MGT162

MGT162
FUNDAMENTALS
OF MANAGEMENT
CHAPTER 4 - ORGANIZING
Norchahaya Johar - FPP UiTMT
Lecture Outline
Definition of Organizing
Organizing Process
Organization Structure
Span of Management
Line of Authority
Centralization and
Decentralization
EXECUTIVE SUMMARY
Organizing is the second management function

to cater to the requirements of planning where
resources are arranged and allocated.
Organization links members of the

organization with other assets so that work can
be done in an efficient and effective manner to
fulfill the goals of the organization.
This chapter discusses how organizing assist

other management functions. This involves
identification of organizational activities,
departmentalization of organizational
activities, classifying authority and
coordination between authority and
responsibility.
WHAT IS ORGANIZING??
The process by which work is

arranged and allocated among
members of the organization so that
the goals of the organization can be
efficiently achieved.
The process of determining:

What tasks to be done.
Who will do them.
How those tasks will be managed and
coordinated.
ORGANIZING PROCESS
Detailing of Work
Division of Work
Departmentalization
Coordination of Work
Monitoring and Organizing
1. Detailing work
Every organization is created for a purpose

in which it is supposed to achieve.
The various tasks of the organization must

first be determined.
Example- restaurant owner, before operating

a new restaurant, must detailed out:
the number of persons involved
the type of cooking equipments to be used
tasks involved in operating a restaurant
operating time
menu to be offered to the customers.
2. Division of Work
Divide complex task into components

that can logically and comfortably be
performed by individuals and groups. It
is also known as work specialization.
The tasks have to be allocated to the

members of the organization based on
the individual capabilities such as
experience, qualifications
Must ensure members are fairly

distributed with the work load.
Advantages of Division of
Labor
It increases productivity of
organization by encouraging
specialization specialization allows
each person becomes expert in certain
job.
It fosters specialization because it

creates simplified tasks that are easily
understood and completed very
quickly.
It is easy to assign task to

individuals based upon their talents,
interests and position.
Disadvantages of Division of
Labor
Alienation The sense of control felt

by managers will be different because
of specialization.
Boredom and dissatisfaction Incurred due to repetitive and

specialized task.
3. Departmentalization
The grouping of work activities into

departments that is similar and logically
connected.
A process in which an organization selects

its organization structures
Two types
Functional where the grouping of
related work activities according to
functions
Divisional where corporate division
operate as relatively autonomous
businesses under a larger corporate
umbrella
4. Coordination of work
The process of integrating the objectives

and activities of the separate units
(departments) of an organization so that
the organizational goals can be achieved
efficiently.
The main reason for coordination is that

department and work groups are
interdependent therefore they depend on
one another for information and resources to
perform their respective activities.
The greater the interdependence between

departments, the more coordination and
organization are required if departments
are to be able to perform effectively.
Forms of Interdependence
Pooled
Interdepend
ence
Reciprocal
Interdepend
ence
Sequential
Interdepend
ence
Forms of Interdependence
Pooled
interdependence
Units with pooled

interdependence operate with
little interaction.
The output of the units is pooled
at the organizational level.
The sub-unit does not depend on
one another for their routine
activities but if one unit fails then
all the sub-units will be affected.
Forms of Interdependencecont
Sequential
interdependence
the output of one unit becomes
the input for another in a
sequential fashion.
Here a sub-unit depends on the
earlier performance of a task by
another sub-unit.
This creates a moderate level of
interdependence.
Forms of Interdependencecont
Reciprocal interdependence
A situation where activities flow both
ways between units.
This form is the most complex
If any of the units does not do its job
properly, all the others will be affected.
E.g. Hotel. The housekeeping
department depends on the information
from the Reservation department to get
ready with the clean room; reciprocally
the Reservation department depends on
the information from the Housekeeping
department for the room availability to
confirm booking with the customers.
5. Monitoring and Re-organizing
Since organizing is an on going

process, periodic reassessment of the
four preceding steps is necessary.
As the organization grows, the

structure of the organization must be
reevaluated to be sure it is consistent
with the current requirements and see
that it is still effective and efficient.
DEPARTMENTALIZATION
:ORGANIZATION STRUCTURE AND
CHART
Organization Chart
The organization chart is a graphic

representation of a formal organization
structure.
The organizational chart illustrates five

major aspects of an organizations structure
which are as follows:
The division of work
Levels of management
Chain of commands
Positions and types of work performed
The grouping of work segments
Organization Chart
Types of organization
structure/departmentalization
By function
By product
By customer
By geography
Matrix
Network
Structure by Function
Grouping activities by functions

performed.
Activities can be grouped according to

function (work being done) to pursue
economies of scale by placing
employees with shared skills and
knowledge into departments for
example human resources, IT,
accounting, manufacturing, logistics,
and engineering.
Functional departmentalization can

be used in all types of organizations.
Example of Structure by Function
President
V. President
Marketing
V. President
Finance
V. President
Production
V. President
Human
Resources
ADVANTAGES & DISADVANTAGES OF

STRUCTURE BY FUNCTION
ADVANTAGES
Supervision
is easier since
each manager is expert in only
a narrow range of skill
is logical, easy to
understand and effective in
practice
DISADVANTAGES
Does not foster

development of general
managers because of the
narrow range of scope
It is slow in response
especially in large
organization
Responsibility to problems
is difficult to pinpoint.
Difficult to determine
accountability and gauge
performance
It
Suited
to a stable
environment
It
is easier to mobilize
specialized skills and bring
them to bear and carry out
their duty where they are
required

STRUCTURE BY FUNCTIONcont
ADVANTAGES
DISADVANTAGES
It does no encourage
innovation due to its
narrow perspective
Limited view of
organizational goals by
employees as each
employee focuses to
the objective of
his/her department
Fosters
development of
expertise
It
facilitates centralized
direction and controlled
Little
need for internal

coordination within each
department
Structure by Product
Involves the grouping of activities and

functions of a product or related
family of products into one
department.
It is focused on good or service

produced
It groups departments together based

on organizational outputs.
LA Gear is an example of company

that uses product
departmentalization. Its structure is
based on its varied product lines
Example of Structure by Product
President
Vice President
Personal Care
Products
Vice
President
Consumer
Products
Vice
President
Industrial
Products
Vice
President
Electrical
Products
ADVANTAGES & DISADVANTAGES OF STRUCTURE

BY PRODUCT
ADVANTAGES
Easily
coordinated and the

product gets the full
attention to perform well
Development
of a general
management skills
DISADVANTAGES
Duplication of resource
across the departments
such as personnel and
finance.
The interests of the

department may be placed
ahead of the needs and
goals of the organization
Top management will face a

difficulty in controlling,
since departmental
managers are fairly
independent
Fosters
concern for
customers needs
It
eases the burden of top

management since the
department head now
assumes more authority and
responsibility.

STRUCTURE BY PRODUCTcont
ADVANTAGES
DISADVANTAGES
Responsibility
to
problems is easy to
pinpoint.
Easy
to determine
accountability and gauge
performance
Promotes
product
innovation and the
tendency for the various
departments to compete
among them.
It is costly
Structure by Customer
Adopted when the various group of

customers of a company have different
interests.
Normally manufacturing firms with a

highly diversified line of products tend
to be organized by customer to satisfy
to a particular class of customer.
Example of Structure by Customer
President
Vice
President
Foreign Trade
Financing
Vice
President
Home
Financing
Vice
President
Agricultural
Financing
Vice
President
Small
Business
Financing

STRUCTURE BY CUSTOMER
ADVANTAGES
are happy
because they are attended
by specialized staffs who
really know their needs
DISADVANTAGES
It may be difficult to
coordinate operations
between competing
customer demands
The customer groups

may not always be
clearly defined
It is also costly to get

the right staff with
such abilities
Customers
It
develops expertise in
the customer handling
Structure by Geography
Brings together in one department all activities

performed in the region where the unit conducts its
business
Used when there is a need to differentiate products or

services in various locations, such as different regions
of a country.
It is common in international operations where

unique cultures and requirements of particular
regions need to be addressed to.
For example, the organization structure of Coca-Cola

has reflected the companys operation in two broad
geographic areas the North American sector and the
international sector, which includes the Pacific Rim,
the European Community, Northeast Europe, Africa
and Latin America groups.
Example of Departmentalization by
Geography
President
Vice
President
North &
Latin
America
Vice
President
Europe
Vice
President
Africa
Vice
President
Asia & Far
East

STRUCTURE BY GEOGRAPHY
ADVANTAGES
It
emphasizes on the interests

of local markets and problems
DISADVANTAGES
Top management will face

difficulty in controlling,
since departmental
managers are fairly
independent
It requires more staff with

general manager abilities
Conflict may arise

between a regional
divisions activities and
the overall organizations
goal
It
offers better services at

lower costs
Responsibility
to problems is
easy to pinpoint. Easy to
determine accountability and
gauge performance
Local
managers know their

environment and face to face
communication is possible and
would be able to make better
decisions
Structure by Matrix
Matrix structure is often referred to as

a `multiple command system where
some employees actually report to two
supervisors or more simultaneously.
The matrix organization has gained a

strong foothold in especially in
construction industry.
Example of Structure by Matrix

General
Manager
Manager of
Project
Project A
Manager
Project B
Manager
Project C
Manager
Manufacturing
Manager
Engineering
Manager
Sales
Manager

STRUCTURE BY MATRIX
ADVANTAGES
DISADVANTAGES
Create confusion
among the employee
when receiving
conflicting order from
the bosses
Team meetings in
matrix are also time
consuming and
sometimes more
discussion than action
Power struggles
between the bosses
Better
cooperation across
functions
Better
customer service,
since there is always a
product or project manager
informed and available to
answer questions
Improved
decision making
as problem solving takes
place at the team level,
where the best information
is available
Structure by Network
Operates by using outsiders such as subcontracting the activities and many of its
major functions to specialized organizations.
The organization may be viewed as `central

core or `central hub surrounded by a
network of outside specialists but the
specialists are not under one roof.
Communication of activities and controlled

are done with the help of information
technology from the central hub to the
specialists and vice versa.
Example of Structure by Network
Design
Company
(Network 1)
Manufacturing
Company
(Network 3)
Central Hub
(Broker)
Transportation
Company
(Network 2)
Distribution
Company
(Network 4)

STRUCTURE BY NETWORK
ADVANTAGES
DISADVANTAGES
It may be difficult to
control and coordinate
among the networks
especially when it is
too big
If one network fails to

deliver, the whole
system suffers the
consequences
Dual loyalties and

conflict
Reduced
administrative
costs and help organization
to remain competitive
It
can operate with fewer

full-time employees and
less-complex internal
system
Fast
actions or quick
decisions among the
networks to show their
abilities and hope to get
more business in the future
Span of Management (Control)
Defined as the number of employees

(subordinates) reporting to a given
supervisor/manager (boss).
It defines the layers of management

that exist within the organization
Narrow span shows only few

subordinates are under the
supervision of a given manager.
Wide span indicates the manager

supervises many subordinates.
Span of Management
(Control)...cont
NARROW/TALL
SPAN
Narrow
span of
management has narrow
span, and sometimes
referred as steep or lean
span of management
Advantages
Close supervision
Close control
Rapid communication
between subordinates
and supervisors
WIDE SPAN
Wide span of management

sometimes referred as flat span
of management.
Advantages
Superiors are forced to
delegate and put
empowerment to practice
Clear policies must be made
to avoid confusion
Less overhead cost of
supervision
Better communication and
coordination
Suitable for repetitive jobs
Span of Management
(Control)...cont
NARROW SPAN
Disadvantages
of
narrow span of
management
Tall organizations have
more managers, they
are more costly
Superiors tend to get
too involved in
subordinates work
It will cause excessive
distance between the
lowest and top levels
WIDE SPAN
Disadvantages
of wide
span of management
Little communication
because of too many
subordinates
There is a danger of the
superiors loss of
control
The organization
requires an exceptional
quality manager to
handle the situation
which means high costs
Chain of Command
The line of authority and

responsibility that flows through the
organization
It will make it easier for the

organization members to
understand:
to whom they can delegate
who can delegate to them
to whom they are accountable
Chain of Commandcont
The unity of command principle

states that each person in the
organization should report to only one
superior of boss. It is intended to
avoid confusion among the
subordinates to receive instructions
from many bosses and which one is to
be done first.
Authority
A power which is given to a person the

right to act in ways needed to carry
out the assigned tasks within
recognized boundaries. This right
arises from their formal position in
an organization.
Power is the ability to exert influence,

for example the ability to change the
behavior or attitude of someone. The
authority given is linked with the
responsibility to carry out the tasks.
Authoritycont
Responsibility is the duty to perform the

task or activity in which an employee has
been assigned.
There are two major views on the origin of

formal authority in organizations:
Classical view: authority comes from the
top and pass it down from level to level.
Management has the right to give orders
and the duty of the subordinates to
follow the orders
Acceptance view: the management has
the right to give orders and the duty of
the subordinates to think and to take
alternative actions either to accept or to
reject
orders.
Norchahaya
Johar - the
FPP UiTMT
Authoritycont
Line
of authority
a form of authority in which

individuals in management
positions have the power to
direct and control immediate
employees.
Line managers may be defined
as those in the organization
directly responsible for
achieving these goals.
Characteristics of Line of
Authority
Pertains to superior subordinate

relationship
It is directly related to objectives of the

organization
Deals mainly with the exercise of authority

along the channel of line authority
Identifies units that initiate and carry

through to conclusion the basic activities
The manager is a doer
Designates a line manager
Staff Authority
Staff Authority can be defined as a

form of authority granted to staff
specialists in their areas of expertise.
Mainly based on expert power
For example Human Resource

Manager is a staff specialist in the
area of human resource management
who is responsible to assist the line
manager.
Characteristics of Staff
Authority
Characteristically, it is a manager-tomanager relationship
It is indirectly related to the objectives of

the organization
Deals mainly with the exercise of

authority to a channel of line authority
Includes all units that are not line
Manager has supporting role and aids the

doer
Designates a staff manager
Functional Authority
Right to control the activities of other

departments which are related to
specific staff responsibilities
DELEGATION
Defined as the assignment to another

person of formal authority and the right
to make decisions and to take action on
specific activities.
Even though some part of the tasks is

given to the subordinates, the
managers responsibility is not
surrendered and is still responsible to
see that the job is done accordingly.
The delegation of authority by superiors

to subordinates is necessary for the
efficient functioning of any organization,
since no superior can personally
accomplish or supervise all the
organizations tasks.
FACTORS FOR DELEGATION
The culture of the organization
The specific situation involved
The relationships, personalities, and

capabilities of the people in that
situation
REASON FOR DELEGATION

Through
delegation managers
burden is partly released by the
subordinates an would be able to
concentrate on a more important
matter
Manager
would be able to receive

more responsibilities from their
superior
In
some cases subordinates are

much more effective to solve the
problem, as they are the ones who
confronted the problem everyday
REASON FOR DELEGATIONcont

Delegation
helps to develop the

skills of the subordinates, and
through time it improves their
managerial abilities
It
speeds up decision making

and sometimes may reduced
the costs to the organization
EMPOWERMENT
Employees, managers, or team at all

levels in the organization are given
the power to make decisions without
asking their superiors for permission.
SIGNS OF TOO LITTLE

DELEGATION
Taking work home
Performing employee tasks
Being behind in work
Continual feeling of pressures and

stress
Rushing to meet deadlines
Not meeting deadlines
Employees seeking approval before

acting
DELEGATION PROCESS
BARRIERS TO DELEGATION AND

HOW TO OVERCOME
OVERCOMING
BARRIERS
BARRIERS
Some
managers are so
disorganized that they are
unable to plan work in
advance and, as a result,
cannot delegate properly
Managers must give their

subordinates real freedom to
accomplish delegated tasks
Managers must accept that

there are many ways to solve
the problem and the path
taken by their subordinates
may be different from their
own, therefore allow them to
use their creativity and
ingenuity
Improve communication
between managers and
subordinate
Some
managers are worry

that their subordinates will
do too well and pose a threat
to their own advancement
Managers
may not trust the

subordinate to do the job
well
BARRIERS TO DELEGATION AND

HOW TO OVERCOMEcont
OVERCOMING
BARRIERS
BARRIERS
No
rewards for the job done
Do
not want to accept

additional responsibility
because it means burden or
additional works to the one
that has been assigned
No
proper communication
given with regards to the
importance of delegation
(parties are willing to accept
for a win-win situation)
Increases in the
complexity of
delegated assignments
over time
Provide training
CENTRALIZATION VS
DECENTRALIZATION
CENTRALIZATIO
N
process of
systematically retaining
power and authority in
the hands of higher-level
managers and therefore
the concentration of
authority for most
decisions are at the top
level of an organization.
DECENTRALIZATI
ON
A process of
systematically
delegating power and
authority throughout
the organization to
middle and lowerlevel.
It is the dispersion of
authority to make
decisions as far down
the chain of command
as possible.
ADVANTAGES AND DISADVANTAGES

OF CENTRALIZATION
ADVANTAGES
It
is easy to have a uniform

policy
The
concentration of
authority are at the top and
therefore it provides control
over the organization and
ensures adherence to the
laid down policies
It
is administratively
convenient and focal point
for each function is ready
discernible
DISADVANTAGES
Burdening of top
managers
The control can

become autocratic and
inflexible
Does not promote the

development of future
managers

OF CENTRALIZATIONcont
ADVANTAGES
DISADVANTAGES
It can lead to frustrations

among members of staff,
particularly the managers
and supervisor are unable
to use their discretion but
are force to operate
according to inflexible rules
Bureaucratic control
method may be imported,
resulting in a proliferation
of forms and rigid
procedures slowing down
the operations of the
organization
It
is possible to have
common standards
throughout the
organization
The
organizations will
benefit from the
economies of scale

OF DECENTRALIZATION
ADVANTAGES
Unburdening
DISADVANTAGES
May results in loss of

some control by upper
level managers
Extensive
decentralization
sometimes are not
possible due to lack of
qualified managers
Involves considerable
expenses for training
managers
of top
managers
Improved
decision
making because decisions
are made closer to the
scene of action
Better
training, morale,
and initiative at lower
levels

OF DECENTRALIZATIONcont
ADVANTAGES
flexibility and
faster decision making in
rapidly changing
environments
More
Increases complexity of
coordination of
decentralized
organizational units
May not be favored by

economies of scale of
some operations
development
of general managers
in adaptation to
fast-changing environment
It is difficult to have a
uniform policies
through the
organization
Promotes
Aids
DISADVANTAGES
END OF CHAPTER 4
Source: Management: Challenges for

Tomorrows Leaders by Goodman, Fandt,
Michlitsch and Lewis

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Norchahaya Johar - FPP UiTMT

Norchahaya Johar - FPP UiTMT

Organizing is the second management function

Organization links members of the

This chapter discusses how organizing assist

Norchahaya Johar - FPP UiTMT

Norchahaya Johar - FPP UiTMT

The process by which work is

The process of determining:

Norchahaya Johar - FPP UiTMT

Every organization is created for a purpose

The various tasks of the organization must

Example- restaurant owner, before operating

Divide complex task into components

The tasks have to be allocated to the

Must ensure members are fairly

Norchahaya Johar - FPP UiTMT

It fosters specialization because it

It is easy to assign task to

Norchahaya Johar - FPP UiTMT

Alienation The sense of control felt

Boredom and dissatisfaction Incurred due to repetitive and

Norchahaya Johar - FPP UiTMT

The grouping of work activities into

A process in which an organization selects

Norchahaya Johar - FPP UiTMT

The process of integrating the objectives

The main reason for coordination is that

The greater the interdependence between

Norchahaya Johar - FPP UiTMT

Norchahaya Johar - FPP UiTMT

Units with pooled

5. Monitoring and Re-organizing

Since organizing is an on going

As the organization grows, the

Norchahaya Johar - FPP UiTMT

Norchahaya Johar - FPP UiTMT

The organization chart is a graphic

The organizational chart illustrates five

Norchahaya Johar - FPP UiTMT

Norchahaya Johar - FPP UiTMT

Grouping activities by functions

Activities can be grouped according to

Functional departmentalization can

Norchahaya Johar - FPP UiTMT

Example of Structure by Function

Norchahaya Johar - FPP UiTMT

ADVANTAGES & DISADVANTAGES OF

Does not foster

ADVANTAGES & DISADVANTAGES OF

need for internal

Norchahaya Johar - FPP UiTMT

Involves the grouping of activities and

It is focused on good or service

It groups departments together based

LA Gear is an example of company

Norchahaya Johar - FPP UiTMT

Example of Structure by Product