Principles of Management unit 3 organizing

Principles of
Management
Unit 3: Organizing
Prepared and presented by,
Ganesha Pandian . N

Content
• Nature and purpose of organizing
• Organization structure
• Line and staff authority
• Departmentation
• Span of control
• Centralization and decentralization
• Delegation of Authority
• Staffing – selection and
recruitment
• Career development
• Career stages
• Training
• Performance appraisal
2MSM-MBA Odd Semester

Think of Organizing
1. Identification and classification of required activities
2. The group of activities necessary for attaining
objectives
3. Assignment of each group to a manager with the
authority (delegation)
4. The provision for coordination horizontally and
vertically
MSM-MBA Odd Semester 3

Purpose of Organizing
1. Organization structure should be designed
to clarify the roles and responsibilities
2. To remove obstacles to performance caused
by confusion and uncertainty
3. To furnish decision making
4. Communication networks reflecting

Organization – Definition
• Organization – A formalized intentional structure of roles or position
Types of organization: 1. Formal organization and 2. Informal
organization
1. Formal Organization: structure must furnish environment for
individual performance to contributes group and organizational
goals
- Must be flexible
- Individual effort – channeled toward group and organizational
goals

Informal organization
• A network of interpersonal relationships
that arise when people associate with each
other
• Relationship not on organizational charts
• Machine shop group, Friday evening
cricket game and alike

Organization Division – Department
• Department – designates a distinct area, division or
branch of an organization over which a manager has
authority for the performance of specified activities
• It is emphasized – no best single for of departmentation
solution for all organization or to all situations
• So the pattern used will depend on the given situations
and the manger’s belief of yielding result structure

Classification of departments
I. Departmentation by enterprise function:
Grouping of activities according to the functions of an enterprise such
as production, sales and financing
The activities are grouped according to functions
Functional departmentation – most widely used basis for organizing
activities
Recognized and thoroughly understood
Coordination of activities among departments – achieved through
rules and procedures, various aspects of planning and so on.

Illustration of Functional Department
President
PersonnelVice President
Marketing Engineering Production Finance

Advantages of Functional department
1. Logical reflection of functions
2. Maintains power and prestige of major
functions
3. Follows principle of occupational hazard
4. Simplifies training
5. Furnishes means of tight control at top

Disadvantages of Functional departments
1. De-emphasis of overall company
objectives
2. Over specializes and narrows view points
3. Reduces coordination between functions
4. Slow adaptation to changes
5. Limits development to general manager

II. Departmentation by customer group
• Grouping of activities that reflects a
primary interest with customers
• Customers – key to the way activities are
grouped
• (e.g.) retail customer group, wholesale
customer group

Illustration chart of customer
departmentation
President
Community
City Bank
Real Estate
and Mortgage
loans
Corporate
Banking
Agricultural
Banking
Institutional
Banking

Advantages of Customer departmentation
1. Concentrates on customer needs
2. Gives feeling to customer
(understanding them)
3. Develops expertness in customer area

Disadvantages of Customer
departmentation
1. Difficult to coordinate operations
2. Requires managers and staff expertise in
customer problem only
3. Customer groups may not always be
clearly defined

III. Departmentation by territory or
geography
•Grouping of activities by
area or territory is common
in enterprises operating over
wide geographic areas

Illustration chart of Territorial or Geographical
organization grouping
President
Western region
Marketing Engineering Production Finance
South-west region Central region Eastern region

Advantages of Territorial organization
1. Places responsibility at a lower level
2. Places emphasis on local markets and
problems
3. Improves coordination in a region
4. Better communication with customers

Disadvantages of Territorial departmentation
1. Requires more persons with general manager
activities
2. Decentralization of power
3. Increases problem of top management
control

IV. Departmentation by product
• Grouping of activities according to products or
product lines, (especially present in large
enterprise) multi product lines.
• (e.g.) A company having cool-drink beverages
with different flavors is an example for product
line departmentation

Illustration chart of Product line departmentation
President
Cool drinks division
Marketing HR Production Finance
Potato chips Badam Milk Snacks

Advantages of product line
departmentation
1. Places attention and effort on product line
2. Permits growth and diversity of products and
services
3. Improves coordination of functional activities
4. Places responsibility for profits at the
division level

Disadvantages of Product line
departmentation
1. Requires more persons with general
manager abilities
2. Tends to make maintenance of central
services difficult
3. Increased problem to top management
control

V. Matrix organization
• Combining functional and projects or product patterns of
departmentation in the same organization structure
Guidelines for making matrix management effective:
1. Define the objectives of the project or task
2. Clarify the roles, authority and responsibilities of managers and
team members
3. Ensure – Influence is based on knowledge and information
rather than rank
4. Balance the power of functional and project managers
Contd…

5. Select an experienced manger for the project
6. Undertake organizational and team development
7. Install appropriate cost, time and quality
controls that reports deviation in timely manner
8. Rewards projects managers and team members
fairly

Illustration of Matrix organization (Engineering)
Director of
Engineering
Chief Design
Engineer
Chief Mechanical
Engineer
Chief Electrical
engineer
Chief
Metallurgical
Engineer
Project A
Project B
Project C
Project D

Advantages of Matrix Organization
1. Oriented towards end result
2. Professional identification is
maintained
3. Pin points product profits responsibility

VI. Strategic Business Units (SBUs)
• Distinct business set up as units in a larger company to
ensure that certain products or product lines are promoted
and handled as though each were an independent business
• Each SBUs – a manager (business manager) is appointed
with the responsibility of guiding and promoting the product
from the research laboratory through product engineering,
market research, production, packaging, marketing and with
bottom line responsibility for its profitability

Illustration of SBUs
President/CEO
SBUs Indian
operations
SBUs Japan
operations
SBUs Korean
operations

Core competency
• Collective learning, coordination and
integration of skills to obtain “streams of
technology”.
• The allocation of resources to individual
SBU’s can result in the under investment in
core competencies that benefit the total
organization

Organization structures for global
Environment
1. Organization structures – differs greatly –
operating in global environment
2. Kind of structure – depends on variety of factors
– such as degree of orientation and commitment.
3. MNC’s chooses – geographic departmentation
combined with any of product or customer
departmentation – as per need

Virtual organization
• A rather loose concept of a large group of
independent firms or people that are
connected through IT (Information
Technology)

Choosing the pattern of departmentation
• No best pattern - applicable to all organization
• Managers must determine – based on many
internal and external environmental factors in the
situation
• Ultimate objective – organizing – achieving
organizational goals

Authority and power
• Power – The ability of individuals or group to
induce or influence the beliefs or actions of
other person or groups
• Authority – The right in a position to exercise
discretion in decision making affecting others

Types of power
1. Legitimate power – normally arises from position and
drives from our culture system of rights, obligations and
duties
2. Referent power - may also come from expertness of a
person or a group
3. Reward power – power arises from the ability of some
people to grant rewards
4. Coercive power – power to punish, whether by firing a
subordinate or by withholding a merit pay increase

Empowerment
•Employees at all levels in the
organization are given the power to
make decisions without asking their
superior for permission

Application of Scalar Principle
• The clearer the line of authority – clearer will be the
responsibility for decision making and the more
effective will be organizational communication
1. Line Authority – The relationship in which a superior
exercises direct supervision over a subordinate
2. Functional Authority – The right delegated to an
individual or a department to control specified,
processes, practices, policies or so on.

Decentralization of Authority
• Decentralization – the tendency to
disperse decision making authority in an
organized structure
• Fundamental aspect of delegation, to the
extent of authority that is delegated is
decentralized

Illustration of Delegation of Authority
Complete Centralization Complete decentralization

Different kinds of Centralization
1. Centralization of performance – pertains
to geographical concentration
2. Centralization of department –
centralization of specialized activities –
one department
3. Centralization of Management – tendency
to restrict delegation of decision making

Delegation of Authority
• Superiors can’t delegate authority, that they do not have
• Determining the result
expected from a positionStep 1.
• Assigning tasks to a positionStep 2.
• Delegating Authority to accomplish
itStep 3.
• Holding the person in that positionStep 4.

Art of Delegation
• Failures in delegation – mostly as result
of managers unwilling to apply them
• Personal attitudes affects delegation
greatly.

Personal attitudes towards delegation
1. Receptiveness
2. Willingness to let go
3. Willingness to allow mistakes by subordinates
4. Willingness to trust subordinates
5. Willingness to establish and use broad controls

Overcoming weak delegation
1. Define assignments and delegate authority in light of
result expected
2. Select person – job to be done
3. Maintain open lines of communication
4. Establish proper controls
5. Reward effective delegation and successful
assumption of authority

Recentralization
• Centralization of authority that was
once decentralized, normally not a
complete reversal of decentralization
as the authority delegated is not
wholly withdrawn

Organizational levels and the span of
management
• Purpose of organizing – to make human co-operation effective
1. Narrow span of organization:
There are many levels of organization exists
Advantages:
1. Close supervision
2. Close control
3. Fast communication
Contd…

Disadvantages of Narrow span of
organization
• Superiors – too involved in subordinates’
work
• Many levels of management
• Distance between top and low level
management of hierarchy increased

Illustration of Narrow span of
organization

Wide span of organization
• There are less no. of organization exists
Advantages:
1. Superiors are forced to delegate
2. Clear policies must be made
3. Subordinates must be carefully selected

Disadvantages of wide span of
organization
1. Tendency of overload superiors to
become decision bottle necks
2. Danger of superior’s loss of control
3. Requires exceptional quality of
managers

Illustration of Wide span of
Organization

Staffing
Definition: The management function of staffing is defined
as filling and keeping filled, positions in the organization
structure.
Staffing involves identifying work for force requirements,
inventorying the people available, recruiting, selecting,
placing, promoting, appraising, planning the careers
Staffing – closely linked to organizing – the setting up of
intentional structure of roles and positions

Systems approach in HRM
• The present and projected organization structures
determine the number and kinds of managers
required.
• 2 types of sources 1. Internal 2. External
• Staffing requires an open system approach
• carried out within the enterprise, which in turn is
linked to external environment

Illustration : system approach to HRM

Situational factors affecting staffing
•The actual process of staffing –
affected by many environmental
factors
1. Internal Environmental forces
2. External Environmental forces

1. External Environment
• Factors in external environment do affect staffing –
Influences grouped into educational, socio-cultural,
legal – political and economic constraints
1. Equal Employment opportunity (EEO)
2. Women in Management
3. Diversity in Workplace

2. Internal environment
• Staffing managerial positions – from outside
and within firm
1. Promotion from within
2. Promotion – large corporations
3. The principle of open competition
4. Responsibility for staffing

Selection : Matching the person with
Job
•Selection – Process of choosing
from among candidates, from
within organization or from outside,
the most suitable person for the
current position or for future
positions

Illustration of System approach of selection

Position requirement and Job design
• An objective analysis of position requirements must be
made – the job must be designed to meet organizational
and individual needs
Identifying job
requirements
Appropriate scope of the
job
Meeting managerial skill
required by job design

Job design
• Requires an appropriate job structure in terms of content, function and
relationships
• Skills and personal characteristics needed in managers – Analytical and
problem solving abilities (skills)
• Personal characteristics:
1. Desire to manage
2. Communication skills and empathy
3. Integrity and honesty
4. Past performance as manger (Experience)

Recruitment
• Attracting candidates to fill positions in the organization
structure
Selection process, techniques and instruments
• The validity and reliability of selection techniques –
should be verified before administration
• Validity – the degree to which the data predict the
candidate’s success as a manager
• Reliability – the accuracy and consistency of the
measurement

The selection process
Selection criteria
established
Filling of application
form
A Screening
Interview
Formal Interview
Background checks
and verification
Physical examination
or medical fit

Interviews
• Traditional and common method used
3 types of interviews –
1. Structured
2. Semi structured
3. Unstructured
- Improve selection is to conduct multiple interviews
utilizing different interviewers
- Interview – one aspect of the selection process.

Tests
• The primary aim of testing is to obtain data about applicants that help predict their
probable success as manager
1. Intelligence test – designed to measure mental capability and to test memory,
speed of thought and ability to see relationship in complex situations
2. Proficiency and aptitude test – constructed to discover interests, existing
skills and potential for acquiring skills
3. Vocational tests – designed to indicate a candidate’s most suitable occupation
or the area in which candidate’s interests match the organizational interest area
4. Personality tests – designed to reveal a candidate’s personal characteristics and
the way the candidate may interact with others, thereby giving a measure of
leadership potential

Assessment centers
- Not a location, but a technique for
selecting and promoting mangers
- Intended to measure how a potential
manger will act in typical managerial
situations
- Measure and promote managerial skills

Problems in Assessment centers
1. Costly in terms of time
2. Training assessors problem (line manager not
fit) – psychologist needed
3. Different exercises are available – but are
these best criteria for evaluation
4. Motivation – difficult quality to measure

Selection process: Limitations
1. Diverse selection process available – no one perfect
way to select mangers
2. Experience shows that even carefully chosen
selection criteria are still imperfect
3. Psychological testing – limitations
4. Some tests unfairly discriminate against women or
members of minority group
5. Selecting are hiring are time and costs involved

Orienting and socializing new employees
• Selecting of the best person for job – first step in effective
management team
Orientation – involves the introduction of new employees to
the enterprise – its functions, tasks and people
Company provide details on ‘history, product, services, general
policies and practices, organizational details and benefits as
well as safety and regulatory measures’
The orientation meeting provides new employees with an
opportunity to ask questions

Socialization
• Acquisition of work sills and abilities
and adoption of appropriate role
behaviors and adjustment to the norms
and values of the work group
• Orientation and socialization – reduces
the employees anxiety on uncertainties

Performance appraisal
• Managerial appraisal – difficult to measure
– an appraisal program must be reliable and
valid
• Effective performance appraisal should also
recognize the legitimate desire of
employees for progress in their professions

Choosing performance criteria
• The appraisal should measure – performance in accomplishing goals
and plans as well as performance as a manager
1. Performance in accomplishing goals:
- system of appraising against verifiable pre-selected goals
- Consistent, integrated and understood planning designed to reach
specific objectives
2. Performance as managers:
The system of measuring performance against pre established
objectives should be supplemented by an appraisal of the manager as
manager

Different views on appraisal issues
1. Subjective Vs objective evaluation:
Subjective rating – Essay type appraisal (Qualitative)
Objective rating – Rating scale appraisal (Quantitative)
2. Judging Vs Self-appraisal:
Manager judge the performance of coordinates
Employees given to appraise himself on criteria
Contd…

3. Assessing past performance Vs Future
development
One should learn from past mistakes and
translate these insights into development plans
for the future

Kinds of reviews
1. A comprehensive review:
Should be conducted at least once a year, but some people
suggest that such discussion take place more frequently.
2. Progress or periodic reviews:
Formal comprehensive review should be supplemented by
frequent progress or periodic reviews
help identify problems or barriers that hinder effective
performance
Contd…

3. Continuous monitoring of performance
If plan deviate from standard, should not
wait, act quickly

Strengths of appraisal against verifiable
objectives
1. Appraisal based on performance
2. The goals accomplished or not will be
known
3. Reasonable and expected target may be
set by the company and individual

Weaknesses of appraisal against verifiable
objectives
• Uncertainty in performance of an individual
• Difficult to take uncontrollable or unexpected
factors into account
• Outstanding performers – rated highly – as long
as they perform
• Goal attainment is short term

Appraising Manager as Manager
• The most appropriate standards – to appraise
managers as manager – fundamental of
management
• Managers are rated on how well they perform the
activities
• The scale from “0” – Inadequate to “5” – superior
Contd…

• To further reduce subjectivity and to increase the
discrimination between the performance levels
1. Incident examples given to support rating –
comprehensive annual appraisal
2. The ratings be reviewed by the superior’s
superior
3. Raters informed about the discrimination in
rating

1. Advantages of the program:
Effective tool to measure
tool for management development
2. Weaknesses of the program:
Apples only to managerial aspects of a
position
Time consuming process

Career stages
• Definition – the career stages refers to the
stages of career development that an
individual passes through 5 stages basically
– undergo during his lifetime
• According to Keith Davis, a career is all the
jobs that are held during ones working life

1. Career path – A career path – a career path is the sequential
pattern of jobs that for a career
2. Career planning – career planning is the process by which
one selects career goals and path to these goals
3. Career goals - career goals are the future position one
strives as a part of career
4. Career management – According to French and Bell,
Career Management is the process of designing and
implementing goals, plans and strategies to enable the
organization to satisfy employee needs and also allowing
individuals to achieve their career goals

Stages in Career development
Stage 1 • Exploration
Stage 2 • Establishment
Stage 3 • Mid career
Stage 4 • Late Career
Stage 5 • Decline

Illustration of career stages chart

Formulating the career strategy
• It is considered personal strategy that is conceptually similar
to an organization strategy
1. Preparation of a personal profile
2. Development of Long range personal and professional
goals
3. Analysis of Environment, threats and opportunities
4. Analysis of personal strengths and weaknesses
5. Development of short range career objectives and action
plans

6. Consistency testing and strategic choices
7. Development of short range career
objectives and action plans
8. Development of contingency plans
9. Implementation of the career plan
10. Monitoring progress

Strategy for dual career couples
• Dual career couples – both partners working –
facing some problem of relocation process,
maternity leave and so on
• Large number of married women in the
workforce – companies have recognized the
stressful situation of dual career couples –
incorporate flexibilities in their policies

Managerial training :
The use of programs (mostly short term) that facilitate the learning
process to help managers do their jobs better
Manager development:
The use of long term future oriented programs to develop a person’s
ability in managing
Organizational development:
A systematic, integrated and planned approach to improving the
effectiveness of people and of the whole organization or a major
organization unit

Training needs
Present Skills Future skills
Declining performance Increase
performance

Approaches to Manager Development
• Trainees can learn as they contribute to the aims of the enterprises
1. Planned progression:
gives manager a clear idea of their path of development
2. Job rotation:
is intended to broaden the knowledge of mangers or potential managers
in different enterprise functions
3. Creation of “Assistant-to” position:
are often created to broaden the viewpoints of trainees through working
closely with experienced mangers
Contd…

4. Temporary promotions:
To acting manager is used to cover the responsibilities of the absent
manager
5. Committees and Junior Boards:
also know as multiple management, give trainees the opportunity to
interact with experienced managers
6. Coaching:
Must be dome in a climate of confidence and trust, with the aim of
developing subordinates’ strengths and overcoming weaknesses

Approaches to management development :
Internal and External training
1. Conference programs - expose managers or
potential managers to the ideas of speakers who
are experts in their field
2. University management programs: expose
managers to theories, principles and new
developments in management
3. In house universities – Companies setup their
own training institutions
Contd…

4. Readings, Television, Video Instruction
and online Education
5. Business Simulation and Experiential
exercises
6. E-training
7. Special training programs

Evaluation of training programs
• Determining the effectiveness of training programs require
measurements against standards and a systematic identification of
training needs and objectives
Development objectives include:
1. An increase in knowledge
2. Development of attitudes conducive to goods managing
3. Acquisition skills
4. Improvement of management performance
5. Achievement of enterprise objectives

The Learning organization
• An organization that can adopt to changes in the external
environment through continuous renewal of the structure and
practices
5 techniques
1. System thinking
2. Personal thinking
3. Mental models
4. A shared vision
5. Team learning

Principles of Management unit 3 organizing

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