5.

Organising
Introduction:
After plans have been laid down and objectives specified the next step is organizing. It is a
function which integrates the resources-human, physical and financial of the organisation for
the accomplishment of objectives. Objectives specified in the planning process are achieved by
structuring the work of an organisation. Therefore the activities of an enterprise must be
organised so as to implement the plans successfully.
Meaning and Definition
Organising refers to identification and grouping of activities to be undertaken and assigning
them to different departments. It also involves creating job positions at various levels of the
organisation. It is the process of establishing relationship among the members of the enterprise.
The relationship is created in terms of authority and responsibility. Organisation provides the
frame work with in which people associate for the attainment of objectives of business. A sound
organisation helps management in achieving group efforts. Each one in the organisation is clear
about his duties,the work he has to do, his responsibilities, to whom he is accountable, or who is
accountable to him.
organising is the process of identifying and grouping various activities, bringing together
physical, financial and other resources, and establishing authority relationships among job
positions.
“Organisation is a structural relationship by which an enterprise is bound together
and the framework in which individual effort is coordinated.” Koontz and O’ Donnell’.
Steps in the process of Organising
Organising involves a series of steps required to be taken in order to achieve the desired
objective. The process of organising involves the following steps :
1. Identification and division of work
The first steps in the process of organising are to identify and divide the work to be
performed as per the predetermined plans. The total work is therefore, to be divided into
various functions or activities so that each activity may be comfortably performed by one
person or a group of persons. This brings in specialization of efforts and skills.
2. Departmentalisation
The process of grouping similar activities or related jobs into large units called
departments is called departmentalization. There are various methods of grouping
activities into departments. It may be based on function, product, location, process,
customer, etc.
3. Assigning Duties
The next step involves the allotment of various activities to different individuals
according to their ability and aptitude. Each one is given a specific job and he is
responsible for its execution.
4. Establishing reporting relationship
Each employee should know from whom he has to take orders and to whom he is
accountable. It is at this stage that the various members of the organisation are linked by
authority-responsibility relations. It helps in coordination among various departments.
Importance of Organising
1. Benefits of specialization
Organising involves systematic allocation of jobs amongst the employees. Repetitive
work allows a worker to gain experience in that field which leads to specialization. This
enhances efficiency and productivity.
2. Clarity in working relationship
There is a clear cut definition of working relationship. This clarifies lines of
communication and clearly specifies as to who should report and to whom. This removes
ambiguity in transfer of information and instruction.
 3. Optimum utilisation of resources
Organising ensures the optimum use of material, financial and human resources. In
organizing , work is assigned as per ability and proper assignment of jobs avoids
overlapping of work and also makes possible the best use of resources.
4. Adaption to change
A sound organisation facilitates adjustments to changes due to changing conditions in the
external environment with respect to technology, markets, products, etc. It also provides
stability to the enterprise which enables survival and growth in spite of changes.
5. Effective administration
Specific jobs are assigned to individuals and departments. This helps in avoiding
confusion and duplication. Clarity in authority- responsibility relationships enables
proper execution of work. All these enable the management of an organisation to
effectively administer these activities.
6. Development of personnel
Organising provides creativity among managers. Through delegation managers can get
their work load reduced by assigning routine jobs to their subordinates. By doing so,
subordinates get an opportunity to develop. Managers get enough time to explore areas of
growth and innovation there by strengthening the company’s competitive position.
It allows managers to develop new methods and ways of performing tasks. This will
result in development of managers.
7. Expansion and growth
Organising helps in the growth and expansion of an enterprise. It allows a firm to add
more job positions, departments, new geographical territories and diversity product lines.
This will help to increase customer base, sales and profit.
Organisation Structure :(Framework within which managerial and operative tasks
are performed)
Organisation structure refers to the framework within which managerial and operating
tasks are performed. It states the relationships among various positions and jobs
within the organization. The structure provides a base or framework for managers
and non-managerial employees to perform their various functions. The structure also
facilitates work flow in the organisation.
How is organization structure created ?
The structure of an organization is deliberately designed and planned. It is greatly
influenced by span of management. Span of management refers to the number of
subordinates that can be effectively managed by a superior. This determines the levels
of management in the structure. So management must consider the span of
management, while creating the organisation structure.
Types Of Organisation Structure
The organizational structure can be classified under two categories which are as follows
(i) Functional Structure
(ii) Divisional Structure
1. Functional Structure (Occupational specialization)
Functional structure refers to grouping of jobs of similar nature under one
department. .
A person will be in charge of each department. In case of a manufacturing concern,
we can have production, purchase, marketing, finance and personnel functions. Each
function may be further divided into sub-sections.
Companies like Britania Industries, Bata, Maruti Udyog, Modi Xerox,etc. follow the
Functional structure.
Advantages
(a) Specialisation : It promotes specialisation since each department has to perform a
specific function. Repetitive performance of a particular task makes the employee
experienced and thus leads to specialization.
 (b) Better control and co-ordination : It promotes control and coordination within a
department due to similarity of tasks performed.
(c) Increased profit : Expert and experienced officers are specially appointed for each
department. It helps in increasing managerial and operational efficiency and this
results in increased profit.
(d) Economies of scale : It leads to minimum duplication of work and hence result in
economies of scale.
(e) Training becomes easier : As focus is only on a specific function, it makes training of
employees easier.
(f) Due attention : It ensures due attention to different functions.
Disadvantages
(a) Organisational interest overlooked : Functional head may give emphasis on functional
areas overlooking the overall objectives of the organisation. This can hinder the
interaction between two or more departments.
(b) Problems in Co-ordination: An information has to be exchanged among various
functional departments, there arises the problem in proper co-ordination.
(c) Interdepartmental conflicts :It may lead to conflict between two or more departments
if their interest are not compatible. This interdepartmental conflicts can prove to be
harmful in terms of fulfillment of organizational interest.
(d) Inflexibility : people with same skills and knowledge may develop a narrow perspective
and are unable to gather experience in diverse areas. Functional heads do not get training
for top management positions. It may lead to inflexibility in promotion.
(e) Difficult to hold Accountable:
It becomes difficult to hold a particular department accountable if the organizational
goal is not achieved.
Suitability
It is suitable
(a) When the size of the organisation is large,
(b) Where there is diversified activities and
(c) Where a high degree of specialization is required.
2. Divisional Structure
Divisional structure is an organizational design wherein there are separate divisions for
different products, each division having functions like production, purchase, finance,
marketing, etc. Under this method, a separate business unit or department or division is
created for each major product. Each department is headed by a divisional manager,
who has to carry out all functional activities related with the department. Each division
is self – contained as it develops expertise in various functions related to a product
line. Each division acts as a profit centre and the divisional head is responsible for its
profit or loss. For example, a large company may have divisions like cosmetics,
clothing, etc.
Advantages
(a) Development of skills : The divisional head gains experience in all functions related to
a particular product. Product specialisation helps in the development of varied skills of
the divisional head which makes him suitable for higher positions.
(b) Fixation of responsibility : As revenue and costs of each division can be identified and
assigned , divisional head can be made accountable for profits. It also helps in fixation of
responsibility in case of unsatisfactory performance of the division.
(c) Quickness in decision making : Since each division functions as an autonomous body,
it leads to quicker decision making.
(d) Facilitates expansion and growth : New divisions can be added without any
interruption to the existing ones. This facilitates expansion and growth of the
organisation.
 Disadvantages
(a) Conflicts among divisions : Allocation of funds to various divisions is an area of
conflict. Further, trying to maximize profit of a particular division at the cost of other
divisions is another reason for dispute.
(b) Increased cost : Each product division has to maintain its own facilities, equipments
and personnel. It may lead to increase in operating costs since there may be duplication
of activities.
(c) Independent authority harmful : A manager in a division is independent in his
authority, and soon becomes powerful. This kind of independence may make him ignore
organizational interests.
Suitability
It is suitable
(a) Where a large variety of products are manufactured and
(b) When an organisation grows and requires more departments and more lines of product in
future.
(c) When it is important to determine profit and loss made by each product line so
that decision can be taken to expand, continue or close a particular product line.
Differences between Functional Structure and Divisional Structure
Basis Functional Structure Divisional Structure
1. Meaning It refers to grouping of jobs of It refers to grouping of jobs of
similar nature under one one product under one
department. department.
2. Function It is based on functions It is based on product lines,
supported by functions
3. Specialisation Functional Specialisation Product Specialisation
4. Responsibility Difficult to fix on department Easy to fix on a particular
department
5. Managerial Difficult Easier
development
6. Cost Functions are not duplicated hence Duplication of resources in
economical various departments, hence
costly
7. Coordination Difficult for a multi product Easy for a multi-product
company company
Formal and Informal Organisation
On the basis of relationship, an organisation may be divided into two broad categories :
(i) Formal organisation and (ii) Informal organisation
Both types of organisations are necessary, just like two blades are needed for a scissor.
Formal Organisation :
Formal organisation refers to the organisation structure which is deliberately planned and created
by the management to achieve organisation goals. It specifies clearly the boundaries of authority
and responsibility. Every member is responsible to perform a specified task assigned to him on
the basis of authority- responsibility relationship. It also defines rules and procedure of the
organisation. The structure in a formal organisation can be functional or divisional.
The formal organisation is a system of well-defined jobs, each bearing a definite measure of
authority, responsibility and accountability. Louis Allen
Features of Formal Organisation
1. It specifies the relationship among various job positions and clarifies as to who has to
report and to whom.
2. It lays down rules and procedure which act as a means to achieve objectives.
3. It is deliberately planned and created by top management to facilitate smooth functioning
of the organisation.
4. Efforts of various departments are co-ordinated and integrated through formal
organisation.
 5. It emphasizes jobs or positions and not individuals and their interpersonal relationships.
Advantages
(a) Easier to fix responsibility : This is because superior-subordinate relationship are
clearly defined .
(b) Avoidance of duplication of effort : The duties and role of each member is clearly
defined . This helps to avoid duplication of effort.
(c) Unity of command: Communication through established chain of command ensures
unity of command .
(d) Accomplishment of goals : It provides a framework for the performance of all the
activities and ensures that each employees know his or her role , it accomplishes
goals .
(e) Provide stability : It provides stability to the enterprise. There are specific rules to guide
the behavior of members.
Disadvantages
(a) Procedural delays: Communication through established chain of command leads to
procedural delays .Decision making will thus get delayed .
(b) No creativity : Formal organization does 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 organisation..
(c) More emphasis on structure and work: It gives importance to only job and not
human relationships.
Informal Organisation (Network of social relationships)
Within the formal organisation, individuals carry out the assigned task in co-operation with each
other. This gradually develops into friendly relations and forms small social groups. The network
of personal and social relationships on the basis of friendship and common interest is called
informal organisation.
For example, employees with common interest in Sports, films, religion, etc. may form their own
informal groups, like who take part in Cricket matches on Sundays, meet in the cafeteria for
coffee, etc.
An informal organisation is an aggregate of interpersonal relationships without any conscious
purpose but which may contribute to joint results. Chester Barnand
Features of Informal organisation
1. It originates from within the formal organisation as a result of personal interaction among
employees.
2. Standards of behavior evolve from group norms and not from officially laid down rules
and regulations.
3. Independent channels of communication without specified direction are followed by
group members.
4. It emerges spontaneously and is not deliberately created by the management.
5. It is indefinite and has no structure because it is a complex network of social relationships
among members.
Advantages
(a) Speedy communication : Since prescribed lines of communication are not followed,
there will be faster spread of information as well as quick feedback.
(b) Fulfils social needs : Informal organisation satisfies social needs of the members,
which is not satisfied in the formal organisation. This enhances their job satisfaction
as it gives them a sense of belongingness.
(c) Supports formal organisation : The inadequacies in the formal organisation can be
compensated through informal organisation. For example, employees’ reaction towards
plans and policies can be tested through informal network.
Disadvantages
(a) Spread of false news : Since prescribed line of communication is not followed by
informal organisation, there are chances of spreading false news in the organisation. It is
very difficult to trace the origin of such rumours and hence responsibility can’t be fixed
 easily.
(b) Delay or restricted growth : If informal group is strong they may oppose
implementation of changes by the management . Such resistance to change may
hinder growth.
(c) Against organizational interest : Informal orgaisation gives priority to personal
interests than organizational interests. This can be harmful to the organisation.
Differences between Formal Organisation and Informal Organisation
Basis Formal organisation Informal organisation
1. Meaning Formal organisation refers to the The network of personal and social
organisation structure which is relationships on the basis of
deliberately planned and created by friendship and common interest is
the management to achieve called informal organisation.
organisation goals.
2. Formation Deliberately planned and created by Arises spontaneously as a result of
top management social interaction among the
employees
3. Authority Arises by virtue of position in Arises out of personal qualities
management
4. Behavior It is directed by rules There is no set behavior pattern
5. Flow of Communication takes place through Informal communication based on
communication the Scalar chain convenience
6. Nature It is very rigid in nature It is flexible in nature
7. Leadership Managers are leaders Leaders may or may not be managers.
They are chosen by the group.
Delegation (Sharing work and authority by a superior with his subordinates)
Delegation refers to the downward transfer of authority from a superior to a subordinate. It
enables a manager to distribute his work load to others so that he can concentrate more on
important functions. It gives subordinates opportunities to develop and exercise initiative. It also
satisfies the subordinate’s need for recognition. The person who delegates is known as
Delegator and other person as Delegatee. The concept of delegation is based on principles of
Division of work.
“ Delegation of authority merely means the granting of authority to subordinates to operate
within prescribed limits.” Theo Haimman
Elements of Delegation
“Delegation is the entrustment of responsibility and authority to another and the creation of
accountability for performance.” Louis Allen
This definition has three elements- authority, responsibility and accountability.
1. Authority
Authority means the right of an individual to command his subordinates and to take
action within the limits of his positions. It is the power of the superior to command the
subordinate to get the work done. It is the right to command and control others.
Authority arises from the scalar chain which links the various job positions and levels in
the organisation. The extent of authority will be the highest at the top level and reduces
successively as we come down to the lower level. Thus authority flows from top to
bottom.
2. Responsibility
Responsibility may be defined as the obligation of a subordinate to properly perform the
duties assigned.It always moves upwards from a subordinate to a superior.
Responsibility cannot be delegated . For effective delegation, the authority granted must
be commensurate with responsibility. If authority granted is more than responsibility , it
will result in misuse ofauthority. On the other hand, if responsibility is more than
authority, it makes the person ineffective.
3. Accountability
Accountability implies answerability for the final outcome of the assigned task. It cannot
be delegated and flows upwards, i.e., a subordinate will be accountable to a superior for
satisfactory performance of work. At the same time the superior would still be
accountable for the outcome.
Thus it may be stated that while authority is delegated , responsibility is accepted and
accountability is imposed. Responsibility is derived from authority while accountability
is from responsibility.
The following table gives an overview of the elements of delegation
Basis Authority Responsibility Accountability
1. Meaning Right to command Obligation to perform To account for and
the assigned duty report the outcome of
the assigned task
2.Delegation Can be delegated Cannot be delegated Cannot be delegated
3. Comes Formal position Delegated authority Responsibility
from
4. Flow Flows downward Moves upward Moves upward
Importance of Delegation
1. Effective management : By entrusting the task with subordinates , top executives are
able to function more efficiently and effectively as they get more time to concentrate on
important matters. Delegation gives them the freedom from doing routine work and
provides them with opportunities to excel in new areas.
2. Employee development : Through delegation, subordinates get ample opportunities to
utilize their talent. It facilitates them to develop those skills which enable them to
perform complex tasks and assume more responsibilities. It makes them better leaders
and decision makers. Thus Delegation develops future mangers.
3. Motivation of employees : Delegation has a psychological aspect also. When a work is
entrusted with a subordinate, an element of trust is there on the part of the superior and a
commitment on the part of the subordinates. They , therefore, will try to improve
their performance. Thus, delegation motivates the subordinates to improve their
performance as well as their capabilities.
4. Facilitates growth : As the quality of managerial talents at all levels improves, the
organisation can face the future challenges better. It enables the firm to grow and expand
to a bigger size.
5. Basis of management hierarchy : It establishes superior – subordinate relationships,
which are the basis of hierarchy of management.
6. Better co-ordination : Delegation elements like authority, responsibility and
accountability clearly define the powers, rights and duties of various job positions in an
organisation. Clarity in reporting helps to develop and maintain effective co-ordination
amongst departments, job positions and functions of management.
Decentralisation(Autonomy/Belief in subordinates/ Systematic dispersal of authority to all
levels)
Decentralisation refers to the systematic dispersal of authority to the lower levels of the
organisation. In other words ,it refers to delegation of authority throughout all the levels of
the organization
.“Decentralisation is the systematic effort to delegate to the lowest levels all authority,
except that which can only be exercised at central points.”
Louis A. Allen
Centralisation and Decentralisation
When decision making authority is retained by higher management levels it is called
centralization. It implies concentration of authority at a few specific points. When authority
is delegated to various levels of an organisation, it is called decentralization.
In decentralisation, authority is placed nearest to the points of action.
“ Everything which goes to increase the subordinate’s role is decentralisation, everything
which goes to decrease it is centralization.

Importance of Decentralisation
1. Develops initiative among subordinates : It helps to promote self-reliance and
confidence amongst the subordinates. It gives them greater freedom to take
their own decisions and to depend on their own judgment. This will encourage
subordinates to take initiative and adopt innovative methods.
2. Develops managerial talent for the future : Decentralisation provides a better
means to develop future managers as it gives them a chance to take decisions,
exercise judgement and perform activities of top executives. Thus
decentralization develops managerial talent for the future.
3. Quick decision making : In decentralisation, decision making power is entrusted
with those who are supposed to execute the decisions. In other words decisions are
taken at levels which are nearest to the point of action. This speed up the process of
decision making.
4. Relief to top management : In a decentralised organisation, top executives are
not engaged in day to day problems. This is because authority is delegated to the
lower levels. Therefore, top executives get enough time to plan ahead, develop
new strategies, make important policy decisions and concentrate on co-ordination
and control. This, in fact , is a relief to top executives.
5. Facilitates growth :
Decentralisation provides greater autonomy to lower and middle levels of
management. This allows them to function in a manner best suited to their
departments and develops a sense of competition amongst departments. The result
will be increase in productivity, more returns and scope for expansion. Thus
decentralisation facilitates growth.
6. Better Control : In a decentralised set up, it becomes easier to fix standards of
performance, evaluate the performance and take corrective action. This will lead to
better control. Control systems such as the balance score card and management
information system (MIS) have been evolved for accountability of performance.
Differences between Delegation and Decentralisation
Basis Delegation Decentralisation
1.Meaning It is the downward It is the delegation of
transfer of authority from authority throughout all the
a superior to a subordinate levels of the organisation
2. Nature It is a compulsory act as It is optional. It is at the
no individual can perform discretion of the top
all tasks on his own management
3. Freedom of action More control by superiors Less control over
and hence less freedom to subordinates and therefore
take own decisions greater freedom of action
4. Status It is a process of It is the result of the policy of
management, followed to the top management
share tasks
5. Scope Scope is narrower as it is It has wider scope as it
limited to superior and his implies extension of
immediate subordinate delegation to lowest levels
6. Purpose To reduce the work load To increase the role of the
of the superior subordinates by giving them
more autonomy