Chapter 5 ORGANIZING

5.1 Introduction
Organizing is one of the key functions of management. It is explained in this unit in terms of
its three elements: departmentation, span of management and delegation. The discussion that
deals with delegation focuses on centralization and decentralization as well. Since organizing
implies arranging people, group dynamics and committees are also taken care of in this unit.
5.2 Meaning of Organizing
A. WHAT IS ORGANIZING?
“Organizing involves the establishment of an intentional structure of roles through
determination and enumeration of the activities required to achieve the goals of an enterprise
and each part of it; the grouping of these activities, the assignment of such groups of activities
to the manager, the delegation of authority and informational relationship horizontally and
vertically in the organization structure” (Harold Koontz and O’Donnell, 1985) are important
aspects of the organizing function.
As we can see from the above definition and many other definitions given by other authors,
organizing is a process and it involves the following activities.
- Identification of key activities necessary to achieve objectives
- Grouping of these activities in a manageable manner
- Assignment of each group of activities to a manager who has the authority and
responsibility to manage
- Delegation of authority to managers so as to accomplish their duties efficiently
- Coordination of different groups of activities horizontally or vertically.
It is also possible to see that organizing is a process of creating a coherent whole (organization),
whereas organization is any human association created to achieve some common objectives of
members of the group. In other words, organizing is the process and organization is a social
grouping.
B. Nature of Organizing
Organizing possesses the following characteristics.
1. Division of Labor: -The total work of an organization can be divided into many parts for
effective performance of the work. The division of labour results in the creation of
specialized persons, because a person does the same work again and again.
Specialization in turn has the following advantages.
a) It eliminates waste of time, energy and resources. Efficient utilization of
resources is made possible.
b) It increases quality of output, and
c) It increases quantity of product without any additional capital. It increases
productivity.

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2. Co-ordination: -Each and every department or section of the organization should
have relationship with each other to get mutual co-operation. This will result in
sharing resources and experiences, which will help them to tackle problems and
increase productivity.
3. Objectives: -The objectives of the organization should be defined clearly. The
objectives cannot be achieved without the existence of a good organizational structure.
In turn, the organization cannot exist without objectives for a long period. Hence,
objectives are the inherent characteristics of organizations.
i. Authority-Responsibility Structure: -An organization means an
arrangement of position of executives by adopting rank system. The
position of each of the executives is defined with regard to the extent of
authority deligated and responsibility assigned to him/her to discharge
the duties. This structure indicates who has authority over whom and
the responsibility of each person at different ranks of the structure.
4. Communication: -Every organization has its own communication systems and
methods. The channels of communication may be divided into formal, informal, downward,
upward or horizontal. It is through communication that organizations achieve mutual
cooperation.
C. Importance of Organizing
Organizing creates the relationship between top-level executives and lower-level staff
members. The following are achieved through the process of organizing.
1. Facilitate administration: -Duplication of work, wrong planning, inefficient personnel,
lack of motivation, improper allocation of duties and responsibilities, absence of coordination,
communication gap, improper instructions are the ingredients of ineffective administration.
This ineffective administration can be removed by having a sound organization.
2. Facilitates growth and diversification: -The growth of business means an increase in
the scale of operation; diversification means starting of production of a new type of
product. For both growth and diversification, organization identifies the necessary
activities, raises the necessary resources and determines how and when to use it.
3. Increases the efficiency of management: -Under good organization, there is division
of work and specialization, which are the tools:
a) for optimum utilization of workers’ ability, resources, materials, technology, etc in
full;
b) for placing proportionate importance on the various activities of the enterprise. Money
and efforts are spent in proportion to the contribution made by each and every
department. More money and time are given to a department that contributes more
than others.
c) for avoiding confusion, delay and duplication of work through dividing and
regrouping of activities into a manageable whole.
4. Improves the efficiency and quality of work through synergism

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It facilitates co-ordination. Through coordination it helps parts to contribute their roles more
efficiently and effectively, as every part is a specialist for its duties. No part is working alone.
In order to get more results as the theory of synergism states. “A whole is greater than the sum
of the parts” all parts should be coordinated properly.
5. Encourage creativity and initiative
A sound organizational structure will give an opportunity for the staff to show their hidden
talents, which will help the enterprise to achieve the business goals and earn higher profits. It
provides opportunities for training new staff members and give refresher courses to existing
employees.
The spirit of constructive and creative approach in management will be developed through
clear distribution of authority and responsibility incentives can be offered for specialized
work and freedom can be given to personal work. This will be possible through a properly
worked out organization.
i. Establishes lines of authority /-vertical division of labor/
As it is already stated, organization is the arrangement of position of executives by adopting
rank system. This represents who in the organization reports to whom and who has authority
over whom. This creates order within the group. Its absence almost always leads to chaotic
situations where every one tends to tell everyone else what to do.
ii. Improves communication
A good organization structure clearly defines channels of communication among the members
of the organization. This develops transparency among members and improves flow of
information. A good organization structure also develops morale, honesty, devotion to duty
and loyalty to the business firm. This will help remove corruption, secretiveness and
unjustified influence.

5.3. Types of Organization

Organizations can be classified on the basis of legality authority delegated and responsibility
assigned to the personnel and their relationship with each other. On the basis of this, an
organization can be either formal or informal.
5.3.1 Formal Organization
It is the intentional structure of roles in a formally and legally organized enterprise. It is
flexible enough in structure as to furnish an environment in which individual performance,
both present and future, contributes most effectively to group goals; it allows for discretion,
for taking advantage of creative talents and for recognition of individual likes and capacities
in the most formal organizations. The establishment of effective formal organization must be
based on the principles that pertain to the unity of objectives and organizational efficiency.

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Developing a responsive organizational structure committed to quality is another important
task in the establishment of formal organization.
Organizational structure is the framework of jobs and departments that directs the behavior of
individuals and groups toward achieving the objectives of the organization.
a) Characteristics of Formal Organization
i) It is properly planned.
ii) It is based on delegated authority.
iii) It is deliberately impersonal.
iv) The responsibility and accountability at all levels of organization are clearly
defined.
v) Unity of command is normally maintained.
vi) It provides for division of labor.
b) Advantages of Formal Organization
i) The definite boundaries of each worker are clearly fixed and this avoids conflict
among the workers.
i) Overlapping of responsibility is easily avoided.
ii) Shifting responsibility is very difficult.
iii) A sense of security arises from classification of the task
iv) There is no chance for favoritism in evaluation and placement of the employee.
v) It makes the organization less dependent on one man.
c) Disadvantages of Formal Organization
i. In certain cases, the formal organization may reduce the initiatively of employees.
ii. Sometimes authority is used for the sake of convenience of the employee without
considering the need for using the authority.
iii. It does not consider the sentiments and values of the employees in the social
organization.
iv. It may reduce the speed of information communication.

The following arrangements or organizational structures are commonly used in most firms
and enterprises.

a) Pure Line Organization Structure

It is an arrangement in which all authority flows in a direct and vertical line from the board of
directors to the president, to the manager of key line functions, to subordinate managers and
down to operative personnel. Each individual reports to only one other person. The following
chart shows the structure of pure line organization.

Board of Director

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President

Top
Manager

1 2 3

1.1
Key: 1.2 1.3 2.1 2.2 2.3 3.1 3.2 3.3
1. Production Manager
1.1 Production First Level Manager or Supervisor
1.2 Production First Level Manager or Supervisor
1.3 Production First Level Manager or Supervisor
2. Marketing Manager
2.1 Marketing First Level Manager or Supervisor
2.2 Marketing First Level Manager or Supervisor
2.3 Marketing First Level Manager or Supervisor
3. Finance Manager
3.1 Finance First Level Manager or Supervisor
3.2 Finance First Level Manager or Supervisor
3.3 Finance First Level Manager or Supervisor

b) Line –and-Staff Organization Structure

It is a form of organization that applies mainly to complex enterprises where handling all the
activities becomes difficult for line managers. This requires the assignment of some
specialized staff to advise line managers on certain issues. It means, in this case, it becomes
necessary to organize both line and staff personnel.
Staff personnel cannot command or issue orders, but act in a strictly advisory capacity,
because of their technical and professional skills in areas such as law, accounting, auditing,
data processing, advertising or publicity, engineering, etc. The following chart shows the
structure of line-and-staff organization.
General Manager

Legal
2
Advisor
Audit 1

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Service

Production Marketing Finance

Manager Manager Manager

3 4 5

Quality Procurement Budget

6 Control Unit 7 Unit Unit 8

Key
1. Staff official
2. Staff official
3. Line official (middle level manager)
4. Line official (middle level manager)
5. Line official (middle level manager)
6. First level manager or supervisor
7. First level manager or supervisor
8. First level manager or supervisor
c) Matrix organization Structure
It is a form of organization in which some managers report to two bosses rather than to the
traditional single boss as in the case of pure line or line-and-staff organization.
Every matrix contains three unique and critical roles:
 the top manager-heads and balances the dual chains of command;
 the matrix bosses or functional production managers who share
subordinates;
 the managers who report to two different matrix bosses.

Top Manager

Production Marketing
Manager Manager

Project A Production Marketing

Manager Group Group

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Project B Production Marketing
Manager Group Group

Project C Production Marketing

Manager Group Group

The chart above shows that the production manager is in charge of three groups of
subordinates, each of which is also assigned to either project A, B, or C. Therefore, the groups
of subordinates report to both their functional manager and to their project managers. In turn,
the functional managers and the project managers report to the top manager, who oversees the
organization.
Matrix Organization is used:
 When it is absolutely necessary that the groups be highly responsive to two
sectors at the same time, such as markets and technology;
 When the bosses face uncertainties that generate very high information
processing requirements;
 When they must deal with strong financial and/ or human resources.
The following are some of the common disadvantages of matrix organization.
 It violates the unity of- command principle because the subordinates are
accountable to two managers.
 It may lead to power struggles. One manager may compete with another
manager for the services of a joint subordinate.
This weakness can be minimized if senior managers stress that harmony and cooperation are
absolutely essential.
d) The Functional Organization Structure
This is a structure that is most widely used because of its simple logical and common since
appeal. It is the module from which other forms are built. In its simple form, the functional
structure consists of the three major areas of business: production, marketing and finance.
This organizational structure is characterized by the following features:
 Specialization by function.
This structure orients employees toward a special activity, and helps them to concentrate
competence in particular ways.
 Sub-goal emphasis.
This structure forces departmental heads to concentrate on sub-unit goals to meet the
standards and achieve the targets.
 Pyramidal growth.
Added positions and departments are made part of the existing functional structure. Each
function grows by adding layers to be the base of the pyramid. The span of supervision and

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the number of levels reporting to each manager within the functional pyramid are the results
of the growth of each function.
 Line-and- Staff division
The distinction between line and staff activities is observed in all functional structures. In fact,
functional organization is a modified form of line-and-staff structure. Line functions have
direct responsibility for achieving the basic purpose of the organization. They command while
the staff gives support and advice.
 Functional relationship.
When the need arises some managers are made to supervise multiple departments.
Departmentation can take place with all the three types of authority: line, staff and functional
authority. Functional authority is subordinate to line authority and is a way of relating
specialists to work in the organization. Functional specialists have a limited scope of
command authority.
 Centralization and decentralization.
In a functional organizational structure one person heads all of one kind of work. Authority is
centralized to a great extent. As a result, coordination within function is simplified.
 Span of control.
In functional structures, the span of management is limited. So there is a tendency for these
structures to be tall. Managers exercise close supervision and rely on impersonal rules and
procedures to manage individuals in organization.
The following figure shows functional organization structure.

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General Manager

Public Personnel Finance Personnel Research

Relations

Production Marketing

Purchase Sales
Metal Plastic

M1 M2 M3 P1 P2 P3 MP1 MP2 MP3 MS1 MS2 MS3

Key:
 M1, M2 and M3 stand for Metal Production Supervisors
 P1, P2 and P3 stand for Plastic Production Supervisors
 MP1, MP2 and MP3 stand for Marketing purchase supervisors
 MS1, MS2 and MS3 stand for Marketing Sales supervisors

5.3.2. Informal Organization

It is a network of personal and social relations not established or required by the formal
organization, but arising spontaneously as people associate with one another on the basis of
the likes and dislikes of members without considering the rules, regulations and procedures of
the organization. The relationship does not appear on an organization chart.
Informal organizations are influenced by the number of people in the group, the actual
personnel involved what the group is concerned with its changing leadership and the
continuing process of change.
a) Characteristics of Informal Organization
i) It arises without any external causes, i.e. voluntarily.
ii) It is a social structure formed to meet personal needs.

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iii) It has no place in the organization chart.
iv) It acts as an agency of social control.
v) It can be found on all levels of organization within the managerial hierarchy.
vi) Its rules and traditions are not written but are commonly followed.
vii) It develops from habits, conduct, customs and behavior of social groups.
viii) It is one of the parts of the total organization.
ix) There is no structure and definiteness to the informal organization.
b) Advantages of Informal Organization
The advantages of informal organization are:
i) It fills up the gaps and deficiency of the formal organization.
ii) It gives satisfaction to the workers and maintains the stability of work
iii) It is a useful channel of communication.
iv)Its presence encourages the executives to plan to work correctly and act
accordingly.
v) It also fills up the gaps among the abilities of the managers.
c) Disadvantages of Informal Organization
The disadvantages of informal organization are:
i) It has the nature of upsetting the morality of the workers.
ii) It indirectly reduces the efforts of management to promote greater productivity.
iii) It spreads rumors among the workers regarding the functioning of the
organization unnecessarily.
5.4. Process of Organizing
Organizing as a function of management follows these steps.
1. Determination of Activities

This includes the identification of the required activities and the division of these activities to
achieve the objectives of the organization in to homogenous groups.
2. Grouping of Activities

The tasks to be done are grouped into reasonably homogenous or similar activities and are
arranged under one individual or department. Eg. Finance department.
3. Allotment of Duties to Specified Persons /Departmentalization/
The grouped activities are allotted to specified persons. In other words:
a) Sales activities are assigned to the sales manager.
b) Purchasing activities are assigned to the purchasing manager.
c) Production activities are assigned to the production manager.
Besides, adequate staff members are appointed under the specified persons. The specified
persons are specialized in their respective fields.
4. Delegation of Authority

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Assignment of duties or allotment of duties to specified persons is followed by delegation of
authority. It will be very difficult for a person to perform the duties effectively if there is no
authority to do it. While delegating authority, responsibilities are also fixed. Authority and
responsibility should be in parity with each other.
 Authority: - represents the legitimate exercise of power. It is a power derived
from the rights that come with a position.
 Responsibility: -is accountability for the attainment of objectives, the use of
resources and the adherence to organizational policy.
 Power: - is the ability to influence, command, or apply force. It is usually
derived from the control of resources.
5. Defining Relationship
When a group of persons are working together for a common goal, it becomes necessary to
define the relationship among them in clear terms. If it is done, each person will know who
his boss is, from whom he has to receive orders, or to whom he is answerable. In other words,
each boss should know what authority he has and over which person.
6. Co-ordination of Various Activities
The delegated authority and responsibility should be co-coordinated by the chief managerial
staff. The reason is that there must be a separate and responsible person to see whether or not
all the activities are going on to accomplish the objectives of the organization.

5.5 Key Elements of Organizing

5.5.1 Departmentation
Departmentation is a process by which similar activities of a business are grouped into units
for the purpose of facilitating smooth administration at all levels. It is one of the key concepts
of organizing.
"Departmentation is a process of dividing the large monolithic functional organization into
small and flexible administrative units” (Koontz & O'Donnell).
5.5.2 Need and Importance of Departmentation
Departmentation contributed to the success of the organization in a number of ways given
below.
a) Departmentation increases the operating efficiency of the employees. It facilitates
the grouping of activities, which are of similar nature.
b) There is a fixation of responsibilities to various executives of the organization.
Executives will be alert and efficient in their duties.
c) The departmental heads (managers) are given certain powers and are allowed to
make their own decisions. By doing so, the prestige and skills of the departmental
heads are increased.

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d) The working of the various departments are evaluated by the top management and
the departments which are not managed properly are identified. This makes the
departmental heads efficient, responsible and accountable.
e) There is a possibility of the expansion of the organization because of fixing of the
responsibilities to the executives.
f) Besides, departmentation gives other advantages such as facilitating budget
preparation, effective control of expenditure, attaining specialization, better co-
ordination among the managerial personnel, etc.
5.5.3 Factors Considered in Departmentation
The following factors are to be taken into consideration in departmentation.
a. Specification: Departmentation is concerned with identifying and specifying
organizational activities as coherent whole. Departmentation should yield the
advantages of specialization. Specialization may be functional such as sales,
finance, production and personnel.
b. Control: As a general rule, there should be scope for automatically checking the
activity of one person by another person. There should be a proper control under
departmentation and simplification of control process.
c. Co-ordination: The whole business activities are grouped department wise and it
requires co-ordination in order to direct organizational activities in the same
direction. One department should be organized so that it can support the other
department and vice-versa. No department is independent but is interdependent
with other departments of the same organization.
d. Securing Attention: Sometimes, certain functions emerge within a unit that desires a
special treatment. Hence, the activity may be entrusted to a separate division or a
higher level of organization according to its importance. Even an unusually
important activity of the business could be given a recognition in the organization.
e. Recognition of Local Conditions: The departmentation should take into
consideration the local conditions of the place concerned. Local conditions may
include such factors as the area dispersion, diversity of customers needs, types of
product and availability of specialized man power
f. Economy: The departmental arrangement will be effective if the departmentation is
done with minimum expenses. Cost of departmentation should not exceed benefits
generated from departmentation.
5.5.4 Bases or Patterns or Types of Departmentation
There are certain basic methods of dividing the duties and responsibilities within an
organization structure. They are:
Departmentation by functions
Departmentation by products or service
Departmentation by regions (area or location) or territory
Departmentation by customers
Departmentation by process
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Departmentation by time
Departmentation by numbers
Departmentation by marketing channels
a) Departmentation by Enterprise Function
Functional departmentation is perhaps the most logical and basic form of departmentalization.
It is a form of departmentalization in which everyone engaged in one functional activity, such
as marketing or finance, is grouped into one unit. It works best when the organizational
environment is stable and tight control over processes and operations is desired.

It is used mainly (but not only) by smaller firms that offer a limited line of products, because:
 it makes efficient use of specialized resources;
 it makes supervision easier;
 it makes it easier to mobilize specialized skills, and bring them to bear where
they are most needed.
i) Advantages: The following are the advantages of functional departmentation.
 It is a logical reflection of functions.
 It maintains power and prestige of major functions
 It follows the principle of occupational specialization /fosters development of
expertise/.
 It simplifies training
 It furnishes means of light control at the top.
 It requires little internal coordination.
 It requires fewer interpersonal skills.
ii) Disadvantages
Functional departmentation
 reemphasizes overall company objectives.
 overspecializes and narrows view points of key personnel.
 reduces coordination between functions.
 responsibility for profits is at the top only.
 slows adaptation to changes in environment.
 limits development of general managers.
 slows response time in large organization.
 causes bottlenecks due to sequential task performance.
 does not encourage innovation; has narrow perspective
 fosters conflicts over products priorities.
 does not foster development of general managers.
 obscures responsibility for the overall task.
b) Departmentation by Product or Service

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This type of departmentation comes as a result of organizing a company by divisions that
bring together all those involved with a certain type of product or service. This type of
departmentation is made by the large multi-product companies. Each department is
responsible for a product or related family /product line/.
It is a logical pattern to follow when a product type calls for manufacturing technology and
marketing methods that differ greatly from those used in the rest of the organization.
i) Advantages of Product Departmentation:
 Places attention and effort on product line.
 Facilitates use of specialized capital, facilities, skills and knowledge.
 Permits growth and diversity of products and services.
 Improves coordination of functional activities.
 Places responsibility for profits at the product level.
 Furnishes measurable training round for general managers.
 Flexible strategy could be developed for different products.
ii) Disadvantages of Product Departmentation
 Requires more persons with general managerial abilities.
 It is expensive.
 Presents increased problem of top management control.
 There is a danger of duplication of work.
 Creates conflicts between divisional tasks and corporate priorities.
c) Departmentation by Region or Area or Territory (Geographical)
This brings together in one department all activities performed in the region where the unit
conducts its business. This arrangement follows logical pattern when a plant must be located
as close as possible to:
 its sources of raw materials - mining and oil producing companies;
 its major markets;
 its major sources of specialized labor.
Territorial departmentation is especially attractive to large-scale firms or other enterprises
whose activities are physically or geographically dispersed and its customers needs and
characteristics vary greatly.
It is most often used in sales and in production; it is not used in finance, which is usually
concentrated at the headquarters.
i) Advantages of Geographical Departmentation
 It makes possible effective span of control.
 It reduces the cost of operation and gains saving in time.
 The sales may be increased with the help of intimate knowledge about the
tastes and preferences of the customers in the local market.
 Regional managers could win the confidence of customers and remove the
competitors from the market.

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 Accounts are prepared area-wise. So, the profitability of each area is known to
the management.
 It provides opportunities to mangers to improve their skill in various fields.
 Control process is very easy to manage.
ii) Disadvantages of Geographical Departmentation
 It increases the number of personnel and involves high cost of operation.
 The control of head office is a less effective one.
 It may also involve duplication of work.
 A small business concern cannot manage the high cost of operation.
Geographical or territorial and product departmentation can be structured according to the
chart shown below:
President

Vice President Vice President Vice President Vice President

Marketing Finance Production Human Resource
Marketing Finance Production Human Resource
and Development

Vice President Vice President Vice President

North America Latin America Europe, Africa
Product A and Far East and Middle East
d) Departmentation by Customers Product B ProductBC
Product
It occurs when a division sells most or all of its products to a particular class of customers.
This type of departmentation is preferred when the various needs of customers are different in
nature. For example a bank may divide its loan section into a number of heads and assign
them to various departments.
- loan to businessmen
- loan to farmers
- loan to professionals, and so on.
i) Advantages of Departmentation by Customers
 It fulfils the expectations and needs of customers.
 It develops specialization among the organizational staff.
 It gives customers a feeling that they have an understanding supplier.
 Customers will get better service and the supplier can boost its sales by
understanding customers needs.
ii) Disadvantages of Departmentation by Customers

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 May be difficult to coordinate operations between competing customer
demands.
 Requires managers and staff experts in customers' problems.
 Customer groups may not always be clearly defined.
 There is a wastage of available resources and facilities
 There may be duplication of activities.

The chart below shows an organizational structure of departmentation by customers.

President

Vice President Vice President

Industrial Consumer Vice President
Products Products Military
Products

e) Departmentation by Process or Equipment

In this kind of departmentation, people and materials are brought together in order to carry out
a particular operation. This type of departmentation is followed when the production activities
are carried on in many places. For example, a textile factory may have many departments
such as ginning, spinning, weaving, dyeing and printing, packing and sales distribution.
Textile, sugar, beverage and many other factories also follow these kinds of departmentation.
i) Advantages
 Process or equipment departmentation has economic advantages.
- The costlier machines can be used effectively.
- There is no duplication of activities.
 It uses specialized technology.
 It utilizes special skills.
 It simplifies training.
 It helps top managers to have effective performance control.
 It is used in processing industrial products.
ii) Disadvantages of Departmentation by process or Equipment
 Coordination of departments is difficult.
 Responsibility for profit is at the top.
 Is unsuitable for developing general managers.
 More specialists are essential for each process.
 Heavy cost of operation - separate rooms for operation and other facilities
should
be provided for all the process.
f. Departmentation by Time

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Business activities can grouped together on the basis of the time of performance. If the work
is not completed within the normal working hours, extra time will be given to complete after
the normal working hours. Whatever may be the work performed after the normal working
hours, a separate department will be in charge of this type of activity.
For example: - University extension programs have their coordinator. Hospitals, fire
departments, steel furnaces etc. use same methods.
i) Advantages
 Services can be rendered beyond the typical 8-hour day.
 It enables activities/ processes not to be interrupted.
 Expensive capital equipment can be used for more hours (more than 8 hours a
day)
 It is convenient for employees to work at any shift
ii) Disadvantages
 Supervision may be lacking during the night shift.
 There is the fatigue factor, i.e., it is difficult for most people to switch from day
to
night shift and vice versa.
 The changing of the shifts may cause problems in coordination and
communication.
 The payment of overtime rates can increase the cost of the product or service.
g) Departmentation by Numbers
It was once an important method in the organization of tribes, clans and armies. The essential
fact is not what these people do, where they work or what they work with, but that the success
of the undertaking depends only upon the number of people involved in it. Its usefulness has
declined with each passing century. Because:
 technology has advanced, demanding more specialized and different skills;
 groups composed of specialized personnel are frequently more efficient than
those based on mere number;
 it is useful only at the lowest level of the organization structure.
Departmentation by number is still used in the army where soldiers are grouped into squads,
battalions, companies, brigades, and regiments. The principles that govern span of
management or span of control or span of supervision are used in this type of
departmentation.

h) Departmentation by Marketing Channels

This type of departmentation is adopted on the basis of the channel of distribution chosen by
the particular business unit. Normally the channel of distribution is selected by the business
unit on the basis of nature of goods and marketability of the product.

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5.6. Span of Management
5.6.1. Definition
Span of management is the number of subordinates who report directly to a given manager or
the number of people managed efficiently by a single officer in an organization. Span of
management may be narrow or wide. The alternative names for span of management are span
of control, span of supervision, span of authority and span of responsibility.
A narrow span of control is where the number of subordinates under a given supervisor are
very few. A narrow span of supervision has the following characteristics:
a) The organizational structure is tall, i.e., there is a long distance between top
level management and supervisors.
b) There are many managerial levels between top and lower level
management.
c) The number of employees supervised by a manager will be very few.
The following chart shows an organizational structure with a narrow span of control.

a) Advantages of Narrow Span of Supervision

Close supervision of employees or work is possible.
Close control is simple.
Fast communication between subordinates and superiors is possible.
b) Disadvantages of Narrow Span of Supervision
i) Superiors tend to get too involved in subordinates’ work.
ii) There are many levels of management, and therefore the cost is high.
iii) The distance between the lowest level and the top level is long.
A wide span of control is an arrangement where the number of subordinates under a given
supervisor are many. A wide span has the following characteristics
The organizational structure is flat.
1. There are few managerial levels between the top and lower level managers.
2. There are few middle level managers.
3. There is short distance between the top-level management and the supervisors.

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The following chart shows an organizational structure with a wide span of control.

a) Advantages of Wide Span of Supervision

i) Superiors are forced to delegate authority.
ii) Clear policies are required.
iii) Subordinates are carefully selected.
b) Disadvantages of Wide Span of Supervision.
i) There is a tendency of becoming decision bottlenecks on the part of overloaded
superiors.
ii) There is a danger of losing control on the part of superiors.
iii) A wide span requires exceptionally qualitative managers.
The appropriate span of control must be determined by the management of the respective
organization, because the span of management affects the efficient utilization of managers and
effective performance of their subordinates. If the span of control is too wide, managers will
be overextended. The subordinates will get little guidance or control, and this will lead to
frustration. On the other hand, if the span of control is too narrow managers can be
underutilized. Subordinates can also be:
- too close supervision by superiors;
- dependent because of very close and frequent supervision.
5.6.2 Factors Affecting Span of Management
No formula exists for determining the ideal span of control. The ideal number of people that
one person can supervise depends on a variety of factors. The following are some of the
factors which influence the span of management.
a) Subordinate Training or Quality of Subordinates
The better the training of subordinates, the less the impact of necessary superior-subordinate
relationships. Well-trained subordinates require not only less of their managers time but also
fewer contacts with them.
b) Clarity of Delegation of Authority
As managers delegate their authority, they have to clearly define the delegation. To undertake
a well-defined task, a well-trained subordinate can get it done with a minimum of the
superiors' time and attention.
c) Clarity of Plans
If plans are well defined, workable, if the authority to undertake them has been delegated, and
if the subordinate understands what is expected, little of a supervisors time will be required.

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If policies are clear, consistent with the operation and goals of a department, and if the
subordinate understands them, there will certainly be fewer demands on the superior’s time
and attention.
d) Use of Objective Standards
Good objective standards:
i) reveal with ease any deviations from plans.
ii) enable managers to avoid many time-consuming contacts.
iii) enable managers to direct attention to exceptions at points.
iv) enable the successful execution of plans.
e) Rate of Change
The rate of change is an important determinant of the degree to which policies can be
formulated and the stability of policies maintained
- rapid rate of change/ Narrow span of management
- stable and durable/ Wider span of management
f) Variety of Tasks
This refers to the number of different types of jobs being managed. The greater the variety of
jobs supervised by a manager, the higher time it requires. As the number of subordinates
increases the contact required will be more.
g) Proximity
Physical dispersion of jobs being managed affects span of management. If organizational
activities are geographically dispersed, subordinates performance will be out of their
supervisor’s sight. Besides, as the number of subordinates increases the problem becomes
more.
h) Communication Techniques
Methods of communication may be divided into two, i.e. oral and written. Oral
communication requires more time and energy and these can be avoided by the written
communication. Clear and concise communication increases span of control. Easy style of
leaders may create wide span if it is properly handled.
i) Complexity of Jobs
Complexity of jobs refers to the scope and depth of jobs. Job scope is the number of different
types of operations performed in the job. Job depth is the freedom of employees to plan and
organize their work to work at their own pace and to move around and communicate as
desired.
j) Quality of a Manager
A competent and trained manager can effectively supervise more than one subordinate that do
not have specialization. Other factors include the amount of personal contact needed or the
degree of interaction required, the utilization of technology, non-managerial responsibilities
of the manager, and the size of personnel that exist at the different management levels of
organization.
5.6.3 Delegation of Authority

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It is the act of entrusting formal authority and assigning responsibility to a subordinate for
completion of specific activities. Just as no one person in an enterprise can do all the tasks
necessary for accomplishing a group purpose, it is also impossible, for one person to exercise
all the authority for making decisions as the enterprise grows.

5.6.4 The Steps Followed in the Delegation process

The delegation of authority involves the following key activities
a) Analyze how time is spent.
b) Decide which task can be delegated and the expected results Authority and tasks
delegated must be clearly stated, and should be modified when necessary for accomplishing
these tasks.
c) Decide who should get the assignment. The right person should be selected from
members based on merit or effective performance of job.
d) Delegate the authority. Assign the task with the right authority to the right person.
e) Create an obligation (responsibility)
f) Establish a feedback system
g) Follow unity-of-command and chain-of-command principles as you delegate.

5.6.5. Factors That Determine the Delegation of Authority

Most of the factors that affect delegation lie in the personal attitudes of both superiors and
subordinates towards delegation. Some of them are discussed as follows.
a) Personal Attitudes of Superiors
i) Receptiveness/ Avoidance of Risk
Decision-making always involves some discretion, and a subordinate's decision is not likely
to be exactly the one a superior would have made. Therefore, managers who delegate
authority must be willing to give other people's ideas a chance and be ready to take the risk,
due to the possible mistake that could be committed by the subordinate. One has to give up
the old saying, “ If you want something done right, do it yourself.”

ii) Willingness To Let Decision Making Authority Go

A manager who is ready to effectively delegate authority must be willing to release the right
to make decisions to subordinates. If the manager has an autocratic attitude, delegation will
not be effective. Some managers fear that a subordinate who looks so good bight replace
him/her.
iii) Perfectionism/Unwillingness To let Others Make Mistakes
Since superiors cannot delegate responsibility for performance, they should not delegate
authority unless they are willing to find means of getting feedback; that is, of assuring
themselves that the authority is being used to support enterprise or department goals and
plans. If superiors target to be perfect in their job and if they fear subordinates may not be as
perfect as themselves, they avoid delegation.

iv) Willingness To Trust Subordinates/ Confidence in Subordinates

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Superiors have no alternative to trusting their subordinates, for delegation implies a trustful
attitude between them. Some people do not like to delegate and argue that it is easier for a
manager to do a task than to teach a subordinate how to do it.
b) Attitudes of Subordinates
Subordinates may refuse accepting delegation of authority because of any of the following
reasons.
i) Love of spoon-feeding. They want superiors to do the job or show them
how to do it.
ii) Fear of criticism.
iii) Lack of information or resource.
iv) Lack of self-confidence.
v) Too much workload.
vi) Inadequate incentives.
vii) Fear of failure.
5.6.6 Guides for Overcoming Weak Delegation
The five practical guidelines of delegation are:
i) Define assignments and delegate authority in the light of results expected.
ii) Select the person in the light of the job to be done.
iii) Maintain open lines of communication to avoid misunderstanding among
and between organizational members.
iv) Establish proper controls because responsibility cannot be abandoned by
the superior.
v) Reward effective delegation and successful assumption of authority.
5.6.7. Advantages of Delegation
i) Delegation allows for promptness in action.
ii) It enables managers to perform higher-level work Managers get enough time to pursue
other tasks.
iii) It can be a training experience for supportive staff. It helps to develop subordinates and
satisfy customers by giving them better service.
iv) It can result in better decisions.
v) It can improve morale Subordinates gain feelings of belongingness and being needed
which leads to a genuine commitment on the part of the subordinates.
vi) The expansion and diversification of business activities is possible
5.6.8 Disadvantages of Delegation
Delegation has two potential limitations.
i) Control at the top may be more difficult
The further decisions are removed from the highest level, the more difficult it is to pen point
problem areas and to take effective corrective action.
ii) A manager may over time lose touch with what is really happening in the organization
Without proper communication and feedback channel, the subordinate may make decisions
and take actions without the knowledge of the superior.
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5.7. Centralization versus Decentralization as Features of Delegation
Centralization and decentralization are important features that become obvious in the process
of delegation. This is due to the fact that authority is decentralized or centralized in the
process of delegation.
a) Centralization is defined as the systematic and conscious reservation of authority at
central points in the organization. In a centralized set-up, decision-making authority is
concentrated in few hands at the top. Most of the time even though the degree might
be high or low, both centralization and decentralization can appear and exist in an
organization.
b) Decentralization implies the placing of greater power in the hands of persons away
from the center. It means a greater number of important decisions are made at the
lower levels and few of these decisions are subject to prior approval of the higher
authorities. So decentralization can be defined as the systematic effort to delegate to
the lowest levels all authority except that which can be exercised at central points. In
other words, there cannot be absolute decentralization. If managers delegate all
authority without exception, their status as managers would cease, their position would
be eliminated, and there would again be no organization.
The degree of decentralization is greater when:
i) the number of decisions made at lower levels of the organization are greater;
ii) the decisions made at lower levels of an organization are more important;
iii) more functions are affected by decisions made at lower levels of the
organization;
iv) the manager has less checking on decisions made by others;
v) there is no checking on decisions made by others; and
vi) fewer people at the lower level in the hierarchy are consulted.
a) Factors Determining the Degree of Decentralization of Authority
Although the temperament of individual managers influences the extent to which
authority is delegated, other factors also affect it. They are:
i) Costliness of the Decision
The more costly the action to be taken the more probable it is that the decision will
be made at the upper levels of management. Costs may be in dollars and Cents
Company’s reputation, its competitive position and employee morale.
ii) Desire for Uniformity of Policy
Those who value consistency above all invariably go for centralized authority
since this is the easiest road to such a goal.
iii) Size and Character of the Organization
The larger the organization, the more the decisions that are to be made, the more the
places in which they must be made and the more difficult it is to coordinate them.
iv) History and Culture of the Enterprise

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Whether authority will be decentralized frequently depends upon the way the business has
been built. Owner founders have a tendency toward high centralization of authority.
Enterprises that result from mergers and consolidations are likely to show, at least at first, a
definite tendency to retain decentralized authority, especially if the unit acquired is already
operating profitably.
v) Management Philosophy
Sometimes top managers are not interested to delegate to others and they want to safeguard
their authority as a source of power. In many cases, top managers may see decentralization as
a way of organizational life that takes advantage of the innate desire of people to create, to be
free, and to have status.

vi) Desire for Independence

Individuals and groups often desire a degree of independence from bosses who are far away.
Individuals may become frustrated by delay in getting decisions made by long line
communication and by the practice of giving a difficult problem to someone else to solve it
even though it is ones own responsibility.

vii) Availability of Trained Managers

A real shortage of managers would limit decentralization of authority, since delegation of
authority requires qualified managers. Executives who complain that they have no one to
whom they can delegate authority are often trying to magnify their own value to the firm or
confessing a failure to develop subordinates.
viii) Control Techniques
A good manager at any level of the organization cannot delegate authority without having
some way of knowing whether it will be used properly. Some managers do not know how to
control. They may think that it takes more time to correct a mistake committed by others than
to do the job themselves.
ix) Decentralized Performance
It refers to the situation where the managers of an enterprise are dispersed over a geographic
area.
The reason is basically a technical matter that depends upon such factors as
 the economies of the division of labor;
 the opportunities for using machines;
 the opportunities for using machines;
 the nature of the work to be performed; and
 the location of raw materials, labor supply and customers.
Authority tends to be decentralized when performance is decentralized.
x) Business Dynamics: the Pace of Change
If a business is growing fast and facing complex problems of expansion, its managers,
particularly those responsible for top policy, may be forced to make a large share of the
decisions; but strangely enough, this very dynamic condition may force these managers to

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delegate authority and take a calculated risk on the costs or error. This dilemma is resolved by
implementing the following:
- Directing of delegation;
- Avoid delegating authority to untrained subordinates;
- Give close attention to rapid formation of policies;
- Accelerate training in management; and
- Slow the rate of change.
In old well-established or slow-moving business, there is a natural tendency to centralize
authority, whatever danger too much centralization may carry.
xi) Environmental Influences
In addition to the internal factors, there are definite external forces affecting the extent of
decentralization. Among the most important of these are governmental controls, national
unionism, and tax policies (political, social and economic factors).
d) Advantages of Decentralization
i) It relieves top managers from the burden of decision-making.
ii) It encourages decision making and assumption of authority and responsibility.
iii) It promotes the use of broad control techniques
iv) Performance comparison between departments becomes possible.
v) It facilitates setting up of profit centers.
vi) It facilitates product diversification.
vii) It promotes development of general managers.
viii) It aids in adaptation to fast-changing environment.
e) Limitations of Decentralization
i) The uniformity of policies will be less.
ii) Coordination becomes complex.
iii) The top management may lose control.
iv) It requires qualified managers and subordinates.
v) Its cost is high.
vi) It is affected by external forces.
vii) It doesn’t favor economic scale of some operations.
f) Guidelines to obtain the desired degree of decentralization
In order to obtain the degree of decentralization they want, top managers must:
i) understand decentralization which does not mean independence;
ii) establish policies to guide decision making along desired courses;
iii) delegate authority to the right person/subordinate;
iv) accompany delegation by controls designed to ensure that delegated
authority is used properly;
v) realize that knowing the mere fact of delegation is not enough to ensure
decentralization;
vi) make sure that a system of verifiable objective is established;

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vii) provide a statement of each manager’s duties and of the responsibility and
the degree of authority delegated to that manager;
viii) the statement should be clear, written and easily understood by all
employees who want to know;
ix) that the example and teaching of a superior has to start at the top of the
organization;
x) develop a policy of promoting managers only when they have
subordinates able to take their places.

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