Organizational Management Defined

You can think of an organization as an entity consisting of members and resources

that are directed towards the achievement of a goal. Organizational management is
the process of structuring, planning and directing the resources and members of the
organization to achieve its goal. In the world of business, the end goal is pretty
much the same - to make a profit for the organization's owners. Let's take a look
at some important principles of organizational management.

Structuring the Organization

Just like a house, an organization needs a solid foundation upon which to build. An
organization's structure helps provide that foundation. Organizational structure is
the manner in which the parts of an organization interact with each other to
achieve the organization's goal. It determines lines of authority, communication,
duties and responsibility among and between each part of the organization and its
members. Let's take a quick look at some of the more common organizational
structures.

Organizations can be designed with a tight vertical, hierarchical structure or a

flatter, horizontal structure. Think about an organization as a pyramid. Each layer
of the pyramid is a management level. In large organizations, there may be many
layers of management.

For example, a large corporation has a board of directors at the apex of the
pyramid who direct the president of the company. The president may direct the
activities of four divisional vice presidents who each direct the activities of
several department managers. The department managers lead several team supervisors
who manage the primary workforce of the company. A horizontal organization, on the
other hand, has just a few layers of management, perhaps only one.

Structuring an organization also involves grouping organizational activities in a

way that will effectively allow it to achieve organizational goals. This grouping
of activities is often referred to as departmentalization. You have several
different methods of departmentalization. If taking a traditional approach, you can
organize by function, geography, product or market. A matrix approach uses a
combination of different organizational structures, such as functional and product.

Specialization & Division of Labor

Specialization and division of labor is another important principle of
organizational management. We've already touched upon this concept a bit in our
discussion of departmentalization. Specialization is simply assignment of tasks
within an organization to specific people so they become specialized and efficient
in the task. For example, if you own a bakery, you may have chefs that specialize
in cakes, others that specialize in pies and others who specialize in pastries.

Division of labor, on the other hand, is taking advantage of specialization of

labor through organization and cooperation. All the specialists cooperate to
achieve a task that might not otherwise be achievable by contributing their
specialty to a part of the overall task. For example, a car company will have
engineers that design a car, production workers that build it, and marketing and
sales people that make sales.

Authority & Delegation

The activities of an organization need to be directed and coordinated just like a
conductor coordinates an orchestra performing a symphony. Authority in an
organization can be either centralized or decentralized. Centralized authority is
pretty much 'top-down'; most decisions and orders come from one, centralized
source, which is usually at the top of the organizational hierarchy. Information
flows up the organization to the top where it is analyzed and synthesized to make
decisions. When a decision is made, the orders flow down the organization to
accomplish the specified tasks. The military is an excellent example.