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The importance of organizing can be readily seen when managers allocate organizational resources efficiently and effectively by specifying when, where, and how resources are to be used. Effective organizing gets rid of the duplication of effort and/or maximizing the utilization of resources. For example, resources can be moved from an unprofitable business unit to a more profitable one.
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Organizational structure is a system that consists of rules and policies to outline work roles, responsibilities and reporting relationships and how they fit within the overall system.
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A visual representation of an organization structure is an organization chart.
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Organizational design is the process of developing or changing an organization structure.
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Two categories of organizational design are mechanistic design and organic design.
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The key elements in organizational design include: • division of labor • chain of command • span of control • centralization / decentralization • formalization • departmentalization
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Division of labor or work specialization is the degree to which work activities are divided into separate jobs. Although the division of labor is advantageous, too much specialization leads to problems as the job tasks can become repetitive and boring.
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The chain of command is defined as the hierarchy of authority and the reporting relationships from one management level to the next. It clearly shows who is responsible for each task and who has the authority to make decisions.
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The unity of command recommends that an individual should report to only one supervisor or manager. If an employee has more than one supervisor, conflicting demands from multiple supervisors may lead to problems and conflict in the chain of command.
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Authority refers to the right of a person to give instructions, make decisions and allocate resources. In an organization, a manager has the formal authority from his or her position that is accepted by subordinates. The authority flows down the hierarchy such that top managers have more authority than those at the bottom.
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There are two forms of authority: line authority and staff authority.
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Line authority takes the form of employeremployee relationship that moves from top to bottom according to the chain of command.
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Staff authority is created to assist, support, and advise the work of line managers.
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Power is a personal trait or capacity to influence others’ actions, decisions, and performances. The major source of power is knowledge and expertise.
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It may be thought that the terms authority and power are one and the same. However, there is a difference between the two in organizations. While authority flows downward through the hierarchy, power flows in any direction and individuals can be powerful even though s/he has little authority.
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Responsibility refers to the obligation or expectation that all employees have to perform the duties associated with their jobs. Those duties are assigned by managers who have the authority to assign work to employees.
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Delegation occurs when a manager divides work among subordinates and gives them the responsibility and authority to accomplish tasks. A manager is responsible for all work in an area and can only complete the work by delegating part of the work to subordinates. This process continues down the chain of command.
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To be more effective at delegation, managers should keep in mind to select the right person for the job, to ensure that authority equals responsibility, to maintain feedback and to evaluate and to reward performance. In today’s dynamic business environment, managers may need to delegate more to lower level employees especially those who regularly face customers. This way, organizations can be more responsive to customer needs while becoming more flexible and adaptable to the changes in the environment.
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The span of control or span of management refers to the number of employees directly supervised by a manager. The question is the appropriate number of subordinates each manager can efficiently and effectively manage in the hierarchy.
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The span of control in a company influences the height of its hierarchy. A flat organization structure has relatively fewer layers of management while a tall structure has multiple layers. Generally, the lower the height of the structure, the wider the span of control.
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Centralization is when most important decisions are made by managers at the top of the hierarchy. When the decision authority is pushed down to lower levels of the hierarchy, this means decentralization.
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Formalization refers to the use of written or computerized documents to describe and guide behaviors and activities of employees. Documentation includes rules, procedures, regulations, policy manuals and job descriptions. Formalization is used to standardize operations in organizations.
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Departmentalization is the basis for grouping of jobs into logical units. Managers group employees into departments, each a unique group of resources to perform certain related tasks.
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Five common types of departmentalization are functional, product, customer, geographic, and process.
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Functional departmentalization groups work activities together by the functions employees perform.
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