Unit 3: Organizing structures & authority
Business Organization and Management notes · PTU syllabus (BCOM 101-18)
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Unit summary
Organising turns plans into a structure of jobs, departments and relationships. This unit covers the concept and process of organising, types of organisation structure, departmentalisation, authority, delegation, decentralisation and coordination.
After this unit you can
- Explain the concept, importance and process of organising
- Compare types of organisation structure
- Explain bases of departmentalisation
- Explain authority, delegation, decentralisation and coordination
PTU syllabus topics
- Organizing concepts
- organization structure
- departmentalization
- authority
- delegation
- decentralization
- coordination
Decision power
Kept at the top
Spread to lower levels
Speed
Slower for local issues
Faster, closer to the problem
Control
Tight and uniform
Flexible, needs trust
Suits
Small firms, crises
Large, diverse firms
Topic 1
Organising concepts
Organising is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority, and establishing relationships so that people work together effectively (Louis Allen).
- 1Identify and divide work
- 2Group activities into departments
- 3Assign duties
- 4Establish authority and reporting relationships
- 5Coordinate
- Importance: benefits of specialisation, clarity of working relationships, optimum use of resources, adaptation to change, effective administration, development of personnel, expansion and growth.
Origin
Created deliberately by management
Arises from social interaction
Purpose
Achieve organisational goals
Satisfy social needs
Structure
Defined, official
Undefined, unofficial
Communication
Through scalar chain
Grapevine
Stability
Stable
Unstable
Topic 2
Organisation structure
Organisation structure is the framework within which managerial and operating tasks are performed — the pattern of relationships among positions.
Line
Authority flows directly from top to bottom
Line and staff
Line managers advised by staff specialists
Functional
Specialists have authority in their function
Divisional
Divisions by product or region
Matrix
Dual reporting to functional and project managers
Network and team
Flexible, outsourced, cross-functional
| Structure | Merits | Demerits |
|---|---|---|
| Line | Simple, quick decisions, clear authority, discipline | Overload on top, no specialists, rigid |
| Line and staff | Expert advice, better decisions | Line–staff conflicts, costly |
| Functional | Specialisation, efficiency | Violates unity of command, coordination problems |
| Divisional | Accountability, flexibility, product focus | Duplication of resources, costly |
| Matrix | Flexible, efficient use of experts | Dual authority confusion, power struggles |
- Span of management (control): number of subordinates a manager can supervise effectively. Narrow span → tall structure; wide span → flat structure. Graicunas' formula shows relationships grow rapidly with each added subordinate.
Topic 3
Departmentalisation
Departmentalisation is grouping activities and people into departments.
Functional
Production, marketing, finance, HR
Product
Separate departments for each product line
Territorial
By region — north, south, export
Customer
Retail, wholesale, institutional customers
Other bases: process (spinning, weaving, dyeing in a textile mill), time (shifts), number (army platoons).
Topic 4
Authority, responsibility and delegation
- Authority: the right to give orders and expect obedience.
- Responsibility: the obligation to perform the assigned duties.
- Accountability: answerability for results to the superior.
- Parity principle: authority must be commensurate with responsibility.
Delegation
Delegation is the entrustment of responsibility and authority to a subordinate and the creation of accountability for performance.
- 1Assignment of responsibility
- 2Grant of authority
- 3Creation of accountability
- Principles: delegation by results expected, parity of authority and responsibility, absoluteness of accountability (cannot be delegated), unity of command, authority level principle, scalar principle.
- Barriers: fear of losing control, lack of confidence in subordinates, subordinates' fear of criticism, lack of incentives.
Topic 5
Centralisation and decentralisation
Meaning
Decision authority retained at top
Decision authority dispersed to lower levels
Speed
Slow at lower levels
Quick, close to action
Suitable for
Small organisations, crises
Large, diversified organisations
Development of managers
Limited
Develops future managers
Control
Tight, uniform
Needs good control systems
- Delegation vs decentralisation: delegation is a process between a superior and a subordinate; decentralisation is the systematic delegation throughout the organisation — a philosophy.
Exam tip
Factors determining degree of decentralisation: size, diversity of products, geographical spread, cost of decisions, availability of managers, control techniques.
Topic 6
Coordination
Coordination is the orderly arrangement of group efforts to provide unity of action in pursuit of a common purpose (Mooney and Reiley).
- Features: integrates group efforts, ensures unity of action, continuous, pervasive, deliberate function, responsibility of all managers.
- Types: internal and external; vertical and horizontal.
- Techniques: sound planning, clear structure, effective communication, committees, chain of command, liaison officers, leadership, MBO.
- Principles (Follett): direct contact, early beginning, reciprocal relationship, continuity.
Key terms
- Organising
- Grouping activities and establishing authority relationships
- Span of control
- Number of subordinates a manager can supervise effectively
- Departmentalisation
- Grouping activities into departments
- Delegation
- Entrusting responsibility and authority with accountability
- Decentralisation
- Systematic dispersal of decision-making authority
Quick revision
- Organising process: identify work → group → assign → authority → coordinate.
- Structures: line, line and staff, functional, divisional, matrix.
- Bases: function, product, territory, customer, process.
- Delegation = responsibility + authority + accountability; accountability cannot be delegated.
- Coordination: essence of management; Follett's principles.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.Define organising.
- Q2.Distinguish formal and informal organisation.
- Q3.What is matrix organisation?
- Q4.What is span of control?
- Q5.What are the elements of delegation?
- Q6.Distinguish delegation and decentralisation.
Long-answer questions
- Q1.Explain the process and importance of organising.
- Q2.Discuss different types of organisation structure with merits and demerits.
- Q3.Explain delegation of authority, its principles and barriers.
- Q4.Explain centralisation, decentralisation and coordination.
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