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Topic 5:




Chapter 12 in Text Book

Pages: 312 - 341


Key topics in this chapter :


        What is Organizing

        Organization Structure

        Organization Chart

        Organizational Design

        Organizing Process:

        Division of Work




        Trends in Organizing



What is Organizing


Organizing is the process of arranging people and resources to work toward a common purpose. In organizing, mangers create the structure of working relationships between organisational members that best allows them to work together and achieve goals by creating departments and laying down lines of authority and responsibility.


Organization Structure


An organizational structure is the outcome of organizing. It is the system of tasks, reporting relationships and communication linkages by which an organization's activities are divided, organized and coordinated.


Organization Chart


An organization chart is a diagram that shows the formal arrangement of work positions by depicting the lines of authority and communication between them. Some charts show titles with the position held and the names of the title holders. An organisational chart also provides a visual map of the chain of command. Each individual can identify the boss and trace the lines of authority to the top position. Today most organisations have organisation charts showing the chain of command and the basic structure of the organisation.


It should also be remembered that apart from the formal organisational structures that an organisation chart depicts there also exists in an organisation Informal organisational structures which reflects the relationships between members that emerge out of social and group needs of employees.


Organizational Design


Inorder to determine the most appropriate organization structure managers have to consider a variety of factors such as the long term goals and objectives, strategies, people, technology, external environment etc. This process of determining the right organization structure is called organizational design. An organization's design may be mechanistic (bureaucratic, many rules and procedures, formal coordination, central authority) or organic (decentralized, fewer rules and procedures, wider span of control and personal coordination)


Organizing Process


The organizing process includes the following


1.      Division of work

2.      Departmentalization

3.      Hierarchy

4.      Coordination


Division of Work


The activities of an organisation should be divided into several small parts or jobs and individuals should be made responsible for a limited set of activities. By frequently repeating


the same tasks, efficiency of employees will increase due to job specialization. However, excessive job specialization may make the job monotonous and boring and creativity of workers may be affected.




Departmentalization is the process of grouping activities into departments that are similar and logically connected. There are various ways to group activities. These are discussed below:


Functional Structure : It is a form of departmentalization in which individuals engaged in one functional activity, such as marketing are grouped into one unit. Thus under such a structure there are different departments for marketing, finance, human resources, operations etc.


Divisional Structure: A divisional structure groups together people who work on the same product, market (geographical region) or customer.


Matrix Structure: Also referred to as a "Multiple Command System", this is a hybrid structure in which employees work in two chains of command and report to two heads for better control. Example:  Toyota had a matrix structure designed exclusively for the production of it's luxury car Lexus


Example: When H.J.Heinz became concerned about the company's international performance they decided to change the structure. The former structure which emphasized countries and regions, was changed to global product divisions. The company believed that this new structure will bring the best brand management to all countries and increase cooperation around the world within product businesses


Consider the different organisational structures given below:





A pattern of multiple levels of an organisation structure is called hierarchy. A hierarchy helps in serving the following decisions.


1.      Establishing reporting relationships

         Chain of command - plan that specifies who reports to whom

         Span of management control - number of subordinates reporting directly to a given manager

         Tall Vs Flat Organisation: A wide span of control creates a flat structure and a narrow span of control creates a tall structure.



Example: Nucor Corp is a successful steel company with a reputation for cost efficiency and streamlined management. The firm operates with a minimum of staff by putting daily decision making in the hands of operating people. Larger steel companies have typically 8 or 9 levels of management, Nucor operates with half as many with close to 7000 employees. They believe in having the fewest management levels and in delegating authority to the lowest level possible.


2.      Distributing Authority : Authority is the power given by the organisation because of the position held.

         Delegation - the process by which a manager assigns a portion of his/her total workload to others.

         Decentralization - the process of systematically delegating power and authority throughout the organisation to middle and lower levels.


Elements of Delegation of Authority


The superior has to define the jobs to be performed by his subordinates. He must also define the results expected of them and has to further decide on the allocation of various duties to the subordinates. The subordinate should then be given the right amount of authority which he will require to perform the delegated tasks. Along with the grant of authority the superior should also create a standard of performance for the subordinates. In other words they should be made responsible for the work they are supposed to do. Arising out of his responsibility the subordinates will be made accountable or answerable for the performance of his tasks and duties.


Authority is delegated; responsibility is created ; and accountability is imposed.


Importance of Delegation of Authority


        Reduces the work load of managers

        Helps establish superior-subordinate relationships

        Improves managerial effectiveness as managers can concentrate on more important matters

        Motivates subordinates to perform well and use their full potential.

        The increased authority and responsibility helps subordinates develop into future managers.

        Increases efficiency of the whole organisation if used at all levels.


Centralization and Decentralization


Centralization of authority means concentration of authority for decision making at higher or top levels of management. It refers to a situation where all decisions on specific matters are taken by one or a few managers at relatively higher levels.


Decentralization of authority refers to the systematic delegation of authority at all levels of management and in all departments of the organisation for taking decisions and actions appropriate at the respective levels. In a decentralized organisation authority is retained at the top management level for taking major decisions and framing policies concerning the entire organisation. At the same time, the middle and lower level management is entrusted with


authority for taking decisions on tasks assigned to them. Authority is pushed down even to the lower levels of management.


Everything that goes to increase the subordinates role is decentralization and everything that goes to decrease it is centralization.


Example: When Leo F. Mullin became CEO of Delta Airlines he took steps to restore the airline's reputation and performance. Rebuilding began at once and with a new focus on employees. Mullin met with workers all over the system to gather ideas and rebuild morale and started decentralizing. His goal was to give managers more day-to day decision making power to speed problem solving and improve service.




Coordination is the process of integrating the activities of separate parts of an organisation (departments) to achieve organisational goals effectively. 


The differences in the functioning of various departments in an organisation is called Differentiation. For example, accountants may see cost control as the most important factor while the production department may see the quality of the product as the most important factor and the marketing department may see the variety of models available as the most important factor in the success of the organisation.


Integration is the degree to which members at various departments work together in a unified manner. For example, the sales personnel should give advice to the market research department about the needs of the customers and this information should then be passed on to the production department so that they can ensure the production of the right kinds of goods.


Coordination should exist between all departments and also between various levels of management to ensure that the work is carried on smoothly and that no conflict or confusion arises.


Example: When Ford took over as the new owner of Jaguar it had to resolve many quality problems. Although the "Jaguar" automobile enjoyed cachet, it had also developed a reputation for maintenance problems. The quality turnaround at Jaguar took longer than Ford anticipated, in part because of what Jaguar's chairman called "excessive compartmentalization". In building cars, the different departments did very little talking and working with one another. Ford's response was to push for more inter departmental coordination, consensus decision making and cost controls.


Trends in Organizing


The complexities and the dynamism of the modern business world is putting increasing pressures on organisations to search for productivity improvements and performance advantages in the workplace. Some such new developments that are taking place in organizing include team structures, network structures, boundary's organizations, virtual corporations, sub-system structures etc.




Example: Intel is a major player in the dynamic computer chip industry. It is a fast moving company, and it operates in a fast moving environment. To stay ahead of it's competitors, Intel relies on a team organisation in which most workers are assigned to one or more projects under he direction of the team leaders. The traditional hierarchy of organisations takes a back seat to the focus of team activities and project accomplishments. Team members feel responsible for meeting performance targets and act accordingly.



Test Your Knowledge



&   The process of arranging work, authority and resources among an organization's goals to achieve goals is referred as __________

&   The way in which an organization's activities are divided, organized and coordinated is referred as ______________

&   An organization chart is a visual representation of an organization's structure (True or False)

&   The process of determining the most appropriate organization structure is called _______

&   By repeatedly performing the same task, the efficiency of workers will increase. (Name the concept)

&   ________ is the process of grouping activities into departments that are similar and logically connected.

&   The three major types of structures are ________, _________ and __________

&   Organizations may be divided into different divisional structures on the basis of ________, ___________ and ____________.

&   A matrix structure is also referred to as _____________________.

&   A pattern of multiple level of an organisation structure is called _________.

&   ____________ is the number of subordinates reporting directly to a given manager.

&   A _____ span of control leads to a flat structure and a narrow span of control leads to a _____ structure.

&   The process by which a manager assigns a portion of his/her total workload to others is called delegation (True or False)

&   ____________ means concentration of authority for decision making at higher levels of management.

&   ___________ is the degree to which members at various departments work together in a unified manner.




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