CBSE Class 12 Business Studies Organising Notes Set 02

Step Involved in the Process of Organising: –
1. Identification and Division of Work: – It involves identification and dividing the 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 specialisation of work & skills. Duplication of work can be avoided by dividing the work into manageable activities.
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 which an organisation undertakes to achieve its objective. For example, departments may be created for manufacturing, marketing, financing 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 an individual called departmental head (e.g., 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: –
1. Benefits of specialisation: – In organising every individual is assigned a part of total work and not the whole task. Due to this division of work into smaller units and repetitive performance leads to specialisation. Thus, organising 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 organising.
3. Effective Administration: It provides a clear description of jobs and related duties which help 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.

Types of Organisation Structures
I. 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.

Advantages:
1. Specialisation – Better division of labour takes place which results in specialisation of functions and its consequent benefits.
2. Coordination is established: – All the persons working within a department are specialist 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.

II. DIVISIONAL ORGANISATION STRUCTURE: Dividing the whole enterprise according to the major products to be manufactured (like metal, plastic, cosmetics etc) in known as divisional organisation structure.
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 unprofitable division can be closed.
3. Growth and Expansion: – It facilitates growth and expansion as new divisions can be added without disturbing existing departments. Difference between Formal & Informal organisation 

Organising

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 goals of the organisation.

According to Henry Fayol, "To organise a business is to provide it with everything useful to its functioning; raw materials, machines and tools, capital and personnel."

Process Of Organising

(i) Identification and division of work

(ii) Departmentalisation

(iii) Assignment of duties

(iv) Establishing reporting relationships

Importance Of Organising

• Benefits of specialization: Work is divided into smaller tasks and each task is performed by those employees who possess the required skills. Performing similar tasks leads to specialization.
• Clarity in working relationships: It removes ambiguity and miscommunication as working relationships are clearly stated.
• Optimum utilization of resources: It avoids duplication and overlapping of work which leads to minimum wastage of resources.
• Adaptation to change: It tries to incorporate the changes in the business environment by modifying organizational structures and revising interrelationship at managerial levels as and when required.
• Effective administration: Clarity in working relationships and proper execution of work brings effective administration.
• Development of personnel: Proper delegation reduces employer's burden, stimulates creativity and motivates them to complete tasks efficiently.
• Expansion and growth: It helps in growth and expansion by incorporating changes in the business environment.

Organisation Structure

It can be defined as "Network of job positions, responsibilities and authority at different levels." The considerations to be kept in mind while forming the organisational structure are:

• Job design
• Departmentation
• Span of management
• Delegation of authority

Types Of Organisation Structure

1. Functional Structure: When the activities or jobs are grouped keeping in mind the functions or the job then it is called functional structure.

Advantages:

• Specialisation
• Easy supervision
• Easy co-ordination
• It helps in increasing managerial efficiency
• Effective training

Disadvantages:

• The departments become specialised in their own way only.
• When departments become too large then the co-ordination decrease.
• When the organisational goals are not achieved then it becomes very difficult to make any one department accountable.
• Employees get training in one function only i.e., the department to which they belong so they can not be shifted to another department.

2. Divisional Structure: When the organisation is large in size and is producing more than one type of product then activities related to one product are grouped under one department.

Advantages:

• Product specialisation
• Fast decision making
• Accountability
• Flexibility
• Expansion and growth

Disadvantages:

• Each department will require all the resources as every division will be working as an independent unit.
• Conflict on allocation of resources.
• Each department focuses on their product only and they fail to keep themselves as a part of one common organisation.

Difference Between Functional Structure And Divisional Structure

Formal Organisation

When the managers are carrying on the organising process then as a result of the organisation process an organisational structure is created to achieve systematic working and efficient utilisation of resources. This type of structure is known as formal organisational structure.

Advantages:

• Systematic working
• Achievement of organisational objectives
• No overlapping of work
• Co-ordination
• Creation of chain of command
• More emphasis on work

Disadvantages:

• Delay in action
• Ignores social needs of employees
• Emphasis on work only

Informal Organisation

It is a network of personal and social relations not established or required by the formal organisation but arising spontaneously as people associate with one another.

Advantages:

• Fast communication
• Fulfills social needs
• Correct feedback

Disadvantages:

• Spread rumors
• No systematic working
• May bring negative results
• More emphasis to individual interest

Difference Between Formal And Informal Organisation

Delegation Of Authority

"A process of entrusting responsibility and authority to the subordinates and creating accountability on those employees who are entrusted responsibility and authority."

Importance Of Delegation

• (i) Effective management
• (ii) Employee development
• (iii) Motivation of employees
• (iv) Facilitation of growth
• (v) Basis of management hierarchy
• (vi) Better co-ordination

Elements Of Delegation

• Responsibility: It means the work assigned to an individual. It includes all the physical and mental activities to be performed by the employees at a particular job position.
• Authority: It means power to make decisions. To carry on the responsibility every employee needs to have some authority. Authority flows in a downward direction that is top to bottom, as the superior has authority over his subordinate. Also the level of authority increases as one moves higher in the management hierarchy.
• Accountability: It means subordinates will be answerable for the non-completion of the task. It flows from bottom to top in upward direction, as a subordinate is accountable for his work and performance to his superior.

Difference Between Authority, Responsibility And Accountability

Centralisation

• All powers and authority of decision-making is retained with the top level management in this concept.
• All the decisions are taken by the higher level management in a centralised firm.
• Though an organisation cannot be completely centralised, as it may disrupt the production efficiency as well as discourage departments and employees to perform to the best of their abilities. Hence for this a balance between centralisation and decentralization is needed.

Decentralisation

Decentralisation explains the manner in which decision-making responsibilities are divided among hierarchical levels.

Importance Of Decentralisation

• Develops initiative among subordinate
• Develops managerial talent for the future
• Quick decision making
• Relief to top management
• Facilitates growth
• Better control

Difference Between Delegation And Decentralisation