Infolink University college Department of Business Management

CHAPTER FOUR
THE ORGANIZING FUNCTION
5.1 Concept of organizing and organization
What to do and how to do have already been determined in the planning process.
The result of a good planning process is a detailed program of what actions are to be
taken to accomplish predetermined objectives, how long it will take, and where it will
take place. The next task becomes that of organizing.
Organizing is the process of identifying and grouping tasks to be performed,
assigning responsibility, delegating authority and establishing relationships for the
purpose of enabling to work most effectively together in the accomplishment of
objectives.
Organizing is a detailed arrangement of work and working conditions in order to
perform the assigned activities in an effective manner.
Organizing is a management function that involves arranging human and non-
human resources to help attain organizational objectives. It is the management
function that establishes relationship between activity and authority. Put more
specifically, the organizing function has the following four distinct activities:
 It determines what work activities are to be done to accomplish
organizational objectives
 It classifies the types of work needed and groups them into manageable
way
 It assigns the grouped work to individuals and hand over appropriate
responsibility
 It designs a hierarchy of decision making relationships
The end result of an organizing process is an organization.Organization - is the total
system of social and cultural relationship among peoples who are joined together to
achieve some specific common objectives. It is a whole consisting of unified parts (a
system) acting in harmony to execute tasks to achieve goals effectively and efficiently.
5.1.1 The Organizing Process
The organizing process has the following steps.
1. Identification of objectives
This is to understand clearly the objectives of the organization, i.e. to
reconsider the objectives established during planning and identify the specific
objectives to be pursued.
2. Identification of the specific activities needed to accomplish
objectives
Knowing the objectives clearly makes the identification of activities needed
clear and simple. Here we ask what work activities are necessary to
accomplish the identified organizational objectives. Creating a list of tasks to
be accomplished begins if we identify clearly what objective is to be
accomplished or met. This identification of specific activities needed is called
division of labor.
3. Grouping of activities necessary to attain objectives
The series number of activities listed and/or identified must be grouped together.
That is, this involves grouping together of activities in accordance with similarities
(homogeneity) of the activities, interdependence, job characteristics or any other
grouping criteria, and this result in departments and the process is called

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Departmentation. For example sales, advertising, packaging and shipping can be
considered marketing related activities. Thus, they are grouped under the
marketing heading. Machining, grinding, assembly and inspection are
manufacturing processes; they can be grouped under production. Personnel
related activities include recruiting, hiring, training, and compensation; they are
grouped under human resources.
Grouping of similar activities is based on the concept of division of labor and
specialization.
4. Assigning group of activities (work) and delegate the appropriate
authority
Management has identified activities necessary to achieve objectives, has
classified and grouped these activities into major operational areas and has
selected a departmental structure.The activities now must be assigned to
individuals who are simultaneously given the appropriate authority to accomplish
task.
5. Provision for coordination/Design a hierarchy of relationships
This step requires the determination of both vertical and horizontal operating
relationships of the organization as a whole. The vertical structuring of the
organization results in a decision-making hierarchy showing who is in charge of each
task, of each specialty area, and the organization as a whole. Levels of management
are established from bottom to top in the organization. These levels create the chain
of command, or hierarchy of decision-making levels, in the company.
5.1.2Importance of Organizing
a. Organizing promotes collaboration and negotiation among individuals in a group.
Thus, it improves communication within the organization.
b. Organizing sets clear-cut lines of authority and responsibility for each individuals
or departments. It helps employees to know their responsibilities and
concentrate on the key tasks at hand. It specifies who is responsible for what.
c. Organizing improves the directing and controlling functions of managers. It
enables management to effectively control the work and workers.
d. Permit optimum use of resource-Organizing develops maximum use of time,
human, and material resources. It also enables for proper work assignment for
individuals in pursuit of common goal.
e. Organizing enables the organization to maintain its activities coordinated so that
the efforts of managers and employees can be well integrated and directed
towards an end; i.e. to accomplish organizational goal.
5.2 Types of Organizations: Formal and Informal Organization
There are two types of organizations: Formal and informal
1. Formal organization - is the intentional, deliberate or rational structures of
roles in a formally organized enterprise. It is characterized by well-defined
authority - reporting relationships, job titles, policies, procedures, specific job
duties and a host of other factors necessary to accomplish its respective
goals.It is represented by a printed chart that appears in organizational
manuals and other formal company documents called organization chart.
Organization chart is a diagram of formal relationship which shows how
departments are tied together along the principal lines of authority. Formal
organization has consciously designed durable and inflexible structure. Formal
organization may have legal personality.

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2. Informal organization: is a network of personal and social relationships that
arises spontaneously as people associate with one another in a work environment.
It is an unofficial network of personal and social relations developed as a result of
association or working together. E.g. the Chess group, the Morning Coffee group,
the Bowling team, etc. It operates outside formal authority relationships. It
doesn’t have legal personality. Informal organization develops within the formal
organization. It is composed of all the informal groupings of people with in a
formal organization (it is not only the domain of workers; managers form informal
groups that cut across departmental lines). Informal organization has a structure
which is loosely designed, highly flexible and spontaneous. In such an
organization, the pattern of information flow, the exact nature of relationships
among the members, and the goals of the organization are unspecified. However,
to identify the existence of informal organizations and their composition we can
use two tools: a Sociogram and an Interaction Chart.
A Sociogram is a diagram of group attraction. The Sociogram is developed
through a process asking members whom they like or dislike and with whom they
wish to work or not to work. It is based on the belief that group interactions are the
result of people's feelings of like and dislike for another.
An Interaction Chart is a diagram that shows the informal interactions people
have with one another. For any specific person, the chart can show with whom the
person spends the most time and with whom the person communicates informally.
5.2.1 Types of Groups in the Informal Organization
The informal organization is often looked at as groups of people. Informal groups
may be described as horizontal, vertical, or mixed. These titles indicate whether
the group members come from the same or different levels of formal organization.
Horizontal Groups:-Include persons whose positions are on the same level of the
organization i.e. they are groups that are formed by peers.The groups can consist
of all the members in the same work areas or membership developed across
departmental lines. Members may be all management or non-management
personnel.Horizontal groups are the common kind of informal groups by virtue of
the ease of accessibility.Membership in a horizontal group is usually mutually
beneficial to individuals - “You help me and I will help you”. People in the same or
related work areas often share the same problems, interests, and concerns.
Vertical Groups:-Include people on different levels of the formal organization’s
hierarchy.These people always come together within the same department (work
areas).A vertical group can consist of a supervisor and one or more of his/her
employees. It may also be formed through skip - level relationships - a top-level
manager may associate with a first level manager.Their relationships can be the
result of outside interests or various employment relationships.
Mixed Group:-It is a combination of two or more persons whose positions are on
different levels of the formal organization and in different work areas.E.g. a Vice-
President may develop a close relationship with the director of computer services
in order to get preferential treatment.Mixed groups often form because of common
bonds outside work.
5.2.2 Reasons for the formationof informal group
1. Need for satisfaction: People have needs that in some cases are not met
through the formal organization. The opportunity to fulfill security, affiliation,

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esteem, and sometimes self-actualization needs can encourage people to look out
and join others in an informal group. They provide the opportunity to satisfy needs.
2.Proximity and interaction:A common reason people join groups is that they
work near one another. This can be either through working in close proximity
physically or because of frequent interaction. Horizontal informal groups are prime
examples of this.
3. Similarity:People may join informal groups because they are attracted to other
people who are similar to themselves. Several persons with the same attitudes or
beliefs may join one group. Other factors or similarity can be personality, race, sex,
economic position, age, educational background etc.In informal group/organization
one is not limited to one informal organization because there may exist still
unsatisfied needs by involving in one/two informal organization.
5.2.3The Impact of Informal Organization on the Formal Organization
The groups that compose the informal organization can affect the formal
organization negatively and positively.
The Negative Impacts
i. Resistance to change: The informal organization can resist change. In an effort
to protect its values and beliefs, the informal group can place roadblocks in the
path to any modifications in the work environment. The informal group shows its
resistance through hampering its implementation.
ii. Conflict: In an attempt to satisfy the informal group, the employee may come in
conflict with the formal organization.E.g. The Company may allow 10 minutes for
coffee break; however, the informal group may extend it to 30 minutes for the
employee’s social satisfaction. There, the employee’s social satisfaction is in
conflict with the employer’s need for productivity.
iii. Rumor: The informal communication system - the grapevine - can create and
process false information or rumors. The creation of rumors can upset the balance
of the work environment.
iv. Pressure to conform: The norms that the informal groups develop act as a
strong inducement toward conformity. The more cohesive the group, the more
accepted are the behavioral standards.
The Positive Impacts
Despite the possibility of these problems, informal groups do have the potential to
be helpful to managers.
i. Makes the total system effective: If the informal organization blends well with
the formal system, the organization can function more effectively. The ability of
the informal group to provide flexibility and instantaneous reactions will polish the
plans and procedures developed through the formal organization.
ii. Provides support to management: The informal organization can provide
support to the individual manager. It can fill in gaps in the manger’s knowledge
through advice or through performing the work, for example, budgeting and
scheduling. By performing effectively and positively, it can build a cooperative
environment. This, in turn, can mean more delegation to the employees and less
time spent by the manager controlling employee behavior.
iii. Provides a useful communication channel: The informal organization
provides employees with the opportunity for social information, for discussing their
work, and for understanding what is happening in the work environment.
iv. Encourages better management: Managers should be aware of the power of
the informal organization in what is actually a check and balance system.

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v. Provides stability in the environment: The informal organization can provide
acceptance and belonging. This feeling of being wanted by the group can
encourage employees to remain into environment, thus reducing turnover.
Additionally, the informal organization provides a place for a person to vent
frustrations. Being able to discuss them in a supportive environment may receive
emotional pressures.
5.3Organizational structure
Organizational structure is the structural framework for carrying out the
functions of planning, decision-making, controlling, communication, motivation,
etc.Organizational structure is the formal pattern of interactions and coordination
designed by a manager to link the tasks of individuals and groups in achieving
organizational goals. Organization structure is the arrangement and
interrelationship of the component parts, and positions of an
organization.Organizational structureis the formal arrangement of jobs within an
organization.Organizational structureis the formal arrangement of jobs within an
organization.The process of developing an organization structure is referred to as
organization design.
The formal structure of an organization is of two-dimensional: The horizontal
dimension and vertical dimension.The horizontal dimension identifies departments,
units, and divisions on the same level of a management. Whereas the vertical
dimension refers to the authority relationships between superiors and subordinates
and it also identifies who is responsible and accountable for whom.One aid to
visualizing organization structure is the organization charts.
Organizational Chart: is the means through which we depict the organization
structure. Organization chart is a line diagram that depicts the broad outlines of an
organization’s structure. It shows the flow of authority, responsibility, and
communication among the various departments which are located at different
levels of the hierarchy. An organization chart is a visual representation of the way
in which an entire organization and each of its components fit together
The organization chart can tell us:
1. Who reports to whom (chain of command)
2. The number of managerial levels
3. How many subordinates work for each manager (the span of control)
4. Channel of official communication through the solid lines that connect each job
(box)
5. How the organization is structured-by function, territory, customer, etc.
6. The work being done in each job- the labels on the boxes
7. The hierarchy of decision making- where a decision maker for a problem is
located
8. How current the present organization is (if a date is on the chart)
9. Type of authority relationships- line authority,staff authority, and functional
authority

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Figure 5.1:Example of an organization chart
5.4Division of labor/ work specialization
work specialization is dividing work activities into separate job tasks. Individual
employees “specialize” in doing part of an activity rather than the entire activity in
order to increase work output. It’s also known as division of labor.
When specialization is extensive, employees specialize in a single task, such as
running a particular machine in a factory assembly line. Jobs tend to be small, but
workers can perform them efficiently.
In short, division of labor involves:
 Breaking down a task into its most basic elements
 Training workers in performing specific duties
 Sequencing activities so that one person's efforts build on another's
Advantages Disadvantages
 Increases efficiency and  Boredom and fatigue caused by monotonous,
productivity. repetitive tasks
 Decreased transfer  limited knowledge.
time.  Creates communication barriers.
 Less wastage of  causes workers to think more in terms of
materials their department or function instead of the
 Ease of supervision. company.
 Decreases training cost.  Specialization leads to time-oriented
confusion.
5.5 Departmentation: Meaning and Bases
Departmentation - The process of grouping specialized activities in a logical
manner is called Departmentation.this involves grouping together of activities in
accordance with similarities (homogeneity) of the activities, interdependence, job
characteristics or any other grouping criteria.
Department - is a distinct area, division, or branch of an organization over which
a manager has authority for the performance of specified activities. It is a unit
formulated as a result of the Departmentation process.The physical and mental
limitations of individual managers to effectively oversee and coordinate activities
beyond a given limit partly justify the need for departmentation. Departmentation
is not an end in itself but is simply a method of arranging activities to facilitate the
accomplishment of objectives.
5.5.1Bases for Departmentation
Since organizations are different in their activities, objectives and areas in which
they operate, there are different bases for departmentation. The most common
bases are function, territory, product, customer, and process
I. Departmentation by Function
It is the grouping of activities together in accordance with the functions of an
enterprise - on the basis of similarity of expertise, skills or work activities. In other
words, jobs that call for certain skills or the use of similar working methods will be
put together. It is probably the most common base for departmentation and is
present in almost every enterprise at some level in the organization structure. It
asks the question “what does the enterprise/organization do” what kind of
activities.E.g. Human resources, production, marketing, finance, etc.
Advantages: Disadvantages
1. It is a logical reflection of functions. 1. De-emphasis of overall company
2. It maintains power and prestige of objectives-narrow minuends may
major functions of the organizations. develop.

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3. Follows principle of occupational 2. Over specializes and narrow
specialization viewpoints of key personnel.
4. It simplifies training. 3. Reduce coordination and
5. Provides unity of command communication
4. Decisions are concentrated at
6. easier time coordinating and planning
the top management, creating delay.
7. Promotes specialization and 5. Limits development of general
efficiency. managers.
II. Departmentation by Territory/ Geography
Groups activities on the basis of geographic region or territory.Is common in
enterprises that operate over wide geographic areas i.e. it is attractive to large-
scale firms or other enterprises whose activities are physically or geographically
dispersed. The logic is that all activities in a particular area or region should be
assigned to a manager. This individual would be in charge of all operations in that
geographic area. Can be used by business, government, NGOs, or other
enterprises.Geographic departmentalization works best when different laws,
currencies, languages and traditions exist and have a direct impact on the ways in
which business activities must be conducted.
Advantages Disadvantages
1. Places emphasis on local markets and 1. Requires more persons
problems with general manager abilities
2. Encourages local participation in 2. Duplicates staffs,
decision-making services, or effort.
3. Improves coordination of activities in a 3. Tends to make
region maintenance of economical
4. Takes advantage of economies of local central services difficult
operations 4. Increases problem of top
5. Furnishes measurable training ground management control
for general managers.
6. Encourages decentralized decision-
making.
III. Departmentation by Product (Line)
It is the grouping and arrangement of activities around products or product
groups. Departmentation by product should be considered when attention, energy
and efforts need to be focused on an organization’s particular products. This can
be true if each product requires a unique strategy or product process or
distribution system or capital sources.This approach works well for an enterprise
which engaged in very different types of products.E.g. Textile products - Nylon
products, woolen products, silk products, cotton products.Petroleum refining -
kerosene, diesel. Electronics - Radios, TVs, Computers
Advantages Disadvantages
1. Places attention and effort on product 1. Requires more persons
line with general manager abilities
2. Facilitates use of specialized skill, 2. Tends to make
capital facilities and knowledge maintenance of economical
3. Permits growth and diversity of products central services difficult -
and services duplication of business
4. Places responsibility for profits at the functions within each product
division level line.
5. Furnishes measurable training ground 3. Presents increased
for general managers problem of top management
control
IV. Departmentation by Customer

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It is a grouping of activities around customers. This grouping reflects a primary
interest in customers. Customers are the key to the way activities are grouped
when each of the different things an enterprise does for them is managed by one
department head. This makes economic sense when the customers are distinct
enough in their demands, preferences, and needs. It helps organizations meet the
special and widely varying needs of customers. It can be used in medical
institutions such as hospitals and clinics - emergency services, outpatient services,
inpatient services, x-rays; retail stores- men's clothing, women's clothing,
children's clothing.
Advantages Disadvantages
1. Encourages 1. May be difficult to coordinate operation
concentration on customer between competing customer demands
needs 2. Requires managers and experts in
2. Gives customers customers’ problems
the feeling that they have 3. Customer groups may not always be clearly
an understanding supplier defined
3. Develops 4. The possibility of underemployment of
expertness in customer facilities and labor specialized workers in customer
area groups
V. Departmentation by Process
Manufacturing firms often group activities around a process or type of equipment.
This is when special skill is needed to operate different machines. Making plywood,
for example, involves several sequential processes: poling (removing bark from
logs); sawing logs in to 8’ lengths, heating; veneer stripping and stamping veneer
sheets in to 4' segments; drying and grading according to quality; gluing plies
together; finishing and bundling.
Advantages Disadvantages
1. Achieves economic 1. Coordination of departments is
advantage difficult
2. Uses specialized 2. Responsibility for profit is at the top
technology 3. Is unsuitable for developing general
3. Simplifies training mangers
VI. Matrix Departmentation
It is an organizational arrangement that developed because of the need for quick
completion of highly technical projects that required significant contributions by
two or more functional groups. It begins with functional stricture and then another
structure organized by product or by client /customer or by project is overlaid upon
the original
structure. The result is that employees are assigned to a basic functional
department
and, at the same time, they are assigned to work on a particular product/project
or for a particular customer/client. The essence of matrix organization normally is
the combining of functional and product departmentation in the same organization
structure.
Advantage Disadvantage
1. more channels of 1. Conflict exists (power struggle).
information 2. Possibility of disunity of command exists
2. oriented toward end 3. higher over head costs because more
results. managerial positions are created.
3. Professional identification is 4. Requires manager effective in human
maintained. relations.
4. Resources are used

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efficiently
5.6 Span of Management
Meaning: The term span of management is also referred to as a span of control,
span of supervision, span of authority or span of responsibility.
Span of management - refers to the number of subordinates who report directly
to a manger, or the number of subordinates who will be directly supervised by a
manager.This varies from one situation to another. There is no magical number for
the span of control. There are various factors affecting the span of management.
Based on the number of subordinates who should report to a manager or the
number of subordinates that a superior should supervise, we can have Wide span
of management and Narrow span of management.
i. Narrow Span of Management
This means superior controls few numbers of subordinates or few subordinates
report to a superior. When there is narrow span of management in an organization,
we get:
 Tall organization structure with many levels of supervision between top
management and the lowest organizational level.
 More communication between superiors and subordinates.
 Managers are underutilized and their subordinates are over controlled.
 More trained managerial personnel and centralized authority.
Advantages Disadvantages
1. Close supervision and 1. Superiors tend to get too involved in the
control subordinates work
2. 2. problem of setting more trained managerial
Fast communication between personnel
subordinates and superiors. 3. Excessive distance between lowor level and
3. Easy to coordinate top level management.
and control activities. 4. High costs due to many levels
ii. Wide Span of Management
This means many subordinates report to a superior or a superior supervises many
subordinates.
If the span of management is wide, we get:
 A flat organization structure with fewer management levels between top and
lower level
 Many number of subordinates and decentralized authority
 Managers are overstrained and their subordinates receive too little guidance
and controlFewer hierarchal level
Advantages and DisadvantagesWide Span of Management
Advantages Disadvantages
1. Superiors are forced to 1. Tendency of overloaded superiors
delegate to become decision bottle necks
2. It initiates the 2. Danger of superior’s loss of
development of clear polices control
3. Require exceptional quality of
mangers
Span of Control Vs Levels of Management: If one wants to reduce the number of
hierarchical levels in an organization, the only way to do so without reducing the
number of employees at the bottom is to increase spans of control.
Relationship of centralization, decentralization to span of control

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The company’s philosophy of centralization or decentralization in decision-making
can influence the span of control of subordinate managers. A philosophy of
decentralized decision-making generally means that the span of management
should be wider for each manager. This is so because decision-making is forced
down to subordinates, thus feeling up a manager’s time commitments. This
situation also generally means fewer level of management in an organization.

Conversely, a philosophy of centralized decision-making should result in a

narrower span of control and more levels of management. If it is the philosophy of
the company to have managers make the majority of decisions, the mangers will
closely supervise their subordinates and delegate little. Contacts with subordinates
should increase in number and in length, thus narrowing the span of control.
Factors Determining an Effective Span of Management
The principle of span of a management states that there is no any specific number
of subordinates to be supervised by a manager. Rather, it states, there are factors
that affect the span of management. Some are:
1. Ability of the manger: The ability of the manager (supervisor) who is
responsible for supervising subordinates affects the span of a management. If the
manager is well trained and highly capable, receives assistance in performing
her/his supervisory activities, doesn’t have many additional non-supervisory
activities to perform, and if that manager defines tasks and responsibilities to
subordinates clearly, the appropriate span can be relatively broad (wide).
2. Manager’s personality: if managers strongly need to share power, they
may prefer a wider span of control. Some managers develop reputation as empire
builders and attempt to increase their spans.
3. The abilities of subordinates: The amount of training, experience, and
ability that subordinates have is directly related to a manager’s span of control.
Knowledgeable subordinates who work well on their own require less supervision
than inexperienced, poorly trained workers do. Well - trained subordinates require
not only less of their manager’s time but also fewer contracts with them.
4. Motivation and commitment: motivated employees take initiative and
responsibility, utilize and develop their skills committed to their job, devote more
time and effort and needs less of their supervisor’s time.
5. Need for autonomy: subordinates with high need for autonomy prefer to
make decisions by themselves (wider span) and vise versa is true for those who
take every problem to their superior for decision-making.
6. Type of work: Routines and simplicity of work. Managers supervising
people with simple and repetitive jobs are able to manage more immediate
subordinates than are those who supervise people with complex, non-repetitive
tasks.
7. Geographic dispersion of subordinates: Normally, there is an inverse
relationship between a manager’s span of control and the geographic dispersion of
his/her subordinates. For example, a sales manager whose sales people are
scattered over a wide geographic region cannot supervise as many subordinates
as a manager can whose subordinates are in one building. This is especially true
when the manger and subordinates must meet on a regular basis.
8. The availability of information and control systems: If there are
sophisticated information and control systems, well-defined policies and plans, the
manager can supervise many subordinates and hence the span will be wide.

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9. Levels of management: The size of the most effective span differs by
organizational level.
 At the top level of management the span is narrow, because the nature of
their work they deal with: general/broad policy control rather than direct
supervision.
 At the middle level of management the span is wider than top level
management, because they involve in policy supervision and much more
direct, personal contract with subordinates than top-level managers.
 At the lower level of management the span is wide, because as managers of
operating employees, supervisors frequently supervise work that is not
complex and that rarely requires policy decisions.
10. Economic Factor: Narrow spans of management require not only more
supervisors (and their services) but also the added expense of executive offices,
secretaries and fringe benefits. However, the wide spans of a management
require few supervisors with their accessories. So, organizations should take
cost into consideration.

The concept of an "optimal" span of management is the one that is neither too
broad nor too narrow. The concept of an optimal span of management suggested
that spans could be too broad or too narrow in specific instances.The wider the
span of management, the less direct supervision there is; the narrower the span,
the greater the number of managers and, therefore, the higher the cost in salaries.
5.7 Authority and power: source of power
Authority: is the right to commit resources (that is, to make decisions that
commit an organization’s resources), or the legal (legitimate) right to give orders
(to tell someone to do or not to do something) authority is the right to make
decisions, carry out actions, and direct others in matters related to the duties and
goals of a position. It is the formal right of a superior to command and compel his
subordinates to perform a certain act. All managers in an organization have
authority. It provides the means of command.Generally, level of authority varies
with levels of management. Higher-level managers have greater authority, with
ultimate power resting at the top. Authority decreases all the way to the bottom of
the chart, where positions have little or none.

When an organization gives one of its members authority, or the legitimate right to
use power over others, it carries with it the burden of responsibility. Responsibility
means being held accountable for attainment of the organization’s goal. Authority
is derived from the person’s official position in the organization. The person who
occupies the position has its formal authority as long as he/she remains in the
position. As the job changes in scope and complexity, so should the amount and
kind of formal authority possessed. Even though a manager has formal or
legitimate authority, it is wise to remember that the willingness of employees to
accept the legitimate authority is a key to effective management.
Power: is the capacity to affect the behavior of others, in other words, power is
the ability of individuals or groups to induce or influence the beliefs or actions of
other persons or groups. It is a resource or patronage an individual has at his/her
disposal to stage-manage others towards a wanted behavior. Having power can
increase the effectiveness of a manager by enabling the manager to influence

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people to what is wanted. Leaders in organizations typically rely on some or all of
five major types of power: legitimate, reward, coercive, expert and referent.
Base and sources of Power
Where does power come from? What is it that gives an individual or group
influence over others? The answer to these questions was developed by social
scientists John French and Bertrand Raven, who first presented a five-category
classification scheme of sources or bases of power: coercive, reward,
legitimate, expert, and referent. Managers derive power from both
organizational and individual sources. These sources are called position power
and personal power, respectively.
1. Position Power
Three bases of power are available to a manager solely as a result of his or her
position in the organization: reward, coercive, and legitimate power.
A. Coercive Power
Coercive power (in the organizational context) is the ability to apply
punishment. Forms of coercion or punishment include criticisms, terminations,
reprimands, suspensions, warning letters that go into an individual’s personnel
file, negative performance appraisals, demotions and with held pay rises,
(punishment may range from loss of a minor privilege to loss of one's job).
Coercive power is usually used to maintain a minimum standard performance
or conformity among subordinates. The greater the freedom to punish others,
the greater a manager’s coercive power. And the more coercive power a
manager uses, the more resentment and opposition he/she faces from
subordinates.
B. Reward Power
Reward power is derived from the person’s ability to control the allocation of
rewards valued by others and to remove negative sanctions (i.e., negative
reinforcement). The greater a manager’s control over valued rewards, the
greater the manager's reward power and the more power to influence. These
rewards can be anything that another person values. In an organizational
context, we think of money, time off, vacation schedules,work assignments,
favorable performance appraisals, promotions, interesting work assignments,
friendly colleagues, important information, and preferred work shifts or sales
territories. As with coercive power, you do not have to be a manager to be able
to exert influence through rewards. Rewards such as friendliness, acceptance,
and praise are available to everyone in an organization.
C. Legitimate Power
It is the extent to which a manager can use the “right of command” to control
other people. It represents the power a person receives as a result of his or her
position in the formal hierarchy of an organization. Positions of authority
include coercive and reward powers. Legitimate power, however, is broader
than the power to coerce and reward. Specifically, it includes acceptance by
members of an organization of the authority of a position. For example, the
boss may have the formal authority to approve or deny such employee
requests as job transfers, equipment purchases, personal time off, or overtime
work.
2) Personal Power
Personal power resides in the individual and is independent of that individual’s

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position. Personal power is important in many well-managed firms.There are
two bases of personal power: expertise and the respect and admiration of
others.
A. Expert power
Expert power is influence based on expertise, special skills, or knowledge.
Expertise has become one of the most powerful sources of influence as the
world has become more technologically oriented. Young people may find they
have increased power in the workplace these days because of the technical
knowledge and expertise. Expert power relies on trust that all relevant
information is given out honestly and completely. Of course, since knowledge
is power, the more that information is shared, the less expert power a person
has. Thus, some individuals try to protect their power by withholding
information.
B. Referent Power/ charismatic power
Referent power develops out of admiration of another and a desire to be like
that person. In a sense, then, it is a lot like charisma. If you admire someone to
the point of modeling your behavior and attitudes after him or her, that person
possesses referent power over you. Sometimes teachers and coaches have
referent power because of our admiration of them. For example Movie stars, a
Great Athlete, a Great Football Player, a Musician or a Military Hero might
possesconciderable referent power.
5.8 Types of Authority
In an organization different types of authority are created by the relationships
between individuals and between departments. There are three types of authority.
i. Line Authority
Line authority defines the relationship between superior and subordinate. It is a
direct supervisory relationship. It exists in all organizations as an uninterrupted
score or series of steps.In line authority a superior exercises direct command over
a subordinate. Line authority is represented by the standard chain of command
that starts with the most superiors and extends down through the various levels in
the hierarchy to the point where basic activities of the organization are carried out.
Line departments, headed by line managers, are the departments established to
meet the major objectives of the organization. Departments normally designated
as line departments include production, marketing, and finance. In functioning with
employees and departments under their control, line managers exercise line
authority.
ii. Staff Authority - is advisory in nature.
The function of people in a pure staff capacity is to give advice, expertise,
technical assistance, and support to help line managers to work more effectively in
accomplishing objectives. Advisory authority doesn’t provide any basis for direct
control over the subordinates or activities of other departments with whom they
consult (Within the staff manager’s own department, s/he exercises line authority
over the department’s subordinates).
E.g. Personnel, research and development, legal, plant maintenance, compost
quality control, etc.
 Staff authority is advisory and normally flows upward.
Staff departments provide assistance to the line departments and to each other.
They can be viewed as making money indirectly for the company through advice,

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service and assistance. Staff departments are created on the basis of the special
needs of the organization. As an organization develops, its need for expert, timely,
ongoing advice becomes critical. Examples could be legal, personnel, computer
service, etc.
Benefits of Staff managers
 Staff managers provide advice for line managers, i.e. the advice of well-
qualified specialists in various areas of an organization’s operations can
scarcely be overestimated, especially as operations become more complex.
 These specialists may be allowed to the time to think, to gather data, and
analyze, when their superiors, busy managing operations, cannot do so.
 As problems become more complex, staff analysis and advice becomes an
urgent necessity.
iii. Functional Authority
It is the right which is delegated to an individual or a department to control
specified process, practices, or provinces or other matters relating to activities
undertaken by persons in other departments. Functional authority breaks the unity
of command principle by having individuals report to two bosses. Functional
authority allows specialization of skills and improved coordination. It is delegated
by their common superior to a staff specialist or to a manager in another
department.

Functional authority is not restricted to managers of a particular type of

department. It may be exercised by line, derive or staff department heads, more
often the latter two, because they are usually composed of specialists whose
knowledge becomes the basis for functional controls.
Example:
 The Finance Manager can give direct command to the marketing manager of
the same level about financial affairs.
 The Legal Advisor can give direct command to others concerning the legal
affairs of the organization.
 The Personnel Manager can give direct command to others regarding
recruitment, selection, performance appraisal systems.
Conflict between Staff and Line Managers
For several reasons there is a conflict between line and staff managers. Some are:
1. Demographic factor: There is a general premise that staff mangers are
younger, well educated, firmly attached to their profession than their organization
and want more money, power and prestige.The older line officers dislike or
receiving what they regarded as instructions from someone so much younger than
themselves.
2. Threats to Authority: Line managers consider staff managers as potential
threats to their authority, particularly if staff managers exercise functional
authority.
3. Dependence on knowledge: Line managers feel discomfort and get
frustrated when they progressively depend on the advice of staff managers; i.e.
they fell that they are less important to the organization.
4. Exceed authority:Staff managers may exceed their authority and attempt
to give direct command to the line managers.

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5. Credit taking struggle:Staff managers may attempt to take credit for
ideas implemented by line managers; conversely, line managers may not
acknowledge the role of staff managers.
Resolving Conflict
The line - staff problem is not only one of the most difficult that organizations face
but also the source of an extra ordinarily large amount of inefficiency, solving this
problem requires great managerial skill, careful attention to principles and patient
teaching of personal. Some ways of resolving the conflict include:
1. Understanding authority relationships: Managers must understand the
nature of authority relationships if they want to solve the problems of line and
staff. Line means making decisions and acting on them. Staff relationship, on the
other hand, implies the right to assist and counsel. In short the line may “tell”, but
the staff must “sell” (its recommendations).
2. Making line listen to staff: Line manager should be encouraged or
required to consult with staff. Enterprises would do well to adopt the practice of
compulsory staff assistance where in the line must listen to staff.
3. Keeping staff informed: Specialists should take care that their
recommendations deal only with part of a problem. Many critics arise because staff
assistants are not kept informed on matters in their field. Even the best assistant
cannot advise properly in such cases. If line managers fail to inform their staff of
decisions affecting its work or if they don’t pave the way through announcements
and requests for cooperation - for staff to obtain the requisite information on
specific problems the staff cannot function as intended.
4. Requiring completed staff work: Completed staff work implies
presentation of a recommendation based up on full consideration of a problem,
clearance with persons importantly affected, suggestions about avoiding any
difficulties involved, and often, preparation of the paper work - letters, directives,
job descriptions, job specifications so that a manager can accept or reject a
proposal without further study, long conferences, or unnecessary work.
5. Responsibility and accountability: Clear areas of responsibility and
accountability for results.
5.9 DELEGATION OF AUTHORITY, CENTRALIZATION AND DECENTRALIZATION
These are important elements in organizing.
5.9.1Delegation of Authority
Delegation is the downward transfer of authority from a manager to a subordinate
to make decision within their area of responsibilities. It is the process of allocating
tasks to subordinates, giving them adequate authority to carry out those
assignments, and making them obligated to complete the tasks satisfactory.
Delegation is a concept describing the passing of formal authority to another
person. It is the assignment of part of a manager’s work to others, along with both
the responsibility and authority necessary to achieve expected results.

Delegation is necessary for an organization to exist. Just no one person in an

enterprise can do all the tasks necessary for accomplishing a group purpose, so is
it impossible, as an enterprise grows, for one person exercise all the authority for
making decisions.

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In delegating authority a manager doesn’t surrender his power because he does
not permanently dispose of it; delegated authority can always be regained. This is
called recovery of delegated authority.
5.9.1.1The Process of Delegation
Delegation of authority has the following steps:
Step one: Assignment of tasks: Specific tasks or duties that are to be
undertaken are identified by the manager for assignment to the subordinate. The
subordinate is then approached with the assignment (task).
Step Two: Delegation of authority: In order for the subordinate to complete
the duties or tasks, the authority necessary to do them should be delegated by the
manager to the subordinate. A guideline for authority is that it be adequate to
complete the task - no more and no less.
Step Three: Acceptance of responsibility: Respensability is the obligation to
carryout one’s assigned duties to the best of one’s ability. It is the obligation
created when someone accepts task assignments together with the appropriate
authority. Responsibility is not delegated by a manager to an employee, but the
employee becomes obligated when the assignment is accepted.The employee is
the receiver of the assigned duties and the delegated authority; these confer
responsibility as well.
Step Four: Creation of accountability: Accountability is having to answer to
someone for your results or actions. It means taking the consequences - either
credit or blame. It is the requirement to provide satisfactory reasons for significant
deviations from duties or expected results. When the subordinate accepts the
assignment and the authority, s/he will be held accountable or answerable for
actions taken. A manager is accountable for the use of his/her authority and
performance. The manager is also accountable for the performance and actions of
subordinates.
5.9.1.2 Importance of Delegation
1. It relieves the manager from heavy workload: Delegation frees a
manager from some time consuming duties that can be adequately handled by
subordinates and lets the manager devote more time to problems requiring his/her
full attention (lets the manager concentrate on strategic issues). Enables
managers to perform higher level work.
2. It leads to better decisions: Since subordinates are closer to real “firing
line” activities and problems than superiors, they have more realistic information
and better understanding. The realistic information that subordinates have may
lead them to make better decisions.
3. It speedup decision-making: Decisions made by lower level managers
usually are timelier than those that go through several layers of management.
4. It helps subordinates to train and builds moral: Subordinate managers
can reach their full potential only if given the chance to make decisions and to
assume responsibility for them.
5. It encourages the development of professional managers: Had there
not been any delegation, professional managers wouldn’t have been produced.
6. It helps to create the organization structure: If there were no
delegation of authority in an organization, there would exist only the
president/CEO/ top-level manager. And an individual cannot create an
organization.

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5.9.2 Centralization vsDecentralization
The terms centralization and decentralization refer to a philosophy of organization
and management that focuses on either the selective concentration
(centralization) or the dispersal (decentralization) of authority within an
organization structure. Centralization or decentralization are tendencies of
delegation of authority.
Centralization - is the extent to which power and authority are systematically
retained by top managers.
If an organization is centralized:
- Decision-making power remains at the top
- The participation of lower-level managers in decision-making is very low
Decentralization - is the extent to which power and authority are systematically
dispersed / delegated throughout the organization to middle and lower level
managers. It is the tendency to disperse decision-making authority in an organized
structure.
 In a decentralized organization decision-making power is pushed downwards
and lower-level managers actively participate in decision-making process.
That is, they are not only called for implementation but also for decision-
making.
Centralization and decentralization are not opposites rather they are
tendencies/proportions in delegation of authority. If they were opposites, there
could be absolute centralization or absolute decentralization, but there is no
absolute centralization or absolute decentralization. There could be absolute
centralization of authority in one person. But that implies no subordinate managers
and therefore no structured organization. Some decentralization exists in all
organization, on the other hand, there cannot be absolute decentralization, for if
managers should delegate all their authority, their status as mangers would cease,
their position would be eliminated, and there would, again, be no organization.
Centralization and decentralization are tendencies; they are qualities like “hot” and
“cold”.
 Centralization and decentralization form a continuum with many possible
degrees of delegation of power and authority in between.
When decentralization is greater:
 The greater is the number of decisions made at lower level of the
organization
 The more functions are affected by decisions made at lower levels
 The less a subordinate has to refer to his/her manager prior to a decision
and the less checking required as decisions are made at the lower level.
Factors Determining Delegation
Managers cannot ordinarily be for or against decentralization of authority.They
may prefer to delegate authority, or they may like to make all the decisions. Some
factors that affect the degree of centralization or decentralization- delegation of
authority- are:
1. History and culture of organization: Whether authority will be
decentralized frequently depends upon the way the business (organization) has
been built. Those enterprises that, in the main, expand from within show a marked
tendency to keep authority centralized. On the other hand, enterprises that result
from mergers and consolidations are likely to show, at least first, a definite

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tendency to retain decentralized authority. In other words, organizations which
were centralized or decentralized at their establishment tend to centralize and
decentralize authority to repeat what they have done before.
2. The nature of the decision: The costlier,important and the riskier the
decision is, the more centralized the authority will be. Cost may be reckoned
directly in birr and cents or in such intangibles as the company’s reputation, its
competitive position or employee morale.
3. Availability and ability of managers (Lower level managers): A real
shortage of managers would limit decentralization of authority, since in order to
delegate, superiors must have quantified managers to whom to give authority. In
addition to the availability of lower level managers, the quality of the existing
lower level managers (subordinates) has impact on centralization or
decentralization. Hence, the competency to carry out and exercise the delegated
authority has some effects.
4. Management philosophy: The willingness of managers to delegate
authority and limit the degree of decentralization or the desire to do the job by
herself/himself. The character and philosophy of top executives have an important
influence on the extent to which authority is decentralized. Sometimes top
managers are despotic, tolerating no interference with the authority they jealously
hoard. At other times, top managers keep authority not merry to gratify a desire
for status or power but because they simply cannot give up the activities and
authorities they enjoyed.
5. Size and character of the organization: The larger the organization, the
more decisions to be made, and the more places in which they must be made, the
more difficult it is to coordinate them. These complexities of organization may
require decentralized decicion making.
6. Geographic dispersion of operations: Geographic dispersion of
operations makes decentralization more necessary because top executives
frequently find it impossible to keep abreast of the details of what is going on at
various locations. Moreover, managers on site may be in a better position to
assess local situations and make appropriate decisions.
7. Environmental uncertainty: Environmental uncertainty tends to produce
a need for more decentralization. In this case, the fast pace of change interferes
with top management’s ability to assess situations with the speed necessary to
make timely decisions.
Problems in Effective Delegation
Despite of the advantages, many managers are reluctant to delegate authority and
many subordinates are reluctant to accept it. Both these barriers hinder effective
delegation.
A. Reluctance to delegate/Problems from Managers
There are a number of reasons that managers commonly offer to explain why they
do not delegate. Some are:
1. Fear of loss of powe- Some managers fear when they delegate authority
because they expect that they will be substituted/replaced by their subordinates if
subordinates have got the experience and skill of decision-making.
2. “I can do it better myself” fallacy: Some managers have an inflated
worth of themselves and think that they do everything better than their
subordinates.

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3. Lack of confidence in subordinates: The perception of managers that my
subordinates just are not capable enough. When managers delegate authority to
their subordinates they do also delegate responsibility. That is, managers are
accountable for the actions of their subordinates and may fear the blame if
subordinates fail, if subordinates lack knowledge and skill.
4. Fear of being exposed: Some managers fear that their subordinates do
too good job as compared with themselves i.e. feel threatened that competent
subordinates may perform too well and possibly make the manager look poor by
comparison.
5. Difficulty in briefing: Many times managers are reluctant to delegate
authority if they conclude that the time for briefing is more than the time for
decision-making or if they believe they lack the time to train subordinates. “It
takes too much time to explain what I want done”.
B. Reluctance to Accept Delegation/problems from subordinates
1. Fear of failure and criticism: Subordinates who fear criticism or
dissemble for mistake are frequently reactant to accept delegation. The solution
for this problem can be teaching subordinates when they make mistakes than
criticizing or dismissing.
2. Increase in the risk of making mistakes but not rewards:Subordinate
may believe that the delegation increases the risk of making mistakes but doesn’t
provide adequate rewards for assuming greater responsibility.
3. Lack of adequate information and resources: If subordinate managers
think that they don’t have enough factual information on which to base a decision
or other resources necessary to carry out the assigned duties, they tend to
decline/reject accepting authority delegated.
4. Already overworked subordinates:If subordinates are exploited so many
times.
5. Lack of self-confidence:Whensubordinats lack the confidence to assume
responsibility.
6. Believing/Thinking that decision-making is the boss’s job:Sometimes
subordinates feel that deciding on different matters is the work for boss’s.
Overcoming the barriers in effective delegation
The most basic prerequisite to effective delegation is the willingness of managers
to give their subordinates real freedom to accomplish delegated tasks. Managers
have to accept the fact that there are usually several ways to solve a problem and
that subordinates may legitimately choose a path differently from their own. And,
subordinates will make errors in carrying out their tasks. But they must be allowed
to develop their own solutions to problems and learn from their mistakes. The
solution to subordinates mistake is not for the manager to delegate less, but to
train or otherwise support subordinate more.

Improved communication between managers and subordinates will increase

mutual understanding and thus help to make delegation more effective. Managers
who know the abilities of their subordinates can more realistically decide which
tasks can be delegated to whom. Subordinates who are encouraged to use their
abilities and who feel their managers will “back them up” will in turn be more
accepting of responsibility.

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