UNIT III

FUNDAMENTAL OF MANAGEMENT- BBA I

Concept of Organizing
The term organizing as a group of individuals who are interacting with each other and contributing their
efforts towards the attainment of certain goals or objectives. In other words organizing may be defined as a
co-operative & healthy relationship among the groups which is built up by them through proper network of
communication system with a view to achieve their specific or common goals.

"Organizing" may be defined as such process which is made by any business firm for the purpose of achieving
its own goals or objectives in smooth way. It is the process of ensuring healthy relationship among the
departments by the proper channel of communication so that the personnel (employees) of every
department can give their hundred percent

According to Theo Haimann, “Organizing is the process of defining and grouping the activities
of the enterprises and establishing the authority relationships among them. In performing the
organizing function, the manager defines departments and assigns activities so that they can be
most effectively executed”.

According to Lows A. Allen, “Organizing is the process of identifying and grouping the work to
be performed defining and delegating responsibility and authority, and establishing
relationship for the purpose of enabling people to work most effectively together in
accomplishing objectives. An Organization is defined as a social structure designed to
coordinate the activities of two or more

People through a division of labor and hierarchy of authority for the achievement of a common
purpose or goal”.

According to Oliver Sheldon, “the process of so combining the work which individual or groups
have to perform with facilities necessary for its execution that the duties so performed provide
the Best channels for official systems. It is positive & co-ordinates application of the available
efforts.”

OBJECTIVES OF ORGANIZING

Organizing is the function of management which follows planning. It is a function in which the
synchronization and combination of human, physical and financial resources takes place. All the three
resources are important to get results. Therefore, organizational function helps in achievement of
results which in fact is important for the functioning of a concern.

According to Chester Barnard, “Organizing is a function by which the concern is able to define
the role positions, the jobs related and the co-ordination between authority and responsibility.
 Hence, a manager always has to organize in order to get results. A manager performs organizing
function with the help of following steps:-

1. Identification of activities - All the activities which have to be performed in a concern have to be
identified first. For example, preparation of accounts, making sales, record keeping, quality control,
inventory control, etc. All these activities have to be grouped and classified into units.

2. Departmentally organizing the activities - In this step, the manager tries to combine and group
similar and related activities into units or departments. This organization of dividing the whole
concern into independent units and departments is called departmentation.

3. Classifying the authority - Once the departments are made, the manager likes to classify the powers
and its extent to the managers. This activity of giving a rank in order to the managerial positions is
called hierarchy. The top management is into formulation of policies, the middle level management
into departmental supervision and lower level management into supervision of foremen. The
clarification of authority helps in bringing efficiency in the running of a concern. This helps in
achieving efficiency in the running of a concern. This helps in avoiding wastage of time, money,
effort, in avoidance of duplication or overlapping of efforts and this helps in bringing smoothness in a
concern’s working.

4. Co-ordination between authority and responsibility - Relationships are established among various
groups to enable smooth interaction toward the achievement of the organizational goal. Each
individual is made aware of his authority and he/she knows whom they have to take orders from and
to whom they are accountable and to whom they have to report. A clear organizational structure is
drawn and all the employees are made aware of it.

5. sense of security - Organizational structure clarifies the job positions. The role assigned to every
manager is clear. Co-ordination is possible. Therefore, clarity of powers helps automatically in
increasing mental satisfaction and thereby a sense of security in a concern. This is very important for
job- satisfaction.

6. Scope for new changes - Where the roles and activities to be performed are clear and every person
gets independence in his working, this provides enough space to a manager to develop his talents and
flourish his knowledge. A manager gets ready for taking independent decisions which can be a road
or path to adoption of new techniques of production. This scope for bringing new changes into the
running of an enterprise is possible only through a set of organizational structure

IMPORTANCE OF ORGANIZING FUNCTION

1. Specialization - Organizational structure is a network of relationships in which the work is divided

into units and departments. This division of work is helping in bringing specialization in various
activities of concern.

2. Well defined jobs - Organizational structure helps in putting right men on right job which can be
done by selecting people for various departments according to their qualifications, skill and
experience. This is helping in defining the jobs properly which clarifies the role of every person.
3. Clarifies authority - Organizational structure helps in clarifying the role positions to every
manager This can be done by clarifying the powers to every manager and the way he has to
exercise those powers Importance of Organizing Function should be clarified so that misuse of
powers do not take place. Well defined jobs and responsibilities attached helps in bringing
efficiency into managers working. This helps in increasing productivity.

4. Co-ordination - Organization is a means of creating co-ordination among different departments of

the enterprise. It creates clear cut relationships among positions and ensure mutual co-operation
among individuals. Harmony of work is brought by higher level managers exercising their
authority over interconnected activities of lower level manager For smooth running of an
organization, the co-ordination between authority- responsibility is very important.

5. Responsibility attached to every authority. There is a saying, “Authority without responsibility

leads to ineffective behavior and responsibility without authority makes person ineffective.”
Therefore, co-ordination of authority- responsibility is very important.

6. Effective administration - The organization structure is helpful in defining the jobs positions. The
roles to be performed by different managers are clarified. Specialization is achieved through
division of work. This all leads to efficient and effective administration.

NATURE OF ORGANIZING

1. Organization is a group of Individuals:

Organization can consider as a group of individuals who comes together and Make co-operative relationship
with each-other and contributing their efforts with a view to attain preset goals. Infect, in the absence of
group of individuals there is no Existence of organization. Thus it is clear that organization is a group of
individuals.

2. Organization is a process:

The feature of organization can put to be as a process, because a large number of events are done under
organizing process towards the attainment of predetermined goals, such as determination of various
activities, grouping of activities, allocation of work amongst the employees and delegation of authority as
well. Hence, organization is a process.

3. Organization is a ‘Means’ not an ‘End’:

Organization is a means to reach out the goals of an enterprise. In fact organization provides such platforms to
enterprise where all the activities are clearly predefined, as a result of this enterprise easily obtain its goals.
Thus it is proved that organization is a ‘Means’ not an ‘End’.

4. Organization is an important Function of Management:

5. It is an essential feature of organization. Organization refers to an important function of management
because all other functions of management like staffing, directing, controlling etc will become ineffective in
the absence of this function.

6. Organization is related to its Objectives:

Organization is directly concerned with the objectives of enterprise. In the absence of objectives there is no
life of organization. If there is an organization then the objectives must be attached with it. Hence,
Organization is related with its goals.

7. Communication is the life of organization:

organization It is also an important feature of organization. Communication can be treated as a life of

organization, because in the lack of proper network of communication there is no existence of organization.
Infect the foundation of an organization properly depends on communication. On the whole it is clear that is
the system of communication.

DELEGATION

A delegation is a group of people who have been tasked with a specific job or given a specific purpose, or the
act of assigning a specific task or purpose to a person or group of people. Delegation is a common practice in
contract law. Delegation occurs when a party to the contract transfers the authority & responsibility for
performing a particular contractual duty to another party. Delegation doesn't involve the transfer of
contractual rights.

Elements of Delegation

The Delegation of Authority is a process through which manager assigns responsibility to the
subordinate with a certain level of authority, i.e. power to take decisions, in order to accomplish
certain assignments on the manager’s behalf.
1. Authority - authority as the power and right of a person to use and allocate the resources efficiently,
to take decisions and to give orders so as to achieve the organizational objectives. Authority is the
right to give commands, orders and get the things done. The top level management has greatest
authority. Authority always from top to bottom. It explains how a superior gets work done from his
subordinate by clearly explaining what is expected of him and how he should go about it. Authority
should be accompanied with an equal amount of responsibility.

2. Responsibility - is the duty of the person to complete the task assigned to him. A person who is
given the responsibility should ensure that he accomplishes the tasks assigned to him. If the tasks for
which he was held responsible are not completed, then he should not give explanations or excuses.
Responsibility without adequate authority leads to discontent and dissatisfaction among the person.
Responsibility flows from Bottom to top. The middle level and lower level management holds more
responsibility.

3. Accountability - means giving explanations for any variance in the actual performance from the
expectations set. Accountability cannot be delegated. Accountability can’t be escaped. It arises from
responsibility. Delegation of authority is the base of superior-subordinate relationship,

it involves following steps:-

1. Assignment of Task & Duties - The delegator first tries to define the task and duties to the
subordinate. He also has to define the result expected from the subordinates. Clarity of duty as well as
result expected has to be the first step in delegation.

2. Granting of authority - Subdivision of authority takes place when a superior divides and shares his
authority with the subordinate. It is for this reason, every subordinate should be given enough
independence to carry the task given to him by his superiors. The managers at all levels delegate
authority and power which is attached to their job positions. The subdivision of powers is very
important to get effective results.

3. Creating Responsibility and Accountability - The delegation process does not end once powers are
granted to the subordinates. They at the same time have to be obligatory towards the duties assigned
to them. Responsibility is obligation of an individual to carry out his duties in best of his ability as per
the directions of superior. responsibility is absolute and cannot be shifted.

on the others hand, is the obligation of the individual to carry out his duties as per the standards of
performance. it is said that authority is delegated, responsibility is created and accountability is
imposed. Accountability arises out of responsibility and responsibility arises out of authority.
Therefore, it becomes important that with every authority position an equal and opposite
responsibility should be attached. .

RELATIONSHIP BETWEEN AUTHORITY AND RESPONSIBILITY

Authority is the legal right of person, superior to command his subordinates while accountability is
the obligation of individual to carry out his duties as per standards of performance Authority from the
superiors to subordinates, in which orders and instructions are given to subordinates to complete the
task. It is only through

Authority, a manager exercises control. In a way through exercising the control the superior is
demanding

Differences between Authority and Responsibility

Authority Responsibility

It is the legal right of a person It is the obligation of subordinate to perform

or a superior to command his the work assigned to him.
subordinates.

Authority is attached to the Responsibility arises out of superior-

position of a superior in subordinate relationship in which subordinate
concern. agrees to carry out duty given to him.

Authority can be delegated by Responsibility cannot be shifted and is

a superior to a subordinate absolute

It flows from top to bottom. It flows from bottom to top.

KEY DIFFERENCES BETWEEN AUTHORITY AND RESPONSIBILITY
1. The power or right, inherent to a particular job or position, to give orders, enforce rules, make
decisions and obtain conformity, is called authority. Duty or obligation to undertake and
complete a task satisfactorily, assigned by the senior or established by one’s own commitment or
circumstances is called responsibility.
2. Authority refers to the legal right of the manager to give orders and expect obedience from
subordinates. On the other hand, responsibility is the corollary, i.e. result of the authority.
3. The position of an individual in an organization determines his/her authority, i.e. the higher the
position of a person in the corporate ladder, the more is the authority and vice versa. As against
this, the superior-subordinate relationship forms the basis for responsibility.
4. While authority is delegated, by the superior to subordinates, responsibility is assumed, i.e. it is
inherent in the task assigned.
5. Authority needs the ability to give orders and instructions, whereas responsibility demands the
ability of compliance or obedience, to follow orders.
6. Authority flows downward, i.e. the extent of authority is greatest at the top level and lowest at
the low level. On the contrary, the responsibility exacts upward, i.e. from bottom to top, the
subordinate will be responsible to superior.
7. The purpose of the authority is to take decisions and execute them. Conversely, responsibility
aims at executing duties assigned by the superior.
8. Authority is inherent with the position, and so it continues for a long period. Unlike
responsibility, which is attached to the task assigned and hence it is short-lived, it ends as soon as
the task accomplishes successfully

FEATURES OF DELEGATION OF AUTHORITY

1. Delegation means giving power to the subordinate to act independently but within the limits
prescribed by the superior. Also, he must comply with the provisions of the organizational policy,
rules, and regulations.
2. Delegation does not mean that manager give up his authority, but certainly he shares some
authority with the subordinate essential to complete the responsibility entrusted to him.
3. Authority once delegated can be further expanded, or withdrawn by the superior depending on the
situation.
4. The manager cannot delegate the authority which he himself does not possess. Also, he can not
delegate his full authority to a subordinate.
5. The delegation of authority may be oral or written, and may be specific or general.
6. The delegation is an art and must comply with all the fundamental rules of an organization.

ADVANTAGES OF DELEGATION OF AUTHORITY

 Delegation of authority refers to the transfer of power. While some managers may be wary of it, it has
its own advantages. Here, we present the pros and cons of delegating authority.

Surround yourself with great people; delegate authority; get out of the way."
― Ronald Reagan

1. Builds Trust and Understanding

Delegation involves trusting in someone's abilities and relying on them. This helps build a feeling
of mutual understanding and trust. It gives managers the opportunity to understand the employees'
approach towards work.

2. Motivates Employees
Entrusting employees with additional responsibilities works as a great motivator at the workplace.
An employee who feels trusted; i.e. when he knows that the higher management trusts him and
relies on his capabilities, he works with greater efficiency. Delegation of authority makes him feel
important and more responsible.

3. Tests Employee Skills

With authority comes added responsibility, shouldering which, is not easy. It requires one to work
with greater focus and efficiency, and to take initiatives, be alert, think creatively, analyze
situations, and take decisions. Assessing how well the delegates are functioning can help a manager
rate their performance and take decisions about their promotions.

4. Provides Training
Delegation gives the employees an experience of the actual work, thus providing them with
practical training of the job. Delegation of authority involves sharing and transfer of knowledge,
thus increasing the delegates' general awareness and know-how of the work. The skills and gained
knowledge is tested while working, thus giving the employees an opportunity to prove themselves.

5. Achieves Work Distribution

This can be considered as a major advantage of delegation, as it reduces the burden of work with
the manager, gives more people a chance to share responsibility, and thus leads to a fair distribution
of work. Delegating authority for a certain project or task can help a manager concentrate on other
more important tasks. Transfer of smaller responsibilities can make it easy for a manager to
shoulder greater or more important responsibilities in the organization.

6. Gives Scope for Innovation

To implement new ideas in the organization, one needs to have certain powers and the right amount
of freedom. A rigid framework and lack of authority may restrict an individual from thinking
differently. If deserving individuals are given the right authorities, they may be able to bring
innovation. Delegation of authority may invite out-of-the-box ideas and positive changes in the
organization.

7. Builds Team Spirit

Delegating authority to a group of individuals increases their bonding and mutual understanding.
They get a chance to work together towards a common goal, thus building the team spirit.

DISADVANTAGES OF DELEGATION OF AUTHORITY

Misuse of Power
In delegating authority, there is a risk of the delegate misusing his power for personal gains. He may
have access to confidential information, which he may leak to the competitors, or involve himself in
other fraudulent activities. This possibility raises a question mark on the employee's integrity, in
which case, choosing such an individual as the delegate would be a wrong decision.

Failure to Fulfill the Tasks

The manager's instructions may not be well taken care of by the delegate, or he may not be very
particular about following them. This may breed from unwillingness or incapacity of the delegate.

Delay
The delegate may take long to understand the new responsibility. As he has authority, delayed actions
on his part may hamper his team's performance. A delay in planning or taking decisions may not be
affordable for the organization. Hence, it is not advisable to delegate authority when there is a time
crunch.

Impact on Quality of Work

There are chances of quality being affected simply because the employee is new to the work. The
experience and knowledge that the manager has, may be lacking in the delegate. He might make
mistakes. His way of working may be different. This may impact the overall quality of work. Thus, it
is important for a manager to understand that his responsibility does not end after delegation.
Delegation of authority must be planned and executed with care. Only the deserving candidate should
be given additional responsibilities. The manager should give clear instructions and provide the
delegate with sufficient training. Even after delegating, frequent monitoring may be required in the
initial phase.

Main Types of Organization Structure

The types are:

1. Line Organization
2. Line and Staff Organization
3. Functional Organization
4. Project Organization
5. Matrix Organization

1. Line Organization:
Line organization is the simplest and oldest form of organization structure. It is called as military or
departmental or scalar type of organization. Under this system, authority flows directly and vertically
from the top of the managerial hierarchy ‘down to different levels of managers and subordinates and
down to the operative level of workers.

Line organization clearly identifies authority, responsibility and accountability at each level. The
personnel in Line organization are directly involved in achieving the objectives of the organization
The line organization structure is given below:

Advantages of Line Organization:

a. The line organization structure is very simple to understand and simple to operate.

b. Communication is fast and easy and feedback can be acted upon faster.

c. Responsibility is fixed and unified at each level and authority and accountability are clear-cut,
hence each individual knows to whom he is responsible and who is or in truth responsible to him.

d. Since it is especially useful when the company is small in size, it provides for greater control and
discipline in the organization.

e. It makes rapid decisions and effective coordination possible. So it is economic and effective.

f. The people in line type of organization get to know each other better and tend to feel close to each
other.

g. The system is capable of adjusting itself to changing conditions for the simple reason that each
executive has sole responsibility in his own sphere.

Disadvantages of Line Organization:

a. It is a rigid and inflexible form of organization.

b. There is a tendency for line authority to become dictatorial.

c. It overloads the executive with pressing activities so that long-range planning and policy
formulation are often neglected.,

d. There is no provision for specialists and specialization, which is essential for growth and
optimization.

e. Different departments may be much interested in their self-interests, rather than overall
organizational interests and welfare.

f. It is likely to encourage nepotism.

g. It does not provide any means by which a good worker may be rewarded and a bad one punished.

2. Line and Staff Organization:

This type of organization structure is in large enterprises. The functional specialists are added to the
line in line and staff organization. Mere, staff is basically advisory in nature and usually does not
possess any command authority over line managers. Allen has defined line and staff organization as
follows.

“Line functions are those which have direct responsibility for accomplishing the objectives of the
enterprises and staff refers to those elements of the organization that help the line to work most
effectively in accomplishing the primary objectives of the enterprises.”

In the line and staff organization, staffs assist the line managers in their duties in order to achieve the
high performance. So, in an organization which has the production of textiles, the production manger,
marketing manager and the finance manager may be treated as line executives, and the department
headed by them may be called line departments

On the other hand, the personnel manager who deal with the recruitment, training and placement of
workers, the quality control manager who ensure the quality of products and the public relations
manager are the executives who perform staff functions.

Here, it is better to see the type of staff, which may be in an organization.

Type of Staff:
The staff organizations mentioned above all has in common the fact that they are auxiliary to the main
functions of the business. There are, however, different types of staff.

The three main divisions may be listed as:

1. Personal Staff.

2. Specialized Staff.

3. General Staff.

1. Personal Staff:
Personal staff consists of a personal assistant or adviser attached to the line executive at any level. His
main function is to aid and advise the line executive as also to perform any other work assigned to
him.

In business, the personal staffs is typified by the private secretary, who may keep the executive’s
personal check book, buy his Christmas presents and arrange his appointments. General or business
executives are given personal staff assistants on the same theory. Their time is too valuable to be
spent in handling the details of daily living.

2. Specialised Staff:
The specialised staff have expert knowledge in the specific fields. The specialised staff are those that
handle the specialised functions. For example, accounting, personnel, engineering and research. It is
now impossible for one man to familiarise himself with all the various specialities needed in the
modern large business.

Hence the general or the company president, and perhaps the department head, is provided
with experts in each Field to counsel him on the various specialise staff could serve in any of the
following capacities:
a. Advisory Capacity.

b. Service Capacity.

c. Control Capacity.

a. Advisory Capacity:
Its purpose is to render specialised advice and assistance to management while needed. Some typical
areas covered by advisory staff is legal, public relations and economic development areas.

b. Service Capacity:
This group provides a service, which is useful to the organisation as a whole and not to any specific
division or function. An example would be the personnel department serving the enterprises by
procuring and training the needed personnel for all departments. Other areas of service include
research and development, purchasing, statistical analysis, insurance problems etc.
c. Control Capacity:
This includes quality control staff that may have the authority to control the quality and enforce
standards.

3. General Staff:
Any decision that cuts across departmental lines must be made by the Chief Executive. It cannot be
delegated to the head of a specialised staff group or to a line department head, since other department
heads will naturally resent interference in their department heads will naturally resent interference in
their department by someone who is in no way their superior.

A line and staff organization chart

Advantages of Line and Staff Organisation:

a. Line officers can concentrate mainly on the doing function as the work of planning and
investigation is performed by the staff. Specialization provides for experts advice and efficiency in
management.

b. Since the organization comprises line and staff functions, decisions can be taken easily.

c. The staff officers supply complete factual data to the line officers covering activity within and
without their own units. This will help to greater co-ordination.

d. It provides an adequate opportunity for the advancement of workers.

e. The staff services provides a training ground for the different positions.
f. Adequate organisation a balance among the various activities can be attained easily.

g. The system is flexible for new activities may be undertaken by the staff without forcing early
adjustments of line arrangements.

h. Staff specialists are conceptually oriented towards looking ahead and have the time to do
programme and strategic planning and analyse the possible effects of expected future events.

Disadvantages of Line and Staff Organisation:

a. Confusion and conflict may arise between line and staff. Because the allocation of authority and
responsibility is not clear and members of the lower levels may be confused by various line orders
and staff advices.

b. Staff generally advise to the lines, but line decides and acts. Therefore the staffs often feel
powerless.

c. Too much reliance on staff officers may not be beneficial to the business because line officials may
lose much of their judgment and imitative.

d. Normally, staff employees have specialized knowledge and expert. Line makes the final decisions,
even though staff gives their suggestions. Staff officers, therefore, may be resented.

e. Staff officers are much educated so their ideas may be more theoretical and academic rather than
practical.

f. Although expert advice is available it reaches the workers through the managers. Here it is liable to
create a greater deal of misunderstanding and misinterpretation.

g. Since staff specialists demand higher payments, it is expensive.

h. The staff are unable to carry out its plan or recommendations because of lack of authority. So they
become ineffective sometimes, it will make them careless and indifferent towards their jobs.

i. Since the line are performed, with the advise provided by the staff, if things go right then the staff
takes the credit and if things go wrong then the line get the blame for it.

3. Functional Organization:
The functional organization was evolved by F.W. Taylor while he was working as a foreman. He
suggested eight foremen, four in factory and four in planning division as under.
Factory Division:
(i) The gang boss,

(ii) The speed boss,

(iii) The inspector, and

(iv) The maintenance or repair boss.

Planning Division:

(i) Route Clerk,

(ii) Instruction card clerk,

(iii) Time and cost clerk, and

(iv) The shop disciplinarian.

He evolved his functional organization system, which consists in “so dividing the work of
management that each man, from the assistant superintendent down, shall have as few functions as
possible to perform.”

According to Terry, “Functional organization refers to the organization which is divided into a
number of functions such as finance, production, sales, personnel, office and research and
development and each of functions are performed by an expert”. Line authority, staff authority and
functional authority as a third type of authority are in this type of organization.

Features of Functional Organization:

a. Each worker receives instructions not only from one superior, but also from a group of specialists.

b. Three types of authority relationships are in the functional organization such as line authority, staff
authority and functional authority.

c. Staff specialists are given the authority to decide and do things in a limited way.

d. The scope of the work is kept limited but the area of authority is left unlimited.

e. There is a grouping of activities of the enterprise into certain major functional departments.

Advantages of Functional Organization:

a. Each manager is an expert in his field. He has to perform a limited number of functions. So
complete specialization will be in functional organization.

b. The greater degree of specialization leads the improvement in the quality of product.

c. Since the job requirements are definite and tangible, organization can achieve the intensive
utilization of the principle of specialization of labor at the managerial level.

d. Specialization will lead for mass production and standardization.

e. Since experts get sufficient time for creative thinking, planning and supervision are made efficient.

f. It increases the work satisfaction for specialists who presumably do what they like to do.

Disadvantages of Functional Organization:

a. Since there is no direct boss or controller of the workers, co-ordination is hard to achieve.

b. Since workers are under different bosses, discipline is hard to achieve. As results there will be low
morale on the part of the workers.

c. The non-supervisory employees are uncertain as to whom they should turn for advice and aid when
problem call for analysis.

d. Due to that control is divided, action cannot be taken immediately.

e. Since there will be many foreman of equal rank in the same department, the conflicts of leadership
may arise.

f. It reduces the opportunities for the training of all-round executives to assume further leadership in
the firm.

4. Project Organization:
This organizational structure are temporarily formed for specific projects for a specific period of time,
for the project of achieving the goal of developing new product, the specialists from different
functional departments such as production, engineering, quality control, marketing research etc., will
be drawn to work together. These specialists go back to their respective duties as soon as the project
is completed.

Really, the project organization is set-up with the object of overcoming the major weakness of the
functional organization, such as absence of unity of command, delay in decision-making, and lack of
coordination.
The project organization chart may be shown as follows:

Advantages of Project Organization:

a. It is a remarkable illustration of relationship between environment, strategy and structure.

b. The grouping of activities on the basis of each project results in introduction of new authority
patterns.

c. Since the specialists from different departments is drawn to work together under the project
organization it helps to coordination.

d. It makes for meaningful control and fixation of individual responsibility.

Disadvantages of Project Organization:

a. The uncertainty may be attributed to the diverse backgrounds of the professional who are deputed
to the project.

b. The project manager finds it difficult to motivate and control the staff in a traditional way in the
absence of well-defined areas of responsibility lines of communication and criteria to judge
performance.

c. Delay in completion of the project may occur.

d. Effective project management may also be hindered by the top management who may not be
wholly are of the problems at the project centre.

5. Matrix Organization:
According to Stanley Davis and Paul Lawrence matrix organization is “any organization that employs
a multiple command system that includes not only the multiple command structure, but also related
support mechanism and an associated organizational culture and behavior pattern.”
A matrix organisation, also referred to as the “multiple command system” has two chains of
command. One chain of command is functional in which the flow of authority is vertical.

The second chain is horizontal depicted by a project team, which is led by the project, or group
manager who is an expert in his team’s assigned area of specialisation.

Since the matrix structure integrates the efforts of functional and project authority, the vertical and
horizontal lines of authority are combination of the authority flows both down and across.

Advantages of Matrix Organisation:

1. Since there is both vertical and horizontal communication it increases the coordination and this
coordination leads to greater and more effective control over operations.

2. Since the matrix organisation is handling a number of projects, available resources will be used
fully.

3. It focuses the organisational resources on the specified projects, thus enabling better planning and
control.
 4. It is highly flexible as regards adherence to rules, procedures etc. Here experience is the best guide
to establishing rules and procedures.

5. As any department or division has to harness its effort towards accomplishment of a single project,
employees are effectively motivated.

Disadvantages of Matrix Organisation:

1. Since, there is more than one supervisor for each worker, it causes confusion and conflicts and
reduce effective control.

2. There is continuous communication both vertically as well horizontally, which increases paper
work and costs.

3. It is difficult to achieve a balance below on the projects technical and administrative aspects.

MEANING OF CENTRALIZATION

Centralization means the authority is centralized at the top level of management. Decisions are made
by the higher level managers. It is opposite of decentralization. Top managers make all the decisions.
Subordinates simply carry them out.

According to Ricky Griffin,” Centralization is the process of systematically retaining power and
authority in the hands of higher level managers”.

ADVANTAGES OF CENTRALIZATION

1. Specialization management: The higher the specialization of jobs, the greater the need for
centralization. Tall hierarchical organizations with functional departments are best managed through
centralization.

2. Complexity management: Specialization of jobs creates complexity. Narrow spans of management

also create complexity. Centralization provides advantage to manage complexity. Uniform policies
and practices are fostered. Specialists can be used.

3. Significant decision making: Non-programmed significant decisions require centralized decision

making by top management. Decentralization is not suitable for making such decisions. Moreover,
management philosophy may also favor centralization in such decision.

4. Environmental stability: Centralization is the most suitable model for making decisions in stable
environment.

5. Improved capacity at lower levels: Subordinates may lack capacity or be unwilling and inexperienced
to exercise decentralized authority. Such situations give advantage to centralization.
6. Crisis management: When organizations face crisis or risk of failure, centralized decision making by
top management has advantage.

7. Cost effective: High cost of decentralization makes centralization advantageous. Duplication of

efforts is minimized.

DISADVANTAGES OF CENTRALIZATION

1. Poor environmental adaptation: Organizational environment tends to be dynamic, complex and

uncertain. Centralization cannot quickly adapt to the changing environment.

2. Poor diversification management: Modern organizations tend to be highly diversified. They are also
geographically dispersed. Centralization is not suitable to manage diversified and dispersed
organizations.

3. Unsuitable for programmed decisions: Programmed decisions are routine-type decisions. They are
relatively minor decisions. Such decisions are not suitable for centralization. They burden top
managers.

4. Poor management development: Centralization blocks the management development of subordinates.

Their skills and talents remain unutilized because of lack of participation and involvement in decision
making.

5. Delayed decisions: Centralization creates multiple layers for decision making purposes. The files
move through the hierarchy from subordinates to bosses. This delays decision making.

MEANING OF DECENTRALIZATION

Decentralization is the result of delegation of authority. It is devolution of decision making authority

downward.

According to Koontz and Weihrich,” Decentralization is the tendency to disperse decision-

making authority in an organized structure”.

ADVANTAGES OF DECENTRALIZATION

1. Quicker and better decisions: it disperses decision making authority close to unit managers who
execute decisions. It reduces problems of communication and red tape. This leads to quicker and
better decision making

2. Diversification: decentralization facilitates diversification of products, activities and markets. Profit

centers can be established with independence in decision making.

3. Competitive organizational climate: Decentralization promotes competitive climate for improving

performance among divisions and profit centers.

4. Management development: decentralization encourages managers to exercise freedom and

independence in decision making. They learn to make decisions and exercise judgment. This develops
managerial competency.
5. Environmental adaptation: Decentralization helps organizations to adapt to fast-changing
environment.

6. Relieves burden of top management: Top managers are relieved from making routine decisions. They
can concentrate on important issues of strategic relevance.

7. Higher motivation and morale: Decentralization provides power, prestige and status to subordinates.
This increases motivation and morale of subordinates.

DISADVANTAGES OF DECENTRALIZATION

1. Problem of coordination and control: Decentralization provides freedom and independence in

decision making. This can lead to inconsistencies in policies, programs and procedures. This can
create the problem of poor coordination and control.

2. High cost: Decentralization can result in duplication of efforts and waste of resources. Human
resources need to be trained. This results in increased costs. It is also time consuming.

3. Unsuitable for specialized services: Decentralization is not suitable in tackling emergency

situations. Adjustment to fast changing situation may be difficult.

4. Handicap in emergency: Decentralization can become a handicap in tackling emergency

situations. Adjustment to fast changing situation may be difficult.

5. Lack of managerial capacity: Decentralization requires competent and skilled subordinates. It may
be difficult to find them.

6. Managerial desires and fears