CHAPTER FOUR

THE ORGANIZING FUNCTION

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 Chapter objectives
At the end of this chapter, students will be able
to:
 Distinguish between Organizing(to arrange) and
Organization(company,)
 Explain the Organizing Process
 List the characteristics of organization
 Identify the Bases for Departmentalization
 Explain the Authority and its Distribution
 Discuss Delegation of Authority
 Distinguish between Formal and Informal
organization
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 4.1. Concept of organizing and organization
Organizations
• are groups of people, with ideas and resources, working
together toward common goals.
• An identified group of people contributing their efforts
towards the attainment of goals is called an
organization.
Koontz and O’Donnel define organizing as
“The grouping of activities necessary to attain objectives,
the assignment of each grouping to a manager with
authority necessary to supervise it, and the provision
for co-ordination horizontally and vertically in the
enterprise structure”. 3
 Cont’d…..

According to Haimann,
• “Organizing is the process of defining and
grouping the activities of the enterprise and
establishing the authority relationships
among them”.

• The purpose of the organizing function is to

make the best use of the organization's
resources to achieve organizational goals.
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 Basic concepts in Organizing

Work Specialization/division of labor

 Involves dividing large tasks into smaller packages of
work to be distributed among several people.
 It describes the degree to which tasks in an
organization are divided into separate jobs
 It involves breaking down a task in to its most basic
elements, training workers in performing specific
duties, and sequencing activities so that one person’s
efforts build on another’s.
 Specialized jobs are characterized by simple, easy-to
learn steps, low variety, and high repetition.
 Advantages and disadvantages- 5
 Cont’d…..
Chain of Command
The chain of command is the vertical
line of authority that clarifies who reports to
whom throughout the organization.
 The people higher in the chain of command have the
right to give commands, take action, and make decisions
concerning activities occurring anywhere below them in
the chain.
Key assumption underlying the chain of
command is Unity of command.
– Unity of command : each employee is accountable to
only one supervisor 6
 Five Fundamental Steps in Organizing Process

1. Consider Plans and Goals:

– Plans and their goals affect organizing.
• Therefore, it is vital for a manager to
consider any changes in the plans and goals
of the firm.
• As a result of changes in plans, new
departments may be created and old ones
may be given additional responsibilities

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 Steps in Organizing Process…. Cont’d

2. Determining tasks necessary to accomplish

objectives
Here, managers list down activities necessary to
accomplish the objectives,
E.g. advertising, training, sales, budgeting,
3. Grouping of activities according to their similarities
to form departments
– management classifies and group activities using
the guidelines of homogeneity or similarity of
activities.
– Works that are similar in nature are placed together to
achieve organizational objectives. 8
 Steps in Organizing Process…. Cont’d
4. Assigning work and delegating authorities:
 Managers have to assign individuals different tasks
and
make them authorize of their activities to enable
them perform their job assignments
5. Design a Hierarchy of Relationships
• both vertical and horizontal operating relationships
of the organization.
– The vertical structuring results in a decision making
hierarchy showing who is in charge of each task.
– Horizontal structuring defines the working relationships
between operating departments 9
 4.2. Formal and Informal Organization

• On the basis of authority and responsibility

assigned to the personnel and the relationship
with each other:
 Formal: is the official organizational structure
created by management.
 It is organization formed purposefully to
achieve well defined and formal objectives.
 Informal: It is natural grouping of people in
the work situation based on their behavioral
patterns, interests, beliefs, objective etc.
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 4.2.1. Formal organization
Characteristics of formal organization
• It is properly planned
• It is based on delegated authority.
• The responsibility and accountability at all
levels of organization should be clearly defined.
• organizational charts are usually drawn
• unity of command is normally maintained
• It provides for division of labor.

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 4.2.2. Informal organization
Characteristics of Informal organization
• arises without any external cause i.e. voluntarily.
• It is a social structure formed to meet personal
needs.
• has no place in the organization chart
• It acts as an agency of social control.
• The rules and traditions of informal organization
are not written but are commonly followed.
• is one of the parts of total organization

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 Advantages of informal organization

• It fills up the gaps and deficiency of the formal

organization
• gives satisfaction to the workers and maintains
the stability of the work.
• It is a useful channel of communication
• also fills up the gaps among the abilities of the
managers.

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 Difference between formal and informal
organization

Formal organization Informal organization

1. it arises due to delegation • it arises due to social
of authority interaction of people
2. It gives importance to terms • It gives importance to people
of      authority and and their relationships.
functions. • it is spontaneous and natural
3. It is created deliberately. • The informal authority is
4. the formal authority is attached to a person.
attached to a      position • No such written rules and
5. rules, duties and duties followed in informal
responsibilities of workers organization
are given in writing
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 4.3. Organizational Charts

• Are graphical portrayal of the various positions in the

enterprise and the formal relationships among them.
• is the visual representation of an organization’s
structure.
• It shows the organizational relationships and activities
within an organization
• is graphic illustration of the organization’s management
hierarchy and departments and their working
relationships.
• Each box indicates position within the organization
and each line indicates reporting relationships and
lines of communication. 15
Organization chart cont’d

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 Importance of organizational chart
Organizational chart provide information regarding:
• Who reports to whom- i.e. chain of command.
• Span of control- how many subordinates does a manager have
• Channels of formal communication shown by solid lines that connect
each job(box)
• Bases of departmentalization- how the organization is
departmentalized- by function, customer, or product, geographical
etc
• Activities in each position- The labels in boxes describe each
individual ‘s activities
• The hierarchy of decision making - where the decision maker for a
problem is located
• Authority relationships- solid connections between boxes illustrate
line authority, broken lines show staff authority, and Zigzag line show
functional authority. 17
 Limitation of Organizational Chart

• Organizational chart has some limitations

since it doesn’t show
informal communication channel
Informal relationship among workers
Degree of authority held by individuals

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 4.3. Departmentalization :meaning & base
4.3.1. Meaning of Departmentalization
 Departmentalization involves subdividing work and workers into
separate organizational units responsible for completing particular
tasks.
• The basis on which individuals are grouped into departments and
departments into the total organization.
• Is grouping of related activities into work units.
 Similar activities intimately related with a distinct function are grouped
together to form departments.
 It aims at achieving unity of direction, effective communication,
coordination and control.
 Unity of direction: Organizational activities must have one central
authority and one plan of action.
 Similar activities in an organization should be grouped
together under one manager. 19
 4.3.2. Bases for Departmentalization
– There are five methods/ basis for grouping work

1. Functional departmentalization
• involves organizing departments around essential input activities,
• It is the grouping of positions into departments based on similar skills, expertise, work
activities, and resource use.
• Employees have similar training and expertise.
• E.g. production, marketing, finance, accounting and personnel

2. Product Departmentalization
• Organizing work and workers into separate units responsible for producing particular
products or services.
• Companies with multiple products commonly use this basis.
• Departments are grouped together based on organizational outputs.
• Each department may become self-contained company, making and selling its own
products. E.g. such as women's clothing, men's clothing, and children's clothing.
3. Customer Departmentalization: involves organizing departments around
needs of different types of customers. E.g. private sector, public sector, government,
or not-for-profit organizations. 20
 Cont’d………
4. Territorial (Geographic) Departmentalization
– Involves grouping of activities and responsibilities
according to territory.
– All activities in a geographic area are assigned to a
particular manager.
– E.g. Northeast, Southeast, Midwest, Southwest, and
Northwest
5. Process Departmentalization
– Groups jobs on the basis of product or customer flow.
E.g. Each process requires particular skills and offers a basis for homogeneous
categorizing of work activities.
A patient preparing for an operation would first engage in preliminary diagnostic
tests, then go through the admitting process, undergo a procedure in surgery,
receive post operative care, be discharged and perhaps receive out-patient
attention. 21
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 4.5. Span of Management (span of control)
Span of control refers to the number of employees
reporting to one manger, or
 the number of subordinates a manger directly supervises.
the optimum number of subordinates an executive can
effectively supervise,
It determines how closely a supervisor can monitor
subordinates.
No fixed number of subordinates to be supervised by a
single manger
The number depend on:
Complexity and variety of subordinates job
Ability and competence of mangers
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 Cont’d……

• Managers willingness to delegate authority
• The geographic location of organizational
departments.
• As a general rule,
 the more complex a subordinate’s job, the fewer
should be that manger’s number of subordinates.
the more routine the work of subordinates,
the greater the number of subordinates.
 as one goes up in the organization hierarchy,
he/she should have to deal with smaller number of
subordinates
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 Wide and narrow spans of control

Based on the numbers of subordinates supervised by

mangers span of control is classified into:
Wide span of control:-
in which as many people may report to the same person,
results in a flat organization structure.
Narrow span of control
number of subordinates supervised by one manager is
few
Result in a tall organizational structure

Advantages and disadvantages (reading Assignment)

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 4.6. Authority and Power: Source
Authority: - is the formal and legitimate right of a
manger to make decisions, give orders, and
allocate resources.
Source of authority- “makes that authority is legal
right of a manager because of the position he or
she occupies in the organization.
 As the job changes in scope and complexity, the
amount and kind of formal authority possessed
should be changed.

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 Types of authority
i. Line authority –
• is the right to command immediate subordinates in the
chain of command.
• Defines the relationship between superior and
   subordinates.
 Any manager who supervises operating employees or other
manger has line authority.
 It allows mangers to give direct    orders, evaluate the actions,
reward and punish employees.
 Helps the manager to make decisions and issue orders down
the chain of command.
 A line function is an activity that contributes directly
to creating or selling the company’s products. E.g
Manufacturing, marketing 29
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 Cont’d…..
ii. Staff authority-
• Staff authority is the right to advise, but not command, others
who are not subordinates in the chain of command.
• is the authority to serve in an advisory capacity
 Managers who provide advice or technical assistance are granted
advisory authority.
 Staff supervisors help line departments decide what to do and how
to do it.
 Provides no basis for direct control over the subordinates or activities
of other departments;
 However, within the staff managers own department, he or she can
exercise line authority.
A Staff function, such as accounting, human resources, or legal
services, does not contribute directly to creating or selling
the company’s products, but instead supports line activities.31
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 Responsibility and Accountability
For effective delegation, the authority granted to an
employee must equal the assigned responsibility.
Responsibility is the obligation to do assigned tasks.
I. Individual: Employees have individual responsibilities
to be proficient in their job.
 They are responsible for their actions.
 Nobody gives or delegates individual
responsibilities.
 Employees assume them when they accept a
position in the organization.

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 Cont’d……

II. Organizational responsibility:

refer to collective organizational
accountability and include how well
departments perform their work.
For example, the supervisor is responsible
for all the tasks assigned to his or her
department, as directed by the manager.

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Cont’d
When someone is responsible for something,
he or she is liable, or accountable to a superior,
for the outcome
Thus, accountability flows upward in the
organization.
Accountability is answering for the result of
one's actions or omissions.
Accountability results in rewards for good
performance, as well as discipline for poor
performance.
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 Power and Its Sources
• Power is ability to exert influence in the
organization.
• Or Power is the ability to exert influence in the
organization beyond authority, which is derived
from position.
• It is ability to influence others’ behavior.
• Power can be positional and personal.
• Position power is derived from top
management and is delegated down the chain
of command.
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Cont’d

• Personal power is derived from the follower

based on the individual behavior.
• A person does not need to be manager to
have power.
• Some administrative assistants of top mangers
have considerable power, but no authority.

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 Sources of Power
Reward
Power

Legitimate Coercive
Power Power
Enable managers to be
leaders & influence
subordinates to
achieve goals

Expert Referent
Power Power
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Cont’d
(i). Legitimate or position power – The power possessed
by manger and   derived from the positions they
occupy in the formal organization.
ii) Reward power- comes from the ability to promise or
grant rewards.
Reward power results in people doing what is asked
because they desire positive benefits or rewards.
(iii) Coercive power –enables mangers to force
individuals to attain their work assignments or to
punish those workers who failed to attain their job
assignments.
Coercive power is the threat of sanctions. Eg.
demotion, terminating   employment etc 39
Cont’d
(iv) Referent (charismatic) power – is the power that is
based on the kind of personality or charisma an
individuals has and how others perceive it.
 Referent power refers to a person who has desirable
resources or personal traits.
It results in admiration and the desire to emulate.
(v) Expert Power- is power derived from an
individual’s knowledge and expertise.
 Others listen to and follow the person with expert
power because she/he is regarded as capable and
knows how to do things right.

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 4.7. Delegation, Centralization and Decentralization
 Delegation is the process of assigning authority and creating
obligation to accomplish objectives.
 Delegation of authority is the assignment of direct authority and
responsibility to a subordinate to complete tasks for which the
manager is normally responsible.

 Delegation is the downward transfer of formal authority from one

person to another.
Process of Delegation
 Assignment of Tasks
 Delegation of Authority
 Creation of Obligation: create accountability with
subordinates for fair use of authority and effective
performances of activities
 Establishment of Control System 41
 Cont’d
Merits of delegation
• It freed managers from routine activities and enables
them to focus on critical ones.
• It acts as a tool of development and motivation of
employees.
• It is means of pushing down decision to lower level so
decisions are likely to be timelier as well as realistic.
Obstacles to Delegations
• Managers believe that they can make better decisions
• Managers are afraid of loosing importance
• Some managers do not know how or what to delegate
• Subordinates lack confidence in their activities etc. 42
 Centralization and decentralization
• Centralization is a philosophy of management that
focuses on systematical retention of authority in the
hand of higher level managers. I.e. it is the degree to
which decision-making power is concentrated in top
management's hands.
• Decentralization is a philosophy of management that
focuses on systematical delegation of authority
through out the organization to middle and lower level
managers. ;
• It is the extent to which decision-making authority is
pushed down the organization structure and shared
with many lower-level employees.
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 4.8. Groups and Committees

Group:-is a social unit consisting of two or more interdependent,

interactive individuals who are striving to attain common goals.
• Work teams consist of a small number of people with complementary
skills who hold themselves mutually accountable for pursuing a common
purpose, achieving performance goals, and improving interdependent
work processes

Types of groups
• Task group/work group consists of people with different skill for
performance of a common task.
• Command group consists of managers and their employees formed due
to authority and responsibility relationship.
• Mediating group a group formed to resolve conflict that may arise
between departments and individuals.
• Policy making group:- a group established to formulate operating policy.
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 Committees
• Committee: is a group of members that represent functional areas of
expertise.

• Types of committee
 Adhoc committees: -
• are those formed for a particular purpose.
• If the objectives are for which they are established have been met,
• they are disbanded (dispersed).
• They are temporary.
 Standing committee-
are permanent in nature.

They are not disbanded.

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END!!!

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