UNIT -3

Meaning of Organizing

Organizing is the process of arranging and structuring work, authority, and

resources in such a way that people can work together effectively to achieve the
objectives of the organization. It involves identifying tasks, grouping them,
assigning responsibilities, and establishing relationships among employees.

Definitions

1. Henry Fayol

“To organize is to provide the business with everything useful or its

functioning; raw materials, tools, capital and personnel.”

2. Koontz & O’Donnell –

“Organizing is the process of identifying and grouping the work to be

performed, defining and delegating responsibility and authority, and establishing
relationships for the purpose of enabling people to work most effectively together
in accomplishing objectives.”

3. Louis Allen

“Organizing is the process of identifying and grouping work to be performed,

and establishing authority relationships among them for the purpose of
accomplishing objectives.”
Nature of Organizing (Nature = characteristics of organizing)

1. Goal-Oriented Process – Organizing is always done to achieve organizational

objectives efficiently.

2. Division of Work – It involves breaking down the total work into small tasks
and assigning them to individuals.

3. Coordination – Ensures different departments and employees work in

harmony.

4. Authority-Responsibility Relationship – Establishes clear lines of authority

and accountability.

5. Continuous Process – Organizing is not one-time; it adapts as the organization

grows or changes.

6. Group Activity – It involves working with people, not just planning for
individuals.

7. Flexibility – The structure must be adaptable to environmental changes and

new challenges.

Scope of Organizing (Scope = areas/coverage of organizing in management)

1. Identification of Activities – Finding out what tasks need to be done.

2. Division of Activities – Breaking tasks into manageable jobs (specialization).

3. Grouping of Activities – Clubbing similar tasks into departments or units (e.g.,

finance, marketing).

4. Assignment of Duties – Allocating specific work to individuals or teams.

5. Delegation of Authority – Giving employees the necessary authority to

perform their tasks.
6. Establishing Relationships – Defining superior–subordinate relationships to
avoid confusion.

7. Providing Resources – Ensuring manpower, materials, machines, and funds

are available.

8. Coordination and Adjustment – Making sure all activities work together

smoothly to achieve goals.

In short

➢ Nature = Features → Goal-oriented, division of work, authority-

responsibility, coordination, continuous, group activity, flexible.
➢ Scope = Steps/coverage → Identify, divide, group, assign, delegate,
establish relations, provide resources, coordinate.

Characteristics of Organizing

1. Goal-Oriented – Organizing is done to achieve specific organizational

objectives.

2. Division of Work – The total work is divided into smaller jobs for
specialization and efficiency.

3. Authority-Responsibility Relationship – Clear lines of authority and

responsibility are established.

4. Coordination – It brings together people, departments, and resources in a

unified way.

5. Continuous Process – Organizing is not one-time; it goes on as the

organization grows and changes.
6. Group Activity – It involves working with people collectively, not
individually.

7. Flexibility – The organizational structure should adapt to environmental and

technological changes.

8. Efficiency-Oriented – Proper organizing ensures optimum use of resources

(men, money, materials, machines).

9. Foundation of Management – It provides the framework for other functions

like staffing, directing, and controlling.

In short

Organizing is goal-oriented, involves division of work, authority-responsibility

relationships, coordination, group activity, continuous, flexible, and efficiency-
oriented.

Importance of Organizing

1. Facilitates Specialization

Work is divided into smaller tasks and assigned to people according to their
skills → leads to expertise and efficiency.

2. Clarifies Authority and Responsibility

Establishes a clear hierarchy of authority → avoids confusion and

duplication of work.

3. Promotes Coordination

Links different departments and activities together → ensures harmony in

efforts.
4. Optimum Use of Resources

Proper allocation of men, money, materials, and machines avoids wastage and
ensures maximum productivity.

5. Facilitates Adaptation to Change

A well-structured organization can adjust to environmental, technological, or

market changes easily.

6. Ensures Effective Communication

Clear reporting relationships and departments make communication flow

smoothly.

7. Facilitates Growth and Expansion

With a proper structure, organizations can handle increased activities, new

projects, or diversification easily.

8. Improves Efficiency and Productivity

Since tasks are clearly assigned, employees work better, faster, and with
accountability.

9. Basis for Other Functions of Management

Organizing provides the foundation for staffing, directing, and controlling →

without it, management cannot function effectively.

In short

Organizing is important because it:

(1) Promotes specialization, (2) Clarifies authority, (3) Ensures coordination, (4)
Utilizes resources effectively, (5) Helps adaptation, (6) Improves communication,
(7) Supports growth, (8) Increases efficiency, (9) Provides base for other
functions.
Formal Organization

Meaning:

It is the official and structured system created by management to achieve

organizational goals. It defines authority, responsibilities, communication
channels, and relationships.

Characteristics:

➢ Created intentionally by management.

➢ Based on rules, policies, and procedures.
➢ Defines authority–responsibility relationships (hierarchy).
➢ Communication is official and through proper channels.
➢ Goal is to achieve organizational objectives.

Advantages:

➢ Clarity of authority and responsibility.

➢ Systematic working.
➢ Stability and discipline.

Limitations:

➢ Rigid structure, less flexibility.

➢ Delays in decision-making due to hierarchy.
➢ May ignore social/psychological needs of employees.
Informal Organization

Meaning:

It is the network of personal and social relationships that naturally develops

among employees within the formal organization (friendship groups, social
groups).

Characteristics:

➢ Arises spontaneously, not created by management.

➢ Based on personal interaction, friendship, or common interests.
➢ No fixed rules or hierarchy.
➢ Communication is informal, often fast (grapevine).
➢ Goal is to satisfy social and emotional needs.

Advantages:

➢ Quick communication.
➢ Improves teamwork and job satisfaction.
➢ Provides support to formal organization.

Limitations:

➢ Can spread rumors (grapevine).

➢ May resist changes or management decisions.
➢ Conflicts with formal organization goals sometimes.
 Key Differences (Formal vs Informal Organization)

Aspect Formal Organization Informal Organization

Creation - By management By employees (naturally)
Structure - Well-defined, hierarchical Flexible, no fixed structure
Communication- Official, through channels Informal, fast (grapevine)
Objective- Achieve organizational goals Satisfy social & emotional needs
Stability - Stable, permanent Dynamic, changes often
Rules & Procedures- Based on policies No written rules

In short

➢ Formal Organization → Official, structured, rule-based, goal-oriented.

➢ Informal Organization → Social, spontaneous, flexible, people-oriented.

Organization Chart – Meaning

An Organization Chart is a diagrammatic representation of the structure of an

organization. It shows different positions, departments, authority relationships,
and communication channels in a clear and systematic way.

In short: It is a visual picture of the formal structure of an organization.

Features of an Organization Chart

1. Shows structure – Displays the hierarchy and reporting relationships.

2. Indicates authority – Who reports to whom is clearly shown.

3. Depicts departments – Shows different functions/units (finance, HR,

marketing, etc.).
4. Visual tool – Easy to understand compared to written explanations.

5. Represents formal organization only – Does not show informal relations.

Types of Organization Charts

1. Vertical Chart – Top management at the top → subordinates below in

hierarchy (common type).

2. Horizontal Chart – Positions arranged from left to right.

3. Circular Chart – Top position at the center, others in circles around it.

4. Functional Chart – Shows functions and their interrelationships.

Importance of Organization Chart

➢ Clarifies authority & responsibility.

➢ Helps in avoiding confusion.
➢ Useful for communication and coordination.
➢ Helps new employees understand structure.
➢ Acts as a control tool for management.

Meaning of Organization Structure

An Organization Structure is the framework within which the activities of an

organization are planned, coordinated, and executed. It defines how work is
divided, grouped, and assigned, and it establishes the authority–responsibility
relationships among people at different levels.
In simple words:

Organization Structure = The formal arrangement of jobs, duties, authority, and

communication in an organization.

Definitions

1. Koontz & O’Donnell

“Organization structure is the established pattern of relationships among the

components of the organization.”

2. Henry Fayol

“Organization structure is a system of authority and responsibility

relationships.”

3. Mooney & Reiley

“Organization structure is the form of every human association for the

attainment of a common purpose.”

Types of Organization Structure

1. Line Organization (Scalar / Military Structure)

➢ Meaning: Authority flows directly from top to bottom. Each person reports
to only one superior.
➢ Features: Simple, clear authority, quick decisions.
➢ Advantages: Easy to understand, strong discipline.
➢ Disadvantages: Overburden on top managers, no specialization.
2. Functional Organization

➢ Meaning: Work is divided based on functions (e.g., production, marketing,

finance). Specialists head each function.
➢ Features: Employees may receive instructions from multiple functional
heads.
➢ Advantages: Specialization, efficiency, expert supervision.
➢ Disadvantages: Confusion due to multiple bosses (violation of unity of
command).

3. Line and Staff Organization

➢ Meaning: Combines line authority (direct chain of command) with staff

specialists (advisors).
➢ Example: Production manager (line) gets advice from HR or legal expert
(staff).
➢ Advantages: Expertise + clear authority, better decisions.
➢ Disadvantages: Conflicts between line and staff, costly.

4. Committee Organization

➢ Meaning: Decisions are made by a group/committee instead of a single

manager.
➢ Advantages: Collective wisdom, democratic decisions.
➢ Disadvantages: Slow decisions, lack of accountability.

5. Divisional Organization

➢ Meaning: Organization is divided into divisions based on products,

geography, or markets. Each division has its own functions.
➢ Advantages: Focus on product/market, accountability, flexibility.
➢ Disadvantages: Expensive (duplication of resources), rivalry between
divisions.
6. Matrix Organization (Project Organization)

➢ Meaning: Combines functional structure (specialists) and project structure

(teams). Employees report to both a functional head and a project manager.
➢ Advantages: Dynamic, flexibility, efficient use of resources.
➢ Disadvantages: Dual authority → confusion, conflicts possible.

In short

➢ Line – Authority flows top to bottom.

➢ Functional – Based on functions, specialist heads.
➢ Line & Staff – Line managers + staff experts.
➢ Committee – Decisions by group/committee.
➢ Divisional – Based on product/region/market.
➢ Matrix – Combines functional & project, dual authority.

Meaning of Departmentalization

Departmentalization is the process of grouping activities and jobs into

departments or units so that work can be carried out efficiently and objectives can
be achieved.

In simple

After dividing the total work, similar activities are put together into one
department (like Finance, Marketing, HR, Production). It is an important step in
organizing, because it defines how jobs and people are grouped.
Definitions

Koontz & O’Donnell

“Departmentalization is the process of grouping activities into departments.”

Louis Allen

“Departmentalization is a means of dividing large and complex activities into

smaller and more manageable units.”

Types of Departmentalization

1. By Function

• Based on major functions of business.

• Example: Production, Marketing, Finance, HR.
• Specialization, Poor coordination between departments.

2. By Product

• Each product line has a separate department.

• Example: Hindustan Unilever → soaps, detergents, cosmetics divisions.
• Focus on product, Expensive (duplication).

3. By Territory/Geography

• Activities grouped based on regions/areas.

• Example: North Zone, South Zone, East Zone.
• Better local service, Coordination issues between regions.
4. By Customer

• Based on type of customers served.

• Example: Banks → Retail Banking, Corporate Banking, Priority Banking.
• Customer satisfaction, Duplication of resources.

5. By Process/Equipment

• Based on production process or equipment used.

• Example: Textile industry → Spinning, Weaving, Dyeing.
• Specialization in process, Coordination difficulty.

6. By Time (less common)

• Work divided by shifts (day shift, night shift).

• 24-hour production, Overlapping issues.

Importance of Departmentalization

➢ Promotes specialization.
➢ Increases efficiency.
➢ Simplifies supervision.
➢ Helps in coordination.
➢ Provides clarity in responsibilities.
➢ Facilitates growth and expansion.

In short

➢ Departmentalization = Grouping of activities into departments.

➢ Types → By Function, Product, Territory, Customer, Process, Time.
Authority

Meaning:

Authority is the legal and formal right of a manager to give orders, make
decisions, and expect obedience from subordinates.

In simple : Authority = Right to command + power to take decisions.

Features of Authority:

1. It flows from top to bottom in the hierarchy.

2. It is legitimate and official (given by the organization).

3. It helps in getting things done.

4. It is linked with responsibility.

Responsibility

Meaning:

Responsibility is the obligation of a subordinate to perform the duty assigned

to him by his superior.

In simple: Responsibility = Duty to do the work assigned.

Features of Responsibility:

1. It arises from the assignment of duty.

2. It is always downward – from superior to subordinate.

3. It cannot be delegated fully – the person assigned is accountable.

4. It is personal in nature – rests with the individual.

Relationship between Authority and Responsibility

➢ Balance is essential: Authority without responsibility → misuse;

Responsibility without authority → frustration.
➢ Authority should be equal to responsibility given.
➢ Both go hand in hand in successful management.

Key Differences

Basis Authority Responsibility

Meaning Right to command Duty to perform work
Direction Flows downward Flows upward (accountability)
Delegation Can be delegated Cannot be fully delegated
Nature Legal & official power Obligation/duty
Ends with Position Individual

In short

➢ Authority = Right to command.

➢ Responsibility = Duty to perform.
➢ Both must be balanced for effective management.

Centralization – Meaning

Centralization means concentration of decision-making authority at the top

level of management. Here, most decisions are taken by top managers, and lower
levels have little authority.

In simple: Centralization = Power with the top bosses.

Features:

➢ Top-level holds authority.

➢ Decisions flow from top to bottom.
➢ Strong control and uniformity.

Advantages:

➢ Unity of command.
➢ Better coordination.
➢ Quick implementation of top policies.
➢ Suitable for small organizations.

Disadvantages:

➢ Overburden on top managers.

➢ Delays in decision-making.
➢ Neglect of lower-level talent.
➢ Less flexibility.

Decentralization – Meaning

Decentralization means systematic delegation of decision-making authority to

lower levels of management. Here, subordinates and departments get power to
take decisions in their areas.

In simple: Decentralization = Power is shared across levels.

 Features:

➢ Authority is dispersed.
➢ Decisions made at different levels.
➢ Subordinates have independence.

Advantages:

➢ Quick decisions at local level.

➢ Motivates employees and develops leadership.
➢ Reduces burden on top management.
➢ Improves flexibility and efficiency.

Disadvantages:

➢ Lack of uniformity in decisions.

➢ Risk of misuse of authority.
➢ Requires trained and competent staff.
➢ Coordination may become difficult.

Difference between Centralization and Decentralization

Basis Centralization Decentralization

Authority concentrated at top Authority distributed at all
Meaning levels
Only by top managers by managers at various levels
Decision-making
 Strong, uniform control Shared control, more
Control flexibility
Slow decisions Faster decisions
Speed
Suitability Small org., stable environment Large org., dynamic
environment

Key Point

➢ Neither absolute centralization nor absolute decentralization exists in

practice.
➢ Every organization maintains a balance depending on:
• Size of business,
• Nature of decisions,
• Competence of employees,
• Cost and risk factors.

In short

✓ Centralization = Decision-making at top.

✓ Decentralization = Decision-making delegated to lower levels.
✓ Best practice = Maintain balance between the two.

Meaning of Span of Management

The Span of Management refers to the number of subordinates a manager can

effectively supervise.
In simple:

It is the limit on how many people report directly to one manager.

Definitions

➢ Koontz & O’Donnell – “Span of management refers to the number of

subordinates who can be managed effectively by a superior.”
➢ Graicunas – “Span of control is the number of subordinates a manager can
supervise directly.”

Types of Span of Management

1. Narrow Span

➢ Few subordinates under one manager.

➢ More levels of management (tall structure).
➢ Close supervision, Expensive and bureaucratic.

2. Wide Span

➢ Many subordinates under one manager.

➢ Fewer levels of management (flat structure).
➢ Less costly, quick communication, Overburdened manager.

Factors Affecting Span of Management

1. Ability of Manager – Efficient managers can handle more subordinates.

2. Ability of Subordinates – Skilled employees need less supervision → wider

span possible.
3. Nature of Work – Routine/simple work → wide span; Complex work →
narrow span.

4. Level of Management – Top-level (strategic) → narrow span; Lower-level

(operational) → wide span.

5. Geographical Spread – If subordinates are scattered → narrow span.

6. Use of Technology – Better communication systems → wider span possible.

7. Clarity of Plans – Clear goals & policies → manager can control more people.

Importance of Span of Management

➢ Determines the organization structure (tall or flat).

➢ Affects cost of management.
➢ Influences communication and coordination.
➢ Impacts efficiency and supervision quality.
 QUESTIONS
1. Define Organizing. Explain its meaning and definitions.

2.Write the nature of Organizing.

3.Explain the scope of Organizing.

4.Distinguish between Formal and Informal Organization.

5.Write short notes on Formal Organization.

6.What is an Organization Chart? Explain its features.

7.Explain the importance of Organization Chart.

8.Write the types of Organization Charts with examples.

9. Define Organization Structure. Explain its meaning.

10.What are the types of Organization Structure?

11.Explain the meaning of Departmentalization.

12.What are the bases of Departmentalization?

13.State the advantages and disadvantages of Departmentalization.

14.Define Authority. What are its features?

15.Define Responsibility. What are its features?

16.Explain the relationship between Authority and Responsibility.

17.Differentiate between Authority and Responsibility.

18.Write short notes on Accountability.

19.What is Centralization? Explain its merits and demerits.

20.What is Decentralization? Explain its merits and demerits.

21.Differentiate between Centralization and Decentralization.

22.Define Span of Management. Explain its meaning.

23.Distinguish between Narrow Span and Wide Span of Management.

24.State the factors affecting Span of Management.

25.Explain the importance of Span of Management.