Principles of Management &
Organisational Behaviour
Module : Organizing
Organizing
• The word ‘organise’ means placement of ideas, objects
or people in a correct order so that they are easily
available whenever required.
• In management, it represents all those activities that
result in the formal assignment of tasks, authority &
responsibility to groups and individuals.
Organizing
• It involves:
• Classification of work
• Designing of different work units
• Assigning different tasks.
• Establishing co-ordination and relationship amongst the
different units and positions.
Organizing Process
• Step I: Review of Strategic and Operational Plans
• Step II: Determination of the activities to be performed
to implement the Plans
• Step III: Creation of a job
• Step IV: Departmentation
• Step V: Organization Structure
• Step VI: Determination of Authority
Organization
• Organization involves two or more people with ideas and
resources, working together in a structured, formal environment to
achieve common goals.
• It is a social and managerial system with a clearly defined
boundary, which pursues collective goals through planning, hiring
the human resources, directing their effort and controlling the
performance.
Basic Organizational Designs:
• Functional Organization
• Divisional Organization
• Matrix Organization
• Strategic business Unit. (SBU)
• Virtual Organization
Functional Organization
• This structure is based on
occupational specialisation.
• Finance, manufacturing,
marketing, accounts,
research etc.
• It leads to efficiency and
economy.
Divisional Organization
In this design, the
corporate house or
group is divided into
different divisions.
These divisions are
relatively autonomous.
Divisional Organization
• These operate as self contained business units.
• Various divisions can be totally unrelated but work
under the single corporate umbrella.
• The central headquarter focuses on all the
divisions.
Matrix Organization
• This structure
utilises both the
functional and
divisional chains
of command
simultaneously in
the same part of
the organisation.
Matrix Organisation
This structure assigns specialists from different functional units
to work together on a project as a cross functional team.
The team is led by a project manager.
Project managers have the authority over activities geared
towards achieving organisational goals while functional
managers have authority over tasks related to their
department.
Strategic business Unit. (SBU)
• SBUs are distinct business units within a large company.
• They are treated as separate business as they have
adequate size and mission.
• A manager is appointed to head an SBU and made fully
accountable for its profitability and operations.
• The main advantage here is that SBUs can be provided
with specific focus and their heads can manage them
with entrepreneurial zeal.
Virtual Organization
• This comprises of a
group of independent
people or organisations
that come together to
execute a project and
then disperse.
• This is made possible by
telecommuting and
customer organisation
linkages.
Virtual Organisation
• Virtual organisations appear for the execution of tasks
and disband after the successful execution of the
task.
• The only disadvantage is that the focus is specific on
the task and there is little sense of belongingness and
ownership.
Line Authority
• Line authority represents superior-subordinate
relationships for functions, which are directly
responsible for accomplishing the key objectives
of the enterprise.
• The line identifies those positions that possess
command and authority to make decisions.
Staff Relationship
• Staff identifies those positions in an organisation that do
not command a decision making authority.
• These are support positions providing services, advice,
assistance and support to the line authority to enable
them to perform their duties.
• It is for the line managers to decide whether to take some
decision with respect to the given advice.
Line & Staff Relationship
Departmentation
• A department is a distinct area or a branch of the organisation
which handles tasks of similar nature.
• The process of grouping of activities into units for the purpose of
administration is called departmentation.
Types/Basis of Departmentation
Departmentation by Function
Departmentation by Product
Departmentation by Geographical Regions
Departmentation by Customer Group
Matrix Organization
Strategic Business Units
Virtual Organization
The Boundary less Organization
1. Departmentation by Function
• In this type, similar occupational specialties are
grouped together under functional system units of
finance, manufacturing, marketing, accounts,
research etc.
Departmentation by Function
Advantages
1. Logical reflection of functions
2. Maintains power and prestige of major functions
3. Follows principle of occupational specialization
4. Simplifies training
5. Furnishes means of tight control at top
Disadvantages
1. De-emphasizes overall company objectives
2. Overspecializes and narrows view points of key personnel
3. Reduces coordination between functions
4. Responsibility for profits is at the top only
5. Slow adaptation to changes in the environment
6. Limits development of general managers
2. Departmentation by Product
• This form assembles different activities of an organisation in
accordance with different product types that it manufactures.
• This form of departmentation enables organisations to focus on
different products simultaneously which sell a large number of
products simultaneously.
• Eg: Cosmetics, Clothing etc
Departmentation by Product
Advantages
1. Places attention and effort on product line
2. Facilitates use of specialized capital, facilities, skills and knowledge
3. Permits growth and diversity of products and services, Improves coordination and functional activities
4. Places responsibility for profits at the division level
5. Furnishes measurable training ground for general managers
Disadvantages
1. Requires more persons with general manager abilities
2. Tends to make maintenance of economical central services difficult
3. Presents increased problems of top management control
3. Departmentation by Geographical Regions
• In this form, different jobs are grouped on the basis
of territory.
• South Asia, Europe, North America etc.
Departmentation by Geographical Regions
Advantages
1. Places responsibility at lower level
2. Places emphasis on local markets and problems
3. Improves coordination in a region
4. Takes advantage of economies of local operations
5. Better face-to-face communication with local interests
6. Furnishes measurable training ground for general managers
Disadvantages
1. Requires more persons with general manager abilities
2. Tends to make maintenance of economical central services difficult and may require services such as personnel or
purchasing at the regional level
3. Makes control more difficult for top management
4. Deparmentation by Process
• Activities are grouped on the basis of different
steps involved in the process of manufacturing.
• Eg. Bottling, capping, labeling, filling etc.
5. Departmentation by Customer Group
• Some organisations serve different market segments by offering
different types of products.
• These markets or customers can be served effectively with different
channels.
• This forms of departmentation groups jobs on the basis of a
common set of needs or problems of specific customers
Departmentation by Customer Group
Advantages
1. Encourages focus on customer needs
2. Gives customers the feeling that they have an understanding supplier
3. Develops expertise in customer area
Disadvantages
1. May be difficult to coordinate operations between competing customer demands
2. Requires managers and staff expert in customer’s problems
3. Customer group may not be clearly defined
6.Matrix Organization
Advantages
1. Oriented towards end results
2. Professional identification is maintained
3. Pinpoints product-profit responsibility
Disadvantages
1. Conflict in organization authority exists
2. Possibility of disunity of command
3. Requires manager effective in human relations
7. Strategic Business Unit (SBU)
• SBUs are distinct business units within a large company.
• They are treated as separate business as they have adequate size and mission.
• A manager is appointed to head an SBU and made fully accountable for its profitability
and operations.
• The main advantage here is that SBUs can be provided with specific focus and their
heads can manage them with entrepreneurial zeal.
8.Virtual Organization
• This comprises of a group of independent people or organisations that come
together to execute a project and then disperse.
• This is made possible by telecommuting and customer organisation linkages.
The Boundary less Organization
• It has been mentioned by former CEO of General Electric.
• Open,, anti-parochial environment, friendly towards seeking and sharing new
ideas, regardless of their origin.
• Remove barriers between departments
• Integration model
Merits of Line and Staff Organization
• Relief to line of executives- The line executive can concentrate on
the execution of plans and they get relieved of dividing their
attention to many areas.
• Expert advice- The line and staff organization facilitates expert
advice to the line executive at the time of need.
• Benefit of Specialization- Every officer or official can concentrate in
its own area.
• Better co-ordination- Helps in bringing co-ordination in work as every
official is concentrating in their own area.
• Benefits of Research and Development- This is possible due to the
presence of staff specialists.
• Training- Due to the presence of staff specialists and their expert
advice serves as ground for training to line officials.
• Balanced decisions- This relationship automatically ends up the line
official to take better and balanced decision.
• Unity of action- Unity of action is a result of unified control. serves as
effective control in the whole enterprise.
Demerits of Line and Staff Organization
• Lack of understanding- In a line and staff organization, there are two
authorities flowing at one time. This results in the confusion between
the two
• Lack of sound advice- At times the staff specialist may give wrong
decisions which the line executive has to consider. This can affect the
efficient running of the enterprise.
• Line and staff conflicts- This leads to minimizing of co-ordination
which hampers a concern’s working.
• Costly- In line and staff concern, the concerns have to maintain the
high remuneration of staff specialist.
• Assumption of authority- The power of concern is with the line official
but the staff dislikes it as they are the one more in mental work.
• Staff steals the show- In a line and staff concern, the higher returns
are considered to be a product of staff advice and counseling
