CBSE Business Studies Revision Notes Chapter-5 Organising

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Organising refers to the process of identification and division of work, departmentalization, assignment of duties and creating reporting relationships.

Process of Organising

Steps involved in process of organising are as follows:

Identification and Division of work: The total work of the organisation is divided into smaller jobs. Division of work is essential because entire work cannot be done by one person.
Departmentalization: In this step, similar activities are grouped under one department or division.
Assignment of duties: Jobs are assigned to different employees as per their skills, abilities and competence.
Establishing reporting relationships: Every person should know whom he has to take orders from and to him he is accountable for the performance.

Importance of Organising - click here

Types of Organisations

There are two types of organisations namely:

Formal Organisation
Informal Organisation

Distinction between formal organisation and informal organisation:

Basis	Formal organisation	Informal organisation
Meaning	Organisation which is deliberately created by management to achieve predetermined organisational goals.	Organisation which arises spontaneously when people interact with each other.
Purpose	To achieve predetermined organisational goals	To fulfill social needs of members
Origin	Well planned and deliberately created	Originate automatically
Nature	Rigid	Flexible
Flow of communication	Follows formal channels of communication	No fixed patterns of communication
Structure	Well defined structure	No fixed structure
Behaviour	Well defined behaviour	Members are free to behave in any manner
Leaders	Managers are leaders by virtue of their position.	Leaders are chosen by the group on the basis of their qualities.
Flow of authority	Authority flows from top to bottom.	Authority flows vertically as well as horizontally.
Interdependence	Can exist independently of informal organisation	Dependent on the formal organisation.
Stability	Usually stable	Not stable

Formal organisation

Merits of formal organisation:

It is helpful in achievement of predetermined organisational goals.
There is no duplication of efforts because role of each member is clearly defined.
It is easier to fix responsibility.
Unity of command is followed.
It provides stability to the organisation.

Demerits of formal organisation:

It is time consuming because formal channels of communication have to be followed.
It focuses too much on rules and regulations. This may lead to rigidity and reduction in creativity.
It places more focus on work and ignores human relationships.

Informal organisation

Merits of informal organisation:

Communication is fast because no formal chain of communication is to be followed.
It helps to satisfy social needs of members.
It helps in filling the gaps or inadequacies of formal organisation.

Demerits of informal organisation:

It may spread rumours in the organisation.
It may be against the interests of the formal organisation.
It pressurizes members to follow the group norms.
It may resist changes in the organisation. This can negatively affect its survival and growth.

Types of Organisational structure

Divisional Structure
Functional Structure

Functional structure

Functional structure is a structure in which activities are grouped and departments are created on the basis of functions to be performed.

Advantages of functional structure:

It leads to occupational specialisation.
It helps in increasing efficiency.
It helps in better control and coordination of activities within each department.
It is less costly because training is to be given for a limited area.

Disadvantages of functional structure:

There are chances of lack of understanding and coordination among different departments.
Each department focuses on its own department. Organisational interest might get ignored.
Departments may develop narrow perspective because each department focuses on a limited range of activities.
It may not be suitable for organisation manufacturing more than one product.

Divisional Structure

Divisional structure is a structure in which activities are grouped and departments are created on the basis of products.

Advantages of divisional structure

It leads to product specialisation.
It helps in increasing efficiency.
It provides greater flexibility to the divisions to take their independent decisions.
It is easier to know the profitability of each product; thus, it is easier to fix responsibility on divisions.

Disadvantages of divisional structure

There is duplication of different functions in various divisions.
It is costly because each division employs its own team of specialists.
There are chances of conflicts and lack of coordination among different divisions.
Each division focuses on its own interest. Organisational interest might get ignored.

Delegation

Delegation refers to downward transfer of authority from a superior to a subordinate.

Elements of Delegation:

Authority: Authority refers to power to command and take decision.

It flows downward from superior to subordinate.

Responsibility: Responsibility refers to obligation or duty of a subordinate to perform the assigned task.

It flows upward from subordinate to superior.

Accountability: Accountability refers to answerability for the result of an assigned task.

It flows upward from subordinate to superior.

Importance of delegation

Effective delegation of authority can provide following benefits

Effective management: Delegation reduces the burden of managers. By assigning the routine activities to the subordinates, managers can concentrate better on the important matters.
Employee development: Delegation helps the subordinates to learn new skills and take decisions independently.
Motivation of employees: Delegation involves trust of the superior on the subordinates. Sense of responsibility for work builds confidence in subordinates.
Facilitation of growth: Delegation prepares employees for the future. It helps organisation to plan for growth and expansion as managerial talent is available within the organisation.
Basis of Management hierarchy: Delegation establishes superior-subordinate relationships. This acts as the basis of hierarchy of management.
Better coordination: There is clarity in superior subordinate relations. This helps in better coordination in the organisation.

Decentralization

Decentralization refers to delegation of authority at all levels.

Importance of Decentralization:

The advantages of decentralization are as follows:

Develops initiative among subordinates: When employees are given greater power and freedom, they get an opportunity to take initiative. They learn to take decisions and become self-reliant. This also increases their confidence.
Develops managerial talent: With decentralization, the subordinates get an opportunity to take decisions and prepare themselves for getting promotions in the organisation.
Relief to top management: Decentralization leaves the top management with more time. Top management can devote more time to policy making and other important matters.
Quick decision making: In decentralization, decisions are taken at all levels. There is no need to get approval from the superior while taking decisions. Therefore, decision making becomes faster.
Facilitates growth: With more freedom and power given, everyone wants to do the best for their department. This promotes a sense of competition among the departments. As a result, productivity and returns of organisation go up.
Better control: In decentralization, departments are individually held accountable for their results. This leads to effective control.

Distinction between delegation and decentralization

Basis	Delegation	Decentralisation
Nature	Compulsory, as one person can perform all tasks on his own.	Optional policy decision
Objective	To reduce the burden of manager.	To increase the role of subordinates.
Scope	Narrow	Wider
Freedom	Lesser freedom	Greater freedom
Status	It is a process to share tasks.	It is a result of policy decision of top-level management.

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Thursday, September 30, 2021