Chapter Four

Organizing Function
Introduction
Once managers have their plans in place, they need to organize the
necessary resources to accomplish their goals. Organizing, the second of
the universal management functions, is the process of establishing the
orderly use of resources by assigning & coordinating tasks. The organizing
process transforms plans into reality through the purposeful deployment of
people & resources within a decision-making framework known as the
organizational structure.

What is organizing: Meaning and Importance?

 A key issue in accomplishing the goals identified in the planning
process is structuring the work of the organization.
 Organizations are groups of people, with ideas & resources, working
toward common goals.
 The purpose of the organizing function is to make the best use of the
organization's resources to achieve organizational goals

 Organizing is the process of identifying and grouping tasks to be

performed, assigning responsibility and delegating authority, and
establishing relationships for the purpose of enabling to work most
effectively together in the accomplishment of objectives.

 Organizing results in an organization structure that can be thought of

as a framework that holds the various functions together according to
the pattern determined by the management.
 An organization structure is a tool of management to achieve
plans.

 Organizational structure is the formal decision-making

framework by which job tasks are divided, grouped, and
coordinated. Formalization is an important aspect of structure. It is
the extent to which the units of the organization are explicitly defined
and its policies, procedures, and goals are clearly stated. It is the
official organizational structure conceived and built by top
management. The formal organization can be seen and represented in
chart form. An organization chart displays the organizational
structure and shows job titles, lines of authority, and relationships
between departments.

As plans change, the organization structure should be responsive. And even

when objectives are similar, what works for one organization will not
necessarily work for another for the purpose.

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The management (managerial) functions of planning and organizing are
intimately related organizing begins with and is governed by plans, and
plans state where the organization is going and how it will get there. An
organization must be built, or an existing one must be modified, to make
sure that the plans are executed and that their goals are reached.

It has been observed that organizations due to several reasons, keep their
organizational structures changing to the tunes of the times. Accordingly,
the management function of organizing might sometimes be referred as Re-
organizing.

Organizing structure is a framework that managers devise for dividing and

coordinating the activities of members of an organization. Because
strategies and environmental circumstances differ from one organization to
the next, there are a variety of possible organizational structures. (As plans
change, the organization structure should be responsive. And even when
objectives are similar, what works for one organization will not necessarily
work for another.

The Organizing Process

Organizing is an ongoing managerial process whether forming a new
organization, or reorganizing the existing one, managers do take five
fundamental steps.
1) Consider Plans and Goals: As noted earlier, plans and their goals
affect organizing. Therefore it is vital for a manager to consider any
changes in the plans and goals of the firms. As a result of changes in
plans, new departments may be created and old ones may be given
additional responsibilities and the organizing process must see this in
its telescope.
2) Determine the Work Activities Necessary to Accomplish
Objectives: It is the step through which managers know what tasks
must be done. Here, all the necessary activities that should be
incorporated into the business are identified. Once managers know
what tasks are to be done, they can classify and group these activities
into manageable work units
3) Classify and Group Activities: This step asks managers to perform
three activities. One is to examine each activity identified to
determine its general nature (i.e. marketing, production, finance,
personnel, etc. The other activity is to group the activities into these
related areas and the remaining one is to establish the basic
department design for the organization structure. While grouping the
activities, the management classifies and clusters the activities by
using the guidelines of homogeneity or similarity of activity. Grouping
similar activities is based up on the concept of division of work
(labor). Division of labor is breaking down the work into its basic
components.

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 4) Assign and Delegate Appropriate Authority: The identified
essential activities after being classified and grouped into major
operational areas must be assigned the appropriate authority to
accomplish the task. In this step; the type and quantity of authority
necessary.
5) Design a Hierarchy of Relationships: This step requires the
determination of both vertical and horizontal operating relationships
of the organization as a whole. The vertical structuring of the
organization results in a decision making hierarchy showing who is in
charge of each task, of each specialty area, and of the organization as
a whole. Consequently, the level of management from the bottom to
top in the organization and it will help for the practice of the chain of
command, or hierarchy of decision making levels. On the other hand,
horizontal structuring defines the working relationships between
operating departments and also makes the final decision on the span
of control (the number of subordinates under direction of each
manager).

Major Principles Used in Organizing

Organizing makes use of the following principles.
1) Division of Work: is dividing large tasks into smaller packages of
work to be distributed among several people. In other words, it is
breaking down complex organizational tasks in to a more simple,
routine and well defined tasks. Division of work is one of the oldest
managerial principles. It facilitates the organizing process. The
advantage of division of work (specialization) is obviously its direct
contribution in upgrading productivity. However, it has also
disadvantages like boredom and absenteeism. When given a specific
job for a long period of time, some people have the habit of being
bored of the given job and boredom in turn is the major cause for
absenteeism. In order to overcome the disadvantages of division of
work, managers usually apply concepts like job enlargement and job
enrichment. Job enlargement and enrichment focus on creating
additional features of a job so that a worker will not perform the same
job forever.
2) Hierarchy (Scalar Chain): Scalar chain represents a line of
authority in an organization. It specifies the order of rank from top
management to the lowest level of the enterprise. It shall clearly
answer “who is the boss of whom?”, “who shall work for whom” and
“who should be supervised by whom?” It is seen as the end result of
organizing process. Scalar chain is instrumental in applying both
unity of command and direction and it can also signify where solution
finder for a given problem is located.

Scalar chain is very much related with the chain of command. A chain of
command is the plan that specifies who reports to whom in an organization.

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The result of the decisions about span of control and chain of command is a
pattern of multiple levels in an organization structure which is known as
hierarchy. The higher the employee in an organization hierarchy, the higher
will be the employee’s organizational responsibility Vice-versa
3) Span of Control: The span of management or control refers to the
number of people and departments that report directly to a particular
manager. Span of Control is an important decision because:
 It can affect what happens to work relationships in one particular
department.
 It can affect the speed of decision making in situations where multiple
levels in the hierarchy are necessarily involved.

There is no correct number for the span of control. A wide span of control is
the type of structure where significantly many subordinates are supervised
by one superior. On the other hand, narrow span of control is an
organizational structure situation where the number of subordinates is not
too much. The number of span of control (having wide or narrow span of
control) is determined by the following variables:

Complexity and variety of the subordinates’ work

 The more complex subordinate’s job, the fewer should be number of
subordinates. If the jobs are complex, a given manager can not best
control many subordinates.
 The more routine the work of subordinates, the greater the number of
subordinates.

The ability and training of the subordinates

 The more capable and experienced the subordinates are, the greater
should be the number of subordinates. If the subordinated being
supervised are talented individuals, you need not control them closely.
Therefore more number of subordinates for one manager can be
assigned.
 The more trained the subordinates are, the greater should be the
number of subordinates.
The ability of the manager
 If the manager has high potential ability, the number of subordinates
can be made too many.
Company’s philosophy for centralization and decentralization
 companies that favor centralization usually has narrow span of control
(tall structure)
 companies that encourage decentralization usually display wide span
of control (flat structure)

Spans within effective organizations vary greatly. The actual number

depends on the amount of complexity and the level of specialization. In
general, a wide span of control is possible with better-trained, more

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experienced, and committed employees. Narrow span of control presumably
results in tall organizational structure, whereas wide span of control results
in flat structure. Tall and flat organizational structures both represent a
bundle of their own advantages and disadvantages
4) Coordination: Co-ordination is the process of integrating the
activities of separate departments in order to pursue organizational
goals effectively. Without co-ordination, people would lake lose sight
of their roles within the total organization and be tempted to pursue
their own departmental interests at the expense of organizational
goals.
 The extent of co-ordination depends on the nature of the tasks
performed and the degree of interdependence of the people in the
various units performing them.
 High degree of co-ordination as likely to be beneficial for works that is
non-routine and unpredictable, for work in which factors in the
environment are changing, and for work in which interdependence is
high.
5) Departmentation: Departmentalization is the process of combining
jobs (activities) into groups. These sets of activities may further be
sub-divided into sections or units. These groupings may be done on
the basis of primary function such as production, finance, sales,
personnel etc. or it may be done on derivate basis, such as type of
customers, geographical areas etc.

After reviewing the plans, usually the first step in the organizing process is
departmentalization. Once jobs have been classified through work
specialization, they are grouped so those common tasks can be coordinated.
Organizational structure refers to the way in which organizations activities
are divided, grouped and coordinated into relationships between managers
and employees, managers and managers, and employees and employees.
Numerous bases for Departmentalization exist. Departmentalization is the
basis on which work or individuals are grouped into manageable units.
There are five traditional methods for grouping work activities.

Bases for Departmentalization

i. Functional Departmentation: Departmentalization by function
organizes by the functions to be performed. The functions reflect the
nature of the business. The advantage of this type of grouping is
obtaining efficiencies from consolidating similar specialties and
people with common skills, knowledge and orientations together in
common units.

The functional design of organization groups positions into departments

according to their main functional areas. Functional organization is perhaps
the most logical and basic form of departmentalization. The type and
number of functions would depend on the type of the organization. A

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business firm includes functions such as production, marketing, finance,
accounting and personnel. A hospital consists of functions such as surgery,
psychiatry, pharmacy, personnel and nursing.
ii. Territorial (Geographic) Departmentation: If an organization
serves different geographical areas the divisional structure may be
based up on geographical bases. The territorial basis frequently is
used by firms whose operations are similar from region to region.

Departmentalization by geographical regions groups jobs on the basis of

territory or geography. For example, Merck, a major pharmaceutical
company, has its domestic sales departmentalized by regions such as
Northeast, Southeast, Midwest, Southwest, and Northwest.
iii. Product Departmentation: When an organization uses its different
products as the basis for divisions, it is using a product division
structure. This structure is useful when firm’s goods and services are
specialized and require specific expertise for their manufacture and
sale. In many large, diversified companies, activities and personnel
are grouped on the basis of product.

Departmentalization by product assembles all functions needed to make and

market a particular product are placed under one executive. For instance,
major department stores are structured around product groups such as
home accessories, appliances, women's clothing, men's clothing, and
children's clothing.
iv. Customer Departmentation: It refers to grouping activities so that
they reflect a primary interest in customers. To cater to the
requirements of clearly defined customer group, businesses and
managers frequently arrange activities on the basis of type of
customers.

Departmentalization by customer groups jobs on the basis of a common set

of needs or problems of specific customers. For instance, a plumbing firm
may group its work according to whether it is serving private sector, public
sector, government, or not-for-profit organizations.
v. Process Departmentalization: Departmentalization by process
groups jobs on the basis of product or customer flow. Each process
requires particular skills and offers a basis for homogeneous
categorizing of work activities. A patient preparing for an operation
would first engage in preliminary diagnostic tests, then go through
the admitting process, undergo a procedure in surgery, receive post
operative care, be discharged and perhaps receive out-patient
attention. These services are each administered by different
departments.

Types of Organizational Structures and Design

Organizational Structure

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Even though the differences among organizations are enormous, there are
many similarities that enable them to be classified. One widely used
classification is the twofold system (mechanistic versus organic forms of
organizational structure) developed by Tom Burns and G. M. Stalker in their
study of electronics firms in the United Kingdom. The type of organizational
structure optional to this division is contingency form of organizations.

The mechanistic structure is the traditional or classical design, common in

many medium- and large-size organizations. Mechanistic organizations are
somewhat rigid in that they consist of very clearly delineated jobs, have a
well-defined hierarchical structure, and rely heavily on the formal chain of
command for control. Bureaucratic organizations, with their emphasis on
formalization, are the primary form of mechanistic structures. According to
Max Weber, bureaucracy is a form of organization characterized by a
rational, goal-directed hierarchy, impersonal decision making, formal
controls, and subdivision into managerial positions and specialization of
labor.

Bureaucratic organizations are tall consisting of hierarchies with many

levels of management. In a tall structure, people become relatively confined
to their own area of specialization. Bureaucracies are driven by a top-down
or command and control approach in which managers provide considerable
direction and have considerable control over others. Other features of the
bureaucratic organization include functional division of labor and work
specialization.

On the other hand, the organic structure is more flexible, more adaptable to
a participative form of management, and less concerned with a clearly
defined structure. The organic organization is open to the environment in
order to capitalize upon new opportunities.

Organic organizations have a flat structure with only one or two levels of
management. Flat organizations emphasize a decentralized approach to
management that encourages high employee involvement in decisions. The
purpose of this structure is to create independent small businesses or
enterprises that can rapidly respond to customers' needs or changes in the
business environment. The supervisor tends to have a more personal
relationship with his or her employees.

On the other end, Contingency organization means that the most

appropriate organization structure for each situation depends upon
technology, organizational size, goals and strategy, environmental stability,
and characteristics of the employees. Mechanistic organizations are best
suited to repetitive operations and stable environments, while organic
organizations are best suited to an uncertain task and a changing
environment.

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 Flat & Tall Structure

a) Tall structure
Merits Demerits
Closer control Slows down decision making
Better coordination Less control and coordination
Most suited to individuals desiring Distorted Communication
challenge responsibility and autonomy
Fast decision making Distance between top level &
Workers level
Closer supervision and fewer mistake Increased administrative overhead

-
b) Flat Structure
Merits Demerits
Reduces over head costs and the number Control and coordination difficult
Of subordinates as the work is highly interlocking.
Improved and fast communication Less control and coordination
Most suited to individuals desiring
challenge responsibility and autonomy
Fast decision making

Organization Design
Designing an organization involves choosing an organizational structure
that will enable the company to most effectively achieve its goals.
Organization design is the creation of an organization's structure,
traditionally functional, divisional, and/or matrix.

Functions or divisions arrange traditional organizations. In a functional

organization, authority is determined by the relationships between group
functions and activities. Functional structures group similar or related
occupational specialties or processes together under the familiar headings
of finance, manufacturing, marketing, accounts receivable, research,
surgery, and photo finishing. Economy is achieved through specialization.
However, the organization risks losing sight of its overall interests as
different departments pursue their own goals.

In a divisional organization, corporate divisions operate as relatively

autonomous businesses under the larger corporate umbrella. In a
conglomerate organization, divisions may be unrelated. Divisional
structures are made up of self-contained strategic business units that each
produces a single product. A central headquarters, focusing or results,
coordinates and controls the activities, and provides support services

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between divisions. Functional departments accomplish division goals. A
weakness however, is the tendency to duplicate activities among divisions.

In a matrix organization, teams are formed and team members report to two
or more managers. Matrix structures utilize functional and divisional chains
of command simultaneously in the same part of the organization, commonly
for one-of-a-kind projects. It is used to develop a new product, to ensure the
continuing success of a product to which several departments directly
contribute, and to solve a difficult problem. By superimposing a project
structure upon the functional structure, a matrix organization is formed that
allows the organization to take advantage of new opportunities. This
structure assigns specialists from different functional departments to work
on one or more projects being led by project managers. The matrix concept
facilitates working on concurrent projects by creating a dual chain of
command, the project (program, systems, or product) manager and the
functional manager. Project managers have authority over activities geared
toward achieving organizational goals while functional managers have
authority over promotion decisions and performance reviews
Matrix organizations are particularly appealing to firms that want to speed
up the decision-making process. However, the matrix organization may not
allow long-term working relationships to develop. Furthermore, using
multiple managers for one employee may result in confusion as to manager
evaluation and accountability. Thus, the matrix system may elevate the
conflict between product and functional interests. The essence of matrix
organization normally is the combining of functional and project or product
patterns of Departmentation in the same organization structure.

An organization with a matrix structure has two types of structure existing

simultaneously. Employees have in effect two bosses that work in two
chains of command.
1) One chain of command is functional or divisional
2) The second is a horizontal overlay that combines people from various
division or functional departments into a project or business team led
by a project or group manager who is an expert in the team's assigned
area of specialization

This kind of organization occurs frequently in construction (for example

building a bridge) in marketing (for e.g. planning and executing an
advertising campaign for a major new product)

Advantages of Matrix form of Structure

1) The matrix structure is an efficient means for bringing together the
diverse specialized skills required to solve complex problem.
2) Problems of coordination that plague most functional designs are
minimized here because the most important personnel for a project
work together as a group.

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 3) By working together people come to understand the demands faced
by those who have different areas of responsibility.
4) It gives the organization a great deal of cost saving flexibility. Because
each project is assigned only the number of people it needs,
unnecessary duplication is avoided.

Disadvantage
Not everyone adapts well to a matrix system. To be effective, team members
most have good interpersonal skills and must be flexible and cooperative.

Authority and its Distribution

What is Authority?
Authority is the right to command resources of organizations or the right to
give orders within a given hierarchy to exact obedience. A manager derives
authority by virtue of his position as manager. By virtue of his authority, the
manager acquires the right to decide, to act and to command the persons
working under him. Thus, all organizational members have a responsibility
to carry out the best of their abilities, the duties that their superiors assign
to them and the functions of their positions. In other words, authority is the
set of rights that enables members to discharge their responsibilities and it
can be viewed from two perspectives.

Authority is the legitimate power of a supervisor to direct subordinates to

take action within the scope of the supervisor's position. Formal authority in
the organization can be traced all the way back to the U.S. constitutional
right to own property. The owner of the organization has the authority to
make decisions. For example, entrepreneurial firms have an informal
arrangement of employees and centralization of decision-making authority,
the owner.

Classical View of Authority (top-down theory of authority)

According to the classical view, authority originates from a very high level
then it is lawfully passed down from level to level. At the top of the
hierarchy may be God or the state. The military has long operated on this
view.

Acceptance View of Authority (bottom-up theory of authority)

Acceptance view of authority finds the basis of authority is the influenced
rather than the influencer. Accordingly, existence of authority is felt only in
its acceptance by the influenced and not otherwise. This view says authority
of management is only to the extent of which subordinates are willing to
accept.

Types of Authority

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 1) Line Authority: Gives a manager the right to direct the work of
his/her employees & make many decisions without consulting others.
Line managers are always in charge of essential activities such as
sales, and they are authorized to issue orders to subordinates down
the chain of command. Line authority is represented by the standard
chain of command or it flows downward in an organization directly
from superior to subordinates. Line authority is direct supervisory
authority from superior to subordinate. Authority flows in a direct
chain of command from the top of the company to the bottom.
2) Staff Authority:-is advisory in nature. Managers whose role is to
provide advice or technical assistance are granted advisory authority.
Staff authority is more limited authority to advice. It is authority that
is based on expertise & which usually involves advising line
managers. Staff members are advisers & counselors who aid line
departments in making decisions but do not have the authority to
make final decisions. Staff supervisors help line departments decide
what to do and how to do it. They coordinate & provide technical
assistance or advice to all advisors, such as accounting, human
resources, information technology, research, advertising, public
relations & legal services. Staff authority is not providing any basis for
direct control over the subordinates or activities of other departments
with whom they consult. (Within the staff managers own department
he or she exercises line authority over the department’s
subordinates.”
3) Functional Authority:-The right to control activities of other
departments as they relate to specific staff responsibilities is known
as functional authority. It is authority delegated to an individual or
department over specific activities undertaken by personnel in other
departments. Staff departments may be given functional authority to
control their systems procedures in other departments. E.g. Audit
department has legitimate authority to control & regulate the
activities of other departments such as finance, inventory etc, (here it
can be considered as both expert & legitimate power) & Personnel
dep't has legitimate power to control recruitment, selection
performance appraisal system with in other departments.

Power Vs Authority
Many scholars argue that terms power and authority are synonymous, but
the words are only related to each other. Power is the ability to exert
influence on other people; power can be present in any relationship. Still,
managers are not the only people who can exert influence at organizations.
Employees say and do things to influence managers. Authority on the other
side only holds functional with relationship within organizations.

In addition to authority, managers have more personal sources of power to

draw upon for getting things done. Power is the ability to exert influence in

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the organization beyond authority, which is derived from position. The
manager’s personal power could include job knowledge, personal influence,
interpersonal skills & ability to get results, empathetic ability, persuasive
ability, and physical strength. Everyone has power in one form or another &
it is by exercising this power that organizations get things accomplished.
Managers who are capable of achieving their objectives independently of
others are said to possess strength. When these "strong" managers involve
& incorporate others into their plans and activities they are making use of
power, and in fact increasing the total amount of power available to
incorporate into a particular situation or problem. Involving employees in
setting objectives & making decisions as it relates to their jobs empowers
everyone, and results in greater job satisfaction and commitment, as well as
increased productivity. Empowering employees provides them with greater
autonomy.

The Sources of Power

Power does not drive simply from an individual’s level in the organization
hierarchy. The source of power may be present in a variety of human
relationships. In an organization, each may occur at all levels. The following
are among sources of power.
A) Reward Power: - is based on one person (the influencer) having the
ability to reward another person for carrying out orders or meeting
performance requirements which may be expressed or implied.
Reward power results in people doing what is asked because they
desire positive benefits or rewards. Rewards can be anything a person
values (praise, raises, and promotions).
B) Coercive power: - based on the influencer ability to punish another
individual for not meeting requirements. It is virtually the opposite of
reward power. Coercive power is the threat of sanctions. It is
dependent on fear and includes, but is not limited to the ability to
dismiss, assign undesirable work, or restriction of movement.
C) Legitimate power: - (formal authority) exists when an employee or
the ones those are being influenced acknowledges that the influencer
is entitled to exert influence within certain bounds. Legitimate power
is a result of the position a person holds in the organization hierarchy.
This position power is broader than the ability to reward and punish,
as members need to accept the authority of the position. The right of a
manager to establish reasonable work schedules is an example of
"downward" legitimate power. A plant guard may have the 'upward'
authority to require even the company president to present an
identification card before being allowed onto the premises. Simply,
legitimate power is the power which is derived from a person’s official
position in an organization.
D) Expert Power: - is based on the perception or belief that the
influencer has some relevant expertise or special knowledge that the
person being influenced doesn't. When we do what our doctors tell us

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 we are acknowledging their expert power. Expert power comes from
expertise, skill, or knowledge.
E) Referent Power: - is based on the identification of an individual with
who is held in high esteem, admired, and often imitated by the
subordinates. Charismatic managers usually have this power.
Referent power refers to a person who has desirable resources or
personal traits. It results in admiration and the desire to emulate.
F) Information Power: information power is a kind of power that is
closely related with communication. Information power is based upon
the persuasiveness or content of a communication and is independent
of the influencing individual. If an employee believes his manager is
capable of communicating effectively with others, he is more likely to
be affected by the information power of his boss.

In conclusion, in the process of power exercising, there are two

independent parties. These are the one influencing and the ones being
influenced. The party that is being influenced believes that the party
influencing holds one of the powers we have discussed so far.

Delegation of Authority
It is impractical for the supervisor to handle all of the work of the
department directly. In order to meet the organization's goals, focus on
objectives, and ensure that all work is accomplished, supervisors must
delegate authority. Authority is the legitimate power of a supervisor to
direct subordinates to take action within the scope of the supervisor's
position. By extension, this power, or a part thereof, is delegated and used
in the name of a supervisor. Delegation is the downward transfer of formal
authority from superior to subordinate. The employee is empowered to act
for the supervisor, while the supervisor remains accountable for the
outcome. Delegation of authority is a person-to-person relationship
requiring trust, commitment, and contracting between the supervisor and
the employee.

The supervisor assists in developing employees in order to strengthen the

organization. He or she gives up the authority to make decisions that are
best made by subordinates. This means that the supervisor allows
subordinates the freedom to make mistakes and learn from them. He or she
does not supervise subordinates' decision-making, but allows them the
opportunity to develop their own skills. The supervisor lets subordinates
know that he or she is willing to help, but not willing to do their jobs for
them. The supervisor is not convinced that the best way for employees to
learn is by telling them how to solve a problem. This results in those
subordinates becoming dependent on the supervisor. The supervisor allows
employees the opportunity to achieve and be credited for it.

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An organization's most valuable resource is its people. By empowering
employees who perform delegated jobs with the authority to manage those
jobs, supervisors free themselves to manage more effectively. Successfully
training future supervisors means delegating authority. This gives
employees the concrete skills, experience, and the resulting confidence to
develop themselves for higher positions. Delegation provides better
managers and a higher degree of efficiency. Thus, collective effort, resulting
in the organization's growth, is dependent on delegation of authority

Delegation is the assignment of authority and responsibility to others in

order to carry out certain assignments. The chief executive cannot perform
all the tasks of the organization himself, so he must share his duties with his
immediate subordinates. Who in turn delegate to their subordinates and
this process continues until all activities are assigned to persons who are
made responsible for performing them.

Delegation is the process of pushing down of authority from superior to

subordinates who possess specialized skill to perform such job. This is
because the assignment of responsibility for some department or job usually
goes hand in hand with the delegation of adequate authority to get the work
done.

Delegation of authority is a pre requisite for the existence and efficiently

functioning of the organization. Delegation is a two-sided affair by which
the superior must be willing to sacrifice a portion of his authority and the
subordinate must be willing to shoulder the additional responsibility.

Advantages of Delegation
When used properly, delegation has several important advantages. These
are
1) It results in quick decisions
2) Delegation gives executives more time for strategic planning and
policy making since the central mgt. will not be involved in day-to-day
decisions, it can concentrate its efforts on higher-level work and
problems.
3) Delegation is a Motivational Factor: Subordinates usually respond to
delegated authority with favorable attitude. They become more
responsible and more dedicated to their work and they feel proud of
being given the authority.
4) Delegation can be a training ground for executive ability:
Subordinates, when given the control over the problems they face, are
able to analyze the situation and make decisions accordingly. This
continuous involvement prepares them for problem solving process
when they reach a higher executive level.

The Process of Delegation

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The process of delegation consists of three steps.
1) Assignment of tasks to the Subordinates
In this step, specific tasks or duties that are to be undertaken are identified
by the manager for assignment to the subordinate. However, the
distribution and allocation of duties among subordinates must be fair and
well balanced. The tasks should be distributed in such a manner that the
subordinates are not unnecessarily over burdened and that each one is
capable of efficiently completing it.

2) Delegation of authority
In order for the subordinate to complete the duties or tasks, the authority
necessary to do them should be delegated by the manager to the
subordinate. A guideline for authority is that it should be adequate to
complete the task- no more and no less.

3) Acceptance of responsibility
Responsibility is the obligation to carry out one’s assigned duties to the best
of one’s ability. Responsibility is not delegated by the manager, the
employee accepts it. Then only, the employee can be obligated.

4) Creation of Obligation or Accountability

Accountability has to answer to someone for your actions. The person
assigned the task is morally responsible to do his best since he has willingly
accepted these tasks. Obligation is a personal concern for the task. Even if
the subordinate gets part of the task done through other people, the
obligation and the accountability still lie with the subordinate.

Barriers to Delegation
A) Reluctance of Executive/Managers
è An executive may believe that he can do his work better than his
subordinates. He might believe that his subordinates are not capable
enough.
è Lack of confidence and trust in subordinates.
è Sense of Insecurity. Some managers fell very insecure in delegating
authority, especially when the subordinate is capable of doing the job
better. i.e. -Loss of power and competition from the subordinate
è A manager may fear being known as 'Lazy' if he delegates most of his
tasks

B) Reluctance of Subordinates
è Fear of criticism and dismissal for making wrong decisions.
è The subordinates may not be given sufficient incentives for assuming
extra responsibility, which could mean working harder under
pressure.
è Lack of self - confidence in doing the job

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 è The subordinate may fear that the superior will not be available for
guidance once the delegation is made and this makes them feel
uncomfortable with additional responsibility.
è Some subordinates hesitate to accept new and added assignments
when there is a lack of necessary information and when the available
resources are not adequate or in proper.

Guidelines for Effective Delegation

1) The management must be willing to give employees freedom to
accomplish delegated tasks. This means letting them use choose
methods and solutions different from the ones the manager choose. It
also means giving them the freedom to make mistakes and to learn
from their mistakes, Mistakes are not obstacles to stop delegating, but
rather an opportunity to offer training and support.
2) Open Communication between managers and employees: - Managers
who know the capabilities of their employees can more realistically
decide which task can be delegated to whom. The subordinate must
know precisely what he has to know and do. It should be preferably in
writing with specific instructions so that the subordinated does not
repeatedly refer problems to the manager for opinion and decision.
3) Proper Selection and training: The management must make proper
assessment of subordinates in terms of their abilities and limitations
before delegating the proper authority.
4) Motivate Subordinates: Adequate incentives in the form of promotion,
status better working conditions or additional browses must be
provided for additional work well performed.
5) Establish adequate controls (feedback system)

If there are adequate check points and controls built in the system, like
weekly report...etc., then managers will not be continuously spending time
in checking the performance and progress of subordinates and their
concerns about subordinates performing inadequately will be reduced.

Centralization vs. Decentralization

Centralization is the situation in which authority for most decisions is
concentrated at the top of the managerial hierarchy (selective
concentration).

Decentralization: - requires the authority to be dispersed by extension and

delegation throughout all levels of management. (Dispersion of authority)

Advantages of Centralization
Facilitates the adoption and enforcement of uniform policies and co-
ordination of activities, since all decisions are made at one central point.
1) The quality of the decisions is expected to be higher since the top
management who makes decisions are much more experienced and

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 knowledgeable about organizational problems and situations than the
subordinates.
2) Promotes greater standardization of specialization. Centralization
makes it easier to achieve balance among the activities of different
function and division. For instance, if the departments of production
marketing and finances, each went its own way, then each would try
to make decisions that would beneficial to its department, even at the
cost of other department. This would be harmful to the organization
as a whole.
3) Centralization results in optimal utilization of human and physical
resources.
4) Centralization can be highly motivating and moral - boosting for
executives.
5) It is better to be an important executive of the whole organization
than only one unit. It provides prestige and power, which strengthens
the self-confidence which in turn would be useful in decision making
at times of crisis.

Disadvantages of Centralization
1) Concentration of power among few people
2) It hampers the development of lower levels
3) Complicated communication as decisions affecting lower levels are
made at the top.
4) Superiors are overburdened with multiplicity of tasks
5) Time is wasted.

Advantages of Decentralization: disadvantages of centralization

Disadvantages of Decentralization: advantages of centralization
Reading Assignment!

Refer to the available books and identify the advantages and disadvantages
of all the bases of Departmentation.

Formal vs. informal organization

Formal organization is the structure of roles in a formally organized
enterprise. Communication flow is from top to bottom in the hierarchy.
Formal principles are established for effective formal organization.

Informal organization is a network of social and personal relationship not

established or recognized by the formal organization but arising
spontaneously as people as associate with one another

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