CH 5 Organising Quick Notes

Ch 5 Organising Notes ( Quick Revision)
ORGANISING IS A PROCESS of defining and grouping the activities of

the enterprise and establishing authority relationships among them.
STEPS IN THE PROCESS OF ORGANISING IDAE

1. Identification and division of work into manageable activities so that
duplication can be avoided.
2. Departmentalisation: Activities of a similar nature are grouped together.
It facilitates specialisation.
3. Assignment of duties to job positions according to their skills and
competencies for effective performance.
4. Establishing reporting relationships: Authority-responsibility
relationships are clearly established so that each individual knows who he has
to take orders from and to whom he is accountable.
IMPORTANCE OF ORGANISING SG_CEO
1. Specialisation: A systematic allocation of jobs increases productivity and
leads to specialisation.
2. Clarity in working relationships: ....
3. Effective administration: Due to clarity in working relationships
management of an enterprise becomes easy.
4. Optimum utilisation of resources by avoiding duplication of work and
minimising wastage of resources and efforts.
5. Growth and expansion as a business enterprise can add more job
positions, departments and product line
FORMAL ORGANISATION refers to the organisation structure which is

designed by the management to achieve its objectives.
Features:
1. It is deliberately designed by top management for smooth functioning
of the organisation.
2. It specifies the relationships among various job positions. This clarifies who
has to report to whom.
3. It places more emphasis on work rather than interpersonal relationships.
Advantages of formal organisation:

1. Easier to fix responsibility since mutual relationships are clearly defined.
2. Avoids duplication of effort since there is clarity of role.
3. Maintains unity of command through an established chain of command.
4. Leads to accomplishment of goals by providing a framework for the
operations to be performed.
5. Provides stability to the organisation because there are specific rules to
guide behaviour of employees.
Limitations of formal organisation:

1. Procedural delays in decision-making
2. Fails to recognise creative talent of employees
3. Non-fulfilment of social needs of employees
INFORMAL ORGANISATION is a network of personal and social relations

which arises as people associate with one another, e.g., managers and
subordinates taking part in cricket matches.
Features:
1. It originates from within the formal organisation as a result of personal
interaction among employees.
2. It emerges spontaneously and is not deliberately created by the management.
3. The standards of behaviour evolve from group norms.
4. It has no fixed lines of communication.
Advantages:
1. Faster spread of information as well a quick feedback.
2. Fulfils the social needs of the members.
3. Fulfilment of organisational objectives by filling inadequacies in the
formal structure.
Limitations:
1. It may spread rumours
2. It may lead to resistance to change
3. It pressurises members to conform to group norms.
ORGANISING AS A STRUCTURE: Organisation structure refers to

the framework within which managerial and operating tasks are
performed. It clarifies the relationship between work, people and resources.
Need for an adequate organisation structure is felt when

an enterprise grows in size or complexity because coordination becomes
difficult due to new functions or increase in number of products.
Span of management refers to the number of subordinates that can be
effectively managed by a superior.
FUNCTIONAL STRUCTURE is an organisational structure formed by

grouping of jobs of similar nature according to functions and organising
these functions as separate departments. For example, a company
manufacturing garments may have separate departments for Production,
Marketing, Finance, etc. Functional structure is suitable for those enterprises
which have only one category of products to offer.
Advantages:
1. Occupational specialisation since emphasis is placed on specific functions.
2. Promotes control and coordination within a department because similar
tasks are performed.
3. Increases efficiency—managerial and operational efficiency.
4. Lowers cost as it reduces duplication of effort.
5. Makes training of employees easier as it focuses on a limited range of skills.
Disadvantages:
1. Functional empires — pursuing own departmental interests.
2. Inter-departmental conflicts
3. Problems in coordination between departments.
SUITABILITY: Large organisation having diversity activities and requires high degree of
specialisation.
DIVISIONAL STRUCTURE is an organisation structure having separate

business divisions created on the basis of different products, etc. For
example, a large company may have two divisions, say Footwear and Garments.
Each division is multi-functional because within each division functions like
production, marketing, finance, etc. are performed together. Divisional structure
is suitable for business enterprises having large variety of products.
Advantages:
1. Product Specialisation helps in the development of varied skills in a
divisional head and this prepares him for higher positions.
2. Divisional heads are accountable for profits.
3. Promotes flexibility and initiative because each division functions as an
autonomous unit which leads to faster decision-making.
4. Facilitates expansion and growth.
Limitations:
1. Conflict may arise among different divisions.
2. Increase in costs because of duplication of activities across products.
3. Divisional interests may supersede organisational interests.
SUITABILITY
More products, more levels and when organisation want to grow and want to
Add new products.
DELEGATION
Delegation is the transfer of authority from superior to subordinate,
entrustment of responsibility and creation of accountability for performance.
However, delegation does not mean abdication; the manger shall still be
accountable for the assigned task.
Elements of Delegation
1. Authority: Meaning–Right of an individual to command his subordinates.
Origin–It arises from formal position. Flow–Authority flows from top to bottom,
i.e. the superior has authority over the subordinate. Delegation– Can be
delegated.
2. Responsibility: Meaning–Obligation of a subordinate to perform the
assigned duty. Origin–It arises from delegated authority. Flow–It flows
upwards, i.e. a subordinate will be responsible to his superior. Delegation–
Cannot be entirely delegated.
3. Accountability: Meaning–Answerability for the final outcome. Origin–
It arises from responsibility. Flow–It flows upwards. Delegation–Cannot be
delegated at all.
IMPORTANCE OF DELEGATION GEM – EMC

1. Effective management as the managers get more time to concentrate on
important matters.
2. Employee development as they get more opportunities to utilize their talent.
3. Motivation of employees as they feel encouraged and try to improve their
performance.
4. Facilitates growth by providing a ready workforce to take up leading
positions in new ventures.
5. Basis of management hierarchy through clear superior subordinate relationships.
6. Better coordination by avoiding overlapping of duties.
DECENTRALISATION refers to systematic delegation of authority through
all the levels of management and in all the departments.
Decentralisation implies selective dispersal of authority and believes that
people are competent, capable and resourceful. It recognises the decision-
maker’s need for autonomy.
IMPORTANCE OF DECENTRALISATION TC–RIGD

1. Relief to the top management who can concentrate on policy decisions.
2. Initiative amongst subordinates by promoting self-reliance and
confidence in them.
3. Managerial talent for the future by creating qualified manpower to take
up challenging positions in future.
4. Facilitates growth by increase in productivity. Organisation is able to
generate more profits which can be used for growth and expansion purposes.
5. Quick decision-making as there is no requirement for approval from many levels.
6. Better control by evaluating performance at each level of management.
Difference between Delegation and Decentralisation NPFS

Nature: Compulsory act because no individual
can perform all tasks on his own.
Optional policy decision, done at the
discretion of top management.
Purpose: To reduce the burden of the
manager.
To increase the role of the
subordinates.
Freedom of action:
More control by superiors, hence
less freedom to take own decisions.
Less control over executives, hence
greater freedom of action.
Scope :Narrow scope as it is limited to
superior and his subordinate.
Wide scope as it is extension of delegation
to the lowest level of management.

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Ch 5 Organising Notes ( Quick Revision)

ORGANISING IS A PROCESS of defining and grouping the activities of

STEPS IN THE PROCESS OF ORGANISING IDAE

FORMAL ORGANISATION refers to the organisation structure which is

Advantages of formal organisation:

Limitations of formal organisation:

INFORMAL ORGANISATION is a network of personal and social relations

ORGANISING AS A STRUCTURE: Organisation structure refers to

Need for an adequate organisation structure is felt when

FUNCTIONAL STRUCTURE is an organisational structure formed by

DIVISIONAL STRUCTURE is an organisation structure having separate

IMPORTANCE OF DELEGATION GEM – EMC

IMPORTANCE OF DECENTRALISATION TC–RIGD

Difference between Delegation and Decentralisation NPFS

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