Organizational Management

3.1. Organization
When two or more people work together to achieve a group result, it is an organization.
Organization is one of the fundamental functions of management.

3.1.1. Definition: Organization is the coordination of man, machine, materials, money and
method to achieve specific objective or goal with optimum cost.

It is also can be regarded as the systematic arrangement (control and coordination) of people
working together for a common goal.

After establishing the objective, Organization may be defined as a process of

a) Indentifying and grouping of work to be performed

b) Defining and delegating authority and responsibility
c) provides adequate communication
d) Establishing the relation between the employees to work more effectively
e) Co-ordinates, integrates and controls the activity of the individual to achieve common
objective i.e. organizational goal

3.2.2. Steps in Organization:

1. Identification and Division of work:

The organizing function begins with the division of total work into smaller units. Each unit of
total work is called a job. And an individual in the organization is assigned one job only. The
division of work into smaller jobs leads to specialization because jobs are assigned to individuals
according to their qualifications and capabilities. The division of work leads to systematic
working. For example, in a bank every individual is assigned a job. One cashier accepts cash,
one cashier makes payments, one person issues cheque books, one person receives cheques etc.
With division of work into jobs the banks work very smoothly and systematically.

2. Grouping the Jobs and Departmentalization:

After dividing the work in smaller jobs, related and similar jobs are grouped together and put
under one department. The departmentalization or grouping of jobs can be done by the
organization in different ways. But the most common two ways are:

(a) Functional departmentalization:

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Under this method jobs related to common function are grouped under one department. For
example, all the jobs related to production are grouped under production department; jobs related
to sales are grouped under sales department.

(b) Divisional departmentalization:

When an organisation is producing more than one type of products then they prefer divisional
departmentalization. Under this jobs related to one product are grouped under one department.
For example, if an organisation is producing cosmetics, textile and medicines then jobs related to
production, sale and marketing of cosmetics are grouped under one department, jobs related to
textile under one.

3. Assignment of Duties:

After dividing the organisation into specialized departments each individual working in different
departments is assigned a duty matching to his skill and qualifications. The work is assigned
according to the ability of individuals. Employees are assigned duties by giving them a document
called job description. This document clearly defines the contents and responsibilities related to
the job.

4. Establishing Reporting Relationship:

After grouping the activities in different departments the employees have to perform the job and
to perform the job every individual needs some authority. So, in the fourth step of organizing
process all the individuals are assigned some authority matching to the job they have to perform.
The assignment of the authority results in creation of superior-subordinate relationship and the
question of who reports to whom is clarified. The individual of higher authority becomes the
superior and with less authority becomes the subordinate.

Principles of Organistions:
1. Division of labour (Departmentalisation )
2. Delegation of authority and responsibility (centralization and decentralization )
3. Principle of unity of command
4. Span of control
5. Principle of scalar chain

3.2. Types of Organisation:

The structure of industrial organisation differs from other organisation which depends on:

1. size of the organisation

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 2. nature of the product being manufactured
3. Complexity of the problem being faced.

Organization structure depends on line of authority, responsibility and co-ordination. A few

commonly known forms of organization structure or types of organization are:

1. Line/ Military/ Scalar organization

2. Functional organization/ Staff organization
3. Line and staff organization
4. Project organization

1. Line/ Military/ Scalar organisation:

• It is the simplest form of organization structure.

• It was called military organization because it resembled to old military
organisations.
• Line organisation is based upon relative authority and responsibility rather than
on the nature and kind of operation or activities.
• The authority flows directly from Work Manager (WM) to Superintendent to
Foremen (F/M) and from them to workers.
• Line organisation is direct and people at different levels know to whom they are
accountable.
• The immediate superior (e.g. boss) gives orders to the subordinates, assigns duties
and also takes disciplinary action against them.
• Any enterprise that starts small probably starts with a line type of organisation.

Advantages:

1. It is simple and easy to understand.

2. It makes clear division of authority.
3. There is clear channel of communication
4. It encourages speedy action i.e. quick decision making is possible.
5. It is strong in discipline, as it fixes responsibility on an individual.
6. It is capable of developing the all-round executive at the higher level of authority.

Disadvantages:

1. It neglects the specialists.

2. It overloads a few key executives.
3. It requires a high type of supervisory personnel to meet the challenges imposed in the
absence of specialists as advisors.
4. In line organisation, provisions are seldom made to train, develop and replace top
executives.

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 5. Due to lack of specialization resources cannot be effectively utilized
6. Due to same reason quality of work is not up to the mark
7. It encourages the dictatorial way of working

Application

• Small concerns and free from all complexities.

• Automatic and continuous process industries such as, paper, sugar, textile etc.

2. Functional organization/ Staff organization

Functional organization has been divided to put the specialists in the top position throughout the
enterprise. This is an organization in which we can define as a system in which functional
department are created to deal with the problems of business at various levels. Functional
authority remains confined to functional guidance to different departments. This helps in
maintaining quality and uniformity of performance of different functions throughout the
enterprise.
The concept of Functional organization was suggested by F.W. Taylor who recommended the
appointment of specialists at important positions. For example, the functional head and
Marketing Director directs the subordinates throughout the organization in his particular area.
This means that subordinates receives orders from several specialists, managers working above
them.

Features of Functional Organization

• The entire organizational activities are divided into specific functions such as operations,
finance, marketing and personal relations.
• Complex form of administrative organization compared to the other two.
• Three authorities exist- Line, staff and function.
• Each functional area is put under the charge of functional specialists and he has got the
authority to give all decisions regarding the function whenever the function is performed
throughout the enterprise.
• Principle of unity of command does not apply to such organization as it is present in line
organization.

Advantages

1. Functional organization makes use of specialist to give expert advice to worker

2. Since a foreman is responsible for one function, he can perform his duties in a better
manner.
3. Executive are relieved of overburden
4. Expert guidance reduces wastages of resources (man , material , machine hours)
5. Quality of work can be improved

Disadvantages
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 1. Co ordination between various functional supervisors is difficult.
2. It is difficult to fix responsibility & authority of each functional supervisor
3. Difficult to maintain discipline as workers is responsible to different functional
supervisor.
4. Workers are confused that to whom they are accountable
5. It makes industrial relationship more complex.
6. Workers are not given opportunity to make use of their ingenuity, initiative and drive.
7. All-round executives cannot be developed.

Applications
For these disadvantages, the functional organisation is obsolete. But in some case of research &
development activity it may be used with some modification.

3. Line and staff organisation

Line and staff organization is a modification of line organization and it is more complex than line
organization. According to this administrative organization, specialized and supportive activities
are attached to the line of command by appointing staff supervisors and staff specialists who are
attached to the line authority. The power of command always remains with the line executives
and staff supervisors guide, advice and counsel the line executives. Personal Secretary to the
Managing Director is a staff official.

MANAGING DIRECTOR

Production Manager Marketing Manager Finance Manager

Plant Supervisor Market Supervisor Chief Assistant

Foreman Salesman Accountant

Features of Line and Staff Organization

• There are two types of staff :

a. Staff Assistants- P.A. to Managing Director, Secretary to Marketing Manager.
b. Staff Supervisor- Operation Control Manager, Quality Controller
• Line and Staff Organization is a modification of line organization. It is more complex
than line concern.

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 • 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.
• There are two lines of authority which flow at one time in a concern :
a. Line Authority
b. Staff Authority
• Power of command remains with the line executive and staff serves only as counselors.

Advantages:

1. The organization takes the advantages of good points of both line organization & staff
organization
2. Line executives are relieved of some of their loads and are thus able to devote more
attention towards production.
3. Discipline is maintained at higher level than functional organization
4. Advice from expert is fully utilized
5. Expert guidance reduces wastages of resources (man , material , machine)
6. Quality of work can be improved.

Disadvantages:

1. Product cost will increase because of high salaries of staff executives.

2. Some time line and staff members get confused about their authority and responsibility
3. Sometimes worker also get confused that to whom they should report
4. Discipline cannot be maintained like line organization
5. Frictions and jealousies, if developed between line and staff executives may cause harm
to the enterprise.
6. Line executives, if they start depending too much on staff executives, may lose their
initiative, drive and ingenuity.

Applications:

It is very much common used almost all medium and large industries.

4. Project organization

• When an already existing organisation finds it difficult to cope up with the new
situations, it decides to launch a project organization.
• For accomplishing the project goal, a separate division is created for each project. Project
organisation is created if the project is big in size and subject to high standard of
performance.
• The project organisation is solely responsible for planning, design, development,
production, evaluation and support of a single system or product.

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 • A project organisation is time limited with the commitment of varied skills and resources
for accomplishing the task.
• A project team is created, consisting of specialist from different department of the
existing organisation. The activities of the project team are co-oriented by project
manager. And the team consists of best talent to achieve the task within time, cost and
quality parameters.

It is a temporary organisation designed to achieve specific results by using teams of

specialists from different functional areas in the organisation. Some of the examples of
projects are: research and development projects, product development, construction of a new
plant, housing complex, shopping complex, bridge etc.

Importance of Project Organisational Structure:

Project organisational structure is most valuable when:

(i) Work is defined by a specific goal and target date for completion.
(ii) Work is unique and unfamiliar to the organisation.
(iii) Work is complex having independent activities and specialized skills are necessary
for accomplishment.
(iv) Work is critical in terms of possible gains or losses.
(v) Work is not repetitive in nature.

Advantages:

1. It does not interfere with the existing organization.

2. It provides concentrated attention that a complex project demands.
3. It allows maximum use of specialists available in the enterprise.

Disadvantages:
1. Project manager has to deal with persons of varied nature and interest.
2. Project work being temporary, there is quite uncertainty and insecurity of job for
specialists, hired from outside.
3. Decision-making is very difficult because there are unusual pressures from specialists
from diverse fields.
4. There may be conflicts among the specialists.

3.3. Departmentalization

For large enterprises, the increased number of employees makes it difficult to manage.
Therefore, enterprise in such case is broken up into various departments. This process is known
as departmentalization.
It helps in limiting the number of subordinates to be supervised by a manager.
Departmentalization i.e. grouping of activities is done on some logical basis so that; these groups

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perform functions of similar nature, in order to attain the objectives of the enterprise. This helps
in
1. Bringing specialization in various activities
2. Fixing responsibility of the heads of various departments for achieving the goal.
For example, such departments are production, marketing, personnel, finance etc. Sometimes,
enterprise can be divided into department according to products or processes.

Method of Departmentalisation

a) Departmentalisation by Function

The oldest and most common method of grouping related functions is by specialized function,
such as marketing, finance, and production (or operations).

President

Operations Marketing Finance

b) Departmentalisation by PROCESS

Departmentalization can also take place by process. This type of departmentalization, which
often exists in manufacturing companies, is illustrated in Figure below.

President

Pattern Treatment Painting

Design of Materials and
Finishing

c) Departmentalisation by PRODUCT

Whenever specialized knowledge of certain products or services is needed, departmentalization

by product may be best. This usually occurs in large diversified companies. This form of
departmentalization is illustrated in Figure below

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 Vice-President Marketing

Cosmetics Textiles Medicines

d) Departmentalisation by MARKET

When a need exists to provide better service to different types of markets, departmentalization by
market may be the appropriate form. An example of a business serving non-profit markets,
which uses the market form of departmentalization, is shown in Figure below.

President

Health Care Government Education

e) Departmentalisation by CUSTOMER

Sometimes key or major customers warrant departmentalization by customer. This is often the
case in banks. See Figure below.

Key Customer
Account Manager

IBM General Foods PepsiCo

f) GEOGRAPHIC AREA

When organizations are spread throughout the world or have territories in many parts of a
country, departmentalization by geographic area may provide better service to customers and be
more cost effective. A typical example for this form of departmentalization is shown in Figure
below.

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 Vice President

Northeast region Midwest Region Western Region

g) Departmentalization by project

It has received considerable use in recent years, particularly in such industries as aerospace (e.g.,
NASA). In this method, personnel with different backgrounds and experiences that bear on the
project are assembled and given the specific project to be accomplished within a certain time
period. When the project is completed, these specialized personnel return to their regular work
assignments.

h) Combination Approach

Many organizations, particularly large, physically dispersed and diversified organizations, utilize
several different forms of departmentalization. Below figure is an organizational chart showing
the use of several forms of departmentalization.

President

Function Vice President Vice President Vice President

Operations Marketing Finance

Director Director Director

Market Healthcare Government Education

Area Manager Area Manager Area Manager

Geographic area Northeast region Midwest region Western region

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