11 Organising – Basic Considerations

Organising – Basic Considerations

Organisations are an essential part of human life. We are born and brought up in organisations, educated in organisations, and spend our lives working in organisations. It is, therefore, necessary to understand the nature and functioning of organisations.

Concept of Organisation

The term ‘organisation’ is used in management in two different ways: (i) as a structure, and (ii) as a process.

Organisation Structure: As a structure, organisation is the network of horizontal and vertical relationships among the members of a group designed to accomplish some common objective. It is system or pattern of formal relationships that govern the activities of people. Organisation Structure consists of a social group of persons, a structural framework in which people interact to accomplish common goals. As a systematic combination of people, functions and facilities, organisations structure provides the mechanism within which people work together for the accomplishment of desired objectives. The formal structure of an organisation is two dimensional -horizontal and vertical. The horizontal dimension depicts differentiation of jobs into departments or divisions. The vertical dimension reflects the hierarchy of authority relationships with a number of levels from top to bottom. It is a structure of duties and responsibilities with a number of levels from top to bottom. It is a structure of duties and responsibilities which are necessary for the achievement of objectives. According to James D. Mooney, organisation is the form of every human association for the attainment of a common purpose. Thus, organisation Structure is the skeleton framework of business. The lines of authority which hold this framework together are, at the same time, communication channels through which flow the elements or currents of authority, responsibility and accountability.

This is a static and mechanistic interpretation of the term ‘organisation’ Organisation Structure of a firm is depicted in the organisation chart, which is a graphic portrayal of the organisation.

Organising Process : As a basic function of management, organising is the continuous and dynamic process of creating harmonious authority-responsibility relationships between specialised units. In the words of Allen “Organising is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority, and establishing a pattern of relationships for the purpose of enabling people to work most effectively together and accomplishing objectives.

According to Koontz and O’Donnel, organising involves “the establishment of an intentional structure of roles by identifying and listening the activities required to achieve the purpose of an enterprise, the grouping of these activities, the assignment of such groups of activities to a manager, the delegating authority to carry them out, and provision for coordination of authority relationship horizontally and vertically in the organisation Structure.”

Thus, organising is “the process of defining and grouping the activities of the enterprise and establishing the authority relationships among them, In performing the organising function, the manager defines departmentalises and assigns activities so that they can be most effectively executed.”

Organising as a process is a dynamic and humanistic concept. However, the two terms are complementary to each other. The process of organising results in a structure, i.e., organisation Structure is the end-result of the organising Process. To recognise both the structure and process concepts, organisation may be defined as a structured process in which individuals interact for achieving predetermined objectives.

Organising defines the role each individual is to play and establishes relationships between them. The two interpretations of the term are complementary to each other. The process of organising results in an organising structure.

Elements or Features of Organisation

An organisation can be differentiated from a mob on the basis of following features of organisation:

1. Division of work : Without division of work, there can be no organisation. An organisation cones into existence only when total work is divided into activities and functions. Division of work is necessary not only because one individual cannot do all the work but also because specialisation results in effective accomplishment of objectives.
2. Common Objectives. Every organisation exists to achieve some objectives for which it is established. An organisation structure is not an end in itself but a means towards the accomplishment of sone common goal.
3. Coordination and Communication. There must be cooperative relationships, both vertically and horizontally, between the different departments and divisions of the organisation. Different functions or activities must be properly unified and integrated into a common whole.
4. Plurality of Persons. An organisation is a group of people working together for the achievement of a common objective. A single person cannot constitute an organisation.
5. Chain of Command. In every organisation, there is a central authority from which a chain of authority relationships stretches throughout the organisation.
6. The Dynamic Element. An organisation is not a mere mechanical structure but a living organism arising out of the sentiments, attitudes and behaviour of people. The people are the material of construction, their loyalty the foundation and their cooperative spirit the mortar that holds the structure together and gives it vitality. On the basis of these elements, an organisation may be defined as a coordinated structure of positions arranged in a hierarchy for the accomplishment of some common objectives through division of labour.

Importance of Organisation

Whenever two or more persons work together, there arises the need for organisation. Organisation is the time-honoured mechanism that enables people to live and work together. Human beings cooperate to achieve what they cannot achieve individually. According to Allen, sound organisation can contribute to the success of an enterprise in the following ways:

1. Facilitates Administration. Sound organisation makes for effective management. It enables smooth operation of the enterprise by providing a framework within which management can perform the functions of planning, directing, controlling, etc.
2. Makes Growth and Diversification Possible. Growth and Diversification become possible due to systematic division of work and consistent delegation of authority. An organisation facilitates changes necessary for taking up new activities and new lines of business. An ideal organisation would provide the flexibility and strength necessary for meeting new demands.
3. Permits Optimum Use of Resources. A sound organisation helps in the optimum utilisation of technological innovations and human resources. It avoids duplication of work and overlapping of efforts. Optimum use of technological improvements can be made through a sound structure manned with efficient employees.
4. Encourages Good Human Relations. In a sound organisation, every individual is assigned the job for which he is best suited. The assignment of right jobs to right persons improves job satisfaction and interpersonal relations.
5. Stimulates Initiative and Creativity. A well-designed organisation demands creative effort, encourages innovation and permits extensive delegation and decentralisation. A sound organisation also helps in the continuity of the firm by providing scope for the training and development of executives.
6. Facilitates Cordination. Organisation is an important means of unifying and integrating individual efforts. It helps in putting balanced emphasis on different activities and an establishing effective relationships between the different departments or divisions of the enterprise. It also provides efficient channels for communication between different groups. Describing the importance of organisation, Andrew Carnegie, the great American industrialist, once said, “Take away our factories, our trade, our avenues of transportation, our money, but leave me with our organisation and, in four years. I will have re-established myself.”

Formal and Informal Organisations

An organisation may be formal and informal.

Formal Organisation

The formal organisation refers to the structure of jobs and positions with clearly defined functions and relationships. it is deliberately created by top management for the realisation of enterprise objectives. it is made up of official authority responsibility relationships. Formal organisation is bound by established rules, regulations and procedures. Every individual is assigned a specific job with definite authority and responsibility. According to Chester Barnard a formal organisation comes into existence when the activities of two or more persons are consciously coordinated toward a common objective. Formal organisation is stable and predictable. It defines the official channels of communication and is based upon the concept of rational economic man. It is an effective means of integrating individuals into a team. But it tends to be inflexible and discourages initiative. It is impersonal and requires subordination of personal goals to common purpose.

Informal Organisation

Informal organisation is a natural or spontaneous network of relationships based upon personal needs, attitudes and emotions. It consists of small groups which often overlap each other as one person maybe a member of more than one group. It is personal and human. According to Barnard, informal organisation is joint personal activity without conscious common purpose through contributing to joint results. It arises from social interaction among people inside and outside the enterprise. People at different levels in an organisation frequently come into contact though formal relations between them require no such contacts. The sales manager may be in close contact with a factory supervisor because of a common hobby. A senior worker may command greater authority over workers than the supervisor. Informal organisation arises because it provides social satisfaction to people. It helps to preserve the integrity of the work group. It fills deficiencies of formal organisation and a good leader can easily secure cooperation of employees by using constructively the informal groups.

Informal organisation has strong group attitudes and a manager can increase his effectiveness by winning the cooperation of informal groups. Employees give their full support to an executive who carries the informal leader with him. However, informal organisation tends to resist change and maintain status quo. There may be conflict between organisational goals and norms of Informal groups. A manager has little control over an informal organisation and he cannot eliminate it. He can make use of it to reinforce formal organisation. A manager should encourage informal relationships to ensure harmonious relations. Instead of considering it a threat to his power and authority, he should study the informal organisation so that it can be used constructively.

Distinction between Formal and Informal Organisation

The Process of Organising

The building up of an organisation structure is an important function of management. The process of organising consists of the following steps:

1. Determination and Division of Work. The first step in organising is to determine the tasks required for the accomplishment of established objectives. Enumeration and definition of activities initiates the organising function. Fayol divided business activities into technical, commercial, financial, security, accounting and managerial. In a modern business enterprise, manufacturing, marketing, financing, purchasing and personnel are considered to be the main activities of business.
2. Grouping Activities. The various activities identified under the first step are then classified into appropriate departments and divisions according to similarities and common purpose. Such grouping of activities is known as ‘Departmentation’. Activities may be grouped on the basis of functions, products, territories, customers, etc. They may also be grouped on the basis of most use, most interest, competition, coordination and policy control. Each department may be further divided into sections to create a logical structure.

3. Assignment of Duties. The individual departments are then allotted to different positions and individuals. The duties of every individual are defined on the basis of his abilities and aptitude. Clear definition of the responsibility of each is necessary to avoid duplication of work and overlapping of efforts. Every individual is made responsible for the specific job assigned to him. In this way, duties are assigned to specific individuals.

4. Delegation of Authority. Once the duties and responsibilities of every individual have been fixed, he must be given the authority necessary to carry out the duties assigned to him. A chain of command is created from top to bottom through successive delegations of authority. Different individuals are linked horizontally and vertically by establishing formal authority-responsibility relationships. Provision is made for the coordination of individual efforts.

                                     Thus, the process of organising is a series of steps which must be undertaken to create a logical structure of authority-responsibility relationships. This process involves division of work, placement of individuals on jobs, delegation of authority, coordination of individual efforts and execution of responsibility for results.

Principles of Organising

In the designing a sound organisation structure, following principles can be helpful:

• Unity of Objectives. An organisation and every part of it should be directed towards the accomplishment of common objectives. The application of this principle implies the existence of formulated and understood objectives. An organisation structure can be called sound only when it is able to achieve the desired objectives.
• Efficiency. An organisation is efficient if it able to accomplish predetermined objectives at minimum possible cost. An organisation should also provide maximum possible satisfaction to its members and should contribute to the welfare of the community.
• Division of Work. The total task should be divided in such a manner that the work of every individual in the organisation is limited as far as possible to the performance of a single leading function. The activities of the enterprise should be so divided and grouped that there is the most efficient breakdown of tasks.
• Span of Control. No executive should be required to supervise more subordinates than he can effectively manage. On account of the limitation of time and ability, there is a limit on the number of subordinates that an executive can effectively supervise.
• Scalar Principle. Authority and responsibility should be in a clear unbroken line from the highest executive to the lowest executive. There must be a clear chain of command. Every subordinate must know who his superior is and to whom policy matters beyond his own authority should be referred for decision.
• Delegation. Authority delegated to an individual manager should be adequate to enable him to accomplish results expected of him. Authority should be delegated to the lowest possible level, consistent with necessary control so that coordination and decision-making can take place as close as possible to the point of action.
• Functional Definition. The duties and authority-relationships of different individuals must be clearly defined so that there is no confusion or overlapping. The relationships between various jobs should also be clearly defined.
• Absoluteness of Responsibility. The responsibility of the subordinate to his superior is absolute is absolute. No superior can escape responsibility for the organisational activities of his subordinates. Similarly, subordinates must be held responsible for the performance of tasks assigned to them.
• Correspondence. Authority and responsibility must be coterminous and co-extensive. The responsibility exacted from a position should be commensurate with the authority delegated to that position, and vice-versa.
• Unity of Command. Each person should receive orders from only one superior and be accountable to him. This is necessary to avoid the problems of conflict in instructions and divided loyalty and to ensure the feeling of personal responsibility for results.
• Unity of Direction. There must be one head and one plan for a group of activities directed towards the same objective.
• Balance. The various parts of an organisation should be kept in balance and none of the functions should be given undue emphasis at the cost of others. In order to create organisational or structural balance, it is necessary to maintain a balance between centralisation & decentralisation, between narrow span of management and long lines of communication, between line and staff, etc.
• Exception Principle. Every manager should take all decisions within the scope of his authority and only matters beyond the scope of his authority should be referred to higher levels of management. This principle is also known as authority level principle.
• Coordination. There should be an orderly arrangement of group effort and unity of action in the pursuit of a common purpose. The purpose of organising is to secure unity of effort.
• Flexibility. The organisation must be free from complicated procedures and red tape. Devices, techniques and environmental factors should be built into the structure to permit quick and easy adaption of the enterprise to changes in its environment.
• Continuity. Change is the law of nature. The organisation should be so structured das to have continuity of operations. Arrangements must be made to enable people to gain experience in position of increasing diversity and responsibility

Basic Considerations in Organising

The main considerations involved in designing the structure of an organisation are as follows:

1. Objectives and Strategy. An organisation structure is designed to achieve the objectives efficiently and effectively. The objectives of an organisation determine its strategy and tasks. According to Alfred Chandler, the structure of an organisation must be designed to fit its strategy.
2. Environment. Economic, social, political, legal, technological and other forces in the external environment exercise a significant influence on the functioning of an organisation. Therefore, the structure must be designed keeping in view the environment of organisation. An organisation operating in a simple and stable environment can afford to have a mechanical and rigid structure. But an organic and flexible structure is necessary for organisations which function in a complex and fast changing environment. Traditional structures have become outdated and ineffective due to rapid and complex changes in business environment.
3. People. Organisations consist of people and operate through people. People have their own goals, perceptions, beliefs, values and attitudes. These factors must be duly considered while designing the organisation structure. Tasks, activities and technology become meaningful when they are built around people. Participative decision-making, cohesive work groups, supportive supervision and democratic leadership need to be provided in the structure so as to ensure efficiency of the people.
4. Technology. Technology deals with the manner in which different activities in the organisation are to be performed. Therefore, the technology employed in an organisation has direct and indirect impact on its structure. The chain of command, span of control, division of work, shape of the organisation, and work flow all depend on technology. For example, use of advanced technology requires high degree of specialisation which may lead to a complex pattern of relationships among employees.
5. Size. Large organisations tend to be more complex in structure. Increase in size leads to greater differentiation, more decentralisation, formulization (rules and regulations) and greater complexity. On the other hand, small organisations tend to be more centralised, less complex and less formal.
6. Job Design and Departmentation. Organisation structure is built on the basis of jobs. Job design means way various activities and tasks are combined to form a complete job. Jobs are classified into departments. The nature of job design and the basis of departmentation shape the structure of an organisation.
7. Span of Control. Span of control refers to the number of persons a manager can directly supervise and control. There is a limit to the number of subordinates that a manager can supervise directly. At the same time a manager’s time & talent may be underutilised if he has too few subordinates. The exact number of subordinates under an executive will depend upon the following factors: (a)Nature of Work. Work of a routine and repetitive nature can easily be delegated to subordinates. Therefore, span of control can be wide. (b)Manager’s Ability. A manager who possesses high degree of leadership and communication skills can control a large number of subordinates. (c)Time Available for Supervision. At higher levels, top managers have little time for supervision. They have to devote a major part of their time on decision-making. Therefore, span tends to be narrow at the top level. (d)Capacity of Subordinates. A manager can have a wide span if the subordinates are skilled, efficient and self-confident. (e)Communication System. When the communication system is effective, the manager can transmit information quickly and easily. Therefore, he can control a large number of persons. (f)Control Mechanism. Control through personal supervision is more time consuming than control through reports. Span tends to be narrow in the case of the former and wide in the letter case.

                                 Span of control is also known as ‘span of supervision’ and ‘span of management’. Span of control exercises a significant influence on the shape of the organisation

structure. Wide span means fewer levels of authority and shorter chain of command. Therefore, organisation structure becomes flat. On the other hand, narrow span leads to a tall structure characterised by several levels of authority and a long chain of command.

In recent years, there has been a tendency towards wide span of management due to the following factors:

1. The trend towards decentralisation.
2. Increasing size of organisation.
3. Need for quick decision-making.
4. Improved communication techniques, and
5. Growing acceptance of group processes and new patterns of leadership.