NCERT Business studies class 12 Organizing chapter 5| CBSE/PUC Class 12

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Chapter 5
Organizing

Explain the concept of organizing as a structure and as a process.

Organising implies a process which coordinates human efforts, assembles resources and integrates both into a unified whole to be utilised for achieving specified objectives. The organising function leads to the creation of an organisational structure which includes how the roles to be filled by suitably skilled people has to be designed and defining the inter relationship between these roles so that uncertainty in performance of duties can be eliminated

Organising can be defined as a process that initiates implementation of plans by clarifying jobs and working relationships and effectively deploying resources for attainment of identified and desired results (goals).

Explain the importance of organising

The following points gives the importance 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
specific workers performing a specific job ,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 .
It specifies who is to report to whom.
This removes ambiguity in transfer of information and instructions.

(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 prevents confusion and minimise the wastage of resources and efforts.

(iv) Adaptation to change:

Organising allows a business firm 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
It also provides stability to the enterprise as it can then continue to survive and grow in spite of changes.

(v) Effective administration:

Organising provides a clear description of jobs and related duties.
Clarity in working relationships enables proper execution of work.
Management of the firm thereby becomes easy and this brings effectiveness in administration.

(vi) Development of personnel:

Organising stimulates creativity amongst the managers.
Effective delegation allows the managers to reduce their workload by assigning routine jobs to their subordinates.
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:

Organising helps in the growth and diversification of an enterprise
It allows a firm to add more job positions, departments and diversify their product lines.
this will help to increase customer base, sales and profit.

Describe the steps in the process of organizing

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
Thus duplication can be avoided and the burden of work can be shared among the employees.

(ii) Departmentalisation:

Once work has been divided , then those activities which are similar in nature are grouped together.
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 territory (north, south, west, etc.) and products (appliances, clothes, cosmetics etc)

. (iii) Assignment of duties:

Once departments have been formed, an individual is in charge of it.
Jobs are then allocated to the members of each department in accordance to their skills and competencies.
a proper match is made between the nature of a job and the ability of an individual for effective performance
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 hierarchical structure and helps in coordination amongst various departments.

Describe functional and divisional structures of organisation.

Functional structure

Grouping of jobs of similar nature under functional and organising these major functions as separate departments creates a functional structure Managing Director Human Resources Marketing Research and Development Purchasing

All departments report to a coordinating head.

For example, in a manufacturing concern division of work into key functions will include production, purchase, marketing, accounts and personnel.

These departments may be further divided into sections.

Thus, a functional structure is an organisational design that groups similar or related jobs together.

Divisional Structure

When a company diversifies into varied product categories, the need for a more evolved structural design is needed and so they reorganise themselves towards a 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. Each division is multi functional because within each division functions like production, marketing, finance, purchase, etc., are performed together to achieve a common goal and is self contained as it develops expertise in all functions related to a product line.
Each division also works as a profit centre where the divisional head is responsible for the profit or loss of his division.

Explain the advantages, disadvantages and suitability of functional and divisional structure.

Functional Structure

Advantages:

The functional structure has many advantages . Important among them are as follows:

(a) A functional structure leads to occupational specialisation since emphasis is placed on specific functions. This promotes efficiency in utilisation of manpower as employees perform similar tasks
(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) It leads to minimal duplication of effort 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:

The functional structure has certain disadvantages which an organisation must take into consideration before it adopts it. Some of them are as follows:

(a) A functional structure places less emphasis on overall enterprise objectives than the objectives pursued by a functional head. This leads to a particular function to be overemphasised. Pursuing departmental interests can also hinder the interaction between two or more departments.
(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. Interdepartmental conflicts can also arise in the absence of clear separation of responsibility.
(d) It may lead to inflexibility as people with same skills and knowledge base may develop a narrow perspective and thus, have difficulty in appreciating by other point of view.

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

Advantages:

The divisional structure offers many benefits. Prominent among these are as follows:

(a) 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.
(b) 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.
(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 by merely adding another divisional head and staff for the new product line.

Disadvantages:

The divisional structure has certain disadvantages. Some of them are as follows:

(a) Conflict among different divisions with reference to allocation of funds a particular division may seek to maximise its profits at the cost of other divisions.

(b) It may lead to increase in costs since there may be a duplication of activities across products.

(c) It provides managers with the authority to supervise all activities related to a particular division. In course of time, such a manager may gain power and may ignore organisational interests.

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 add more employees, create more departments and introduce new levels of management, it will decide to adopt a divisional structure.

Explain the concept of formal and informal organisation. 

Formal Organisation

In all organisations, to enable smooth functioning of the enterprise, job description and rules and procedures related to work have to be laid down. This is done through the formal organisation.
Formal organisation 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 .
It is a system of well-defined jobs, each bearing a definite measure of authority, responsibility and accountability.
There is a systematic coordination among the various activities to achieve organisational goals. The structure in a formal organisation can be functional or divisional.

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 when people interact beyond their officially defined roles.
When people have frequent contacts they tend to form groups based on their interaction and friendship Examples of such groups formed with common interest are those who take part in cricket matches on Sundays, meet in the cafeteria for coffee, etc.
Informal organisation has no written rules, is fluid in form and scope and does not have fixed lines of communication.

Discuss the advantages, disadvantages of formal and informal organisation.

Advantages:

Formal organisation offers many advantages. Some of the important ones are:

(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.
(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
(e) It provides stability to the organisation as behaviour of employees can be fairly predicted since there are specific rules to guide them.

Limitations:

The formal organisation suffers from the following limitations:

(a) The formal communication may lead to procedural delays as the 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
(c) As it places more emphasis on structure and work it is difficult to understand all human relationships. Hence, the formal organisation does not provide a complete picture of how an organisation work

Informal

Advantages:

The informal organisation offers many benefits. Important among them are given below:

(a) the informal organisation leads to faster spread of information as well as quick feedback.
(b) It helps to fulfil the social needs of the members and allows them to find like minded people. which enhances their job satisfaction
(c) It contributes towards fulfilment of organisational objectives . For example, employees reactions towards plans and policies can be tested through the informal network.

Disadvantages:

The informal organisation has certain disadvantages. Some of them are as follows:

(a) It can spread rumours, and can become 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 and can 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.

Understand the concept of delegation.

A manager, even efficient , cannot manage to do every task on his own. The volume of work makes it impractical for him to handle it all by himself. So to ensure that all work is accomplished, he must delegate authority.
Delegation refers to the downward transfer of authority from a superior to a subordinate. It is a pre-requisite to the efficient functioning of an organisation .
It enables a manager to use his time on high priority activities. It also satisfies the subordinate’s need for recognition and provides them with opportunities to develop and exercise initiative.
Delegation helps a manager to extend his area of operations . However,the manager shall still be accountable for the performance of the assigned tasks.
Also, the authority granted to a subordinate can be taken back and re delegated to another person. But, the manager shall still be accountable to the same extent as before delegation.

Describe the elements of delegation. 

Elements of Delegation

A detailed analysis of Louis Allen’s definition brings to light the following essential elements of delegation:

(i) Authority:

Authority refers to the right of an individual to command his subordinates and to take action within the scope of his position.
Authority also refers to the right to take decisions and to tell people what to do and expect them to do it. In the formal organisation authority is highest at the top management levels and reduces successively as we go down the corporate ladder. Thus, authority flows from top to bottom,
Authority helps to maintain order in the organisation by giving the managers the right to exact obedience and give directions to the workforce under them.

(ii) Responsibility:

Responsibility 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,
An important consideration with respect to both authority and responsibility is that when an employee is given responsibility for a job he must also be given the degree of authority necessary to carry it out. Thus, 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.

(iii) Accountability:

Accountability implies being answerable for the final outcome.
Once authority has been delegated and responsibility accepted, one cannot deny accountability.
It indicates that the manager has to ensure the proper discharge of duties by his subordinates.
The subordinate will be expected to explain the consequences of his actions.
It can be concluded that while authority is delegated, responsibility is assumed, and accountability is imposed.
Responsibility is derived from authority and accountability is derived from responsibility.

Explain the importance of Delegation.

Delegation ensures that the subordinates perform tasks on behalf of the manager thereby reducing his workload and providing him with more time to concentrate on important

Effective delegation leads to the following benefits:

(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:

employees get more opportunities to utilise their talent and this may give rise to latent abilities in them.
It allows them to develop those skills which will enable them to perform complex tasks and develop themselves for higher positions.
It makes them better leaders and decision makers.
Thus, delegation helps by preparing better future managers.

(iii) Motivation of employees :

Delegation helps in developing the talents of the employees and has psychological benefits.
When a superior gives an employee a task or responsibility this builds the self-esteem of an employee and improves his confidence.
He feels encouraged and tries to improve his performance further.

(iv) Facilitation of growth:

Delegation helps in the expansion of an organisation
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, which are the basis of hierarchy of management.
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

(vi) Better coordination:

The elements of delegation, defines 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 being done at various levels.
Such clarity i help in developing and maintaining effective coordination amongst the departments,

Understand the concept of decentralisation. 

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 shared with lower levels and is consequently placed nearest to the points of action.
In other words decision making authority is pushed down the chain of command.
When decisions taken by the lower levels are numerous as well as important an organisation can be regarded as greatly decentralised.
An organisation is decentralised when decision-making authority is delegated.

Explain the importance of decentralisation. 

Decentralisation is a philosophy that implies selective dispersal of authority because it propagates the belief that people are competent, capable and resourceful. They can assume the responsibility for the effective implementation of their decisions. Thus this philosophy recognises the decision maker’s need for autonomy. 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.
because they are given freedom to take their own decisions they learn to depend on their own judgement.
It also keeps them in a state wherein they are constantly challenged and have to develop solutions for the various problems they encounter.
A decentralisation policy helps to identify those executives who have the necessary potential to become dynamic leaders.

(ii) Develops managerial talent for the future:

Decentralisation gives subordinates 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.
Thus, it is a means of management education as well as an opportunity for trained manpower to use its talent in real life situations.

(iii) Quick decision making:

In centralised organisation because every decision is taken by the top management the flow of information is slow and hence decision making process is very slow
In a decentralised organisation, however ,since 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 leaves the top management with more time which they can devote to important policy decisions

(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 manner best suited to their department and fosters a sense of competition amongst the departments. Consequently, with each department doing its best in a bid to outdo the other, 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.

Achievement of organisational objectives and contribution of each department in meeting the overall objectives can be ascertained.

Feedback from all levels helps to analyse variances and improve operations.

Decentralisation compels the management to innovative performance measurement systems.

Differentiate between delegation and decentralisation.

Delegation

Decentralisation

is a compulsory act

is an optional policy decision.

More control by superiors

less freedom to take own

decisions

Less control over executives

hence greater freedom of action.

it is a process followed

to share tasks

It is the result of the policy

decision of the top management

It has narrow scope

It has wide scope

Purpose To lessen the

burden of the manager

To increase the role of the

subordinates

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