Advantages: The functional structure has many advantages to o er.

Important among them are

as follows: (a) A functional structure leads to
occupational specialisation since emphasis is placed on speci c functions. This promotes
e ciency 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 e ciency and this results in increased pro t.
(d) It leads to minimal duplication of e ort 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 di erent 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. Such practices may lead to functional empires wherein the
importance of a particular function may be overemphasised. Pursuing departmental interests at
the cost of organisational 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
di erentiated departments.
(c) A con ict 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
di culties in production. Such dissension can prove to be harmful in terms of ful llment of
organisational interest. Inte departmental con icts can also arise in the absence of clear
separation of responsibility.
(d) It may lead to in exibility as people with same skills and knowledge base may develop a
narrow perspective and thus,

The formal organisation can be better understood by a study of its features which are as
follows:
(a) It speci es the relationships among various job positions and the nature of their inte
relationship. This clari es who has to report to whom.
(b) It is a means to achieve the objectives speci ed in the plans, as it lays down rules and
procedures essential for their achievement.
(c) E orts 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 than interpersonal relationships among the
employees.

Advantages: Formal organisation o ers many advantages. Some of the important ones are:
(a) It is easier to x responsibility
since mutual relationships are
clearly de ned.
(b) There is no ambiguity in the role
that each member has to play as duties are speci ed. This also helps in avoiding duplication of
e ort.
(c) Unity of command is maintained through an established chain of command.
(d) It leads to e ective accomplis ment 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 orga isation. This is because behaviour of employees can be fairly
pr dicted since there are speci c rules to guide them.

Limitations: The formal organisation su ers from the following limitations: (a) The formal
communication may
lead to procedural delays as the established chain of command has to be followed which
increases the
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 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 polices.
(c) It is di cult to understand
all human relationships in an enterprise as it places more emphasis on structure and work. Hence,
the formal organisation does not provide a complete picture of how an organisation works.

Informal organisation can be better understood with the help of the following features:
(a) An informal organisation
originates from within the formal organisation as a result of personal interaction among
employees.
(b)The standards of behaviour evolve from group norms rather than o cially laid down rules and
regulations.
(c)Independent channels of communication without speci ed direction of ow of information are
developed by group members.
(d) It emerges spontaneously and is not deliberately created by the management.
(e) It has no de nite strucure or form because it is a complex network of social relationships
among members.

Advantages: The informal organisation o ers many bene ts. Important among them are given
below:
(a) Prescribed lines of communication
are not followed. Thus, the informal organisation leads to faster spread of information as well as
quick feedback.
(b) It helps to ful ll the social needs of the members and allows them to nd like minded people.
This enhances their job satisfaction since it gives them a sense of belongingness in the
organisation.
(c) It contributes towards ful llment of organisational objectives by compensating for
inadequacies in
Business Studies
the formal organisation. 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) 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 cha ges 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.

Importance of delegation
(i) E ective management: By empowering the employees, the managers are able to function more
e ciently 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 opportunitiecs 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. It makes them better leaders and decision makers. Thus,
delegation helps by preparing better future managers. Delegation empowers the employees by
providing them with the chance to use their skills, gain experience and develop themselves for
higher positions.
(iii) Motivation of employees: Delegation helps in developing the talents of the employees. It also
has psychological bene ts. When a superior entrusts a subordinate with a task, it is not merely
the sharing of work but involves trust on the superior’s part and commitment
on the part of the subordinate. Responsibility for work builds the sel esteem of an employee and
improves his con dence. He feels encouraged and tries to improve his performance further.
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 (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 signi cant 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 hie archy: Delegation of authority establishes superio subordinate
relationships, which are the basis of hierarchy of management. It is the degree and ow 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 organisation.
(vi) Better coordination: The elements of delegation, namely authority, responsibility and
accountability help to de ne the powers, duties and answerability related to the various positions
in an organisation. This helps to avoid overlapping of duties and duplication of e ort as it gives a
clear picture of the work being done at various levels. Such clarity in reporting relationships help
in developing and maintaining e ective coordination amongst the departments, levels and
functions of management.

Importance of organising
(i)Bene ts 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 speci c
workers performing a speci c job on a regular basis. Repetitive performance of a particular task
allows a worker to gain experience in that area and leads to specialisation.
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.
(ii) Clarity in working relatio (v) E ective administration:
ships: The establishment of working relationships clari es lines of communication and speci es
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 xation of responsibility and
speci cation 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, nancial
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 e orts.
(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 modi ed
and the revision of inte relationships amongst managerial levels to pave the
Organising provides a clear description of jobs and related duties. This helps to avoid confusion
and duplication. Clarity in working relationships enables proper executionofwork.Management of
an enterprise thereby becomes easy and this brings e ectiveness in administration.
(vi) Development of personnel: Organising stimulates creativity amongst the managers. E ective
delegationallowsthemanagers to reduce their workload by assigning routine jobs to their
subordinates. The reduction in workload by delegation is not just necessary because of limited
capacity of an individual but also 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 e ectively with challenges and helps them to realise their full
potential.
(vii) Expansion and growth: Orga ising helps in the growth and diversi cation of an enterprise by
enabling it to deviate from existing norms and taking up new challenges.
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