CBSE XII COMPILED BY S.K.

SINHA
BUSINESS STUDIES

ORGANISING
Once the plans have been laid down and objectives specified therein, the next step is to organise
resources in a manner which leads to the accomplishment of objective. The management function
of organizing ensures that efforts are directed towards the attainment of goals laid down in the
planning function in such a manner that resources are used optimally and people are able to
work collectively and effectively for a common purpose.
Organising essentially implies a process which coordinates human efforts, assembles resources and
integrates both into a unified whole to be utilised for achieving specified objectives. 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).
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. (Louis Allen)

Organising is the process of defining and grouping the activities of the enterprise and establishing
authority relationships among them. (Theo Haimman)

STEPS IN THE PROCESS OF ORGANISING

Organising involves a series of steps that need to be taken in order to achieve the desired goal

(i) Identification and division of work: The first step in the process of organising 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 canbe avoided and the
burden of work can be shared among the employees.

(ii) 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 departmentalisation. Departments can be created using several
criteria as a basis

(iii) Assignment of duties: It is necessary to allocate work to various employees. 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

(iv) Establishing 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

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 which helps him 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
CBSE XII COMPILED BY S.K.SINHA
BUSINESS STUDIES
information and instructions. It helps in creating a hierarchical order thereby enabling the fixation
of responsibility
(iii) Optimum utilization 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.

(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 interrelationships amongst managerial level.
(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.
(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. It
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 by
enabling it to deviate from existing norms and taking up new challenges.
Thus, organising is a process by which the manager brings order out of chaos, removes conflict
among people over work or responsibility sharing and creates an environment suitable for
teamwork.

ORGANISATION STRUCTURE
The organisation structure can be defined as the framework within which managerial and
operating tasks are performed. It specifies the relationships between people, work and resources. It
allows correlation and coordination among human, physical and financial resources and this
enables a business enterprise to accomplish desired goal. An organisation structure provides the
framework which enables the enterprise to function as an integrated unit by regulating and
coordinating the responsibilities of individuals and departments.
Span of management, to a large extent gives shape to the organisational structure. 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

TYPES OF ORGANISATION STRUCTURES

The organisational structure can be classified under two categories which are as follows:
(i) Functional structure and
(ii) Divisional structure

FUNCTIONAL STRUCTURE
Grouping of jobs of similar nature under functional and organising these major functions as
separate departments creates a functional structure. A functional structure is an organisational
design that groups similar or related jobs together.

Advantages:
(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
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.
CBSE XII COMPILED BY S.K.SINHA
BUSINESS STUDIES
(c) It helps in increasing managerial and operational efficiency and this results in increased
profit.
(d) It leads to minimal 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 than the
objectives pursued by a functional head. Such practices may lead to functional empires wherein the
importance of a particular function may be overemphasized.
(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 any 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
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. Generally, manpower is grouped on the basis of different products manufactured.
Each division is multifunctional because within each division functions like production, marketing,
finance, purchase etc, are performed together to achieve a common goal.

Advantages:
(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:
(a) 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.
(b) It may lead to increase in costs since there may be a duplication of activities across products.
Providing each division with separate set of similar functions increases expenditure.
(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 in a bid to assert his independence
may ignore organisational interests.
CBSE XII COMPILED BY S.K.SINHA
BUSINESS STUDIES
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.

DELEGATION
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 because 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.

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. 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.
(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 i.e., a
subordinate will always be responsible to his superior.
(iii) Accountability: Delegation of authority, undoubtedly empowers an employee to act for his
superior but the superior would still be accountable for the outcome: Accountability 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 indicates that the manger has to
ensure the proper discharge of duties by his subordinates.

Importance of Delegation
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: As a result of delegation, 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 assume those responsibilities which will
improve their career prospects
(iii) Motivation of employees : Delegation helps in developing the talents of the employees. It also
has psychological benefits. Responsibility for work 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 by 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 by replicating the work ethos they
have absorbed from existing units, in the newly set up branches.
(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.
(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 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.
CBSE XII COMPILED BY S.K.SINHA
BUSINESS STUDIES
DECENTRALISATION
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.

DEFINITION:
Louis Allen Decentralisation refers to systematic effort to delegate to the lowest level all authority
except that which can be exercised at central points.
Henri Fayol Everything which goes to increase the importance of a subordinate’s role 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. This is because when lower managerial levels are given freedom
to take their own decisions they learn to depend on their own judgment. It also keeps them in a state
wherein they are constantly challenged and have to develop solutions for the various problems they
encounter.
(ii) Develops managerial talent for the future: Decentralisation gives employees 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: The management hierarchy can be looked upon as a chain of
communication. In centralised organisation because every decision is taken by the top management the
flow of information is slow as it has to traverse many levels. Response also takes time. This reduces the
speed of decision making and makes it difficult for an enterprise to adapt to dynamic operating
conditions.
(iv) Relief to top management: Decentralisation diminishes the amount of direct supervision exercised
by a superior over the activities of a subordinate because they are given the freedom to act and decide
albeit within the limits set by the superior. Also, personal supervision is generally replaced by other
forms of control such as return on investment etc.
(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.
(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. Decentralisation compels the management to innovative performance
measurement systems.