FUNDAMENTALS OF ORGANIZING

SOURCE: SAMUEL CERTO

Definitions of ORGANIZING and ORGANIZING SKILL

Organizing – is the process of establishing orderly uses for resources within the management system.

Organizing Skill – is the ability to establish orderly uses for resources within the management system.

Organization – refers to the result of the organizing process.

The Importance of Organizing

It is the primary mechanism managers use to activate plans.

It creates and maintains relationships between all organizational resources.

Helps managers minimize costly weakness.

Three Primary Responsibilities

First:The department should periodically formulate

reorganization plans that make the management system more effective and efficient.

Second:The department should foster and support an

advantageous organizational climate within the management system.

Third:The department should develop plans to improve

managerial skills to fit current management system needs.

FIGURE 11.1Keys to organization: Fayol’s guidlines

1. Judiciously prepare and execute the operating plan.2. Organize the human and material facets so that they are consistent with objectives,

resources and requirements of the concern.3. Establish a single competent, energetic guiding authority (formal management

structure).4. Coordinate all activities and efforts.5. Formulate clear, distinct and precise decisions.6. Arrange for efficient selection so that each departments is headed by a competent,

energetic manager, and all employees are placed where they can render the greatest duties.

7. Define duties.8. Encourage initiative and responsibility.9. Offer fair and suitable rewards for services rendered.10. Make use of sanctions against faults and errors.11. Maintain discipline.12. Ensure that individual interests are consistent with the general interests of the

organization.13. Recognize the unity of command.14. Promote both material and human coordination.15. Institute and effect controls.16. Avoid regulations, red tape, and paper work.

The Organizing Process

Step 1:Reflect on Plans and Objectives

Step 2:Establish major

tasks

Step 3:Divide major task

into subtasks

Step 4:Allocate resources and directives for

subtasks

Step 5:Evaluate results

of organizing survey

feedback

FIGURE 11.2

Classical Organizing Theory

Classical organizing theory comprises the cumulative insights of early management writers on how organizational resources can best be used to enhance goal attainment.

Three major components of classical

organizing theory

Weber’s Bureaucratic Model

- Max Weber’s most notable contribution to classical organizing theory

Bureaucracy – to label the management system that includes three primary components:

detailed procedures and rules A clearly outlined organizational hierarchy Impersonal relationships among organization members

Caution: a bureaucracy is not an end itself, but rather means to the end of management system goal attainment.

Weber’s Bureaucratic Model

Main criticism: They give short shrift to the human variable within organizations.

- It is recognized today that the bureaucratic approach without an appropriate emphasis on the human variable is almost certainly a formula for organizational failure.

Another criticism: Bureaucracy may negatively influence organizational effectiveness.

Division of Labor

- The assignment of various portions of a particular task among a number of organization members.

Importance: Individuals specialize in doing part of a task rather than the entire task.

Advantage and disadvantage of Division

of Labor Advantages:

When workers specialize in a particular task, their skill in performing that task will increase.

Workers who have one job and one place in which to do it do not lose valuable time changing tools or locations.

When workers concentrate with only one job, they naturally try to make the job easier and more efficient.

Division of labor creates a situation in which workers need only to know how to perform their part of the work, task rather than the entire process for producing the end product.

Disadvantages: Division of labor focuses solely on efficiency and

economic benefit and overlooks the human variable in organizations.

Work that is extremely specialized tends to be boring and therefore will eventually cause production rates to go down as workers become resentful of being treated like machines.

Division of Labor and Coordination

Coordination –” the orderly arrangement of group effort to provide unity of action in the pursuit of a common purpose.” Mooney

- Coordination is a means for achieving any and all organizational objectives.

- It involves encouraging the completion of individual portions of a task in a synchronized order that is appropriate for the overall task.

Follett’s guidelines on Coordination

First, Follett said that coordination can be attained with the least difficulty through direct horizontal relationships and personal communications.

Second, Follett suggested that coordination be a discussion topic throughout the planning process.

Third, maintaining coordination is a continuing process an should be treated as such. Managers cannot assume that because their management system shows coordination today, it will show coordination tomorrow.

Follett’s guidelines on Coordination

Follett also noted that coordination can be achieved only through purposeful management actions--It cannot be left into chance.

She stressed the importance of the human element and advised that the communication process is an essential consideration in any attempt to encourage coordination.

StructureStructure

- refers to the designated relationships among resources of the management system.

Purpose: to facilitate the use of each resource, individually and collectively, as the management system attempts to attain its objectives.

Two basic types of structure:Formal Structure – the relationships among

organizational resources as outlined by management.

- represented primarily by the organization chart.

Informal Structure – the patterns of relationships that develop because of the informal activities of organization members.

An organization’s informal structure is the system or network of interpersonal relationships that exist within , but is not usually identical to the organizations formal structure.

Organization structure is represented primarily by means of a graphic illustration called an organization chart.

Organization Chart

Constructed in pyramid form. The relative positioning of individuals within

boxes on the chart indicates broad working relationships, and lines between boxes designate formal lines of communication between individuals.

Also communicate to outsider the complexity of the organization.

Two Primary Dimensions of Structure

1. Vertical DimensioningRefers to the extent to which an organization uses

vertical levels to separate job responsibilities.Directly related to the concept of Scalar Relationships

- the chain of command.○ Related to unity of command – The management

principle that recommends that an individual have only one boss.

Span of Management(span of control, span of authority, span of supervision, and span of responsibility)- The number of individuals a manager supervises. The

more individuals a manager supervises, the greater the span of management.

- Has a significant effect on how well managers carry out their responsibilities.

Central Concern : to determine how many individuals a manager can supervise effectively.

Designing Span of Management

Similarity of Functions - the degree to which activities performed by supervised individuals are similar of dissimilar.

Geographic Continuity - the degree to which subordinate are physically separated.

Complexity of Functions - the degree to which workers’ activities are difficult and involved.

Coordination - the amount of time managers must spend synchronizing activities of their subordinates with the activities of other workers.

Planning – The amount of time managers must spend developing management system objective and plans and integrating them with the activities of their subordinates.

TABLE 11.1 Major Factors That Influence the Span of Management

FactorFactor Has Tendency to

Increase Span of Management When --

Factor Has Tendency to Decrease Span of

Management When --

1. Similarity of Functions1. Subordinates have similar functions

1. Subordinates have different functions

2. Geographic contiguity2. Subordinates are physically close

2. Subordinates are physically distant

3. Complexity of functions3. Subordinates have simple tasks

3. Subordinates have complex tasks

4. Coordination4. Work of subordinates needs little coordination

4. Work of subordinates needs much coordination

5. Planning5. Manager spends little time planning

5. Manager spends much time planning

Graicunas and Span of Management

V.A. Graicunas – Developed formula for determining the number of possible relationships between in manager and subordinates when the number of subordinates is known.

Graicunas Formula:

C = total no. of possible relationships between manager and subordinates

n = is the known number of subordinates

Height of Organization Chart

Directly influenced by the span of management

Organization Charts with little height are usually referred to as flat, while those with much height are usually referred to as tall.

Top Manager 1 2

1 2 3 4 5 6 1 2 3 1 2 3

Top Manager

HEIGHT

HEIGHT

ORGANIZATION CHART A

ORGANIZATION CHART B

FIGURE 11.3

2. Horizontal Dimensioning - refers to the extent to which firms use lateral

subdivisions or specialties within an organization.

- to build organizations horizontally, organizations establish departments.

Department – is a unique group of resources established by management to perform some organizational task.

Departmentalizing – is the process of establishing departments within the management system.

Department Based on FunctionThe most widely used basis for establishing

departments within the formal structure is the type of work functions (activities) being performed with the system.

Functions are typically divided into the major categories of marketing, production and finance.

This structure allows for consistent marketing messages throughout the company.

This structure may implicitly impose functional standardization that may not optimize the needs of the organization’s various products and services.

CEO

Vice President Of

Finance

Vice President of Research and

Development(R&D)

Vice President of

Marketing

FIGURE 11.4Department by function at Sony

Department based on Products or ServiceDepartmentalizes resources according to products or

service being offered.Primary advantage: the ability to focus the

organizations efforts on each of the firm’s products or services

Primary Disadvantage: The different units may result in some duplication of efforts, which may lead to higher costs.

CEO

Vice PresidentOf

Financial Services

Vice PresidentOf

Entertainment

Vice PresidentOf

Electronics

FIGURE 11.5Departments by product at Sony

Departments based on GeographyDepartmentalizes according to the places where the

work is being done or the geographic markets on which the management system is focusing.

As market areas and work locations expand, the physical distances between places can make the management task extremely cumbersome. To minimize this problem, resources can be departmentalized according to the territory.

Primary Advantage: It helps the organization to focus equally on the organization’s various geographic locations.

Primary disadvantage: Lack of focus on products and services

CEO

Vice PresidentOf

Europe

Vice PresidentOf

North America

Vice PresidentOf

Asia

FIGURE 11.6Departments by geography at Sony

Departments based on customerEstablish departments in response to the

organization’s major customers.Assumes that major customers can be identified and

divided into logical categories.Primary advantage: The firm focuses explicitly on its

customers.Primary Disadvantage: This structure may also create

redundancies and increased costs.

CEO

Vice PresidentOf

Movie Distributors

Vice PresidentOf

Music Retailers

Vice PresidentOf

Electronics Retailers

FIGURE 11.7Departments by customer at Sony

Departments by MatrixOne in which a project manager(s) borrows workers

from various parts of the organization to complete some specific project.

Also called project organizations. Primary advantage: It allows the organization to focus

in various projects simultaneously.Primary disadvantage: The matrix structure can be

confusing, and employees may not be able to effectively cope with two bosses.

Vice President of Marketing

Vice President of Research and Development

(R&D)

Vice President of Finance

PlayStation III Marketing Support Staff

R&D Support Staff

Finance Support Staff

Spiderman III Marketing Support Staff

R&D Support Staff

Finance Support Staff

Finance Support Staff

R&D Support Staff

Marketing Support Staff

Portable Digital Music Player

CEO

FIGURE 11.8Matrix departments at Sony

TABLE 11.2 Advantages and Disadvantages of Departmentalization Modes

Departmentalization Advantages Disadvantages

Functional • Power of functional heads promotes

consistency• Relatively easy to

assign blame or credit to the performance of

a function

• May prove difficult to coordinate between

various functions• Difficult to assign credit or blame when product performs well or poorly

Product • Allows managers to focus on the products sold by the company• Relatively easy to

assign credit or blame on the performance

of the product

• Focus on product may force managers to miss

differences in customers or geographic regions• May be difficult to

coordinate across products

Departmentali-zation

Advantages Disadvantages

Geographic • Managers can focus on the various regions (and their differences) served by the

company•Allows firms to develop human resources by rotating managers

across different regions

• May prove difficult to coordinate between

various regions• May prove difficult to

assign credit or blame based on the performance

of a particular product

Customer • Allows manager to focus on and cater the most important

customers•Relatively easy to assign blame

or credit regarding customer relationships

• May prove difficult to coordinate across various

customers• May introduce

complexities as customers span different products and

geographic areas

Matrix • Allows firm to pool human resources for both short-term

and long-term projects• Allows firm to maintain

flexibility over time

• Difficult for employees to understand power

structure within the firm• Difficult for employees to

prioritize responsibilities based on multiple authority

figures

Responsibility Is the obligation to perform assigned activities.It is the self-assumed commitment to handle a

job to the best of one’s ability.The act of accepting the job means that the

person is obligated to a superior to see that job activities are successfully completed.

The Job DescriptionA list of specific activities that must be performed by

whoever holds the position.A clear job description can help employees to become

successful by focusing their efforts on the issues that are important for their position.

When properly designed:○ Job descriptions communicate job content to

employees.○ Establish performance levels that employees must

maintain.○ Act as a guide that employees should follow to help the

organization reach its objectives.

Job activities are delegated by management to enhance the accomplishment of management system objectives.

A sound organizing strategy delineates specific job activities for every individual in the organization.

Note: that as objectives and other conditions within the management system change, so will individual job activities.

Three areas related to Responsibility

Dividing Job ActivitiesOne person cannot be responsible for performing all

of the activities that takes place within an organization.

Functional Similarity Method ○ according to many management theorist, the most basic

method of dividing job activities.○ the method suggests that management should take four

basic interrelated steps to divide job activities in the following sequence:

Functional Similarity and Responsibility o Additional guides can be used to supplement

the functional similarity method:○ First: Overlapping responsibility should be

avoided when making job activity divisions.Overlapping responsibility – refers to a situation in which more than one individual is responsible for the same activity.

○ Second: Responsibility gaps should be avoided.Responsibility gap – exist when certain tasks are not included in the responsibility area of any individual organization member.

Third: management should avoid creating job activities for accomplishing tasks that do not enhance goal attainment. Organization member should be obligated to perform only those activities that lead to goal attainment.

When two (or more) employees are uncertain as to who is responsible for a task, four outcomes are possible:

1. One of the two may perform the job. The other may either forget to or choose not to do the job – and neither of these is a desirable outcome for product quality control.

2. Both employees may perform the job. At the least, this situation results in duplicated effort, which dampens employee morale. At worst, one employee may diminish the value of the other employees’ work, resulting in a decrement in product quality.

3. Neither employee may perform the job because each assumed the other will do it.

4. The employees may spend valuable time negotiating each aspect and face of the job to carefully mesh their job responsibilities, thus minimizing both duplication of effort and responsibility gaps. Though time consuming, this is actually the most desirable option in terms of product quality.

Clarifying Job Activities of Managers:Is even more important than dividing the job activities

of non – managers because managers affect greater portions of resources within the management system.

One process used to clarify management job activities, “Enables each manager to actively participate with his or her superiors, peers, and subordinates in systematically describing the managerial job to be done and then clarifying a role each manager place and relationship to his or her workgroup and to the organization.

Management Responsibility Guide○ A specific tool developed to implement this

interaction process. ○ This guide helps management to describe the

various responsibility relationships that exist in the organization and to summarize how the responsibilities of various managers relate to one another.

Responsible managersManagers can be describe as responsible if they

perform the activities they are obligated to perform. Responsible managers are a prerequisite for

management system success.

Authority

The right to perform or command. It allows its holder to act in certain designated

ways and to directly influence the actions of others through orders.

It also allows its holder to allocate the organization’s resources to achieve organizational objectives.

Authority on the Job

Acceptance of the Authority Those positioned toward the top of the chart more

authority than those position toward the bottom. Chester Barnard writes that the exercise of authority

is determined less by formal organizational decree that by acceptance among those under the authority. Authority exacts obedience only when it’s accepted. Authority is the character of communication by

which an order is accepted by an individual as governing the actions that individual takes within the system.

Barnard’s Conditions: 1. The individual can understand the order being

communicated.2. The individual believes the order is consistent

with the purpose of the organization. 3. The individual sees the order as compatible with

his or her personal interest.4. The individual is mentally and physically able to

comply the order.

Note: The fewer of these four conditions that are present, the lower the probability that authority will be accepted and obedience be exacted.

Barnard maintains that more and more of a manager’s commands will be accepted over the long term if:

1. The manager uses formal channels of communication and these are familiar to all organization members.

2. Each organization members has an assigned formal communication channel through which orders are received.

3. The line of communication between manager and subordinates is as direct as possible.

4. The complete chain of commands is used to issue orders.

5. The manager possesses adequate communication skills.

6. The manager uses formal communication lines only for organizational business.

7. A command is authenticated as coming from a manager.

Types of Authority Line and Staff Authority

Line authority○ The most fundamental authority within an

organization, deflects its existing superior – subordinate relationships.

○ Pertains to matters directly involving management system production, sales, and finance, and as a result the attainment of objectives.

Staff Authority○ Consists of the right to advise or assist those

who possess line authority as well as other staff personnel.

○ Enables those responsible for improving the effectiveness of line personnel to perform their requires task.

To ensure that line and staff personnel do work together productively, management must make sure both groups understand the organizational mission, have specific objectives, and realize that they are partners in helping the organization reach its objectives.

Size – The most significant factor in determining whether an organization will have staff personnel.○ The larger the organization, the greater the need and

ability to employ staff personnel.

Roles of Staff ManagerHarold Stieglitz

1. The advisory or counselling role – Staff personnel use their professional expertise to solve organizational problems.

2. The service role – Staff personnel provide services that can more efficiently and effectively be provided by a single centralized staff group than by many individuals scattered throughout the organization.

3. The control role – Staff personnel help establish a mechanism for evaluating the effectiveness of the organizational plans.

Conflict in Line – Staff Relationships

From the viewpoint of line personnel, conflict is created because staff personnel tend to assume line authority, do not give sound advice, steal credit for success, fail to keep line personnel informed of their activities and do not see the whole picture.

From the viewpoint of the Staff personnel, conflict is created because line personnel do not make proper use of staff personnel, resist new ideas, and refuse to give staff personnel enough authority to do their jobs.

• Functional Authority―Consist of the right to give orders within a segment of

organization in which this right is normally not existing.

―Usually assigned to individuals to complement the line of staff authority they already possess.

―Generally covers only specific task areas and is operational only for designated amounts of time.

―Accountability – Refers to the management philosophy whereby individuals are held liable, or accountable, for how well they use the authority and live up to their responsibility of performing predetermined activities.

Delegation Is the actual process of assigning job activities

and corresponding authority to specific individuals within the organization.

Steps in Delegation Process (Newman and Warren)

1. Assigning specific duties to the individual.2. Granting appropriate authority to the

subordinate.3. Creating the obligation for the subordinate to

perform the duties assigned.

TABLE 12.3 Guidelines for Making Delegation Effective

•Give employees freedom to pursue tasks in their own way.

•Establish mutually agreed-upon results and performance standards for delegated tasks,

•Encourage employees to take an active role in defining, and communicating progress on tasks.

•Entrust employees with completion of whole projects or tasks whenever possible.

•Explain the relevance of delegated tasks to larger projects or to department or organization goals.

•Give employees the authority necessary to accomplish tasks.•Allow employees access to all information, people, and departments necessary to perform delegated tasks.

•Provide training and guidance necessary for employees to complete delegated tasks satisfactory.

•When possible, delegate tasks on the basis of employee interests.

Obstacles to the Delegation Process1. Obstacles related to the supervisor2. Obstacles relate to the subordinates3. Obstacles related to the organization Elimination of Obstacles to the Delegation

Process Importance:○ To enhance employees’ confidence.○ To improve subordinate involvement and interest ○ More free time for the supervisor to accomplish

task○ As the organization gets larger, assistance from

subordinates in completing tasks the manager simply wouldn’t have time for.

What can Managers do to eliminate obstacles to the Delegation Process?○ They must continually strive to uncover any

obstacles to delegation.○ They should approach taking action to eliminate

these obstacles with the understanding that they may be deeply ingrained and therefore require much time and effort to overcome.

○ They could build subordinate confidence in the use of delegated authority, minimizing the impact of delegated authority on established working relationship, and helping delegates cope with problem whenever necessary.

Centralization and DecentralizationUsed to describe the general degree to which

delegation exists within an organization.Centralization implies that a minimal number

of job activities and a minimal amount of authority have been delegated to subordinates by management, whereas Decentralization implies the opposite.

Decentralizing an organization: a contingency viewpoint

The appropriate degree of decentralization for an organization depends on the unique situation of that organization.

Some specific questions managers can use to determine the amount of decentralization appropriate for a situation are as follows:

1. What is the present size of the organization? 2. Where are the organization’s customers

located?

3. How homogenous is the organization’s product line?

4. Where are the organizational suppliers?5. Are quick decisions need in the organization?6. Is creativity a desirable feature of the

organization?

Decentralization at Massey – Ferguson: A classic example from

the world of Management Guidelines for Decentralization:1. The competence to make decisions must be

possessed by the person to whom authority is delegated.

2. Adequate and reliable information pertinent to the decision is required by the person making the decision.

3. If a decision affects more than one unit of the enterprise, the authority to make the decision must rest with the manager accountable for the most units affected by the decision.

Delegation as a frame of mind – The company’s organization manual indicates that the delegation is not delegation in name only but a frame of mind that includes both what a supervisor says to subordinate and the way the supervisor acts toward them.

Complementing Centralization – Decentralization is complemented by centralization.

Management Responsibilities1. Responsibility for determining the overall

objective of the enterprise.2. Responsibility for formulating the policies that

guide the enterprise. 3. Final responsibility for control of the business

within the total range of the objectives and policies, including control over any changes in the nature of the business.

4. Responsibility for product design where a product decision affects more than one area of accountability.

5. Responsibility for planning for achievement of overall objective and for measuring actual performance against those plans.

6. Final approval of corporate plans or budgets.7. Decision’s pertaining to availability and

application of general company funds.8. Responsibility for capital investment plans.