ORGANIZING

Dr. Jangkung Handoyo Mulyo,M.Ec.

Defining organization and Defining organization and structure structure

Organizing: Organizing: process of creating an organization’s process of creating an organization’s

structurestructure

Organization structureOrganization structureAn organization framework (or system of An organization framework (or system of

communication and authority) as communication and authority) as expressed by its degree of complexity, expressed by its degree of complexity, formalization, and centralizationformalization, and centralization

Organization structureOrganization structure

1. Complexity1. ComplexityThe amount of differentiation in an The amount of differentiation in an

organization organization The more division of labor there is in The more division of labor there is in

organization, the more vertical levels in the organization, the more vertical levels in the hierarchy, and the more geographically hierarchy, and the more geographically dispersed the organization’s units, the dispersed the organization’s units, the more difficult (complex) it is to coordinate more difficult (complex) it is to coordinate people and their activitypeople and their activity

Organization structureOrganization structure

2. Formalization2. FormalizationThe degree to which an organization The degree to which an organization

relies on rules and procedures to direct relies on rules and procedures to direct the behavior of employeesthe behavior of employees

The more rules and regulations in an The more rules and regulations in an organization, the more formalized the organization, the more formalized the organization’s structureorganization’s structure

Organization structureOrganization structure

3. centralization3. centralization The concentration of decision-making The concentration of decision-making

authority in upper managementauthority in upper management In some organizations, decision making is In some organizations, decision making is

highly centralized in upper levels of highly centralized in upper levels of management.management.

In other organization, decentralization is used.In other organization, decentralization is used. Decentralization: the handling down of Decentralization: the handling down of

decision-making authority to lower levels in an decision-making authority to lower levels in an organizationorganization

Organization designOrganization design

““the development or changing of an the development or changing of an organization’s structure”.organization’s structure”.

The process involves about the amount The process involves about the amount of complexity, formalization, and of complexity, formalization, and centralization to be used.centralization to be used.

These three aspects of organization These three aspects of organization structure can be mixed and matched to structure can be mixed and matched to create various organization design create various organization design

Some purposes of Some purposes of organizingorganizing

Divides work to be done into specific jobs and Divides work to be done into specific jobs and departmentsdepartments

Assign task and responsibilities associated with Assign task and responsibilities associated with individual jobsindividual jobs

Coordinates diverse organizational taskCoordinates diverse organizational task Cluster jobs into unitsCluster jobs into units Establishes relationships among individuals, Establishes relationships among individuals,

groups, and departmentsgroups, and departments Establishes formal lines of authorityEstablishes formal lines of authority Allocates and deploy organizational resourcesAllocates and deploy organizational resources

Vertical dimension of Vertical dimension of organizationorganization

1. Unity of command1. Unity of command ““The principle that a subordinate should have one and The principle that a subordinate should have one and

only one superior to whom he is directly responsible”.only one superior to whom he is directly responsible”. No person should report to two or more bosses. No person should report to two or more bosses.

Otherwise, a subordinate might have to cope with Otherwise, a subordinate might have to cope with conflicting demands or priorities from several managers.conflicting demands or priorities from several managers.2. Authority and responsibility2. Authority and responsibility

Authority: the rights inherent in managerial position to Authority: the rights inherent in managerial position to give orders and expect them to be obeyed.give orders and expect them to be obeyed.

Line authority: the authority that entitles a manager to Line authority: the authority that entitles a manager to direct the work of a subordinate. It is superior-direct the work of a subordinate. It is superior-subordinate authority relationship that extends from the subordinate authority relationship that extends from the top of organization to the lowest levels, following what is top of organization to the lowest levels, following what is called the chain of command.called the chain of command.

AuthorityAuthority

Chain of command: the flow of authority from Chain of command: the flow of authority from the top to the bottom of an organizationthe top to the bottom of an organization

Staff authority: authority given to individuals Staff authority: authority given to individuals who support, assist, advise others who have who support, assist, advise others who have line authority. It is happened because line authority. It is happened because organization become larger and more complex, organization become larger and more complex, line managers find that they do not have the line managers find that they do not have the time, expertise, or resources to get their job time, expertise, or resources to get their job done effectively. done effectively.

The chain of command

Chief Executive Officer

Executive Vice President President Executive Vice President

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Chief Executive Officer

Executive Vice President President Executive Vice President

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Acceptance theory of authority

“comes from the willingness of subordinates to accept it” (Chester Barnard)Subordinates will accept orders only if the following condition are satisfied:

They understand the orderThey feel the order is consistent with the

purpose of organizationThe order does not conflict with their personal

beliefsThey are able to perform the task as directed

Line and staff authority

Executive Director

Dir Personnel

Ass to Exec. Dir

Dir PurchasingDir Operation

Unit Manager 1

Personnel

Unit Manager 2

Operations Purchasing Operations PurchasingPers

Line authority

Staff authority

Authority and powerAuthority and power

Authority : legitimate right that’s held because of Authority : legitimate right that’s held because of a person’s position in an organization. Authority a person’s position in an organization. Authority goes with the job.goes with the job.

Power refers to an individual’s capacity to Power refers to an individual’s capacity to influence decision. influence decision.

Span of control: how many subordinates a Span of control: how many subordinates a manager can effectively supervise. It’s another manager can effectively supervise. It’s another vertical dimension that managers must address vertical dimension that managers must address when designing an appropriate organization when designing an appropriate organization structure.structure.