CHAPTER 4

ORGANIZING
NATURE OF ORGANIZATION
• Organization follows planning. After planning is
in place, organizing is the next step in the
management process. Organization is a group of
people who work together, coordinate, and
collaborate their actions to achieve a broad
scope of goals.
• Basically, organization can be viewed in two ways:
1. Organization is a process and
2. Organization as a structure
ORGANIZATION AS A PROCESS
• As a process, organization is an executive function.
Therefore it becomes a managerial function which
involve the following activities:
• Accomplishment of business objectives
• Division of labor
• Departmentalization
• Delegation of duties and responsibilities
• Coordination efforts
• REMEMBER:
organization is a continuous process, and it goes
throughout the lifetime of the firm.
ORGANIZATION AS A STRUCTURE
• As a structure, the organization is a
network of internal responsibility and
authority relationships. It is a framework of
relationships among various levels of
operation to accomplish common
objectives. An organization structure is a
systematic combination of people function
and physical facilities.
TYPES OF ORGANIZATIONAL
STRUCTURE
• All managers must bear in mind that there are two
organizations that they must deal with one formal and
the other informal.
• The official structure in usually delineated by an
organizational chart and job descriptions.
• Alongside the formal organization exist are informal
organization which is a set of evolving relationship and
pattern of human interaction within an organization that
is not officially prescribed.
FORMAL ORGANIZATIONAL
STRUCTURES ARE AS FOLLOWS:
1.Line organization structure
2.Functional authority organizational
structure
3.Divisional organizational structure
4.Matrix organizational structure
LINE ORGANIZATIONAL STRUCTURE
• Has only direct vertical relationship between
different levels in the firm.
• There are only line departments directly involved
in accomplishing the primary goal of the
organization.
• Tend to simplify and clarify authority,
responsibility, and accountability.
FUNCTIONAL AUTHORITY
ORGANIZATIONAL STRUCTURE
• The line officers or managers have the direct
power to achieve the organizational goals. The
staff officers or managers have staff authority
over the line. This is known as functional
authority.
DIVISIONAL ORGANIZATIONAL
STRUCTURE
• In this type of structure, the organization
can have a different basis on which
departments are formed. They are by
function, product, geographic, territory,
project and combination approach.
MATRIX ORGANIZATIONAL
STRUCTURE
• It is a permanent organization designed to achieve
specific result by using teams of specialist from
different functional areas in the organization.
• Matrix organization decentralized decision making,
improve environmental monitoring, responses to
change and has flexibility in the use of resources.
ORGANIZATION THEORIES AND
APPLICATION
• A company’s organizational structure is a key question
for an entrepreneur and a major factor in the success of
the business. Organizational theories can help you
address business issues successfully by highlighting
specific organizational problem and how a suitable
structure can deal with them. A survey of the different
possibilities can help you make an informed choice
( smallbusiness.chron.com)
THEORY CLASSICAL STRUCTURE
• Managers in classical structures rely on
organizational structure to channel work to the
appropriate department.
CONTINGENCY ORGANIZATIONS
• Assumes that organizations adapt to their
environments in the absence of formal
structure. How well the adaption addresses
the issue confronting the business depends
on the experience and knowledge of the
managers and employees of the company.
BEHAVIORAL ORGANIZATION
THEORY
• Organizations that focus on the behavior of
individual employees can be successful in a
wide variety of business environments and an
alternative to a classical structure. These
organizations types assumes employee
complete the required work if their company
provides a suitable business environment.
DELEGATION
• A delegation of authority is a process
through which managers assigns
responsibility to the subordinates with a
degree of authority.
3 MAJOR ELEMENTS OF
DELEGATION
• Responsibility – means assigning the work
to an individual. The managers assign
particular responsibility to the subordinates
for the completion of certain task on his
behalf.
• Authority – to fulfill the duty, certain
authority is delegated to the subordinates.
Authority means the power to take
decisions independently and accomplish
the task efficiently.
• Accountability - means to check whether the
subordinates are performing their responsibilities
in an expected manner or not. Accountability
cannot be delegated which means, in the case
of non- completion of the task, the manager will
only be held responsible for it, not the
subordinates
FORMAL AND INFORMAL ORGANIZATION
• Formal organization – is formed when two or more persons
come together. They have a common goal. They are willing to
collaborate to achieve this common goal. The formal
organization has it’s rules and regulations.
• Informal organization – exist within the formal organization. An
informal organization is a network of personal and social
relationship. An informal organization does not have it’s rules
and regulations. It has not a system of co – ordination and
authority.
FORMED BY WHOM?
• A formal organization is formed by the top level
management.
• An informal organization is formed by social
forces within the formal organization.
RULES AND REGULATIONS
• Member of a formal organization have to
follow certain rules and regulations. These
rules are documented.
• Member of an informal organization does
not have follow any rules and regulations.
DUTIES AND RESPONSIBILITIES
• In a formal organization, duties, and
responsibilities, authority and accountability of
each member are well- defined.
• In an informal organization there are no fixed
duties, responsibilities, authority, accountability,
for the members.
OBJECTIVES OR GOALS
• In a formal organization, the objectives or goal are
specific and well- defined. The main objectives of a
formal organization are productivity, growth, and
expansion.
• In an informal organization, the objectives are not
specific and well – defined. The main objectives of an
informal organization are friendship, security, common
interrest, individual and group satisfaction.
STABILITY
• A formal organization is stable
• An informal organization is not
stable
ORGANIZATIONAL CHART
• A formal organization is shown he
organization chart
• An informal organization is not shown on
the organization chart
BENEFITS OF MEMBERS
• Member of the formal organization get
financial benefits like or salaries, bonuses,
allowances, health insurance, etc.
• Members of the informal organization get
personal social benefits like friends,
community group, etc.