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 AND INFORMAL ORGANIZATION

Informal organization Formal organization

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 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.,
ORGANIZATIONAL LEVELS AND
THE SPAN OF MANAGEMENT

Span of management: refers to the number of

subordinates that a manger can efficiently
manage.
Number of subordinate 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: Disdvantages:
Close supervision Superiors tend to get too
Close control involved in subordinates
Fast communication work
between Many levels of management
subordinates and
superiors High costs due to many
Effective levels
Excessive distance between
lowest and top level
ORGANIZATION WITH WIDE SPAN

Advantages: Disadvantages:
Superiors are forced to Tendency to overloaded
delegate superiors to become decision
Clear policies must be bottlenecks
made Danger of superiors loss of
Subordinates must be control
carefully selected 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.
FACTORS DETERMINING AN
EFFECTIVE SPAN

The number of subordinates a manager can

effectively manage depends on the impact of the
underlying factors.
Personal capacities like comprehending quickly,
getting along with the people, commanding
loyalty and respect etc., influence the span.
Most important determinant is the managers
ability to reduce the time he or she spends with
the subordinates.
Some factors that influence the time a manager
has to spend with the subordinates are:
 FACTORS DETERMINING AN
EFFECTIVE SPAN
Narrow spans ( a great Wide spans ( very
deal of time spent with little time spent with
subordinates) subordinates)
Little or no training of Thorough training of
subordinates subordinates
Inadequate or unclear Clear delegation and
authority delegation well-defined tasks
Unclear plans for Well-defined plans for
repetitive operations repetitive operations
Non-verifiable objectives Verifiable objectives
and standards used as standards
Fast changes in the Slow changes in the
external and internal external and internal
environments environments
 FACTORS DETERMINING AN
EFFECTIVE SPAN
Narrow spans
Use of poor or inappropriate
communication techniques,
including vague instructions
Ineffective interaction of
superior and subordinate
Ineffective meetings
Greater no of specialties at
lower and middle levels
Incompetent and untrained
manager
Complex task
Subordinates unwillingness to
assume responsibility and
reasonable risks
Immature subordinates
Wide spans
Use of appropriate
techniques such as proper
organization structure and
written and oral
communication
Effective interaction of
superior and subordinate
Effective meetings
Greater no of specialties at
upper levels
Competent and trained
manager
Simple task
Subordinates willingness to
assume responsibility and
reasonable risks
Mature subordinates
 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.
AN ORGANIZATIONAL ENVIRONMENT FOR
ENTREPRENEURING AND INTRAPRENEURING

The essence of entrepreneurship is innovation,

that is, goal oriented change to utilize the
enterprises potential.
An intrapreneur is a person who focuses on
innovation and creativity and who transforms a
dream or an idea into a profitable venture by
operating within an established organizational
environment. Gifford Pinchot.
An entrepreneur is a person who does similar
things as the intrapreneur, but outside the
organizational setting.
AN ORGANIZATIONAL ENVIRONMENT FOR
ENTREPRENEURING AND INTRAPRENEURING

Entrepreneurs have the ability to see an

opportunity, obtain the necessary capital, labor
and other inputs and then put together an
operation successfully.
They are willing to take personal risk of success
and failure.
As entrepreneurs, managers try to improve the
situation.
www.intrapreneur.com

www.entrepreneur.com
CREATING AN ENVIRONMENT FOR
ENTREPRENEURSHIP

It is a managerial responsibility to create an

environment for effective and efficient
achievement of group goals.
Managers must promote opportunity for
entrepreneurs to utilize their potential for
innovation.
Taking reasonable risk will, at times, result in
failure, but this must be tolerated.
Entrepreneurs need some degree of freedom to
pursue their ideas; this in turn requires that
sufficient authority be delegated.
CREATING AN ENVIRONMENT FOR
ENTREPRENEURSHIP

Steve Wozniak left HP to join Steve Jobs and

developed Apple computer.

Steve Wozniak Steve Jobs

INNOVATION AND ENTREPRENEURSHIP
Entrepreneurs have creative ideas; they use their
management skills and resources to meet
identifiable needs in the marketplace.
Innovation applies not only to high-tech
companies but equally to low-tech, established
businesses.
Innovation is not a matter of sheer luck; it
requires systematic and rational work, well
organized and managed for results.
Innovations based solely on bright ideas may be
very risky and at times are not successful.
Example:- GEs factory of the future.
INNOVATION AND ENTREPRENEURSHIP
Innovation comes about because of some of the
following situations;
An unexpected event, failure or success
An incongruity between what is assumed and what
really is
Changes in the market or industry structure
Changes in demographics
Changes in meaning or in the way things are
perceived
Newly acquired knowledge
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?
REENGINEERING THE ORGANIZATION

Hammer and Champy are the founders of the

management theory Business process
reengineering (BPR).

Michael Martin Hammer James (Jim) A. Champy

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

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.
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.
 REENGINEERING THE ORGANIZATION
Reenergizing the system
Transformation process

Inputs Business process Technology Outputs

system system
Human Products
Capital Services
Profiles
Technology
Satisfaction
Others
Goal
Goal inputs of Human system Management Integration
stakeholders or system
claimants Others

Information handling system

Enterprise
boundary

Stakeholders or claimants External variables

Employees Suppliers Opportunities
Customers Governments Constraints
Shareholders Others Others
THE STRUCTURE AND PROCESS OF
ORGANIZING

The structure must reflect objectives and plans

because activities derive from them.
It must reflect the authority available to an
enterprises management.
Authority is a socially determined right to exercise
discretion; as such it is subjected to change.
The structure must reflect the environment
(economic, technological, political, social or ethical
factors).
It must be designed to work, to permit contributions
by members of a group and to help people to achieve
objectives efficiently in a changing future.
THE STRUCTURE AND PROCESS OF
ORGANIZING

Effective organization structure depends on the

situation.
Grouping of activities and the authority
relationships of an organization structure must
take into account peoples limitations and
customs.
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.
DEPARTMENTATION BY
ENTERPRISE FUNCTION

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)
FUNCTIONAL ORGANIZATION- ADVANTAGES
Logical reflection of functions
Maintains power and prestige of major functions

Follows principle of occupational specialization

Simplifies training

Furnishes means of tight control at top

FUNCTIONAL ORGANIZATION-
DISADVANTAGES

De-emphasis of overall company objectives

Overspecializes and narrows viewpoints of key
personnel
Reduces coordination between functions

Responsibility for profits is at the top only

Slow adaptation to changes in the environment

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.
DEPARTMENTATION BY
TERRITORY OR GEOGRAPHY

Although this method is suitable for large scale

firms or geographically dispersed enterprises, a
plant that is local in its activities may assign the
personnel in its security dept. on a territorial
basis, by placing two guards at each of the south
and west gates.
This method is adopted for assigning
floorwalkers in departmental stores, janitors,
window washers etc.,
TERRITORIAL OR GEOGRAPHIC ORGANIZATION
(MANUFACTURING COMPANY)
TERRITORIAL ORGANIZATION -
ADVANTAGES

Places responsibility at a lower level

Places emphasis on local markets and problems

Improves coordination in a region

Takes advantage of economies of local operations

Better face-to-face communication with local

interests
Furnishes measurable training ground for
general manager
TERRITORIAL ORGANIZATION -
DISADVANTAGES

Requires more persons with general manager

abilities
Tends to make maintenance of economical
central services difficult and may require services
such as personnel or purchasing at the regional
level
Increases problem of top management level
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)
CUSTOMER DEPARTMENTATION-
ADVANTAGES

Encourages concentration on customer needs

Gives customers feeling that they have an
understanding supplier (banker)
Develops expertness in customer area
CUSTOMER DEPARTMENTATION-
DISADVANTAGES

Maybe difficult to coordinate operations between

competing customer demands
Requires managers and staff expert in customer
problems
Customer groups may not always be clearly
defined
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)
PRODUCT ORGANIZATION- ADVANTAGES
Places attention and effort on product line
Facilitates use of specialized capital, facilities,
skills and knowledge
Permits growth and diversity of functional
activities
Places responsibility for profits at the division
level
Furnishes measurable training ground for
general managers
PRODUCT ORGANIZATION- DISADVANTAGES
Requires more persons with general manager
abilities
Tends to make maintenance economical central
services difficult
Presents increased problem of top management
control
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)
MATRIX ORGANIZATION- ADVANTAGES
Oriented toward end results
Professional identification in maintained

Pinpoints product-profit responsibility

MATRIX ORGANIZATION- DISADVANTAGES
Conflict in organization authority exists
Possibility of disunity of command exists

Requires manager effective in human relations

GUIDELINES FOR MAKING
MATRIX MANAGEMENT EFFECTIVE

Define the objectives of the project or tasks

Clarify the roles, authority and responsibilities of
managers and team members
Ensure that influence is based on knowledge and
information, rather than on rank
Balance the power of functional and project managers
Select an experienced manager for the project who
can provide leadership
Undertake organization and team development
Install appropriate cost, time and quality controls
that report deviations from standards in a timely
manner
Reward project managers and team members fairly
STRATEGIC BUSINESS UNITS (SBU)
Distinct businesses set up as units in a larger
company to ensure that certain products or
product lines are promoted and handled as
though each were an independent business.
Ensure that each product or product line of the
hundreds offered by the company would receive
the same attention as it would if it were
developed, produced and marketed by an
independent company.
Sometimes used only for major product lines.
GE (GE aviation, GE energy, GE oil & gas.,)
Occidental Chemical Company (phosphates,
alkalies, resins.,)
CRITERIA TO BE AN SBU
It must have its own mission, distinct from the
missions of other SBUs
Have definable group of competitors

Prepare its own integrative plans, fairly distinct

from those of other SBUs
Manage its own resources in key areas

Be of an appropriate size, neither too large nor

too small
STRATEGIC BUSINESS UNITS (SBU)
For each SBU, a manager is appointed with the
responsibility of guiding and promoting the
product from the research laboratory through
product engineering, market research,
production, packaging and marketing with
bottom line responsibility for its profitability.
An SBU is given its own mission and goals as
well as a manager who, with the assistance of
full-time or part-time staff, will develop and
implement strategic operating plans for the
product.
STRATEGIC BUSINESS UNITS (SBU)
The major benefit is to provide assurance that a
product will not get lost among other products
in a large company.
It preserves the attention and energies of a
manager and staff whose job is to guide and
promote a product or product line.
It promotes entrepreneurship.
STRATEGIC BUSINESS UNITS (SBU)
(PHOSPHATES CHEMICAL COMPANY)
 POTENTIAL PROBLEMS WITH SBUS
C.K.Prahlad and Gary Hammel, suggest that
companies should invest in their core
competencies and watch out for the tyranny of
SBUs.
Core competency: collective learning,
coordination and integration of skills to obtain
streams of technology.

C.K.Prahlad Gary Hammel

POTENTIAL PROBLEMS WITH SBUS
For Honda, engines are the core products to
which design and development skills are directed
that result in end products such as cars and
motorcycles.
If the motorcycle division had received resources
for development, it may not share this technology
with a car division.
Allocation of resources to individual SBUs can
result in the underinvestment in core
competencies that benefit the total organization.
SBU managers may not be willing to share
talented people and may hide them rather than
lend them to another SBU.
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.
VIRTUAL ORGANIZATION
IBM developed personal computer in 1981 and
were able to market it in 15 months.
Microprocessor from Intel and software from
Microsoft.
By using outside parties, IBM had to invest little
for its decentralized strategy.
Virtual organizations may have neither an
organizational chart nor a centralized office
building.
The Open University of the United Kingdom is
an example of a university without a place.
BOUNDARYLESS ORGANIZATION
Jack Welch of GE stated his vision for the
company as a boundaryless company.
It is an open anti-parochial environment,
friendly toward the seeking and sharing of new
ideas, regardless of their origin.
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
THE AIM: ACHIEVING OBJECTIVES
Departmentation is not an end in itself but
simply a method of arranging activities to
facilitate the accomplishment of objectives.
MIXING TYPES OF DEPARTMENTATION
A wholesale drug firm groups buying and selling
activities relating to beverages in one product
department, in addition it cave these activities
grouped on a territorial basis.
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
better-educated workforce that demands greater
autonomy.
EMPOWERMENT
Empowerment of subordinates means that superiors
have to share their authority and power with their
subordinates.
This makes an autocratic leadership style often
inappropriate in 21st century organizations.
Most employees want to be and involved and want to
participate in decisions; this participation creates a
sense of belonging and achievement and raises self
esteem.
Effective management requires that empowerment be
sincere, based on mutual trust, accompanied by relevant
information for the employees to carry out their tasks,
and given to competent people.
Employees should be rewarded for exercising their
decision authority.
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
LINE AUTHORITY - ADVANTAGES
Simplicity
Unified control

Strong discipline

Fixed responsibility

Prompt decision

flexibility

Clear communication

Speedy action
LINE AUTHORITY - DISADVANTAGES
Overloading
Lack of specialization

In-adequacy of communication

Scope of favoritism

Encourages dictatorial way of working

Large an complex enterprises can not adopt this

syytem
LINE/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

Accounts officer Sales manager

Personal officer Purchase engineer

Industrial engineer
Design engineer
Stores officer

F/M F/M F/M F/M

Workers
LINE/STAFF AUTHORITY - ADVANTAGES
Expert advice to the line management
Line executives are relieved of some of their loads
and are thus able to devote more attention
towards production
Less wastage of material, man and machine
hours
Quality of product is improved
LINE/STAFF AUTHORITY - ADVANTAGES
Product cost will increase because of high salaries of
staff executives
At times the staff department may infringe upon
the rights and responsibilities of the line
organization, thus weakening the line organization
when its true function is to strengthen the
organization
Friction and jealousy if developed between the line
and staff executives may cause harm to the
enterprise
Line executives if they start depending too much on
staff executives may lose their initiative drive and
ingenuity
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.
If the principle of unity of command is followed
without exception, authority over particular
activities would be exercised by the relevant line
superiors.
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
FUNCTIONAL AUTHORITY - ADVANTAGES
Separation of work
Specialization

Narrow range with high depth

Easy in selection and training

Standard operations

Reduction in prime cost

Scope for growth and development of business

FUNCTIONAL AUTHORITY -
DISADVANTAGES

Indiscipline
Shifting of responsibility

Kills the initiative of workers

Overlapping of authority

Lack of coordination between functions

Increase in costs
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 Complete
centralization decentralization
(no organization structure) (no organization structure)

Authority delegated

Authority not delegated

DIFFERENT KINDS OF CENTRALIZATION
Centralization of performance: pertains to
geographic concentration; it characterizes, for
example, a company operating in a single
location.
Departmental centralization: refers to
concentration of specialized activities, generally
in one department. For example, maintenance for
a whole plant may be carried out by a single
department.
Centralization of management: is the tendency to
restrict delegation of decision making. A high
degree of authority is held by managers at or
near the top of the organizational hierarchy.
DECENTRALIZATION AS
A PHILOSOPHY AND POLICY

Decentralization implies more than delegation: it

reflects a philosophy of organization and
management.
It requires careful selection of which decisions to
push down the organization structure and which to
hold near the top, specific policy making to guide
the decision-making, proper selection and training
of people and adequate controls.
It affects all areas of management and can be
looked upon as an essential element of managerial
system.
Without it managers could not use their discretion
to handle the ever-changing situations they face.
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
PERSONAL ATTITUDES TOWARDS
DELEGATION

Most failures in effective delegation occur not

because managers do not understand the nature
and principles of delegation but because they are
unable or unwilling to apply them.
Certain personal attitudes underlie real
delegation.
Receptiveness
Willingness to let go
Willingness to allow mistakes by subordinates
Willingness to trust subordinates
Willingness to establish and use broad controls
RECEPTIVENES
Managers should be willing to give other peoples
idea a chance.
A subordinates decision is not likely to be exactly
the one a superior would have made.
The manager who knows how to delegate must
have a minimum of NIH (Not Invented Here)
factor.
A manager must not only welcome ideas of others
but also help others come up with ideas and
compliment them on their ingenuity.
WILLINGNESS TO LET GO
A manager who will effectively delegate authority
must be willing to release the right to make
decisions to subordinates.
Managers should realize that there is a law of
comparative management advantage.
Managers will enhance their contributions to the
firm if they concentrate on tasks that contribute
most to the firms goals and assign to
subordinates other tasks, even though they could
accomplish them better themselves.
WILLINGNESS TO ALLOW
MISTAKES BY SUBORDINATES
Continual checking on the subordinate to ensure that no
mistakes are ever made will make true delegation
impossible.
Since everyone makes mistakes, a subordinate must be
allowed to make some, and their cost must be considered as
an investment in personal development.
Serious or repeated mistakes can be largely avoided
without nullifying delegation or hindering the development
of a subordinate.
Patient counseling, asking leading or discerning questions
and carefully explaining the objectives and policies are
some of the methods available to manager who would
delegate well.
None of these techniques involve discouraging subordinates
with intimidating criticism or harping on their
shortcomings.
WILLINGNESS TO TRUST SUBORDINATES
Delegation implies a trustful attitude between
superior and subordinate.
A superior may put off delegation with the thought
that subordinates are not yet experienced enough,
that they can not handle people, that they have not
yet developed judgment or that they do not
appreciate all the facts bearing on a situation.
A superior should either train a subordinate or else
select others who are prepared to assume the
responsibility.
Too often bosses distrust their subordinates because
they do not wish to let go, are threatened by
subordinates successes, do not delegate wisely or do
not know how to set up controls to ensure proper
use of the authority.
WILLINGNESS TO ESTABLISH AND
USE BROAD CONTROLS

Since superiors can not delegate responsibility,

they should not delegate authority unless they
are willing to find means of getting feedback,
that is of assuring themselves that the authority
is being used to support enterprise or
departmental goals or plans.
Controls can not be established and exercised
unless goals, policies and plans are used as basic
standards for judging activities of subordinates.
Reluctance to delegate and to trust subordinates
comes from the superiors inadequate planning
and understandable fear of loss of control.
OVERCOMING WEAK DELEGATION
Define assignments and delegate authority in
light of results expected
Select the person in light of the job to be done

Maintain open lines of communication

Establish proper controls

Reward effective delegation and successful

assumption of authority
RECENTRALIZATION

Centralization of authority that was once

decentralized; normally not a complete reversal
of decentralization, as the authority delegated is
not completely withdrawn.
DECENTRALIZATION - ADVANTAGES
Relieves top management of some burden of decision-
making and forces upper level manager to let go.
Encourages decision-making and assumption of authority
and responsibility.
Gives managers more freedom and independence in
decision-making.
Promotes establishment and use of broad controls that may
increase motivation.
Makes comparison of performance of different
organizational units possible.
Facilitates setting up of profit centers.
Facilitates product diversification.
Promotes development of general managers.
Aids in adaptation to fast-changing environment.
DECENTRALIZATION - DISADVANTAGES
Makes it more difficult to have a uniform policy.
Increases complexity of coordination of decentralized
organizational units.
May result in loss of some control techniques.
May be constrained by inadequate planning and
control systems.
Can be limited by the lack of qualified managers.
Involves considerable expenses for training
managers.
Maybe limited by external forces (national labor
unions, governmental controls, tax policies).
May not be favored by economies of scale of some
operations.