UNIT 5 - ORGANISING

Meaning/Concept of Organising :-

After laying down the plans and objectives the next function to be performed by the managers is
organising. It determines what activities and resources are required and decides who will do a particular
task, where it will be done and when it will be done.

Therefore, it is a process, which coordinates human efforts, assembles resources and integrates both
into a unified whole to be utilized for achieving specified objectives.

'Organising is the process of identifying and grouping the work to be performed, defining and delegating
responsibility and authority and establishing relationships for the purpose of enabling people to work
most effectively together in accomplishing objectives.'

Organising as a function fo manangement leads to—

• Creation of organisational structure with suitable personnel.
• Designing specific roles to eliminate ambiguity.
• Defining inter-relationship among personnel for productive cooperation.
• Clarifying authority and responsibility for results and logical grouping of activities.

Steps Involved in the Process of Organising:-

1. ldentification and Division of Work :-
 lt involves identification and division of total work to be done into specific activities
(called jobs)
 By dividing the work, the burden of work can be shared.
 It facilitates specialisation and duplication of work can be avoided.
2. Departmentalisation :-
 The second step in organising is to combine or group similar or related jobs into larger
units called departments, divisions or sections.
 They can be grouped on the basis of functions, products, customers and territories etc.
 Departmentalisation is done to achieve coordination & to facilitate unity of efforts.
3. Assignment of duties :-
 Once departments have been formed each of them is placed under the charge of a
departmental head (eg., production manager, finance manager etc.)
 Jobs are then allocated to the members of each department according to their skills and
qualifications.
4. Establishing Reporting Relationships :-
 Merely allocating work is not enough.
 Each individual should also know from whom he has to take orders and to whom he is
accountable.
 It helps in coordination amongst various departments.
Importance of Organising/Organisational Structure:-

1. Benefits of specialisation : -
 In organising every individual is assigned a part of total work.
 This division of work into smaller units and repetitive performance leads to
specialisation.
 Thus organising promotes specialization and leads to efficient & speedy performance of
tasks.
2. Clarity in working relationships :-
 It helps in creating well defined jobs.
 The authority and responsibility of each job is clearly defined.
 The superior-subordinate relationship is clearly defined.
3. Effective Administration :
 It provides a clear description of jobs and related duties.
 This helps to avoid confusion and duplication.
 Clarity in working relationships enables proper execution of work which results in
effective administration.
4. Optimum utilisation of resources :
 The proper assignment of jobs avoids overlapping/duplication of work.
 This helps in preventing confusion and minimising the wastage of resources and efforts.
5. Adaptation to Change:
 A properly designed organizational structure is flexible.
 This facilitates adjustment to changes in workload caused by change in external
environment related to technology, products, resources and markets.
6. Development of Personnel:
 Sound organization encourages initiative and thinking by the employees.
 When managers delegate their authority, it reduces their workload and they can focus
on more important issues related to growth.
 This also develops the employee’s ability and helps him to realize his full potential.
7. Expansion and growth:
 It helps in growth & diversification of and enterprise by adding more job positions,
departments, products lines, etc.

Meaning of Organisational Structure:-

 Organisational structure refers to that specific pattern of relationship which is created

during organising process.
 Under the organisational structure various posts are created to perform different
activities.
 The structure provides a basis or framework for managers and other employees for
performing their functions.
 The organisation structure can be defined as the frame work within which managerial and operating
tasks are performed.

Relation between Span of Management and Organisation structure: -

 Span of mangement refers to the number of subordinates that can be effectively managed by a
manager/superior.
 The Span of management to a large extent gives shape to the organisation structure.
 This determines the levels of management in the structure.
 Narrow span of management results in tall structure whereas wider span of management
results in flat structure.

Types of Organisation Structures

Functional Structure:-

 In functional structure activities are grouped and departments are created on the basis of
specific functions to be performed.
 For example all the jobs related to production are grouped under production department,
Sales to sales department etc.

Suitability:-

(1) Large organisations producing one line of product.

(2) Organisations which require high degree of functional specialisation with diversified activities.

Advantages:-

1. Specialisation –
 Better division of labour takes place which results in specialisation of functions and its
consequent benefit
2. Coordination is established :-
 All the persons working within a department are specialists of their respective jobs.
 It makes the coordination easier at department level.
 3. Helps in increasing managerial efficiency :
 Managers of one department are performing same type of function again and again
which makes them specialised and improves their efficiency.
4. Minimises cost –
 It leads to minimum duplication of effort which results in economies of scale and thus
lowers cost.

Disadvantages:-

1. Ignorance of organisational objectives –

 Each departmental head works according to his own wishes.
 They always give more weight to their departmental objectives.
 Hence overall organisational objectives suffer.
2. Difficulty in Inter-departmental Coordination –
 All departrmental heads work as per their own wishes which leads to coordination
within the department easier but it makes inter-departmental coordination difficult.
3. Hurdle in complete development –
 Because each employee specialises only in a small part of the whole job.

DIVISIONAL ORGANISATION STRUCTURE:

 Dividing the whole enterprise according to the major products to be up manufactured

(like metal, plastic, cosmetics etc) is known as divisional organisation structure.
 This structure is suitable in organisations producing multi product or different lines of
product requiring product specialisation.
 Also growing companies which intend to add more lines of products in future adopt this
structure.
Suitability:

 This structure is suitable in organisations producing multi product or different lines of

product requiring product specialisation. E.g. Tata, Reliance
 Also growing companies which intend to add more lines of products in future adopt this
structure.
 When an organization grows and needs to add more employees, more departments or
introduce new levels of management.

Advantages:-

1. Quick decision making –

 Divisional manager can take any decision regarding his division independently which
makes decisions quick and effective.
2. Divisional results can be assessed –
 Divisional results (profit / loss) can be assessed easily.
 On this basis any unprofitable division can be closed.
3. Growth and Expansion –
 It facilitates growth and expansion as new divisions can be added without disturbing
existing departments.

Disadvantages:-

1. Conflicts among different divisions on allocation of resources.

2. Duplicity of Functions: -
 Entire set of functions is required for all divisions.
 It gives rise to duplicity of efforts among divisions & increases cost.
3. Selfish Attitude :-
 Every division tries to display better performance and sometimes even at the cost of
other divisions.
 This shows their selfish attitude.

Difference between Functional Structure and Divisional Structure:

Basis Functional Structure Divisional Structure

Formation/Nature/ Focus Based on functions e.g. Based on products and

production, finance etc supported by functions

Specialization Specialized treatment to each Specialised treatment to each

function Functional product & each function of the
specialization division Product specialization
 Structure Simple Complicated

Authority and Concentration at top level and Decentralisation at the divisional

difficult to fix responsibility on a level and easy to fix
Responsibility department responsibility for performance

Coordination Very difficult Less difficult

Control Simple Complex

Suitability Medium sized companies Large companies

Managerial development Difficult as each has to report to Easy, as they perform multiple
the top functions

Cost Economical, duplication of Costly, as duplication of

functions are not there functions are there.

FORMAL ORGANISATION

 This structure is designed by the management to achieve organisational goals in which the
responsibilities, authority and mutual relationships among all the employees working in an
enterprise are clearly defined.
 It can be functional or divisional.

Features:-

1. It is deliberately created by the top management.

2. It is based on rules and procedures which are in written form.

3. It is impersonal i.e does not takes into consideration emotional aspect.

4. It clearly defines the authority and responsibility of every individual.

5. It is created to achieve organisational objectives.

Advantages:-

1. Easier to fix responsibility since mutual relationships are clearly defined.

2. No overlapping of work –
 Because things move according to a definite plan.
3. Unity of command through an established chain of command.
4. Easy to achieve objectives –
 Because of coordination and optimum use of human and material resources.
 5. Stability in the organisation –
 Because behaviour of employees can be fairly predicted since there are specific rules to
guide them.

Disadvantages:-

1. The Work is based on rules which cause unnecessary delays.

2. Lack of initiative –
 The employees have to do what they are told to do and they have no opportunity of
thinking.
3. Limited in scope –
 It is difficult to understand all human relationships in an enterprise as it places more
emphasis on structure and work.

Informal Organisation:

 An informal organisation is that organisation which is not established deliberately but

comes into existence because of common interests, taste and religious and communal
relations.
 The main purpose of this Organisation Structure is getting psychological satisfaction.
 For example, employees with similar interest in sports, films, religion etc may form their
own informal groups.

Features:

1. It originates from within the formal organisation as a result of personal interaction among
employees.
2. It has no written rules and procedures.
3. It does not have fixed lines of communication.
4. It is not deliberately created by the management.
5. It is personal - means the feelings of individuals are kept in mind.

Advantages:-

1. Speed :
 Prescribed lines of communication are not followed which leads to faster spread of
information.
2. Fulfillment of social needs –
 Enhances job satisfaction which gives them a sense of belongingness in the organisation.
3. Quick solution of the problems –
 Because the subordinates can speak without hesitation before the officers, it helps the
officers to understand the problems of their subordinates.
Disadvantages:-

1. It creates rumours :-
 All the persons in an informal organisation talk carelessly and sometimes a wrong thing
is conveyed to the other persons.
 It resists change and lays stress on adopting the old techniques.
2. Priority to group interests –
 Pressurises members to confirm to group expectations.
3. Resistance to changes-
 Members of the group donot accept changes very often.
 This leads to delay in growth of the organization.

Difference between Formal Informal organisations

BASIS FORMAL ORGANISATION INFORMAL ORGANISATION

Meaning If refers to the structure of well It refers to the network of
defined authority and social relationships which
responsibility. develops automatically.

Nature Rigid & Stable Flexible and unstable

Authority Arises by virtue of positions in Arises out of personal

management. qualities.

Adherence to rules: Violation of rules may lead to No such punishments.

rules to penalties and
punishments
Flow of Communication Takes place through Scalar chain Not through a planned route. It
can take place in any direction.
Purpose To achieve planned To satisfy social and cultural
organisational objectives. needs and fulfil common
interests.

Formation/ origin Deliberately planned and Emerges spontaneously as a

created by management. result of social interaction
among employees.

Structure Well-defined structure of tasks & No clear-cut structure

relationships. because of complex network
of relationships.

Flow of authority Authority flows from top to Authority flows vertically as

bottom i.e downwards. well as horizontally.

Interdepen dence Independent. Depends on formal structure.

Delegation of Authority

Meaning –

 It means the granting of authority to subordinates to operate within the prescribed

limits.
 The manager who delegates authority holds his subordinates responsible for proper
performance of the assigned tasks.
 To make sure that his subordinates perform all the work effectively and efficiently in
expected manner the manager creates accountability.

Process / Elements of Delegation:-

1. Authority –
 The power of taking decisions in order to guide the activities of others.
 Authority is that power which influences the conduct of others.
2. Responsibility :
 It is the obligation of a subordinate to properly perform the assigned duty.
 When a superior issues orders it becomes the responsibility of the subordinate to carry
it out.
3. Accountability –
 When a superior assigns some work to a subordinate, he is answerable to his superior
for its success or failure.

Principle of Absoluteness of Accountability - Authority can be delegated but responsibility /

accountability cannot be delegated by a manager. The authority granted to a subordinate can be taken
back and re-delegated to another person. The manager cannot escape from the responsibility for any
default or mistake on the part of his subordinates. For example, if the chief executive asks marketing
manager to achieve a sales target of sale of 100 units/ day. The marketing manager delegates this task
to deputy sales manager, who fails to achieve the target. Then marketing manager will be answerable
for the work performance of his subordinates. Thus, accountability is always of the person who
delegates authority.

Difference between Authority, Responsibility and Accountability:

BASIS AUTHORITY RESPONSIBILITY ACCOUNTABILITY

Meaning Right to command Obligation to perform Answerability for
an assigned task. outcome of the
assigned task
Origin Arises from formal Arises from delegated Arises from
position authority responsibility

Flow Downward – from Upward - from Upward - from

 Superior to Subordinate Subordinate to Superior Subordinate to
Superior

Withdrawn Can be withdrawn Cannot be withdrawn Cannot be withdrawn

anytime by giving once created. once created.
notice.

Importance of Delegation of Authority

1. Effective Management –
 It reduces the work load of officers.
 They can thus utilise their time in more important and creative works instead of works
of daily routine.
2. Employee development –
 Employees get more opportunities to utilise their talent which allows them to develop
those skills which will enable them to perform complex tasks.
 This develops future managers.
3. Quick and better decision are possible –
 The subordinate are granted sufficient authority so they need not to go to their
superiors for taking decisions concerning the routine matters.
4. Motivation of employees –
 Because of delegation of authority to the subordinates they get an opportunity to
display their efficiency and capacity.
 This motivates the employees.
5. Better coordination –
 The elements of delegation - authority, responsibility and accountability help to define
the powers, duties and answerability related to various job positions.
 This results in developing and maintaining effective co-ordination.
6. Facilitation of growth-
 It gives good training to lower level to take up responsibility.
 The lower level can face new challenges and leads to the growth of the organization.

Decentralisation:-

 It is defined as even, systematic and selective dispersal of authority at every level of

management.
 Under this, the authority is transferred to the level where it is to be used, so the
numbers of centres for taking decisions increases.
 It should be noted that 'Decentralisation' is an extension of delegation.

Centralisation and Decentralisation –

  Represents the pattern of authority among managers at different levels.
 Centralisation of authority means concentration of power of decision making in a few hands.
 In such an organisation very little authority is delegated to managers at middle and lower levels.
 No organisation can be completely centralised or decentralised.
 They exist together and there is a need for a balance between the two.
 As the organisation grows in size, there is tendency to move towards decentralisation.
 Thus, every organisation is characterised by both.

Importance of Decentralisation:-

1. Develops initiative amongst subordinates –

 It helps to promote confidence because the subordinates are given freedom to take
their own decisions.
2. Quick and better decisions –
 The burden of managerial decisions does not lie in the hands of few individuals but gets
divided among various persons which help them to take better and quick decisions.
3. Relieves the top executives from excess workload –
 The daily managerial works are assigned to the subordinates who leave enough time
with the superiors whom they can utilise in developing new strategies.
4. Managerial Development –
 It means giving authority to the subordinate’s upto the lower level to take decisions
regarding their work.
 In this way the opportunity to take decisions helps in the development of the
organisation.
5. Better Control –
 It makes it possible to evaluate performance at each level which results in complete
control over all the activities.
6. Relief to top management-
 It relieves top management from routine work.
 They can now concentrate on planning policies etc for the organization.

Difference between - Delegation & Decentralisation:

BASIS DELEGATION OF AUTHORITY DECENTRALISATION

Nature It is a compulsory act. It is an optional policy.

Freedom Less freedom to take decisions due to More freedom of action due to less
more control by the superiors. control by the top management.

Status It is a process of sharing tasks and It is the result of policy decisions taken by
authority. top management.

Scope Narrow - as it is confined to a superior Wide - lt includes extension of delegation

and his immediate subordinate. to the levels of management.
Purpose To reduce the burden of manager. To increase the role and the autonomy of
lower level of management.