P.P.

SAVANI CHAITANYA VIDYA SANKUL, CBSE

Ch. 5 Organising (Notes)
STD: -12th SUBJECT: - BUSINESS STUDIES
CONCEPT:
The organising function leads to the creation of an organisational structure which includes the designing of
roles to be filled by suitably skilled people and defining the inter relationship between these roles so that
ambiguity in performance of duties can be eliminated.
It clarifies of extent of authority, as well as responsibility for results and logical grouping of activities.
Meaning:
The process that initiates implementation of plans by clarifying jobs and working relationships and effectively
deploying resources for attainment of identified and desired results.
Organising is the process of defining and grouping the activities of the enterprise and establishing authority
relationships among them.
Steps in the Process of Organising
Organising involves a series of steps that need to be taken in order to achieve the desired goal. The following
steps emerge in the process of organising:
(i) Identification and division of work: The first step is 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.
(ii) Departmentalisation:
- Similar activities in are grouped together. Such sets facilitate specialisation. This grouping process is
called departmentalisation.
- Departments can be created using several criteria as a basis. Examples of some of the most popularly
used basis are
a. Territory (north, south, west, etc.) and
b. Products (appliances, clothes, cosmetics etc).
(iii) Assignment of duties:
- Once departments have been formed, each of them is placed under the charge of an individual. Jobs
are then allocated to the members of each department in accordance to their skills and
competencies.
- It is essential for effective performance that a proper match is made between the nature of a job and
the ability of an individual. The work must be assigned to those who are best fitted to perform it well.
(iv) 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 hierarchal structure and helps in
coordination amongst various departments.
Importance of Organising
The significance of the organizing function mainly arises from the fact that it helps in the survival and growth
of an enterprise and equips it to meet various challenges. The following points highlight the crucial role that
organising plays in any business enterprise:
(i) Benefits of specialisation: Organising leads to a systematic allocation of jobs amongst the work force.
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 specialisation.
 (ii) 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. It helps in creating a hierarchical order thereby enabling the fixation of
responsibility and specification of the extent of authority to be exercised by an individual.
(iii) Optimum utilisation of resources: Organising 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.
(iv) 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 inter-relationships amongst managerial levels to pave the way for a smooth transition.
It also provides much needed stability to the enterprise as it can then continue to survive and grow
inspite of changes.
(v) 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.
(vi) Development of personnel: Effective delegation allows the managers to reduce their workload by
assigning routine jobs to their subordinates. Allows the manager to develop new methods and ways
of performing tasks. It gives them the time to explore areas for growth and the opportunity to
innovate thereby strengthening the company’s competitive position. Delegation also develops in the
subordinate the ability to deal effectively with challenges and helps them to realise their full
potential.
(vii) Expansion and growth: It allows a business enterprise to add more job positions, departments and
even diversify their product lines. New geographical territories can be added to current areas of
operation and this will help to increase customer base, sales and profit. Thus,
Organizing is a process by which
c. The manager brings order out of chaos,
d. Removes conflict among people over work or responsibility sharing and
e. Creates an environment suitable for teamwork.
Organisation Structure
The need for an adequate organisation structure is felt by an enterprise whenever it grows in size or
complexity. for an organisation to function smoothly and face environmental changes, it becomes necessary
to pay attention to its structure.
“Organisation structure is an indispensable means; and the wrong structure will seriously impair business
performance and even destroy it.”
Span of management refers to the number of subordinates that can be effectively managed by a superior.
This determines the levels of management in the structure. A proper organisation structure is essential to
ensure a smooth flow of communication and better control over the operations of a business enterprise.
Travel agency

Types of Organisation Structures

The organizational structure can be classified under two categories which are as follows:
A. Functional structure and
B. Divisional structure

Functional structure
Grouping of jobs of similar nature under functional and organizing these major functions as separate
departments creates a functional structure. All departments report to a coordinating head.

These departments may be further divided into sections. Thus, a functional structure is an organisational
design that groups similar or related jobs together.
Advantages:
a. Leads to occupational specialisation This promotes efficiency in utilisation of manpower as
employees perform similar tasks within a department and are able to improve performance.
b. It promotes control and coordination within a department because of similarity in the tasks being
performed.
c. It helps in increasing managerial and operational efficiency and this results in increased profit.
d. No duplication of effort which results in economies of scale and this lowers cost.
e. It makes training of employees easier as the focus is only on a limited range of skills.
f. It ensures that different functions get due attention.
Disadvantages:
a. A functional structure places less emphasis on overall enterprise objectives. In Such practices
department is overemphasised..
b. It may lead to problems in coordination as information has to be exchanged across functionally
differentiated departments.
c. A conflict of interests may arise 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.
d. It may lead to inflexibility as people with same skills and knowledge base may develop a narrow.
Functional heads do not get training for top management positions because they are unable to gather
experience in diverse areas.
Suitability:
It is most suitable when the size of the organisation is large, has a diversified activities and operations require
a high degree of specialisation.
Divisional Structure
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. 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:
a. Product specialisation helps in the development of varied skills in a divisional head and this prepares
him for higher positions.
b. Divisional heads are accountable for profits, as revenues and costs related to departments. This
provides a proper basis for performance measurement. It also helps in fixation of responsibility.
c. It promotes flexibility and initiative because each division functions as an autonomous unit which
leads to faster decision making.
d. It facilitates expansion and growth as new divisions can be added without interrupting the existing
operations.
Disadvantages:
a. Conflict may arise among different divisions with reference to allocation of funds and maximizing
profits at the cost of other divisions.
b. It may lead to increase in costs due to duplication of activities across products. Which increases
expenditure.
c. It provides managers with the authority to supervise all activities, so chance of misuse of power
increases
Suitability: Divisional structure is suitable for those business enterprises where a large variety of products are
manufactured using different productive resources.
When an organisation grows and needs to
f. Add more employees,
g. Create more departments and
h. Introduce new levels of management,
it will decide to adopt a divisional structure.

Formal and Informal Organisation

Formal organisation refers to the organization structure which is designed by the management to accomplish
a particular task. It specifies clearly the boundaries of authority and responsibility.
The structure in a formal organization can be functional or divisional.
Features :
a. It specifies the relationships among various job positions. This clarifies who has to report to whom.
b. It is a means to achieve the objectives, as it lays down rules and procedures essential for their
achievement.
c. Efforts of various departments are coordinated, interlinked and integrated through the formal
organisation.
d. It is deliberately designed by the top management to facilitate the smooth functioning of the
organisation.
e. It places more emphasis on work to be performed .
Advantages:
 a. It is easier to fix responsibility.
b. There is no confusion about work. 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 and ensuring that each
employee knows the role he has to play.
e. It provides stability to the organisation.
Limitations:
a. The formal communication may lead to procedural delays
b. Poor organisation practices may not provide adequate recognition to creative talent, since it does
not allow any deviations from rigidly laid down polices.
c. The formal organization does not provide a complete picture of how an organisation works.

Informal Organisation
Interaction among people at work gives rise to a ‘network of social relationships among employees’ called
the informal organisation. Informal organisation emerges from within the formal organisation
Examples of such groups who have Common interest
i. Those who take part in cricket matches on Sundays,
j. Meet in the cafeteria for coffee
k. Interested in dramatics, etc.
Informal organisation has no written rules, is fluid in form and scope and does not have fixed lines of
communication.
Features:
a. An informal organization originates from within the formal organization as a result of personal
interaction among employees.
b. The standards of behavior evolve from group norms
c. Independent channels of communication without specified direction of flow of information are
developed by group members.
d. It emerges spontaneously and is not deliberately created by the management.
e. It has no definite strucure or form.
Advantages:
a. Prescribed lines of communication are not followed. Thus, 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 likeminded people. This
enhances their job satisfaction since it gives them a sense of belongingness in the organisation.
c. Compensating for inadequacies in the formal organisation. For example, employees reactions towards
plans and policies can be tested through the informal network.
Disadvantages:
a. When an informal organization 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 organization opposes
them.
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. Informal organisation cannot be
altogether eliminated.
Such groups can also provide useful communication channels. Instead of confronting them, the
management should skillfully take advantage of both the formal and informal organization so that
work continues smoothly.
Delegation
Delegation refers to the downward transfer of authority from a superior to a subordinate.
l. it enables a manager to use his time on high priority activities.
m. It also satisfies the subordinate’s need for recognition and provides them with opportunities to develop
and exercise initiative.
n. delegation does not mean abdication. The manager shall still be accountable to the same extent as
before delegation.
Elements of Delegation
According to Louis Allen, delegation is the entrustment of responsibility and authority to another and the
creation of accountability for performance. A detailed analysis of Louis Allen’s definition brings to light the
following essential elements of delegation:
1. Authority
2. Responsibility
3. Accountability
(i) Authority: Authority refers to the right of an individual to command his subordinates and to take action
within the scope of his position.
- It is highest at the top management levels and reduces successively.
- Authority flows from top to bottom
- Authority determines the superior subordinate relationship
- The extent to which a superior can exact compliance also depends on the personality of the superior.
- It must be noted that authority is restricted by laws and the rules and regulation of the organisation,
which limit its scope.
(ii) Responsibility: Responsibility is the obligation of a subor-dinate to properly perform the assigned duty.
- It arises from a superior– subordinate relationship.
- Responsibilityflows upwards,
- Responsibility for a job he must also be given the degree of authority necessary to carry it out.
- 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.
(iii) Accountability: Accountability implies being answerable for the final outcome.
- It cannot be delegated and flows upwards,
- AUTHORITY IS DELEGATED,
- RESPONSIBILITY IS ASSUMED,
- ACCOUNTABILITY IS IMPOSED.

- RESPONSIBILITY is derived from AUTHORITY and

- ACCOUNTABILITY is derived from RESPONSIBILITY.

Importance of Delegation
Effective delegation leads to the following benefits:
(i) Effective management:
- Managers get more time to concentrate on important matters.
- Provides them with opportunities to excel in new areas.
(ii) Employee development:
- Delegation empowers the employees by providing them with the chance to use their skills, gain
experience and develop themselves for higher positions.
- Improve their career prospects.
(iii) Motivation of employees:
- Delegation has psychological benefits.
- Involves trust on the superior’s part and commitment on the part of the subordinate.
 - Responsibility for work builds the self-esteem of an employee and improves his confidence.
(iv) Facilitation of growth:
- Providing a ready workforce to take up leading positions in new ventures.
- Trained and experienced employees are able to play significant roles in the launch of new projects
(v) Basis of management hierarchy:
- Delegation of authority establishes superior-subordinate relationships.
- It is the basis of hierarchy of management
- The extent of delegated authority also decides the power that each job position enjoys in the
organisation.
(vi) Better coordination:
- The elements of delegation, help to define the powers, duties and answerability related to the various
positions in an organisation.
- This helps to avoid overlapping of duties and duplication of effort as it gives a clear picture of the work
beingdone at various levels.
- Help effective coordination amongst the departments, levels and functions of management.
- Delegation is a key element in effective organising.

Decentralisation
Those organizations in which decision making authority lies with the top management are termed as
centralised organizations whereas
Those in which such authority is shared with lower levels are decentralised organisations.
Decentralisation explains the manner in which decision making responsibilities are divided among
hierarchical levels.
- Decentralisation refers to delegation of authority throughout all the levels of the organisation.
- Decision making authority is placed nearest to the points of action.
- In other words decision making authority is pushed down the chain of command.
Centralisation and Decentralisation
- An organisation is centralized when decision-making authority is retained by higher management levels
whereas it is decentralized when such authority is delegated.
- Complete centralisation would imply concentration of all decision making functions at the TOP Mgt.
yhen NO need management hierarchy.
- On the other hand, complete decentralisation would imply the delegation of all decision making
functions to the lower level, then NO need for higher managerial positions.
- Both the scenarios are unrealistic.
- An organisation can never be completely centralised or decentralised. there is a need for a balance
between these co-existing forces. Thus, it can be said that every organisation will be characterized by
both centralisation and decentralisation.
- Everything which goes to increase the importance of a subordinate’srole is decentralisation,
everything that goes to reduce it is centralisation.
Importance
Decentralisation is a fundamental step and its importance can be understood from the following points:
(i) Develops initiative among subordinates:
- Decentralisation helps to promote self-reliance and confidence amongst the subordinates.
- It also keeps them in a state wherein they are constantly challenged and have to develop solutions for
the various problems they encounter.
- A decentralization policy helps to identify those executives who have the necessary potential to
become dynamic leaders.
(ii) Develops managerial talent for the future:
 - Decentralisation gives a chance to prove their abilities and creates a reservoir of qualified manpower
who can be considered to fill up more challenging positions through promotions.
- It also helps to identify those who may not be successful in assuming greater responsibility.
(iii) Quick decision making:
- Decisions are taken at levels which are nearest to the points of action and there is no requirement for
approval from many levels, the process is much faster.
- There are also less chances of information getting distorted because it doesn’t have to go through long
channels.
(iv) Relief to top management:
- Decentralisation diminishes the amount of direct supervision exercised by a superior over the
activities of a subordinate
- Decentralisation also leaves the top management with more time which they can devote to important
policy decisions
- Personal supervision is generally replaced by other forms of control such as return on investment etc.
- Decentralization is greatest when checking required on decisions taken by lower levels of management
is least.
(v) Facilitates growth:
- Decentralisation awards greater autonomy to the lower levels of management as well as divisional or
departmental heads.
- This allows them to function in a best manner, which increase the competition amongst the
departments.
- The productivity levels increase and the organisation is able to generate more returns which can be
used for expansion purposes.
(vi) Better control:
- Decentralisation makes it possible to evaluate performance at each level and the departments can be
individually held accountable for their results.
- The extent of achievement of organisational objectives as well as the contribution of each department
in meeting the overall objectives can be ascertained.
- Feedback from all levels helps to analyse variances and improve operations.
- In decentralisation, one of the challenges is the accountability of performance.
- In response to this challenge, better control systems are being evolved such as the balance score card
and management information system.
- Decentralisation compels the management to innovative performance measurement systems.

As a conclusion,
- it must be noted that in spite of its benefits decentralisation should be applied with caution
- Decentralisation must always be balanced with centralisation in areas of major policy decisions.