After establishing objectives and drawing up plans to achieve them, managers must design and develop an organization able to achieve its goals. Organizing refers to the deployment of organizational resources to achieve strategic goals. In simpler terms, it means turning plans into action with the help of leadership and motivation. Managers must organize people, technology, and institutional knowledge to achieve organizational goals along with abstract but real elements such as ideas, information, and technology. Due to the environment’s ever-changing nature, the manager as an organizer must be flexible in approach and able to adapt easily to changing circumstances.
The organizing task of a manager can be described as dividing tasks into jobs, delegating authority, determining appropriate bases for departmentalizing jobs, and deciding the optimal number of jobs in a particular department. All of these involve making decisions, and the organization structure takes on a specific form depending on management’s response to each of these decisions. The organizing process leads to the creation of the organizational structure, which defines how tasks are divided and resources allotted. Organizing functions may involve organizational restructuring or reorganizing a department, region, or entire company due to changes in the working environment.
Organization structure is a tool that managers use to harness resources for getting things done. It can be defined as the set of formal tasks assigned to individuals and departments, formal reporting relationships, including lines of authority, decision responsibility, number of hierarchical levels and span of managers’ control, and the design of systems to ensure effective coordination of employees across departments. Formal tasks and formal reporting are aspects of the vertical control of the organization and can be graphically shown in an organization chart. Fundamental characteristics of organization structure are work specialization, a chain of command, authority and responsibility, a span of management, and centralization and decentralization. These determine how authority and responsibility are distributed within an organization.
Another major concept is departmentalization which describes how organization employees are grouped. There are three possible ways such grouping can happen: functional, divisional, and matrix; modern approaches to grouping include team and virtual network structures. In the case of functional grouping, employees are grouped based on common skills and tasks. The opposite structure is divisional, where people are grouped according to organizational output such that every division has a judicial mix of functional skills and tasks. There are two chains of command in a matrix structure, and some employees have two bosses. The team approach makes use of permanent and cross-functional teams to achieve better coordination and employee commitment. The network approach involves subcontracting. The firm does what it does best and subcontracts other functions to separate organizations connected to the main office electronically.
It is up to the manager to decide which organizational structure works best for the firm. Managers can adjust vertical structure elements, such as the degree of centralization or decentralization, to meet changing needs. As organizations mature, they expand, and there is a need to add new departments, functions, and hierarchical levels. The manager must hold the organization together during the expansion process, which can be achieved through horizontal coordination mechanisms across departments such as reengineering, task forces, project managers, and horizontal teams. The manager must consider the contingency factors of strategy, environment, and production technology. When the firm’s strategy is to differentiate its products or services, an organic, flexible structure using teams, decentralization, and empowered employees is appropriate. A rigid mechanistic structure is appropriate for a low-cost strategy. A looser and more flexible structure is suited to a firm with digital technology. Thus, in the realm of the “organizing” function, the manager looks after the organization’s overall structure along with its people, technology, and environment.