An organization is a host of complex of activities. The basic elements of the management process are
planning, organizing, staffing, directing, communication and control, natural groups; the homogeneity of a set
of activities (which mark them out from another set) within the set itself, the heterogeneity of one set from
another, and the specialization (different types of skill) that is attached to each set of activities, first and foremost
the logic of group formation. Second, and it occurs as a corollary, no single person (or even a single group)
could perform the different activities, the limitation would be physical, intellectual, of education, training and
skill. Third reason is efficiency and economy. The logic is the same as propounded by Adam Smith two
hundred years ago. He noted that ten men, who, with specialization (division of labour as he would say) could
produce (in those days) 4800 pins a day would do no more than 200, in the same period, if each one of the
team were to do all the operations (activities) in producing a pin- draw the wire, cut, flatten heads, sharpen
the points, solder and pack. The same principle applicable to the groupings of activities in the management
task.
GROUPING PRINCIPLES- CRITERIA
(i) Homogeneity of the function within the group
(ii) Heterogeneity of the intergroup functions
(iii) A project may be an activity group as it constitutes a natural unit of planning and control.
(iv) As a cost and effectiveness centre. A product, a region, an overseas market, the after-sales
service division, the R&D function can thus be an activity group.
(v) As a unit of contribution to the organizational goal. Any function or segment in the organization
which comprehends a sub-goal, leading to the enterprise goal-would logically form an activity
group.
(vi) Finally, a compulsive logic behind both grouping and departmentation of organization activities is
to restrict the span of control within manageable limits.
SPAN OF CONTROL
Both control and control span are part and parcel of organization hierarchies and the grouping
principle. The span of control is the range of direct reporting by ( a number of ) subordinate managers to a
single senior manager stationed above them in the management pyramid. We have seen already Lyndall
Urwick declaring (in his Ten Principles) the optimum number not to exceed five or six at least in the higher
echelons. Another writer (JC Worthy ) does not rule out a manager managing effectively twenty to thirty
subordinates.
In summing up, the following conclusions seem to emerge:
(i) The best span of control cannot follow a rigid arithmetical prescription
(ii) The most important consideration is ‘what span’ can be effectively managed by an executive.
(iii) The optimum span must be determined for each enterprise, taking into account all the variables
(iv) Levels being expensive, continuous attention must be paid against its proliferation
(v) Through planning standardization, objective task setting, effective communication system and well
defined policies, inter levels references should be combated, thereby enlarging the effective span
of control.
(vi) The span of control will differ from level to level; the optimum span should be determined
individually for the different levels of management.
Centralized and Decentralized Organization
Here we shall briefly note the logic and relevance of the process for organizational effectiveness. The
words centralization and decentralization are often used with reference to geographical location. If
geographical dispersal is a factor for autonomy of functioning and dispersal of authority, decentralized,
geographically dispersed units are possible. But the underlying principle of decentralization has to include some
or all of the following:
(1) dispersal of authority
(2) dispersal of autonomy
(3) dispersal of functions
(4) dispersal of results, and
(5) autonomy of cost-effectiveness.
Vertical Decentralization
Growth oriented activities sometimes move an enterprise toward vertical expansion. For example,
a major steel plant may find that it is tormented with acute, chronic power shortage; it may decide to set up
a power plant. The subsidiary functions- marketing, production, utilities, raw materials will be shown in the
organization chart as decentralized units or divisions.
Horizontal Decentralization
This occurs when several horizontal or collateral divisions are set up as a result of diversification. A
major tobacco company operating hotels; or a machine tool enterprise starting a watches division or electrical
bulbs are some examples of horizontal decentralization.