Even though we may live in a rapidly changing world, the core principles of building a solid business foundation are as old as time. So, it’s essential to implement the 17 principles of organizing if you want a thriving business and to leave an enduring legacy.
Table of contents
- 17 Principles Of Organizing Highly Efficient Businesses
- 1. Identifying A Common Goal
- 2. Coordinating Departments
- 3. Division Of Labor And Specialization
- 4. Delegation Of Authority
- 5. Leadership Accountability
- 6. Functional Classification
- 7. Span Of Management/Control
- 8. Chain Of Command/Scalar Chain
- 9. Continuousness
- 10. Agility Principle
- 11. Unity Of Command
- 12. Level Of Authority
- 13. Resource Optimization
- 14. The Simplicity Principle
- 15. Performance Appraisals
- 16. Balanced Workload
- 17. The Exception Principle
- What Is Organizing?
- Features Of Organizing
- Why Organizing Is Important?
- Organizing Examples
- Wrap Up
While organizing a business may seem straightforward, that is sadly not the case, as many pitfalls can shatter your plans. So, if you want to know what the 17 principles of organizing are and why they are so vital, with insightful business examples to pave your way to success – read on!
17 Principles Of Organizing Highly Efficient Businesses
Even though it is true that world-class ventures operate differently, all thriving businesses implement the following 17 organizing principles to create structured working environments with clearly defined roles, responsibilities, and levels of authority.
1. Identifying A Common Goal
Establishing an enterprise-wide common goal or company objective is essential. It is a unifying aspiration, so everyone works towards achieving the same goal.
Without a clear common goal, departments within an organization may work in silos, creating their own business objectives, thus producing deep divisions and conflict between various competing departments.
2. Coordinating Departments
Organizing is essential to create a seamless workflow between various departments where all the stakeholders work harmoniously.
It allows senior managers to oversee more junior-level managers in performing their duties to ensure that there is no overlap and that all the departments work together as one efficient unit.
3. Division Of Labor And Specialization
According to this organizational principle, work deliverables are divided and assigned to employees based on their tertiary qualifications, skills, and experience. This division of labor leads to specialization in a particular field.
The theory is that employees are overall more efficient if they are permitted to specialize or to only complete specific tasks in their department. For example, when specialization is widespread, an assembly line factory worker may only manage a particular machine.
While there are several advantages to specialization, it does make employees feel bored and frustrated due to the repetitive mindlessness of their daily tasks. So, most leading organizations are slowly moving away from this organizational principle.
4. Delegation Of Authority
One of the cornerstones of outstanding management skills is the delegation of authority to more junior-level employees.
Delegating authority empowers employees, increases overall job satisfaction, and improves job performance. Employees feel much more valued and are more likely to contribute innovative ideas to the company’s betterment.
Managers who wisely delegate authority to their employees use their resources better. As a result, they can focus on other business-critical tasks.
5. Leadership Accountability
Authority without accountability is not an effective organizational strategy, so those with authority must take ownership of their successes and failures.
Employees with authority are accountable for their decisions when reporting to their superiors and must take responsibility for their actions.
6. Functional Classification
According to this organizing principle, all organizational functions should be clearly defined.
All managers and subordinates should clearly know their key deliverables and areas of responsibility, including their level of authority in relation to their co-workers, and superiors.
Organizations that take the time to clearly define employee roles, responsibilities, and the chain of command are far more efficient, as all the stakeholders know what is expected from them.
E.g., the core functions of manufacturing, finance, sales, and marketing departments, including their areas of responsibility and authority, should be well-defined to increase efficiencies.
7. Span Of Management/Control
This core principle signifies the number of employees a manager can efficiently oversee or manage independently.
According to the span of management principle, a manager should feel comfortable managing either of the following:
- A wide span of management – where a manager oversees a large group of employees.
- Narrow span of management – a manager only supervises a limited number of employees.
8. Chain Of Command/Scalar Chain
A “scalar chain,” or chain of command as it is commonly known, refers to the leader of an organization’s authority flowing from the top to the bottom ranks.
It facilitates a more efficient workflow throughout an organization, minimizes resource wastages, aids communication, and ensures no overlap in work activities.
A chain of command also clarifies management’s level of authority. It empowers managers to make decisions on behalf of a leader, so it aids efficiency.
Organizing is an infinite process that does not conclude when a specific task or project is completed.
Managers must consistently strive for excellence, identify new business objectives, devise an action plan, and define new roles and levels of authority to drive results, improve efficiencies, and increase revenue.
10. Agility Principle
Organizational systems should be agile enough to adapt to the increasing demands of a rapidly changing world that requires more flexibility.
Thus, organizations should be agile enough to change their strategies, programs, and policies if external factors require a dramatic change quickly and efficiently in operations.
11. Unity Of Command
The unity of command principle refers to the relationship between a subordinate and their boss.
The fact that an employee is only answerable to one leader, and not to several managers, aids communication between both parties and ensures that work-related issues are dealt with promptly, and efficiently.
12. Level Of Authority
A manager’s level of authority is a formal mandate to make decisions on behalf of a going entity, assign resources, and issue orders to meet business objectives. And a leader’s level of authority is clearly outlined in their job descriptions.
Here is a brief overview of the various levels of authority:
- Line management authority affords a manager with the formal mandate to oversee their team’s work and make certain decisions without consulting their superiors.
- Staff authority is a more limited level of authority that grants a line manager’s assistant the mandate to make low-level operational decisions on their behalf.
- Functional authority is granted to an employee or department to do specific tasks on behalf of another department. It grants staff managers a functional authority mandate to issue orders in their department.
13. Resource Optimization
Having adequate resources to meet operational requirements and using them efficiently without any wastage is essential to any thriving concern.
Resources like employees, technology, information, machinery, and financial capital need to be readily available and expertly managed to ensure long-term financial sustainability.
14. The Simplicity Principle
In stark contrast to a complex, confusing organizational structure, the simple principle means that every employee, role, and level of authority is easy to understand.
Simple organizational structures are far more efficient as there are no overlapping work activities, and all the stakeholders clearly understand what is expected from them.
15. Performance Appraisals
One of the core principles of highly efficient organizations is their ability to manage their employees’ performance.
Performance appraisal tools are helpful to measure whether an employee is meeting expectations in line with their job requirements.
Quarterly employee performance appraisals highlight potential “red flags” that must be addressed timeously. And it is a means of recognizing the efforts of high-performing employees who exceed expectations.
16. Balanced Workload
This important organizational principle means that tasks should be assigned in a balanced manner. All employees are given the right amount of work, and no one is burdened with an overwhelming workload.
This balanced workload means that employees can perform optimally without running the risk of burnout due to excessively long work hours.
17. The Exception Principle
The exception principle implies that top management should predominantly focus on high-level matters like business strategies and policy development and leave the micro-management of rudimentary tasks to lower-level managers.
Senior management should only, in exceptional circumstances, intercede if lower-level work issues, and only when their assistance is requested.
The exception principle is vital as it prevents top management from getting bogged down by routine tasks that junior-level managers can handle.
What Is Organizing?
Organizing which follows the planning phase is one of the most critical functions of management. It synchronizes the management of all resources to create an efficient, financially viable going concern.
Organizing is a vital component of efficiently managing an organization. It defines an employee’s role, responsibilities, and level of authority to meet enterprise-wide objectives and get results.
Features Of Organizing
The main features of organizing are typically comprised of the following main steps:
- Identifying work activities like improving records management systems, preparing for an annual audit, or finetuning quality control needs to be identified before a plan of action can be devised.
- Departmentalizing work activities or grouping similar work activities into the same unit is known as departmentalizing activities.
- Authority levels are classified so that middle and lower-level managers are empowered with the right level of authority to oversee work activities that fall within their department, or unit.
- An inter-departmental workflow structure is created to foster efficient operations, where all the role players know their responsibilities and level of authority.
Why Organizing Is Important?
Organizing resources is the core foundation of all highly efficient and successful ventures. Although organizing has several other significant benefits, here is a brief outline on the importance of organizing in any environment.
Organizing is essential to foster better communication between various departments, as it unites disparate roles within an organization through a formal structural working relationship. And it outlines the multiple channels of communication between different departments.
Creates Efficient Administration
Having an organized business structure means that job specifications are clearly outlined, and everyone within an organization knows what their duties entail, including their level of specialization.
Diversification And Expansion
Companies that are efficiently organized, with a clearly defined structure, and employees who know what their duties entail and what they need to do to accomplish their aims are in a prime position to grow their businesses.
Diversification and expansion are only possible when a company has a solid foundation built on organized processes that optimize efficiencies and increase revenue.
An organizational structure with comprehensive job descriptions for all employees that outline their level of authority and key deliverables makes employees feel more secure.
Employees who know what their superiors expect from them are less anxious than those who work for organizations where expectations must be clarified.
Managers who work for companies that are well organized and provide enough autonomy to lead a team are in a better position to harness their skills.
Leaders can focus on their own professional development as organized structures foster growth and innovation which ultimately benefits all concerned.
Clarity And Transparency
Working in an organized environment means no ambiguity about an employee’s role and level of authority.
And because formal job descriptions outline every employee’s role, it creates transparency and greater clarity throughout an organization.
The efficient management of any organization entails planning, organizing, leading, including controlling (P.O.L.C.) functions. Thus, organizing does not occur in a vacuum, as its part of a robust management framework.
There are predominantly two types of organizational structures, namely hierarchical or tall, including flat organizational management structures.
And a company’s organizational composition affects its management structure. Flat structures are typically decentralized, while tall, structured organizations are primarily centralized.
Centralized hierarchical (tall) organizational structures are more traditional, with senior management making all the most crucial business decisions. Information trickles down to the middle and lower management levels, with rigid policies and procedures in place.
Decentralized flat organizational structures are far less authoritarian. While the executive management team makes strategic decisions, middle managers can implement the business strategy with some leeway. Information flows freely from lower levels to senior management.
So, these companies are far more agile and innovative than traditional hierarchical organizations.
The Planning Phase
As previously mentioned, the two main organizational structures function differently. In a hierarchically structured organization, the executive management team oversees the business planning phase based on financial reports, industry trends, and, if applicable internal manufacturing statistics.
While in flat organizational structured companies, the executive management team consults with departmental line managers in the planning phase.
Although the company’s C.E.O. may, depending on their leadership style, also consult with managers in the lower echelons.
However, flat organizational structures or more inclined to plan activities based on the input of line managers. They are more agile and more ready to promptly adapt to industry changes than hierarchical companies.
Organizing New Operational Business Procedures
The second primary purpose of any management role is to organize and implement planned decisions.
In hierarchical organizations, the executive management team predetermines how their decisions should be operationalized and create standard operating procedures to implement their decisions. So, department heads must follow these procedures.
However, in companies with a flat structure, department heads are given much more leeway to implement new procedures to support their company’s new operating model.
And lower-level managers are far more empowered to use their hands-on experience as they don’t have to consult with the executive management team.
While a manager’s level of autonomy may differ, they are still required to be skilled leaders that command respect.
In hierarchically structured organizations, the executive management team makes most of the decisions, and managers have little decision-making authority. They are expected to follow company policies and execute new procedures in line with expectations.
In flat-structured organizations, leaders are more entrepreneurial. Even though they are expected to operationalize new business strategies according to the deadline and budget constraints, they have much more freedom to use their discretion.
The Control Phase
The fourth role of any manager is to control business procedures. However, the execution of that crucial function differs depending on the company’s structure.
In centralized, hierarchical companies, managers only control their teams. They are subject to control from their superiors like any bureaucratic organization.
While in decentralized, flat organizational structures, control is much more “democratic” at a localized level, and teams are more focused on collaboration and cooperation.
Implementing the 17 principles of organizing businesses is essential to creating a solid foundation fostering growth, clarity, and an enduring legacy of excellence.
While it is true that hierarchical and flat-structured organizations operate differently, all thriving concerns adhere to the tenants of these organizational best practices.
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