The Organizing Process

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The Organizing Process
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Learning Points

1. Organizational principles/Basic guidelines.
2. Organizational structures.
3. Centralization vs. Decentralization.

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Elements of organizational principles
(Assumptions for management)?
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The Organization Chart
Identifies lines of authority.
Gives employees a better understanding of
the formal structure of the organization.
Helps identify areas of overlapping
responsibility that should be eliminated.
Identifies promotional opportunities for
job applicants and new employees.
Identifies areas suitable for training
and orientation.
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Organizing Function is Helpful By
1. Assuring more efficient use of the
organizations resources (Allocative
efficiency).
2. Improving employee understanding of job
duties and responsibilities.
3. Improving employee morale (motivated
employees).
4. Providing a sense of direction for each of
the organizations functional areas.
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1. Organizations Objectives

• Should be written in context of outcomes,
• understood and accepted by employees, be
• measurable, contain a time reference, and
• be challenging but attainable.
• Unity of direction
• Subordination of individual interests to
• the common interest

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2. Span of Control

• Refers to the number of subordinates
• an individual is able to supervise.
• Generally, 6 to 14 (lt20) subordinates per
  manager.
• Division of Work

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3. Interrelated Functions

• Organizations functions have become so
• interrelated that when a problem arises in one
• functional area, other related functions are also
• likely to be affected.
• Centralization or Decentralization
• Esprit de corps (Group harmony)

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4. Chain of Command

• Identifies who reports to whom within
• an organization.
• Two types
• Vertical chain (Top-down, Bottom-up)
• Horizontal chain.
• Scalar Chain

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5. Unity of Command
States that each employee should be directly
responsible to one supervisor. One-boss system
vs. Two-boss system.
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6. Authority and Responsibility
States that individuals who are given
the responsibility to undertake a task must
also be given an appropriate amount of authority
to ensure task completion.
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7. Work Assignment

• States that each employees work assignments
• should be based on his/her special
• strengths and talents.
• Remuneration of personnel (Fair compensation)
• Stability of personnel tenure (Job Security)
• Order (Right person for right place)

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8. Employee Empowerment

• States that empowered employees are
• encouraged to participate as much as possible in
• making decisions that affect all aspects of
• their job tasks.
• Initiative
• Discipline (Mutual agreement) MBOs

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Start working on Ch2 worksheet!
Line
Organizational Structures
Line and Staff
Functional
Product division
Committee
Matrix
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Line Structure
Is the oldest and simplest of structures.
Has direct authority flowing vertically from the
top.


Is generally found in small organizations because
support staff is needed once they begin to grow.
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Board
President
VP Marketing
VP Production
VP Service
Promotion
Sales
Purchase
Foreman
Supervisor
Purchase
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Advantages of Line Structure
1. Employees are fully aware of the boundaries
of their jobs.
2. Decision making is expedited.
3. Is a simple structure to understand.
4. Employees can be held directly accountable
when they fail to perform as expected.
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Disadvantages of Line Structure
1. Fails to provide specialization needed when
organization begins to grow.
2. Line managers need to begin to perform
specialized activities.
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Line and Staff Structure
Has line authority similar to line structure.
Specialized staff activities are added
that support line activities.

Staff employees assist the line function.
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Board
President
President Council
VP Marketing
VP Production
VP Finance
VP Corp. Affairs
Promotion
Auditing
Foreman
Comptroller
Purchase
Sales
Office Service
HR
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Line employees are directly concerned with the
organizations primary objectives.
Line Employees
Staff Employees
Staff employees support the line employees.
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Advantages of Line and Staff Structure
1. Line employees have time to focus on those
activities directly related to the
organizations primary objectives.
2. Staff employees can lend their specialized
support.
3. Flexibility of staff units facilitates
undertaking new projects.
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Disadvantages of Line and Staff Structure
1. Line and staff employees sometimes are
in conflict with one another.
2. Line employees sometimes suppress the
talents of staff employees.
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Exercise

• Wilcox company (Equipment manufacturing)
• Founded and owned by Sean and David Cox)
• Market expansion (Increased sales volume) ---
  Marginal profits for years
• 6 employees are taking general management
  responsibilities
• 6 employees are involved in either marketing or
  production.
• Try to hire new managers.
• You are consultant for Wilcox company.
• You have to know the following issues.
• Current org. structure and recommended org.
  structure(s)
• Problems for current org. structures and
  management.
• Possible problems for new org. structures and
  management.

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Exercise

• Current org. structure and recommended org.
  structure(s)
• Current Poorly designed line structure.
• Recommendations (1) Current structure with
  several temporary workers.
• (2)Well defined line structure
• (3) Line and Staff structure
• Problems for current org. structures and
  management.
• Poor definitions of authority and responsibility
• Poor structural design
• Poor operational design (Efficiency and
  Effectiveness)
• Owner-Manager issues in the stage of growth.
• Demand projections.
• Possible problems for new org. structures and
  management.
• Confusions (Efficiency and Effectiveness) of new
  structure
• Resistance to the new system and structure
• Owner-Manager issues as barriers for
  transformation and growth
• Old boys vs. New comers

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Division Structure
Companys products provide a basis for its
structure.
Each major product is given division status.
Incorporates line and staff structure into
these divisions.


Each product tends to operate independently
of other divisions.
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Advantages of Division Structure
1. Enables divisions to develop processes that
best meet their needs.
2. Divisions can coordinate their own
activities without constraint from main unit.
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Disadvantages of Division Structure
1. Divisions can go their own way to the
extent that they dont work toward common
goals.
2. Problems of some divisions may eventually
be felt throughout the entire organization.
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Matrix Structure
Is often used by organizations undertaking complex
projects.
Results in the formation of temporary new units
to accommodate the undertaking of a new project.


Involves temporarily borrowing employees from
other areas of the organization and assigning
them to the new temporary unit.
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Advantages of Matrix Structure
1. Allows companies to assign employees on the
basis of their expertise.
2. Helps companies avoid having to hire new
employees for a project.
3. Enables companies to adapt quickly to new
situations.
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Disadvantages of Matrix Structure
1. Employees often have two supervisors.
2. Employees may experience job-related
pressures.
3. Managers may have difficulties coordinating
employee activities.
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Places related activities under jurisdiction of
one individual.
Centralization
Places related activities under jurisdiction of
several individuals throughout the organization.
Decentralization
Efficiency and Effectiveness (Cost-pressure and
Local responsiveness)
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Factors That Determine Feasibility
of Centralization
1. Nature of the organization.
2. Size of the organization.
3. Diversification of the organization.
4. Conformity to standardized processes.
5. Quality of personnel.
6. Distribution of operations.
7. Attitude of personnel.