MODULE 04

Organization Design and Structure

❑ Organizing – meaning, process, principles,
❑ Organization structure – determinants and
❑ Forms: line, functional, line & staff, project, matrix, and committees;
❑ Formal and informal organization;
❑ Departmentation – Meaning and Bases;
❑ Span of Control – Meaning and Factors Influencing;
❑ Authority, Responsibility, and Accountability;
❑ Delegation – Meaning, Process; Principles;
❑ Centralization and Decentralization – Meaning;
❑ Degree of Decentralization;
❑ Difference between Delegation and Decentralization.
❑ Organizational structure common in the tourism industry

Organization: Stoner, Freeman, and Gilbert describe that in an organization, two or more people work together in a
structured way to achieve a specific goal or set of goals.
Organizing: Organizing is the second key management function, after planning, which coordinates human efforts,
arranges resources, and incorporates the two in such a way that helps in the achievement of objectives.

Process and Steps of Organising

Process # 1. Determination of Objectives:
The organisation is established for some objective. Overall tasks or activities of the organisation are determined to
achieve this goal. For example, if the organisation wants to export goods, it should determine the nature and type of
goods to be exported, the sources from where raw material will be obtained, countries where goods will be exported,
co-ordinate with foreign buyers etc.
Process # 2. Division of Activities:
Since one person cannot manage all the organisational activities, total task is divided into smaller units and assigned
to members. Work is assigned according to qualification and ability of persons.
Process # 3. Grouping of Activities:
After the work is assigned to people, those performing similar activities are grouped in similar departments. Various
departments like production, marketing, finance etc. are created and filled with people having different skills and
expertise but performing similar activities. Grouping of activities into departments is called departmentalization.
Process # 4. Defining Authority and Responsibility:
After creating departments, departmental heads are appointed to carry out the activities of their respective departments.
It is ensured that the competence of departmental head matches job requirements of the department. Every head has
authority to get the work done through departmental members.
5. Co-Ordination of Activities:
When departments work for their objectives, there may develop inter-departmental conflicts. This can affect
achievement of organisational goals. For example, the finance department wants to cut down costs, but marketing
department wants more funds to advertise the products.
6. Reviewing and Reorganising:
There must be constant appraisal of organising process so that changes in the organisation structure can be introduced,
consequent to changes in the internal and external environmental factors. Constant appraisal and reorganisation is an
integral part of the organising process.
Principle of organizing
Work Specialization
Work specialization is the degree to which organizational tasks are divided into separate jobs. Each employee is trained
to perform specific tasks related to their specialized function.
Specialization is wide, for example running a particular machine in a factory assembly line. The groups are structured
based on similar skills. Activities or jobs tend to be small, but workers can perform them efficiently as they are
specialized in it.AD
Authority
Authority is the legitimate power assigned to a manager to make decisions, issue orders, and allocate resources on behalf
of the organization to achieve organizational objectives.

Chain of Command
The chain of command is an important concept to build a healthy organization structure. It is the unbroken line of
authority that ultimately links each individual with the top organizational position through a managerial position at
each successive layer in between.
It is an effective business tool to maintain order and assign accountability even in the most casual working environments.
A chain of command is established so that everyone knows whom they should report to and what responsibilities are
expected at their level. A chain of command enforces responsibility and accountability. It is based on the two principles
of Unity of command and Scalar Principle.

Delegation
Another important concept closely related to authority is delegation. It is the practice of turning over work-related tasks
and/or authority to employees or subordinates. Without delegation, managers do all the work themselves and underutilize
their workers. The ability to delegate is crucial to managerial success.
Delegation is the downward transfer of authority from a manager to a subordinate. Delegation as a process involves
establishment of expected outcomes, task assignment, delegation of authority for accomplishing these tasks, and exaction
of responsibility for their accomplishment.

Span of Control
Span of control (also referred to as Span of Management) refers to the number of employees who report to one manager.
It is the number of direct reportees that a manager has and whose results he is accountable for.
The span may be wide or narrow. A wide span of control exists when a manager has a large number of employees
reporting to him. Such a structure provides more autonomy.
A narrow span of control exists when the number of direct reportees that a manager has is small. Narrow spans allow
managers to have more time with direct reports, and they tend to spark professional growth and advancement.

Organizational structure (OS) is the systematic arrangement of human resources in an organization so as to achieve
common business objectives. It outlines the roles and responsibilities of every member of the organization so that work
and information flow seamlessly, ensuring the smooth functioning of an organization.

Determinants Of Organisation Structure

1. Nature of the Objectives:
The objectives of an enterprise govern the selection of persons with appropriate skills and equipment capable of
delivering the goods. The objectives, thus, determine the basis of the organisation structure.
For example, an organisation structure of an industrial concern cannot be the same as that of a religious or governmental
institution.
 2. Operative Activities:
An individual in an enterprise may negotiate a sale to a customer; another may be engaged in assembling the parts of a
motor car. The operative activities and the inter-relations that exist among different tasks have an important bearing on
the structure of an organisation.
3. Technology:
The organisation structure of an enterprise depends upon the type and nature of technological process adopted for the
production. Therefore, technology is a factor for consideration in determining the structure of an organisation.
4. Sequence of Tasks:
The nature of technology often dictates the sequence of tasks to be performed and human relationships are required to be
adjusted according to this sequence of tasks. This sequence of tasks also acts as a major determinant to influence the
structure of the organisation.
5. Managerial Functions:
The managerial functions at one level or department may be different from that of other level or department. Therefore,
the structure of organisation is to be devised to maximise effective inter-relationships at different management levels so
that it can facilitate the attainment of objectives by the effective efforts of the subordinate employees.
6. Size and Scope:
The smaller the firm, the more informal and loose becomes the interpersonal contacts and relationships. But they will be
otherwise in the case of big concerns. So, the size of the enterprise and its scope of performance have an effective
influence on the organisation’s structure.

Forms

Line and Staff

• The line system focuses excessively on authority, and the functional organization divides the firm
into departments.
• In a line and staff organization structure, both the line managers and the staff have their own important
roles to play. In this structure, the authority flows from the top down.
• The line manager is the one in charge to make all the important decisions of the company.
• The staff is the experts in this scenario. They have the knowledge and expertise of their field and are there
to assist their line managers.

Line Organization Structure

• In these organizations, a supervisor employs direct supervision over a subordinate.

Functional Organizational structure

• It defines who works for whom and who reports to whom.
• Here every department has its own head or executive.
• And the reporting structure can also differ from department to department.
Matrix Organization
• A matrix organization is a structure in which there is more than one line of reporting managers. Effectively,
it means that the employees of the organization have more than one boss.
• there is a grid structure rather than the traditional hierarchy structure.

Project Management Organizational Structure

• A project management organizational structure is used to determine the hierarchy and authority of people involved in
a specific project.
• The structure defines each team member’s function and the reporting lines on a chart for team members to reference
during a project.

Committee Organization
• A committee organization is an association of individuals set up to reach resolutions to common challenges which
are faced by the organization.
• The committee's organizational structure delivers cohesive ideas of various related company people who are coming
from various fields and have various skills.

Formal Organisations Informal Organisations

An organization type in which the job of each member is An organization formed within the formal organization
clearly defined, whose authority, responsibility and as a network of interpersonal relationship, when people
accountability are fixed is formal organization. interact with each other, is known as informal
communication.
Official communication Grapevine
To fulfill, the ultimate objective of the organization. To satisfy their social and psychological needs.
Work performance Interpersonal relationship

Departmentation
• Departmentation is the process which is used to group activities into units for purpose of administration at all levels.
• By this process, the personnel and functions of an enterprise are departmentalized by division into separate units.

Bases of departmentation

1. Departmentation by Function
2. Departmentation by Products
3. Departmentation by Territory/Geographic Departmentation
4. Departmentation by Process

Span Of Control
The total number of subordinates that a manager or supervisor can manage.

Factors affecting Span Of Control

• The most crucial factor that affects the span of control and management skills of a manager is the type of work.
• If the branches of business are located at far geographic locations, then it becomes difficult for a manager to manage
all the executives working at all the branches.
• The span of control of a manager reduces if he is required to complete several administrative tasks daily.
• An experienced manager with a good understanding of the work and having good relationships with employees can
manage a higher number of employees.

Bases Authority Responsibility Accountability

Meaning Right to command Duty to perform the Answerability for outcome of
assign task the assign task
Delegation Can be delegated Cannot be fully Cannot be delegated.
delegated
Origin Arises from the formal Arises from delegated Arises from responsibility.
position. authority.
Flow Always flows Always flow upward. Always flow upward
downward.
 Delegation:

Delegation refers to the downward transfer of authority from the superior to a subordinate to enable subordinates to
perform their responsibility effectively.

Principles of an Effective Delegation

1. Defining the Function - the manager of the company or the organization must clearly define the scope
and also the extent of the tasks to his subordinate before delegating the task. On the other hand, the subordinator also must
be aware of the tasks he or she has to perform, the activities to be overseen, their relationships with other jobs as well as
their importance. This will actually make the subordinate do his or her task in a better way.

2. Defining the Results - The manager must discuss with his or her subordinates the results he or she
expects from the task before delegating the authority. This actually allows the subordinates to better understand the
standard of the work and also the level of results expected from them. The authority must be delegated accordingly.

3. Balance of Authority with Responsibility - This should be the parity between the responsibility and
authority delegated to the subordinate for effective delegation. He will be unable to complete the task if there is no
authority to carry out the responsibility. Without any responsibility will make him very irresponsible and very ineffective.

4. Absoluteness of Responsibility - The manager remains responsible for the work and also the
performance of the subordinates even after delegating the authority. On the other hand, the subordinates are also very
much responsible for their respective work to their superiors.

5. Unity of Command - Unity of command is very important in an organization or in a company. There

should be only one superior for each and every subordinate. Receiving instructions from more than one superior will lead
the subordinate to confusion. The subordinate will then have to pick up whom to listen and this may have a very negative
impact on the company. This will also lead to divided loyalties.

6. Defining the Limits of Authority - The manager of the company or the organization must ensure that
all the subordinates have a very well-defined authority. This will prevent any overlapping of authority on any subordinate
and will also enable each subordinate to carry out the assigned work efficiently. If there is any work outside this scope of
authority, the subordinate is bound to refer the work to his superiors. The manager at every level of the organization or
the company must make use of their authority. They are expected to avoid referring to their respective superiors for the
matters that come under their authority. Only the matters that are outside of their scope should be referred to as upper-
level management.

7. Authority Level Principle - The managers of the company are expected to make their own decision at
each and every level. They must avoid referring to their respective superior’s decision all the time. And are also expected
to make their decision which they are authorized to. But they can refer to their superior’s decision only if the decisions
are out of their scope.

Centralization
• All powers and authority of decision-making is retained with the top-level management.
• All decisions are taken by the top-level management.

Decentralization
Powers and authority of decision-making are delegated or shared among all levels of management and
all departments.