Chapter Four: The Organizing Function PDF

CHAPTER FOUR THE ORGANIZING FUNCTION 4.1. Concept of Organizing and Organization Organizing is the process of establishing orderly uses for all resources in the organization so as to help attain organizational objectives. Establishes relationship between activity and auth...

CHAPTER FOUR THE ORGANIZING FUNCTION 4.1. Concept of Organizing and Organization Organizing is the process of establishing orderly uses for all resources in the organization so as to help attain organizational objectives. Establishes relationship between activity and authority. Identification, classification and grouping of tasks that are necessary to achieve objectives and assigning of work to individuals and designing hierarchy of decision making relationship.  The Organizing Process 1. Identification of objectives 2. Identification of the specific activities needed to accomplish objectives 3. Grouping of activities necessary to attain objectives (Departmentalization) 4. Assigning group of activities (work) and delegate the appropriate authority 5. Provision for coordination/Design a hierarchy of relationships Importance of Organizing Promotes collaboration and negotiation among individuals Clear authority and responsibility for each individuals Improves the directing and controlling functions Develops maximum use of time, human, and material resources Enables the organization to maintain its activities coordinated so that the efforts of managers and employees can be well integrated Formal and Informal Organization 1. Formal organization An organization that is deliberately and rationally designed and approved by management through organizing process to achieve organizational goals/ objectives. Consciously designed Based on delegated authority Organizational structure is drawn Deliberately impersonal  CONT’D 2. Informal organization People in-group associations, but these associations are not specified in the structure of the formal organization. Characteristics of informal organization o Group norms o Group cohesiveness o Group leadership o Communication network (grapevine)  CONT’D o Lifespan and purpose (short) o Existence of a number of informal organizations in a formal organization o Informal organizations gradually can develop into formal organization Reasons for the formation of informal organization  Mutual benefit  Friendship  The need to fulfill social needs  Physical work condition  Administrative practice  CONT’D Advantages of informal organizations o Additional assets for the formal organization o Useful channels of communication o Provide satisfaction and stability in the organization o Alerts managers to plan and act accordingly than otherwise. o Inform managers sensitive issues that would be embarrassing if formally released  CONT’D Disadvantages of informal group Resistance to change Role conflict Rumor Conformity (have hidden agenda)  Organizational Structure Structural framework for carrying out the functions of planning, decision-making, controlling, communication, motivation, etc. The formal pattern of interactions and coordination designed by a manager to link the tasks of individuals and groups in achieving organizational goals. The formal structure of an organization is of two- dimensional: The horizontal dimension and vertical dimension.  CONT’D The organization structure can tell us: o Who reports to whom (chain of command) o The number of managerial levels o the span of control o Channel of official communication o How the organization is structured-by function, territory, customer o The work being done in each job o Type of authority relationships- line authority, staff authority, and functional authority  Major Elements of the Organizing Function 1.Division of Labor The degree to which the grand task of the organization is broken down and divided into smaller component parts In short, division of labor involves:- o Breaking down a task into its most basic elements o Training workers in performing specific duties o Sequencing activities so that one person's efforts build on another's  CONT’D Advantages of Division of Labor o Enables a person performing a task to become highly proficient o Decreased transfer time o Less wastage of materials in the learning process o Ease of supervision o Training is more easier with specialization and takes shorter period  CONT’D Disadvantages of Division of Labor o Boredom and fatigue caused by monotonous, repetitive tasks o Having limited knowledge o Creates communication barriers (own language ) o Think more in terms of their department or function instead of the company. o Different specialties often formulate rules, policies, and procedures create conflict  2. Departmentalization Divide overall operations into sub- activities and then combine these sub- activities into working groups. The process of grouping specialized activities in a logical manner To effectively oversee and coordinate activities beyond a given limit partly justify the need for departmentation.  Bases for Departmentation The most common bases are function, territory, product, customer, and  CONT’D I. Departmentation by Function Grouping together of activities in accordance with the functions of an enterprise On the basis of similarity of expertise, skills or work activities. Jobs that call for certain skills or the use of similar working methods will be put together. The most common base for departmentation E.g. Human resources, production, marketing, finance, etc.  Tip for you In functional departmentalization, an organization is organized into departments based upon the respective functions each performs for the organization. For example, a manufacturing company may create a production department, sales and marketing department, an accounting department, and a human resources department. Dep.by function  CONT’D Advantages of Departmentation by Function o Maintains power and prestige of major functions o Follows principle of occupational specialization o It simplifies training o Provides unity of command for closely related activities o Managers have an easier time coordinating and planning (similar in content) o Promotes specialization and operational efficiency.  CONT’D Disadvantages of Departmentation by Function o De-emphasis of overall company objectives o Over specializes and narrow viewpoints of key personnel o Reduce coordination and communication between (among) functions. o Decisions are concentrated at the top management, creating delay. o Limits development of general managers.  CONT’D II. Departmentation by Territory/ Geography Geographical departmentalization is an arrangement of departments according to geographic area or territory. It divides works well for international business. Geographical Departmentalization is beneficial when Organization are spread over a wide area. Even each part or areas have different requirement or interests. Groups activities on the basis of geographic region It is attractive to large-scale firms or other enterprises whose activities are physically or geographically dispersed.  Con’t Advantages of Departmentation by Territory o Places emphasis on local markets and problems o Encourages local participation in decision- making o Improves coordination of activities in a region o Takes advantage of economies of local operations o Encourages decentralized decision-making  CONT’D Disadvantages of departmentation by territory  Requires more persons with general manager abilities  Duplicates staffs, services, or effort  require services such as personnel or purchasing at the regional level  Increases problem of top management control  III. Departmentation by Product (Line) Grouping and arrangement of activities around products or product groups. when attention, energy and efforts need to be focused on an organization’s particular products. Well for an enterprise which engaged in very different types of products. Ex. Electronics - Radios, TVs, Computers  CONT’D Advantages of departmentation by product o Places attention and effort on product line o Facilitates use of specialized skill, capital facilities and knowledge o Permits growth and diversity of products and services o Places responsibility for profits at the division level o Furnishes measurable training ground for general managers  CONT’D Disadvantages of Departmentation by product  Requires more persons with general manager abilities  Duplication of business functions within each product line.  Presents increased problem of top management control  Con’t IV. Departmentation by Customer Customer departmentalization - Grouping activities on the basis of common customers or types of customers. Jobs may be grouped according to the type of customer served by the organization. The assumption is that customers in each department have a common set of problems and needs that can best be met by specialists. It is a grouping of activities around customers. Customers are the key to the way activities are grouped Ex. hospitals - emergency services, inpatient services, x-rays  Advantages of Departmentation by customer o Encourages concentration on customer needs o Gives customers the feeling that they have an understanding supplier o Develops expertness in customer area Disadvantages of Departmentation by customer o Difficult to coordinate operation between competing customer demands o Requires managers and experts in customers’ problems  V. Departmentation by Process Manufacturing firms often group activities around a process or type of equipment. When special skill is needed to operate different machines. Advantages of departmentation by Process o Achieves economic advantage o Uses specialized technology o Simplifies training Departmentation by Process Disadvantages of Departmentation by Process o Coordination of departments is difficult o Responsibility for profit is at the top o Is unsuitable for developing general mangers VI. Departmentation on Combined Base It is a base in which multiple bases are used at different organizational levels of a particular organization.  4.5. Span of Management The number of subordinates who report directly to a manger, or the number of subordinates supervised by a manager. i. Narrow Span of Management Superior controls few numbers of subordinates or few subordinates report to a superior. Tall organization structure &More communication between superiors Managers are underutilized and their subordinates are over controlled. Companies with Narrow Span of Control  CONT’D Advantages Close supervision and control Fast communication between subordinates and superiors. Easy to coordinate and control activities. Disadvantages Superiors tend to get too involved in the subordinates work The problem of setting more trained managerial personnel Excessive distance between lowest level and top level management High costs due to many levels  CONT’D ii. Wide Span of Management Many subordinates report to a superior or a superior supervises many subordinates. Flat organization structure and many number of subordinates and decentralized authority. Managers are overstrained and their subordinates receive too little guidance and control Fewer hierarchal level Companies with Wide Span of Control  CONT’D Advantages Superiors are forced to delegate It initiates the development of clear polices Disadvantages Tendency of overloaded superiors to become decision bottle necks Danger of superior’s loss of control Require exceptional quality of mangers Factors Determining an Effective Span of Management Ability of the manger Manager’s personality The abilities of subordinates Motivation and commitment Need for autonomy Type of work Geographic dispersion of subordinates The availability of information and control systems Levels of management  4.6. Authority Relations in Organization There are three types of authority I. Line authority (relationship between superior and subordinate) line departments include production, marketing, and finance. II. Staff Authority (advisory in nature) Personnel, research and development, legal, plant maintenance as staff department Staff authority is the provision of advice and other services to line managers. People in these staff positions are empowered to assist the line functions (such as production and sales), but do not have any authority over them In an organization, the line authority flows from top to bottom and the staff authority is exercised by the specialists over the line managers who advise them on important matters III. Functional authority: Delegated to an individual or a department to control specified process, practices, or provinces undertaken by persons in other departments. Functional Authority is a management term which is. the right that is delegated to an individual or a. department to control specific processes, practices, policies or other matters about activities undertaken by. persons in other departments. Allocating resources within a department: Functional authority may be granted to a manager in charge of allocating resources within a department. This could include decisions about which positions and projects to fund, and what type of equipment and supplies to purchase.  CONT’D Benefits of Staff Staff managers provide advice for line managers These specialists may be allowed to the time to think, to gather data, and analyze, when their superiors, busy managing operations, cannot do so. As problems become more complex, staff analysis and advice becomes an urgent necessity. Power Power is the ability to affect the behavior of others or power is the ability to exert influence on others, or the ability to do something. There are different sources of power o Legitimate power o Reward power (give /withhold rewards) o Coercive Power (psychological, emotional or physical threat) o Reference power (identification, imitation or charisma ) o Expert power  4.7. Delegation, centralization and decentralization Authority is the right to commit resources, or the legal right to give orders. It is the right to make decisions, carry out actions, and direct others in matters related to the duties and goals of a position It is the formal right of a superior to command and compel his subordinates to perform a certain act.  CONT’D Delegation of Authority is the downward pushing of authority from superiors to subordinates to make decision within their area of responsibilities. Allocating tasks to subordinates, giving them adequate authority to carry out those assignments, and making them obligated to complete the tasks satisfactory. Delegated authority can always be regained (recovery of delegated authority).  CONT’D The Process of Delegation Assignment of tasks Delegation of authority Acceptance of responsibility Creation of accountability  CONT’D Importance of Delegation It relieves the manager from his/her heavy workload It leads to better decisions It speedup decision-making It helps subordinates to train and builds moral It encourages the development of professional managers It helps to create the organization structure  CONT’D Centralization and Decentralization 1. Centralization - is the extent to which power and authority are systematically retained by top managers. Decision-making power remains at the top. The participation of lower-level managers in decision- making is very low. 2. Decentralization- is the extent to which power and authority are systematically dispersed / delegated throughout the organization to middle and lower level managers.  CONT’D When decentralization is greater: The greater is the number of decisions made at lower level The more functions are affected by decisions made at lower levels The less a subordinate has to refer to his/her manager prior to a decision. Factors Determining Delegation The history and culture of the organization The nature of the decision  CONT’D Availability and ability of managers (Lower level managers) Management philosophy Size and character of the organization Geographic dispersion of operations Environmental uncertainty  CONT’D Problems in Effective Delegation 1. Problems from Managers Fear of loss of power “I can do it better myself” fallacy Lack of confidence in subordinates Fear of being exposed Difficulty in briefing  CONT’D 2. Problems from subordinates Fear of failure and criticism Subordinate may believe that the delegation increases the risk of making mistakes but doesn’t provide adequate rewards. Lack of adequate information and resources If subordinates are already overworked Lack of self-confidence Thinking that decision-making is the boss’s job  Conflict between Staff and Line Managers Reasons for conflict between line and staff managers: o Demographic factor (mangers are younger, well educated, want more money, power and prestige.) o Threats to Authority o Dependence on knowledge o Staff managers may exceed their authority o line managers may not acknowledge the role of staff managers  CONT’D Some ways of resolving the conflict between Staff and Line Understanding authority relationships Making line listen to staff Keeping staff informed Requiring completed staff work Clear areas of responsibility and accountability for results  y s a d nly l ur O ’ l o : ou f y ce y o oi w s h e c h. o ut a e m in ith cid he ! ! m w e t U e d e n en d O h T m ca p Y o s K c u A N y o H T