Chapter - 5

Organising
• After laying down the plans and
objectives the next function to be
performed by the managers is organizing.
• 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.
• Thus organizing means establishing
relationship between various factors of
production and it is concerned with
establishing relationship amongst jobs,
sections, departments & positions.
 Meaning and Concept of
Organising
• Organising can be defined as “identifying and
grouping different activities in the
organisation and bringing together the
physical, financial and human resources to
establish most productive relations for the
achievement of specific goal of
organisation.”
• When the managers are performing
organising function it results in creation of an
organisational structure which shapes the
system of working.
 Organising Process
1. Identification and Division of Work: It
involves identification and division of total work
to be done into specific activities (called jobs) in
accordance with previously determined plans. By
dividing the work, the burden of work can be
shared among the employees. It facilitates
specialization of work & skills.
Duplication of work can be avoided by dividing
the work into manageable activities.
2. Departmentalization: The second step is to
combine or group similar or related jobs into
larger units called departments, divisions or
sections. The departmentation or grouping of
jobs can be done in two ways:

(a) Functional Departmentation: Under this

method jobs related to common function are
grouped under one department.

(b) Divisional Departmentation: This method is

preferred when an organisation is producing
more than one type of products. Jobs related to
one product are grouped under one department.
3. Assignments of duties: Once departments
have been formed each of them is placed under
the charge of an individual called departmental
head (e.g., production manager, finance manager
etc.) jobs are then allocated to the members of
each department awarding to their skills and
qualifications.
Employees are giving them a document called
job description, it clearly defines the contents
and responsibilities related to the job.
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.
Here all the individuals are assigned some
authority matching to the job they have to
perform. This results in creation of superior
subordinate relationship.
The individual of higher authority becomes the
superior and with less authority becomes the
subordinate.
Importance/Need/Significance of
Organising
1.Benefits of specialization: In organizing every
individual is assigned a part of total work and
not the whole task. This division of work leads
to specialization. Thus organizing promotes
specialisation which in turn leads to efficient &
speedy performance of tasks.

2.Clarity in working relationship: It helps in

creating well defined jobs and also clarifying
the limits of authority and responsibility of
each job. The superior subordinate relationship
is clearly defined in organizing.
3. Effective Administration: It gives a clear
description of jobs and related duties which
helps to avoid confusion and duplication. Clarity
in working relationships enables proper execution
of work which resulted in effective
administration.

4. Optimum utilization of resources: The

proper assignment of jobs avoids duplication of
work. This help in preventing confusion and
minimizing the wastage of resources and efforts.

5. Expansion and growth: It helps in growth &

diversification of and enterprise by adding more
job positions, departments, products lines, new
geographical territories etc.
6. Adoption to Change: A properly designed
organizational structure is flexible which
facilitates adjustment to changes in workload
caused by change in external environment
related to technology, products, resources and
markets.

7. Development of Personnel: Sound

organization encourages initiative. When
managers delegate their authority, it reduces
their workload so they can focus on more
important issues related to growth & innovation.
This also develops the subordinates ability and
helps him to realize his full potential.
 Organizational Structure
• When the managers are performing
organising function it results in creation of an
organisational structure which defines the
job positions, the authority, responsibilities of
different employees.
• The organization structure can be defined as
the frame work within which managerial and
operating tasks are performed.
• Span of management gives shape to
organisational structure.
• Narrow Span of management results in tall
structure and wide span result in flat structure.
• Span of management refers to the number of
subordinates that can be effectively managed
by a superior.
• The Span of management to a large extent
gives shape to the organization.
• This determines the levels of management in
the structure.
Types of Organisational
Structure

Functional Structure Divisional Structure

 Types of Organisational
Structure
(A) 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 departments etc.
• Within the departments also grouping is done
on the basis of specialised functions.
 Suitability of Functional Structure

1. Division of work as per function.

2. Specialisation in every function.
3. Grouping of similar nature of jobs.
4. Uniproduct or single or one type of product
manufacturing company.
 Advantages of Functional Structure
1. Occupational Specialisation – Here emphasis
is placed on specific functions. This promotes
efficiency & they become specialised in their
task.

2. Promotes control & coordination within

Department – Due to similar activities grouped
in one department there is easy supervision
and better control.

3. Increases managerial and operational

efficiency.
4. It leads to minimum duplication of efforts -
This results in economies of scale and lowering of
cost.

5. Easy and Effective Training – As training

focuses only on limited skills or one function only.

6. Due attention to different function – Each

function gets due attention under functional
structure.
 Disadvantages of Functional Structure

1. Places less importance to overall objective

of organisation – It places less emphasis on
overall objectives than the objectives pursued
by functional head.
This may lead to pursuing departmental interest
at the cost of organisational interest.

2. Problems of Coordination – As each

department is specialised in their own
function so they feel to understand the
priority of other department.
3. Inflexibility – Employees get narrow
prospective in the sense that they get training in
one area only, so they cannot be transferred to
other departments.

4. Conflict of Interest – There are chances of

conflict of interest among different
departments. As every department tries to
blame other departments for the failure.

5. Difficult to fix accountability – In case if

failure of organisational goal, the departmental
head blames other departments and it is very
difficult to find out which department is going
against the organisational objectives.
(B) Divisional Structure
• It is a type of organisational structure where
enterprises work as units or divisions.
• Each division adopts functional structure and
performs all functions related to a product.

Suitability of Divisional Structure

1. Organisations producing multi product or
different line of products.
2. Organisations which require product
specialisation.
3. Growing companies which plan to add more
line of products in future.
 Advantages of Divisional Structure

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 – Division

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.
4. Product Specialization – Divisional head is
responsible for the functioning of a division.
While managing all the functions he gains skills
and specialisation of a particular product.

5. Accountability – It becomes easy to identify

the costs and revenues of a division and evaluate
the performance of the manager. It also helps
to fix responsibility in case of poor performance
and take appropriate corrective actions.

6. Flexibility – Each unit functions

independently under the divisional head who has
authority to run the department. This gives
flexibility in decision making.
 Disadvantages of Divisional Structure

1. Conflicts – To achieve their objectives the

departments may try to get more funds or transfer
costs to other departments. This causes conflicts
among different divisions.

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. Ignores Organisational Interest – In the

course of achieving results for their respective
divisions, they make ignore organisational goals.
 Difference between Functional &
Divisional Structure
Basis Functional Structure Divisional Structure
1. Basis Formed on the basis of Formed on the basis of
functions. product.
2.Specialisation Functional specialisation. Product specialisation.
3. Cost Economical. Not economical.
4. Flexibility Less flexibility. More flexibility.
5. Accountability Difficult to fix Easy to fix accountability as
& Responsibility accountability. divisions work independently.
6. Coordination It is difficult to Easy to coordinate as all
coordinate as each functions related to a
department performs particular product are
different functions. performed within a division.
7. Managerial Less chances as manager More chances as managers
Development becomes specialised in performs multi functions.
one function only.
8. Suitable Companies dealing in Companies dealing in multiple
single product. products.
 Formal Organisation
• This structure is designed by the
management to achieve organizational 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.
• Formal organisation clearly spells out the
job to be performed by each individual.
• This structure is created intentionally by
the managers for achievement of
organisational goal.
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 organizational
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 a established
chain of command.
4. Easy to achieve objectives – because
coordination and optimum use of human and
material resources.
5. Stability in the organisation — because
behavior 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 organization is that
organization which is not established
deliberately but comes into existence
because of common interests, taste and
religious and communal relations.
• The main purpose of this organization,
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

organization 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 organization.

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 rumors: All the persons in an

informal organization talk careless and
sometimes a wrong thing is conveyed to the
other persons.

2. It resists change and lays stress on

adopting the old techniques.

3. Priority to group interests: Pressurizes

members to confirm to group expectations.
 Delegation of Authority
● It is actually impractical for an individual to
handle all activities efficiently by himself/
herself.
● As a result, the need of sharing
responsibilities arises. To perform
responsibilities individuals require authority.
● When the responsibility and authority is
shared with others it is called delegation.
● Delegation refers to the downward transfer
of authority from a superior to a subordinate
to enable subordinates to perform their
responsibilities effectively.
● Delegation of authority is a must because:
(i) It enables the efficient functioning of an
organisation.
(ii) It enables managers to use their time on
high priority activities.
(iii) It allows managers to extend their area of
operation.
 Principle of Absoluteness of
Accountability
● Delegation is a very important process to carry
on the work systematically in the organisation.
● But delegation is not a process of abdication
which means accountability is absolute. It can
never be delegated.
● After creating accountability on subordinates,
the superiors also remain accountable.
 Elements of Delegation
1. Responsibility – It is the obligation of a
subordinate to perform the assigned duty
efficiently.
● The process of delegation begins when
manager passes on some of his
responsibilities to his subordinates which
means responsibility can be delegated.
● It arises from a superior-subordinate
relationship.
● It flows upwards i.e., a subordinate will
always be responsible to his superior.
2. Authority – Authority means power to take
decisions.
● To carry on the responsibilities, every
employee need to have some authority.
● Authority flows downward from superior to
subordinate.
● Authority originates by virtue of a position.
It is highest at the top management and
reduces as it flows down.
● Authority is restricted by rules and
regulations of the organisation.
● Authority must be equal to responsibility i.e.,
Authority = Responsibility
3. Accountability – It is the answerability for
the outcome of the assigned task.
● The accountability arises once the authority
is delegated and responsibility is accepted.
● Accountability flows upwards. A subordinate
is accountable to the senior for satisfactory
performance of work.
● A subordinate is expected to provide regular
feedback on work done and explain
consequences of any errors or omissions in
actions.
 Elements of Delegation: A
Comparison
Basis Authority Responsibility Accountability
1. Concept Power to take Obligation to Answerability
decision. complete the for the output
given task. of assigned task.
2. Delegation Can be Cannot be Cannot be
delegated. delegated delegated at all.
completely.
3. Origin Arises from Arises from the Arises from the
formal positions. authority responsibility.
delegated.
4. Flow Flows downward Flows upward Flows upward
from superior to from a from a
subordinate. subordinate to subordinate to
superior. the superior.
 Importance of Delegation
1. Effective Management – In delegation
process the managers passes the routine work
to subordinates. This gives managers the
opportunities to focus on issues of high priority.
This enables the management to use managerial
skills effectively.

2. Employees’ Development - Employees get

more opportunities to utilize their talent which
allows them to develop those skills which will
enable them to perform complex tasks.
This also prepares them as future leaders and
decision makers.
3. Motivation of Employees – Delegation of
responsibility with authority indicates superior’s
confidence and trust in his subordinate. This
builds self esteem, confidence and motivates
the subordinate to prove himself. The
subordinate feel committed and work hard to
achieve higher productivity.

4. Facilitates Growth – In the delegation

process when managers pass their responsibility
& authority they keep in mind the qualification
and capability of all the subordinates. This leads
to division of work & specialisation which is very
important for organisational growth.
5.Basis of Management Hierarchy –Delegation
establishes superior subordinate relationship
which is the base for hierarchy of managers.
The degree and flow of authority determines
the reporting system and powers each position
enjoys.

6. Better coordination - The elements of

delegation - authority, responsibility and
accountability help to define the powers, duties
and answerability related to various job
positions which results in developing and
maintaining effective coordination
7. Reduction of Executives work load - It
reduces the work load of officers. They can
thus utilize their time in more important and
creative works instead of works of daily
routine.
Centralisation & Decentralisation
● It represents the pattern of authority among
managers at different levels.
● Centralisation of authority means
concentration of power of decision making in a
few hands, i.e., the top level management.
● Decentralisation of authority means
systematic distribution of authority at all
levels of management.
● In such an organization very little authority
is delegated to managers at middle and lower
levels.
● No organization can be completely centralized
or decentralized.
● They exist together and there is a need for a
balance between the two.
● They keep the important matters with the top
level management only & share the common
decisions with the people working at different
levels.
● As the organization grows in size, there is
tendency to move towards decentralization.
● Thus, every organization is characterized by
both.
 Features of Decentralisation
● Decentralisation is much more than a mere
transfer of authority to lower level.
● It implies selective dispersal of authority.
● It indicates that employees at middle & lower
level can assume the responsibility for
effective implementation of their decision.
● Decentralisation recognises the need of
authority for decision-makers.
● The top management carefully selects those
decisions which will be pushed down to lower
level and those that will be retained at higher
level.
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 helps them to take better and quick decisions.

3.Better Control - It makes it possible to evaluate

performance at each level which results in complete
control over all the activities.
4. Relieves the top executives from excess
workload - The daily managerial works are
assigned to the subordinate which leaves enough
time with the superiors which they can utilize in
developing new strategies.

5. Managerial Development: It means giving

authority to the subordinates upto the lower
level to take decisions regarding their work. In
this way the opportunity to take decisions helps
in the development of the organization.

6.Facilitates Growth – It helps in increasing

productivity & it will generate more revenue which
can be used for expansion.
 Relation between Delegation &
Decentralisation
(a) Decentralisation is extension of delegation
● In delegation we multiply the authority with
two, whereas in decentralisation the authority
is multiplied by many.
● Systematic delegation taking place at every
level will result in evenly distribution of
authority and responsibility at every level and
results in decentralisation.
● If delegation is restricted to certain levels
only then there will be no complete
decentralisation also.
(b) Delegation is Necessary in Every
Organisation but Decentralisation is Optional

● No organisation can work without using the

concept of delegation as there is no individual
who can do all the work himself only.
● Delegation is a tool to get the work done
effectively & efficiently through others
whereas decentralisation is required when an
organisation grows & expands & only top level
cannot manage it.
● So decentralisation is a matter of choice and
preference of top level management and not
compulsory.
 Difference between Delegation
and Decentralisation
Basis Delegation Decentralisation
1. Parties Only two parties are More than two parties are
involved. involved.
2. Scope It is narrow in scope. It is wide in scope.
3.Freedom There is less freedom of There is more freedom of
of Action action as there is a action because there is
continuous supervision by periodic appraisal not
the managers. continuous supervision.
4.Responsi Responsibility of every Responsibility of top level
bility manager. manager.
5. Nature Compulsory. Optional.
6. Purpose To reduce the burden of To increase the role of
manager. subordinates and giving
them more autonomy.
7. Grant Immediate superior. Top level management.
of
Authority
Presented by –
Ritvik Tolumbia
CS, CWA, M.Com (ABST),M.A (Eco), B.Ed