PRINCIPLES

OF
MANAGEMENT

ORGANIZING
Planning

Organizing

Staffing

Directing

Controlling

ORGANIZATION
A formalized intentional structure of roles or
positions.
A group of people working together to create a
surplus.
People working together must fill certain roles.
The roles people are asked to fill should be
intentionally designed to ensure that required
activities are done and that activities fit together
so that people can work smoothly, effectively and
efficiently in groups.
Most managers believe they are organizing when
they establish an intentional structure.

ORGANIZING
Designing and maintaining a system of roles is
the function, organizing.
For an organizational role to exist and be
meaningful to people, it must incorporate;

Verifiable

objectives
A clear idea of the major duties or activities involved
An understood area of discretion or authority so that
the person filling the role knows what he or she can
do to accomplish goals
Provision for supplying needed information and
necessary tools

ORGANIZING

The steps involved in organizing are;

The

identification and classification of required

activities.
The grouping of activities necessary for attaining
objectives.
The assignment of each group to a manager with
authority (delegation) necessary to supervise it.
The provision for coordination horizontally and
vertically in the organization structure.

THE LOGIC OF ORGANIZING

FORMAL ORGANIZATION
The intentional structure of roles in a formally
organized enterprise.
It refers to the organization structure
deliberately created by management for
achieving the objectives of enterprise.
It is a network of official authority, responsibility,
relationships and communication.
It must be flexible.
There should be room for discretion, beneficial
utilization of creative talents, recognition of
individual likes and capacities.,

INFORMAL ORGANIZATION
A network of interpersonal relationships that
arise when people associate with each other.
Chester Barnard- the functions of the executive
Any joint activity without conscious joint
purpose, although contributing to joint results.
Example:- machine shop group, the sixth floor
crowd, the Friday evening bowling gang, morning
coffee regulars.,

ORGANIZATIONAL LEVELS AND

THE SPAN OF MANAGEMENT
Span of management: refers to the number of
subordinates that a manger can efficiently
manage.
Number of subordinates directly reporting to a
manager is known as span.
Span of management is important for:

Determining

the complexity of an individual

managers job,
Determining shape and structure of the organization.
Fewer the number of subordinates reporting to a
manger larger the number of managers required.
Therefore span of control should be limited.

ORGANIZATION WITH NARROW

SPAN

Advantages:
Close supervision
Close control
Fast communication
between subordinates
and superiors
Effective

Disdvantages:
Superiors tend to get too
involved in subordinates work
Many levels of management
High costs due to many levels
Excessive distance between
lowest and top level

ORGANIZATION WITH WIDE SPAN

Advantages:
Superiors are forced to
delegate
Clear policies must be
made
Subordinates must be
carefully selected

Disadvantages:
Tendency to overloaded
superiors to become decision
bottlenecks
Danger of superiors loss of
control
Requires exceptional quality of
managers

PROBLEMS WITH ORGANIZATIONAL

LEVELS
Levels are expensive:
More effort and money are devoted to managing.
Cost of the additional managers, the staff to
assist them, coordinating the departmental
activities, facilities for the personnel etc., are
overheads.
It is desirable to eliminate indirect labor.

Levels complicate planning and control:

Loses coordination and clarity of plans at lower
levels.
It makes it to control difficult.

PROBLEMS WITH ORGANIZATIONAL

LEVELS
Levels complicate communication:
Great difficulty in communicating objectives,
plans and policies downward through the
organization structure.
Omissions and misinterpretations occur as
information passes down the line.
Complicate the communication from firing line to
commanding superiors.
Levels are filters of information

THE OPERATIONAL MANAGEMENT

POSITION: A SITUATIONAL
APPROACH
Principle of span of management: there is a
limit to the number of subordinates a manager
can effectively supervise, but the exact number
will depend on the impact of underlying factors.
Current guideline is to look for causes of limited
span in individual situations rather than to
assume that there is a widely applicable
numerical limit.
Examine what consumes the time of managers in
their handling of superior-subordinate
relationships and ascertain devices that can be
used to reduce these time pressures.

NEED FOR BALANCE

Despite the desirability of a flat organization structure,
the span of management is limited by real and important
restrictions.
Managers may have more subordinates than they can
manage effectively, even though they delegate authority,
conduct training, formulate clear plans and policies and
adopt efficient communication techniques.
As an enterprise grows, limitations of the span of
management force an increase in the number of levels
simply because there are more people to supervise.
One must balance all costs of adopting a narrow or wide
span, not only financial but also costs in morale, personal
development and attainment of enterprise objectives.

REENGINEERING THE
ORGANIZATION
the fundamental rethinking and radical
redesign of business processes to achieve
dramatic improvements in critical contemporary
measures of performance, such as cost, quality,
service and speed Michael Hammer & James
Champy.
if I were recreating this company today,
knowing what I know now and given current
technology , what would it look like?

KEY ASPECTS OF REENGINEERING

Fundamental rethinking:
Question what the organization is doing and why.
Systems and procedures become outdated,
inefficient and completely unnecessary over time.
Users and customers may question the purpose
and necessity of the procedures followed.
Analyzing the system as a systems outsider
reveals inefficiencies.
New thinking provides a new perspective at what
is being done and why.

KEY ASPECTS OF REENGINEERING

Radical redesign:
Earlier Hammer and Champy considered radical
redesign as the most important aspect and considered
it as not a modification but a reinvention.
Later they admitted that it was wrong as it often
resulted in radical downsizing with detrimental effects
to organizations.
Downsizing or rightsizing reduces the number of
people and cost, but may not address the customer
needs and expectations.
It may result in a business system based primarily on
the engineering model without due considerations
given to the human system.
With radical redesign, trust can be destroyed.

KEY ASPECTS OF REENGINEERING

Business processes:
Process analysis must go beyond operations and
must include the analysis and integration of
technical systems, human systems and the total
management process including the linkage of the
enterprise to the external environment.
Engineers may focus on the business process; but
to be truly effective, the various subsystems need
to be integrated into a total system.

KEY ASPECTS OF REENGINEERING

Dramatic results:
Union Carbide cut $400 million from its fixed
costs in three years.
GTE (General Telephone & Electronics
Corporation) developed one-stop shopping.
Hammer and Champy admit that about 50 to
70% of reengineering efforts fail to deliver the
intended dramatic results.

ORGANIZATIONAL DIVISION: THE

DEPARTMENT
Department designates a distinct area, division
or branch of an organization over which a
manager has authority for the performance of
specialized activities.
Example:- production division, dept. of chemical
engg.,

ORGANIZATION STRUCTURE:
DEPARTMENTATION
Department designates a distinct area, division
or branch of an organization over which a
manager has authority for the performance of
specialized activities.
Grouping of activities and people into
departments makes it possible to expand
organizations.
Departments differ with respect to basic patterns
used to group activities.

DEPARTMENTATION BY
ENTERPRISE FUNCTION

Grouping of activities according to the functions

of an enterprise functional departmentation
embodies what enterprises typically do.
Production

(creating utility or adding utility to a

product or service)
Sales (finding customers, patients, clients, students
or members who will agree to accept the product or
service at a price or for a cost)
Financing (raising and collecting, safeguarding and
expending the funds of the enterprise)

Often these particular functional designations do

not appear in the organization chart.

DEPARTMENTATION BY
ENTERPRISE FUNCTION

There is no generally accepted terminology:

a

manufacturing enterprise employs the terms production,

sales and finance; a wholesaler is concerned with activities
as buying, selling and finance; railroad is involved with
operations, traffic and finance.
Basic activities often differ in importance: hospitals have no
sales departments; churches have no production department.
This does not mean that these activities are not undertaken,
rather they are unspecialized or narrower in scope that they
are combined with other activities.

Some organizations may be using other methods of

departmentation based on product, customer, territory
or marketing channel.

FUNCTIONAL DEPARTMENTATION
Functional departmentation is the most widely
used basis for organizing activities and is present
in almost every enterprise at some level in the
organization structure.
Coordination of activities among departments
may be achieved through rules and procedures,
various aspects of planning (goals, budgets.,), the
organizational hierarchy, personal contacts and
liaison departments.

FUNCTIONAL ORGANIZATION
(MANUFACTURING COMPANY)
President
President
Assistant
Assistant to
to
president
president

Personnel
Personnel

Marketing
Marketing

Engineering
Engineering

Production
Production

Finance
Finance

Market
Market
research
research

Engg.
Engg.
Admin.
Admin.

Production
Production
planning
planning

Financial
Financial
planning
planning

Marketing
Marketing
planning
planning

Preliminary
Preliminary
design
design

Industrial
Industrial
engg.
engg.

Budgets
Budgets

Ads
Ads &
&
Promos
Promos

Electrical
Electrical
engg.
engg.

Production
Production
engg.
engg.

Sales
Sales
admin.
admin.

Mechanical
Mechanical
engg.
engg.

Purchasing
Purchasing

Sales
Sales

Quality
Quality
control
control

Tooling
Tooling

General
General
accounting
accounting
Cost
Cost
accounting
accounting
Statistics
Statistics &
&
data
data
processing
processing

DEPARTMENTATION BY
TERRITORY OR GEOGRAPHY
Grouping of activities by area or territory is
common in enterprises operating over wide
geographic areas.
Business firms resort to this method when
similar operations are undertaken in different
geographic areas, as in automobile assembling,
chain retiling and wholesaling and oil refining.
Govt. agencies like the tax dept., the central
bank, the courts and the postal service adopt this
basis of organization in their efforts to provide
like services simultaneously across the nation.

TERRITORIAL OR GEOGRAPHIC
ORGANIZATION (MANUFACTURING COMPANY)
President
President

Marketing
Marketing
Western
Western
region
region

Personnel
Personnel
South-west
South-west
region
region

Purchasing
Purchasing
Central
Central
region
region

South-east
South-east
region
region

Finance
Finance
Eastern
Eastern
region
region

Personnel
Personnel

Engineering
Engineering

Production
Production

Accounting
Accounting

Sales
Sales

DEPARTMENTATION BY CUSTOMER
GROUP
Grouping of activities that reflects a primary
interest in customers.
Customers are the key to the way activities are
grouped when each customer group is managed
by one department head.
Helps to cater to the requirements of clearly
defined customer groups.
Example:- sales dept. of a wholesaler, banks, IT
companies.

CUSTOMER DEPARTMENTATION
(BANK)

President
President

CommunityCommunitycity
city banking
banking

Corporate
Corporate
banking
banking

Real
Real estate
estate &
&
mortgage
mortgage loans
loans

Institutional
Institutional
banking
banking
Agricultural
Agricultural
banking
banking

DEPARTMENTATION BY PRODUCT
Grouping of activities according to products or
product lines, especially in multiline, large
enterprises.
This structure permits top management to
delegate to a division executive extensive
authority over the manufacturing, sales, service
and engineering functions that relate to a given
product or product line and to exact a
considerable degree of profit responsibility from
each of these managers.
This method originated because of the growth of
firms and limited span of management.

PRODUCT ORGANIZATION
(MANUFACTURING COMPANY)
President
President

Marketing
Marketing

Personnel
Personnel

Purchasing
Purchasing

Finance
Finance

Instrument
Instrument
division
division

Indicator
Indicator
lights
lights division
division

Industrial
Industrial
tools
tools division
division

Engineering
Engineering

Accounting
Accounting

Engineering
Engineering

Accounting
Accounting

Production
Production

Sales
Sales

Production
Production

Sales
Sales

Electronic
Electronic
meter
meter division
division

MATRIX OR GRID ORGANIZATION

Combining functional and project or product
patterns of departmentation in the same
organization structure.
Used in engineering, research & development
and product marketing organizations.
Used in construction, aerospace, installation of
an electronic data processing system,
management consulting firms.,

MATRIX ORGANIZATION
(ENGINEERING)
Director
Director of
of
engineering
engineering

Chief
Chief of
of
preliminary
preliminary
design
design
Project
Project A
A
manager
manager
Project
Project B
B
manager
manager
Project
Project C
C
manager
manager
Project
Project D
D
manager
manager

Chief
Chief
mechanical
mechanical
engineer
engineer

Chief
Chief
electrical
electrical
engineer
engineer

Chief
Chief
hydraulic
hydraulic
engineer
engineer

Chief
Chief
metallurgical
metallurgical
engineer
engineer

ORGANIZATION STRUCTURES
FOR THE GLOBAL ENVIRONMENT
Organization structures differ greatly for
enterprises operating in the global environment.
Structure depends on degree of international
orientation and commitment.

VIRTUAL ORGANIZATION
A rather loose concept of a group of independent
firms or people that are connected through,
usually, information technology.
The firms may be suppliers, customers and even
companies.
The aim of virtual organization is to gain access
to another firms competence, to gain flexibility,
to reduce risk or to respond rapidly to market
needs.
Virtual organizations coordinate their activities
through the market where each party sells its
goods and services.

BOUNDARYLESS ORGANIZATION
The purpose was to remove barriers between the
various departments as well as between domestic
and international operations.
To reward people for adopting the integration
model, bonuses were awarded to those who not
only generated new ideas but also shared them
with others.

CHOOSING THE PATTERN

OF DEPARTMENTATION
There is no one best pattern of departmentation that
is applicable to all organizations and all situations.
Managers must determine what is best by looking at
the situation they face: the jobs to be done and the
way they should be done, the people involved and their
personalities, the technology employed in the
department, the users being served and other
external and internal environmental factors in the
situation.
If they know various departmentation patterns, and
the advantages, disadvantages and danger of each,
practicing managers should be able design the
organization structure most suitable for their
particular operations

AUTHORITY AND POWER

Power: the ability of individuals or groups to
induce or influence the beliefs or actions of other
persons or groups.
Authority: the right in a position to exercise
discretion in making decisions affecting others.
Authority is a type of power, in an organizational
setting.

EMPOWERMENT
Employees at all levels in the organization are
given the power to make decisions without asking
their superiors for permission.
People closest to the task are best able to make
the decision- provided that they have the
required competencies.
Empowerment is based on suggestion schemes,
job enrichment and worker participation.
Empowerment is related to delegation and both
are a matter of degree.

EMPOWERMENT
Employees and teams should accept the responsibility
for their actions and tasks.
Power should be equal to responsibility (P = R)
If P > R, this results in autocratic behavior of the
superior who is not held accountable for his or her
actions.
If P < R, this results in frustration, because the person
has not the necessary power to carry out the task for
which he or she is responsible.
Empowerment is due in part to rise in
competitiveness, the need to respond quickly to the
demands and expectations of customers and a bettereducated workforce that demands greater autonomy.

LINE/STAFF CONCEPTS AND

FUNCTIONAL AUTHORITY

LINE AUTHORITY
Line authority gives a superior a line of authority
over a subordinate.
Scalar principle: the clearer the line of
authority, the clearer will be the responsibility
for decision-making and the more effective will be
organizational communication.
Line authority: the relationship in which a
superior exercises direct supervision over a
subordinate.

LINE AUTHORITY
General Manager

Sales Manager

Production Manager

Chief Accounts
Officer

Salesman
Foreman
Machine Shop

Foreman
Foundry

Foreman
Assembly Shop

Workers

Workers

Workers

STAFF AUTHORITY
The nature of staff relationship is advisory.
The function of people in a pure staff capacity is
to investigate, research and give advise to line
managers.
The staff can be personal staff, specialized staff or
general staff.

LINE & STAFF AUTHORITY

Secretary

Legal advisor

B.O.D.

Sales manager

Accounts officer

G.M.

Personal officer

Purchase engineer

Design engineer

Industrial engineer

W.M.

Supdt. -A

F/M

Stores officer

Supdt. -B

F/M

F/M

Workers

F/M

FUNCTIONAL AUTHORITY
The right delegated to an individual or a
department to control specified processes,
practices, policies or other matters relating to
activities undertaken by persons in other
departments.
Reasons like lack of specialized knowledge, lack
of ability to supervise specified processes and
danger of diverse interpretations of policies limit
the authority of a line executive in some cases.

FUNCTIONAL AUTHORITY
Managing Director
Works Manager

Design
Engineer

Production
Engineer

Maintenance
Engineer

Purchase
Engineer

Gang
Boss

Speed
Boss

Inspecto
r Boss

Repair
Boss

Workers

DECENTRALIZATION OF
AUTHORITY
Organizational authority is merely the discretion
conferred on people to use their judgment to
make decisions and issue instructions
Decentralization: The tendency to disperse
decision making authority in an organized
structure.
It is a fundamental aspect of delegation, to the
extent that authority is delegated is
decentralized.

CENTRALIZATION AND
DECENTRALIZATION AS
TENDENCIES
Complete
centralization
(no organization structure)

Complete
decentralization
(no organization structure)

Authority delegated
Authority not delegated

DELEGATION OF AUTHORITY
Authority is delegated when a superior gives a
subordinate discretion to make decisions.
Superiors can not delegate authority they do not
possess.
The process of delegation involves;

Determining

the results expected from a position

Assigning tasks to the position
Delegating authority for accomplishing these tasks
Holding the person in that position responsible for
the accomplishment of the tasks

RECENTRALIZATION

Centralization of authority that was once

decentralized; normally not a complete reversal of
decentralization, as the authority delegated is
not completely withdrawn.