Organizing: It’s Process, Structure, Importance and Other Details

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Any situation involving two or more persons working collectively requires organising. The act of organising involves integrating, balancing and coordinating the activities of people working together for seeking common goals.

The organizing process, thus, establishes working relationship among employees by assigning those tasks and giving them enough rights (i.e. authority) to perform those tasks.

It is because when employees accept assigned work, they become responsible for performing it, and for discharging responsibility they are given requisite authority. The person who gives authority is called ‘superior’ and the person to whom authority is given are known as ‘subordinate’.

Thus, the process of organising gives rise to a network of authority-responsibility relationships among members of the organisation. This network of authority-responsibility relationships is called ‘organisation structure’. These various aspects of the organising function of management are discussed here under the following two broad heads:

I. Organising as a process; and

II. Organising as a structure.

Organising as a Process:

Concept of Organising:

The term ‘organising” refers to the process of identifying and grouping of activities to be performed and dividing them among the individuals and creating authority and responsibility relationship among them for the accomplishment of organisational objectives.

Characteristics of Organising:

Nature of the organising function can be understood in reference to the following aspects:

1. Organising is a basic function and a sub-process of management:

Organising constitutes an essential element in the main process of management. Organising is done in relation to all other functions of management. The organising function follows the function of planning and the other functions of management follow organising. Thus, organising is a sub-process of management.

2. Organising is a continuous process:

An organisation is a continuing entity. The need for organising function is felt whenever new activities or functions are introduced, or existing functions and activities are re-shuffled in the organisation.

3. Organising is a function of all managers:

The management function of organising is practised by all the managers in the organisation. The nature and importance of the organising function, however, may vary with different managers. Middle-level managers are significantly involved in organising their departmental activities as a large number of members are involved in the performance of departmental activities.

4. Organising involves coordination:

In order to create a balance and structure in the organisation, the activities of members need to be well-coordinated.

5. Goal-oriented:

Organising is designed on the basis of objectives and it aims at achieving them smoothly.

6. Group effort:

Organising deals with group efforts that are made for attaining common goals.

7. Establishes authority-responsibility relationship:

Organising establishes authority- responsibility relationship among the organisational members.

Process of Organising – The steps:

The process of organising involves the following steps:

1. Identification and enumeration of activities:

At the first stage of organising process, a manager identity and determines those activities that are to be performed for achieving common goals. Those activities are determined on the basis of common goals.

For example, an organisation producing and distributing washing machines has to perform large number of activities that may be related to production, distribution, finance, purchase and personnel, etc.

2. Division of activities:

After determining and enumerating activities, these are to be divided and sub-divided into small components known as jobs and tasks.

3. Grouping-up of activities:

Once the activities have been broken into small elements, these can be easily put into various groups on the basis of their relationship and similarities. For example, each job and task related to production is to be grouped up into production group, and elements that are related to marketing, finance and purchase are to be grouped-up in the respective groups.

4. Assignment of group of activities:

After putting various activities into several groups, these are to be assigned or allotted to the various departments created for this purpose, or to the employees if the activities are limited. At the time of making such assignment, it is ensured that the department has required competence and resources for performing that group of activities.

5. Granting necessary rights:

Assignment of group of activities among various departments is followed by giving them adequate rights so that they can perform assigned work in a satisfactory manner.

The rights are granted through the process of delegation. In this process higher level manager gives away some of his right in favour of other who becomes his subordinate and it continues till the last level of management.

6. Coordinating the functioning of various departments:

In the process of organising, attempts are also made for coordinating working of individual with respective department, and finally to coordinate functioning of various departments towards the achievement of common goals.

Need and Importance of Organising:

The organising process creates a network of roles and relationships and provides a framework within which each employee performs the activities that have been assigned to him.

His role becomes more meaningful and he contributes effectively for achieving pre­determined objectives. Therefore, organising is regarded as a mechanism or means to achieve planned objectives. Its importance can be outlined as under:

1. Provides framework to perform management functions:

Organisational structure provides a framework within which various management functions can be performed by the managers more efficiently. It is only through relationship of superior and subordinate, which is created by organising process that the manager plans, directs and controls activities of his subordinates.

2. Facilitates coordination:

Organising process may also be used as a device of maintaining and achieving coordination. In organising, the activities performed by an individual employee are related to the functioning of his department, and then functioning of various departments is harmonised for seeking common goals.

3. Leads to specialisation:

Organising is based on the concept of division of work that ultimately leads to specialisation. Through it, activities are divided, grouped-up and assigned to the concerned department having requisite competence, and resources, and the department develops as a specialised centre for those activities.

4. Helps in achieving efficiency:

Organising process aims at achieving higher efficiency because it helps in making efficient utilisation of both human as well as physical resources.

5. Promotes Employee development:

In a highly decentralised organisational structure, each position is strengthened by delegating required authority. As a result of it, each manager makes decisions, solves problems and tackles the situation that ultimately leads to overall development in his personality.

6. Increases clarity of authority and responsibility:

Division of work and delegation of authority among employees, through the process of organising, gives them a precise idea of what they are expected to perform and within what limits of authority they have to perform. It helps in boosting an employee’s morale and he feels comfortable in the work- setting.

7. Facilitates adaptation:

Organisational structure also provides a useful means to cope with changing environment. In the event of change, necessary modification may be made in the organising process, organisational structure and organisational goals, so as to bring them in conformity with the change. It may be done by maintaining flexibility in the structure and making it adaptive to changes.

Organising as a Structure:

Concept of Organisation Structure:

The organising process ultimately results in the creation of an organisation structure. An organisation structure is the structural framework of all positions in a set-up.

Each position has a set of tasks, responsibilities, and authority. Each task is inter-related, and the collective performance of all tasks by different position holders enables the achievement of organisational goals.

Thus, an organisation structure refers to a network of authority and responsibility relationships by showing who reports to whom and for what in a set-up to facilitate realisation of common goals.

An organisation structure is a mix of vertical and horizontal positions. Horizontal positions arise on account of assignment of activities among various departments.

Vertical positions arise on account of delegation of authority among employees, from higher levels to lower levels. Generally, an organisation structure has a pyramid shape, with less position on the upper side and more positions on the lower side. The appearance of a typical organisation structure is shown in Figure 9.1.

Characteristics of Organisation Structure:

An organisation structure exhibits the following features:

1. Network of activities:

The first and foremost feature of an organisation structure is that it is a network of well-defined activities. These activities are arranged in a logical manner so that the performance of one activity facilitates the performance of other activities. This network of activities creates responsibility centres in an organisation.

2. Authority-responsibility Relationships:

Authority is a core constituent of organisation. Authority brings in responsibility with its self. Thus, creation of authority – responsibility relationships among various positions is a must.

3. Differentiation and Integration:

Differentiation is the extent to which tasks are divided into sub-tasks and performed by individuals with specialised skills. Integration is the extent to which various parts of the organisation cooperate and interact with each other because of interdependence of the tasks. Interdependence may be pooled, sequential and reciprocal.

4. Formalism:

To balance between differentiation and integration of people and activities, formal and defined structure in relation to decision making, communication and control is a must. Formalisation is introduced through line of authority, unity of command, span of control, etc.

Elements of Organisation Structure:

While designing an organisation structure, the managers must keep six elements in consideration.

1. Work specialisation:

It is there since Adam Smith published Wealth of Nations. In work specialisation, a job is broken down into different steps and each step is completed by a separate individual. While preparing Chocolate Candies, one only hots up the raw Chocolate, the next’s man puts hot stuff n dyes, the third person puts into fridge, the fourth person brings it out from the fridge and the dyes, the fifth person starts wrapping, and the next person puts then into boxes.

However, of late the trend is towards broadening the scope of robs and reduced work specialisation. Examples include Hallmark and Ford Australia. As an alternative to job design, managers have five alternative approaches – job rotation, (moving employees from one job to another), job enlargement (giving employees more tasks to perform), job enrichment (increasing the number of activities and also control over the job), job characteristics approach (jobs diagnosed and improved along skill variety, task identity, task significance, autonomy and feedback), and work-teams (to design the work systems).

2. Departmentation:

Departmentation refers to grouping the jobs on some logical arrangements. Each organisation shall have its own specific way of classifying and grouping work activities. We shall discuss about departmentation in greater detail in the chapter titled – Departmentation and span of Management.

3. Establishing Reporting Relationships:

Who to report whom is an important question and it involves deciding about chain of command and the span of management. The chain of command is the continuous line of authority from the top level to the lowest levels in the organisation.

Chain of command involves two principles of management, i.e., unity of command (each person having one boss only) and the scalar principle (someone to be finally responsible as clear line of authority is drawn).

Equally important is to decide how many people will report to one manager. It may be narrow or wide. We shall discuss it in greater detail in the next chapter.

4. Distributing Authority:

Authority is the right to do something due to formal position. Distribution of authority involves addressing two issues – delegation of authority and centralisation-decentralisation.

Delegation involves assigning a part of managerial job by a manager to his subordinate(s), and the requisite authority and the delegate becomes accountable to the delegator.

The second issue is centralisation (retaining power and authority in the hands of top-level managers) and decentralisation (distribution of authority to middle and lower-level mangers). Again, we shall discuss about the two concepts in detail later on.

5. Coordinating Mechanisms:

The process of linking up the activities of the various departments of the organisation is a must to achieve organisational objectives. Coordination is essential because every department is dependent on the others for information resources.

Interdependence may be pooled (the lowest level of interdependence – their output is simply pooled), sequential (out put of one department becomes the input for another in a sequence), and reciprocal (when activities flow both ways).

Coordination can be achieved through managerial hierarchy, rules and procedures liaison roles and integrating departments of late electronic coordination has become important.

6. Differentiating between positions:

The last element is distinguishing between line and staff positions. A line position means one who is in direct chain of command and is responsible for achievement of organisational goals, whereas a staff position is meant to provide guidance, expert advice, and support to line officials.

Factors Affecting Organisation Structure:

Organisation structure is created as a means to achieve goals and objectives of an enterprise. Since objectives of different enterprises tend to be different, they cannot afford to adopt just one topical organisation structure, and yet work efficiently.

Thus, structure of an organisation needs to be tailor-made than merely adopting the so-called ‘typical structure’. What kind of organisation structure is best suited to an enterprise depends upon a number of considerations; the more important ones are given below:

1. Strategy:

Organisation structure to be used for an enterprise is the direct result of objectives to be achieved which are derived from strategy. Organization structure of a manufacturing concern with assured market will be different from that of another concern operating under highly competitive situation.

In the later case, organization structure will be market-oriented whereas organization structure in the former case will basically be production-oriented.

Structure follows strategy:

If the growth strategy is followed, it will need flexible, fluid and instantly adaptable organisation. An organisation following differentiation strategy must innovate and add R&D to its organisation structure. To follow cost- leadership strategy the structure has to be stable and cost efficient.

2. Nature of activities:

Organization structure of a trading concern is different from that of an educational institution for the simple reason that activities of the two organizations are different.

3. Size and Life cycle:

Larger the organisation it tends to have more work specialisation, horizontal and vertical differentiation, and rules and regulations. Organisation structure would be different at birth, youth, and midlife and maturity stages.

4. Culture:

Culture refers to a system of shared beliefs and values. A strong organisation culture means rules and regulations can be substituted by organisation culture. Stronger the culture, the structure can be predictable, orderly and consistent with no written documentation.

5. Technology:

Organisation structure of an enterprise using sophisticated capital- intensive mass-production technology will be different from the enterprise using labour- intensive small-scale production technology.

More routine the technology, the structure will be more standardised and mechanistic. The structures will be organic if the organisation follows non-routine technology.

6. Environment:

Organisation structure of an enterprise operating in the midst of a highly dynamic environment organic will be different from the enterprise operating in a stable environment mechanistic. Organisations operating in stable environment can gainfully employ a highly formalised structure.

7. People:

People-structure relationship is important. A good organisation structure provides people with the supportive structures to attain organisational and individual objectives.

Importance of Organisation Structure:

Organisation structure is the backbone of management. Its importance lies in serving the following purposes:

1. Removes doubts in authority relationships:

Organisation structure allocates authority and responsibility, and thereby, enables people to know who is responsible for what and to whom in the organisation. People know who is to direct whom for what results. This removes confusion, friction and conflict among people.

2. Stimulates creativity and initiative:

Organisation structure stimulates creative thinking and initiative among organisational members by providing them requisite authority to perform their assigned tasks. Authority provides right to decision-making to its holder who feels motivated to take initiative in increasing and improving his work performance.

3. Ensures optimum utilisation of resources:

Allocation of resources is the core activity of organisation structure. Proper allocation of resources helps in proper utilisation also. Division of work and specialisation are the tools used by organisation to attain the objective of optimum utilisation of human efforts and physical resources.

4. Reaping benefits of technology improvements:

A sound organisation structure is flexible enough to accommodate changes in the work technology. Improved work technology modifies pattern of authority-responsibility relationships and helps in improving work performance of employees.

5. Encourages growth of the enterprise:

Organisation structure provides the framework within which an enterprise functions. A sound organisation structure has the capacity to handle increased level of activity. This helps in the expansion and growth of an enterprise.

6. Facilitates management process:

Organisation structure is a mechanism through which manager’s plan, allocates, direct, coordinate and control the activities of people. No activity remains unattended and work is assigned to people in accordance with their skills, aptitude, level of commitment, etc. This facilitates smooth operation of the management process which results in attaining enterprise goals.

Formal and Informal Organisation:

Performance of the organising function provides a compact framework to an enterprise. This compact framework is called formal organisation structure, or simply, formal organisation.

The existence and operation of formal organisation permits people to interact with each other at a personal and social level. This personal and social interaction is called informal organisation. The nature and character of formal and information organisation is briefly discussed below:

Formal Organisation:

A formal organisation, is a consciously planned a deliberately designed entity. It is based on superior-subordinate relationships which are created by assignment of work and delegation of authority.

It is through this formal relationship that members communicate with each other and perform their assigned duties. Thus, a formal organisation functions within set boundaries and is capable of being disciplined and controlled.

Informal Organisation:

When people work together in a formal relationship of superior and subordinate, they come in contact with each other. This interaction provides them an opportunity to know each other and develop personal and social relations.

These social groups and their associated behaviour in called the informal organisation. These personal and social relations become the basis of informal organisation.

Thus, informal organisation may be defined as a network of personal and social relations, arising out of communication and behavioural tendencies in the course of functioning of a formal structure of organisation.

A comparative study of formal organisation and informal organisation will be useful to comprehend their real nature. This is presented in the following Table 9.1.

Table 9.1: Formal vs. Informal Organisation:

Basis	Formal Organisation	Informal Organisation
1.	Formation	Formal	Relationship that is personal and social in nature.
2.	Purpose / objective	Legally Constituted rationally designed and consciously planned.	It arises naturally and spontaneously and is an integral dimension of formal organisation
3.	Relationship	It is meant for achieving specific goals. It is meant to engage in production of goods and/or performing service required by society.	Its purpose is to satisfy social and personal needs of employees.
4.	Rationality	It has a high degree of rationality and leaves no scope for personal, social and emotional factors.	It is influenced by social, personal and emotional factors.
5.	Communication	Line of authority and formal relationship become channel of communication.	Communication takes place through personal and social relationship.

6.	Leadership	Based on formal authority and position in organisation.	Based on competence of individual and group acceptance.
7.	Boundaries	It operates within set boundaries.	It has no set boundaries; rather it operates in different directions.
8.	Nature	It is normative and idealistic in nature.	It is realistic reflecting actual functioning. + notes
9.	Systems and procedures	It operates through predetermined systems and procedures.	It operates through group norms, values and standards.

Recent Trends in Organisation Structure:

Today market place demands lean, flexible and innovative organisation structures. The demand is to meet the needs of customers, employees and other organisational stockholders.

Some of important contemporary designs follow the following concepts.

1. Team-based structures:

Here, the total organisation is made up of teams or work groups which perform the organisation’s work. Employees feel more involved, empowered and motivated. It reduces fractions among functional areas.

Though chain of command maybe a problem. To make team-based structures successful, the employees need to be trained to work as group members, acquire cross-functional skills and a matching compensation.

2. Boundary less organisation:

An organisation whose design or structure is not limited to, or not defined by, the horizontal, vertical or external boundaries imposed by a predefined structure is known as boundary less organisation. The historical boundaries are blurred by increasing an organisation’s interdependence with its environment.

The boundary less organisation doesn’t bother of job specialisation, chain of command or span of management and replaces departments with empowered teams.

To eliminate these boundaries managers might use virtual organisation (a small core of full time employees and hiring outside specialists as and when the need arises); network organisation (concentrate on core activities and balance activities to be outsourced); modular organisation (outside vendors to supply components and the organisation to do assembly job); and learning organisation (per se not a specific organisation structure, but describes an organisational mind-set or philosophy that has significant design issues).

3. Matrix and project structures.

Other contemporary structures in popularity are matrix and project structures. In a matrix organisation the different functional departments assign specialist to work on a project.

Whereas in a project structure there is no formal departments where employees can return after the completion of a project. Here employees continuously work on projects.

Looking at the contemporary trends in organisation structure or design, it would be very essential to differentiate between ‘mechanistic’ and ‘organic’ organisation.

Government of India’s organisation structure is an example of mechanistic or bureaucratic design, whereas some of the private sector firms like NUT, HDFC Bank, or ICICI Bank are examples of organic organisation structure.