ORGANIZING Dr. Jangkung Handoyo Mulyo,M.Ec.

Defining organization and structure Organizing: process of creating an organization’s structure process of creating an organization’s structure Organization structure An organization framework (or system of communication and authority) as expressed by its degree of complexity, formalization, and centralization An organization framework (or system of communication and authority) as expressed by its degree of complexity, formalization, and centralization

Organization structure 1. Complexity  The amount of differentiation in an organization  The more division of labor there is in organization, the more vertical levels in the hierarchy, and the more geographically dispersed the organization’s units, the more difficult (complex) it is to coordinate people and their activity

Organization structure 2. Formalization  The degree to which an organization relies on rules and procedures to direct the behavior of employees  The more rules and regulations in an organization, the more formalized the organization’s structure

Organization structure 3. centralization  The concentration of decision-making authority in upper management  In some organizations, decision making is highly centralized in upper levels of management.  In other organization, decentralization is used.  Decentralization: the handling down of decision-making authority to lower levels in an organization

Organization design “the development or changing of an organization’s structure”. The process involves about the amount of complexity, formalization, and centralization to be used. The process involves about the amount of complexity, formalization, and centralization to be used. These three aspects of organization structure can be mixed and matched to create various organization design

Some purposes of organizing  Divides work to be done into specific jobs and departments  Assign task and responsibilities associated with individual jobs  Coordinates diverse organizational task  Cluster jobs into units  Establishes relationships among individuals, groups, and departments  Establishes formal lines of authority  Allocates and deploy organizational resources

Vertical dimension of organization 1. Unity of command “The principle that a subordinate should have one and only one superior to whom he is directly responsible”. “The principle that a subordinate should have one and only one superior to whom he is directly responsible”. No person should report to two or more bosses. Otherwise, a subordinate might have to cope with conflicting demands or priorities from several managers. No person should report to two or more bosses. Otherwise, a subordinate might have to cope with conflicting demands or priorities from several managers. 2. Authority and responsibility  Authority: the rights inherent in managerial position to give orders and expect them to be obeyed.  Line authority: the authority that entitles a manager to direct the work of a subordinate. It is superior- subordinate authority relationship that extends from the top of organization to the lowest levels, following what is called the chain of command.

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

The chain of command VP R2R3 D-a D-fD-eD-dD-cD-a VP R4 R1 D-b

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 order They feel the order is consistent with the purpose of organization The order does not conflict with their personal beliefs They are able to perform the task as directed

Line and staff authority Executive Director Dir Personnel Ass to Exec. Dir Dir Purchasing Dir Operation Unit Manager 1 Personnel Unit Manager 2 OperationsPurchasingOperationsPurchasingPers Line authority Staff authority

Authority and power Authority : legitimate right that’s held because of a person’s position in an organization. Authority goes with the job. Power refers to an individual’s capacity to influence decision. Span of control: how many subordinates a manager can effectively supervise. It’s another vertical dimension that managers must address when designing an appropriate organization structure.