ORGANIZING
CHAPTER 3
Learning Objectives
1. Define what organizing is..
2. Describe the concepts of responsibility and
authority
3. Contrast centralization and decentralization
4. Explain delegation
5. Cite various types of span of management
6. Distinguish between the different types of
departmentalization and power
Definition & Introduction
What is organizing?
Structure or arrange the relationship between
people, work to be done, and facilities so that
goals are achieved.
Issues:-
Determine what is to be done
Assigning tasks
Decide how to achieve coordination
Decide on a span of management
Decide how much authority you should designate
Draw an organization chart
Departmentalization Structures
There are 5 types of Departmentalization
a. By function
b. By product
c. By territory
d. By customer
e. By Matrix other design
By Function
The common, logical and basic form of
departmentalization
Use mainly by smaller firms that offer a
limited line of products
Eliminate overlapping in execution of basic
business activities
Useful in stable environments where technical
efficiency and quality are important
Advantages
1. Makes supervision easier since each
manager expert in narrow range of skill
2. Easier to mobilize specialized skills and bring
them to bear where they are required
3. Requires little coordination and fewer
interpersonal skills
Disadvantages
1. Difficult to get quick decisions or actions on
a problem
2. Difficult to determine accountability and
gauge performance in functional structure
3. Isolation for those in other department
4. Does not encourage innovation due to its
narrow perspective
5. Does not foster development of general
managers
Departmentalization by
Function
President
Vice President Vice President Vice President
Human Resource
of Production Marketing Finance
Production Planning Customer Service Financial Planning Training
Product Engineering Research
By Product
Involves group activities and functions on the
basis of products manufactured by the
company.
Here a sensible degree of specialization is
encouraged by departmentalization according
to department.
Advantages
1. It places attention and focuses effort on
product.
2. It replaces responsibility for profits at the
division level.
3. It improves coordination of functional
activities.
4. If furnishes measurable training ground for
general managers.
5. It allows growth and diversity of products
and services.
Disadvantages
1. Requires more personnel with the general
manager’s abilities to full up the division of
managerial positions.
2. Maintenance of central services becomes
difficult since each division manger wants
his own services.
3. Top management will face a difficulty in
controlling, since division managers are
fairly independent.
4. It is costly.
Departmentalization By
Product
PRESIDENT
GENERAL MANAGER GENERAL MANAGER GENERAL MANAGER
Pharmaceutical Personal Care Product Cosmetic Product
By Territory
A company or part of it organized around the
places where operations are located.
Commonly found in sales or manufacturing
operations.
Advantages
Offers better services at low cost
Responsible for profits at a lower level
It emphasis on local markets and problems
It offers better face to face communication
with local interests.
Disadvantages
Requires more staff with general abilities
Top management has less control of the since
regional managers since they are fairly
independent
Departmentalization By
Territory
President
West Region East Region Southeast Region Central Region
Departmentalization By
Customer
Grouping of activities to reflect the interests
of different customers
Advantages
1. Encourages concentration on customer’s needs
2. It gives customers the feeling that they have an
understanding supplier
Centralization and
Decentralization
1. Centralization (Concentration of Authority)
Having responsibility and authority concentrated
in one place, so that major decisions are made
by the central controlling body and little
initiative is in the hands of those lower down the
management ladder.
Leads to the situation where all management
decisions have to be approved by the chief
executive before they can be put into the
operation.
Line and staff officers can be inhibited from
embarking on non-routine courses of actions
without prior approval from the top.
2. Decentralization (Dispersion of Authority)
The degree to which lower level employees
provide input or actually make decisions
Occurs when responsibility for various functions
and operations are taken away from the center
and rests at the point where operations occur
Needs the services of high caliber managers
who are able to anticipate and provide for local
needs
Advantages of Centralization
i. It provides absolute control over the
organization and ensures adherence to laid
down policies
ii. It is administratively convenient and the
focal point for each function is readily
discernible (perceive)
iii. It is possible to have common standards
throughout the organizations e.g salary and
wage scales can be standardized policies,
customer relations etc.
Disadvantages of Centralization
The control can become autocratic and inflexible
It can lead to frustration where member staff, particularly
the manager and supervisors are unable to use their
discretion but are forced to operate according to inflexible
rules
Bureaucratic control methods may be imported, resulting
in proliferation (to increase) of forms and rigid procedures
slowing down the operations of the organizations
Managers may see themselves not as independent decision
makers but rather as order taking subordinates. This
become particularly frustrating when they feel that those
giving the orders are not sufficiently aware of what is
needed at operating level
CENTRALIZATION
PRESIDENT
VP PRODUCTION VP SALES VP FINANCE
ADVERTISING SALES PERSONNEL PROMOTION MARKET
MGR MGR MGR RESEARCH MGR
MANAGER MANAGER MANAGER
DISTRICT A DISTRICT B DISTRICT C
DECENTRALIZATION
1. Advantages
i. It provides flexibility to meet changing needs at
the local level because that is where control
resides
ii. It is rewarding to manager and staff because it
enables them to exercise their own judgments
and initiative. So it promotes job satisfaction.
iii. Administrative paperwork may be reduced to a
minimum at operating level though more
reporting to central control may be necessary
2. Disadvantages
i. Central control is difficult because each
section may not be following the same
patter of procedures
ii. In consequences more reporting and
inspection may be needed than if the
control were centralized.
