34 Principles & Practices of Management

Unit - 3 : Organising
Notes
Structure
3.0 Unit Objectives

3.1 Introduction

3.2 Meaning, concept and Process of Organising

3.3 Importance of Organising

3.4 Span of Control

3.5 Delegation of Authority

3.6 Centralisation and Decentralisation

3.7 Concepts of Line and Staff Authority

3.8 Summary
3.9 Questions and Exercises
3.10 Further readings

Objectives
The key objective of this module is a deeper understanding of meaning of Organising,
the concept of span of control and delegation of Authority. It explains:

 Meaning , concept and Process of Organising

 Importance of Organising

 Span of Control

 Delegation of Authority

 Centralisation and Decentralisation

 Concepts of Line and staff Authority

3.1 Introduction
The organizing function of management follows the planning function and strives to
capture the plans and convert them into tasks, to be divided in jobs. The work flow of
the organization designed around a network of authority-responsibility relations. Thus,
the purpose of organising is to evolve a structural framework within which managers and
other perform their functions and play their roles.

3.2 Meaning, Concept And Process Of Organising

The term ‘organising’ refers to the process of making orderly determination and
arrangement of the tasks, functions, relations and roles necessary for achievement of
certain goals. It involves identification of the activities to be done, grouping these activities
into work units, assignment of tasks among job positions, defining their activity roles and
establishing authority-responsibility relationships among them.

The process of organising seeks to provide answers to such questions as : What

activities are to be performed to achieve organisational goals? How are they to be divided
and sub-divided into tasks and jobs? Where are they to be positioned? How are they to

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be combined and grouped into work units? How is authority divided and dispersed into
managerial positions? How are the various managerial positions tied together with the
work units? How are tasks assigned to people and their roles defined?
Notes
The organising process consists of two sub-processes. They are differentiation and
integration.

Differentiation is defined as the process of dividing and sub-dividing a unit of activity

or authority and segmenting it into identifiable sub units. The need for differentiation arises
because the total activity or authority of an organisation cannot be handled by on man.
(Unless it is a very small organisation). It has to be divided and sub-divided to reduce
its complexity and to make it more manageable by assigning the divided pieces of work
or authority to different individuals.

Integration is the process of tying the differentiated or sub-systems together.

For bringing about unity of effort and for ensuring harmony in the functioning of the
organisation. The need for integration arises because all the differentiated units have
to be pulled together, as otherwise they will remain isolated and fragmented. The larger
and more complex an organisation is, the more is the imperative of differentiation. The
more the degree or differentiation, the greater is the need for integration.

More specifically, the following steps are involved in the organising process.

(a) Identification of the activities required to achieve organisational goals.

(b) 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.
(c) Grouping of the jobs into homogeneous work units, sections, departments and
divisions. This is the function of departmentalization. Various bases can be used for
grouping purposes; functional, territorial, products, process, customer and so forth.
(d) Establishment of relationship among the job and departments and positioning them
into a horizontal structure.
(e) Analysis of the decisions required to be made for managing the activity sub-groups.
(f) Creation of a hierarchy of managerial positions around the activity sub-groups. Tasks
are clearly assigned for each managerial position, the required quantum of authority
is vested therein, and accountability is imposed for proper job performance.
(g) Establishment of the required integration system, linking the various managerial
positions and activity groups.

3.3 Importance of Organising

Organising, as stated earlier, is the process of creation of the structure of formalized
activities, roles and relations expected to be activated and animated by the members
of an organisation for achievement of organisational goals. Organising is important for
performing several other functions of management and is outlined as follows:

(a) It facilitates orderly positioning of organisational work in terms of a network of individual

jobs, sections and other work units.
(b) It enables one to know who is to do what, where one stand in the structure and what
is his ‘space’ and status.
(c) The devolution of authority among various managerial positions is essential for
decision making and control. Managers will know the extent of their authority, and
accountability for making decisions, for instructing and directing people, for controlling
and coordinating the functioning of their work units.

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36 Principles & Practices of Management

(d) The communication structure is a formal organisation in an integral element of the

authority and activity structure. This means that organisational structure facilitates
Notes information flow within the organisation and establishes the patterns of interactions
among the various managerial positions and work units.
(e) Organisational structure provides a framework to enable managers to cope with
organisational change without undermining its stability and continuity. Organisational
change may relate to adoption of new technology, growth, diversification, acquisition
of outside enterprises, and reduction of scale of operations, divestment and so on.
Structural support for such and other strategic changes is indispensable.
(f) The creation of staff units to take over some of the work load of line managers is
meant to give the latter some respite, so as to enable them to concentrate on their
day-to-day management functions.
(g) Several processes which are part of the organising function for example, division of
tasks, creation of compact and homogeneous work units, determination of appropriate
spans of management, unity of command, parity of authority and responsibility etc.
are meant to protect the members of the organisation from the perils of over-work,
confusion, inter-position clashes, harassment and so on.

3.4 Span of Control

A manager at any level in an organisation is required to direct, supervise and
coordinate the tasks of a few individuals who are placed as his subordinates and who form
his work unit. He has direct authority-responsibility relationship with them.The concept
span of management (also known as span of control or span of supervision) refers to the
number of subordinates a manager can directly manage in a work setting.
A A

B C B C D

D E
G F E
F G
Wide or Flat
Narrow or Tall Span of Management
Span of Management

It denotes the degree of direct authority and responsibility of a manager for supervision
and direction of efforts and activities of his immediate subordinates. If a manager has only
a small number of subordinates, say two or three, it means that his span of management
is narrow. His span gets widened with an increase in the number of subordinates directly
reporting to him.
‘Span of management’ is a classical concept in the literature on organizational
structure. An understanding of the concept helps in finding out the reasons for creation
of a number of managerial levels, division of managerial labour and formation of compact
work groups in charge of each manager in an organisation.
Early management writers took a rigid view of the appropriate span of management
applicable to organisations. They generally regarded it as a universally applicable limit
for all organisations and all levels.
Modern theorists do not subscribe to the classical view and argue that even though
there is a limit to the number of subordinates a manager can effectively supervise, the
exact number is to be determined by reference to a wide range of variables. There is no
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Principles & Practices of Management 37
one best span to management valid to all situations. A contingency and systems approach
is more realistic in determining the desirable span of management.
Notes
Factors determining span of management: Several organisational, managerial and
task-related factors have to be considered in the determination of appropriate span of
management.
(a) Quality of allocation of work: A well-defined and clear-mind allocation of work by a
manager to his subordinates helps him to manage his work unit efficiently and thereby
enhances this ability to manager a larger number of subordinates helps him to manager
his work unit efficiently and there by enhances his ability to manager larger number
of subordinates. All subordinates should know what is expected of them, what are
their tasks, and how much authority and discretion they have, the incidence of their
confusion and anxiety as also their dependence on the manager tend to be lower.
(b) Organisational planning: A well-designed system of organisational policies,
procedures, plans, rules, measurable standards and methods lubricates organisational
functioning thereby smoothening superior subordinate relationships and increasing
the possible width of span of management.
(c) Communication system: It is an important factor influencing the span of management.
The extent of direct, regular and noise-free communication between a manager and
his subordinates, as also appropriate interactions between them, determine the span
of management.
(d) Staff Assistance: The managerial work load of managers can be substantially
lightened by entrusting some tasks to specialist staff groups. Managers relatively
freed thereby can easily afford to widen their span of management.
(e) Motivation, ability and skills of manager and subordinates: A mature and skillful
manager with requisite leadership and administrative abilities, styles, perspectives
and skills has a better supervisory span. Similarly, well motivated, well-trained,
knowledgeable, competent and team-spirited subordinates need little supervision.
These factors tend to have favourable effect on the span.
(f) Nature of tasks: In a work unit characterized by simple, standardized, stable and
routine tasks, the extent of supervision required tends to be low. This facilitates
enlargement of the work unit under manager and hence a larger span. If the tasks are
complex, variable and highly inter-related, that call for close and careful coordination
by the manager and hence his effective span gets narrow.
The behavior of above factors differs from organisation to organisation and from level
to level. Hence the appropriate span of management is also variable.

3.5 Delegation of Authority

Delegation of authority is a process by which a manager assigns some of the tasks
within his work jurisdiction to his subordinate managers on a selective basis, allows them
to exercise authority on his behalf to accomplish the tasks and makes them accountable
for performance.

Delegation of authority is at the core of the process of organising and entails the
establishment of superior-subordinate relations among the members of the organisation.
The manger to which authority is delegated by his superior is empowered to decide and
do certain specified things; he can act on behalf of his superior as his representative in
certain respects.

In a sense, delegation of authority is a process by which the organisation’s formal

right to command as vested in the top management is partially passed down the chain
of command in a graded manner by creation of a hierarchy of managerial positions.
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All managerial positions in the hierarchy are vertically tied together through authority-
responsibility relations and these relations are created by the process of delegation
Notes of authority. Each managerial position in the organisation is a cluster of rights, roles,
responsibilities, relationships and obligations which demands the person occupying that
position to function in certain ways.

Steps in delegation: As a process, delegation of authority is effected through certain

integrated steps. At every managerial level, the manager who delegates authority to his
immediate subordinates has to take the following steps:

(a) He has to size up the total work load in his unit - the results expected, the functions,
tasks or activities to be under taken in clear and operational terms.
(b) He has to be dividing the tasks into two sets: those which he alone should handle
normally and those which he can assign to his subordinates.
(c) He has to be assigning the tasks to his individual subordinates. As far as
possible, the task content assigned to subordinates has to be kept compact and
homogeneous.
(d) He has to delegate a part of his authority to his subordinates to enable them
to perform the assigned tasks. He has to ensure that his subordinates are given
enough authority content to enable them to function effectively.
(e) He has to impose a personal obligation or accountability on each of his subordinates
for effective performance of the assigned tasks and for proper exercise of delegated
authority.
Need for delegation of authority and its importance: management is the art of
getting things done through people occupying various managerial and other positions
in the organisation. Delegation of authority which includes assignment of tasks and
imposition of accountability are implicit in this function. Delegation is based on the
elementary principle of division of labour among managerial positions.

In most cases, the set of tasks and the amount of authority vested in each managerial
position are such that the person occupying the position cannot shoulder them alone. He
has to share them with his subordinates by an explicit and formal process of delegation.
Otherwise, he is most likely to be over-burdened with the work. Delegation of authority
is a mechanism by which is manager segregates his activities into those that he himself
should do and those that he can pass on to his subordinates.

Delegation of authority in a planned manner permits managers at every level to

concentrate on those key activities which really need their attention - such important
aspects of decision making, planning, organising, direction and control. Certain other
functions which subordinates can carry out equally well deserve to be transferred to
them. Delegation is an important step which managers have to take to multiply their
own effectiveness.

Delegation is a means of management development. A well-planed delegation results

in creation of multiple centers of managerial authority and competence for purposes of timely
decision making and action. It activates interaction among managers and their subordinates,
thereby promoting better understanding, motivation and involvement among them.

It is obvious that a manager cannot delegate his entire authority; if he does so, he
cannot justify his continuance in the organisation. He has to retain those tasks, which
by virtue of his organisational position, he alone should do. These include setting goals,
planning, and allocation of tasks, motivating subordinates to perform, ensuring control
over their performance and bringing about overall coordinated action of his unit. Also in
an emergency, he should be willing to assume total authority and responsibility.
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Principles & Practices of Management 39
Reasons for non-delegation of authority: In many organisations, managers do
not properly practice the art of delegation of authority. The entire do not delegate or
delegate only marginally. Several assumptions can be thought of as to why managers
Notes
do not delegate their authority. They are listed as follows:

(a) Some managers find problems in segregating their tasks into those which can be
delegated and those which they have to do themselves. They tend to feel that they
have to do everything because every thing is important and cannot be delegated. In
reality, they are fond of doing things themselves.
(b) Managers fear that their subordinates (i) are not able exercise authority and assume
responsibility (ii) lack willingness to cooperate with their boss (iii) cannot be trusted
and (iv) will dominate them and eventually will replace them.
(c) Some manages are over-confident of their own competence to handle all things
effectively; they feel that subordinates will mess up things.
(d) Managers are not able to guide, train and motivate their subordinates to perform the
delegated tasks effectively. They lack leadership, administrative and communications
skills.
(e) Managers are very fond of authority and the associated status. They fear that
delegation of authority means loss of authority with its adverse consequences. They
believe that management is exercise of authority and not its delegation.
(f) Managers are afraid that since their responsibility and accountability to their superiors
cannot be delegated, there is no point in delegating authority. They feel that if they
do things themselves, they can have more control.
(g) There are no proper organisational arrangements, which facilitate delegation, like an
effective communication and control system, a clear set of policies and procedures,
management training and development programmes, equitable reward system and so
on.
Signs of ineffective delegation of authority: Some of the major signs of defective
delegation of authority are indicated as follows:-

(a) When managers do not really have the delegated authority but they believe that they
have it. This will lead them to make decisions on matters beyond their authority.
(b) When managers do have the delegated authority but believe that they do not have
it. This will lead to a situation in which they are always hesitant to decide and act.
(c) When too much authority or too little is delegated to managers in relation to the
tasks assigned, with the result that they will fail either to get the tasks performed or
to exercise their authority to the optimum extent.
(d) When authority is delegated to people without considering their ability and experience
to understand the implications of its exercise.
(e) When the superior manager persistently interferes with the functioning of his
subordinate manager to whom has delegated the authority.
(f) When the higher level manager does not design the mechanism to ensure that his
subordinates exercise their authority properly, carry out the assigned tasks and meet
with their obligations or accountability.
(g) When such authority is delegated in an ad-hoc matter to meet with situations and
crises as they of necessity to do so.
(h) When authority, once delegated to a subordinate cannot be withdrawn by the superior
manager, in case of necessity to do so.

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40 Principles & Practices of Management

(i) When the superior manager takes a very serious view of even incidental errors of
judgment in the exercise of authority by the subordinate.
Notes
Guidelines for effective delegation of authority: In order to improve
managerial functioning, some more guidelines on delegation of authority are
suggested as under:-
1. There should be a match between the aptitude and abilities of the subordinates
and the tasks entrusted to them. The principle of fitting jobs to individuals should
be followed as far as possible.
2. The delegating manager has to know the nature of tasks and functions which he
himself should handle and which he cannot delegate. These relate to important
planning and control functions and certain decision-problems which are to be
handled at his own level.
3. There should be a clear definition and assignment of tasks to the subordinate
managers. Preferably, they should be in a written form to avoid vagueness and
misunderstanding. The subordinate should know what is expected of him in terms
of results.

4. Each subordinate should know as to how his tasks are related to the tasks of his
other colleagues in the section. This will bring out cases of overlapping tasks
which can either be justified or rationalized to make them non-overlapping.

5. The content of authority delegated to the subordinate manager should be clearly

defined so that he knows where he stands and what his jurisdiction is while
making decisions and taking action initiatives.

6. In the case of those subordinates who are new to the job, the superior manager
should delegate authority and responsibility in a gradual manner. In the initial
stages, the degree of authority and responsibility delegated should be low while
supervision and guidance should be high. As the subordinate gains experience
and confidence, the extent of guidance and close supervision should be reduced
while the content of delegation should be increased.

7. Once tasks are assigned and authority is delegated, the manger should allow
the subordinates to function with a measure of freedom. In other words, the
superior manager should avoid the temptation of constantly interfering with or
closely supervising the work of his subordinates. This does not however, mean
that the manager should not provide advice and support to his subordinates. But
this should be of a facilitating type, to help the subordinate in developing and
sharpening his managerial competence and skills.

8. The manager should have the necessary skill to provide inputs to his subordinates
to develop their talents and performance competence. He should establish a
supportive relationship with his subordinates, be a friend, guide and philosopher
to them, set an example to them by his own behavior and motivates them to take
initiatives and bold responsibilities.

9. The manager should also maintain open lines of communication with his
subordinates. The latter should feel free to get in touch with the former as and
when necessary, to get clarifications or information pertaining to their problems.
The manager also should be prompt in passing on any important information to
his subordinates. He may also create conditions in which his subordinates can
exchange views and ideas among themselves and with him at regular intervals
on matters of common interest.

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Principles & Practices of Management 41
10. Delegation does not mean abdication of authority by the manager in favour of his
subordinates. The manager has an absolute responsibility for making the process
of delegation a working and effective way of getting things done though his
Notes
subordinates. For this purpose, he should establish adequate norms of performance
for his subordinates and evaluate their performance in terms of these norms.

3.6 Centralisation And Decentralisation

The concepts centralisation and decentralisation are used with reference to the
patterns of location and distribution of management authority within an organisation.
Authority is one of the most activating forces in the organisation. The patterns of its location
and distribution and the creation of a management structure have important effect on the
function of the organisation. We may therefore try to understand these concepts and
their implications for organisations.

Centralisation
Centralisation of authority means retention or concentration of management authority
in a relatively few key managerial positions at the nerve centre of the organisational
structure viz. at the top level. It covers the kind and content of authority retained at the
top management level.An organisational structure is said to be highly centralized if all or
most of the management authority is concentrated at the top and if managers below the
top level are vested with little or no authority.
In a highly or excessively centralized organisational structure, the top management
assumes total and exclusive responsibility for running the organisation and for achieving
its goals. It takes upon itself the entire range of tasks of planning, organising, direction
and control. Top management seeks to get things done by a rather continuous process of
making almost all decisions and taking action initiatives. It undertakes close supervision
and control over every aspect of organisational functioning. Very little managerial authority
is delegated to the middle and lower level managerial personnel. Managers at these levels
are required to execute the decisions made at the top level in the manner prescribed and
to carry out all the orders.
Advantages: Conceptually and theoretically, certain advantages are attributed to
centralisation of authority in the above sense in organisations. These are briefly listed
as follows:-
1. Centralisation permits unified, single minded determination of things and direction
of people in the organisation since all decisions emerge form one point. Since
all decisions and moves originate from one point, it is simpler to achieve a high
degree of consistency and uniformity in organisational functioning.
2. The authority structure created by centralisation is simple and neat. Everyone
in the organisation and other who have some work with it know the source of
decisions and action initiatives. There is little scope for confusion and chaos so
far as the locus of authority is concerned. There is only one power centre; the
rest are all activity centers.
3. Since much authority is concentrated at the top, it tends to make the top
management strong and powerful. This adds to the stature and personality of
the organisation. A strong top management is especially needed to overcome
crisis situations, and to provide effective leadership in moving the organisation
towards its goals.
4. In a highly centralized setting, the over-all organisational perspectives and
interests are almost non-existent. The dangers associated with dilution of goals,
duplication of efforts and resources and distortion or results are low.
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5. Top management is generally supposed to possess maturity and wisdom not

Notes generally found at lower managerial levels. The leadership provided by a mature
top management in a highly centralized organisation tends to be of high quality.
This is beneficial to the organisation. The fate of the organisation does not depend
on the quality. This is beneficial to the organisation. The fate of the organisation
does not depend on the quality of management at lower levels.
Limitations: The limitations of excessive centralisation of authority seem to be
overwhelming, especially for a growing organisation operating in a complex environment.
These limitations are listed as follows:-
1. Excessive centralisation of authority means a top-heavy and top-sided authority
structure. A heavy top weighs down the organisation since the middle and
lower levels are without power and authority and hence are weak. The overall
organisational structure also becomes weak, because there are sharp disparities
in the distribution of authority, influence and status.
2. Concentration of managerial power at the top may lead to its abuse. The adage
‘power corrupts and absolute power corrupts absolutely’, implies in this context.
An alternative possibility is that top management fails to exercise its authority
properly for purposes of decision making, overall direction and control of the
organisation. This situation arises when top management mistakenly equates its
authority with wisdom and does not bother to seek reliable and timely information
from the right sources at middle and lower levels.
3. There is no real management structure at the middle and lower levels, which
can share some managerial workload of top management. The latter will not
be above to cope with the heavy workload of total direction and management.
As an organisation grows, its top management’s capability to handle the work
load becomes weak. It tends to concentrate on eash-to-solve, day-to-day
problems and crises in a routine manner neglecting the major issues and
problems.
4. Over-centralisation of authority fosters a rigid, bureaucratic and autocratic
atmosphere in the organisation. It discourages initiative, enthusiasm and
dynamism on the part of organisational personnel. They tend to experience poor
motivation and morale. Lack of authority corrodes their of sense of confidence and
commitment. The organisation thereby fails to make the best use of its human
assets.
5. The communication system in a centralized structure tends to be rather weak.
It is characterized by delays, discontinuities and distortions in transmission of
information for decision making, action and control. Top management tends to
remain ignorant of organisational needs and pressures for timely and effective
decisions and action.
6. A highly centralized organisational structure is an impediment to organisational
growth or may not have the confidence to manage growth.
Absolute or excessive centralisation of authority for all matters of decision making
and action is generally found in small owner-managed enterprises. The owner-manager
cannot think of any need for devolution of authority by creation of levels of management.
This is because of the small size of the enterprise. Over-centralisation of authority is
also not uncommon in some medium and large sized enterprises in India and abroad.
In India, there is evidence that in many fairly big sized enterprises, all major and many
minor decisions are made at the top level only in name; they are not allowed to do a
thing on their own.

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Decentralisation
Decentralisation means partial dispersal and devolution of management authority
Notes
from the central or top management to lower operational management levels in a formal
and purposeful manner. In a decentralized structure, authority is partly segregated and
pushed down though all managerial levels including the supervisory level. Managers at all
levels are vested on an enduring basis with appropriate degree of authority commensurate
with the tasks and responsibilities assigned to them.
While there could be absolute or almost absolute centralisation of authority, there
could not be absolute or total decentralisation of authority. In a decentralized setting, top
management retains the needed amount of authority to permit itself to function as the
central source of strategic direction and control. It retains overall jurisdiction over the
organisation. Such authority could not be delegated to lower levels. This means that a
decentralized organisational structure contains some amount of centralisation also. Without
such centralisation, decentralisation has no meaning; it will fail. Like any other human
innovation, decentralisation has both merits and demerits. The merits constitute strong
compelling reason for organisations to go for decentralisation of authority and activities.
Several merits are listed as follows:-

Merits
1. Effectiveness: Decentralisation is a means of increasing the effectiveness
of large, multi-product, multi-plant organisations to combine the economies of
large scale operations with the simplicity of small unit management. It is a way
of integrating total corporate unity of purpose with the diversity of sub system
environment. It binds together the diverse sub systems of large and fast growing
organisations.
2. Organisational Growth: It is an efficient structural strategy to manage
organisational growth and diversification as also to cope with the complexity,
diversity, uncertainty and volatility of the external environment. It provides the
much needed flexibility for the large and growing organisation to harness problems
of diverse operations, technologies, and their environment.

3. Sustainability: Decentralisation represents creation of multiple managerial

centres of initiative and capability to cope with diverse and unique situations in
the organisation. It thereby increases the organisation’s capability to survive, to
grow and to gain control over the complex environment.

4. Improval Commonication: Decentralisation reduces the strain on the

organsation’s communication system, because as far as possible, decisions are
made at the points of information generation and the points of action.

5. Divisional Labour: Decentralisation frees top corporate management from routine

operating responsibilities and enables it to devote its full energy for strategic
planning, major policy formulation, overall coordination and control.
6. Options Utilizational Resources: It facilitates the development and utilization
of executive talent and skills at the middle and lower managerial levels because
managers at these levels are called upon to assume authority and responsibility
for making decisions and taking action initiatives. The operating units in a
decentralised organisation serve as training grounds for managers with general
or top managerial potential, who can eventually move to the top corporate level.
7. Pragmatic: The quality of operating decisions in a decentralised setting tends to
be high. Decisions will be more appropriate and timely because they are made

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nearest to the points of the problem, information and action. Decisions will also
Notes be pragmatic and acceptable because they are made by people who are to
implement them.
8. Democracy: In a way, decentralisation represents debureaucratisation and
democratization of organisations. It results in less stratified organisational structure
to the extent that management authority is diffused among the multiple layers of
management. There is a relative balance in the power structure and power relations
among the managerial levels.

It should be obvious from the above that decentralisation shares quite a few
advantages of delegation of authority. In fact, delegation and decentralisation are closely
related. The relations and distinction between these concepts will be discussed shortly.

Limitations
At the same time, one has to understand the limitations, associated with
decentralisation, which are outlined as follows:-

1. Loss of control: Decentralisation, if carried too far without proper planning, tends
to create powerful ‘States within States’ which behave in their own ways. There is
a danger that the top corporate management loses its hold over the functioning
of semi-autonomous units. The latter may drift away from the central corporate
system. They may mistake their autonomy for independence to do whatever
they want; this amount to abuse of autonomy granted to them. They may seek
to pursue their narrow goals as if they are ends in themselves. They may not
observe the policy guidelines while making operational decisions. They may go
beyond the autonomy and make decisions on matter which really fall within the
jurisdiction of top management.

2. Imbalance: It is often difficult to work out proper balance between centralisation

and decentralisation. The operating units always look for more autonomy without
accepting commensurate accountability for results. Top corporate management
may apparently grant autonomy but take it away in actual practice through a string
of controls, administered in the name of coordination. The operating units are
likely to feel suffocated under such controls. They may lead to conflicts between
top management and the management of operating units.A conflict is also likely
to arise among the decentralised units themselves incidental to their interaction
through inter-unit transactions. They may destructively compete with each other
in the product and through factor markets. They may vie with the each other for
a higher share of corporate facilities and resources.

3. Communication problems: There may be serious problems of communication

gaps between corporate management and operating units in understanding
corporate goals and policy guidelines and in designing performance reports.

4. Craze for authority: If the managers in charge of semi-autonomous operating

units are fairly senior and competent, they may not be content with simple
operational authority. They may look for something more to make somewhat major
decisions concerning their units. This may not be granted by top management;
consequently managers of operating units may feel somewhat frustrated.

5. Scarcity of general management talent: It is not easy to get really suitable

managers to operate and handle the decentralised units. Managers of fairly large
decentralised units should have ‘general management’ qualities, perspectives and

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skills in order to successfully pilot their units. The availability of such managers
is not abundant. This problem tends to restrain some organisations from going
in for decentralisation.
Notes
6. Workable Balance: In a truly or genuinely decentralised organisational structure,
there is workable balance and mutual dependence between centralisation and
decentralisation. Certain major functions and activities are to be located at the
head-quarters or top corporate management level while other functions and
activities need to be dispersed to semi-autonomous operating units.

1 It is matter of judgment and organisational relevance as to which areas are to be

centralized and which are to be decentralised. However, judgment can be based
on a few criteria.

2 Perhaps the foremost criterion is the cost of the decision. The costlier the decision
in terms of monetary and other implications, the greater will be the desirability of
making it at relatively higher managerial levels.

3 Another criterion is that decisions and action initiatives which have inter
departmental or inter-divisional implications should be made at a higher level
where authority extends over more than one department.

4 Decisions which commit the organisation over a long period of time should also
be made at a relatively higher level.

5 Problem areas where familiarity is required for solving them should be

decentralised to the point where such familiarity is present. Matters calling for
spot decisions need also be decentralised.

As an organisation grows, the processes of centralisation and decentralisation have

to be properly combined, balanced and integrated because they are mutually dependent
processes. For a large and growing organisation, centralisation of managerial authority
for strategic decisions and action initiatives goes hand in hand with decentralisation of
managerial authority for making operational and administrative decisions at lower levels.
A strong and dynamic central management is imperative for designing and keeping the
various subsystems together and for activating them in concerted manner. At the same
time, the decentralised units have also to be given sufficient autonomy for decision making
on operational matters. They have to be allowed to become effective contributors not
only in achievement of their goals but also of over-all corporate goals.

Centralisation of authority is a means to promote corporate unity and identity, overall

consistency and uniformity of decisions and moves, achievement of certain economies in
staff services and facilities and so on. Decentralisation of authority is effected in recognition
of the diversity of environments of various operating units and the need for relating
decisions to the nature of problems, information, situational knowledge and points of action.
Centralisation and decentralisation are mutually dependent since they ensure fusion of
corporate unity and diversity, freedom and control, creativity and conformity, economies
of large sized organisation and the informal simplicity of small sized organisation.

Relation and distinction between delegation and decentralisation

The relation and distinction between the concepts and processes of delegation and
decentralisation are clarified as follows:
1. Scope: Delegation is a tactical activity of managers to reduce and share their work
load with their immediate subordinates and to concentrate on important areas

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46 Principles & Practices of Management

of planning, control and co-ordination. Decentralisation is a strategic decision

Notes and operation initiated by top management to cope with organisational and
environmental complexity and change. It is an organisation’s structural response
to strategic challenges and changes.
2. Life Span: Delegation is task specific and thus has shorter life span. The
delegation ceases as soon as task is complete. Decentralisation is brought
about when its need is felt through an organisation wide effort keeping a balance
between central management and decentralized unit. Once an organisation is
decentralised it will remain so until its need is felt again.
3. Choice: Delegation is a normal managerial means of getting things done
through subordinates. It infact creates superior-subordinate or authority-
responsibility relations between a manager and his immediate work unit members.
Decentralisation is an organisation-wide feature whereby top management
pushes down operational authority to lower level activity units. The relationship
is between top or central management and the decentralised decision-making
or activity units. For an organisation and its management, delegation of authority
in general is not a matter of choice. It is not a question of whether to delegate
or not to delegate. Managers, if they are not to get trapped with routine and
operational work load have to delegate for their own survival. Decentralisation,
on the other hand, is not necessarily indispensable or inevitable in all cases. It
can be considered as one of the options in many cases.Many organisation do
function well without decentralisation.
4. Freedom of action: Decentralisation is accomplished through the process of
delegation. For effecting delegation of authority, the requirement of decentralisation
is not necessary. This means that delegation of authority could take place without
decentralisation whereas there can be no decentralisation without delegation.

5. Degree of autonomy: Delegation of authority does not always imply granting

of autonomy to subordinates. Delegation, in a sense is a continuous process.
The interaction between the manager and subordinate is rather intense. But in
a decentralised setting, the lower level decision making units and their managers
are granted a semi-autonomous status. Interference of top management in
operational matters handled by the decentralised units tends to be minimal.

3.7 Concepts of Line and Staff Authority

Like many other organisational concepts, the concepts of line and staff have their origin
in military organisations. Having found them useful, business and other organisations
also began to adopt and introduce them into their structures.
We may first understand these concepts in the military context and then discuss
their meaning, distinction and implications of adoption by contemporary business and
other organisations. In military parlance, the term ‘line’ is perhaps a short expression
of the military line or chain of command. Line officers are those who are positioned
along the military chain of command and who are in actual charge of defence and
combat operations. They plan, organize, direct and control military operations. Staff
officers are those who provide advisory, supportive and other related services to the
line officers and units. Staff services include engineering, signals, medical services,
food and other supplies and so on.
Line and Staff in Organisations - Their Meaning and Distinction: the meanings of
and distinction between the notions of line and staff, as concepts and as practices, in
business and other organisations, has two dimensions.

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Principles & Practices of Management 47
 One dimension is on the basis of nature of activities, and
 The second dimension is on the basis of authority relationships. Notes
Nature of Activities: An organisation undertakes certain activities in order to achieve
its objectives. Traditionally, all primary, basic and core activities which are directly relevant
and related to the achievement of organisational objectives are designated as line activities;
they are grouped as line departments/units. All secondary, subsidiary and supportive
activities which smoothen and facilitate the undertaking of line activities are designated
as staff activities; they are grouped as staff departments or units. Staff activities are meant
to aid and assist the effective execution of line activities. They indirectly contribute to the
achievement of organizational objectives.

Check your progress

Tick mark the most appropriate answer
1. Decreasing the role of su3bordinates in decision-making is known as
a) Decentralization c) Centralization
b) Stabilization d) Organization
2. ……………… is a blueprint of the formal organization indicating the lines of authority
within the organization.
a) Management chart c) Formal chart
b) Authority chart d) Organization chart.

3. Which of the following determines the character of an organization?

a) Technology c) Managerial Characteristics
b) Strategy d) All of the above.

4. The ability to see the organization as a whole and being aware how changes in any
one part of the organization affect all the other parts is known as:
a) Leading skill c) Conceptual skill
b) Human skill d) Organising skill

5. Spain of management is determined by-

a) One to one relationship c) Cross relationship
b) Group relationships d) Personal relationship

3.8 Summary
In this chapter we have covered a large number of concepts, processes and dimensions
of organizing. The organizing function involves the determination of activities that are
required to be done to achieve the organizational objectives. It also involves assigning
these activities to persons qualified for the specific activities. In general, organizing is
the function of gathering resources, establishing orderly uses of these resources and
structuring tasks to fulfill organizational plans. It is an important function of managers and
is related to the other functions in several ways.

3.9 Questions and Exercises:

1. Discuss the importance and Process of Organising
2. Authority is at the base of all formal organisations. Explain.

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48 Principles & Practices of Management

3. Discuss the concept of Centralisation and Decentralisation

Notes 4. What are the various factors determining an effective span.
5. ’Delegation is the essence of Management’ Discuss.

3.10 Further Readings:--

Tripathi P. C., and Reddy P.N., Principles of Management, Tata McGraw Hill,2008
Robbins,Stephen P ,Management Prentice Hall,1991
Brech,E.F.L.,Principles and Practice of Management(London: Pitman,1972)
Miner,John B., The Practice of Management(Columbus: Charles E.Merrill Publishing
Co. 1985)

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