CHAPTER FOUR

            The organizing function and organization

At the end of this chapter you will be able to
 Understand the concept of organization and organizing
 Differentiate formal and informal organization
 Describe the concept and basis of departmentalization
 Understand the importance of span of management
 Discuss authority, responsibility and power
 Describe delegation, centralization and decentralization
 Discuss the nature and types of group and committee
4.1 Meaning and process of organization
Organizing is the process of identifying and grouping tasks to be performed, assigning
responsibilities and delegating authority and establishing relationships for the purpose of enabling
workers to work most effectively together in the accomplishments of objectives.
The organizing function involves the following sub functions:
1. Identification of activities required for the achievement of objectives and implementation of
plans.
2. Grouping of activities based on similarity of jobs so as to create self-contained jobs.
3. Assignment of jobs to employees.
4. Delegation of authority so as to enable them to perform their jobs and to command the
resources needed for their performance.
5.  Establishment of a net-work of coordinating relationships.
Steps in organizing process
1. Reviewing of objectives to be accomplished
Objectives are the most important things in organizing and organization as they affect the results of
organization so it is necessary to review objectives to be accomplished.
2. Determining tasks necessary to accomplish objectives
After objectives are reviewed the next activity is to list down activities necessary to accomplish the
objectives e.g. advertising, training, sales, budgeting, assembling

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3. Grouping of activities according to their similarities to form department
In this step management classifies and group activities using the guide lines of homogeneity or
similarity of activities. Work that is similar in nature is placed together to achieve organizational
objectives.
E.g.  Sales, Accounting, Advertisement, Budget, Hiring workers, Training etc.
4. Assigning work and delegating authorities
Managers have to assign individuals different tasks and make them authorize of their activates to
enable them perform their job assignments
5. Hierarchical relationship development
This step requires the determination of both vertical and horizontal operating relationships of
organization as a whole. The result of organizing process is organization is predetermined manner
to achieve common goal.
4.2 The importance of organizing
Organization is an instrument that defines relations among different people which helps them to
understand as in who happens to be their superior and who is their subordinate. This information
helps in fixing responsibility and developing coordination.
The following are the importance of organizing.
(1) Increase in Managerial Efficiency: A good and balanced organization helps the managers to
increase their efficiency. Managers, through the medium of organization, make a proper
distribution of the whole work among different people according to their ability.

(2) Proper Utilization of Resources: Through the medium of organization optimum utilization of
all the available human and material resources of an enterprise becomes possible. Work is allotted
to every individual according to his ability and capacity and conditions ant created to enable him to
utilize his ability to the maximum extent. For example, if an employee possesses the knowledge of
modem machinery but the modem machinery is not available in the organization, in that case,
efforts are made to make available the modem machinery.

(3) Sound Communication Possible: Communication is essential for taking the right decision at
the right time. However, the establishment of a good communication system is possible only
through an organization. In an organization the time of communication is decided so that all the
useful information reaches the officers concerned which. in turn, helps the decision-making.
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(4) Facilitates Coordination: In order to attain successfully the objectives of the organization,
coordination among various activities in the organization is essential. Organization is the only
medium which makes coordination possible. Under organization the division of work is made in
such a manner as to make all the activities complementary to each other increasing their
interdependence. Inter-dependence gives rise to the establishment of relations which, in turn,
increases coordination.
(5) Increase in Specialization: Under organization the whole work is divided into different parts.
Competent persons are appointed to handle all the sub-works and by handling a particular work
repeatedly they become specialists. This enables them to have maximum work performance in the
minimum time while the organization gets the benefit of specialization.

(6) Helpful in Expansion: A good organization helps the enterprise in facing competition. When an
enterprise starts making available good quality product at cheap rates, it increases the demand for its
products. In order to meet the increasing demand for its products an organization has to expand its
business. On the other hand, a good organization has an element of flexibility which far from
impeding the expansion work encourages it.
4.3 Classification of organization
Formal and Informal Organizations
A. Formal organization is the official organizational structure created by management. It is
organization formed purpose fully to achieve well defined and formal objectives.
B. Informal organization is the network of personnel and social relationships that arises
spontaneously as people associate with one another in a work environment.
 It is natural grouping of people in the work situation based on their behavioral patterns,
interests, beliefs, objective etc.

Formal organization
The formal organization represents the classification of activities within the enterprise, indicates
who reports to whom and explains the vertical journal of communication which connects the chief
executive to the ordinary workers.
 In other words, an organizational structure clearly defines the duties, responsibilities,
authority and relationships as prescribed by the top management.
 In an organization, each and every person is assigned the duties tend given the required
amount of authority and responsibility to carry out this job.
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  It creates the co-ordination of activities of every person to achieve the common objectives.
It indirectly induces the worker to work most efficiently. The inter-relationship of staff
members can be shown in the organization chart and manuals under formal organization.
Characteristics of formal organization
The important characteristics of a formal organization are given below
1. it is properly planned
2. It is based on delegated authority.
3. it is deliberately impersonal
4. The responsibility and accountability at all levels of organization should be clearly defined.
5. organizational charts are usually drawn
6. unity of command is normally maintained
7. It provides for division of labor.
Advantages of formal organization
1. The definite boundaries of each worker are clearly fixed. it automatically reduces conflict
among the workers. The entire building is kept under control
2. Overlapping of responsibility is easily avoided. The gaps between the responsibilities of the
employees are filled up.
3. A sense of security arises from classification of the task.
4. There is no chance for favoritism in evaluation and placement of the employee.
Arguments Against formal organization
1. In certain cases, the formal organization may reduce the spirit of imitative.
2. Sometimes authority is used for the sake of convenience of the employee without
considering the need for using the authority.
3. it does not consider the sentiments and values of the employees in the social organization
4. the formal organization may reduce the speed of informal communication

Informal organization
Informal organization is an organizational structure which establishes the relationship on the basis
of the likes and dislikes of officers without considering the rules, regulations and procedures.
 These types of relationships are not recognized by officers but only felt, the friendship. Mutual
understanding and confidence are some of the reasons for existing informal organization, for
example, a salesman receives orders or instructions directly from the sales manager instead of

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 this supervisor. The informal organization relationship exists under the formal organization also.
The informal organization relationship or informal relations give a greater job satisfaction and
result in maximum production’
 It brings to the members of a formal organization a feeling of belonging, status of self-respect
and satisfaction.
 Informal organizations are important means of maintain the personality of the individual gains
certain effects of formal origination which tend to disintegrate personality." of the individual
against certain effects of formal organization which tend to disintegrate personality."

Characteristics of Informal organization

1. Informal organization arises without any external cause i.e. voluntarily.
2. It is a social structure formed to meet personal needs.
3. Informal organization has no place in the organization chart
4. It acts as an agency of social control.
5. Informal organization can be found on all levels of organization within the managerial
hierarchy.
6. The rules and traditions of informal organization are not written but are commonly followed.
7. Informal organization develops from habits, conduct, customers and behavior of social
groups.
8. informal organization is one of the parts of total organization
9. There is no structure and definiteness to the informal organization.

Advantages of informal organization

The advantages of informal organizations are briefly explained below
1. it fills up the gaps and deficiency of the formal organization
2. Informal organization gives satisfaction to the workers and maintains the stability of the
work.
3. it is a useful channel of communication
4. The presence of informal organization encourages the executives to plan the work correctly
and act accordingly.
5. The informal organization also fills up the gaps among the abilities of the managers.
Disadvantages of informal organization
The disadvantages of informal organization are summarized below:
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 1. It has the nature of upsetting the morality of the workers.
2. It acts according to mob psychology.
3. Informal organization indirectly reduces the efforts of management to promote greater
productivity.
4. It spreads rumor among the workers regarding the functioning of the organization
unnecessarily.

Formal organization Informal organization

1. it arises due to delegation of authority 1. it arises due to social interaction of people
2. It gives importance to terms of      authority and 2. It gives importance to people and their
functions. relationships.
3. It is created deliberately. 3. it is spontaneous and natural
4. the formal authority is attached to a  position 4. The informal authority is attached to a person.
5. rules, duties and responsibilities of workers are 5. No such written rules and duties followed in
given in writing informal organization
6. Formal organization comes from outsiders who 6. Informal organization comes from those
are superior in the line of organization. persons who are objects of its control.
7. Formal authority flows from upwards to 7. Informal authority flows upwards to
downwards. downwards or horizontally.
8. formal organization may grow to maximum size 8. Informal organization tends to remain smaller.
9. It is created for technological purposes. 9. it arises from man's quest for social satisfaction
10. Formal organization is permanent and stable. 10. there is no such permanent nature and stability

Table 4.1. Difference between formal and informal organization

Even though informal organization is not established officially it exists and it is there always in the
formal organization. It may affect the formal organization positively or negatively and management
should recognize that informal organization exist in the formal organization; for the benefit of the
formal organization.

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Impacts of the informal organization
The informal organization can affect the organization positively and negatively.
Positive impact
Informal organization can provide some benefits to formal organization
 Support management: - sometimes in providing advices, generate new ideas in performing
activities to attain organizational objectives.
 Creates stability in the work environment since workers have their own group to satisfy their
needs they tend to work for long period of time in the organization. Informal groups
increasing stay and decreasing turnover.
 Provides channels of communication: - individuals who are new for the organization can
easily be informed about the organization through informal organization members.
Encourages development of management, managers can develop their ability of leading because
they may participate in leading of informal organizations besides formal organization

Negative impact
Creates Conflicts: - most of the times members of the informal organization may conflict with their
formal boss while they are trying to satisfy their informal leader.
Change resistance: - sometimes management may want to change operational systems. But
informal group may not agree to adopt the changes.
Can expand rumor and false information: - informal organization may of compurgation inch is
informal so the degree of passing mere gossips and incorrect information may be high.
How to work with informal organization
Management should not attempt to eliminate informal organization as it is impossible to eliminate
it. Rather they have to make use of informal organization for the benefit of formal organization.
Managers should consider the following factors to use informal groups.
 Realize the existence of informal groups
 Identify the roles of members in each informal group
 Use information to work with informal groups

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 4.4. Organization Chart
Organization Chart- is graphic illustration of the organization’s management hierarchy and
departments and their working relationships. Each box indicates position within the organization
and each line indicates reporting relationships and lines of communication.

Organization chart of Jimma university

Ministry of Education

Administrative Board
Office of President

Academic VPand and

Business
Administrative
Research
development
student
CommunityserviceVPVP
service VP

 Directors
Procurement
Income
Researchgeneration
Directorate
 Deans
Directorate
Directorate
Finance Directorate
 Construction
Dep’t headsproject
Community
HR Directorate
 directorate
service
Student directorate
serv.
Directorate
Fig 4.1. Organizational chart
Organizational chart remains useful because it provides different important information regarding;
 Who reports to whom- that, chain of command.
 Span of control- how many subordinates does a manager have
 Channels of formal communication shown by solid lines that connect each job(box)
 Bases of departmentalization- how organization is departmentalized by function, customer,
or product, geographical etc
 Activities in each position- The labels in boxes describe each individual ‘s activities
 The hierarchy of decision making - where the decision maker for a problem is located
 authority relationships- solid connections between boxes illustrate line authority, Zigzag
lines show staff authority, and broken line show functional authority
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Limitation of Organizational Chart
Organizational chart has some limitations since it doesn’t show
 informal communication channel
 Informal relationship among workers
 Degree of authority holds by individuals
4.5. Departmentalization: Meaning and Bases
Departmentalization; is grouping of related activities in to units. After reviewing the plans, usually
the first step in the organizing process is departmentalization.
 Once jobs have been classified through work specialization, they are grouped so those common
tasks can be coordinated. Similar activities intimately related with a distinct function are
grouped together to form departments.
 It aims at achieving unity of direction, effective communication, coordination and control.
The Need for Departmentalization
 It is essential because of the following reasons:
 It permits an organization to take advantage of specialization
 It enables each person to know the particular part he is expected to play in the total activities
of the company.
 It facilitates communication, coordination and control; and contributes to the organizational
success.
 Creates independent and semi- autonomous units that give them a feeling of satisfaction and
recognition.
 Helps to develop managers that in turn develop them for higher level positions and exercise
decision- making in their own areas of specialization.
Bases of Departmentalization
There are some bases for departmentalization but there is no one best way to departmentalize the
activities and the choice of departmentalization depends on the needs of the organization. The
major bases of departmentalization include: function, Product, customer, and territory.

A. Functional departmentalization- Functional departmentalization involves organizing

departments around essential input activities, such as production, marketing and finance, which
are managerial or technological functions.

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  The functions reflect the nature of the business. The advantage of this type of grouping
is obtaining efficiencies from consolidating similar specialties and people with common
skills, knowledge and orientations together in common units.
Advantages
 Functional departmentalization is the best in stable environment
 It creates efficiency through specialization
 It is better suited to medium- size organization
 It minimizes the costly duplication of personnel and equipment with in organization
 It centralizes all organization’s expertise and permits tighter top- management control of the
functions.
 It paves a smooth way for in- depth skill development of personnel employed in
organization.
Limitations
 The responsibility for total organizational performance rests with top management only
because every manager supervises only a narrow function.
 It is very difficult to achieve coordination between and among functions, especially when
organization becomes very large and unmanageable proportions.
 It does not promote innovation
 It is non- responsive to environmental changes
 It makes inter- unit coordination complex and more difficult

B. Product Departmentalization- product departmentalization involves organizing departments

around products or services.
 Companies with multiple products commonly use product departmentalization.
 Each department may become self-contained company, making and selling its own
products.
 It assembles all functions needed to make and market a particular product are placed
under one executive. For instance, major department stores are structured around
product groups such as home accessories, appliances, women's clothing, men's clothing,
and children's clothing.
Advantages
 Departmentalization by product is better in unstable environment

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  It results in high product visibility
 It makes coordination across functions possible
 It is well- suited to large organizations
 It is better when several products are maintained by an organization
 Attention can be directed toward specific product lines and services.
Limitations
 Departmentalization by product requires more personnel and resources and hence is costly.
 It results in duplication of resources.
 It results in poor coordination across the product lines.
 In- depth competence and technical specialization are permanently lost.
 Employees identify with the product line rather than with the functional specialty.
 An organization may lose the economies of scale owing to functional departmentalization.
 It is costly
C. Customer Departmentalization- Customer departmentalization involves organizing
departments around needs of different types of customers.
 It is grouping of activities and responsibilities in departments based on the needs of
specific customer groups.
 For instance, the bank may group its work according to whether it is serving private
sector, public sector, government, or not-for-profit organizations.
A current departmentalization trend is to structure work according to customer, using cross-
functional teams.
 This group is chosen from different functions to work together across various departments to
interdependently create new products or services. For example, a cross-functional team
consisting of managers from accounting, finance, and marketing is created to prepare a
technology plan.

Advantages
 An organization can consider the needs of huge variety of customer.
 Organization can concentrate on clearly identified and potential customers.
 Organization can develop rapport with attractive and resourceful customers.
 It is a means for maintenance of psychological relief of customers.

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Disadvantage
 It is almost impossible to consider all the customers, their interests, habits and customs
 It leaves coordination problems between sales personnel and production people.
 Organizations may discriminate the ‘ rich and first class customers’ from ‘poor customers’

D. Territory (Geographic) Departmentalization- Involves grouping of activities and

responsibilities according to territory.
 All activities in a geographic area are assigned to a particular manager. For example, Merck,
a major pharmaceutical company, has its domestic sales departmentalized by regions such as
Northeast, Southeast, Midwest, Southwest, and Northwest.
Advantages
 Departmentalization by territory enables the local manager to consider the local customers;
their habits, customs, styles, cultures and social forces
 It is better for large organizations
 Zonal profit centers can be established and performance can be checked and improved.
 It enables managers to consider an integrated view of the total organization as a whole,
rather than restricting their interest to their respective function of product.
Limitations
 Territorial departmentalization gives rise to the problems of communication
 Coordination and control pose serious problems of departmentalization by territory
 It leaves some inevitable gap between zonal offices and branch offices; between head office
and zonal offices etc.
E. Departmentalization by process groups jobs on the basis of product or customer flow.
 Each process requires particular skills and offers a basis for homogeneous categorizing of
work activities.
 A patient preparing for an operation would first engage in preliminary diagnostic tests, then
go through the admitting process, undergo a procedure in surgery, receive post-operative
care, be discharged and perhaps receive out-patient attention. These services are each
administered by different departments.

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F. Matrix departmentalization- is departmentalization that combines the functional and product
structures. With matrix departmentalization, the employee works for a functional department
and is also assigned to one or more products or projects.
 The major advantage of matrix departmentalization is flexibility. The major
disadvantage is that each employee has two bosses a functional boss and a project boss-
conflict can result when two people give orders.
Fig 4.2 Different bases of Departmentalization

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4.6. Span of management (span of control)
Span of control refers to the number of employees reporting to manger, in other words, the number
of subordinates a manger directly supervises. No fixed number of subordinates is there to be
supervised by a single manger; the number depends on different factors listed as follows:
1. Complexity and variety of subordinate’s job: - if subordinates are dealing with complex
and many jobs, they will contact with managers frequently to get more assistance, so for
manger to give assistance to subordinates they need to lead only few subordinates
2. Ability and competence of mangers: - if mangers are capable of grasping problems easily
and finding solutions for problems quickly then can supervise more number of subordinates.
3. Managers willingness to delegate authority: - if mangers are permissible or willing to
delegate authority, they can manage or supervise many number of subordinate
4. The geographic location of organizational departments: - if the departments are located
in one-area mangers can control many number of subordinates otherwise few subordinates
are advised.

 Wide and narrow spans of control

Based on the numbers of subordinates supervised by mangers in organizational departments, span
of control can be classified in to wide and narrow span of control.
Wide span of control: -span of control in which as many as 10 or 15 people may report to the same
person, results in a flat organization structure.
 Flat organizational structure is management structure characterized by an overall broad
span of control and relatively few hierarchical levels.
Advantages
 Closer control (supervision) as the number of subordinates to be supervised under one
supervisor is few in number
 Better coordination where the work is highly interlocking
 In crisis situations insures closer supervision and possibly fewer mistakes
 Some individuals work better and actually prefer closer, detailed supervision.
 The general manager has more time and is not busy.
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Disadvantage
 Slows decision- making, as there are more hierarchies.
 Distorted communication
 Costly in terms of administrative overheads
 Increases administrative distance between the top level and the worker
 The general manager consolidates power at the center.
If the number of subordinates is many it is wide span of control.
A narrow span of control: - span of control in a tall organizational structure.
 Tall structure is management structure characterized by an overall narrow span of
management and a relatively large number of hierarchical levels.
Advantage
 Forces a manager to delegate, leading to development of subordinates
 Reduces overhead costs and the number of supervisors needed
 Speeds and improves communication
 For individuals who desire challenge, responsibility and autonomy, flat structures are most
suitable.
Disadvantages
 Flat structures put pressure on managers and exert heavy penalties for failure.
 Lack wide application due to non- availability of competent and willing subordinates.
 If number of subordinates is few it is narrow span of control nearly, but not always real, if
number of subordinates is <10 it is narrow span of control.

Fig 4.3. wide span of control

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Fig 4.4 narrow span of control
4.7. Authority and power and their sources
Organizational structure is a means of facilitating the achievement of organizational objectives.
Such structures are not static, but dynamic. They reorganize in response to changing conditions that
occur in the environment, new technology, or organizational growth.
 Organization structures are dependent upon the employees whose activities they guide.
Supervisors rely upon power and authority to ensure that employees.
Authority: - is the formal and legitimate right of a manger to make decisions, give orders, and
allocate resources. It is the right to command.

Source of authority-comes with the territory, “making that authority is legal right of manager
because of the position he or she occupies in the organization. Thus authority is defined in each
mangers job charter. The person who occupies a position has his/her formal authority as long as he
or she remains in that position. As the job changes in scope and complexity, the amount and kind of
formal authority possessed should be changed.

Types of authority
In an organization three different types of authorities are created by the relationships between
individuals and departments.
i. Line authority – defines the relationship between superior and    subordinates. Any manager who
supervises operating employees or    other manger has line authority. It allows mangers to give
direct    orders, evaluate the actions, reward and punish employees. It is responsible to make
decisions and issue orders down the chain   of command.

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Fig 4.5 Line Authority Chain of Command
ii. Staff authority- is the authority to serve in an advisory capacity: - managers who provide
advice or technical assistance are granted advisory authority.
This staff or advisory authority provides no basis for direct control over the subordinates or
activities of other departments; however, with in the staff managers own department, he or she can
exercise line authority. Staff authority in the form of advice/ assistance flows upward to the decision
maker. Staff authority is more limited authority to advice. It is authority that is based on expertise
and which usually involves advising line managers. Staff members are advisers and counselors who
aid line departments in making decisions but do not have the authority to make final decisions. Staff
supervisors help line departments decide what to do and how to do it. They coordinate and provide
technical assistance or advice to all advisors, such as accounting, human resources, information
technology, research, advertising, public relations, and legal services.

Fig 4.6. Staff Authority

Staff authorities are responsible to advice and assist other personnel.
Functional authority; is an authority which permits staff mangers make decision on specific
activities performed by employees with in other departments. Staff departments often use functional
authority to control their procedures in other departments.

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  Is the right of staff personnel to issue orders to line personnel in established areas of
responsibility?
 Ex. The maintenance department assists production by keeping the operating activity. If the
maintenance determines that a machine is unsafe, the department may issue an order to line
manger to use the machine, but it cannot suggest which products are produced
Fig 4.7. Functional authority
Managing director

Finance Operation Marketing

Human resource
Responsibility and Accountability
Equally important to authority is the idea that when an employee is given responsibility for a job, he
or she must also be given the degree of authority necessary to carry it out. Thus, for effective
delegation, the authority granted to an employee must equal the assigned responsibility. Upon
accepting the delegated task, the employee has incurred an obligation to perform the assigned work
and to properly utilize the granted authority.

Responsibility is the obligation to do assigned tasks. The individual employee is responsible for
being proficient at his or her job. The supervisor is responsible for what employees do or fail to do,
as well as for the resources under their control. Thus, responsibility is an integral part of a
supervisor's authority.
Responsibilities fall into two categories: individual and organizational.
 Employees have individual responsibilities to be proficient in their job. They are
responsible for their actions. Nobody gives or delegates individual responsibilities.
Employees assume them when they accept a position in the organization.

 Organizational responsibilities refer to collective organizational accountability and include

how well departments perform their work. For example, the supervisor is responsible for all
the tasks assigned to his or her department, as directed by the manager.
When someone is responsible for something, he or she is liable, or accountable to a superior, for
the outcome. Thus, accountability flows upward in the organization. All are held accountable
for their personal, individual conduct.

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 Accountability is answering for the result of one's actions or omissions. It is the reckoning,
wherein one answers for his or her actions and accepts the consequences, good or bad.
Accountability establishes reasons, motives and importance for actions in the eyes of managers
and employees alike.
Accountability is the final act in the establishment of one's credibility. It is important to
remember that accountability results in rewards for good performance, as well as discipline for
poor performance.

Power and Its Sources

Power is ability to exert influence in the organization or Power is the ability to exert influence in
the organization beyond authority, which is derived from position. In addition to authority;
supervisors have more personal sources of power to draw upon for getting things done.
- It is ability to influence others’ behavior.
Power can be positional and personal.
Position power is derived from top management and is delegated down the chain of command.
Personal power is derived from the follower based on the individual behavior.
* A person does not need to be manager to have power. Some administrative assistants of top
managers have considerable power, but no authority. Manager can acquire power from several
different sources, based on these sources power can be:

Sources of Power
Reward
Legitimate Power Coercive
Power Enable managers to be Power
leaders & influence
subordinates to
Expert achieve goals
Referent
Power Power
Fig 4.8. Source of Power

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Position power
(i). Legitimate or position power – The power possessed by manger and   derived from the
positions they occupy in the formal organization. This position power is broader than the ability to
reward and punish, as members need to accept the authority of the position
(ii) Reward power- The power that comes from the ability to promise or grant rewards. Mangers
have the ability to decide on praises, promotion favorable performance appraisals, and preferred
work shifts. Reward power results in people doing what is asked because they desire positive
benefits or rewards. Rewards can be anything a person values (praise, raises, and promotions)
(iii) Coercive power – is a power which enables mangers to force individuals to attain their work
assignments or to punish those workers who failed to attain their job assignments. Coercive power
is the threat of sanctions. It is dependent on fear and includes, but is not limited to the ability to
dismiss, assign undesirable work, or restriction of movement. The punishment may include;
demotion, terminating   employment e.t.c
Personal power
i. Referent (charismatic) power – is the power that is based on the kind of personality or charisma
an individual has and how others perceive it.
 Referent power refers to a person who has desirable resources or personal traits. It results
in admiration and the desire to emulate.
 It is the power obtained from the attitude of people toward someone or from idea that one
has on himself.
(ii). Expert Power- is power derived from an individual’s knowledge and expertise. Others listen to
and follow the person with expert power because she/he is regarded as capable and knows how to
do things right. Employees with expert power are often promoted to management.

4.8. Delegation, Centralization and Decentralization

Delegation is the process of assigning authority and creating obligation to accomplish objectives.
 Is the down ward transfer of formal authority from one person to another?
Process of Delegation
Delegation- involves some activities which include
1. Assignment of Tasks- identifying tasks to be performed and assign the tasks to
subordinates. It is a primary activity in delegation of authorities.

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 2. Delegation of Authority- Once tasks are assigned, employees should be given as much
authority as possible which enable them to make decision regarding their job assignments.
3. Creation of Obligation- Managers have to create accountability with subordinates for fair
use of authority and effective performances of activities.
4. Establishment of Control System- The fourth step in delegation process is establishing
adequate control system for evaluating the results of delegation. Because the delegated
manager is responsible for the performance of his subordinates. S/he has to evaluate their
progress from time to time to ensure that authority is utilized effectively for right purpose.

 Delegation is an integral component of the organizing process. Since a manager is

responsible for the performance of such a large variety of tasks, activities and
functions that s/he cannot perform them all by him/herself. S/he assigns a part of
his/her work to his/her subordinates.
Advantages of Delegation
Delegation, when used properly, has several important advantages in an indisputable fact as
described in the following fashion.
1. Superior Related Advantages
 To reduce the burden of responsibility by a manager.
 To provide more time for constructive review or deliberation in the interests of progress.
 To enable selected activities or services to be more expertly covered and provided.
 To provide for the extension of facilities by the establishment of local centers in different
areas.
2. Subordinate Related Advantages
 It acts as a tool of development and motivation of employees.
 It is means of pushing down decision to lower level so decisions are likely to be timelier as
well as realistic.
Delegation Problems
Reluctance to Delegate
Managers offer numerous explanations in support of their conservative outlook.
 Better performance achieved only by managers: sometimes managers believed that
subordinates may not be able to perform tasks I can do it better myself’, because sometimes
managers suffering from an inflated sense of their own worth.

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  No trust: I cannot trust others to do the job.
 Subordinates may get credit: I will lose importance if I let others do the job.
Reluctance to Accept Delegation
Normally the following of the delegate attitudes hinder the delegation process
 Fear of criticism- why should I stick my neck out for that guy?” If there is failure the
superior is likely to direct the arrows of criticism against the subordinates.
 Lack of information resources- Assuming greater responsibilities may be risky in the
absence of necessary information and resources.
 Too heavy- I am already overburdened. In the absence of adequate rewards for satisfactory
performance, subordinates are typically reluctant to assume added responsibilities and
subject themselves to emotional pressure.
 Lack of self-confidence- I do not have the psychological make- up to shoulder heavy
responsibilities. Sometimes a subordinate may simply refuse to take the risk of the outcome
due to lack of self- confidence.
4.9. Centralization and decentralization
Centralization is a philosophy of management that focuses on systematical retaining of authority in
the hand of higher level managers. I.e. it is the degree to which decision-making is concentrated in
top management's hands.

Decentralization is a philosophy of management that focuses on systematical delegation of

authority throughout the organization to middle and lower level managers.; is the extent to which
decision-making authority is pushed down the organization structure and shared with many lower-
level employees.
Thus, consideration of the following additional factors is important in the decision to be made to the
amount of degree of centralization or decentralization. The factors include:
A. Size and Complexity of the Organization
The larger the size of the enterprise the more the authority the central manager is forced to delegate.
If speed and adoptability to change are necessary, decentralization is a must.
B. Dispersion of the Organization Activities
When the difficulties of size are compounded by geographic dispersion, , it is very evident that a
greater degree of decentralization must occur.

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Example, Nowadays of the Federal Republic of Ethiopia is implementing a decentralized type of
structure both in regional governments and ‘woreda’ level administrations.
c. Degree of repetitiveness and standardization of activities
Degree of repetitiveness and standardization of activities as well as adequacy of the communication
system will favor the centralized authority.

If authority is decentralized:
 Greater number of decision will be made at lower level
 Important decisions are made at lower level, and subordinates will refer less their superiors
to make decisions.
 Decentralized organizations have fewer levels of management with wide spans of control
giving employees more freedom of action.
The reverse is true if authority is centralized.
 In centralization decision making criteria are limited to top level management.
 Centralized organizations have more levels of management with narrow spans of control.
Generally;
 Tall organization structures are more of centralized and flat organizations structures are
more of decentralized.
 To be effective and efficient management wants the best possible mix of centralization and
decentralization on all decisions and functions so as to enable a long- run maximization of
return to the enterprise so making a balance between centralization and decentralization very
important.

4.10. Groups and committees

Group; -is a social unit consisting of two or more interdependent, interactive individuals who are
striving to attain common goals.
Types of groups

Formal groups are groups established by an organization, their membership and structure are
formed by the management of the organization.
Formal groups are may be classified as follows
I. Task group/work group consists of people with different skill for performance of a
common task.

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 II. Command group consists of managers and their employees formed due to authority and
responsibility relationship.
III. Mediating group, a group formed to resolve conflict that may arise between
departments and individuals.
IV. Policy making group: - a group established to formulate operating policy.
Informal groups are groups created spontaneously when member join together voluntarily because
of similar interest.
Committees
Committee is a group of members that represents functional areas of expertise.
It is best example of formal group
The primary function of committee is to make or suggest decisions on problems requiring
integration of different departments.

Types of committee
Generally, committees can be ad hoc or standing
i. Adhoc committees: - are those formed for a particular purpose. If the objectives are for
which they are established have been met, they are disbanded (dispersed). They are
temporary.
ii. Standing committee- are permanent in nature. They are not disbanded. In large
organizations they often take the form of finance committees and personnel committee
and there is always enough work to justify their existence.

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