What is Organizing Process?, Definition, Characteristics, Process, Needs, Principles, Structure

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What is Organizing Process?

Organizing is the management function where in organizational resources are allocated and responsibilities are delegated in order to accomplish long-term organizational goals. It ensures efficient use of organizational resources.

Table of Content

It is related with building up of a framework or structure of various interrelated parts. We can say that organizing is a process consisting of a series of steps by which managers create a network of authority responsibility relationship. It helps people to work together (relate to one another) for a common objective.


Where two or more persons work together for achieving a common goal, their activities have to be organized. Organizing is a process of integrating, coordinating and mobilizing the activities of members of a group for seeking common goals.

A few definitions of organization are given below:

Organizing is a process of identifying and grouping the work to be performed, defining and delegating responsibility and authority and establishing a pattern of relationship for the purpose of enabling people to work most effectively together in accomplishing objectives.<span class="su-quote-cite">Alien</span>
As a process of combining the work which individuals or a group have to perform with the facilities necessary for its execution, that the duties so performed provides the best channel for the efficient, systematic, positive and coordinated application of available efforts.<span class="su-quote-cite">Oliver</span>

It is evident that the term organisation has been used as a process and as a structure. Organising a process involves many stages. When the stages are completed, a formal structure comes into existence, known as organisational structure.

Characteristics of Organizing Process

  • Organizing is one of the basic and important elements or functions of management. To get things done by others, a manager has to organize their activities.

  • It is a goal-oriented process. It is only to achieve certain goals that the process of organizing is conducted. The structure of an organization is designed so as to facilitate performance of large number of activities.

  • The organizing process primarily deals with group efforts, which are made to achieve common goals.

  • Organizing is based on the principle of division of work and specialization

  • It involves the processes of differentiation or division of activities and integration of activities by grouping them.

  • The process of organizing aims at interrelating, mobilizing and coordinating the activities of employees.

  • It establishes authority relationship of superior and subordinate among the employees byIt establishes authority relationship of superior and subordinate among the employees by assigning the activities and delegating adequate authority to them.

  • It has two basic components or dimensions, namely authority structure, which is created by delegation of authority from top to lower level and the activity structure, which is created by dividing activities into jobs and tasks, grouping them and then assigning them to the various department or individuals.

Organizing Process

Organizing as a process can be described as follows:

Identification of Activities

At the first stage of organizing, the manager identifies those activities, which are necessary for achieving common goals. The common goals of organization provide the basis for determining and identifying the activities.

Division of Activities

Once the activities have been identified, they are divided and subdivided into jobs and small tasks known as elements of activities.

Grouping of Activities

After division into small elements known as tasks, the closely related ones having similarity may be grouped to form a department.

Assignment of Group Activities

Once activities are classified into groups, they are assigned to the specific department or an individual.

Granting Necessary Authority

Groups of activities are assigned to various departments and individual employee?s demands to grant adequate authority to them are considered.

Coordinating the Functioning of Various Departments

In the process of organizing, attempts are made to coordinate each small element or task with departmental activities. Further, the functioning of each department is coordinated to achieve common goals. After completing the above-mentioned stages involved in the process of organizing, it results in the creation of a structure known as organizational structure.

Need and Importance of Organizing

The need and importance of organizing and organizational structure can be understood on the basis of following points:

  • Sound organizational structure facilitates effective management.

  • The whole process of organizing helps in co-subordinating various jobs in the department or division and by relating them to departmental work.

  • Logical and clear-cut division of work and delegation of authority among the various members leads to many benefits.

  • The sub-processes, differentiation and integration may directly affect operating results of the enterprise. If both the processes are conducted in a proper manner, overall organizational efficiency tends to increase.

  • Creation of organizational structure also necessitates delegation of authority among various managerial positions. Decent ralised organizational structure encourages prompt decision-making and efficient control.
  • The organizational structure provides the basis and framework to the manager, which enables him to cope with the changing environment.
  • The structure of an organization facilitates formal communication through line of authority, established from top to lower levels.
  • Creation of staff units in the activity structure of the organization broaden the span of control of the manager and help him in discharging his responsibility in a more efficient manner.

  • Organizing virtually means order and discipline both in respect of working behavior of the employees and their role and relationship.

  • Highly de-centralized structure of an organization may have a strong influence on development of managers as delegation of authority to 71 lower level managers provides opportunity to them for making decisions and exercising administrative authority.

Principles of Organizing

Introduction of organization refers to those well-established and accepted general statements, which are used in the process of organizing to prepare a sound organizational structure. These principles serve as general guidelines for managers for evolving sound and more effective pattern of relationship in designing the organization.

Most of these principles have classical flavor; early management writers, including F. W.Taylor, Henri Fayol, Lyndall, Ur wick and others have developed them. With the passage of time, these principles have been refined and extended by many modem management scientists to make them more efficacious and relevant in the modem context. Some of these principles are outlined below.

Principle of Division of Labour

This is the basic principle of organizing, which represents division of work and activities into small tasks and jobs necessary for achieving a set of objectives.

Principle of Functional Definition

In order to discharge assumed responsibility by completing the job assigned to the employee, he has to perform many functions. According to this principle, the functions to be performed by an individual employee or by a department must be well-defined.

Principle of Sealer Chain

This principle is known as sealer chain or line of authority or chain of command. It states that there exists an unbroken line of authority or sealer chain from the top to the lowest level.

Principle of Span of Control

This principle refers to the number of subordinates to be placed under the command of the manager so that he can manage their work efficiently.

Principle of Unity of Command

The principle of unity of command implies oneness of command and single source of authority over a subordinate.

Principle of Objective

The organization and each of its components or sub-systems should be directed towards the accomplishment of predetermined objectives.

Principle of Balance

According to this principle, all techniques and principles applied to particular structure of the organization must be properly balanced to ensure that one principle does not contradict with another or benefits of one are not countered by the benefits of the other.

Principle of Flexibility

It suggests that the structure of an organization should be designed to permit growth and diversification.

Principle of Absoluteness of Responsibility

According to this principle, responsibility once assumed by the manager cannot be shifted to subordinates.

Principle of Delegation by Result Expected

For creating the structure of an organization, authority should be delegated in such a way as to clarify performance expectations in terms of cost, volume, time and efforts.

Principle of Parity between Authority and Responsibility

The principle suggests that there should be complete balance or parity between authority and responsibility; only that much authority should be delegated which is needed for carrying out the assigned job.

Principle of Efficiency

According to this principle, the organizational structure should be designed in such a way as to facilitate efficient accomplishment of objectives.

Principle of Efficiency

According to this principle, the organizational structure should be designed in such a way as to facilitate efficient accomplishment of objectives.

Principle of Cooperation

According-to this principle, an organization is considered as teamwork aimed at achieving objectives. Therefore, all members should perform the assigned work in co-operation with each other.Principle of Cooperation: According-to this principle, an organization is considered as teamwork aimed at achieving objectives. Therefore, all members should perform the assigned work in co-operation with each other.

Span of Management

pan of management is a way in which many people in an organisation are controlled and managed by single officer. It can be further called as:

  • pan of management
  • span of authority
  • span of supervision
  • span of authority
  • span of responsibility
  • levels of organization

Such principle depends upon principle of relationship. In this number of members can be more or less as per nature of work done by subordinate or ability of supervision. In working domain with one head, nearly about four to five subordinates tends to work.

Organizational Chart

An organizational chart (often called organization chart/ org chart/ organigram/ organogram) is a diagram that shows the structure of an organization and the relationships and relative ranks of its parts and positions/jobs.

The term is also used for similar diagrams, for example ones showing the different elements of a field of knowledge or a group of languages.

An organizational chart of a company usually shows the managers and sub workers who make up an organization. It also shows the relationships between directors: managing director, chief executive officer and various departments.

In many large companies, the organization chart can be large and incredibly complicated and is therefore sometimes dissected into smaller charts for each individual department within the organization.

The following is an example of a simple hierarchical organizational chart. In this chart, a ‘line relationship’ (or line of command in military relationships) exists between the Manager and the two Supervisors. These two colonels are directly responsible to the General.

Similarly, a ‘lateral relationship’ in this chart exists between “Private A” and “Private B”, who both work on level and both report to the “Sergeant B”. Various shapes such as rectangles, squares, triangles, circles, etc. can be used to indicate different roles.

Color can be used for shaping the borders and connection lines to indicate differences in authority and responsibility and formal, advisory and informal links between people.

A department or position yet to be created or currently vacant might be shown as a shape with a dotted outline.

Importance of the position may be shown both with a change in size of the shape in addition to its vertical placement on the chart.

Organizational Chart
A sample Organizational Chart

Dale has considered organizational chart “as a diagram of formal authority structure.” But this definition virtually ignores the horizontal dimension of an organization. Terry has forwarded a more suitable definition of organizational charts.

In his words, “organizational chart is a diagrammatic al form which shows important sets of an organization, including the major functions and their respective relationship and the relative authority of each employee, who is in charge of each respective function.

Types of Organizational Charts

The structure of an organization can be graphically presented in the following manner:

Vertical chart

A Vertical organization chart
A Vertical organization chart

This is the conservative way of preparing the organizational chart. It indicates the position of chief executive on the top, to which succeeding managerial positions are attached. As the chain of command action goes down, at every following stage, contents of authority tend to decrease. Vertical charts take the shape of a pyramid with fewer managerial positions on the higher side and more positions on the lower sides.

Horizontal chart

Organization of Forest Department

Horizontal organizational chart
Horizontal organizational chart

There is just a slight distinction between vertical and horizontal charts. Firstly, the pyramid line remains in horizontal position in place of the vertical position. Second, the line of authority begins from left to right in the horizontal chart. The position of chief executive lies on acute left side and as it moves to right side, it represents lower level of managerial chain of command.

Since horizontal charts do not serve any extra purpose except complicating the diagram, they are less common in practice.

Circular chart

Circular organizational chart
Circular organizational chart

The circular chart or concentric chart indicates the top managerial position at the center and other middle and lower managerial positions revolve from center in concentric circles. As beside top position, the lowest managerial position lies on the outermost circle.

Circular charts plainly show scope of each managers responsibility and authority and remove status implications which are inbuilt from top to lower levels. It takes less space for presenting different managerial positions. But it is plagued with a weakness; it is very difficult to draw it and it officially creates a lot of confusion regarding managerial positions.

Contents of Chart

The detail of content present in organizational chart includes:

  • Governance
  • Operating Rules of an organization
  • Distribution of work


It is the basic element in an organizational structure where initially some person or group takes decisions in it.

Operation rules of an organization

It carries certain rule by which an organization works. There are certain rules which are open while others are implied and understood.

Distribution of work

In an organization, the distribution of work can be formal or informal, temporary or enduring with certain division of labor. There are four tasks which is main for any group:

  • In for any group.
  • Envisioning desired changes.
  • Transforming the community.
  • Planning for integration.
  • Supporting efforts of working so to promote change.


Organization charts, also known as org charts, are visual representations of an organization’s structure that show the hierarchy of positions and relationships between different departments, teams, and employees.

Organization charts can be of use to an organization in

  • Building and designing organization structure to fulfill business objectives.
  • Guiding employees about the knowledge related to their rights and responsibilities.
  • Dividing the functions of a company, enterprise or department.
  • Show relationships which appear among organization staff members.
  • Judging the officers workload.
  • Locating unrelated persons having no relationship.
  • Determining employee position based on competency.
  • Clarity inside an organization.
  • Improving employee performance.
  • Understanding and coordinating of organization.
  • Determining promotion channels.


The organizational chart has certain limitations such as:

  • In this not every communication channel is formal.
  • It is difficult to keep track of changes which are responsible in maintaining an organisational chart.

Factors Affecting Organizational Chart

Various factors determine the effectiveness of an organization structure. These are organizations environment, strategy, technology, size and people.


An organization is a system, which works within a broader framework of an environment. Though the boundary between the organization and its environment cannot be exact and definite, for all practical purposes, such boundary can be identified.

The organization interacts continuously with its environment. It is affected by environment and it affects the environment. In this interaction, the environment determines the various organizational processes including its structure. The environmental system concept regards the organization as a part of the environment- the environmental system.


There is a close relationship between an organizations strategy and its structure. The understanding of this relationship is important so that in implementing the strategy, the organization structure is designed according to the needs of the strategy.

The relationship between strategy and structure can be thought in terms of utilizing structure for strategy implementation because structure is a means to an end and not an end in itself.


Technology is another factor affecting organization structure. Though technology is one of the components of organizational environment, it should be studied separately because technology directly affects the task structure. Before analyzing the impact of technology on the organizational functioning, it is imperative to understand the nature of technology as relevant to the organizations.


The issue of organizational size has been a compelling one in organizational analysis, though most organization theorists have hardly visualized size as an important factor. This is so because of diverse research findings on the relationship between an organizations size and its structure.

Theoretical proposition suggests that size of an organization influences its coordination, direction, control and reporting systems and, hence, the organization structure. When an organization is small, interaction is confined to a relatively small group, communication is simpler, less information is required for decision-making and there is less need for formal structure.


The organizational structure is the result of conscious actions on the part of people engaged in the organization. As such, the form of organization structure is expected to reflect the thinking and way of working of its framers and participants.

The form of organization is a major source of satisfaction or dissatisfaction for the people. Moreover, the structure is the result of the personality of its framers.

Thus to arrive at appropriate structure, the forces in people may be analyzed. Such analysis may be in two ways: people in superior capacity and people in subordinate capacity.

Organization Structure

The structure of an organization is a network of authority and responsibility assumed by and delegated to the employees. Organizational structure defines the pattern of formal relationship between superiors and subordinates. It may also be regarded as a network of role, relationship, assigned work and delegated authority to employees.

It provides the basis on which the managers and non-managerial employees perform the job assigned to them. The structure of the organization has two components or dimensions, namely authority structure, which comes into existence by delegating authority from top to lower levels and activity structure, which is created by dividing activities, grouping them and assigning them to the various departments or individuals. It has a pyramid shape.

Classification of Organizational Structure

Various activities are grouped together to create departments and units and their relationships in the organization is thus prescribed. On the basis of this, the organizational structure is classified. Thus, there are seven types of organization structure:

  • Line
  • Line and staff
  • Functional
  • Divisional
  • Project
  • Matrix
  • Free-form (virtual organization

Each of these emphasis’s different arrangements of organizational activities. Some of these are designed on mechanistic pattern, for example, line, line and staff structures; some are designed on organic or dynamic pattern, for example, matrix and free-form structures. Others have a combination of both mechanistic and organic patterns in varying degrees.

Further, some of the structures are basic, for example, functional, divisional, etc. some emerge because of overlays denoting superimposition of one element over another, for example, matrix structure. Besides the basic organization structure organizations may create committees taking personnel from different departments where the processes are quite different as compared to a department.

Line Organization Structure

It is the oldest organizational structure which is commonly related as scalar, military or vertical structure. With this concept, it is narrated that in any organization or hierarchy which is obtained from scalar process, there exists one top head that will run and command the structure. Moreover it is clear that executives in an organization will also have power to delegate work and holds responsible for output.

Line Organization Structure
Line Organization Structure

It is found that a line organization can be arranged as:

Pure Line Organization

In this, similar work is carried out at particular level. Here every group of activities is an independent unit which works for an allocated activity without the help of others.

Departmental Line Organization

In this, complete work is shared among various departments as per the commonness of activities. Here each department is kept under individual departmental head. The idea of this is to get specific control, power and liability.

Characteristics of Line Organization

Line organization structure has following characteristics

  • Lines of influence and instructions are vertical, i.e. they flow from the top to the bottom.
  • The unity of command is maintained in a straight and constant line. It implies that each junior receives instructions from his immediate superior alone and is responsible to him only.
  • All people at the same level of organization are self-governing. It im- 81 plies that all the departmental heads are highest in their respective areas and self-regulating and are responsible to the chief executive. This applies to all other positions also.
  • This structure specifies responsibility and authority for all the positions limiting the area of action by a particular position holder.

Merits of Line Organization

Line organization structure has following merits or advantages


This organization is quite simple in both understanding and in plementation.


Since each position is subject to control by its immediate superior position, often the maintenance of discipline is easy.

Prompt Decision

Most of the decisions in such organizations are taken by the superiors concerned. This makes the decision-making process easier and less time-consuming.

Orderly Communication

Line organization follows scalar chain method of communication.

Easy Supervision and Control

The line organization provides for easy supervision and control because each subordinate is controlled by
a single superior.


The line organization is quite economical because it does not use staff specialists whose appointment is a costly affair specially for small organizations.

Overall Development of the Managers

Various functions of managers lead to the overall development of the managers concerned.

Demerits of Line Organization

Line organizations offer many problems and limitations, which are as follows:

Lack of Specialization

The line organization does not offer scope for specialization. A manager has to perform a variety of functions, which may not necessarily be closely interrelated.

Absence of Conceptual Thinking

The managers in this system do not find time for conceptual thinking so essential for organizational growth and development because they remain quite busy in their day to-day managerial problems.

Autocratic Approach

The line organization is based upon autocratic approach of authority being direct, demands high level of obedience on the part of the subordinates.

Problems of Coordination

Coordination among various activities and the departments is achieved through horizontal relationship, whereas the line organization stresses only on vertical relationship,Thus, there is acute problem of coordination, particularly in a large organization.

Line and Staff Organization Structure

Autocratic Approach

The line organization is based upon autocratic approach of authority being direct, demands high level of obedience on the part of the subordinates. 4. Problems of Coordination: Coordination This structure relates to certain arrangement where staff experts advise their line managers to carry out particular task. On increasing work of an executive, its performance will effect and service of specialists cannot able to give as of restricted capabilities.

This type of advice is required to deliver to line managers by staffs personal which are normally specialists in their own fields. The staff positions or departments are of purely advisory nature. They have the right to rec-commend, but have no authority to enforce their preference on other departments.

Line and Staff Organization Structure
Line and Staff Organization Structure

Merits of Line and Staff Organization

As against line organization structure, line and staff structure offers the following advantages:

A need Specialization

The line and staff structure is based upon the principle of specialization. The line managers are responsible for operations contributing directly to the achievement of organizational objectives whereas staff people are there to provide expert advice on the matters of their concerns.

Quality Decision

The quality of the decision derived is superior as the decision is the product of careful thought and systematic analysis.

respect for Personal Growth

The system of organizing offers ample prospect for efficient personnel to grow in the organization.

Demerits of Line and Staff Organization

The line and staff structure suffers from some limitations, which particularly become acute when it is not implemented properly. Following are some basic problems and limitations:

Lack of Well-defined Authority

It becomes difficult to differentiate clearly between line and staff because, in actual practice, the authority is often diffused.

Line and Staff Conflicts

The main problem of line and staff structure is the conflicts between line and staff managers. Such conflicts may be because of various reasons and sometimes the organizational conflicts may be taken as personal conflicts resulting in interpersonal problems.

Functional Organization Structure

Functional organization structure is the most widely used in the medium and large organizations having a limited number of products. This structure emerges from the idea that the organization must perform certain functions in order to carry on its operations. Functional structure is created by grouping the activities on the basis of functions required for the achievement of organizational objectives.

For this purpose, all the functions required are classified into basic, secondary and supporting functions according to their nature and importance. The basic or major functions are essential for the organization,For example, in a manufacturing organization, production and marketing are basic functions.

When departments are created based on basic functions and a manager feels that his span of management is too wide to manage effectively, which invariably happens in large organizations, several departments are created on the basis of dividing a basic function into sub-functions. Marketing may be subdivided into marketing research, advertising, sales and so on.

Characteristics of Functional Organization

Authority relationships in functional structure may be in the form of line/ staff and functional. In fact, the concept of functional authority is very appropriate for functional structure. Thus, functional structure is characterized by the following:

  • Specialization by functions
  • Emphasis on sub-goals
  • Pyramidal growth of the organization
  • Line and staff division
  • Functional authority relationships among various departments
  • Limited span of management and tall structure

The organization chart of functional structure is presented in Figure 2.7:

Functional Organization Structure
Functional Organization Structure

Problems in Functional Structure

Problems in Functional Structure The functional structure is not suitable to an organization, which takes up diversification. New activity may be quite different from the activities being performed by the organization. Thus, diversification cannot be managed properly within the context of functional structure. At least at some level, there may be violation of functional structure.

In such a situation, functional structure presents following problems:

  • Responsibility for ultimate performance cannot be fixed in the functional structure because no one is responsible for product cost and profit. Each department focuses on its contribution to the product, but not the entire product.
  • Functional structure essentially generates slow decision-making process because the problem requiring a decision has to go to various dements as all of them have something to say on the matter.
  • Functional structure lacks responsiveness necessary to cope up with new and rapidly changing work requirements.
  • Functional structure offers usually line and staff conflict and interdepartmental conflict. The heightened degree of such a conflict becomes detrimental to organizational efficiency.

Divisional Organization Structure

The second basic structural form employed by organizations is the divisional structure. In India, many companies have diversified into unrelated businesses and have found functional structure quite unsuitable for them. For example, companies like D.C.M. Limited, Volta’s Limited, Century Spinning Mills, Gwalior Rayon, etc., have adopted the divisional structure.

Divisional structure, also called profit decentralization by Newman and oth- 85 ers is built around business units. In this form, the organization is divided into several autonomous units. Each unit is headed by a manager who is responsible for the organization?

s investment in facilities, capital and people as well as for unit?s development and performance. Divisional structure is similar to dividing an organization into several smaller organizations but it is not quite the same, since each smaller organization is not completely independent.

Each unit is not a separate legal entity; it is still part of the organization. Each unit is directly accountable to the organization.

Basis of Divisional Organization

There are different bases on which various divisions in an organization can be created. The two traditional bases are product and territory.

Product Divisional Organization

In this form, each major product or product line is organized as a separate unit. Each unit has its own functional structure for various activities necessary for the product. Multi-product organizations use this as basis for divisional organization.

This is appropriate specially when each product is relatively complex and large amount of capital is required for each product.The product requires different type of efforts as compared to others in terms of marketing and/or production.

For example, Century Mills has separate divisions for textiles, cement and shipping. Reliance Industries Limited has six product divisions: textiles, polyester, fiber intermediates, polymers, chemical and oil and gas.

Each division caters to different customers and has different types of competition.

Territorial Divisional Organization

Under this form, location of regional offices is standalone units having its own functional departments which work under certain policies and guidelines given by corporate management. This is useful for those organizations whose activities are geographically spread such as banking, transport, insurance, etc.

For example, Life Insurance Corporation of India runs its life insurance business on the basis of territorial divisional organization in which the entire geographical area of the country has been divided into five zones- eastern, central, northern, southern and western.

Each zone has further been divided into appropriate number of divisions, e.g. north-zone into four divisions located at Jallandhar, Chandigarh, New Delhi and Ajmer.

Each division has a number of branches at different places covered by the division concerned.

Divisional Organization Structure
Divisional Organization Structure

Problems in Division Structure

There are certain disadvantages and problems of divisional structure. Some of these problems are inherent in the system while others emerge because of wrong approach of management. Following are the major shortcomings of divisional structure.

Divisional structure is quite costly because all the facilities have to be arranged for each division.

Since there is lack of emphasis of functional specialization, many professionals do not feel satisfied with this structure.

  • Often there is a lack of managerial personnel when a new division is opened because managers working within a division cannot work with same efficiency in other division, as they must have acquired the technical competence of that division.
  • Control system is a major problem of the divisional organization.

Many of these problems can be overcome through sharp focus on tasks and responsibilities of corporate and divisional management, measurement of performance of divisions, long-term policy for performance and incentives, creating more autonomy and decentralization of authority and the explicit strategies for both the organizations as a whole and its various divisions.

Project Organization Structure

Major reforms in the traditional functional structure have come from a group of related structures such as project management. The basic idea behind this structure is that since environment changes very rapidly, the organization must take up various activities on project basis, i.e. adding the required ones and deleting the unnecessary ones. Thus, the organization can be organic-adaptive one.

The project work can be managed in two forms of organization: pure project organization and matrix organization. The pure project organization is suitable for taking small number of larger projects with long duration so that a separate division can be created for each project. 87 Project organization appears like divisional structure except that in the latter, various divisions are created on permanent basis while in the former, they are created only for the lifetime of a project.

When a particular project is completed, the concerned division may disappear. However, since a project may continue for quite long time, a project may become a sort of permanent. For example, Middleton observes, “A project organization can also be the beginning of an organization cycle. The project may become a long term or permanent effort that eventually becomes a programmer or branch organization.

The functional personnel are drawn from various functional departments and functional managers decide who in their department will perform the task and how it will be done. Thus, project manager is a unifying and focal point for the project activities.

Project Organization Structure
Project Organization Structure

A project manager really does not have vertical authority on the personnel drawn from various functional departments unlike a divisional manager who has line authority over the people working in various functional departments assigned to his division. In the absence of any vertical authority, the project manager must convince the functional people so that they help him to complete the project within time.

Problems in Project Organization

In fact, many of the flexibility of project organization may turn into problems if arrangement is not made for overcoming these problems. A project manager has to face unusual problems resulting from the project management. Following problems are usually experienced in project organization.

  • Project organization creates feelings of insecurity and uncertainty among people in the organization. People are not able to identify themselves with any particular department in the organization because they do not have permanent tenure with any project.
  • There is lack of clarity among members about their role in the organization.
  • Often project manager faces numerous problems because he has to carry responsibility without authority.

These problems are real and a challenge lies before the project manager. If he believes in traditional system of organization, he may not be able to work. He has to change the total philosophy of managing.

Matrix Organization Structure

Matrix organization structure is essentially a violation of unity of command and therefore, all the classical concepts related to the principle of unity of command are violated. Matrix structure is the realization of two-dimensional structure, which emanates directly from two dimensions of authority.

Two complementary structures- pure project structure and functional structure are merged to create the matrix structure. Thus, matrix structure not only employs a multiple command but also related support mechanism and associated organizational culture and behavior. Thus, it shows many organizational overlaps, not only in terms of command system but also in terms of complete organizational processes and behavior.

Design of Matrix Structure

In the matrix organization structure, a project manager is appointed to coordinate the activities of the project. Personnel are drawn from their respective functional departments. Upon completion of the project, these people may return to their original departments for further assignment. Thus, each functional staff has two bosses- his administrative head and his project manager.

During his assignment to a project, he works under the coordinative command of the project manager and he may be called upon by his permanent superior to perform certain services needed in the project. Thus, a subordinate in matrix structure may receive instructions from two bosses.

Therefore, he must coordinate the instructions received from two or even more bosses. Similarly, matrix superior has to share the facilities with others. He reports in a direct line to the up, but does not have a complete line of command below.

Fig 3.10 Matrix Organization Structure

Problems in Matrix Structure

The matrix structure has many problems in practice because of its flexibility. The major problems of matrix structure are as follows and managers should take adequate precautions to overcome these.

  • There is always power struggle in matrix structure.
  • Matrix structure can develop anarchy if not managed properly.
  • This structure may not work very well when there is economic crunch.
  • If matrix organization is not followed properly, there is delay in decision-making.
  • At the initial level, matrix structure becomes quite costly because of top heavy management.

A perusal of the various problems suggests that many of these problems arise because of faulty implementation of matrix structure. If it is implemented with proper perspective, many problems will disappear. As it has been pointed out in the beginning, the matrix is not merely a structure but it includes systems, culture and behavior, which must be in accordance with matrix philosophy.

Virtual Organization

The concept of virtual organization or corporation along with virtual team and office has entered management field very recently. The literal meaning of virtual organization is having the efficacy without the material part, unreal but capable of being considered as real for the purpose.

Based on this concept, virtual corporation has been defined as “ a temporary alliance between two or more or-organizations that band together to undertake a specified venture.” Recently, in telecommunication sector in India, many virtual organizations have been created to provide different services.

Virtual Organization
Virtual Organization

Characteristics of Virtual Organization

Business Week has identified five basic features of a virtual organization, which are as follows:


Informational networks will provide far-flung companies and entrepreneurs to link up work together from start to finish. The partnerships will be based on electronic contracts to keep the lawyers away and speed the linkups.


Partnerships will be less permanent, less formal and more opportunistic. Companies will bond together to meet a specific market opportunity and, more often than not, fall apart once the need evaporates.


Because each partner brings its core competence to the effort, it may be possible to create a best-of-everything organization. Every function and process could be world class- something that no single company could achieve0,l;/”


These relationships make companies far more reliant on each other and require far more trust than even before. They will share a sense of co-destiny, meaning that the fate of each partner is dependent on other.

No Borders

The new corporate model redefines the traditional boundaries of the company. More cooperation among competitors, suppliers and customers makes it harder to determine where one company ends and another begins.

Reasons for Virtual Organization

The basic reason behind creating a virtual organization is to generate synergy through temporary alliances. Creating synergy is the process of putting two or more elements together to achieve a sum total greater than the sum total of individual elements separately.

This effect can be described as 2 + 2 = 5 ef- 91 fact. The synergistic effect is generated in virtual organization because of the complementary of competences of different partners. Some companies can do something very well but struggle with most others.

Other companies can do very well in those areas in which the first group of companies feels handicapped. If both these types of companies put their efforts jointly to undertake any project, their combined strengths could lead much better results than what individual companies could have achieved separatel.

Informal Organization


Informal organization endures as a relationship which survives between people in an organization as per their attitudes, emotions, prejudices, likes and dislikes etc. Such type of relation does not exist as per the standards and processing rules which occurs in a formal organization.

Normally, it is seen that a large formal groups will give rise to small informal groups that are not planned earlier but will originate automatically in an organization.


The characteristics of an informal organization are:

  • An informal organization is flexible and unplanned depending on its structure.
  • It carries no defined relationship.
  • It carries two or more than two people.
  • There exists a natural relationship.
  • It carries volunteer side membership.
  • In this, there is no compulsion of groups as people have right to join any numbers of groups at the same time.


  • The importance of informal organization in terms of Employees is:
  • Sense of Belonging.
  • Safety valve for emotional problems Aid on the Job.
  • Innovation and Originality.
  • Important Channel of Communication
  • Social Control.


  • In an informal organization, people sometimes conveyed wrong things to other person that result in horrible results.

  • In such type of organization, the changes are resisted and stress occurs when olden procedures are adopted.

  • With negative thinking of leaders, the personal interest satisfies group interests then such organization tends to function against formal organizational goals that could be dangerous.

  • In this, when role in a group differs from formal goals then under such members conflict occurs in formal and informal roles.

Difference between Formal and Informal Organization

Formal organizationInformal organization
It has defined objective that will save
organization and make it stable
It does not have objectives but inspires
of friendship, fame, respect, unity.
It is established with particular processIt appears spontaneously.
In this the members are bound together
with authority relation.
In this the member has duty, authority
and responsibility
It can be shown in an organizational
It cannot be shown in an organisational
In this the work for achieving
organizational goal are identified.
In this the work for achieving
organizational goal are not identified.
Difference between Formal and Informal Organization


What is Organizing Process?

Organizing is the management function where in organizational resources are allocated and responsibilities are delegated in order to accomplish long-term organizational goals. It ensures efficient use of organizational resources.

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