Unit 2

Organisatio
• According to n Allen, “Organisation
Louis is the
process of identifying and grouping work to be
performed, defining and delegating responsibility
and authority and establishing relationships for the
purpose of establishing relationships for the purpose
of enabling people to work most effectively together
in accomplishing objectives”.

• According to Koontz and O’Donnell , “Organisation is

the establishment of authority relationships with
provision for co-ordination between them , both
vertically and horizontally in the enterprise
structure”.
 Importance of Organisation
• Helps in optimum utilisation of technological
innovations
• Helps in administration
• Promotes growth and diversification
• Training and development of personnel
• Easy co-ordination
• Encourages initiative
• Better human relations
 Objectives of Organisation
• To help management
• To increase production
• Co-operation of employees
 Characteristics of Organisation
• Common objectives
• Co-ordination
• Division of work
• Co-operative relationship
• Well defined Authority – Responsibility
relationship
 Formal and Informal Organisation
S.No. Particulars Formal Informal
1. Meaning Consciously co-ordinated Spontaneous personal
relationships relationships

2. Basis Delegation of Personal needs, attitude and

authority,functions,procedur prejudices
e and regulations

3. Nature Stable and predictable Unstable and unpredictable

4. Sources of Formal position Informal without position
authority

5. Form Definite structure and well Structure less and full of

defined jobs discretions

6. Emphasis Organisational work People

 Requisites of an efficient Business Organisation

• Sound business policies

• Proper supervision and control
• Co-operation and co-ordination
• Capacity for business expansion
• Efficient personnel management
 Organisation Structure

• Organisation structure is the established

pattern of relationships among components or
parts of the organisation.

• Organisation prescribes
structure relationships various positions
among in business.
activities the

and
 Designing Organisation Structure
• Identifying activities
• Grouping of activities
• Delegation of authority
 Features of a good Organisation Structure

• Clear line of authority

• Adequate delegation of authority
• Span of control
• Simple and flexible
 Authority
• Authority is the legitimate right to give orders and
get orders obeyed.

• Authority is given to influence the behaviour of

subordinates so that right things are done at right
times.

• The right of decision making also goes with

authority. This will enable in deciding what is to be
done, when it is to be done and who is to do it.
 Delegation
• Delegation is an administrative process of getting
things done by others by giving them
responsibility.

• According to Hiner, “Delegation takes place when

one person gives another the right to perform
work on his behalf and in his name, and the
second person accepts a corresponding duty or
obligation to do what is required of him”.
 Characteristics of Delegation
• Delegation takes place when a manager grants some of his
powers to subordinates.

• Delegation occurs only when the person delegating

the authority himself has that authority.

• Only a part of authority is delegated to subordinates.

• It is only the authority which is delegated. He/ still

She remains accountable.

• A manager delegating authority can reduce, enhance or

take it back. He exercises full control over the activities of
subordinates even after delegation.
 Importance of Delegation
• Relieving top executives at times
• Improved functioning
• Helps in employee development
• Helps in succession planning
• Helps in expansion and diversification
 Elements of Delegation
• Assignment of Responsibility
• Grant of Authority
• Creation of Accountability
 Authority and Responsibility
S.No. Point of Difference Authority Responsibility

1. Meaning It is a right of a superior It is the obligation of a

to command the subordinate to perform an
subordinates. assigned task.

2. Basis It normally arises either It arises from superior-

from legal provisions subordinate relationship
and formal contract

3. Delegation Can be delegated from It cannot be delegated

a superior to
subordinate

4. Duration It may continue for a It is over when the assigned

long period task is completed
 Accountability
• Accountability is the obligation of an individual to
formally report to his superior about the work he
has done to discharge his responsibility.

• Accountability cannot be delegated to anybody else

even though the work may be done by a
subordinate. A person remains accountable to his
superior.

• Authority always goes downward and Accountability

goes upward.
 Powe
r
• Power is the capacity to influence the behaviour of others. A
person may not have authority but still he can yield power.

• Authority is the right to command whereas Power is

the capacity to command.

• Authority is exercised because of a position in the organisation

but the power is exercised because of the person.

• Authority is delegated to lower levels from higher levels while

Power can be acquired by different means.

• Authority has a hierarchical relationship but Power has

no relation to hierarchy.
 Difficulties involved in Delegation of
Authority

• Over confidence of Superior

• Lack of confidence in Subordinates
• Fear of delegation in Superior
• Inability of subordinates
• Communication gap
Centralisation and Decentralisation of
Authority

• Inthe words of Henry Fayol ,

“Everything
subordinate’s
which goes to role increase the
decentralisation
importance of,
everything is goes to is
centralisation”.which reduce
 Centralisation of Authority
• If the power to take decisions remains in one
hand at the top , is the case of Centralisation.

• All decisions are taken at top and subordinates

donot have authority to change or amend
them.
 Decentralisation of Authority
• If decision making power is dispersed among
many persons , is the case of decentralisation.

• In a decentralised set up, subordinates enjoy

more powers and play an important role in
decision making process.
 Advantages of Centralisation
• Standardisation of procedures and system
• Facilitates evaluation
• Co-ordination of activities
• Economic
 Disadvantages of Centralisation
• Destroys individual initiative
• Over burden of few
• Slows down the operation
• No scope for specialisation
 Advantages of Decentralisation
• Reduces burden of top executives
• Quick decision making
• Motivation of subordinates
• Effective control and supervision
• Sense of competition amongst departments
 Disadvantages of Decentralisation
• Lack of co-ordination
• Lack of able managers
• Costly
• Difficulty in control
 Organisation Chart
• Organizational chart is a
representatio employeesof in an
diagrammatical
n The functions and their
organisation.
relationships, the channels of authority and
relative authority of different managers are
depicted in an organisation chart.

• It is a graphic presentation of
organisation structure.
 Types of Organisation Chart
• Vertical or Top to bottom
• Horizontal or Left to right
 Vertical Organisation Chart
•A Vertical Organisation chart looks
like a pyramid. At the top is the CEO
or company president. A single
segment consists of a series of middle
management and the manager who is
responsible for their department.

•A “vertical” company is known for

having a large staff of middle
managers between the CEO and the
front line. Individual vice-presidents
direct the activities of the staff below
them according to specific lines of
business.
 Vertical Organisation
• In this chart major functions are shown at the
top and subordinated functions in successive
lower positions.

• The President / Top Management controls

various functional managers , who in turn
have downward staff as the requirement of
respective departments.
 Horizontal Organisation Chart

Horizontally oriented companies have relatively few layers of management between

the CEO and front-line personnel. It is thought that with fewer individuals in the chain
of command, decisions can be made more quickly.
Horizontal Organisation Chart
 Forms / Types of Organisation
• Line Organisation
• Functional or Staff Organisation
• Line and Staff Organisation
• Matrix Organisation
 Line Organisation
• Authority flows directly and
vertically from the top of the
managerial hierarchy towards
down to different levels of
managers and subordinates and
down to the operative level of
workers.

• In this kind of structure every

manager exercise a direct
authority over his subordinate
who in turn directly reports to
their superiors.

• There a hierarchical
arrangement
is of authority.
There are no staff specialists.
 Staff or Functional Organisation
• The organisation is divided
into a number of
functional areas. This
organisation has grouping
of activities in accordance
with the functions of an
organisation such as
production, marketing,
finance, human resource
and so on.

• The specialist in charge of

a functional department
has the authority over all
other employees for his
functions.
 Line and Staff Organisation
• It is a combination of line and
functional structures. In this the
authority flows in a vertical line
and get the help of staff
specialist who are in advisory.
When the line executives need
advice, information about any
specific area, these staff
specialists are consulted.

• For example Chief accountant

has command authority over
accountants and clerks in the
accounts departments but he
has advisory relationship with
other departments like
production or sales.
 Matrix Organisation

• This is also known as project management structure. Such structure violates the
principle of ‘unity of command'. The employees in these organisation have two bosses
– their functional department managers and project managers. They follow the dual
chain of command.
 Staffing
• Organizing involves both structure and resources
to be organized and the ‘human resource’
amongst these stands most important as it is the
only resource which can ‘think’ and ‘act’.

• The process of manning an organisation

is
‘staffing’.

• Staffing is filling work positions and maintaining

such positions that are needed over time, fully
manned by competent people.
 Staffing
• According to MacFarland , “Staffing is
the
function by which managers
organization through build an the
selection and developmentrecruitment,
of individuals
as capable employees”.
Staffing Process / Elements of Staffing
Human Resource
Planning

Employee
Job Analysis
Separation

Compensation Recruitment

Performance
Selection
Appraisal

Training and Placement and

Development Orientation
 Human Resource Planning
• Human planning or
resource planning manpower by
is
management thedetermines
process
how an organisation
should move from its actualwhich manpower a
position to desired manpower position.

• Inshort HRP forecasts future

manpower requirements and how can they be
fulfilled.
 Job Analysis
• Job Analysis is a detailed and systematic study
of information relating to the operations and
responsibilities of a specific job.

• It is a procedure by which detailed

information is obtained about the job to be
performed.
 Recruitment and Selection

• Recruitment the process of locating

is
potential individuals who might join an
organisation and encouraging them to apply
for existed or anticipated job openings.

• Selection is the process of choosing best(who

have the relevant qualification) amongst the
individuals who have applied for a particular
position or projected job opening.
 Placement
• Placement is a process in which the new
employee is allocated the job he is hired for.
Placement is the responsibility of the superior
or colleague with/under whom employee has
to work. The HR department monitors the
right placement so that the new employee
must settles down satisfactorily in the work
place.
 Orientation
• After an employee has been selected and
placed, he/she is provided with the basic
background information about the employer,
working conditions and the information
necessary to perform his job satisfactorily.

• The employee’s orientation helps him perform

better by providing him information of the
company rules, and practices.
 Training and Development
• According to , “Training courses are
Campbell
typically such
purpose, designed a shortofterm,stated
as the operation some piece set
of
for
machinery , while development involves a
broader education for long term purposes”.

• Training is short term process focused and

oriented towards definite purpose.

• Development is a long term educational process

broadening an individual’s skills for future
responsibilities.
 Performance Appraisal
• A Performance Appraisal (also called a
performance evaluation) is one small step in a
performance management system. An appraisal
refers to the process of evaluating an employee’s
past work and accomplishments with the
purpose of rating their performance.
 Compensation
• Compensation may be defined as money plus
many kinds of benefits and services an
employee receives against his/her
contribution / performance in organisation.
 Employee Separation
• When an employee separates or remains
no
more part of an organisation due
reason to any is to be
considered
separation. employee