CHAPTER 5 - ORGANISING

Meaning of Organizing
The process of organizing refers to identifying and grouping of activities to be
performed and establishing authority relationships among them. It is concerned
with arranging all the activities of employees in a logical and orderly manner.

Definition of Organizing
According to Henry Fayol, " to organize a business is to provide it with everything
useful for its functioning that is raw materials, machines, tools capital and
personnel".

Steps in the organizing process

1. Identification and division of work

The first step in the process of organizing involves identifying and dividing the
work that has to be done in accordance with previously determined plans and it
also helps to avoid duplication.

2. Departmentalization

Once work has been divided, all those activities which are similar in nature must
be grouped together. This facilitates specialization. This grouping process is called
departmentalization. Departmentalization is done:

• On the basis of function:

The activities are grouped into different departments on the basis of various
functions example marketing, production etc.

• On the basis of type of product manufactured :

The activities are grouped into different departments on the basis of products
manufactured example food division, textile division etc.

• On the basis of territory :

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The activities are grouped on the basis of Territory or zones example North, South
etc.

3. Assignment of duties

It is necessary to allocate work to various employees. Once department have been

formed each of them is placed under the charge of an individual. Jobs are then
allocated to the members of each department in accordance to their skills and
competencies. The work must be assigned to those who are best fitted to perform it
well.

4. Establishing reporting relationships

Merely allocating work is not enough. Each individual should also know who he
has to take orders from and to whom he is accountable. The establishment of such
clear relationships helps to create a hierarchical structure and helps in coordination
various departments.

QUESTIONS
One mark questions

1. What does organizing mean?

2. Which management function translates plans into action?

2 mark questions

1. Define organizing
2. Write the first two steps in the organizing process
3. On what basis departmentalization is done?

4 marks questions

1. Explain the steps in the organizing process

Importance of Organizing
1. Benefits of specialization

Organizing leads to a systematic allocation of jobs amongst the workers. It reduces

the workload as well as enhances productivity because of the specific workers
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performing a specific job on a regular basis. Repetitive performance of a particular
task alarms a worker to gain experience in that area and leads to specialization.

2. Clarity in working relationship

The establishment of working relationships clarifies lines of communication and

specifies who is to report to whom. This removes ambiguity in transfer of
information thereby enabling the fixation of responsibility and specification of the
authority to be exercised by an individual.

3. Optimum utilization of resources

Organizing leads to the proper usage of all materials, financial and human
resources. The proper assignment of jobs avoids overlapping of work and also
makes possible the best use of resources.

4. Adaptation to change

The process of organizing a loves a business enterprise to accommodate in the

business environment. It aloud the organization structure to be suitably modified
and the revision of interrelationship among managerial levels to pave the way for a
smooth transition

5. Effective administration

Organizing provides a clear description of jobs and related duties. This helps to
avoid confusion and duplication. Clarity in working relationship enables proper
execution of work. Management of an enterprise thereby becomes easy and this
brings effectiveness in administration

6. Development of human resources

Organizing stimulates creativity and reduces the supervision on subordinates and

assigns routine jobs to them. The reduction in work load by delegation is not just
necessary because of Limited capacity of an individual but also allows the manager
to develop new methods and ways of reforming tasks.

7. Expansion and growth

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Organizing helps in the growth and diversification of an enterprise by enabling it to
deviate from existing norms and taking new challenges.

QUESTIONS

One mark questions

1. Enlist any one importance of organizing

8 mark question

1. What is organizing? Explain its importance

Organization structure
It is the network of job positions, responsibilities and authority at different levels
of the organization.

Types of organization structure

On the basis of grouping of activities

On the basis of grouping of activities they are divided into Functional and
Divisional Structures

1. Functional structure

It is formed by grouping of activities of similar nature under one department. It

refers to grouping of jobs of similar nature and organizing these major functions as
separate departments such as production, marketing, finance etc.

(DRAW DIAGRAM)

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Advantages
1. Specialization

A function and structure leads to occupational specialization since Emphasis is

placed on specific functions.

2. Efficiency

It helps in increasing managerial and operational efficiency and this results in

increased profit.

3. Minimizes cost

It leads to minimum duplication of efforts which results in economies of scale and

thus reduces cost.

4. Better control and coordination

It promotes control and coordination department because of similarity in the task

being performed.

5. Proper attention

It ensures that different functions get due attention.

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 6. Ease in training employees

It makes training of employees easier as the focus is only on a limited range of

skills.

Disadvantages
1. Functional empires

A function and structure places less emphasis on overall organization. Search

practices may lead to functional empires and the importance of particular functions
maybe over emphasized.

2. Problems in co-ordinate

Pursuing departmental interest at the cost of organizational interest can also hinder
the interaction between two or more departments. It may lead to problems in
coordination different departments.

3. Conflict of interests

A conflict of interest may arise among departments when the interest of two or
more departments is not compatible.

4. Inflexibility

It may lead to inflexibility as people with same skill and knowledge base may
develop an arrow perspective and thus have difficulty in appreciating each others.

2. Divisional Structure

In a divisional structure, the activities are grouped on the basis of product line.
Each division performs all the functions related to the respective product. Large
organizations with diversified activities generally follow the Divisional structure.
The Divisional structure is suitable for those organizations involved in production
of different type of products.

(DRAW DIAGRAM)

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Advantages
1. Product specialization

The members of a division gain experience in all functions related to a particular

product. Product specialization helps them in the development of varied skills and
prepares them for higher positions.

2. Greater accountability

In divisional structure each product department is treated as a profit centre and is

accountable for its own profit or loss. This provides a base for measuring
performance and helps in fixing Responsibility in case of poor performance.

3. Flexibility

It promotes flexibility and initiative as each division functions as an autonomous

unit. It leads to faster decision making.

4. Expansion and growth

It facilitates expansion, diversification and growth as new divisions can be added

without interrupting the existing operations.

Disadvantages
1. Departmental conflicts

Conflicts may arise among different departments with respect to allocation of

funds. Particular department may seek to maximize their profits at the cost of other
departments.

2. Costly

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Each product division has to maintain its own facilities, and personnel. It may lead
to increase in operating cost since they may be duplication of activities.

(DRAW DIAGRAM)

Formal organization
A formal organization is one which has a system of well defined positions, sorry,
responsibilities, policies, principles etc. It is deliberately designed by management
to achieve organizational goals.

According to J.C. Brown" formal organization refers to a structure of well defined

jobs each wearing a definite measure of authorities, responsibility and
accountability".

Features

1. It specifies the reporting relationship among various job positions and the
nature of the interrelationships. This clarifies who has to report to whom.
2. It is a means to achieve the objective as it lays down rules and procedures
essential for their achievement.
3. Formal organization coordinates the efforts of various departments
4. It is deliberately designed by the top management to facilitate smooth
functioning of the organization

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 5. It places more emphasis on work rather than on interpersonal relationships
among the employees.

Advantages
1. Fixation of responsibility

It is easier to fix responsibility as mutual relationships are clearly defined. There

exists clear hierarchical structure with well defined authority responsibility
relationship. So there will be no Chaos and confusion.

2. Clarity of duties

Roles and duties of each member are clearly specified. So there is no confusion
and it helps in avoiding duplication of efforts and increases efficiency, discipline
and order.

3. Unity of command

There is unity of command formal organizations make more use of official

channels of command of an formal communication is followed.

4. Helpful in achieving objectives

It leads to effective accomplishment of objectives by providing a Framework for

operations to be performed and the clarity of roles in the minds of employees.

5. Provides stability

It provides stability to the organization as behavior of employees can be easily

predicted since there are specific rules to guide them about their roles,
responsibilities and targets to be achieved.

Disadvantages
1. Delay in action

The formal communication may lead to delay in decision making and action as the
official chain of command to be followed throughout the levels of organization.

2. Lack of initiative

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Formal organizations do not allow any deviations from rigidly laid down policies
and strict rules. It kills the spirit of initiative and creativity among the members of
the organization.

3. Ignores human element

Formal organization places more emphasis on structure and work. It ignores the
importance of interpersonal relations and human means.

Informal organization
It refers to the relationships between the people in the organization based on
personal attitudes, whims, prejudices, like and dislikes etc. It is a network of social
relationships among the employees which emerges. Within the formal
organization.

According to Keith Davis “informal organization refers to the relationship between

people in the organization based on personal attitudes, prejudices, likes and
dislikes etc".

Features
1. It originate within the formal organization
2. It emerges spontaneously and is not deliberately created by the management
3. The standard of behavior evolved from group norms
4. Independent channels of Communications are developed by group members
5. It has no definite structure of form

Advantages
1. Sense of belonging

In a formal organization, the worker is one among the thousands of workers and to
the management; he is just a worker without any attachment. Under these
circumstances, the workers will not have a sense of belonging. Informal
organization fills this void by constantly emphasizing and re-enforcing each
member's individual personality.

2. Breeding ground for innovation and originality

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 By enabling members to modify the job situation more to their liking, the informal
group creates the necessary environment for individual innovation and originality.
Protected by his group, the individual can experiment with his novel ideas without
having to persuade the boss before trying them out.

3. Important channel of communication

News travels quickly via informal organizations. It is the clandestine transmitter

and receiver of information before it is officially released. After the news is
released, the informal organizations amend, amplify and interpret it. Thus each
person gets a larger, more detailed and meaningful but possibly distorted and
erroneous picture of what is going on the organization.

4. Gives the manager feedback about employees and their work

experiences

This increases the understanding of the manager as to what he needs to do to be a

supportive manager. It also helps interpret management to the workers so that they
may be more supportive. It makes up for any management failures in
communication. Management, in fact, often depends on it to convey certain types
of information which the formal system does not wish to carry and purposely
leaves unsaid. For example, a manager cannot announce his bad mood officially to
his subordinates. The best way to do this would be to put this information on the
grapevine so that it reaches the subordinates informally.

Disadvantages
Informal organization is not an unmixed blessing. If it does not co-operate with
the management, it may create serious problems. These are as under:

1. Resistance to change

Although there are no charts or blueprints to bind an informal organization, there

are customs, conventions and culture which bind it. Therefore, the group resists
those management demands which are perceived by it as detracting from its culture
or threatening the existing relationships among the members.

2. Organization objectives may be affected

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Members of the informal group are likely to put their own group need satisfaction
ahead of organization’s objectives. By this, the group's objectives are likely to
conflict with or take precedence over the organization’s goals. The result is the
organization suffers.

3. Rumour

One undesirable characteristic of informal communication called the 'grapevine' is

its function as a carrier of rumours. Research shows that the story given at the origin
of a rumour is filtered, elaborated or amended in the informal communication
channel. This leads to undesirable consequences.

4. Group-think philosophy

Some members begin to worship the group. They come to believe that what they
seek must be "good" because the group has decided so. Thus, there develops a
delusion of righteousness. Conformity is induced in which an individual loses his
identity.

Differences between formal and informal organization

Basis Formal organization Informal organization
Meaning Structure of authority Network of social relationships
relationships created by the arising out of interaction among
management employees
Origin Arises as a result of company Arises as a result of social
rules and policies interaction
Authority Arises by virtue of position in Arises out of Personal qualities
management
Behavior It is directed by rules There is no set behavior pattern
Law of Communication takes place Flow of communication is not
communication through the scalar chain through a planned route. It can
take place in any one direction
Nature Rigid Flexible
Leadership Managers are leaders Leaders may or may not be
managers. They are chosen by
the group

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QUESTIONS

One mark questions

1. Give the meaning of formal organization

2. Name any one type of organization structure
3. What is informal organization?
4. What is span of management?

Ans: Span of management refers to the number of subordinates that can be

effectively managed by a superior

5. Which type of organization structure is suitable for Enterprises having large

variety of products?

2 mark questions

1. What is functional structure of an organization?

2. What is divisional structure of an organization?
3. Give the meaning of organization structure

4 mark questions

1. Write any five differences between formal and informal organization

2. State any two advantages and two disadvantages of functional structure
3. State any two advantages and disadvantages of Divisional structure
4. State any four features of formal organization
5. State any four features of informal organization
6. State any two advantages and disadvantages of informal organization

8 marks questions

1. What is meant by functional structure of an organization? Explain its

advantages and disadvantages
2. Explain formal and informal organization with its features advantages and
disadvantages
3. State the advantages and disadvantages of formal organization

Practical oriented question

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 1. Draw the functional chart of an organization
2. Draw the Divisional chart of an organization
3. Draw a chart showing both functional and divisional structure of an
organization

Delegation
Delegation refers to the downward transfer of authority from a superior to a
subordinate. It is a prerequisite to the efficient functioning of an organization
because it enables a manager to use his time on high priority activities.

According to Theo Haimman " delegation of authority merely means the granting
of authority to subordinates to operate within prescribed limits".

Elements of delegation
1. Authority

Authority refers to the right of an individual to command his/ her subordinates and
to take action within the scope of his/ her position. It is the right to command.
Security can be delegated. It arises from formal positions and it slows down word
from superior to subordinate.

2. Responsibility

It is the obligation of a subordinate to perform the assigned duty efficiently.

Responsibility cannot be delegated at all. It flows upward from subordinate to
Superior.

3. Accountability

It implies been answerable for the outcome of duties performed. Accountability

cannot be delegated at all. It arises from responsibility e and flows upward from
subordinate to Superior.

Importance of delegation
1. Effective management

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By empowering the employees, managers are able to function more efficiently as
they get more time to concentrate on important matters. Freedom from doing
routine work provides them with opportunities to excel in new areas.

2. Employee development

As a result of delegation, employees get more opportunity to utilize their talent and
this may give rise to new abilities in them. It allows them to develop skills which
will enable them to perform difficult task and to take on those responsibilities
which will improve their career prospects.

3. Facilitation of growth

Delegation helps in the expansion of an organisation by providing a ready

workforce to take up leading positions in new Ventures. Trained and experienced
employees are able to play significant roles in launch of new projects by
replicating the work ethos they have observed from existing units in the newly set
up branches.

4. Basis of Management hierarchy

Delegation of authority establishes superior subordinate relationship, which are the

basis of Hierarchy of Management. It is the degree and flow of authority which
determines who has to report to whom.

5. Better coordination

The elements of delegation namely authority, responsibility and accountability

help to define the powers, duties and accountability related to various positions in
an organization. This helps to avoid overlapping of duties and duplication of
efforts as it gives a clear picture of the work being done at various levels and this
helps in developing and maintaining effective coordination among various
departments.

6. Quick decision making

Subordinates can take the decisions quickly within their authority. It is not
necessary to go to the superior for routine matters. This raises the overall
efficiency in an organization.

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QUESTIONS

One mark questions

1. Name the concept which reduces the workload of managers

2. What is authority?
3. What is responsibility?
4. Can accountability be delegated?

2 mark questions

1. What is delegation?
2. State any two importance of delegation

4 marks questions

1. Explain the elements of delegation

2. Write the differences between authority and accountability
3. Write the difference between authority and responsibility
4. Compare responsibility and accountability

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Decentralization
The dispersal of authority of decision-making to the lower level management is
termed as decentralization. Decentralization is a systematic delegation of authority
at all levels of Management and in all types of organizations

According to you Louis Allen" decentralization refers to the systematic effort to

delegate to the lowest level or authority except that which can only be exercised at
central points"

Importance of decentralization
1. Quick decision making

Decentralization brings decision making process close up to the scene of action.

This leads to quicker decision making of lower level since decisions do not have to
be referred up to the hierarchy.

2. Relief to top management

Decentralization relieves the top executives of the burden of performing various

functions. Centralization of authority puts the whole responsibility on the shoulders
of an executive and his immediate group. This reduces the time at the disposal of
the top executive who should concentrate on other important managerial functions.

3. Facilitates growth

Decentralization awards greater autonomy to the lower levels of Management as

well as divisional or departmental head. This allows them to function in a man of
best suited to their department and fosters a sense of competition amongst the
departments.

4. Better control

Decentralization makes it possible to evaluate performance at each level and the

departments can be individually held accountable for their results. Feedback from
all levels helps to analyze variances and improve operations.

5. Executive development

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When the authority is decentralized, executive in the organization will get the
opportunity to develop their talents by taking initiative which will also make them
ready for managerial positions.

6. Increased motivation and morale

The morality of the employees is increased because of delegation of authority.

Decentralization helps to increase employee morale because it involves delegation.

QUESTIONS

One mark questions

1. Differentiate between delegation and decentralization

Ans:

Basis Delegation Decentralization

Purpose To lessen the burden To increase the role of subordinates by giving
of managers them more autonomy
Nature It is a compulsory act It is an optional policy

2 mark questions

1. What is decentralization?
2. Define decentralization

4 marks questions

1. Explain the importance of decentralization

Centralization
Centralization is said to be a process where the concentration of decision

making is in a few hands. An organization is centralized when decision-making

authority is retained by higher management level.

According to Louis Allen “Centralization is the systematic and consistent

reservation of authority at central points in the organization".

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Differences between Centralization and Decentralization

QUESTIONS

One mark questions

1. Give the meaning of centralization

2. Define centralization
3. When can one say that an organization is centralized?

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