CHAPTER 5

THE ORGANIZING
FUNCTION
 Learning objectives

After completing this chapter you will be

able to:
• Define organizing management function,
• Differentiate formal and informal
organization,
• Recognize importance of organizing, and
• Identify major organizing concepts.
 5.1 Definitions of
Organizing
• Organizing- is the function of management
that creates the organization’s structure.
• Organizing is a managerial function; it
leads to the creation of the formal
organization and results in an
organization structure.
• Organizing is the function of management
that involves developing an organizational
structure and allocating human
resources to ensure the accomplishment of
objectives.
 ORGANIZING FUNCTION

• A manager performs organizing function with the help of

following steps:-

A. Identification of activities - All the activities which have to

be performed in a concern have to be identified first.

For example, preparation of accounts, making sales, record

keeping, quality control, inventory control, etc.

B. Departmentally organizing the activities – Here the

manager tries to combine and group similar and related
activities into units or departments. This is simply called
Departmentalization.
 ORGANIZING FUNCTION

C. Delegating authority- is the process of assigning

responsibility for a task or decision to another person.
D. Co-ordination between authority and
responsibility - Relationships are established among
various groups to enable smooth interaction toward
the achievement of the organizational goal.
 In organizing functions, the manager differentiates
activities (departmentalization) and integrates
activities (Integration ) of an organization.
 Cont’d…

• Organizational structure is the vertical and

horizontal configuration of departments,
authority, and jobs within a company.
• Organization design When managers develop
or change the organization’s structure
• Organization chart or org chart is a diagram
that displays a reporting or relationship hierarchy
and structure
5.2 Formal and Informal
organization
• Organizations can be classified into
formal and informal types one the basis
structure, purpose, and
communication patterns.
 Cont’d…
• Formal organizations are deliberately
created and have a defined structure, with
clear lines of authority, roles, and
responsibilities. They are typically established to
achieve specific goals and objectives
• Examples of formal organizations include
businesses, government agencies, and schools.
Common Characteristics of formal organization
• Consciously designed.
• Has superior-subordinate relationship.
• Has organizational chart.
• Deliberately impersonal (Positions in an
organization are not personal properties).
 Cont’d …
• Informal organizations emerge spontaneously from
social interactions among individuals who share
common interests or goals. They lack a defined
structure and have no official rules or
procedures.
E.G Friendship groups among colleagues or sports
teams within a company.
• They always exist in the formal organization;
nothing can destroy them; they can not be avoided.
• They are natural grouping of people based on their
behavioral patterns, interests, beliefs and
objectives.
• Informal organization may affect formal
organizations positively or negatively.
 5.2.1 Characteristics of
informal organization

1. Group Norms: Informal organizations have their

own set of unwritten rules and expectations that guide
the behavior of their members. These norms can cover
everything from dress code to how to interact with
others.
2. Group Cohesiveness: Informal organizations often
have strong bonds of friendship and camaraderie
among their members. This feeling of unity can help
the group achieve its goals.
3. Group Leadership: Informal organizations often
have informal leaders who emerge from the group.
These leaders are respected by their peers and help to
guide the group's activities.
 Cont’d…

4. Communication Network: Informal

organizations often have their own
communication channels, known as the
grapevine. This network can be used to
share information, spread rumors, and build
relationships.
5. Lifespan and Purpose: Informal
organizations tend to have a shorter lifespan
than formal organizations. They may form to
meet a specific need or goal, and then
disband once that need is met.
5.2.2 Advantages and disadvantages
of informal organizations

Advantages Disadvantages
• They provide satisfaction
• Lack of
and stability in the
accountability
organization
• Promote creativity and • Spread of
innovation
misinformation
• They inform managers
• Resistance to
sensitive issues that would
be embarrassing if change
formally released.
5.3 Departmentalization

• Departmentalization is a method of subdividing work

and workers into separate organizational units that
take responsibility for completing particular tasks.

• Traditionally, organizational structures have been created

by departmentalizing work according to five methods:
functional, product, customer, geographic, and matrix.

• Modern organizational structure include Virtual

networks and outsourcing, holacracy team
structure
 5.3.1 TYPES OF
DEPARTMENTALIZATION
A. Functional Departmentalization- Groups employees based on work performed

(e.g., engineering, accounting, information systems, human resources). It places together

employees who perform similar functions, work processes or who bring similar

knowledge and skills.

B. Product Departmentalization- Groups employees based on major product areas in

the corporation (e.g., women’s footwear, men’s footwear, and apparel and accessories). It’s

also called divisional departmentalization.

C. Customer Departmentalization- Groups employees based on customers’ problems

and needs(e.g., wholesale, retail, government)

D. Geographic Departmentalization- Groups employees based on location served (e.g.,

North, South, Midwest, East).

E. Matrix Departmentalization- They are combination of functional and project/product

patterns of departmentalization in the same organization. They are common in engineering

, Research and Development, and in product-marketing organization

 Cont’d…
• Outsourcing means to contract out certain tasks or
functions, such as manufacturing, human resources, or
credit processing, to other companies.
• Example of Outsourcing is Addis Ababa University hiring
security agency to do its security work.
• Example: U.S. military, which increasingly uses private
military company contractors to handle just about
everything except the core activity of fighting battles and
securing defensive positions.
• A few organizations carry outsourcing to the extreme to
create a virtual network structure.
F. Virtual network structure, sometimes called a
modular structure, the firm subcontracts most of its
major functions or processes to separate companies and
coordinates their activities from a small headquarters
organization.
G. HOLACRACY TEAM STRUCTURE

• The most recent approach to organization design

involves a shift toward self-management.
• One extreme self-management model is called a
holacracy or holacracy team structure.
• The traditional management functions of planning,
organizing, staffing, and controlling are assigned to all
employees. There are no managers to perform these
management functions.
• All organization members are personally responsible
for planning their own work, coordinating their actions
with others, developing their own personal
relationships, acquiring needed resources, and taking
corrective action with respect to other members as
needed.
HOLOCRACY TEAM STRUCTURE
 Functional
Departmentalization
 Product
Departmentalization
VIRTUAL NETWORK STRUCTURE
HOLOCRACY TEAM
STRUCURE
5.4 Organizational
Authority
5.4.1 Chain of Command

• Authority is the right to give commands, take action,

and make decisions to achieve organizational
objectives.
• Traditionally, organizational authority has been
characterized by the following dimensions: chain of
command, line versus staff authority, delegation
of authority, and degree of centralization.
• The Chain of command is the vertical line of
authority that clarifies throughout the organization.
who reports to whom
• People higher in the chain of command have the right,
if they so choose, to give commands, take action,
and make decisions concerning activities occurring
anywhere below them in the chain.
 Cont’d…
• One of the key assumptions underlying the chain of
command is Unity of command, which means that
workers should report to just one boss.
• The purpose of unity of command is to prevent the
confusion that might arise when an employee
receives conflicting commands from two different
bosses.
• Example, when Bill Gates became chairman of
Microsoft (after being CEO) and Steve Ballmer
became CEO, there was confusion about the chain
of command at Microsoft. In one meeting, Gates
approved a budget increase for a project. Ballmer
then denied the increase, shouting at Gates, “You
put me in charge of the company. Let me run it.”
 5.4.2 Line versus Staff
Authority
• A second dimension of authority is the distinction
between line and staff authority.
• Line authority is the right to command immediate
subordinates in the chain of command. E.g Zemen
Bank’s of CEO has line authority over the VP of HR.
• Staff authority is the right to advise, but not
command, others who are not subordinates in the chain
of command.
• A line function is an activity that contributes directly to
creating or selling the company’s products. So activities
that take place within the manufacturing and marketing
departments would be considered line functions.
• A Staff function supports line function and doesn’t
contribute directly to creating or selling.
E.g. Accounting, Human resources, or Legal services.
 5.4.3 Delegation of
authority
• Managers can exercise their authority
directly by completing the tasks
themselves, or they can choose to pass on
some of their authority to subordinates.
• Delegation of authority is the
assignment of direct authority and
responsibility to a subordinate to complete
tasks for which the manager is normally
responsible.
• When a manager delegates work, they
transfer full responsibility, authority and
accountability to the subordinate.
 Cont’d…
The three transfers in delegation include:
• First, the manager transfers full responsibility
for the assignment to the Subordinate.
• The second transfer that occurs with delegation
is that the manager gives the subordinate full
authority over the budget, information,
resources, and personnel needed to do the
job. ‘
• The third transfer that occurs with delegation is
the transfer of accountability. The subordinate
now has the authority and responsibility to do
the job and in return is accountable for getting
the job
 Span of Control
• Span of management/ control refers to the
number of subordinates that single manager can
effectively supervise or should have to direct.
• The manager’s ability to supervise a large
number of subordinates is constrained by
knowledge, experience, time, energy, etc.
• To overcome this limitation, every manager has
to delegate work to subordinates.
• There is no correct number for the span of
control or there is no exact formula to determine
the span of control. It varies from one situation
to another.
 Cont’d…
As a general rule
• The more complex a subordinate’s job, the fewer
will be the manager’s number of subordinates.
• The more routine the work of subordinates, the
greater will be the number of subordinates that
can be effectively directed and controlled.
• Because of these general rule organizations have a
narrow span of control at the top and wider span at
the lower levels. i.e. as one goes up the hierarchy,
the fewer will be the number of subordinates.
• A well trained person/ subordinate follows
directions and master tasks, requires less
supervisory of time and energy.
 Cont’d…
Some of these factors include
• The capability of superiors- an individual’s
ability to manage a greater number of
subordinates is influenced by their
communication, leadership, administrative skills,
and other abilities.
• The competencies of
subordinates(Experience vs Inexperienced)
• The nature of work(Routine Vs Complex),
• The company’s philosophy towards centralization
or centralization in decision making.
• The degree of physical dispersion
 5.4.4 Centralization vs
Decentralization
• Centralization of authority is the location of most
authority at the upper levels of the organization.
• In a centralized organization, managers make most
decisions, even the relatively small ones.
• Decentralization is the location of a significant amount
of authority in the lower levels of the organization.
• An organization is decentralized if it has a high degree
of delegation at all levels.
• In a decentralized organization, workers closest to
problems are authorized to make the decisions
necessary to solve the problems on their own.
• Decentralization develops employee capabilities
throughout the company and leads to faster decision
making and more satisfied customers and employees
 Cont’d…
• The key question is no longer whether companies should
decentralize, but where they should decentralize.
• One rule of thumb is to stay centralized where
standardization is important and to decentralize where
standardization is unimportant.
• Standardization is solving problems by consistently
applying the same rules, procedures, and processes.
• Empowering workers means permanently passing
decision making authority and responsibility from
managers to workers.
• Empowering provide feeling of intrinsic motivation, in
which workers perceive their work to have meaning and
perceive themselves to be competent, having an impact,
and capable of self determination.
 Cont’d…
E.G 1 For instance, in a manufacturing company,
centralized decision-making regarding production
processes and quality control standards can help
maintain consistent product quality and meet
industry standards.
E.G 2 Consider a retail chain operating in various
locations with diverse customer preferences. A
decentralized approach can empower local store
managers to tailor marketing campaigns, product
offerings, and store environments to the specific
needs of their customers. This allows the company
to respond more quickly to local trends and
preferences, enhancing customer satisfaction and
potentially increasing sales.
 5.5 Job Design
Job design—the number, kind, and variety of tasks that
individual workers perform in doing their jobs.

Question:
Could you stand to do the same simple tasks an average of 50 times
per hour, 400 times per day, 2,000 times per week, 8,000
times per month.
5.5.1 Job specialization

Job specialization occurs when a job is

composed of a small part of a larger task or
process.
 Specialized jobs are characterized by simple,
easy-to-learn steps, low variety, and high
repetition, like the McDonald’s drive-through
window job just described.
• One of the clear disadvantages of specialized
jobs is that, being so easy to learn, they
quickly become boring. This, in turn, can
lead to low job satisfaction and high
absenteeism and employee turnover, all of
which are very costly to organizations.
 Cont’d…

Why, then, do companies continue to create

and use specialized jobs?
• The primary reason is that specialized jobs
are very economical.
• Once a job has been specialized, it takes
little time to learn and master.
Consequently, when experienced workers
quit or are absent, the company can
replace them with new employees and
lose little productivity.
Job specialization
example
E.G if you attach side mirrors in an auto factory, you
probably complete this task 45 to 60 times an hour.
E.G If you work as the cashier at a grocery store, you
check out a different customer every two to three
minutes.
E.G if you work as an office receptionist, you may
answer and direct phone calls up to 200 times an hour.
5.1.2 Job Rotation,
Enlargement, and Enrichment
• Because of the efficiency of specialized jobs,
companies are often reluctant to eliminate
them.
• Consequently, job redesign efforts have
focused on modifying jobs to keep the
benefits of specialized jobs, while reducing
their obvious costs and disadvantages.
• Three methods job rotation, job
enlargement, and job enrichment have
been used to try to improve specialized jobs.
 Cont’d…
• Job rotation attempts to overcome the
disadvantages of job specialization by
periodically moving workers from one specialized
job to another to give them more variety and the
opportunity to use different skills.
• For example, the office receptionist who does
nothing but answer phones could be
systematically rotated to a different job, such as
typing, filing, or data entry, every day or two.
• Likewise, the “mirror attacher” in the automobile
plant might attach mirrors in the first half of
the day’s work shift and then install bumpers
during the second half
 Cont’d…
• Job enlargement- increases the number of
different tasks that a worker performs within one
particular job.
 Instead of being assigned just one task, workers with
enlarged jobs are given several tasks to perform.
E.G an enlarged job for the “Mirror attacher” might
include attaching the mirror, checking to see that the
mirror’s power adjustment controls work, and then
cleaning the mirror’s surface.
• Though job enlargement increases variety, many
workers report feeling more stress when their jobs are
enlarged. Consequently, many workers view enlarged
jobs as simply “more work,” especially if they are not
given additional time to complete the additional tasks
 Cont’d…
• Job enrichment attempts to overcome the
deficiencies in specialized work by increasing
the number of tasks and by giving workers the
authority and control to make meaningful
decisions about their work.
E,g The Mirror Attacher job could be enriched as
follows:
• Letting him decide how to attach the mirror to
the car.
• Letting him decide what cleaning products to
use on the mirror.
• Training new employees.
• Troubleshooting problems with mirrors.
 Self Check exercise
• Differentiate between organizing and
organization.
• Discuss the difference between formal and
informal organization.
• Identify the types of departmentalization.
• Identify those factors influence spans of control of
a manager.
• What are the sources of power?
• Differentiate between line and staff authority.
• What are the steps for delegation?
• Describe centralization and decentralization.
• Discuss the advantages and disadvantages of
decentralization.