Organizing

Organizing is the managerial function of arranging people and resources to work toward a common goal. The purposes of organizing include, but are not limited to determining the tasks to be performed to achieve objectives, dividing tasks into specific jobs, grouping jobs into departments, specifying reporting and authority relationships, delegating the authority necessary for task accomplishment, and allocating and deploying resources in a coordinated fashion.

Henri Fayol first identified organizing as a function of management in his classic monograph General and Industrial Administration. This book was published in France in 1916 but was not translated into English until the 1920s, and it was not published in the United States until 1949. Fayol's monograph has had a profound effect on the teaching and practice of management in the years since. Early “principles of management” texts published

in the 1950s generally were organized around management functions, including organizing, as are most basic management texts from the late 1990s.

Organizing plays a central role in the management process. Once plans are created, the manager's task is to see that they are carried out. Given a clear mission, core values, objectives, and strategy, the role of organizing is to begin the process of implementation by clarifying jobs and working relationships. It identifies roles and how different parts of the organization relate to and work with one another. All of this, of course, can be done in many ways. The strategic leadership challenge is to choose the best organizational form to fit the strategy and other demands.

ORGANIZING DECISIONS

When organizing, managers must make decisions about the division of labor and work specialization, departmentalization, chain of command, span of management, centralization, and formalization. Collectively, these decisions are often called organizational design.

Division of Labor or Specialization . More than two centuries ago, Adam Smith concluded that division of labor contributes to increased productivity and efficiency by allowing workers to specialize and become proficient at a specific task. This principle, coupled with technological advances, made possible the tremendous productivity of industrial companies during most of the twentieth century.

By the 1940s most manufacturing jobs in developed nations were highly specialized, with workers performing specific, standardized, and repetitive tasks. This resulted in reduced staffing, training, and compensation costs, since highly skilled workers were often not necessary. In addition, since employees were doing the same task repetitively, they tended to become very good at it.

Despite the improvements in productivity made possible by the division of labor, managers must be aware of the negative aspects of specialization: fatigue, stress, boredom, low quality products, absenteeism, and turnover. Such problems have led to programs geared toward job enlargement and job enrichment. Many enterprises now cross-train specialized workers to avoid constant repetitive work and reduce the risk of layoffs should one skill become obsolete.

Departmentalization . After the work to be completed is organized into identifiable jobs through a process of dividing labor, jobs are then combined into logical sections or departments. Doing so allows for effective coordination of effort. There are many ways to departmentalize, each of which has important advantages and disadvantages. One of the most common forms is functional departmentalization, which involves grouping similar jobs into a common department, such as accounting, sales, human resources, and engineering. Another form is product departmentalization, which involves organizing around an enterprise's various product lines. Other ways of departmentalizing include organizing by customer and by geographic territory. In practice, most large companies use a hybrid form of departmentalization, which means they combine one or more of the above methods to form their organizational structure.

Chain of Command . The chain of command is a line of authority extending from the top to the bottom of the organizational structure. Classic principles of organizing emphasize that one must be aware of the need to define the extent of managers' responsibility and authority by specifying their place in the chain of command. Another principle of organizing related to the chain of command is called the unity of command, which states that a person should have only one superior to whom he or she must report.

Span of Management . The span of management, often called the span of control, is the number of individuals who are directly responsible to a particular manager. A classic principle of organizing suggests that there are definite limits to the number of subordinates one manager can supervise effectively. When organizing, managers must keep these limits in mind. Wide spans of management lead to flatter organizational structures with fewer layers of management, and are thus considered more efficient. However, if spans become too wide managers may not be able to provide adequate direction to subordinates. Narrow spans of management lead to tall organizational structures with many layers of management. Although narrower spans of management allow for closer supervision of subordinates they have many drawbacks, including cost, communication problems, and difficulty in developing the initiative and autonomy of subordinates.

In general, the trend is toward wider spans of management, with an accompanying decrease in management hierarchy. Technological advances in information processing and communication have made wider spans of management more feasible.

Chief among these advances is methods of organization that make it possible for multiple users to co-manage projects away from a centralized office. Software (like PeopleReady and SharePoint) helps organize group efforts in communication, building a customer base, finding and sharing information, creating a proactive mobile work-force, and organizing the company's platform.

Degree of Centralization . Another organizing decision is the degree of centralization in the organizational structure. If decision-making authority in an organization is highly centralized, then most major decisions are made at the upper levels of the structure. Conversely, if decision-making

authority is decentralized, important decisions are often made at lower levels of the hierarchy. The degree of centralization that is appropriate for a given organization depends upon many factors, including the nature of the environmental conditions that face the enterprise, the characteristics and abilities of lower-level employees, and the size of the enterprise. Many organizations are favoring a greater degree of decentralization of their decision-making authority.

Formalization . The degree of formalization in an enterprise refers to the degree to which there are standardized rules and procedures governing the activities of employees. A company with a high degree of formalization is characterized by detailed job descriptions and clearly defined policies and procedures covering a wide variety of employee behaviors. Conversely, a company with a low level of formalization is characterized by non-structured jobs and fewer explicit policies and procedures.

As companies grow larger, a certain amount of formalization is inevitable. Employees require some direction in their job responsibilities and in the procedures required for consistency within the organization's production schema. When organizing, however, managers should be aware of the costs of excessive formalization, which may include stifling employee creativity and innovation as well as slowing the organization's responsiveness to critical issues and problems.

FACTORS AFFECTING ORGANIZING DECISIONS

There is no standard formula for the best way to organize an enterprise. Several factors have been shown to influence organizing decisions. Among the most important of these factors are strategy, size, environmental conditions, and technology.

Strategy . Managers organize in order to achieve the objectives of the enterprise for which they work. Thus, the strategy of the enterprise affects organizing decisions. Changes in strategy frequently necessitate changes in the way the enterprise is organized.

Size . Small enterprises tend to exhibit less formalization, centralization, and complexity in their organizational structure. Nevertheless, enterprises of the same size may be organized quite differently because of differences in strategy, environmental conditions, and technology.

Environmental Conditions . The key factor in the external environment that is relevant to organizing is uncertainty. Some enterprises face competitive environments that change rapidly and are quite complex, while others face relatively stable conditions. Generally, turbulent environments call for organizing decisions that lead to less formalization and centralization in the organizational structure. Companies that wish to be less formal and operate from a less upper-management driven schema will benefit from sharing as much of the information and responsibility as possible with employees at every level in the organization. Weekly newsletters including finance information, town hall-style meetings, an open door policy at all levels of the hierarchy, and an open forum company-wide instant messenger system will all serve to this end.

Technology . The processes by which an enterprise transforms inputs into outputs may also affect organizing decisions. Some research suggests that organizing decisions that lead to high degrees of formalization, centralization, and work specialization are more appropriate for routine technologies and that the converse is true for non-routine technologies. The trend in popular business models shifts constantly, but enterprises of all sizes should take their own needs—not what is popular—into consideration when deciding the degree of formalization and centralization they will implement.

SEE ALSO Management Functions; Organizational Chart; Organizational Structure