BUSINESS STUDIES
CLASS XII
UNIT 5: ORGANISING
CONCEPT OF ORGANISING
MEANING:
Organising is the process of identifying and grouping the work to be performed, defining and
delegating responsibility and authority, and establishing relationships for the purpose of enabling
people to work most effectively together in accomplishing objectives.
DEFINITION:
According to Theo Haimman, “Organising is the process of defining and grouping the activities of
the enterprise and establishing authority relationships among them.”
FEATURES OF ORGANISING
1.DIVISION OF WORK: Division of work is the basis of an organization because it facilitates to
divide the work of the organization into different departments.
2. COORDINATION: Despite the fact that different people in different departments do different
jobs, the aim of all the people is the same, i.e. attainment of organizational goals. Organizing
ensures coordination in all the jobs being performed in the organization.
3. PLURALITY OF PERSONS: In an organization, a group of people assemble to perform various
jobs to accomplish a common objective.
4. COMMON OBJECTIVES: The different departments of the organization perform different
functions with the aim of fulfilling common objectives.
5. ORGANISATION IS A MACHINE OF MANAGEMENT: Organisation is the machine which
enables successful accomplishment of objectives. If the division of work or the assignment of
duties will be incorrect, the organization will collapse.
IMPORTANCE OF ORGANISING
1. Benefits of specialization: Organising leads to a systematic allocation of jobs amongst the workforce.
This reduces the workload as well as enhances productivity because of the specific workers performing
a specific job on a regular basis.
Repetitive performance of a particular task allows a worker to gain experience in that area and leads to
specialization.
2.Clarity in working relationships: The establishment of working relationships clarifies lines of
communication and specifies who is to report to whom. This removes ambiguity in transfer of
information and instructions.
3. Optimum utilization of resources: It leads to the proper usage of all material, financial and human
resources. The proper assignment of jobs avoids overlapping of work and also makes possible the best
use of resources.
Avoidance of duplication of work helps in preventing confusion and minimising the wastage of
resources and efforts.
4.Adaptation to change: The process of organising allows a business enterprise to accommodate
changes in the business environment. It allows the organisation structure to be suitably modified and
the revision of interrelationships amongst managerial levels for smooth conduct of business
5. Effective administration: Organising provides a clear description of jobs and related duties. This
helps to avoid confusion and duplication. Clarity in working relationships enables proper execution of
work. Management of an enterprise thereby becomes easy and this brings effectiveness in
administration.
6. Development of personnel: Organising practices delegation of authority . Effective delegation
provides opportunities of taking decisions to the subordinates .By taking advantage of this situation,
they try to explore latest ideas and techniques and implement them. Consequently ,it helps them to
grow and develop
7. Expansion and growth :The process of organising allows employees the freedom to take decisions
which makes them ready to face new challenges.This situation not only helps in the development of
enterprise but also helps to increase the earning capacity of the enterprise.
Process of Organising
1.Identification and division of work: It involves identifying and dividing the work that has to be done in
accordance with previously determined plans. The work is divided into manageable activities so that
duplication can be avoided and the burden of work can be shared among the employees.
2.Departmentalisation: Once work has been divided into small and manageable activities then those activities
which are similar in nature are grouped together. Such sets facilitate specialisation. This grouping process is
called departmentalization. Departments can be created using several criteria as a basis.
3.Assignment of duties: At this stage ,the responsibility of each individual or post is decided.
While assigning duties,it is important to match the nature of the work and the capabilities of the person to
whom the work is given.
4. Establishing authority and reporting relationships: Merely allocating work is not enough. Each individual
should also know who he has to take orders from and to whom he is accountable. The establishment of such
clear relationships helps to create a hierarchical structure and helps in coordination amongst various
departments.
ORGANISATIONAL STRUCTURE
MEANING:
It is defined as the framework within which managerial and operating tasks are
performed. It specifies the relationships between people, work and resources.
TYPES:
It is of two types:
1. Functional Structure
2. Divisional Structure
Functional Structure
MEANING OF FUNCTIONAL STRUCTURE:
It refers to the division of the whole enterprise according to the major activities to be performed by it.
ADVANTAGES OF FUNCTIONAL STRUCTURE:
1.Benefits of Specialisation: The whole company is divided in to different departments and each department is
headed by expert manager. This results in more and better work being accomplished in much lesser time. Hence
the benefits of specialization becomes available.
2. coordination is established in the respective jobs .It makes coordination easier at the departmental level.
3.Managerial efficiency is increased: It helps in increasing managerial efficiency because of performing the same
work again and again .Further, this results in increased profit.
4.Minimal duplication of efforts :In the functional structure unnecessary duplication of efforts is eliminated.
5.Training is facilitated :It facilitates the training of personnel as the focus is only on a limited range of skills .For
example ,the employees of finance department are given training of financial issues.
6.Equal weightage of all functions : It ensures that all the functions and activities get equal weightage .
DISADVANTAGES OF FUNCTIONAL STRUCTURE:
1.Ignorance of organisational objectives : Each departmental head works to achieve departmental objectives.
Pursuing departmental interests at the cost of organisational interests can also hinder the interaction between
two or more departments. Hence, overall organisational objectives suffer.
2. Difficulty in interdepartmental coordination: It arises when the interests of two or more departments are not
compatible. For example, the sales department insisting on a customer friendly design may cause difficulties in
production. Such dissension can prove to be harmful in terms of fulfillment of organisational interest.
3. Conflicts of Interest: Every departmental head wants to become a functional empire. To satisfy their ego every
one demands maximum resources for their department .This situation leads to conflicts among the various
departmental heads.
4.Hurdle in complete Development : This system is a hurdle in the way of the complete development of the
employees. Each employee specializes only in a small part of the whole job.
SUITABILITY OF FUNCTIONAL STRUCTURE:
1. Where the size of the business unit is large;
2. Where specialization is required;
3. Where decentralization of authority is needed and ;
4. Where there is only one product that is sold.
Divisional Structure
MEANING OF DIVISIONAL STRUCTURE
It refers to the division of the enterprise on the basis of number of products manufactured by it.
In a divisional structure, the organisation structure comprises of separate business units or divisions.
Each unit has a divisional manager responsible for performance and who has authority over the unit.
Each division is multifunctional because within each division functions like production, marketing,
finance, purchase etc, are performed together to achieve a common goal.
In order words, within each division, the functional structure tends to be adopted.
Further, each division works as a profit center where the divisional head is responsible for the profit or loss of his
division. For example, a large company may have divisions like cosmetics, clothing etc
ADVANTAGES OF DIVISIONAL STRUCTURE:
1.Development of Divisional Heads: Product specialisation helps in the development of varied skills in a divisional
head and this prepares him for higher positions. This is because he gains experience in all functions related to a
particular product.
2.Divisional results can be assessed: Divisional heads are accountable for profits, as revenues and costs related to
different departments can be easily identified and assigned to them. This provides a proper basis for performance
measurement.
It also helps in fixation of responsibility in cases of poor performance of the division and appropriate remedial
action can be taken.
3. Quick Decision Making: It promotes flexibility and initiative because each division functions as an autonomous
unit which leads to faster decision making.
4.Easy Expansion: It facilitates expansion and growth as new divisions can be added without interrupting the
existing operations by merely adding another divisional head and staff for the new product line.
DISADVANTAGES OF DIVISIONAL STRUCTURE:
1.Conflicts between Divisional Heads: Conflict may arise among different divisions with reference to
allocation of funds and further a particular division may seek to maximise its profits at the cost of other
divisions.
2.Duplicity of Functions: The entire set of functions (e.g. Production , Marketing, Financial ,Research and
Development, Financial etc )is required for all divisions. It gives rise to duplicity of efforts among divisions.
Hence, resources are misused and cost of operations is unnecessarily increased.
3.Selfish Attitude: Every division tries to display better performance sometimes even at the cost of other
divisions. This shows their selfish attitude . Consequently,it hits the interest of the concern as a whole.
SUITABILITY OF DIVISIONAL STRUCTURE:
1. Divisional Organizational Structure is suitable where the number of main products is more than one.
2. It is also suitable where different manufacturing techniques and marketing methods are required; and
3. Also where the size of the concern is really large.
FORMAL ORGANISATION
It refers to the organisation structure which is designed by the management to accomplish a
particular task.
It specifies clearly the boundaries of authority and responsibility and there is a systematic
coordination among the various activities to achieve organisational goals.
CHARACTERISTICS/ FEATURES
❖ Specifies the relationships among various job positions and the nature of their relationship.
❖ It is a means to achieve the objectives specified in the plans.
❖ Efforts of various departments are coordinated, interlinked and integrated.
❖ It is deliberately designed by the top management to facilitate the smooth functioning of the
organisation.
❖ It places more emphasis on work to be performed than interpersonal relationships among
the employees.
ADVANTAGES OF FORMAL ORGANISATION
(a) It is easier to fix responsibility since mutual relationships are clearly defined.
(b) There is no ambiguity in the role that each member has to play as duties are specified. This also
helps in avoiding duplication of effort.
(c) Unity of command is maintained through an established chain of command.
(d) It leads to effective accomplishment of goals by providing a framework for the operations to be
performed and ensuring that each employee knows the role he has to play.
(e) It provides stability to the organisation. This is because behaviour of employees can be fairly
predicted since there are specific rules to guide them.
LIMITATIONS OF FORMAL ORGANISATION
(a) It may lead to procedural delays as the established chain of command has to be followed which
increases the time taken for decision making.
(b) Poor organisation practices may not provide adequate recognition to creative talent, since it
does not allow any deviations from rigidly laid down policies.
(c) It is difficult to understand all human relationships in an enterprise as it places more emphasis
on structure and work.
INFORMAL ORGANISATION
Interaction among people at work gives rise to a ‘network of social relationships among employees’ called the
informal organisation.
CHARACTERISTICS/FEATURES:
❖ It emerges from within the formal organisation when people interact beyond their officially defined roles.
❖ The standards of behaviour evolve from group norms rather than officially laid down rules and
regulations.
❖ Independent channels of communication without specified direction of flow of information are developed
by group members.
❖ It emerges spontaneously and is not deliberately created by the management.
❖ It has no definite structure or form because it is a complex network of social relationships among
members.
ADVANTAGES OF INFORMAL ORGANISATION
a) Prescribed lines of communication are not followed. Thus, it leads to faster spread of information as well
as quick feedback.
b) It helps to fulfill the social needs of the members and allows them to find like minded people. It
enhances their job satisfaction since it gives them a sense of belongingness in the organisation.
c) It contributes towards fulfillment of organisational objectives by compensating for inadequacies in the
formal organisation. For example, employees reactions towards plans and policies can be tested through
the informal network.
DISADVANTAGES OF INFORMAL ORGANISATION
a) When an informal organisation spreads rumours, it becomes a destructive force and goes against
the interest of the formal organisation.
b) The management may not be successful in implementing changes if the informal organisation
opposes them. Such resistance to change may delay or restrict growth.
c) It pressurises members to conform to group expectations. This can be harmful to the organisation if
the norms set by the group are against organisational interests.
DELEGATION OF AUTHORITY
Delegation
It refers to the downward transfer of authority from a superior to a subordinate.
Delegation of Authority :
It refers to the process of entrusting responsibility and authority, and creating
accountability of the person to whom the work or responsibility has been handed
over.
Definition of Delegation of Authority
“Delegation of authority merely means the granting of authority to subordinates to
operate within prescribed limits.’’
—Theo Haimman
1. Authority: It refers to the right of an individual to command his subordinates and to take action
within the scope of his position. The concept of authority arises from the established scalar chain
which links the various job positions and levels of an organisation.
Authority also refers to the right to take decisions inherent in a managerial position to tell people
what to do and expect them to do it. It flows from top to bottom, i.e. the superior has authority over
his subordinates.
Features
1.Authority can be assigned (delegated) to some other person.
2. Authority determines the superior subordinate relationship wherein the superior communicates his
decision to the subordinate, expecting compliance from him and the subordinate executes the
decision as per the guidelines of the superior
3. It must be noted that authority is restricted by laws and the rules and regulation of the
organisation, which limit its scope.
2. Responsibility: It is the obligation of a subordinate to properly perform the assigned duty. It arises
from a superior– subordinate relationship because the subordinate is bound to perform the duty
assigned to him by his superior.
Thus, responsibility flows upwards, i.e., a subordinate will always be responsible to his superior.
For effective delegation the authority granted must be commensurate with the assigned
responsibility. If authority granted is more than responsibility, it may lead to misuse of authority, and
if responsibility assigned is more than authority it may make a person ineffective.
Features:
1.It gets originated because of superior –subordinate relationship;
2.Responsibility can be assigned to some other person.
3.It comes in to play only after the job has been assigned.
3. Accountability: It implies being answerable for the final outcome. Once authority has been
delegated and responsibility accepted, one cannot deny accountability.
It cannot be delegated and flows upwards, i.e., a subordinate will be accountable to a superior
for satisfactory performance of work.
It can also be stated that while authority is delegated, responsibility is assumed, accountability
is imposed.
Features:
1. Accountability cannot be delegated to some other person.
1. Its base is Superior –subordinate relationship
3. The subordinate will be expected to explain the consequences of his actions or omissions.
IMPORTANCE OF DELEGATION
(i). Effective management: By empowering the employees, the managers are able to function more efficiently as they
get more time to concentrate on important matters. Freedom from doing routine work provides them with
opportunities to excel in new areas.
(ii). Employee development: It helps employees get more opportunities to utilize their talent , by providing them with
the chance to use their skills, gain experience and develop themselves for higher positions.
(iii). Motivation of employees : When a superior entrusts a subordinate with a task, it involves trust on the superior’s
part and commitment on the part of the subordinate. He feels encouraged and tries to improve his performance
further.
(iv). Facilitation of growth: It helps in the expansion of an organization by providing a ready workforce to take up
leading positions in new ventures.
(v). Basis of management hierarchy: It is the degree and flow of authority which determines who has to report to
whom. The extent of delegated authority also decides the power that each job position enjoys in the organization.
(vi). Better coordination:The elements of delegation, namely authority, responsibility and accountability help to define
the powers, duties and answerability related to the various positions in an organization. This helps to avoid overlapping
of duties and duplication of effort as it gives a clear picture of the work being done at various levels. Thereby helps in
DECENTRALISATION
It refers to delegation of authority throughout all the levels of the organisation.
It explains the manner in which decision making responsibilities are divided among hierarchical levels.
The organisations in which decision making authority lies with the top management are termed as centralised
organisations whereas those in which such authority is shared with lower levels are decentralised
organisations.
Definition of Decentralisation: According to LOUIS ALLEN , ‘Decentralisation refers to systematic effort to
delegate to the lowest level all authority except that which can be exercised at central points.’
Features:
1. It is an expanded version of delegation of authority.
2. It reduces the workload of senior officers
3. It increases the significance of the role of subordinates.
IMPORTANCE OF DECENTRALISATION:
1. Develops initiative among subordinates: It helps to promote self-reliance and confidence
amongst the subordinates. This is because when lower managerial levels are given freedom to
take their own decisions they learn to depend on their own judgment.
1. Develops managerial talent for the future: Due to Decentralisation the lower level managers
will get opportunities to take decisions , knowledge and experience at all levels, which increases
their talent to bear extra responsibility in future.
1. Quick decision making: The burden of all managerial decision is no more confined to some
limited people but is distributed among many people. This not only leads to quick decision
making but asp results in better decision making.
1. Relief to top management: Under decentralisation, authority related to take monotonous
decisions is delegated to the subordinates. As a result ,top management saves their valuable
time which is then utilised to brighten the future of the organizati
5. Facilitates growth: Decentralisation provides liberty to the subordinates to take
decisions which inculcates a sense of responsibility among the subordinates. Thus ,they
make effort to show better results thereby leading to the development and growth of
the business.
6. Better control: It facilitates better control in the organisations by making it possible to
evaluate the work performance at all levels and fixing possible accountability.
As a conclusion, it must be noted that in spite of its benefits decentralisation should be
applied with caution as it can lead to organisational disintegration if the departments
start to operate on their own guidelines which may be contrary to the interest of the
organisation. Decentralisation must always be balanced with centralisation in areas of
major policy decisions.
MIND
MAP
