CHAPTER 7: ORGANIZING BUSINESS ACTIVITIES

REASONS FOR ORGANIZING

 Organizing is undertaken to facilitate the implementation of plans.

 In effective organizing, steps are undertaken to break up the total job into more manageable
man-size jobs.

ORGANIZING DEFINED
Organizing is that management function which relates to the structuring of resources and
activities to accomplish objectives in an efficient and effective manner.
THE ORGANIZATIONAL STRUCTURE & ITS DETERMINANTS

 The structure is the means by which the organization will attain its objectives and goals.
 The structure must be one that considers, apart from the organization’s goals and
objectives, its resources, & its environment, both internal and external.
THE DETERMINANTS OF ORGANIZATIONS STRUCTURE ARE:
1. Strategy, or plans for achieving the company’s objectives:
2. The technology that will be used in carrying out the strategy;
3. The people employed at all levels and their functions; &
4. The size of organization
THE FORMAL ORGANIZATION

 The formal organization is the structure that details lines of responsibility, authority and
position.
 What depicted in the organization chart is the formal organization.
 It is the planned structure and it represents the deliberate attempt to establish
patterned relationships among components that will meet the objectives effectively.
THE FORMAL STRUCTURE IS DESCRIBED BY MANAGEMENT THROUGH:
1. Organizational chart;
2. Organizational manual;
3. Policy manual

 The Organizational Chart is a diagram of the organization’s official positions and formal
lines of authority.
 The Organizational manual provides written descriptions of authority relationships,
details the functions of major organizational units, & describes job procedures.
 The Policy Manual describes personnel activities and company policies.
INFORMAL GROUPS

 There are instances, however, when members of an organization spontaneously

form a group with friendship as a principal reason for belonging.
 This group referred to as an informal group
 It is not a part of formal organization and it does not have a formal performance
purpose.

LEVELS OF MANAGEMENT AND SUPERVISION

 The management and supervision of an organization may be done through levels of

hierarchy which may be flat or tall.
FLAT STRUCTURE

 The flat organization has a few level of management.

 This characteristic provide it with the ff. advantages:
1. Communication is generally faster and less distorted.
2. Decisions can be made more quickly.
3. Supervisor’s salaries are eliminated.
 Flat structures, however, have the ff. distinct disadvantage:
 1. They require managers with experience in the various tasks.
2. A manager may have a little time for all subordinates
3. When the manager is out, the group is without a leader.
4. Managers may have little time to anticipate problems.
TALL STRUCTURE

 The tall structure has many level of management

 It has the ff. advantages
1. Since the average span of control is narrower, the supervisory load is less for each
manager.
2. There are more opportunities of promotion because there are more levels of
positions.
3. Managers are provided with opportunities to specialize.
4. There is less demand for managers with multiple skills.
5. Managers are afforded with more time to attend to other important problems.
 Tall structure are also saddled with disadvantages such as the ff.
1. Communications tend to be slower and distorted because of the number of levels it
has to pass through.
2. The number of management levels also hinders effective decision-making rendering
such activity slower and less accurate.
3. It is more expensive to maintain as there are more managers to compensate.

BASIC ELEMENTS OF ORGANIZATIONAL STRUCTURE

 In designing the organizational structure, certain basic elements are considered. These
are follows:
1. Work Specialization
2. Departmentalization
3. Pattern of authority
4. Span of control
5. Coordination of activities
WORK SPECIALIZATION

 The degree to which tasks are divided in the organization is referred to as work
specialization
 A decision must be made regarding this element and it should be reflected in the
organizational structure
WHY SPECIALIZATION?
 Specialization promotes efficiency.
 This is so because it is presumed that people can perform more efficiently if they master
just one task rather than many tasks.
 When an organization is efficient, it means it can perform its function with the least
amount of resources.
DEPARTMENTATION

 Departmentation refers to the grouping of jobs based on criteria that managers believe
help in the coordination & control of activities.
 A decision must also be made on whether the organization would be departmentalized
or not.
Criteria of grouping jobs
These are follows:
1. Knowledge & skills
2. Work Process and function
3. Time
4. Product
5. Customers
6. Location
ADVANTAGE OF GROUPING JOBS

 These are the ff.

1. Supervision is made easier
2. The sharing of resources, such as men, machines, and materials results to maximum use of
such resources.
3. Common measures of performance is established.
4. Communication is encouraged.

PATTERN OF AUTHORITY

 The pattern of authority as an element in designing organizational structure refers to the extent
by which organizational members are allowed to make decisions without getting the approval of
another member.
 Authority patterns may either be:
1. Centralized- when decision-making is concentrated in the hands of higher-level managers
2. Decentralized- when decision-making authority is granted to middle and lower management
positions.

THE APPROPRIATE PATTERN OF AUTHORITY

 The environments of organizations differ and so no single pattern of authority is appropriate for
all.
 Instead, the pattern of authority must match the organization’s environment.
 Centralized authority is better suited for stable environments, while decentralized authority is
for complex and changing environments.
 Decentralized Authority offers the ff. advantages :

1. Efficiency- red tapes and bottlenecks are reduced.

2. Flexibility- managers can cope with situations as they come.

3. Initiative- managers are highly motivated by the challenge.

4. Motivation- managers are highly motivated by the challenge.

5. Development- managers are provided with opportunity for training.

 Decentralized authority has also some disadvantages.

These are as follows:
1. Control- coordinating overall activities is more difficult.
2. Duplication- there is a great chance of efforts duplicated between departments.
3. Centralized expertise- home office experts maybe overlooked or disregarded.
4. Competency- the organization may not be able to produce competent managers at all levels.
University

Nursing Engineering Business

FIGURE 23. A sample grouping of jobs According to knowledge and skills.

 Company

Credit and
SALES Service
Collection
FIGURE 24. A sample grouping of jobs According to work process and function.

Company

First Shift Second Shift Third Shift

6:00 AM-2:00PM 2:00 PM-10:00PM 10:00 PM-6:00 AM

FIGURE 25. A sample grouping of jobs according to time.

Company

Motorcycle Appliance Lubricants

FIGURE 26. A sample grouping of jobs a according to products.

Company

Cash Credit

Company

Government Consumers

FIGURE 27. A sample grouping of jobs according to customers

Company

Luzon Visayas Mindanao

Division Division Division

FIGURE 28. A sample grouping of jobs according to location

SPAN OF CONTROL

 Span of control is another consideration in designing the organizational structure.

 It refers to the number of subordinates reporting to a single supervisor.
 The span of control may either be narrow or wide.
 It is narrow when there are few subordinates reporting to a supervisor. The narrow span of
control is characterized the ff.
1. There is closer relationship between manager and subordinates;
2. Here is less delegation of authority;
3. Controlling activities are more tight; and
4. There is more time for rewarding behavior
 Span of control is wide when there are many subordinates reporting to a supervisor. The ff.
characteristics are inherent to an organization with a wide span of control:
1. Employees work with little supervision;
2. There is a high level of delegation of authority;
3. Controlling activities are lighter; and
4. There is less time for rewarding behavior

THE APPROPRIATE SPAN OF CONTROL

 Neither the narrow or the wide span of control is applicable to all types of situations.
 There are also situations appropriate for the wide span of control.

COORDINATION

 This terms refers to the linking of activities in organization that serve to achieve a common
goal or objective.
BASIC ORGANIZATIONAL DESIGN
 These are the four basic organizational designs;
1. Functional design
2. Divisional design
3. Hybrid; and
4. Matrix.
FUNCTIONAL DESIGN
 An organization may be designed basically according to function.
 In organizations with functional design, employees are grouped together in separate
departments on the basis of common tasks, skills, or activities.

STRENGHTS OF THE FUNCTIONAL DESIGN

 Using functional design offers some advantages consisting of the ff.
1. Efficient use of resources
2. In- depth skill development
3. Clear career paths
4. Unity of direction
5. Enhanced coordination within function
WEAKNESSES OF THE FUNCTIONAL DESIGN
 These are certain weaknesses inherent to the functional design. These are follows:
1. Slow decision- making
2. Less innovation
3. Unclear performance responsibility
4. Limited management training
5. Poor coordination across functions
DIVISIONAL DESIGN
 The organization with division design is that type where all activities needed to produce a good
or service are grouped together into an independent unit.
STRENGHTS OF THE DIVISIONAL DESIGN

 The divisional design is strong on certain points pertaining to the ff.

1. Adaptation to unstable environment
2. High customer satisfaction
3. High task coordination
4. Clear performance responsibility
5. General management training

WEAKNESSES OF THE DIVISONAL DESIGN

 The weaknesses of divisional design are as follows:

1. Inefficient use of resources
2. Low in-depth training for personnel
3. Focus is on division objectives
4. Loss of control

HYBRID DESIGN

 The hybrid design is a combination of divisional units and functional departments located at
corporate headquarters.

STRENGTHS OF THE HYBRID-DESIGN

 The hybrid-designed organization is strong in terms of the ff.
1. Simultaneous coordination
2. Integration of goals with objectives
3. Efficient and highly adaptable

WEAKNESSES OF THE HYBRID-DESIGN

 The organization with a hybrid-design is weak on the ff. points:

1. Slow response to exceptional situation
2. Conflict between headquarters and division
3. Administrative overhead

MATRIX DESIGN

 An organization with a matrix design is one that implements functional and divisional structures
simultaneously in each department.
 The employee is supervised by the functional manager in his work as a specialist.
 The divisional manager integrates the activities of the specialists.
 The following conditions favor the use of matrix design:
 1. Environmental pressures exist for a dual focus, such as innovation and quality.
2. Large quantities of information must processed.
3. Efficiency is needed in the use of resources.
STRENGHTS OF THE MATRIX DESIGN
 The matrix-designed organization has an array of strengths which are as follows:
1. It allows demands from the environment to be met simultaneously.
2. It provides flexibility
3. It encourages resource efficiency
4. It enhances skill development
5. It increases motivation and commitment among employees
6. It aids top management in planning.
WEAKNESSES OF THE MATRIX DESIGN
 The matrix designed organization has its own share of weaknesses. They are the ff.
1. It creates dual- authority confusion.
2. It spawns power struggle.
3. It is time-consuming.
4. It requires interpersonal skills training.
5. It generates high implementation cost.