ORGANIZING 03

Edmundo B. Casaul, Jr.

College of Economics and Management

Central Bicol State University of Agriculture
Organizing
- is the function of management which follows
planning
- it is a function in which the synchronization and
combination of human, physical and financial
resources takes place. All the three resources are
important to get results.
- according to Chester Barnard, “Organizing is a
function by which the concern is able to define the
role positions, the jobs related and the coordination
between authority and responsibility. Hence, a
manager always has to organize in order to get
results.
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Organizing

Definition:
- the process of identifying activities needed to
accomplish a goal, subdividing and grouping these
activities into meaningful units, and assigning
authority and responsibility to people for their
accomplishment

- “dividing work and coordinating divided work”

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Organizing

- the subdividing and grouping of the activities gives

rise to a formal organization structures - reflected
through an organizational charts

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Advantages of an Organization with a well
defined Organizational Structure:

1) efficiency gains from specialization

2) order arising from the clarity of job definitions
3) reduction of unintended gaps or overlaps in the
conduct of the activities of the organization

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Steps in Organizing:

1) Identification of activities - all the activities which

have to be performed by concerned department
need to be identified first
2) Classifying the authority - once the activities and
departments were identified, power and authority
be given to the managers.
3) Coordination between authority and
responsibility - relationships are established
among various groups to enable smooth interaction
toward the achievement of the organizational goal

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The Dimensions of Organizational Structure

1) the bases for grouping activities together

2) the type of authority relationships among
organizational units
3) the coordination mechanism used

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Grouping Activities in an Organization

A) Grouping by Function
- the most common
- hopes to gain efficiencies through specialization
- to facilitate coordination of similar or related
activities
- e.g. grouping activities: marketing, production,
finance, personnel, admin

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Organizing by Function

President/ General
Manager

VP VP VP VP VP
Marketing Production Finance External Affairs Research

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Grouping Activities in an Organization

B) Grouping by Product
- common in large business organizations
- production and coordination efficiency are
sought by grouping together all the activities
needed to produce specific products
- facilitates the treatment by top management of
these divisions as “profit centers”

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Grouping Activities in an Organization

B) Grouping by Product
- managers are evaluated based on the
reported profit performance of each
division
- e.g. San Miguel Corporation: beer division;
Magnolia, packaging, feeds & agri, coconut
milling, etc
:United Laboratories: pharmaceutical,
feeds, veterinary, game fowl, real estate

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Organizing by Product

General Manager

Pharmaceutical Agri Game fowl Veterinary

Division Division Division Division

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Grouping Activities in an Organization

C) Grouping by Area or Territory

- when the geographic scope of the business
operation becomes large
- when the diff areas in which the business
operates become very differentiated in
terms of requirements
- common among multinational companies and
government offices

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Organizing by Area/ Territory

General Manager

Luzon Area NCR Area Visayas Area Mindanao Area

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Grouping Activities in an Organization

D) Grouping by Client
- this method is important when the business
serves well defined clients groups with diff
characteristics and requirements in terms of
products or services or both

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Organizing by Client

Store Manager

Children’s
Men’s Dept Ladies Dept Adult Dept
Dept

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Grouping Activities in an Organization

E) Grouping through a combination of the various

criteria
- according to product lines, grouping by
function, grouped by client and grouping by areas

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Organizing through a Combination of Various
Criteria
President

Product A Product B Product C Product D

Marketing Finance Production

Industrial Sales Consumer Sales Luzon Plant Vis-Min Plant

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Grouping Activities in an Organization

F) Other Criteria in Grouping Activities

1) Numbers – e.g in military – battalion, companies,
platoons, squads
2) Time – in the production dept: day shift, night shift,
afternoon shift

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• Project management structure that links employees
from different parts of the organization to work
together on specific projects.
• Employees report to a line manager and a project
manager.
Advantages: Challenges:
 Flexibility in adapting to  Integrating skills of many
changes. specialists into a coordinated
team.
 Focus on major problems or
products.  Employee frustration and
confusion over reporting to two
 Outlet for empoyees’ creativity
bosses.
and initiative.
Formal Relationship in an Organization

a) Line Relationship
- exist when two organizational units are related to
each other by a relationship of direct command
- line authority – is the power of command that is
exercised by a person over his direct subordinates in
the formal structure
- authority includes – power to supervise, direct and
evaluate the work of his subordinates and even the
power to hire and fire

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Line Authority Relationship

President

VP for
Production

Assembly
Supervisor

Factory Worker

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Features of Line Relationship
1) It is the simplest form
2) Line of authority flows from top to bottom.
3) Specialized and supportive services do not take
place
4) Unified control by the line officers can be
maintained since they can independently take
decisions in their areas and spheres.
5) This kind of relationship always helps in bringing
efficiency in communication and bringing stability
to a concern.

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Merits of Line Relationship

1) Simplest- It is the most simple and oldest method of

administration.
2) Unity of Command- superior-subordinate
relationship is maintained and scalar chain of
command flows from top to bottom.
3) Better discipline- The control is unified and
concentrates on one person and therefore, he can
independently make decisions of his own. Unified
control ensures better discipline.

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Merits of Line Relationship

4) Fixed responsibility- In this type, every line

executive has got fixed authority, power and fixed
responsibility attached to every authority.

5) Prompt decision- Due to the factors of fixed

responsibility and unity of command, the officials can
take prompt decision.

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Merits of Line Relationship

6) Flexibility- There is a co-ordination between the top

most authority and bottom line authority. Since
the authority relationships are clear, line officials
are independent and can flexibly take the
decision. This flexibility gives satisfaction of line
executives.

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Demerits of Line Relationship

1) Over reliance- The line executive’s decisions are

implemented to the bottom. This results in over-
relying on the line officials
2) Lack of specialization- A line organization flows in a
scalar chain from top to bottom and there is no scope
for specialized functions
For example, expert advices whatever decisions are
taken by line managers are implemented in the same
way.

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Demerits of Line Relationship

3) Inadequate communication- The policies and

strategies which are framed by the top
4) authority are carried out in the same way. This
leaves no scope for communication from the
other end. The complaints and suggestions of
lower authority are not communicated back to
the top authority. So there is one way
communication.

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Demerits of Line Relationship

5) Lack of Coordination- Whatever decisions are

taken by the line officials, in certain situations
wrong decisions, are carried down and
implemented in the same way. Therefore, the
degree of effective co- ordination is less.
6) Authority leadership- The line officials have
tendency to misuse their authority positions.
This leads to autocratic leadership and
monopoly in the concern.

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Formal Relationship in an Organization

b) Staff Relationship
- the units in the organization which are
considered staff are those which provide
advice or services to other units of the
organization
- staff units usually do not exercise any
authority or command power over other
units in the organization

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Line and Staff Authority Relationship

President

Legal Controller

Marketing Production

- the Legal and the Controller departments are staff units

whereas the Marketing and the Production department are line
units
- neither the Legal or the Controller departments exercises
command authority over Marketing or Production
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Formal Relationship in an Organization

c) Functional Authority
- this is a form of limited authority exercised
usually by a staff unit in the organization
over another unit
- e.g. the Personnel Manager may prescribe
certain procedures which should be
followed by a Plant Manager in hiring or
firing employees even though the
Plant Manager is not a subordinate of the
Personnel Manager
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Functional Authority Relationship

President
-the controller’s office
may prescribe the
accounting procedures
Controller
to be used by the
factory accountant
- the accountant may
Factory Manager be directly responsible
to the plant manager

- It is important for the

Accounting Staff authority of staff units over
other units of the
organization to be limited
and specific so as not to
create problems of dual
subordination and confusion
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Coordinating Activities in an Organization

- divided activities in the organization must be

coordinated to ensure that these are directed at the
overall goals of the organization

Mechanism:
1) The Authority Structure
2) Formal Coordination Structures
3) Information Systems
4) Informal Mechanisms

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Coordinating Activities in an Organization

1) The Authority Structure – authority devolves from

the authority of the person who is higher in the
command structure
- this is the basic mechanism which makes
possible the unified direction and coordination
of the activities in an organization

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Coordinating Activities in an Organization

2) Formal Coordination Structures – through the

information exchange and collective decision
making by the committees, task forces, and
work teams, activities in the different parts of
the organization maybe made more integrated

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Coordinating Activities in an Organization

3) Information Systems – organizational activities

tend to be more coordinated to the extent that
the organizational units are aware of the
situation occurring in other parts of the
organization, or share common planning and
decision making premises

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Coordinating Activities in an Organization

4) Informal Mechanisms – as organizations become

larger, information sharing and coordination
among the different units of the organization
become more difficult
- face to face interaction among employees
become less and less possible

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Classical Principles of Organization

1) Principle of Unity of Command

2) Parity of Authority and Responsibility
3) Absoluteness of Responsibility
4) Check and Balance
5) Principle of Specialization

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Classical Principles of Organization

1) Principle of Unity of Command – a person should

have only one direct superior
- to avoid:
a) inconsistency – could produce confusion,
inaction and conflict – reduces efficiency
or effectiveness
b) “by passing” – a superior should avoid going
orders directly to the subordinates of his
subordinate

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Classical Principles of Organization

2) Parity of Authority and Responsibility – if a

person is responsible for accomplishing a certain task
he should be given sufficient authority to accomplish
that task

3) Absoluteness of Responsibility – though a superior

may delegate a portion of his authority to
subordinates, he does not, in so doing, reduce his
responsibility or accountability for the performance
of his tasks under his jurisdiction

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Classical Principles of Organization

4) Checks and Balance – the organizational unit

whose function is to check or evaluate the
activities of another organizational unit must not
be placed under the control or supervision of
the unit to be evaluated

5) Principle of Specialization – an organizational unit

becomes more efficient the more it specializes
in the performance of a set of similar or related
activities over time

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Application: Case Analysis

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Quiz

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ISSUES IN
ORGANIZING
Theory of Bureaucracy
 according to Max Weber
 characteristics:
there is the principle of fixed and official jurisdictional
 the principle of office hierarchy - there is the
supervision of the lower offices by the higher offices
 the management of the modern office is based on
written documents (“the files”)
 preserved on their original form
 must have expert training
 follows general rules which are more or less stable,
exhaustive and can be learned
 represents the highest development of organizations
 like a machine in terms of efficiency

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Theory of Bureaucracy

 results of strictly bureaucratic organization:

 precision
 speed
 knowledge of the file
 unity
 strict subordination
 reduction of material and personal costs

 efficient due to the impersonality and formalization

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Criticism of the Theory of Bureaucracy

 negative comments coming from other researchers

 rigidity
 excessive rules orientation (red tape)
 delay
 lack of innovativeness and responsiveness to change

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Specialization
 while task specialization increases human skills and
efficiency, it also lead to :
 “goal displacement” – a narrow and parochial job
perspectives on the part of the specialist – putting more
weight on the goals of the group or department rather
than the goal of the entire organization
Result: 1) intergroup or inter-departmental conflicts
2) organizational politics (protecting boundaries or
interests)
3) can render more difficult the task of coordination
and integration
 steps to counteract includes:
 job rotation, training, inter-unit linking committees,
matrix structures, joint planning exercises
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Centralization
 the concentration of decision making authority at the
upper management for better coordination and
consistency
 lead to:
 “ dysfunctions” - delayed or maladaptive decisions from
the top – overloaded
 demotivated and apathetic employees – no challenge for
the lower mgt who are just doing the routinary functions
 steps to counteract includes:
 decentralization or delegating authority to lower mgt
with appropriate control systems , performance
evaluation

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Formal Hierarchies
 chain of command in the organization
 also represents the formal channel of communication
 issues:
 delay in the flow of communications in large
organizations
 intended or unintended distortions of information
 increased difficulties in lateral communication and
coordination
 increase the feeling of distance of personnel at the
bottom from the leaders at the top
 steps to counteract includes:
 expanding the channels, open door policy, suggestion
systems, company picnics and
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Standardization
 the formal specification of the methods used in the
performance of the job
 this increases efficiency and reduces variability in the
output of the process
 issues:
 feeling of loss of control by the worker over his job
 boredom and monotony resulting from the repetitive
nature of the work
 steps to counteract includes:
 “job enlargement”, “job enrichment”,
 quality circles and self-managing groups – giving certain
degree of autonomy and control over their immediate
work environment

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Application: Case Analysis

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