Meaning of Organising

Once the plans have been laid down and the objectives have been specified, the next crucial function of management is organising. Organising is the process that initiates the implementation of plans by defining jobs, clarifying working relationships, and effectively deploying all necessary resources to achieve the desired goals. In essence, it is the fundamental process of creating the structure and framework through which an organisation works. It is the means for translating abstract plans into concrete action.

The organising function leads to the creation of an organisational structure. This structure is the formal framework of roles and relationships within which the organisation operates. It involves designing roles to be filled by suitably skilled people and defining the interrelationship between these roles. This process helps to eliminate ambiguity in the performance of duties and clarifies the extent of authority and responsibility for results, ensuring that everyone knows what they are supposed to do and who they report to.

Organising essentially implies a process which coordinates human efforts, assembles all other resources (like money, materials, machines), and integrates both into a unified, efficient whole to be utilised for achieving specified objectives. As seen in the case of Wipro, restructuring (a key part of organising) was considered the most important step in its journey to becoming a global giant. Wipro reorganised itself by separating into several subsidiaries by product line (a divisional structure) and shifting from a centralised to a decentralised system to improve its customer-orientation.

Definition of Organising

Organising can be defined as a process that initiates the implementation of plans by clarifying jobs and working relationships and effectively deploying resources for the attainment of identified and desired results (goals).

In simple terms, it is the process of:

• Identifying and grouping the work to be performed.

• Defining and delegating responsibility and authority.

• Establishing relationships for the purpose of enabling people to work most effectively together in accomplishing common objectives.

Steps in the Process of Organising

Organising is not a single action but a systematic process that involves a series of logical steps. Following these steps helps managers to create an effective organisational structure that facilitates the achievement of goals.

(i) Identification and Division of Work

The first step in the process of organising is to identify all the work that has to be done in accordance with the pre-determined plans. The total work is then divided into specific, manageable activities or jobs. For example, the work in a bank is divided into tasks like accepting deposits, giving loans, and processing cheques. The division of work into smaller jobs leads to specialisation and improved efficiency. This step ensures that there is no duplication of effort and that the burden of work can be shared among the employees. It is the foundation of the entire organising process.

(ii) Departmentalisation

Once work has been divided into small and manageable activities, the next step is to group together those activities that are similar in nature. This grouping process is called departmentalisation. This creates organisational units or departments. Such grouping facilitates specialisation, coordination, and control. Departments can be created using several criteria as a basis. The most common bases are:

• Functions: Grouping activities based on the functions performed, such as creating a production department, a marketing department, a finance department, and a human resources department.

• Products: Grouping activities based on the major products manufactured, such as creating a cosmetics division, a clothing division, and a footwear division in a diversified company.

• Territory: Grouping activities based on geographical areas, such as creating a north zone, a south zone, a west zone, and an east zone for sales activities.

(iii) Assignment of Duties

Once departments have been formed, each of them is placed under the charge of an individual, such as a department head or manager. The next crucial step is to define the work of different job positions within each department and to allocate these jobs to the members according to their skills and competencies. It is essential for effective performance that a proper match is made between the nature of a job (as defined by a 'job description') and the ability of the individual. The work must be assigned to those who are best fitted to perform it well.

(iv) Establishing Reporting Relationships

Merely allocating work is not enough for an organisation to function smoothly. Each individual should also know who they have to take orders from and to whom they are accountable. This step involves establishing clear lines of authority and responsibility among the various job positions. This defines the superior-subordinate relationships. The establishment of such clear relationships helps to create a hierarchical structure and facilitates coordination amongst various departments. It clarifies who reports to whom, which is essential for smooth communication, effective control, and fixing accountability.

Importance of Organising

The organising function is of critical importance as it provides the structure through which plans are executed. It helps in the survival and growth of an enterprise and equips it to meet various challenges posed by the dynamic business environment. The importance of organising is highlighted by the following points:

(i) Benefits of Specialisation

Organising leads to a systematic allocation of jobs amongst the workforce. The division of work into smaller tasks and the repetitive performance of a particular task by the same individual allows that worker to gain experience and expertise in that specific area. This leads to specialisation. Specialisation, in turn, enhances productivity and efficiency because the worker becomes highly proficient in their job.

(ii) Clarity in Working Relationships

The establishment of clear working relationships is a key part of organising. It clarifies the lines of communication and specifies who is to report to whom. This removes any ambiguity in the transfer of information and instructions. It helps in creating a clear hierarchical order, thereby enabling the fixation of responsibility and the specification of the extent of authority to be exercised by each individual. Everyone in the organisation knows their role and their relationship with others.

(iii) Optimum Utilisation of Resources

Organising leads to the proper and efficient usage of all material, financial, and human resources. The proper assignment of jobs avoids the overlapping of work and ensures that there is no duplication of effort. The avoidance of duplication helps in preventing confusion and minimising the wastage of resources, time, and effort, which ultimately leads to higher efficiency and reduced costs.

(iv) Adaptation to Change

A sound and flexible process of organising allows a business enterprise to accommodate changes in the business environment. It allows the organisation structure to be suitably modified and the inter-relationships amongst managerial levels to be revised, paving the way for a smooth transition in response to external changes. This provides much-needed stability to the enterprise, enabling it to continue to survive and grow in spite of a dynamic environment.

(v) Effective Administration

Organising provides a clear description of jobs and their related duties. This clarity in working relationships helps to avoid confusion and duplication of work, which enables the proper and smooth execution of tasks. As a result, the management and administration of an enterprise become easier and more effective.

(vi) Development of Personnel

A sound organising structure that includes effective delegation encourages creativity and initiative amongst managers and subordinates. Effective delegation allows senior managers to reduce their workload by assigning routine jobs to their subordinates. This gives the managers time to explore new areas for growth and to innovate. At the same time, delegation develops the subordinates' ability to deal effectively with challenges, helps them to realise their full potential, and prepares them for higher-level positions in the future.

(vii) Expansion and Growth

Organising helps in the growth and diversification of an enterprise. A well-designed and scalable organisational structure allows a business to add more job positions, new departments, and even diversify its product lines or enter new geographical territories without disrupting its existing operations. A solid structure provides the necessary foundation to support growth and expansion, which in turn helps to increase customer base, sales, and profit.

Organisation Structure

The organisation structure is the tangible outcome of the organising process. It can be defined as the framework within which all managerial and operating tasks are performed. It specifies the relationships between people, work, and resources, creating a formal system of authority and responsibility. An effective structure contributes significantly to the increased profitability of the enterprise, whereas a wrong structure can seriously impair business performance.

The structure of an organisation is typically depicted in an organisation chart, which shows the formal lines of authority and communication. The span of management, which refers to the number of subordinates that can be effectively managed by a single superior, is a key factor that determines the shape of the organisational structure (i.e., whether it is a tall structure with many levels or a flat structure with fewer levels).

A proper organisation structure is essential to ensure a smooth flow of communication and better control over the operations of a business. As an organisation grows in size and complexity, the need for an adequate and adaptable organisation structure becomes even more critical.

Types of Organisation Structures

The type of structure adopted by an organisation will vary with the nature and types of activities it performs. The organisational structure can be broadly classified into two main categories: the functional structure and the divisional structure.

1. Functional Structure

A functional structure is created by grouping jobs of a similar nature under one department. All these major functions, such as production, marketing, finance, and human resources, are organised as separate departments. All departments report to a single coordinating head, such as the Managing Director or CEO. This is the most common and logical form of organisational structure.

Advantages of Functional Structure

• Occupational Specialisation: Since emphasis is placed on specific functions, it leads to a high degree of specialisation and efficiency in the utilisation of manpower.

• Promotes Control and Coordination: It is easier to exercise control and coordinate activities within a department because all the tasks are similar in nature.

• Increases Efficiency: The focus on specific functions helps in increasing managerial and operational efficiency, which results in increased profit.

• Reduces Duplication: It leads to minimal duplication of effort and resources (e.g., only one marketing department for the whole company), which results in economies of scale and lowers costs.

• Easier Training: It makes the training of employees easier as they have to be trained only in a limited range of skills relevant to their function.

Disadvantages of Functional Structure

• Functional Empires: It can lead to a situation where a department places more emphasis on its own objectives than on the overall objectives of the enterprise. This can lead to conflicts of interest between departments.

• Problems in Coordination: As an organisation grows, it may face problems in coordination between different departments, as information has to be exchanged across functionally differentiated areas.

• Inflexibility: People with the same skills and knowledge base may develop a narrow perspective (functional bias) and may have difficulty appreciating other points of view, leading to inflexibility.

• Restricts Managerial Development: It is difficult for functional heads to get training for top management positions as they are unable to gather experience in diverse areas outside their own function.

Suitability

The functional structure is most suitable for large organisations that operate on a single product line and where operations require a high degree of functional specialisation.

2. Divisional Structure

A divisional structure is one where the organisation is divided into separate, semi-autonomous business units or divisions. This structure is typically adopted by large, diversified organisations that deal with multiple product lines or operate in different geographical areas. Each division has a divisional manager who is responsible for the performance of their division and has authority over it.

Each division is multifunctional because within each division, all necessary functions like production, marketing, and finance are performed together to achieve a common goal for that specific product or region. Each division works as a profit centre, where the divisional head is responsible for the profit or loss of their division.

Advantages of Divisional Structure

• Product Specialisation: It helps in the development of varied skills in a divisional head as they gain experience in all functions related to a particular product. This prepares them for higher management positions.

• Greater Accountability: Divisional heads are accountable for the profits of their division, as the revenues and costs related to their division can be easily identified and assigned to them. This provides a proper basis for performance measurement.

• Promotes Flexibility and Initiative: Each division functions as an autonomous unit, which leads to faster and more responsive decision-making.

• Facilitates Expansion and Growth: New divisions can be added easily without interrupting the existing operations, which facilitates organisational growth and diversification.

Disadvantages of Divisional Structure

• Conflicts: Conflict may arise among different divisions with reference to the allocation of funds and other organisational resources.

• Increased Costs: It may lead to an increase in costs since there may be a duplication of activities and resources across different product divisions (e.g., each division having its own marketing, finance, and HR team).

• Organisational Interests Ignored: A divisional manager may gain too much power and, in a bid to assert their independence and maximise their division's profits, may ignore the overall interests of the organisation.

Suitability

The divisional structure is suitable for those business enterprises where a large variety of products are manufactured using different productive resources. It is also suitable for organisations that operate in different geographical areas or that plan to grow and diversify significantly.

Comparative View: Functional vs. Divisional Structure

Formal and Informal Organisation

In any functioning enterprise, two types of organisational structures exist simultaneously. The first is the formal organisation, which is the official structure deliberately designed by management. The second is the informal organisation, which is an unofficial network of social relationships that arises spontaneously from the personal interactions among employees.

Formal Organisation

The formal organisation refers to the organisation structure which is deliberately and consciously designed by the management to accomplish a particular task. It is a system of well-defined jobs, each with a definite measure of authority, responsibility, and accountability. It specifies clearly the boundaries of authority and responsibility, and there is a systematic coordination among the various activities to achieve organisational goals. The structure of a formal organisation, which can be either functional or divisional, is typically depicted in an organisation chart.

Features of Formal Organisation

• Deliberately Created: It is deliberately designed by top management to facilitate the smooth and efficient functioning of the organisation.

• Well-defined Authority and Responsibility: It clearly specifies the relationships among various job positions and the nature of their interrelationship. This clarifies who has to report to whom.

• Based on Rules and Procedures: It is a means to achieve the objectives specified in the plans, as it lays down the rules and procedures essential for their achievement.

• Impersonal: It places more emphasis on the work to be performed and the positions, rather than on the interpersonal relationships among the individuals occupying those positions.

• Coordination: The efforts of various departments and individuals are coordinated, interlinked, and integrated through the formal organisation.

Advantages of Formal Organisation

• Systematic Working: The formal structure provides for a systematic and smooth functioning of the organisation.

• Fixation of Responsibility: It is easier to fix responsibility and hold people accountable since their roles and responsibilities are clearly defined.

• No Ambiguity in Roles: There is no ambiguity in the role that each member has to play as their duties are clearly specified, which also helps in avoiding duplication of effort.

• Unity of Command: The principle of unity of command is maintained through an established, unbroken chain of command.

• Effective Goal Accomplishment: It leads to the effective accomplishment of goals by providing a clear framework for all operations.

• Stability: It provides stability to the organisation as the behaviour of employees can be fairly predicted since there are specific rules and procedures to guide them.

Limitations of Formal Organisation

• Procedural Delays: Action may be delayed as the established chain of command has to be followed, which increases the time taken for decision making (red tape).

• Reduces Creativity: Rigid policies and procedures may not provide adequate recognition for creative talent and initiative, as they do not allow for deviations.

• Limited View: It is difficult to understand all human relationships and dynamics within an enterprise as it places more emphasis on structure and work, ignoring the social aspects of the organisation.

Informal Organisation

Interaction among people at work gives rise to a ‘network of social relationships among employees’ called the informal organisation. It emerges spontaneously from within the formal organisation when people interact beyond their officially defined roles. This structure is not based on rules and procedures but on friendship, common interests, and personal attitudes. Examples include groups of employees who meet for coffee, play sports together on weekends, or share similar hobbies.

Features of Informal Organisation

• Spontaneous Origin: It originates from within the formal organisation as a result of personal and social interaction among employees; it is not deliberately created by management.

• Based on Norms: The standards of behaviour and conduct evolve from group norms rather than officially laid down rules and regulations.

• Independent Communication Channels: It has independent channels of communication, often called the 'grapevine', which are not defined by the formal structure and can flow in any direction.

• No Definite Structure: It has no definite structure or form because it is a complex and fluid network of social relationships among members.

• Personal: Its purpose is to satisfy the personal and social needs of its members.

Advantages of Informal Organisation

• Faster Communication: Since prescribed lines of communication are not followed, the informal organisation leads to a faster spread of information and quick feedback through the grapevine.

• Fulfills Social Needs: It helps to fulfill the social and psychological needs of the members (like belongingness and recognition), which enhances their job satisfaction.

• Supports Formal Organisation: It contributes towards the fulfillment of organisational objectives by compensating for the inadequacies and rigidities of the formal organisation. For example, employee reactions towards plans can be tested through the informal network.

Disadvantages of Informal Organisation

• Spreads Rumours: When the informal organisation spreads false information or rumours, it can become a destructive force and go against the interest of the formal organisation.

• Resists Change: The management may not be successful in implementing changes if the informal organisation opposes them. Such resistance to change may delay or restrict growth.

• Conformity Pressure: It pressurises members to conform to group expectations and norms. This can be harmful to the organisation if the norms set by the group (e.g., restricting output) are against organisational interests.

An informal organisation cannot be eliminated. Therefore, it is in the best interest of the organisation for the management to recognise its existence and skillfully take advantage of both the formal and informal organisations so that work continues smoothly. The knowledge of informal groups can be used to gather their support, improve communication, and enhance overall organisational performance.

Formal vs. Informal Organisation: A Comparative View

Delegation

A manager, no matter how capable they are, cannot perform every single task on their own. The sheer volume of work makes it impractical. To meet organisational goals and to be able to focus on high-priority activities, a manager must practice delegation. Delegation refers to the downward transfer of authority from a superior to a subordinate. It is a fundamental and prerequisite concept for the efficient functioning of any organisation.

Delegation empowers subordinates, which satisfies their psychological needs for recognition and provides them with valuable opportunities to develop their skills and exercise initiative. It is important to understand that delegation does not mean abdication (giving up responsibility). The manager who delegates remains accountable for the performance of the assigned tasks. The authority granted to a subordinate is not permanently transferred; it can be taken back and redelegated to another person if necessary.

Elements of Delegation

Delegation is a three-pronged concept, consisting of three essential and interdependent elements: Authority, Responsibility, and Accountability.

(i) Authority

Authority refers to the right of an individual to command their subordinates and to take action within the scope of their position. It is the legal and formal right to give orders and expect them to be obeyed. The concept of authority arises from the established scalar chain in the formal organisation. Authority flows from top to bottom, meaning a superior has authority over their subordinate. However, this authority is not absolute; it is restricted by laws and the rules and regulations of the organisation.

(ii) Responsibility

Responsibility is the obligation of a subordinate to properly perform the assigned duty. When a superior delegates a task to a subordinate, it is the subordinate's responsibility to complete it. It arises from a superior-subordinate relationship because the subordinate is bound to perform the duty assigned to them by their superior. Responsibility flows upwards, i.e., a subordinate will always be responsible to their superior for the performance of the task. A crucial guiding principle of delegation is that there should be a parity between authority and responsibility: when an employee is given responsibility for a job, they must also be given the degree of authority necessary to carry it out.

(iii) Accountability

Accountability implies being answerable for the final outcome of the assigned task. Once authority has been delegated and responsibility has been accepted, the subordinate becomes accountable to their superior for the satisfactory performance of the work. Accountability is the ultimate answerability for the job, and it cannot be delegated. While a subordinate is accountable to their superior, the superior, in turn, remains accountable to their own superior for the task's completion. Accountability flows upwards.

In conclusion, while authority is delegated (it can be passed down), responsibility is assumed (it is the obligation taken on by the subordinate), and accountability is imposed (it is the inherent answerability that cannot be passed down). Responsibility is derived from authority, and accountability is derived from responsibility.

Importance of Delegation

• Effective Management: By entrusting routine tasks to subordinates, managers are able to function more efficiently as they get more time to concentrate on important strategic matters.

• Employee Development: Employees get more opportunities to utilise their talent and develop new skills. This allows them to develop the abilities needed to perform complex tasks and assume higher responsibilities, preparing them to be better future managers.

• Motivation of Employees: When a superior entrusts a subordinate with a task, it involves trust on the superior’s part and commitment on the part of the subordinate. The responsibility for work builds the self-esteem of an employee and improves their confidence.

• Facilitation of Growth: Delegation helps in the expansion and growth of an organisation by creating a ready workforce of trained and experienced employees who are able to take up leading positions in new ventures.

• Basis of Management Hierarchy: Delegation of authority is what establishes the superior-subordinate relationships, which are the very basis of the hierarchy of management. The degree and flow of authority determine who has to report to whom.

• Better Coordination: The elements of delegation—authority, responsibility, and accountability—help to clearly define the powers, duties, and answerability related to the various positions in an organisation. This clarity helps to avoid the overlapping of duties and duplication of effort, leading to effective coordination.

Decentralisation

Decentralisation is a key policy decision in organisational design. It explains the manner in which decision-making responsibilities are divided among the different hierarchical levels. Put simply, decentralisation refers to the systematic and selective delegation of authority throughout all the levels of the organisation. In a decentralised organisation, decision-making authority is pushed down the chain of command and is consequently placed nearest to the points of action.

An organisation is considered to be greatly decentralised when the decisions taken by the lower levels are not only numerous but also significant in nature. As seen in the case of Johnson & Johnson, decentralisation is a core concept where the large corporation is operated as 190 smaller, agile companies, enabling each one to stay close to its customers.

Centralisation and Decentralisation

Centralisation and decentralisation are relative terms that represent the two ends of a continuum of authority distribution.

• An organisation is centralised when decision-making authority is retained and concentrated in the hands of the higher management levels.

• An organisation is decentralised when such authority is systematically delegated and dispersed to the lower levels.

An organisation can never be completely centralised or completely decentralised. Complete centralisation would mean that all decision-making functions are concentrated at the very top, which would make the management hierarchy redundant. On the other hand, complete decentralisation would imply the delegation of all decision-making functions to the lowest level of the hierarchy, which would make the higher managerial positions unnecessary. Both of these scenarios are unrealistic.

Therefore, there is a need for a balance between these co-existing forces. As an organisation grows in size and complexity, there is a natural tendency to move towards more decentralised decision-making. Every organisation is characterised by a unique blend of both centralisation and decentralisation.

Importance of Decentralisation

Decentralisation is much more than a mere transfer of authority; it is a management philosophy that implies a selective dispersal of authority. Its importance can be understood from the following points:

• Develops Initiative Among Subordinates: Decentralisation helps to promote self-reliance and confidence amongst subordinates. When lower managerial levels are given the freedom to take their own decisions, they learn to depend on their own judgment and develop solutions for the various problems they encounter.

• Develops Managerial Talent for the Future: Decentralisation provides valuable experience by allowing subordinates to handle assignments independently. This gives them a chance to prove their abilities and creates a reservoir of qualified manpower who can be considered to fill more challenging positions through promotions. It is an effective means of management education.

• Quick Decision Making: In a centralised organisation, the flow of information is slow as it has to traverse many levels to reach the top for a decision. In a decentralised organisation, however, since decisions are taken at levels which are nearest to the points of action, the process is much faster. This allows the enterprise to adapt quickly to dynamic operating conditions.

• Relief to Top Management: Decentralisation diminishes the amount of direct supervision required by superiors. This leaves the top management with more time, which they can devote to important strategic and policy decisions rather than being occupied with routine operational decisions.

• Facilitates Growth: Decentralisation awards greater autonomy to the lower levels of management as well as to divisional or departmental heads. This allows them to function in a manner best suited to their department and fosters a healthy sense of competition amongst the departments. This can lead to increased productivity and returns, which can be used for expansion purposes.

• Better Control: Decentralisation makes it possible to evaluate performance at each level and to hold departments individually accountable for their results. This allows management to ascertain the contribution of each department towards the overall objectives and to analyse variances and improve operations.

While decentralisation has many benefits, it must be applied with caution, as it can lead to organisational disintegration if departments start to operate on their own guidelines, which may be contrary to the interests of the overall organisation. Therefore, decentralisation must always be balanced with centralisation in areas of major policy decisions.

Delegation vs. Decentralisation: A Comparative View

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