottom.

• Line executives – Involved in the basic activities of the organisation.

• Unity of command.
Types of Organization

Military or Line Organisation

(+) Clear division of authority and responsibility and Unity of control

(-) The organization is rigid and inflexible
Military or Line Organisation
Types of Organization

Line and Staff Organization

Line authority - flows down the chain of command.

Examples - Production supervisor gets the rights to direct an employee to operate a particular

machine.

Staff authority is the right to advise or counsel those with line authority.

Examples - HRD employees help other departments by selecting and developing a qualified

workforce.
Types of Organization

Line and Staff Organization

Types of Organization

Functional Organization
The work is organised on the basis of specialization.

• Functional organisation at the Top

Whether a worker is in production, finance or marketing department, questions

relating to his salary, promotion etc. will be decided by the personnel manager.

• Functional organisation at the Bottom

The foreman should not be burdened with looking after all the aspects of his

work, instead, the specialists can help him solving technical problems.
 Types of Organization

Functional Organization

(-) Violates principles of unity of command

Types of Organization

Matrix Structure

The matrix structure combines elements of the functional and the divisional
structures, bringing together specialists from different areas of a business to work
on different projects on a short-term basis.

• Each person on the project team reports to two bosses: a line manager and a
project manager.
Matrix Structure CEO

Vice president, Vice president, Vice president, Vice president,

engineering production finance marketing

Employees
Project
manager A

Project
manager B

Project
manager C
 Types of Organization

Project Organization

• Project organizational structure refers to the creation of an independent project

team.

• The team’s management is separated from the parent organization’s, other

units, have their own technical staff and management, enterprise assigns certain

resources to project team, and grant project manager for implementation of the

project .
Types of Organization

Project Organization
 Types of Organization

Committee Organization

• “A committee is a group of persons performing a group task with the object of

solving certain problems”.

• Committee organization brings together individuals from different areas to

consider various organization problems.

Examples:
• Advisory committees
• Finance committees etc.
Committee Organization
Committee Organization

(+) Committees provide a forum for the pooling of knowledge and experience
of many persons of different skills, ages and backgrounds.

(-) In case a wrong decision is taken by committee, no one is held responsible

which may results in irresponsibility among members.
Types of Organization

Free form Organization

• Also known as boundary less structure.

• Roles, authority and relationships are not clearly defined.

• Members of organisation jointly exercise authority and are jointly

responsible.
 Mechanistic and Organic Structures

• The mechanistic organization (or bureaucracy) was the natural result of

combining the six elements of structure.

• The organic organization is a highly adaptive form that is as loose and

flexible.
Mechanistic and Organic Structures
 Why do structures differ ?

Organization Global
Strategy Technology Environment
size Implications
Organizational structure

Span of control
The number of employees a manager can efficiently and effectively manage.
Organizational structure

Factors affecting the Span of Management

1) Ability of the manager

2) Ability of the employees
3) Type of work
4) Geographic location
5) Well-defined authority and responsibility.
6) Level of management
7) Economic considerations
Management by Objectives (MBO)
Management by Objectives (MBO)

 The father of modern corporate management - Peter

Drucker.

 He is considered to be the world’s most influential

corporate guru.
Peter Drucker
 He developed Management by Objectives (MBO) 1909-2005

through his 1954 book ‘The Practice of Management’.

Management by Objectives (MBO)

 MBO, a process/principle/practice by which the objectives of an organization

are agreed to and decided between the management and the employees.

 This way the employees understand what is expected of them.

 By this they attain both their personal goals and the organization’s targets.
Management by Objectives (MBO)
Management by Objectives (MBO)

In MBO goals are expected to be SMART, i.e.

•Specific

•Measurable

•Achievable

•Realistic

•Time bound
Management by Exception (MBE)

• Management by Exception (MBE) is a method of control.

• Managers intervene the work of employees only when they work outside the
prescribed scope or when they can't meet the goals/set targets.

• Manager leaves employee free till they work within the scope and within they
meet the goals."
STAFFING
Definition

 Staffing is the process of filling positions/posts in the organization with

adequate and qualified personnel.

 Staffing is the process of acquiring, deploying and retaining a workforce of

sufficient quantity and quality to create positive impacts on the organization's
effectiveness.

 Staffing is the function by which managers build an organization through the

recruitment, selection, and development of individuals as capable
employees.
Objectives of Staffing

 To understand all function of in an organization.

 To understand manpower planning so that people are available at right time

and at a right place.

 To understand issues related to job analysis and to overcome the problem.

Importance of Staffing

Training and Development.

Effective Co-ordination.

Effective Recruitment & Placement.

Building effective human resource.

Optimum Use of Resource.

Enhances Corporate Image.

Job Satisfaction.
Elements of Staffing

Manpower planning Manpower

Requirements

Compensation Recruitment
Job analysis

Recruitment and selection

Promotions
Staffing Selection
Process
Training and Development

Performance appraisal Performance Placement &

Appraisal Orientation

Training &
Development
Elements of Staffing

Manpower • Involves Forecasting.

Requirements
• Determining the number and kind of manpower required by the organization in the future.

Recruitment • Process of locating, identifying, and attracting capable candidates.

• Process of choosing and appointing the right candidates for various job positions in the
Selection
organization

Placement • Placement refers to the employee occupying the position/post.

& • Orientation is introducing the selected employee to other employees and familiarizing him
Orientation with the rules and policies of the organization.
Elements of Staffing

Training &
Development • Facilitate Employee Learning.

Performance • Evaluating an employee’s current / past performance as against certain predetermined

Appraisal
standards.
Recruitment
Definition

“Recruitment is the process of searching for prospective employees

and stimulating them to apply for jobs in the organization.”

 Need of Recruitment

 Vacancies due to promotions, transfers, retirement, termination, permanent

disability and death.

 Creation of new vacancies due to growth, expansion and diversification of

business activities of an enterprise.

 New vacancies are also possible due to job specification.

 Recruitment Sources

Internal Sources External Sources

Transfers and Promotions Management trainee schemes

References Press Advertisement

Internal Notifications Employment agencies / Consultancies

Educational institutions

Walk-ins

Recommendations/References
 Selection Process

A series of steps from initial applicant screening to final hiring of the new employee.

Step 1 Completing application materials

Interviews

Step 2 Conducting an interview

Step 3 Completing any necessary tests Tests

Step 4 Doing a background investigation

Step 5 Deciding to hire or not to hire

Assessment
Centers
Step 6 Socialization
 Selection Process

Step 1 Completing application materials

Gathering information regarding an applicant’s background and

experiences.

Typical application materials includes; Application forms and Résumés

Step 2 Conducting an interview

Interviews can provide rough ideas concerning the person’s fit with the job
and the organization.
 Selection Process

Step 3 Completing any necessary tests

Administered before or after the interview.

E.g. of employment tests are; Reasoning / Mechanical aptitudes / Personality.

Step 4 Doing a background investigation

Can be used early or late in selection process.

Background investigations include:

Basic level checks.

Reference checks.
 Selection Process

Step 5 Deciding to hire or not to hire

A physical examination may be required if it is relevant to job performance.

Negotiation of salary and/or benefits for some jobs.

Step 6 Socialization
The final step in the staffing process.

Involves orienting new employees to:

The firm & work units in which they will be working.

The firm’s policies and procedures and organizational culture.

End of Module