Module:-05

Business Organisation/ Organisation of a Business:-

To carry out any business and achieve its objective of earning profit it is required to bring
together all the resources and put them into action in a systematic way, and coordinate and
control these activities properly. This arrangement is known as business organisation.

The term "business organization" refers to how a business is structured. The business
organization is defined in the bylaws when the business is formed with the name and contact
information of those who own and run the company with their roles defined. The bylaws state
the purpose of the organization and what it does.

Characteristics of an Ideal Form of Business Organisation:-

Before selecting a suitable form of commercial organization, entrepreneurs will have to

consider a number of factors. The choice of the form of commercial organization largely
depends upon the following factors.

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Ease in Formation: -

An ideal form commercial organization is one, which can be formed with ease. It should
involve the least expense and minimum legal formalities. On this account, the sole trading
concern scores over the other forms of commercial organization.

Ease in Raising Capital: -

Every commercial organization requires capital. Some organization may require less capital.
Whereas others may require more capital. When a small amount of capital is required, then
the entrepreneur himself can invest. However the amount of capital is large, then Joint Stock
Company is the most suitable form.

Extent of Liability: -

The owner (s) of a business would normally prefer limited liability. In such a case, the joint
stock company form of commercial organization is ideal. All other form of organization
requires more liability except co-operative society.

Business Secrecy: -

The sole trader can maintain complete business secrecy. This is because; he undertakes
business activities all by himself. However, business secrecy may not be possible in joint stock
companies and to a certain extent in partnership firms.

Continuity and Stability: -

An ideal form of organization should exist for a long period of time. It must not be closed
down or wound up within a short period of time. Here a joint stock company and a co-
operative society have an advantage over sole trading concern and partnership firm.

Flexibility of Operations: -

Flexibility refers to the ability of the organisation to adjust its activities, depending upon the
changed situation. On this account, the sole trading concerns and partnership firms outweigh
the joint stock companies.

Ownership Management and Control: -

As far as possible, there should be a direct relationship between ownership, management and
control. Those who manage must have complete control over business matters. On this
account, the sole trading concerns and partnership firms outweigh the joint stock companies.

Tax Considerations: -

An ideal form of commercial organisation should attract minimum tax liability. Here the sole
trader scores over the partnership firm and joint stock companies.

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Minimum Government Regulations: -

As far as an ideal form of commercial organisation must be subject to least government

regulations. A Joint stock Company is subject to more government regulations, and the sole
trader is least subject to such regulations.

Bargaining Power: -

An ideal form of commercial organisation also needs to have a good bargaining power with
the suppliers and customers. The joint stock company may scores over the partnership firm
and the sole trading concern in this respect.

Factors determining the choice of Business Organisation:-

These are the factors determining the choice of Business Organisation:-

Liability of Owners:-

The first crucial factor to be kept in view by an entrepreneur while choosing a form of
organization is liability of the owner in meeting the business obligations. Generally, an
entrepreneur would prefer a form of organization in which the owner’s liability is limited only
to the capital invested by him in the business. He would not like his personal assets to be
utilised under any circumstances to settle the business obligations.

Life of Organization:-

Age of a firm plays crucial role in its growth and success. This is why entrepreneurs prefer a
form of enterprise whose life is not linked to the lives of its members so that existence of the
organization remains unaffected.

Transferability of Ownership:-

Another variable influencing choice of the form of organization is freedom of the owner to
transfer his ownership in the company to someone else as and when desired. This will
facilitate the firm to raise funds from the market.

Flexibility:-

Entrepreneurs would like to choose a form of organization which offers the maximum degree
of flexibility of making recourse to a variety of sources of funds from the market.

Tax Liability:-

Tax on earnings is an important cost to an enterprise. An entrepreneur chooses a form of

organization which involves lowest tax liability.

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Legal Formalities:-

Certain procedures have to be followed and formalities need to be complied with for
establishing an enterprise. These formalities, as per legal provisions, differ depending on the
type of organization to be set up. Obviously, entrepreneurs would like to select that form of
organization which enables them to start business with minimum legal formalities and costs.

Geographical Mobility:-

Another important consideration influencing an entrepreneur’s choice of business

organization is geographical mobility. Usually, an entrepreneur likes to select a form of
organization that provides freedom and right to conduct business in different regions of the
country without much legal complications.

Scope of Expansion:-

Entrepreneurs would like that form of organization which provides ample scope for expansion
and diversification of business to-exploit emerging market opportunities.

Government Control:-

Entrepreneurs are loath to choose a form of organization to conduct their business where
there always remains a great possibility for governmental interference and control.

Centralisation of Management Control:-

The last but not the least factor that influences the decision of an entrepreneur is the extent
of control which he will command over the operations of the business. Generally,
entrepreneurs prefer such form of organization as enables them to command exclusive
control over the business and thereafter delegate it in an orderly manner.

Organizational Structure:-

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It refers to the level of management & division of responsibilities within a business, which
could be presented in an organizational chart.

For simpler business in which the owner employs only himself, there is no need for an
organizational structure.

However if the business expands & employs other people, an organizational structure is
needed.

OR
An Organizational Structure is a system that outlines how certain activities are directed in
order to achieve the goals of an organization. These activities can include rules, roles, and
responsibilities.

Organisation structure provides a basis or framework within which managers and non-
managerial employees perform the jobs assigned to them.

In other words, organisation structure may be considered as the core element around which
various functions are performed and several processes operate. The structure of organisation
is consciously designed by the management.

An Organizational Structure consists of activities such as task allocation coordination &

supervision, which are directed towards the achievement of organization and its
environment. It affects organizational action in two ways:-

1) It provides the foundation on which the standard operating procedures and routines
rest.
2) It determines which individuals get to participate in guide decision making process and
thus to what extent their views shape the organization actions.

Extra:-
Types of Organisational Structures/ Organisational Charts:-
1) Hierarchical Structure
2) Matrix Structure
3) Horizontal/Flat Structure
4) Network Structure
5) Divisional Structure
6) Line Organizational Structure
7) Team-based Organizational Structure

At some point, you have likely seen an organizational chart for your company. And we can
probably guess what it looked like.

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The typical org chart looks like a pyramid, your C-level executives at the top with lines
stretching down to middle management and finally staff-level employees.

But not every company functions best with a hierarchical organizational structure. Many
types of organizational charts exist because many types of organizational structures exist.

Let’s go through the seven common types of org structures and reasons why you might
consider each of them.

1. Hierarchical Organisational Structure:-

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The pyramid-shaped organizational chart we referred to earlier is known as a hierarchical org
chart. It’s the most common type of organizational structure––the chain of command goes
from the top (e.g., the CEO or manager) down (e.g., entry-level and low-level employees) and
each employee has a supervisor.

Pros:-

 Better defines levels of authority and responsibility.

 Shows who each person reports to or who to talk to about specific projects.
 Motivates employees with clear career paths and chances for promotion.
 Gives each employee a specialty.
 Creates camaraderie between employees within the same department.

Cons:-

 Can slow down innovation or important changes due to increased bureaucracy.

 Can cause employees to act in interest of the department instead of the company as
a whole.
 Can make lower-level employees feel like they have less ownership and can’t express
their ideas for the company.

2. Functional Organisational Structure:-

Similar to a hierarchical organizational structure, a functional org structure starts with

positions with the highest levels of responsibility at the top and goes down from there.
Primarily, though, employees are organized according to their specific skills and their
corresponding function in the company. Each separate department is managed
independently.

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Pros:-

 Allows employees to focus on their role

 Encourages specialization
 Help teams and departments feel self-determined
 Is easily scalable in any sized company

Cons:-

 Can create silos within an organization

 Hampers interdepartmental communication
 Obscures processes and strategies for different markets or products in a company

3. Horizontal or Flat Organisational Structure:-

A horizontal or flat organizational structure fits companies with few levels between upper
management and staff-level employees. Many start-up businesses use a horizontal org
structure before they grow large enough to build out different departments, but some
organizations maintain this structure since it encourages less supervision and more
involvement from all employees.

Pros:-

 Gives employees more responsibility

 Fosters more open communication
 Improves coordination and speed of implementing new ideas

Cons:-

 Can create confusion since employees do not have a clear supervisor to report to
 Can produce employees with more generalized skills and knowledge
 Can be difficult to maintain once the company grows beyond start-up status

4. Divisional Organisational Structure:-

In divisional organizational structures, a company’s divisions have control over their own
resources, essentially operating like their own company within the larger organization. Each

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division can have its own marketing team, sales team, IT team, etc. This structure works well
for large companies as it empowers the various divisions to make decisions without everyone
having to report to just a few executives.

Depending on your organization’s focus, there’s a few variations to consider:-

Market-based Divisional Organisational Structure:-

Divisions are separated by market, industry, or customer type. A large consumer goods
company, like Target or Walmart, might separate its durable goods (clothing, electronics,
furniture, etc.) from its food or logistics divisions.

Product-based divisional Organisational Structure:-

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Divisions are separated by product line. For example, a tech company might have a division
dedicated to its cloud offerings, while the rest of the divisions focus on the different software
offerings––e.g., Adobe and its creative suite of Illustrator, Photoshop, InDesign, etc.

Geographic divisional Organisational Structure:-

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Divisions are separated by region, territories, or districts, offering more effective localization
and logistics. Companies might establish satellite offices across the country or the globe in
order to stay close to their customers.

Pros:-

 Helps large companies stay flexible

 Allows for a quicker response to industry changes or customer needs
 Promotes independence, autonomy, and a customized approach

Cons:-

 Can easily lead to duplicate resources

 Can mean muddled or insufficient communication between the headquarters and its
divisions
 Can result in a company competing with itself

5. Matrix Organisational Structure:-

A matrix organizational chart looks like a grid, and it shows cross-functional teams that form
for special projects. For example, an engineer may regularly belong to the engineering
department (led by an engineering director) but work on a temporary project (led by a project
manager). The matrix org chart accounts for both of these roles and reporting relationships.

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Pros:-

 Allows supervisors to easily choose individuals by the needs of a project

 Gives a more dynamic view of the organization
 Encourages employees to use their skills in various capacities aside from their original
roles

Cons:-

 Presents a conflict between department managers and project managers

 Can change more frequently than other organizational chart types

6. Team-based Organisational Structure:-

It’ll come as no surprise that a team-based organizational structure groups employees

according to (what else?) teams––think scrum teams or tiger teams. A team organizational
structure is meant to disrupt the traditional hierarchy, focusing more on problem solving,
cooperation, and giving employees more control.

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Pros:-

 Increases productivity, performance, and transparency by breaking down silos

 Promotes a growth mindset
 Changes the traditional career models by getting people to move laterally
 Values experience rather than seniority
 Requires minimal management
 Fits well with agile companies with scrum or tiger teams

Cons:-

 Goes against many companies’ natural inclination of a purely hierarchical structure

 Might make promotional paths less clear for employees

7. Network Organisational Structure:-

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These days, few businesses have all their services under one roof, and juggling the multitudes
of vendors, subcontractors, freelancers, offsite locations, and satellite offices can get
confusing. A network organizational structure makes sense of the spread of resources. It can
also describe an internal structure that focuses more on open communication and
relationships rather than hierarchy.

Pros:-

 Visualizes the complex web of onsite and offsite relationships in companies

 Allows companies to be more flexible and agile
 Give more power to all employees to collaborate, take initiative, and make decisions
 Helps employees and stakeholders understand workflows and processes

Cons:-

 Can quickly become overly complex when dealing with lots of offsite processes
 Can make it more difficult for employees to know who has final say

Consider the needs of your organization, including the company culture that you want to
develop, and choose one of these organizational structures.

Principles underlying designing of a Structure/Organisational

Structure:-

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The following are the principles underlying designing of a Structure/Organisational Structure:-

1. Division of Labour and Specialization:-

Division of the activities into compact tasks and their further sub division into individual job
units, by using the concepts of division of labour and specialization.

2. Consideration of Objectives:-

All organizations and each part of any undertaking should be the expression of the purpose,
either expressed or implied - the principle of objective.

3. The Scalar Principle:-

There must be a clear line of formal authority running from top to the bottom of every
organization that is scalar principle.

4. The Principle of Departmentalization:-

Grouping of the jobs into homogeneous work unit, sections, departments and division is the
function of departmentalization.

5. The Principle of Unit of Command:-

There should be clear lines of authority from superior to subordinate managers to facilitate
more effective decision making and communication. No managers can delegate or pass on his
own accountability to his subordinates.

6. The Principle of Span of Control:-

No superior can supervise directly the work of more than five or at most six subordinate
whose work interlocks- the principle of span of control.

7. The Principle of Flexibility:-

The organization structure should be designed and adopted in tune with the changing of
goals, strategies, technology and other major environmental variables that affect its
functioning.

8. The Principle of Decentralization:-

The creation of hierarchy of managerial positions around the activity sub groups. Tasks are
clearly assigned to each managerial position, the required quantum of authority is wasted
therein, and accountability is imposed for proper job performance. Each managerial position
is given a span-the number of subordinate, managerial positions to be directly attached to it.
The concepts of delegation and decentralization of authority are relevant in this connection.

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Formal Organisation:-
When the managers are carrying on organising process then as a result of organising process
an organisational structure is created to achieve systematic working and efficient utilization
of resources. This type of structure is known as formal organisational structure.

Formal organisational structure clearly spells out the job to be performed by each individual,
the authority, responsibility assigned to every individual, the superior- subordinate
relationship and the designation of every individual in the organisation. This structure is
created intentionally by the managers for achievement of organisational goal.

Features of Formal Organisation:-

(1) The formal organisational structure is created intentionally by the process of
organising.
(2) The purpose of formal organisation structure is achievement of organisational goal.
(3) In formal organisational structure each individual is assigned a specific job.
(4) In formal organisation every individual is assigned a fixed authority or decision-making
power.
(5) Formal organisational structure results in creation of superior-subordinate relations.
(6) Formal organisational structure creates a scalar chain of communication in the
organisation.

Advantages of Formal Organisation:-

1. Systematic Working:-

Formal organisation structure results in systematic and smooth functioning of an

organisation.

2. Achievement of Organisational Objectives:-

Formal organisational structure is established to achieve organisational objectives.

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3. No Overlapping of Work:-

In formal organisation structure work is systematically divided among various departments

and employees. So there is no chance of duplication or overlapping of work.

4. Co-ordination:-

Formal organisational structure results in coordinating the activities of various departments.

5. Creation of Chain of Command:-

Formal organisational structure clearly defines superior subordinate relationship, i.e., who
reports to whom.

6. More Emphasis on Work:-

Formal organisational structure lays more emphasis on work than interpersonal relations.

Disadvantages of Formal Organisation:-

1. Delay in Action:-

While following scalar chain and chain of command actions get delayed in formal structure.

2. Ignores Social Needs of Employees:-

Formal organisational structure does not give importance to psychological and social need of
employees which may lead to demotivation of employees.

3. Emphasis on Work Only:-

Formal organisational structure gives importance to work only; it ignores human relations,
creativity, talents, etc.

Informal Organisation:-
In the formal organisational structure individuals are assigned various job positions. While
working at those job positions, the individuals interact with each other and develop some
social and friendly groups in the organisation. This network of social and friendly groups forms
another structure in the organisation which is called informal organisational structure.

The informal organisational structure gets created automatically and the main purpose of
such structure is getting psychological satisfaction. The existence of informal structure
depends upon the formal structure because people working at different job positions interact
with each other to form informal structure and the job positions are created in formal
structure. So, if there is no formal structure, there will be no job position, there will be no
people working at job positions and there will be no informal structure.

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Features of Informal Organisation:-
(1) Informal organisational structure gets created automatically without any intended
efforts of managers.
(2) Informal organisational structure is formed by the employees to get psychological
satisfaction.
(3) Informal organisational structure does not follow any fixed path of flow of authority
or communication.
(4) Source of information cannot be known under informal structure as any person can
communicate with anyone in the organisation.
(5) The existence of informal organisational structure depends on the formal organisation
structure.

Advantages of Informal Organisation:-

1. Fast Communication:-

Informal structure does not follow scalar chain so there can be faster spread of
communication.

2. Fulfills Social Needs:-

Informal communication gives due importance to psychological and social need of employees
which motivate the employees.

3. Correct Feedback:-

Through informal structure the top level managers can know the real feedback of employees
on various policies and plans.

Strategic Use of Informal Organisation. Informal organisation can be used to get benefits in
the formal organisation in the following way:-

1. The knowledge of informal group can be used to gather support of employees and
improve their performance.
2. Through grapevine important information can be transmitted quickly.
3. By cooperating with the informal groups the managers can skillfully take the
advantage of both formal and informal organisations.

Disadvantages of Informal Organisation:-

1. Spread Rumors:-

According to a survey 70% of information spread through informal organisational structure

are rumors which may mislead the employees.

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2. No Systematic Working:-

Informal structure does not form a structure for smooth working of an organisation.

3. May Bring Negative Results:-

If informal organisation opposes the policies and changes of management, then it becomes
very difficult to implement them in organisation.

4. More Emphasis to Individual Interest:-

Informal structure gives more importance to satisfaction of individual interest as compared

to organisational interest.

Difference between Formal and Informal Organisation:-

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Line Organisation:-
Line organisation is the basic framework for the whole organisation. It represents a direct
vertical relationship through which authority flows. This is the simplest and oldest, known as
chain of command or scalar principle. The authority flows from top to the lower levels. Every
person is in charge of all the persons under him and he himself is accountable to his superior
only.

This organisation is a vertical structure where one person delegates authority to his
subordinate and who in turn delegates to his subordinate and so on. Authority flows vertically
from top level person to all the persons responsible for the execution of work. Responsibility,
on the other hand, flows upwards. Everybody is responsible for his work and is accountable
to his boss.

Since authority and responsibility flow in an ‘unbroken straight line, it is called line
organisation. In the words of J.M. Lundy, “It is characterised by direct lines of authority
flowing from the top to the bottom of the organisational hierarchy and lines of responsibility
flowing in an opposite but equally direct manner.”

This form of organisation is followed in military establishments. The ‘Commander-in-Chief is

at the top with various other officers at the lower levels. The officers at downward positions
derive authority from the top. The modern military organisations do not entirely rely on line
organisation. They have staff wings like intelligence, medical and so on.

Types of Line Organisation:-

Pure Line Organisation:-

In pure line organisation all persons at a given level perform the same type of work. The
divisions are solely for the purpose of control and direction.

The departmental divisions are made only for the sake of convenience and control. All
workers perform the same type of work.

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Departmental Line Organisation:-

The departmental type of line organisation divides the enterprise into different departments
which are convenient for control purposes. There is a unity of control and line of authority
flows from top to the bottom. The whole organisation is put under the overall control of Chief
Executive who may be called by the name of General Manager. Different departments are put
under the control of Departmental Managers.

Departmental managers get orders directly from the General Manager. The managers are not
dependent upon each other. Every department has its own line of organisation. There may
be deputy managers, supervisors, workers in every department. The deputy managers get
orders from the departmental manager and in turn pass them on to the supervisors.

The orders ultimately reach the workers who actually execute them. Various departmental
managers are equal to each other in status and authority. They do not exchange instructions
with each other. Any communication between them is routed through their immediate boss.

The system of line organisation will be successful if following conditions are present:-

1. There should be a hierarchical arrangement of giving commands. The subordinates should

get commands only through their immediate superiors. The links in the chain of command
should not be skipped. This type of organisation helps in co-ordination and control.

2. There should be a single line of command. One person should get orders from one
supervisor only.

3. All persons at the same level of authority should be independent of one another.

4. The number of subordinates should be such that they are properly supervised.

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Merits of Line Organisation:-
The line organisation has the following good points:-

1. Simplicity:-

Line organisation is simple to establish and can be easily understood by the employees. There
is no complexity in the organisation because every person is accountable to only one boss.
Everybody knows his work and also to whom he is responsible. So it can be operated simply
and clearly.

2. Identification of Authority and Responsibility:-

Line organisation helps in fixing authority and responsibility of each and every person in the
organisation. The authority is given with reference to the assignment of task. The authority
should be commensurate with the work assigned. The allocation of work will also help in fixing
responsibility of various individuals. So line organisation enables the fixation of authority and
responsibility.

3. Co-Ordination:-

The hierarchy in management helps in achieving effective co-ordination. The general manager
is in-charge of all the departments and he can easily co-ordinate the work of various
departments. At departmental level manager is in charge and he can direct the activities of
his juniors.

4. Effective Communication:-

The chain of command goes from top to bottom. There is a direct link between the superior
and his subordinate, both can communicate properly among themselves. The reactions of
subordinates also reach top management in a short span of time.

5. Economical:-

Line organisation is easy to operate and less expensive. There are no staff personnel to advice
line officers. Line officers take their own decisions without looking to specialized personnel.
This greatly reduces the establishment cost.

6. Quick Decisions:-

Only one person is in charge of a department or division. He has to take various decisions by
himself. There are no staff personnel for consultation too. This enables a manager to take
prompt decisions If a decision making process involves the consultation of a number of
person’ then there are likely to be delays in deciding things. In line organisation only
departmental head is required to take decisions and he will not waste time in deciding things.

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7. Unity of Command:-

In line organisation every person is under the command of one boss only. This type of
organisation is in accordance with the principle of scalar chain.

8. Effective Control and Supervision:-

The number of subordinates is limited under line organisation. The superior can exercise
effective control and supervise over the persons under him. There is a direct link between
superior and subordinates. This also helps in having better control because the subordinates
will be under constant watch.

9. Executive Development:-

Under this system the departmental head is involved in taking and executing various
decisions. His task is challenging and he is expected to discharge his responsibility in an
efficient way. This helps an executive to learn many things and develop his capabilities.

10. Flexibility:-

Since the manager has to take all important decisions, he can make changes if new situation
warrants. He need not to waste time in getting instructions from above. He can take a decision
according to the requirements of the situation.

Demerits of Line Organisation:-

Line organisation suffers from a number of drawbacks:-

1. Excess Work:-

In line organisation too much is expected from executives. They are expected to take
numerous decisions and supervise the work of subordinates under them. The work load of
executives goes on increasing with the expansion and diversification of the unit. The line office
cannot devote sufficient time to each and every work and are over loaded with
responsibilities.

2. Lack of Specialization:-

The lack of managerial specialization is the demerit of line organisation. The line officers
cannot be experts in every line of business. Since they are to take decisions with regard to
every aspect of business, the quality of decisions may suffer. The officers will have to depend
heavily on subordinates for advice.

3. Lack of Co-ordination:-

There is a lack of co-ordination among various departments. All departmental heads try to
run the departments in their own way and according to their suitability. There may be a lack
of operational uniformity among various departments. This may become the reason for lack

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of co-ordination among different departments. This may become the reason for lack of co-
ordination among different departments.

4. Improper Communication:-

The ultimate authority for taking all decisions lies with line officers. The line officers may
become autocratic and start deciding things without consulting their subordinate. The
subordinates start keeping distance from the superiors. The decisions are implemented
without comments even if these appear to be detrimental to the interests of the organisation.
The subordinates do not convey their reactions or the reactions of workers to the superiors.
The lack of communication creates many problems for the smooth conduct of business.

5. Lack of Initiative:-

In line organisation final decision-making is taken by the top management. The lower level
officials do not show initiative in suggesting new things. They feel that their suggestions may
not carry weight with their superiors so they avoid taking any type of initiative.

6. Favouritism:-

There is a scope for favouritism in line organisation. The officers work according to their
whims and preferences. They judge the performance of persons according to their own
yardsticks. There is a likelihood that some persons may be given favours and deserving
persons, on the other hand, may be ignored.

7. Instability:-

The business is dependent upon some key persons and the sudden disappearance of such
persons from the scene may create instability in the business. There is also a lack of grooming
the new persons for taking up important work. The managerial growth also suffers because
lower level persons are not involved in decision-making process.

Line and Staff Organisation:-

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Line and staff organization is a modification of line organization and it is more complex than
line organization. According to this administrative organization, specialized and supportive
activities are attached to the line of command by appointing staff supervisors and staff
specialists who are attached to the line authority. The power of command always remains
with the line executives and staff supervisors guide, advice and council the line executives.
Personal Secretary to the Managing Director is a staff official.

Features of Line and Staff Organization:-

1) There are two types of staff:-
a) Staff Assistants- P.A. to Managing Director, Secretary to Marketing Manager.
b) Staff Supervisor- Operation Control Manager, Quality Controller, PRO
2) Line and Staff Organization is a compromise of line organization. It is more complex
than line concern.
3) Division of work and specialization takes place in line and staff organization.
4) The whole organization is divided into different functional areas to which staff
specialists are attached.
5) Efficiency can be achieved through the features of specialization.
6) There are two lines of authority which flow at one time in a concern:-
a) Line Authority
b) Staff Authority
7) Power of command remains with the line executive and staff serves only as
counselors.

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Merits of Line and Staff Organization:-
Relief to Line of Executives:-

In a line and staff organization, the advice and counseling which is provided to the line
executives divides the work between the two. The line executive can concentrate on the
execution of plans and they get relieved of dividing their attention to many areas.

Expert Advice:-

The line and staff organization facilitates expert advice to the line executive at the time of
need. The planning and investigation which is related to different matters can be done by the
staff specialist and line officers can concentrate on execution of plans.

Benefit of Specialization:-

Line and staff through division of whole concern into two types of authority divides the
enterprise into parts and functional areas. This way every officer or official can concentrate
in its own area.

Better Co-ordination:-

Line and staff organization through specialization is able to provide better decision making
and concentration remains in few hands. This feature helps in bringing co-ordination in work
as every official is concentrating in their own area.

Benefits of Research and Development:-

Through the advice of specialized staff, the line executives, the line executives get time to
execute plans by taking productive decisions which are helpful for a concern. This gives a wide
scope to the line executive to bring innovations and go for research work in those areas. This
is possible due to the presence of staff specialists.

Training:-

Due to the presence of staff specialists and their expert advice serves as ground for training
to line officials. Line executives can give due concentration to their decision making. This in
itself is a training ground for them.

Balanced Decisions:-

The factor of specialization which is achieved by line staff helps in bringing co-ordination. This
relationship automatically ends up the line official to take better and balanced decision.

Unity of Action:-

Unity of action is a result of unified control. Control and its effectivity take place when co-
ordination is present in the concern. In the line and staff authority all the officials have got
independence to make decisions. This serves as effective control in the whole enterprise.

©SATYASNU SUTRADHAR
Demerits of Line and Staff Organization:-
Lack of Understanding:-

In a line and staff organization, there are two authority flowing at one time. This results in the
confusion between the two. As a result, the workers are not able to understand as to who is
their commanding authority. Hence the problem of understanding can be a hurdle in effective
running.

Lack of Sound Advice:-

The line official get used to the expertise advice of the staff. At times the staff specialist also
provide wrong decisions which the line executive have to consider. This can affect the efficient
running of the enterprise.

Line and Staff Conflicts:-

Line and staff are two authorities which are flowing at the same time. The factors of
designations, status influence sentiments which are related to their relation, can pose a
distress on the minds of the employees. This leads to minimizing of co-ordination which
hampers a concern’s working.

Costly:-

In line and staff concern, the concerns have to maintain the high remuneration of staff
specialist. This proves to be costly for a concern with limited finance.

Assumption of Authority:-

The power of concern is with the line official but the staff dislikes it as they are the one more
in mental work.

Staff steals the Show:-

In a line and staff concern, the higher returns are considered to be a product of staff advice
and counseling. The line officials feel dissatisfied and a feeling of distress enters a concern.
The satisfaction of line officials is very important for effective results.

©SATYASNU SUTRADHAR