CONCEPT MAPPING

FOR 12TH COMMERCE

Chapter – 5

ORGANISING
 MEANING OF ORGANISING

• Organising can be defined as “identifying and grouping different activities

in the organisation and bringing together the physical, financial and human
resources to establish most productive relations for the achievement of
specific goal of organisation”.

• “To organise a business is to provide it with everything useful to its

functioning: raw materials, machines and tools, capital and personnel.”
– Henry Fayol
 MEANING OF ORGANISING

Organising refers to arranging everything in an orderly form and making most efficient
use of resources. While performing this function, it results in creation of organisational
structure which shape the system of working.

For example, your school plans to conduct Sports Day or annual function. All the
teachers and students are assigned different duties, various resources are arranged
and a coordinator is appointed whom everyone report for the work done and pending.
This whole arrangement is called organising.

In simple words, organising is the combination of 3 things:

1.) Identify resources
2.) List all the activities & grouping them after setting different departments for each
activities
3.) Develop superior – subordinate relationship
ORGANISING PROCESS

Identification and Division of

Work

Grouping the Jobs an

Departmentalization

Assignment of
Duties

Establishing Reporting
Relationship
Identification and Division of
Work
The first step in the organising is identifying and dividing the work as per plan. The
division of work make sure there is no duplication of work and there is no burden of work
on one person. Work can be shared among the employees. The manager divides the work
into smaller units and each unit of work is called a job.

For example, in a bank every individual is assigned a job. One cashier accepts cash, one
cashier makes payments, one person issues cheque books, one person receives cheques,
etc. With division of work into jobs the banks work very smoothly and systematically.
Identify various activities:
- Sales
- Advertising
- Social media promotion
- Production
- Raw material
- Selection of employees and recruitments
- Raising of Funds
- Distribution of profits etc.
Grouping the Jobs an
Departmentalisation

After dividing the work in smaller jobs, related and similar jobs are grouped together and
put under one department.
The departmentation or grouping of jobs can be done by the organisation in different
ways. But the most common two ways are:

a) Functional departmentation: Under this method jobs related to common function

are grouped under one department. For example, all the jobs related to production
are grouped under production department, jobs related to sales are grouped under
sales department and so on.

b) Divisional departmentation: When an organisation is producing more than one

type of products then they prefer divisional departmentation. Under this jobs related
to one product are grouped under one department. For example, if an organisation
is producing cosmetics, textile and medicines then jobs related to production, sale
and marketing of cosmetics are grouped under one department, jobs related to
textile under one and so on.
a) Functional Departmentation:

ABC Ltd.

Top Level
(Board of Directors, CEO, CFO, CMO, General
Manager)

Marketing HR Finance
Department Department Department

Sales Recruitment Investment

Advertising Selection Raising of Funds
Promotions Training Budgets
Digital Marketing Promotion Allocation of
etc. Salary Funds etc.
 a) Divisional Departmentation:

ABC Ltd.

Cosmetics Grocery Stationery

Managing Managing Managing

Directors Directors Directors

Marketin
g HR Finance
Sales Investmen
Advertisin Recruitme t
g nt Raising of
Promotion Selection Funds
s Training Budgets
Digital Promotion Allocation
Marketing Salary of Funds
etc. etc.
Assignment of
Duties

After dividing the organisation into specialised departments each

individual working in different departments is assigned a duty
matching to his skill and qualifications. The work is assigned
according to the ability of individuals. Employees are assigned
duties by giving them a document called job description. This
document clearly defines the contents and responsibilities related
to the job.
Establishing Reporting
Relationship

- After grouping the activities in different departments the employees have to perform
the job and to perform the job every individual needs some authority.
- So, in the fourth step of organising process all the individuals are assigned some
authority matching to the job they have to perform.
- The assignment of the authority results in creation of superior-subordinate
relationship and the question of who reports to whom is clarified.
- The individual of higher authority becomes the superior and with less authority
becomes the subordinate.
- With the establishment of authority, managerial hierarchy gets created (chain of
command) and principle of scalar chain follows this hierarchy.
- The establishment of authority also helps in creation of managerial level.
- The managers with maximum authority are considered as top level managers,
managers with little or less authority become part of middle level management and
managers with minimum authority are grouped in lower level management.
- So with establishment of the authority the individuals can perform their jobs and
everyone knows who will report to whom.
 CEO

Marketing HR Finance
Manager Manager Manager

Marketing HR Finance
Lead Lead Lead

Employe Employe Employe Employe Employe Employe

e e e e e e
A C A C A C
Employe Employe Employe
e e e
B B B
 Process of Organising – IDEA

I – Identifying and Division of Work

D – Departmentalisation
A – Assigning of Duties
E – Establishing Reporting Relationships
 IMPORTANCE/SIGNIFICANCE OF ORGANISING

1. Benefits in specialization
2. Clarity in working relationship
3. Optimum utilization of resources
4. Adoption to change
5. Effective administration
6. Expansion and growth
7. Development of personnel
 IMPORTANCE/SIGNIFICANCE OF ORGANISING

1. Benefits in specialization: In organising, every individual is assigned a part of total

work and not the whole task. Due to this division of work into smaller units and
assignment of units according to the qualification leads to specialisation. The
specialisation automatically comes when an individual is performing one job
repeatedly.

2. Clarity in working relationship: In the organising function, it is clearly defined that

what all and how much power and authority is enjoyed by different individuals or
managers. Each manager knows very clearly to whom he can give order and from
whom he has to receive the order The superior-subordinate relation is clearly defined
in organising.

3. Optimum utilization of resources: In the organising function, there are very few
chances of duplication of work or over-lapping of work because the jobs are assigned
to different individuals by clearly defining the job in job description document. So,
there are no chances that the same work is performed by two or more individuals.
4. Adoption to change: Whenever the changes take place in the business environment
then with the help of organising function these changes can be adopted
systematically because organising function creates different departments and group
related activities under each department. With this, changes can be adopted only in
that area which may be affected by these changes and changes can be easily
communicated to whole organisation through departments. Organisational structures
can be suitably modified according to changes.

5. Effective administration: In the organising function, the similar and related jobs
are grouped under one department which leads to unification of efforts and harmony
in work. The organising function establishes relation between different departments
keeping in mind the co-ordination among different departments. By bringing clarity in
working relationship administrative efficiency improves.

6. Expansion and growth: With optimum utilisation of resources and proper division of
work and departmentation, companies can easily meet the challenges and can
expand their activities in a planned manner.

7. Development of personnel: Delegation of authority is an important part of

organising. By delegating the routine the managers can concentrate to develop new
methods and ways of performing job. It gives them time to innovate new technologies
and areas for growth of the companies. Delegation not only reduces the work load of
 Importance of Organising – OG
ABCDE

O – Optimum Utilisation of Resources

G – Growth and Expansion

A – Adaptation to Change
B – Benefits of Specialisation
C – Clarity in Working Relationship
D – Development of Personnel
E – Effective Administration
 ORGANISATIONAL STRUCTURE

• Organisational structure can be defined as “Network of job positions,

responsibilities and authority at different levels.”
• Or it can be called as a frame work within which managerial and
operational tasks are performed. It specifies the relations between people,
work and resources.
Span of
Management

• Means how many employees or subordinates can be effectively managed

by one manager or how many subordinates can be effectively controlled
by one superior.

• When the authority and responsibility relationships are established in

organising process then the managers must keep in mind the span of
control.
 IMPORTANCE OF ORGANISATIONAL STRUCTURE

1. Structure organises properly all the operations of business and ensures better
flow of communications.
2. A clear structure makes it easy to check the responsibility of each part of
business.
3. A clear idea about the working style of an enterprise can be known from
organisational structure.
4. Organisational structure allows correlation and co-ordination among human,
physical and financial resources.
5. It clearly defines the levels of management and span of control
under each level.
 TYPE OF ORGANISATIONAL STRUCTURE

The organisational structure can mainly be of two types which are:

(i) Functional Structure

(ii) Divisional Structure
 TYPE OF ORGANISATIONAL STRUCTURE

1. Functional Structure:

 When the activities or jobs are

grouped keeping in mind the
functions or the job then it is called
functional structure.

 It is suitable for uniproduct

organisation.
 TYPE OF ORGANISATIONAL STRUCTURE

1. Functional Structure:
Board of
Directors

Managing
Director

Production Marketing HR Finance Operationa

Departmen Departmen Departmen Departme l
t t t nt Departme
nt
Manager
Assistant
Manager
Team of
Employees
 ADVANTAGES

1. Occupational Specialisation: Since in functional structure emphasis is placed on

specific functions. This promotes efficiency in utilisation of manpower as by
performing similar jobs their performance improves and they become specialised in
their task.

2. Promotes control and coordination within department: Due to similar

activities grouped in one department there is easy supervision and better control.

3. Increases managerial and operational efficiency: Minimum cost leads to

increase in profit.

4. It leads to minimum duplication of efforts: This results in economies of scale

and lowering of cost.

5. Easy and effective training: As training focuses only in limited skills or one
function only i.e., all the people in the department are related to the same expertise.
For example: Every employee in marketing department will have expertise in some
or the other task of marketing.
 DISADVANTAGES

1. Places less importance to overall objective of organisation: Functional structure

places less emphasis on overall enterprise objectives than the objectives pursued by
functional head. They fail to give priority to organisational interest. This may lead to
pursuing departmental interest at the cost of organisational interest.

2. Problems of coordination: As each department is specialised in their own function so they

feel to understand the priority of other department.

3. Inflexibility: In functional structure, employees develop, narrow perspective as they get

training in one area or skill only. They cannot be transferred to other departments. Functional
heads do not get training for top management positions as they are unable to gather
experience in diverse areas.

4. Conflict of interest: There can be conflict of interest between different departments. For
Example: Sales department insists on giving discount to interest sale. Finance department
puts objection as it will reduce the revenue.

5. Difficult to fix accountability: In case of failure of organisational objective, the

departmental head blames other departments as all departments are inter-related and it is
very difficult to find out which department is going against the organisational goal. For
Example: The sales department may blame production for poor quality, production output
may pass blame on purchase for low quality raw materials purchase may due to less finance
 SUITABILITY

1. Division of work as per functions.

2. Specialisation in every function.

3. Grouping of similar nature of jobs.

4. Uniproduct or single or one type of product manufacturing company.

 TYPE OF ORGANISATIONAL STRUCTURE

2. Divisional Structure:

 When organisation is large and

produces more than one product,
then activities related to one product
are grouped under one department.

 It is suitable only to multiproduct

manufacturing large organisation.
 TYPE OF ORGANISATIONAL STRUCTURE

2. Divisional Structure:
Board of
Directors

Managing
Director

Textiles Cosmetics Medicines Soap Perfumes

 Productio  Productio  Productio  Productio  Productio

n n n n n
 Purchase  Purchase  Purchase  Purchase  Purchase
 Marketing  Marketing  Marketing  Marketing  Marketing
 Finance  Finance  Finance  Finance  Finance
 ADVANTAGES

1. Product specialisation: All the activities related to one type of product are
grouped under one department only which brings integration and co-ordination
in the activities.

2. Fast decision-making: The decisions are taken much faster in divisional

structure because there is no dependence on other departments for taking
decisions.

3. Accountability: In this type of structure, the performance of individual

departments can easily be assessed and you can hold the department
accountable for non-accomplishment of objectives.

4. Flexibility: Fast decision-making leads to flexibility.

5. Expansion and growth: New departments can be added without disturbing

existing departments.
 DISADVANTAGES

1. More resources required: Each department will require all the

resources as every division will be working as an independent unit.

2. Product focus department: Each department focuses on their

product only and they fail to keep themselves as a part of one common
organisation.

3. Conflict: Conflict may arise among department on allocation of

resources.

4. Increase in cost: It may lead to increase in cost due to duplication of

activities, providing each division with separate set of similar functions
increases expenditures.
 SUITABILITY

1. Organisations producing multi-product or different line of products.

2. Organisations which require product specialisation.

3. Organisations which require each division to be self contained as under

divisional structure each department has production, sale and finance
department.

4. Growing companies which plan to add more line of products in future.

 QUESTION

Bimal Cloth Ltd. was manufacturing only fabrics. After having great
success in fabric business they started acquiring different new
manufacturing units and acquired units of Electronics, Mobiles and Steel.
With this they started selling multiple products in the market.
State which type of organisational structure should be adopted by Bimal
Clothing now?

a) Functional Structure
b) Divisional Structure
 Difference Between Functional and Divisional
Structure

S. No. Points of Functional Structure Divisional Structure

Difference
1 Basis of Formation This structure is formed on the basis This structure is formed on the
of function. basis of product.
2 Accountability and Difficult to make accountable as Easy to fix the accountability as
Responsibility departments are interdependent. departments work independently.
3 Economy Cost It is economical. It is not very economical because
all the resources are required in
different departments.
4 Development of Less chances as manager becomes More chances as managers
Managers specialised in one function only. perform multifunctions.
5 Specialisation This type of structure brings It brings product specialisation.
functional specialisation.
6 Co-ordination Compared to Divisional less when Better co-ordination because all
company is producing more the activities related to one
products. product are in one department
only.
7 Autonomy of Less autonomy of action. More autonomy.
operations
8 Suitable It is suitable for all types of It is suitable for multiproduct or
organisations. diversified firms.
 FORMAL & INFORMAL ORGANISATION

1. Formal Organisation:

 It clearly spells out the job to be performed by each

individual, the responsibility assigned to each 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.
 Formal Organisation –
Features

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.
 Formal Organisation –
Advantages

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.

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. Coordination: 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.
 Formal Organisation –
Disadvantages

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.
 FORMAL & INFORMAL ORGANISATION

2. Informal Organisation:

 It gets created automatically with the main purpose of

psychological satisfaction.

 Its existence depend on 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.
 Informal Organisation –
Features

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.
 Informal Organisation –
Advantages

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 motivates the
employees.

3. Correct feedback: Through informal structure the top level managers

can know the real feedback of employees on various
policies and plans.
 Informal Organisation –
Disadvantages

1. Spread rumours: According to a survey 70% of information spread

through informal organisational structure are rumours which may
mislead the employees.

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.
 Strategic Use of Informal
Organisation

Informal organisation can be used to get benefits in the formal

organisation in the following ways:

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.
 STRUCTURE OF FORMAL & INFORMAL ORGANISATION

Difference between Formal & Informal Organization

General
Manager

Production Sales Purchase

Manager Manager Manager

Production Sales Officer Purchase

Officer Officer

Formal Organization Informal

Organization
 Difference Between Functional and Divisional
Structure

S.No Basis Formal Structure Informal Structure

.
1 Formation Formal organisational structure is Informal organisational structure gets
formed deliberately in a planned created spontaneously without any
manner. planning.
2 Purpose The purpose of formal structure is to The purpose of informal structure is to
work systematically and achieve the get psychological satisfaction.
organisational goal.
3 Behaviour of Under this structure the behaviour of Under this structure there is no control
members the employees is decided by the of the management over the behaviour
managers. of members. But if the behaviour of
informal group is bringing negative
results then the management may
interfere.
4 Structure Under formal organisation there is In case of informal, there is no well
well defined organisational structure defined structure, no fixed superior or
which decides the scalar chain and subordinate and no scalar chain.
defines superior- subordinate
relationship.
 Difference Between Functional and Divisional
Structure

S.N Basis Formal Structure Informal Structure

o.
5 Communication Under formal structure all the Under informal structure there is no
information passes through scalar fixed path of passing of information.
chain and the managers prefer Information can travel from any
written channels for side. Mostly oral communication
communication. takes place.
6 Leadership In formal structure there is direct Under informal structure there is no
relation between the authority and relation between the authority and
leadership. The person with highest leadership. The person with the
authority is considered as the lowest authority also can be a
leader. Generally the managers act leader.
as leaders.
7 Stability or It is more stable and durable It is not very stable because
duration because once the organisational employees can change their friendly
structure is made, it exists till and social group whenever they
survival of organisation. desire.
8 Flow of Authority flows from top to bottom Authority can flows in all the
authority directions.
 DELEGATION OF AUTHORITY

 In simple words delegation refers to downward transfer of authority from superior to

subordinate.

 After creating accountability on subordinates, the superior also remain accountable

 Principle of Absoluteness of
Accountability

After creating accountability on subordinates, the superiors also remain

accountable.

For example, if the sales manager is assigned a target of selling 1,000 units in one
month, he divided this target among the five salesmen working under him. One of
the salesmen fell sick. So, at the end of one month only 800 units could be sold.

In such a situation, the accountability lies with the manager although he has
delegated or passed this target to his subordinates. But by passing or delegating the
responsibilities, he cannot get rid of accountability.
 QUESTION

Ram was given a task by his superior to perform a task and make a plan in
15 days. He asked two of his subordinated to work upon two aspects of his
task, one of the subordinates met with an accident and could not complete
his work. Who is accountable for this task?

a) Ram is accountable
b) Ram’s superior is accountable
c) Ram’s subordinate is accountable
d) None of them is accountable
 ELEMENTS OF DELEGATION

 There are there elements of delegation;

1. Responsibility (to complete the given task)

2. Authority (the power to take decision)

3. Accountability (answerability in case of non-completion of responsibility)

 Authority is delegated, Responsibility is assumed and Accountability is imposed.

 Responsibility is derived from authority and Accountability is derived from responsibility.

 RESPONSIBILITY

1. Responsibility: It means the work assigned to an individual.

Features of Responsibility:

1. Responsibility is the obligation of a subordinate to properly perform the assigned duty.

2. It arises from superior subordinate relationship because subordinate is bound to

perform the duty assigned by his superior.

3. Responsibility flows upward because subordinate will always be responsible

to his superior.
 AUTHORITY

2. Authority: It means power to take decision. To carry on the responsibilities, ever

employee need to have some authority. So, when managers are passing their
responsibilities to the subordinates, they also pass some of the authority to the
subordinates.

Authority = Responsibility
Features of Authority:

1. In a formal organisation authority arise or originate from an individual's position.

2. Authority refers to right to take decision due to your managerial position.

3. Authority determines superior-subordinate relationship. As superior communicates

his decisions to subordinate expecting compliance from him as per his directions.

4. Authority is restricted by law and rules and regulations of the organisation.

5. Authority arises from the scalar chain which links various job positions.

6. Authority flows downward from superior to subordinate.

7. Authority must be equal to responsibility.

 ACCOUNTABILITY

3. Accountability: To make sure that the employees or subordinates perform their

responsibilities in their expected manner, the accountability is created.

Features of Responsibility

1. Accountability refers to answerable for the final output.

2. It cannot be delegated or passed.

3. It enforced through regular feedback on the extent of work accomplished.

4. If flows upward, i.e., subordinate will be accountable to his superior.

 Difference Between Responsibility and
Accountability

S.No Basis Responsibility Accountability

.
1 Meaning Responsibility means all the Accountability means obligation to complete
physical and mental activities to be the job or to meet the responsibilities.
performed by an individual in the
organisation.
2 Delegati Responsibility cannot be entirely Accountability can never be delegated as it
on delegated as superiors pass their lies with the superiors as well as with
responsibilities to the subordinates. subordinates.
3 Flow of Responsibilities flow upward. Accountability flows upward because
direction managers with more authority are more
accountable or as you move up in the
management, accountability increases.
 Difference Between Authority and Responsibility

S.No Basis Authority Responsibility

.
1 Meaning Authority is the power or right to take It is the duty or task to be
decision. performed by an individual.
2 Origin Authority arises because of a formal Responsibility arises from the
position in the organisation. superior subordinate relationship.
3 Flow of Authority always flows downward Responsibility flows upward as a
direction from superior to subordinate. superior assigns task or
responsibility to subordinates.
4 Delegation Can be delegated. Cannot be fully delegated.
 Comparative Study of Elements of
Delegation

S. Basis Authority Responsibility Accountability

No
.
1 Meaning Power to take decision. Obligation to perform a Answerable for the
task. output of assigned task
2 Origin Arises from formal Arises from delegation of Arises from
position. authority. responsibility.
3 Flow of Flows downward from Flows upward from Flows upward from
direction superior to subordinate. subordinate to superior subordinate to superior.
4 Delegatio Can be delegated. Cannot be fully delegated. Cannot be delegated at
n all.
 IMPORTANCE OF DELEGATION

1. Effective Management
2. Employee’s Development
3. Motivation of Employees
4. Facilitates Organisational Growth
5. Basic of Management Hierarchy
6. Better Coordination
7. Reduce the work load of managers
 CENTRALISATION AND DECENTRALISATION

1. Centralisation:
It refers to concentration of power and authority in few hands.

2. Decentralisation:
• It can be defined as even an systematic distribution of authority at every level of
management.

• Under decentralisation every employee working at different levels gets some share
in the authority.
 Features of
Decentralisation

1. Decentralisation is much more than a mere transfer of authority to lower level.

2. It implies selective dispersal of authority.

3. It shows the belief that people are competent, capable and resourceful.

4. Decentralisation indicates that employees at middle and lower level can assume the
responsibility for effective implementation of their decisions.

5. Decentralisation recognises the need of authority for decision-makers.

6. The top management carefully selects those decisions which will be pushed down to
lower level and those that will be retained at higher level.
 Relation Between Delegation and
Decentralisation

1. Decentralisation is extension of delegation: In delegation, we multiply the authority with

two, whereas in decentralisation the authority is multiplied by many.

Director
Delegatio
n
Production
Head
Delegatio

Decentralisati
n
Production
Manager Delegatio
Supervis n
on or Delegatio
Forema n
n
Delegatio
Machine n
Operator
 IMPORTANCE OF DECENTRALISATION

1. Develops initiative among subordinates (by passing of authority at middle and lower
level)
2. Develops managerial talent for future
3. Quick decision – making
4. Relief to top level management
5. Facilitates growth
6. Better control
 IMPORTANT QUESTIONS

Q1.) Importance of Organizing

Q2.) Process of Organizing
Q3.) Merits & Demerits of Functional & Divisional structure (Case Studies)
Q4.) Importance of Delegation & Decentralization (Case Studies)