UniverSity of Gondar

ColleaGe of bUSineSS and eConomiCS

department of manaGement

information SyStemS

introdUCtion to manaGement

GroUp aSSiGnment
name id no
1. HanaAbrham GUR/40895/13
2. HaymaontFiker GUR/40528/13
3. KalkidanTilahun GUR/41517/13
4. MarkosTaddese GUR/22804/13
5. MesayAssegid GUR/40528/13
6. MulukenAshenafi GUR/40118/13
7. NatnaelTadesse GUR/40099/13
8. RedietMandefro GUR/24047/13
9. RudwanJemal GUR/40200/13
10. Samuel Dagnaw GUR/00537/13
11. Samuel G/Tsadik GUR/23679/13
12. SemayawitMihert GUR/40570/13

SUbmitted to - yeSHiWorK

SUbmiSSion date –15/11/14 e.C

 CHapter - tHree

orGaniSinG
Objectives: After reading this lesson, the students will be able to understand the
meaning, characteristics and nature of organization; to explain steps in designing
effective organization; to analyze formal and informal organization; and to understand
the nature of different types of organizations.

Lesson Structure:

3.1 Introduction to the Concept

3.2 Meaning and Characteristics of Organization
3.3 Nature of Organization
3.4 Steps in the Process of Organizing
3.5 Objectives of Organizing
3.6 Principles of Organization
3.7 Advantages of Organization
3.8 Formal and Informal Organization
3.9 Forms of Organization Structure
3.9.1 Line Organization
3.9.2 Line and Staff Organization
3.10 Summary

3.1 introdUCtion to ConCept

Organization is the backbone of management. Without efficient organization, no
management can perform its functions smoothly. Sound organization contributes
greatly to the continuity and success of the enterprise. Once Andrew Carnagie, an
American industrialist said, "Take away our factories, take away our trade, our avenues
of transportation, our money. Leave nothing but our organization, and in four years we
shall have re-established ourselves". That shows the significance of managerial skills and
organization. However, good organization structure does not by itself produce good
performance – just as good constitution does not guarantee great presidents or good
laws a moral society. But a poor organization structure makes good performance
impossible, no matter how good the individuals may be. The right organizational
structure is the necessary foundation; without it the best performance in all other areas
of management will be ineffectual and frustrated.

3.2 meaninG and CHaraCteriStiCS of orGaniSation

The term 'organization' connotes different meanings to different people.
Many writers have attempted to state the nature, characteristics and principles of
organization in their own may. For instance, to the sociologists organization means a
study of the interactions of the people, classes, or the hierarchy of an enterprise; to the
psychologists organization means an attempt to explain, predict and influence
behaviour of individuals in an enterprise; to a top level executive it may mean the
weaving together the functional components in the best possible combination so that
an enterprise can achieve its goals. The word 'organization' is also used widely to
connote a group of people and the structure of relationships. Some important
definitions of organization are given below :

"It is grouping of activities necessary to attain enterprise objectives and the assignment
of each grouping to a manager with authority necessary to supervise it". Koontz and
O'Donnel

"The process of identifying and grouping the work to be performed, defining and
delegating responsibility and authority and establishing relationship for the purpose of
enabling people to work more effectively together in accomplishing objects". Louis A.
Allen

"The structure and process by which a cooperative group of human beings allocates its
tasks among its members, identifies relationship, and integrates its activities towards
common objectives". Joseph L.

Massive From the above definitions, it is clear that organizing is the process of
determining the total activities to achieve a given objective, grouping and assigning of
activities to individuals, delegating them authority necessary to perform the activities
assigned and establishing authority relationship among different positions in the
organization.
An analysis of the above definitions reveals the following characteristics of an
organization :
1. It is a group of individuals which may be large or small.
2. The group in the organization works under the executive leadership.
3. It is a machine or mechanism of management.
4. It has some directing authority or power which controls the concerted efforts of the
group.
5. The division of labour, power and responsibilities are deliberately planned.
6. It implies a structure of duties and responsibilities.
7. It is established for accomplishment of common objectives
8. It is a functional concept.

Sound organization brings about the following advantages :

1. Facilitates attainment of the objectives of the enterprise.
2. Facilitates optimum use of resources and new technological development.
3. Facilitates growth and diversification.
4. Stimulates creativity and innovation.
5. Facilities effective communication.
6. Encourages better relations between the labour and the management.
7. Increase employee satisfaction and decreases employee turnover.

3.3 natUre of orGaniSation

The term 'organization' is used in two different senses. In the first sense it is used to
denote the process of organizing. In the second sense, it is used to denote the results of
that process, namely, the organizational structure. So, the nature of organization can be
viewed in two ways :

(a) Organization as a process; and

(b) Organization as a structure or framework of relationship.

Organization as a process :As a process, organization is an executive function. It

becomes a managerial function involving the following activities :

(i) Determining activities necessary for the accomplishment of the business objective.
(ii) Grouping of interrelated activities.
(iii) Assigning duties to persons with requisite competence,
(iv) Delegating authority, and
(v) Coordinating the efforts of different persons and groups.
When we consider organization as a process, it becomes the function of every manager.
Organizing is a continuous process and goes on throughout the life time of an enterprise.
Whenever there is a change in the circumstances or material change in situation, new
type of activities spring up. So, there is a need for constant review and reassignment of
duties. Right persons have to be recruited and necessary training has to be imparted to
enable them to be competent to handle the jobs. The process of organization thus,
involves dividing the work into rational way and interpreting the activities with work
situation and personnel. It also represents humanistic view of the enterprise since it is
the people which are uppermost in the process of integration of activities. Continuous
review and adjustment makes this dynamic as well.

Organization as a structure or framework of relationships :As

structure, organization is a network of internal authority, responsibility relationships. It

is the framework of relationship of persons, operating at various levels, to accomplish
common objectives. An organization structure is a systematic combination of people,
functions and physical facilities. It constitutes a formal structure with definite authority
and clear responsibility. It has to be first designed for determining the channel of
communication and flow of authority and responsibility. For this, analysis of different
types has to be done. Peter F. Drucker suggests following three types of analysis :

(i) Activities analysis

(ii) Decision analysis, and
(iii) Relations analysis,

A hierarchy has to be built-up i.e., a hierarchy of positions with clearly defined authority
and responsibility. The accountability of each functionary has to be specified. Therefore,
it has to be put into practice. In a way, organization can be called a system as well. The
main emphasis here is on relationships or structure rather than on persons. The
structure once built is not liable to change so soon. This concept of organization is, thus,
a static one. It is also called classical concept. Organization charts are prepared depicting
the relationship of different persons. In an organizational structure, both formal and
informal organizations take shape. The former is a per-planned one and defined by the
executive action. The latter is a spontaneous formation, being laid down by the common
sentiments, interactions and other interrelated attributes of the people in the
organization. Both formal and informal organizations, thus, have structure.

3.4 StepS in tHe proCeSS of orGaniSinG

The managerial function of organizing may be called as the 'process of organizing'.
When the objectives have been set and policies framed, the necessary infrastructure of
organization has to be built up. The concentration goes to activities and functions. These
form 'the building blocks' of the organizational structure. There are no such rules as to
which will lead to the best organizational structure. But the following steps can be of
great help in the designing a suitable structure, which will laid in achieving enterprise
objectives :

1. Clear definition of objectives : The first step in developing an organizational structure

is to lay down its objectives in very clear terms. This will help in determining the type,
stability and basic characteristics of the organization. In fact, organization activities are
detailed in terms of objective to be achieved.

2. Determining activities : In order to achieve the objectives of the enterprise, certain

activities are necessary. The activities will depend upon the nature and size of the
enterprise. For example, a manufacturing concern will have production, marketing and
other activities. There is no production activity in retail establishment. Each major
activity is divided into smaller parts. For instance, production activity may be further
divided into purchasing of materials, plant layout, quality control, repairs and
maintenance, production research etc.

3. Assigning duties : The individual groups of activities are then allotted to different
individuals according to their ability and aptitude. The responsibility of every individual
should be defined clearly to avoid duplication and overlapping of efforts. Each person is
given a specific job suited to him and he is made responsible for its execution. Right man
is put in the right job.

4. Delegating authority :Every individual is given the authority necessary to perform the
assigned activity effectively. By authority we mean power to take decisions, issue
instructions, guiding the subordinates, supervise and control them. Authority delegated
to a person should commensurate with his responsibility. An individual cannot perform
his job without the necessary authority or power. Authority flows from top to bottom
and responsibility from bottom to top.
5. Coordinating activities :The activities and efforts of different individuals are then
synchronized. Such coordination is necessary to ensure effective performance of
specialized functions. Interrelationship between different job and individuals are clearly
defined so that everybody knows from whom he has to take orders and to whom he is
answerable.

6. Providing physical facilities and right environment : The success of an organization

depends upon the provision of proper physical facilities and right environment. Whereas
it is important to have right persons on right jobs, it is equally important to have right
working environment. This is necessary for the smooth running and the prosperity of
the enterprise.

7. Establishment of structural relationship for overall control :It is

very essential to establish well defined clear-cut structural relationships among

individuals and groups. This will ensure overall control over the working of all
departments and their coordinated direction towards the achievements
ofnpredetermined goals of business.

It is thus clear from the foregoing analysis that organization provides a structural
framework of duties and responsibilities. It not only establishes authority relationship
but also provides a system of communication. The various processes of organization
explained above are technically performed through

(a) departmentation
(b) delegation of authority and fixation of responsibilities and
(c) decentralization of authority subject to central control through centralization of
decision-making.

3.5 obJeCtiveS of orGaniSinG

Every economic activity which is deliberately done has some purpose. When a group of
people assemble without any per-planed aim or purpose, it is not an organization but
just a mob. But when, for instance they are invited to participate in a conference, an
element of purpose has been introduced. A purpose refers to commitment to desired
future. Objectives and purposes, generally, are interchangeable terms. Why should
business enterprise organize itself ? The answer to this question brings out its objectives.
Objectives of a business organization are distinguished from the objectives of other
social organizations. To put it more precisely, the nature of an organization (i.e. political,
social, religious or economic) can only be known by studying its objectives. The
following may be, generally speaking, the objectives (or purpose) of organizing business:

1. Effective management of the enterprise : Effective management organization which

ensures proper balance between authority and responsibility. It achieves a clear line of
communication, and defines the areas of work. It is the organization which allows the
top management to concentrate on overall planning and supervision, leaving the
routine work for the lower levels of administration. It saves the entire enterprise from
adhocism, over-lappings and inefficiency.

2. Maximum production at minimum cost : The activities are allotted according to the
principle of division of labour. The efficient system of organization encourages every
employee to make his best contribution in raising output. The increase in output and
control of wasteful expenditure helps to decrease the cost of production. The
profitability of the concern will also go up.

3. Sustained growth and diversification : A business enterprise should be a growing

organism. With the passage of time, an enterprise must expand its activities. It should
also aim at diversification of products and markets.

A static business soon grows stale and get out of run. It should grow from a small scale
concern to a medium scale one and from a medium scale concern to large scale one.
Organization plays an important role in this respect. Execution of policies in organized
manner builds the necessary capacity and confidence in undertaking bigger activities.

4. Cooperation of employees :The organizational structure will succeed only if

employees cooperate in the work. The employees learn working in closer cooperation of
others. The management introduces various incentive schemes and gives monetary and
other benefits to the employees, so that they work in a team spirit.

5. Discharging social responsibility :Maximizing of profits, no doubt, is the motive of

every business. Without profit, no business can exist. But business is a part and parcel of
society at large. It cannot survive long by exploiting consumers and society. It has to
serve the society by providing it with goods of good quality at reasonable prices. It has
to ensure smooth supply of goods as per the needs to consumers. The service motto
cannot be realized without a well-knit organization structure. So, to discharge social
obligation is an important objective of building up sound organization. The purpose of
sound organization is :
(i) to establish an activity-authority environment in which people can perform most
effectively.
(ii) to make group action efficient and effective by providing centres for decision making
and a system of communication to effectively coordinate individual efforts towards
group goals.
(iii) to create relationships which minimize friction, focus on the objective, closely define
the responsibilities of all parts and facilitate the attainment of the objective.
(iv) to subdivide the management process by which plans are translated into actions so
as to make management most effective. Thus, to sum up we can say that organization is
a process by which the manger brings order out of chaos, removes conflicts between
people over work or responsibility, and establishes an environment suitable for
teamwork.

3.6 prinCipleS of orGaniSation

Effective and efficient working of any organization depends on how the managerial
function of organization is being performed. The function of organization can be carried
effectively with the help of under mentioned principles:

(i) Division of work :While structuring organization, division of work, at the very outset,
should be considered as the basis of efficiency. It is an established fact that group of
individuals can secure better results by having division of work. Therefore, while
designing the organization we should aim at making suitable grouping of activities. This
is also called the principle of specialization.

(ii) Attention to objectives : An organization is a mechanism to accomplish certain goals

or objectives. The objectives of an organization play animportant role in determining the
type of structure which should be developed. Clearly defined objectives facilitate
grouping of activities, delegation of authority and consequently effective coordination.

(iii) Span of management : Span of management also refers to span of control signifying
the number of subordinates reporting directly to any executive. It is an established fact
that larger the number of subordinates reporting directly to the executive, the more
difficult it tends to be for him to supervise and coordinate them effectively. This
important principle of management should also be kept in mind.
(iv) Unity of command : Organization structure should also be designed in such a way
that there exists unity of command in the sense that a single leader is the ultimate
source of authority. This facilitates consistency in directing, coordinating and controlling
to achieve the end objectives.

(v) Flexibility : While designing the organization it should be kept in mind that
organizational structure should not be regarded as static. Every organization is a living
entity in a living environment which is fast changing . As such there must be sufficient
room for changing and modifying the structure in the light of environmental changes so
that the ultimate objective of the organization is achieved.

(vi) Proper balance :It is important to keep various segment or departments of an

organization in balance. The problem of balance basically arises when an activity or a
department is further divided and subdivided into smaller segments. The problems of
balancing also crops up with the growing of any organization in its size and functioning.

(vii) Management by exception :It is a fundamental principle that makes any

organization effective in its true sense. This principle signifies that problems of unusual
nature only should be referred upward and decided by higher level executives in the
managerial hierarchy, whereas the routine problems should be passed on to lower
levels and resolved there. Application of this principle as such, certainly requires
adhering to the principle of delegation of authority. The principle of exception is thus of
significant practical utility and applies to all levels in the organization structure.

(viii) Decentralization : This principles is of great significance to big organizations.

Decentralization implies selective dispersal of authority to help departments and units
to run effectively and efficiently without frequent interruptions from the top of the
enterprise. It requires very careful selection of what decisions to push down into the
organization, of what to hold at or near the top specific policy making to guide the
decision-making, selection and training of people and adequate control.
Decentralization, as such, embraces all areas of management and evidently is of
overwhelming significance in organization structure.

(ix) Departmentation :Departmentation is the process of grouping activities into units

for purposes of administration. In other words, it denotes grouping of related jobs and
activities without violating the principle of homogeneity over which an executive has
authority to exercise and assert. The main advantages of departmentation are that it
enables individual executive to mange his subordinates effectively since a manageable
number of persons are brought under the direct supervision of individual executive.

(x) Efficiency : The organization should be able to attain the predetermined objectives at
the minimum cost. It is done so, it will satisfy the test of efficiency. From the point of
view of an individual, a good organization should provide the maximum work
satisfaction. Similarly, from the social point of view, an organization will be efficient
when it contributes the maximum towards the welfare of the society.

(xi) Scalar principle :Scalar chain refers to the vertical placement of superiors starting
from the chief executive at the top through the middle level to the supervisory level at
the bottom. Proper scalar chain or line of command is prerequisite for effective
organization.

(xii) Unity of direction :This means that each group of activities having the same
objectives should have one plan and one head. There should be one plan or programme
for each segment of work which is to be carried under the control and supervision of
one head or superior. If different plans or policies are followed in one department by
the subordinates, confusion is bound to occur.

(xiii) Continuity :The form of organization structure should be such which is able to
serve the enterprise to attain its objectives for a long period of time.

(xiv) Coordination : The principal of coordination underlines that there should be proper
liaison and cooperation between different departments and units of work. Unity of
efforts for the accomplishment of desired objectives is the main aim of organization.
This can be achieved through the principle ofcoordination.

(xv) Authority and responsibility :Authority should commensurate with responsibility.

While assigning the responsibility, authority should also be assigned. If authority is not
granted, the subordinates cannot discharge their responsibility properly.

3.7 advantaGeS of orGaniSation

The primary duty of management is to achieve the objectives of the enterprise. The
objectives may be social, economic, political or religious. Proper organization of men,
materials, money and equipment is necessary. Organization is the mechanism through
which management directs, coordinates and controls the business. A sound organization
offers the following advantages, which summarizes its importance :

1. Enhancement of managerial efficiency : A sound organization brings a proper

coordination among various factors of production and leads to their optimum utilization.
It avoids confusion, duplication and delays in work. It motivates the worker by proper
division of work and labour. It reduces the work load of executives by delegation of
authority.

2. Growth, expansion and diversification :Organization provides the framework within

which an enterprise can expand and grow. Through organization, management can
multiply its strength. In a good organization, the money and effort spent on different
activities are in proportion to their contributions. It is through proper organization setup
that many firms have grown from humble beginning to a giant size.

3. Specialization : A sound organization structure provides the benefits of specialization.

Various activities are allocated between different individuals according to their
qualifications, experience and aptitude. It increases their efficiency. Systematic
organization of activities helps to secure economics and to minimize costs.

4. Adoption of new technology : A properly designed and wellbalanced organization

permits prompt adoption and optimum use of technological improvements. It has the
capacity to absorb changes in the environment of business and to provide a suitable
reaction to such changes. A good organization helps in the development of new and
improved means of doing things.

5. Coordination :Organization facilitates coordination of diverse activities. Different

functions are welded together to accomplish the desired objectives. Clear lines of
authority and responsibility between various positions, ensure mutual cooperation and
harmony in the enterprise. A good organization enables people to work with team spirit.

6. Training and Development :By delegating authority to lower levels, training and
development of future executives is made possible. A good organization puts 'right man
at the right job' and provide them right training and managerial development
programmes. By appointing employees in different department assigning them different
jobs, their training needs can be ascertained.
7. Creativity, initiative and innovation :A good organization encourages initiative and
creative thinking. Employees are motivated to break new grounds and try
unconventional methods. A sound organization offers the scope for recognition of merit
followed by financial incentives to the personnel showing creativity.

8. Check on corrupt practices :A weak and unsound organization is source of corruption

and inefficiencies. Well organized, welldefined,disciplined and sound organizations
boost the morale and motivation of workers. It develops a feeling of involvement,
belongingness, devotion, honesty and sincerity among employees. It prevents
corruption, inefficiencies and wastage in an enterprise.

9. Proper weightage to all activities :A sound organization divides the entire enterprise
into different departments, sections and subsections according to the functions to be
performed by them. Each function of an enterprise has got its own importance.
Emphasis is given according to their relative importance. Funds and manpower is
allocated to their relative importance.

10. Better human relations : Human beings involved in an organization are only
dynamic element of organization. A dedicated and satisfied group of persons proves an
asset to any establishment. An organization, built on sound principles, helps harmony in
human relations. With properly defined authority, responsibility and accountability,
different persons enjoy job-satisfaction. Organization consists of human beings and their
satisfaction helps in improving human relations. Thus, organization is the foundation of
management. Sound organization is an indispensable mean for efficient management
and better business performance. It not only facilitates efficient administration but also
encourages growth and diversification. It provides for optimum use of new technology,
stimulates innovation and creativity.

3.8 formal and information orGaniSation

Formal organization refers to the structure of relationships deliberately built up by the
top management to realize the objectives. In this form instructions, responsibility,
authority, accountability, lines of command, and positions and authority are clearly
defined and declared. Each person is aware of his duties and authority. Every
subordinate is expected to obey his supervisor in the formal chain of command. Each
individual is fitted in the organization like a cog in the machine. It is designed after
careful identification, classification and assignment of business activities. So, it is
conscious creation of relationships. Informal organization refers to the network of
personal and social relationships which arise spontaneously when people working
together interact on personal whims, likes and prejudices. Such relations are not
created by the top management and they are not recognized formally. The informal
groups sometimes run parallel to the formal ones. Informal relations are not portrayed
on organization charts and manuals. An informal organization provides an opportunity
to workers to come close to each other, develop a feeling of cooperation and
coordination among themselves.

Difference Between Formal and Informal Organizations

The difference between formal and informal organizations can be enumerated briefly as
below : 1.
Formation : Formal organization is deliberately created by management. It is the result
of a conscious and deliberate effort involving delegation of authority. On the other hand,
informal organization arises spontaneously and no conscious efforts are made to create
it. It takes place on the basis of relationships, caste, culture, occupations and on
personal interests etc. No delegation of authority is essential in informal organization.
2. Basis : A formal organization is based upon rules and procedures, while an informal
organization is based upon attitudes and emotions of the people. It depends on informal,
social contacts between people working and associating with one another. 3.
Nature : A formal organization is stable and predictable and it cannot be changed
according to the whims or fancies of people. But an informal organization is neither
stable nor predictable.
4. Set up :A formal organization is a system of well defined relationships with a definite
authority assigned to every individual. It follows predetermined lines of communication.
On the contrary, an informal organization has no definite form and there are no definite
rules as to who is to report to whom. Even a low-placed employee may have an informal
relationship with an officer far above him in the formal hierarchy.
5. Emphasis :In a formal organization, the main emphasis is placed on authority and
functions. In an informal organization the stress is on people and their relationships.
6. Authority : Formal authority is attached to a position and it flows from top to bottom.
Informal authority is attached to a person and it flows either downwards or horizontally.

7. Existence : A formal organizations exists independently of the informal groups that

are formed within it. But an informal organization exists within the framework of a
formal structure.
8. Rationality : A formal organization operates on logic rather than on sentiments or
emotions. All activities follow a predetermined course. As an association between like-
minded people, an informal organization has little rationality behind it. In an informal
organization, activities are influenced by emotions and sentiments of its members.
9. Depiction :Formal organization can be shown in an organization chart or a manual.
But an informal organization cannot be depicted in the chart or manual of the
enterprise.

3.9 formS of orGaniSation StrUCtUre

Organization requires the creation of structural relationship among different
departments and the individuals working there for the accomplishment of desired goals.
The establishment of formal relationships among the individuals working in the
organization is very important to make clear the lines of authority in the organization
and to coordinate the efforts of different individuals in an efficient manner. In order to
organize the efforts of individuals, any of the following types of organization structures
may be set up :

i. Line organization
ii. Line and staff organization
iii. Functional organization
iv. Committee organization
v. project Organization, and
vi. Matrix organization.
The nature, merits and demerits of line organization, and line and staff organization are
discussed as under :
3.9.1 Line Organization

The line organization represents the structure in a direct vertical relationship through
which authority flows. It is the simplest from of organization structure and is also known
as scalar or military organization. Under this, the line of authority flows vertically
downward from top to bottom throughout the organization. The quantum of authority
is highest at the top and reduces at each successive level down the hierarchy. Every
person in the organization is in the direct chain of command as shown in In line
organization, the line of authority consists of an uninterrupted series of authority steps
and forms a hierarchical arrangement. The line authority not only becomes the avenue
of command to operating personnel but also provides the channel of communication,
coordination and accountability in enterprise.

In line organization, the line of authority consists of an uninterrupted series of authority

steps and forms a hierarchical arrangement. The line authority not only becomes the
avenue of command to operating personnel but also provides the channel of
communication, coordination and accountability in Enterprise.

Advantages of Line Organization

(i) It is very easy to establish line organization and it can be easily understood by the
employees.
(ii) If facilitates unity of command and thus conforms to the scalar principle of
organization.
(iii) There is clear-cut identification of authority and responsibility relationship.
Employees are fully aware of the boundaries of their jobs.
(iv) It ensures excellent discipline in the enterprise because every individual knows to
whom he is responsible.

(v) It facilitates prompt decision-making because there is definite authority at every level.
An executive cannot shift his decision making to others, nor can the blame be shifted.

Disadvantages of Line Organization

(i) With growth, the line organization makes the superiors too overloaded with work. If
the executive try to keep up with every activity, they are bogged down in myriad details
and are unable to pay proper attention to each one. It will hamper their effectiveness. (ii)
There is concentration of authority at the top. If the top executives are not capable, the
enterprise will not be successful.
(iii) Line organization is not suitable to big organizations because it does not provide
specialists in the structure. Many jobs require specialized knowledge to perform them.
(iv) There is partially no communication from bottom upwards because of concentration
of authority at the higher levels. If superiors take a wrong decision, it would be carried
out without anybody having the courage to point out its deficiencies. In spite of these
drawbacks, the line organization structure is very popular particularly in small
organizations where there are less number of levels of authority and a small number of
people. A modification of this structure is line and staff organization under which
specialists are attached to line executives to provide them specialized assistance on
matters of great importance to be enterprise.

3.9.2 line and Staff orGanization

The line executive is often described as the individual who stands in the primary chain of
command and is directly concerned with the accomplishment of primary objectives. Line
organization provides decision-making authority to the individuals at the top of the
organization structure and a channel for the flow of communication through a scalar
chain of authority. Line executives are generalists and do not possess specialized
knowledge which is a must to tackle complicated problems. With a view to give
specialist aid to line executives, staff positions are created throughout the structure. Staff
elements bring expert and specialized knowledge to provide advice to line managers so
that they may discharge their responsibilities successfully. In line and staff organization,
the line authority remains the same as it does in the line organization. Authority flows
from top to bottom. The main difference is that specialists are attached to line managers
to advise them on important matters. These specialists stand ready with their specialty to
serve line men as and when their services are called for to collect information and to give
help which will enable the line officials to carry out their activities better. The staff
officers do not have any power of command in the organization as they are employed to
provide expert advice to the line officers. Staff means a supporting function intended to
help the line manager. In most organizations, the use of staff can be traced to the need for
help in handling details, gathering data for decision-making and offering advice on
specific managerial problems. Staff investigates and supplies information and
recommendations to managers who make decisions. Line and staff structure has gained
popularity because certain problems of management have become very complex and, in
order to deal with them, expert knowledge is necessary which can be provided by the
staff officers. For instance, personnel department is established as staff department to
advise the line executives on personnel matters. Similarly, finance, law and public
relations departments may be set up to advice on problems related to finance and
accounting, law and public relations. The staff officers do not have any power of
command in the organization as they are employed to provide advice to the line officers.
In most organizations, the use of staff can be traced to the need for help in handing details,
gathering data and offering advice on specific managerial problems.
advantaGeS of line and Staff orGanization

(i) Specialized knowledge. Line managers get the benefit of specialized knowledge of
staff specialists at various levels.
(ii) Reduction of burden. Staff specialists relieve the line managers of the botheration of
concentrating on specialized functions like accounting,selection and training, public
relations, etc.
(iii) Proper weightage. Many problems that are ignored or poorly handled in the line
organization can be properly covered in the line and staff organization by the use of staff
specialists.
(iv) Better decisions. Staff specialists help the line executives in taking better decisions
by providing them with adequate information of right type at the right moment and expert
advice.
(v) Flexibility. Line and staff organization is more flexible as compared to the
lineorganization. General staff can be employed to help line managers at various levels.
(vi) Unity of command. Under this system, the experts provide special guidance without
giving orders. It is the line manager who only has got the right to give orders. The result
is that the enterprises takes advantage of functional organization while maintaining the
unity of command i.e., one subordinate receiving orders from one boss only.

Demerits of Line and Staff Organization

Line and staff organization suffers from the following drawbacks :

(i) There is generally a conflict between the line and staff executives. There is a danger
that the staff may encroach on the line authority. Line managers feel that staff specialists
do not always give right type of advice, and staff officials generally complain that their
advice is not properly attended to.
(ii) The allocation of duties between the line and staff executives is generally not very
clear. This may hamper coordination in the organization. (iii) Since staff men are not
accountable for the results, they may not be performing their duties well.
(iv) There is a wide difference between the orientation of the line and staff men. Line
executives’ deals with problems in a more practical manner. But staff officials who are
specialists in their fields tend to be more theoretical.

SUperiority of line and Staff orGanization over line orGanization

Line and staff organization is considered better than the line organization because of the
following reasons :
(i) Staff makes available expert advice to line executives. This is necessary to deal with
complex problems of management. For instance, personnel department is established as a
staff department to advise the top executives and other line executives on personnel
matters.
(ii) Better decisions are ensured in line and staff organization as compared to a simple
line organization
(iii) Line and staff structure is more suitable for large organizations as expert advice is
always available. The line managers can make use of the knowledge of staff specialists to
deal with complicated problems. Therefore, line and staff organization is certainly better
than line organization.

3.10 SUmmary
The word organization has two common meanings. The first meaning refers to the
process of organizing. The second meaning signifies the institution or group which comes
into existence as a result of organizing. The organizing process involves a number of
steps, viz. consideration of objectives, grouping of activities into departments, deciding
which departments will be treated line and which will be related staff, determining the
levels at which various types of decisions are to be made, determining the span of
supervision and setting up a coordination mechanism. There are a number of principles of
organizing, which should be remembered in the process of organizing