Fundamentals of

Organizing
DR. SHOBITHA POULOSE
ASSISTANT PROFESSOR

DEPARTMENT OF MANAGEMENT STUDIES

NATIONAL INSTITUTE OF TECHNOLOGY TIRUCHIRAPPALLI
LEARNING OUTCOMES

1 2 3 4
Describe six key Define What Compare and Discuss the design
elements in factors affect contrast traditional Challenges faced
organizational organizational and contemporary by today’s
Structure. structure? organizational organizations
designs.
Organizing as a Management
Function

 Organizing as a management function

 Organizing
 Arranges people and resources to work together to accomplish a goal
 Organization structure
 The formal arrangement of jobs within an organization
Organizing viewed in relationship
with the other management
functions
 Purposes of Organizing

• Divides work to be done into specific jobs and departments

• Assigns tasks and responsibilities associated with individual jobs
• Coordinates diverse organizational tasks
• Clusters jobs into units
• Establishes relationships among individuals, groups, and
departments
• Establishes formal lines of authority
• Allocates and deploys organizational resources
Organizing as a Management Function

 Formal Structures
An organization chart is a diagram describing reporting
relationships and the formal arrangement of work positions
within an organization. It includes:

The division of Supervisory Communication Levels of

Major subunits
work relationships channels management
 Organizing as a Management Function

 Informal Structures
 The set of unofficial relationships between
organization members
 Social network analysis
 Identifiesinformal structures and social
relationships in the organization
What is organizing as a management
function?

 Informal structures 
 Potential advantages of informal structures:
 Helping people accomplish their work
 Overcoming limits of formal structure
 Gaining access to interpersonal networks
 Informal learning
Organizing as a Management Function

Potential disadvantages of informal structures:

May work Diversion of

against best May carry May breed work efforts Feeling of
Susceptibility
interests of inaccurate resistance to from alienation
to rumor
entire information change important by outsiders
organization objectives
Organizational
Structure
Factors Affecting Organizational Structure
  Formal system of task and reporting relationships
that coordinates and motivates organizational
members so that they work together to achieve
organizational goals

Defining  Designing organization structure involves decisions

about six key elements:
Organizational 1. Work specialization
Structure 2. Departmentalization
3. Chain of command
4. Span of control
5. Centralization and decentralization
6. Formalization
Work Specialization  The degree to which tasks in
the organization are divided
into separate jobs
 Overspecialization can result
in human diseconomies from
boredom, fatigue, stress,
poor quality, increased
absenteeism, and higher
turnover
Work Specialization

• Makes efficient use of employee skills

• Increases employee skills through repetition
• Less between-job downtime increases productivity
• Specialized training is more efficient
• Allows use of specialized equipment
 Departmentalization

 This allows each department to focus on a specific task the professionals

in each group work together to achieve.
 Departments refer to groups of professionals of a similar skill set within a
company.
  Functional
Grouping jobs by functions performed
 Product
Grouping jobs by product line
Departmentalizat  Geographical
ion by Type Grouping jobs based on territory or
geography
 Customer
Grouping jobs by type of customer and
needs
  The continuous line of authority that extends
from upper levels of an organization to the
lowest levels of the organization and clarifies
who reports to whom.

Chain of  defined an order which authority and power in

an organization is used and delegated from top
Command management to the lower management.

 It also ensures clear assignment of duties and

responsibilities of every employee at every level.
Organizational Structure (cont’d)
Span of Control
 The number of employees who can be effectively and efficiently supervised by a manager
 Width of span is affected by:
 Skills and abilities of the manager and the employees
 Characteristics of the work being done
 Similarity of tasks
 Complexity of tasks
 Physical proximity of subordinates
 Standardization of tasks
 Sophistication of the organization’s information system
 Strength of the organization’s culture
 Preferred style of the manager
Contrasting Spans of Control
Members at Each Level

(Highest) Assuming Span of 4 Assuming Span of 8

1 1 1
Organizational Level

2 4 8
3 16 64
4 64 512
5 256 4096
6 1024
7 4096

(Lowest)
Span of 4: Span of 8:
Employees: = 4096 Employees: = 4096
Managers (level 1–6) = 1365 Managers (level 1–4) = 585
Organizational Structure (cont’d)
Centralization
 The degree to which decision making is concentrated at a single point in
the organization
 Organizationsin which top managers make all the decisions and lower-
level employees simply carry out those orders
Decentralization
 The degree to which lower-level employees provide input or actually make
decisions
 Employee Empowerment
 Increasing the decision-making discretion of employees
 Factors that Influence the Amount of
Centralization
 More Centralization
 Environment is stable
 Lower-level managers are not as capable or experienced at making
decisions as upper-level managers
 Lower-level managers do not want to have a say in decisions
 Decisions are significant
 Organization is facing a crisis or the risk of company failure
 Company is large
 Effective implementation of company strategies depends on
managers retaining say over what happens
Factors that Influence the Amount of
Decentralization
 More Decentralization
 Environment is complex, uncertain
 Lower-level managers are capable and experienced at making
decisions
 Lower-level managers want a voice in decisions
 Decisions are relatively minor
 Corporate culture is open to allowing managers to have a say in
what happens
 Company is geographically dispersed
 Effective implementation of company strategies depends on
managers having involvement and flexibility to make decisions
Organizational Structure (cont’d)

 Formalization
 The degree to which jobs within the organization are standardized and
the extent to which employee behaviour is guided by rules and
procedures.
Common Organization Designs
Simple Structure
A structure characterized by a low degree of departmentalization,
wide spans of control, authority centralized in a single person, and
little formalization
Common Organization Designs (cont’d)

Bureaucracy
A structure of highly operating routine tasks achieved
through specialization, very formalized rules and
regulations, tasks that are grouped into functional
departments, centralized authority, narrow spans of
control, and decision making that follows the chain of
command
 Functional Structure
– An organizational structure composed of all the departments that
an organization requires to produce its goods or services.
– Advantages
• Encourages learning from others doing similar jobs.
• Easy for managers to monitor and evaluate workers.
– Disadvantages
• Difficult for departments to communicate with others.
• Preoccupation with own department and losing sight of
organizational goals.
 Functional Structure

CEO

Human Finance &

Engineering Production Marketing
Resources Accounting
 Divisional Structures

– An organizational structure composed of separate business units

within which are the functions that work together to produce a
specific product for a specific customer.
• Divisions create smaller, manageable parts of a firm.
• Divisions develop a business-level strategy to compete.
• Divisions have marketing, finance, and other functions.
• Functional managers report to divisional managers who then
report to corporate upper management.
 Types of Divisional Structures
Product Structure
– Customers are served by self-contained divisions that handle a
specific type of product or service.
• Allows functional managers to specialize in one product area.
• Division managers become experts in their area.
• Removes need for direct supervision of division by corporate
managers.
• Divisional management improves the use of resources.
 Product Structure
+ Allows specialization in
particular products and
services
+ Managers can become
experts in their industry

+ Closer to customers

– Duplication of functions

– Limited view of
organizational goals
 Types of Divisional Structures (cont’d)
• Geographic Structure
– Each regional or a country or area with customers with differing
needs is served by a local self-contained division producing
products that best meet those needs.
– Global geographic structure
• Different divisions serve each world region when managers find
different problems or demands across the globe.
• Generally, this structure is adopted when managers are pursuing a
multi-domestic strategy.
Geographic Structure
 Types of Divisional Structures (cont’d)

• Market (Customer) Structure

– Each kind of customer is served by a self-contained division
– Global market (customer) structure
• Customers in different regions buy similar products so firms can
locate manufacturing facilities and product distribution networks
where they decide is best.
• Firms pursuing a global strategy will use this type of structure.
Market Structures
 Matrix Design Structure

• Matrix Structure
– An organizational structure that simultaneously groups
people and resources by function and product.
• Results in a complex network of superior-subordinate reporting
relationships.
• The structure is very flexible and can respond rapidly to the need
for change.
• Each employee has two bosses (functional manager and product
manager) and possibly cannot satisfy both.
Matrix Structure
Product Team Design Structure

 Product Team Structure

 Does away with dual reporting relationships and two-boss managers
 Functional employees are permanently assigned to a cross-functional team
that is empowered to bring a new or redesigned product to work
Product Team Design Structure

 Product Team Structure

 Cross-functional team is composed of a group of managers from
different departments working together to perform organizational tasks.
Product Team Structure
 Tall and Flat Organizations

• Tall structures have many levels of authority and

narrow spans of control.
– As hierarchy levels increase, communication gets
difficult, creating delays in the time being taken to
implement decisions.
– Communications can also become garbled as it is
repeated through the firm.
• Flat structures have fewer levels and wide spans of
control.
– Structure results in quick communications but can lead
to overworked managers.
Flat Organizations
Tall Organizations