ORGANIZING

Managers in every organization face the question about how to organize for maximum efficiency and
effectiveness.

Definition:

Is the deployment of organizational resources to achieve strategic goals.

It is the process of classifying and categorizing personnel, establishing relationships among

them, and defining their authority and responsibilities.

Organizing is focused on determining the functions of individual employees in an organization

and how their individual efforts should be integrated to attain organizational objectives
collectively.

The deployment of resources is reflected in the organization’s:

 Division of labor into specific departments and jobs

 Formal lines of authority
 Mechanisms for coordinating diverse organization tasks

Strategy defines “what to do”; organizing defines “how to do it”.

Importance:

 It is the primary mechanism that managers use to implement the plans.

 It provides structure for how materials, human, and other resources are utilized in the
organization.
 It helps in maximizing the productivity of the organization by bridging the light to idle resources
and duplicate tasks.

ORGANIZING PROCESS

Steps:

1. Reflect on plans and objectives – determine the how the pharmacy’s time and resources will be
used to execute the plans.
2. Establish major tasks – identify and define each task to be completed
3. Divide major tasks into subtasks
4. Allocate resources and directives for subtasks – assign the established tasks to an individual of a
group of individuals. Group employees into job units that are related in some manner and assign
manager to each unit, providing him/her with the necessary authority and responsibility to
ensure the completion of tasks within the unit.
 Arrange these units relative to one another both horizontally and vertically and establish who
reports to whom.

5. Evaluate results of implementing the organizing strategy – establish a control system for
monitoring the progress and achievements of each unit.

ORGANIZATION

Refers to the process of structuring activities, procedures, and people within the business. It is a
formal and intentional design of structures, roles, and positions.

Organization Structure

-the framework in which the organization defines how tasks are divided, resources are
deployed, and departments are coordinated.

It is defines as:

 The set of formal tasks assigned to individuals and departments

 Formal reporting relationship, including lines of authority, decision responsibility,
number of hierarchical levels, and span of managers’ control
 Design of system to ensure effective coordination of employees across departments

The set of formal tasks and formal reporting relationships provide a framework for vertical control of the
organization.

Organization chart -the visual representation of an organization’s structure.

 Delineates the chain of command

 Indicates departmental tasks and how they fit together
 Provides order and logic for the organization
 Presents the functions of the top management and the subordinate units in
successively descending positions, indicating the hierarchical structure from top
management to rank and file employees.

Purposes of an Organization Chart

 To assist in viewing the firm’s whole structure

 To help management in dividing the different duties or functions of the business
 To show the grouping of departments in order to easily direct and control activities
 To sort the responsibilities of the positions so there will be no wasted time or effort
Major aspects of Organizational Structure: (Principles of Organization)

I. Differentiation – refers to the degree to which units are dissimilar.

A. Horizontal Differentiation
– differences among workers or units which may include their education, type of
training, and the tasks assigned to them.
- may also refer to the multi-ownership of different firms from a variety of related
industries.

B. Vertical Differentiation

- Differences in hierarchical positions

- “chain of command” – the number of levels between the top management or owner
of the organization and the rest of the staff.
- The degree of authority and the number of staff vary depending on the size of
organization
- The smaller the organization, the less positions of authority are present in the
hierarchical structure.

C. Spatial Differentiation

- Involves location or sites of an organization’s units, whether they are in one place or
spread across several areas.
- Ex. Chain pharmacy operation (multiple units in several areas), organization with
different departments located in different areas
- Coordination is the key among these units especially as an organization grows and
differentiates

II. Formalization

– Refers to the degree to which jobs in the organization are standardized

– It emphasizes the maintenance of the structure. Maintenance involves the following:
o The rules – degree of organizational control of employee behavior
o Procedural specifications – defined techniques that the organizational members
must follow when dealing with specific situations
o Technical competence – the “universal” standards as defined by the organization ,
and the extent of its use in selecting personnel and advancing processes
o Impersonality – treatment of both members of the organization and individuals
outside the organization regardless of their individual qualities.
III. Centralization vs Decentralization

Hierarchical levels at which decisions are made:

1. Centralization – decision authority is located near the top organization

2. Decentralization - decision authority is pushed downward to lower organization levels
Advantages:
 Relieve the burden on top managers
 Make greater use of employees’ skills and abilities
 Ensure that decisions are made close to the action by well-informed people
 Permit more rapid response to changes

Factors that influence centralization vs decentralization:

 Greater change and uncertainty in the environment are usually associated with
decentralization.
 The amount of centralization should fit the firm’s strategy. (Ex. Google –
decentralization fit with the strategy of allowing creative people to innovate and
respond quickly to customer needs)
 In times of crisis or risk of company failure, authority may be centralized at the top.

The trend now is toward broader span of management and greater decentralization.

IV. Work Specialization (also called division of labor)

-is the degree to which organization tasks are subdivided into separate jobs.

Advantage: When work specialization is extensive, employees specialize in a single task. Jobs
tend to be small, but they can be performed efficiently.

Disadvantage: employees are isolated and do only a single, boring job; creates separation and
hinders the coordination.

V. Chain of Command

-is an unbroken line of authority that links all employees in an organization and shows who
reports to whom.

It is associated with two underlying principles:

1. Unity of command – each employee is held accountable to only one supervisor

2. Scalar principle – clearly defined line of authority in the organization that includes all employees.

All individuals in the organization should know to whom they report, as well as the successive
management levels all the way to the top.

The chain of command illustrates the authority structure of the organization.

VI. Span of Management (also called Span of Control)

- is the number of employees reporting to a supervisor. This characteristic of structure

determines how closely a supervisor can monitor subordinates.

Traditional views of organization design recommend a span of management of about 7 to 10

subordinates per manager.

Generally, when supervisors must be closely involved with subordinates, the span should be small, and
when supervisors need little involvement with subordinates, it can be large.

Factors that are associated with large span of control (less supervisor involvement):

 Work performed by subordinates is stable and routine

 Subordinates perform similar work tasks
 Subordinates are concentrated in a single location
 Subordinates are highly trained and need little direction in performing tasks
 Rules and procedures defining task activities are available
 Support system and personnel are available for the manager
 Little time is required in non-supervisory activities, such as coordination with other
departments or planning
 Managers’ personal preferences and styles favor a large span
 The average span of control used is an organization determines whether the
structure is tall or flat.

Flat structure – has a wide span, is horizontally dispersed, and has a fewer
hierarchical levels

Tall structure- has a narrow span and more hierarchical levels.

VII. Parity of Authority and Responsibility

- With balanced responsibility and authority, the responsibilities of each individual in the
organization are clearly defined.
- Each individual is also given the authority necessary to meet these responsibilities and is held
accountable for meeting them.

Authority – is the formal and legitimate right of a manager to make decision, issue orders,
and allocate resources to achieve the organizationally desired outcomes. It is
distinguished by three characteristics:

 It is vested in organizational positions, not people

 It flows down the vertical hierarchy
 It is accepted by subordinates (argument: acceptance theory of
authority – a manager has authority only if subordinates choose to
 accept his or her commands. If the subordinates refuse to obey because
the order is outside their zone of acceptance, a manager’s authority
disappears.)

Delegation – is the process used to transfer authority and responsibilities to positions

below them in the hierarchy.

Most organizations today encourage managers to delegate authority to the lowest

possible level to provide maximum flexibility to meet customer needs and adapt to the
environment.

When to Delegate

Responsibility -is the duty to perform the tasks or activity as assigned.

Managers are assigned authority commensurate with their responsibilities.

Accountability - It is the mechanism through which authority and responsibility are brought
into alignment. It means that the people with authority and responsibility are
brought into alignment.

Line and Staff Authority – these are terms that reflect whether managers work in line
department or staff department in the organization’s structure.

Line departments – perform tasks that reflect the organization’s primary

goal and mission
 Staff departments -includes all those that provide specialized skills in
support of line departments. They have an advisory
relationship with line departments (marketing, labor
relations, research, accounting and human resource).

Line authority – means that people in the management positions have formal authority
to direct and control immediate subordinates.

Staff authority-is narrower and includes the right to advise, recommend and counsel in
the staff specialists’ area of expertise.

VIII. Departmentalization

-the basis for grouping positions into departments and departments into total organization.

Five Approaches to Structural Design

These approaches reflect different uses of the chain of command in departmentalization.

The basic difference among structures is the way in which employees are departmentalized and
to whom they report.

Traditional approaches – rely on the chain of command to define departmental

groupings and reporting relationships along with the hierarchy.

- Functional, divisional and matrix

Innovative approaches – have emerged to meet the changing organizational needs in a

turbulent global environment.

- Teams and virtual network

1. Vertical Functional Approach (also called a U-form <unitary structure>)

- Activities are grouped together by common function from the bottom to the top
organization. The functional structure groups positions into departments based on
similar skills expertise, work activities, and resources use.
- Departmentalization by organizational resources
- People, facilities, and other resources representing a common function are grouped
into a single department.
- Managers and employees are compatible because of similar training and expertise.
- Rules and procedure governs the duties and responsibilities of each employee.

2. Divisional Approach (also called M-form <multidivisional> or decentralized form)

- Departments are grouped together based on similar organizational output
 - Separate divisions can be organized with responsibility for individual product , services,
product groups, major projects or programs, divisions, businesses, or profit centers.
- (also called product structure, program structure, or self-contained unit structure). It
means diverse departments are brought together to produce a single organizational
output, whether it is product, a program, or service to a single customer.
- The chain of commands from each function converges lower in the hierarchy
- Divisions are created as self-contained units, with separate functional departments for
each division. Departments are duplicated across product line.

Geographic- or Customer – Based Divisions

An alternative for assigning divisional responsibility is to group company
activities by geographic region or customer group. The structure focuses company
activities on local market conditions.

3. Matrix Approach
- Combines aspects of both functional and divisional structure simultaneously.
- It is evolved as a way to improve horizontal coordination and information sharing
- It has a dual line of authority. The vertical structure provides traditional control within
functional departments, and the horizontal structure provides coordination across.
- The two lines of authority are geographic and product. The matrix provides excellent
coordination simultaneously for each geographic region and each product line.
- The success of the matrix structure depends on the abilities of the people in the key
matrix roles.
o Two-boss employees – those that report to two supervisors simultaneously.
They need excellent human skills with which to confront managers and resolve
conflicts.
o Matrix Boss – is the product or functional boss, who is responsible to the one
side of the matrix.
o Top Leader – oversees both the product and functional chains of command. His
responsibility is to maintain a power balance between the two sides of the
matrix.

4. Team-based Approach
- Most widespread trend in departmentalization
- Gives managers a way to delegate authority, push responsibility to lower levels and be
more flexible and responsive in a complex and competitive global environment.
o Cross-functional team – consist of employees from various functional
departments who are responsible to meet as a team and resolve mutual
problems. They can provide needed horizontal coordination to complement an
 existing divisional or functional structure. It is usually for change project such as
new products or service innovation.
o Permanent team – group of employees who are organized in a way similar to a
formal department. Emphasis is on horizontal communication and information
sharing because representatives from all functions are coordinating their work
and skills to complete a specific organizational task. Team members may share
or rotate team leadership.

5. Virtual Network Approach

- It extends the idea of horizontal coordination and collaboration beyond the boundaries
of the organization.
- The firm subcontracts many of its major functions to separate organizations and
coordinates their activities from a small organization at headquarters.
- Outsourcing –farming out certain activities, such as manufacturing or credit processing.
It allows organizations, small and large, to focus on their core strengths and products.
- This ‘personal outsourcing’ approach allows people to shift only tedious and time-
consuming tasks to be handled by the outsourcing partner while they focus on higher-
value work.
- The organization may be viewed as a central hub surrounded by a network of outside
specialists.
- Networked computer systems, collaborative software, and the Internet enable
organizations to exchange data and information so rapidly and smoothly that a loosely
connected network of suppliers, manufacturers, assemblers and distributors can look
and act as one seamless company.
- It is a continually evolving group of organizations that unite temporarily to exploit
specific opportunities or attain strategic advantages, and then disband when objectives
are met.

ORGANIZING FOR HORIZONTAL COORDINATION

The trend is towards breaking down barriers between departments, and many companies are
moving towards horizontal structures based on work processes rather than departmental functions.

As the organizations grow and evolve:

- New positions and departments are added to deal with factors in the external
environment or with strategic needs.
- Senior managers have to find a way to tie all these departments together

The organization needs systems to process information and enables communication among people in
the different departments and at different levels.

Coordination – managerial task of adjusting and synchronizing the diverse activities among
different individuals and departments.
 Collaboration – a joint effort between people from two or more departments to produce
outcomes that meet a common goal or shared purpose and that are typically greater than what
any of the individuals or departments could achieve working alone.

Although the vertical function structure is effective in stable environments, it does not provide the
horizontal coordination that is needed in times of rapid change. Innovations such as cross-functional
teams, tasks force, and project managers work within vertical structure but provide a means to increase
horizontal communication and cooperation.

From Vertical to Horizontal

Reengineering – refers to the radical redesign of business processes to achieve dramatic

improvements in cost, quality, service, and speed.

Task Forces – a temporary team or committee designed to solve a problem involving several
departments. Task force members represent their departments and share information that enables
coordination.

Cross-functional Teams – participants from several departments meet regularly to solve ongoing
problems of common interest. It works with continuing rather than temporary problems and might exist
for several years.

Project Managers (also called product manager, integrator, program manager or process owner)- is a
person responsible for coordinating the activities of several departments for the completion of a specific
project. Project managers are located outside the departments.

They set budget goals, marketing targets, and strategies and obtain cooperation from advertising,
production, and sales personnel needed for implementing product strategy.

They are included in the organization chart, drawn to one side of the chart to indicate authority over the
project, but not over the people assigned to it. The dashed lines to the project manager indicate
responsibility for coordination and communication with assigned tram members.

Relational Coordination – highest level of horizontal coordination.

It refers to frequent, timely, problem-solving communication carried out through relationships of shared
goals, shared knowledge, and mutual respect. In an organization with a high level of relational
coordination…coordination is carried out through a web of ongoing positive relationship rather than
because of formal coordination roles or mechanisms. Employees coordinate directly with each other
across the units. Rather than having people separated into cubicles, companies are using open offices
(huddle rooms) designed for conversation and impromptu problem solving.

Must have trainings for people in skills needed to interact with one another and resolve cross-
departmental conflicts based on shared goals. Rewards are based on team efforts and accomplishments.
Department Organizational Structures

A. Formal

Line Organization Line-and-staff Organization

Characteristics - Straight and direct line of - Employs the assistance of
responsibility and control from the technical specialists (staff
top management to the managers)
department head. - The functions of the staff
- The head of each department is managers are to provide
subject and responsible only to the assistance and advice, and to
individual directly above him. coordinate the functions on a
- Coordination among the various company-wide level.
departments is established and - Common for larger pharmacies
maintained by a supervisory with more complex and
executive next at the higher level. specialized services
- Usually found in smaller
pharmacies that employ fewer
people
Advantage - Centralization of authority - Expertise in some finer points of
regarding concerns is small. the business is provided
Problems are solved promptly -
- Easier to define responsibility,
maintain single accountability, and
achieve better control.
- Decreased overhead expenses
Disadvantage - The growth of the organization - Violation of the principle of the
increase the workload and unity of command
responsibilities of the department - Non-managerial employees may
head get conflicting directives
- May provide complicated
instructions
- Line executives are less likely to
acquire expert knowledge and gain
relevant experience in a particular
field

B. Informal
a. Organization by Time – base on working hours (Figure)
b. Organization by Number – To manage a large group of employees with a similar skill set
or specialization, members are grouped by numbers (Figure)
c. Organization by Function – applied when there is a considerable diversity in jobs and
skills required to accomplish a task satisfactorily.
 i. Professional functions – prescription dispensing, patient consultation, patient
drug record system, compounding, clinical pharmacy functions,
pharmacovigilance, and professional relations
ii. Merchandising functions – purchasing, inventory management, marketing
(promotions and sales), warehousing
iii. Financial functions – general accounting, budgeting, operational analysis and
control
iv. Personnel functions – hiring and recruitment, performance evaluation, training,
salary and benefits determination, plantilla review, job leveling, and other
employee relations including fringe benefits.

Results of Good Organization

 Well-established responsibilities and prevention of “buck-passing”

 Ease of communication among managers and staff
 Development of executive abilities
 Elimination of jurisdictional disputes between individuals
 Effective measurement of a person’s work performance based on her duties and responsibilities
 Equal distribution of work, functions, and/or personnel supervision.
 Expansion and contraction are permitted without seriously disorganizing the structure
 “Dead-end” jobs are pointed out
 Business can move toward the direction of the “ideal” organization in times of change
 Develops good coordination and higher morale of employees
 Clear and definite delineation of avenues of promotion
 Prevents duplication of work
 Adequate control of growth without overworking top executives
 Wage and salary administration is aided by job analysis and job description.