Chapter

Organising 5
NCERT Question

Very Short Answer Type Questions downward then the shape of the organisational
1. Identify the network of social relationship structure will be as follows. It also gives a way
which arises spontaneously due to interaction for unity of command.
work. Top level
Ans. A network of social relationship that arises Middle level
spontaneously due to the interaction at
work is referred as informal organisation. Lower level
It rises from social interaction and free flow 3. State any two circumstances under which
of communication among the employees of the functional structure will prove to be an
an organisation. On the other hand, formal appropriate choice.
organisation refers to a formal system based Ans. Functional structure would proved to be an
on superior-subordinate relationship. Whereas; appropriate choice if:
delegation and decentralisation are exercised (i) The organisation is large in size, it can
with the transfer of authority and responsibility function smoothly. Large organisation can
to the subordinates. follow departmentalisation to improve
2. What does the term ‘Span of management’ managerial efficiency and the degree of
refer to? control.
Ans. It means how many employees can be easily (ii) There is a clear division of activities in
controlled by an employer or a superior, or how various departments. Then a functional
many number of employees are working under structure promotes coordination and
one superior. The span of management, to a ensures smooth functioning.
large extent gives shape to the organisational 4. Draw a diagram depicting a divisional
structure, e.g., if the number of subordinates structure.
under a superior keep increasing when we move Ans.
Managing Director

Cosmetics Garments

Production Purchase Finance Marketing Production Purchase Finance Marketing

Skin Care Footwear

Production Purchase Finance Marketing Production Purchase Finance Marketing

5. A company has its registered office in Delhi, functions in different areas, then it should
manufacturing unit at Gurgaon and marketing adopt functional structure.
and sales department at Faridabad. The (ii) The services of experts are common for
company manufactures the consumer products. all products. It will be economical as no
Which type of organisational structure should duplication will take place.
it adopt to achieve its target? (iii) Span of management can be increased as
Ans. (i) As a company is performing separate workers will be doing same type of work.

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24 | CBSE NCERT Question Business Studies– XII
Short Answer Type Questions Ans. The informal organisation offers many benefits.
1. What are the steps in the process of organising? Important among them are given as follows:
Ans. Organising involves following steps that need (i) Quick Feedback: Fixed lines of communi-
to be taken in series cation are not followed. Thus, the informal
organisation leads to faster spread of
(i) Identification and Division of Work:
information among subordinates as well as
Organising process begins with identifying
quick feedback.
and division of total work into small
units, it focuses on specialization. So that, (ii) Social Needs: It aids to fulfil social needs
duplication of work can be avoided. of the members and grants them to find
minded people. This enhances their job
(ii) Departmentalisation: After dividing the
satisfaction, since it gives them a sense of
work, related and similar jobs are grouped
belongingness in the organisation.
together and put under one department it
can be on the basis of regions, area, work, (iii) Organisational Objectives: It contributes
process, nature, function. towards attainment of organisational
objectives by compensating for flaws in the
(iii)Assignment of Duties: After
formal organisation e.g., feedbacks on new
departmentalisation, the work is assigned
policies etc, can be tested through informal
according to the skills and competencies
network.
of individuals. It is done on the basis of
specialization, it helps in reduction of 4. Can a large sized organisation be totally
wastages and overlapping of resources. centralised or decentralised? Give your
opinion.
(iv) Establishing Reporting Relationship:
Assigning duties is not enough. Each Ans. No, large organisation cannot be totally
individual should also know, from whom centralised or decentralised. Complete
he has to take orders and to whom he is centralisation would imply power of
accountable. Thus, reporting relationship concentration of all decision making authority
helps in co-ordination among various at the apex of the management hierarchy. Such
departments. a scenario could influence the management
hierarchy in a very bad manner. On the other
2. Discuss the elements of delegation.
hand, complete decentralisation would imply
Ans. The elements of delegation are as follows:
the delegation of all decision making authority
(i) Authority: It refers to the right of an individual to the lower level of the hierarchy and this
to command his/her subordinates and to take would finish off the need for higher, managerial
action within the scope of his position. The positions. Both the situations are unrealistic.
concept of authority arises from the established
As an organisation grows in size, there is
scalar chain and unity of command, which
a tendency to move towards decentralised
links the various job positions and levels of an
decision making. This is because, in large
organisation. It must be noted that authority is
organisations those employees, who are directly
restricted by laws and the rules and regulations
and closely involved with certain operations
of the organisations. Authority flows down-
tend to have more knowledge about them
wards and it can be delegated i.e., the superior
than the top management, which may only be
has authority over the subordinate.
indirectly associated with individual operations.
(ii) Responsibility: Responsibility is the obligation Hence, there is a need for balance between these
of a subordinate to properly perform the duty co-existing forces.
assigned by his/her superior. It arises from
5. Decentralisation is extending delegation to the
a superior-subordinate relationship because
lowest level. Comment.
the subordinate is bound to perform the duty
Ans. Decentralisation is extending delegation to
assigned to him by his superior so, responsibility
the lowest level. Decentralisation refers to
flows upward.
delegation of authority throughout all the
(iii) Accountability: Accountability is an obligation
levels of the organisation. Decentralisation
or a liability for a subordinate which is created
explains the manner in which decision making
by the superior for the use of authority and
responsibilities or power are divided among
responsibility of actions undertaken for business
hierarchical levels. Decision making authority
operation.
is shared with lower levels and is accordingly
3. How does informal organisation support the placed nearest to the point of action. In other
formal organisation?

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 Organising | 25
words, decision making authority is pushed Ans. Delegation implies transfer of authority,
down the chain of command. Delegation is the from a superior to his subordinate. It is an
process and decentralisation is the end result, essential concept of an effective that command
e.g., if the director gives the responsibility to high priority. It helps in efficient completion of
production head to complete the target of 20,000 tasks as the subordinates can now show their
units and authorise him to hire the workers, skills and exercise initiative. Effective delegation
production head further shares his responsibility leads to the following benefits:
with manager to select the worker. Manager (i) Effective Management: By empowering the
shares his responsibility with supervisors, who employees, the managers are able to function
are dealing with workers, authorise him to select more efficiently as they get more time to
workers. Here, the responsibility distributed concentrate on core activities rather than
at every level. That’s why we say systematic focusing on immaterial activity. This would
delegation leads to decentralisation. increase the efficiency and effectiveness of
6. Neha runs a factory wherein she manufactures the working.
shoes. The business has been doing well and (ii) Employee Development: As a result
she intends to expand by diversifying into of delegation, employees get more
leather bags as well as western formal wear, opportunities to utilise their talent and this
thereby making her company a complete may give rise to develop skills in them.
provider of corporate wear. This will enable Delegation empowers the employees by
her to market her business unit as the one stop providing them with the chance to use
for working women. Which type of structure their skills, gain experience and develop
would you recommend for her expanded themselves for higher positions.
organisation and why? (iii) Motivation of Employees: Delegation
Ans. Neha should go for divisional structure because: motivates the employees to work with
(i) She will diversify the units into various greater responsibilities. It has psychological
product lines. benefits too. Responsibility builds the self-
(ii) This structure would enable her to know esteem of an employee and improves his
the profit margins from each product confidence. He feels encouraged and tries to
line so that she can plan accordingly and improve his performance further.
select the specific product for the future (iv) Facilitation of Growth: Delegation helps
diversification. in the expansion of an organisation by
(iii) It will ease the further expansion without providing a workforce who is keen to get
bothering the existing units. new positions in a job. Trained and
7. The production manager asked the foreman experienced employees are able to play
to achieve a target production of 200 units per significant roles in the launch of new
day, but he doesn’t give him the authority to projects.
requisition tools and materials from the stores (v) Basis of Management Hierarchy:
department. Can the production manager Delegation of authority establishes
blame the foreman if he is not able to achieve superior-subordinate relationship, which is
the desired target? Give reasons. the basis of hierarchy of management. The
Ans. No, the production manager cannot hold the extent of delegated authority also decides
foreman responsible for the incomplete work the power that each job position enjoys in
as the foreman was not given authority by the organisation.
the manager. The principle of authority and (vi) Better Co-ordination: Due to the delegation
responsibility states that there should be a equity of work, duties, power, everything becomes
between the authority and the responsibility. very clear. This helps to avoid overlapping
If the authority is given more, then it leads of duties and duplication of effort as it gives
to misuse of authority and if responsibility a clear picture of the work being done at
is more, then the work will not be completed. various levels. Such clarity in reporting
Hence, excessive authority without matching relationships help in developing and
responsibility may bring negative results. So, maintaining effective coordination amongst
there is a need of bringing parity between then. the departments, levels and functions of
Long Answer Type Questions management.
1. Why delegation considered essential for 2. What is a divisional structure? Discuss its
effective organising? advantages and limitations.

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Ans. A divisional structure comprises of separate Develops initiative among subordinates:
business units or divisions. Each unit has Decentralisation helps to develop
a divisional manager responsible for the confidence among the subordinates. When
performance and who has authority over the lower managerial levels are given freedom
unit. Generally, manpower is grouped on the to take their own decisions they learn to
basis of different products manufactured. depend on their judgement. A decentralised
It should be adopted by the diversified policy helps to recognize those executives,
organisation to enable it to cope with the who have the necessary potential to become
emerging complexity. dynamic leaders.
Advantages: (ii) Develops managerial talent for the future:
(i) Development of any skills: Product Formal training plays an important role in
specialisation helps in the development of arranging subordinates with skills that help
varied skills in a divisional head and this them to rise in the organisation, but gaming
prepares him for higher positions as he experience by handling assignments
gains experience in all functions. independently is equally important. It gives
(ii) Answerability: Divisional heads are them a chance to prove their abilities and
accountable for profits, as revenues and creates a backlog of qualified manpower.
costs related to different departments, can (iii) Quick Decision Making: In a decentralised
be easily identified and assigned to them. organisation, however, since decisions are
This provides proper basis for performance taken at level, which is nearest to the points
measurement. of action and there is no requirement for
(iii) Extentive decision making: It promotes approval from many levels as the process is
flexibility and initiative because each much faster.
division functions as an autonomous unit
(iv) Relief to Top Management: Decentra-
which leads to faster decision making.
lisation leaves the top management with
(iv) Focuses on growth: It facilitates growth
more time, so they can devote this time
as new divisions can be added without
to important policy decisions instead of
interrupting the existing operations, by
occupying their time with both the policy as
merely adding another divisional head and
well as the operational decisions.
staff for the new product line.
(v) Facilitates Growth: Decentralisation
Disadvantages:
awards greater liberty to the lower levels
The divisional structure has certain
of management as well as divisional or
disadvantages:
departmental heads. This grants them
(i) Conflicts: There may be conflicts among to function in a best possible manner
different divisions with reference to
suited according to their department and
allocation of funds.
develops a sense of competition amongst the
(ii) Non-economical, leads to huge cost: departments, consequently, the productivity
Providing each division with separate set of level increases and the organisation is able to
similar functions increases expenditure.
generate more returns, which can be used for
(iii) Ignoring Organisational Goals: It provides expansion purposes.
managers with the authority to supervise
(vi) Better Control: Decentralisation makes
all activities related to a particular division.
it possible to evaluate performance at
In course of time, such a manager may gain
each level and the departments can be
power and in a bid to assert his independence
may ignore organisational interests. individually held liable for their results.
The scope of achievement of organisational
3. Decentralisation is an optional policy. Explain
objectives as well as the contribution of
why an organisation would choose to be
each department in meeting the over all
decentralised.
objectives can be ascertained.
Ans. Decentralisation is much more than mere
transfer of authority to the lower levels of 4. Distinguish between centralisation and
management hierarchy. decentralisation.
Its importance can be understood from the Ans. Difference between centralisation and
following points: decentralisation.
(i)

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 Organising | 27
Basis Centralisation Decentralisation
Meaning It refers to the congregation of powers. at It refers to the distribution of powers at
higher level only. every level of management.
Authority Top management retains maximum Authority is systematically delegated
authority. Middle and lower level are among all levels.
having low authorities.
Suitable It is suitable for small size organisation. It is suitable for large scale organisation.
Freedom Managers have less freedom of actions. Managers have more freedom of actions.
5. How is a functional structure different from a divisional structure?
Ans. Difference between functional and divisional structure are:
Basis Functional Structure Divisional Structure
Formation Formation of it is based on functions Formation of it is based on product
performed. lines.
Specialisation Functional specialisation Product specialisation
Responsibility Difficult to fix responsibility Easy to fix responsibility
Managerial Difficult, as each manager specialises in Easy, as each manager performs
developmen one function. multifunctions.
Cost Economical, as no duplication of work. Costly, due to duplicaton of functions.
Co-ordination Difficult for a multi-pfoduct company. Easy, because all functions related to a
particular product are integrated in one
department.
6. A company, which manufactures a popular making. As the result it is not able to adapt
brand of toys, has been enjoying good market to changing business environment. The work
reputation. It has a functional organisational force is also not motivated since they cannot
structure with separate departments for vent their grievances except through formal
Production, Marketing, Finance, Human channels, which involve red tape. Employee
Resources and Research and Development. turnover is high. Its market share is also
Lately to use its brand name and also to cash declining due to changed circumstances and
on to new business opportunities it is thinking business environment.
to diversify into manufacture of new range You are to advise the company with regard to
of electronic toys for which a new market change it should bring about in its organisation
is emerging. Which organisation should structure to overcome the problems faced by it.
be adopted in this situation? Give concrete Give reasons in terms of benefits it will derive
reasons with regard to benefits the company from the changes suggested by you.
will derive from the steps it should take. Ans. The suggestions for the company are:
Ans. In the situation given above, organisation should (i) To conquer the limitations of formal
shift from a functional structure to a divisional organisation, the management should
structure as the company wants to diversify; by encourage workers to interact and socialise
adding a new product line. with each other through get together
outings. In this way, everyone will connect
The reasons and benefits are:
and will get to know each other better. The
(i) Every unit’s performance is assessed. net result will be more satisfied workforce.
(ii) New product lines can be added easily (ii) Decentralization can be a good option to
without bothering the existing units. choose.
(iii) Decision making is faster. (iii) The business can be diversified in the flexible
(iv) Divisional structure controls short line of areas like embroidery units, sequencing
communication with customers and provide units, buttoning units, tailoring units in
better services to them. textile machineries.
7. A company manufacturing sewing machines 8. A company X limited manufacturing
set up in 1945 by the British promoters follows cosmetics, which has enjoyed a pre-eminent
formal organisation culture in totality. It is position in business, has grown in size. Its
facing lot of problems in delays in decision business was very good till 1991. But after that,

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new liberalised environment has seen entry of How will the changes suggested by you help
many MNC’s in the sector. the firm? Keep in mind that the sector in which
With the result the market share of X limited the company is FMCG.
has declined. The company had followed a very Ans. The company X Ltd. is working in a centralised
centralised business model with directors and way, which is not giving enough time to the
divisional heads making even minor decisions. higher officials to think of better policies,
Before 1991, this business model had served strategies to handle the changes in the changing
the company very well as consumers had no environment. The company should get
choice. But now the company is under pressure decentralised so that the routine type of work,
to reform. What organisation structure changes involving minor decisions can be looked after
should the company bring about in order to by the lower levels. This will give/save more
retain its market share? time for the directors and divisional heads to
plan strategies to fight with competition.


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