CBSE Class 12 Business Studies Planning Notes

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Revision Notes for Class 12 Business Studies Chapter 4 Planning

Class 12 Business Studies students should refer to the following concepts and notes for Chapter 4 Planning in Class 12. These exam notes for Class 12 Business Studies will be very useful for upcoming class tests and examinations and help you to score good marks

Chapter 4 Planning Notes Class 12 Business Studies

Concept : Deciding in advance what to do and how to do it. It involves setting objectives and developing an appropriate course of action to achieve these objectives. Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. Planning bridges the gap from where we are to where we want to go. It is one of the basic managerial functions. Planning involves setting objectives and developing appropriate courses of action to achieve these objectives.

Importance : (a) provides direction (b) reduces risks of uncertainty (c) reduces overlapping and wasteful activities (d) promotes innovation (e) facilitates decision making (f) provides standards for controlling

Limitations : (a) rigidity (b) reduces creativity (c) huge costs (d) time consuming (e) does not guarantee success (f) may not work in dynamic environment

Process : (a) setting objectives (b) developing premises (c) identifying alternatives (d) evaluating alternatives (e) selecting an
alternative (f) implement the plan (g) follow up action

Types: (a) objectives (b) strategy (c) policy (d) procedure (e) method (f) rule (g) programme (h) budget 

IMPORTANCE OF PLANNING

Planning is the first and most important function of the management. It is needed at every level of the management. In the absence of planning all the business activities of the organization will become meaningless. The importance of planning has increased all the more in view of the increasing size of organizations In the absence of planning, it may not be impossible but certainly difficult to guess the uncertain events of future.

1 Planning facilitates Decision making: Decision making means the process of taking decision. Under it, a variety of alternatives are discovered and the best alternative is chosen. But it is important to determine the objectives before the discovery of alternatives. Objectives are determined under the process of planning. So. it can be said that planning facilitates decision making.

2 Planning reduce risk of Uncertainty: planning is always done for future and future is uncertain. With the help of planning possible changes in future are anticipated and various activities are planned in the best possible way 

3. Planning reduces overlapping and wasteful activities: Under planning, future activities are planned in order to achieve objectives. the problems of when, where ,what and almost decided. This puts an end to disorder. In such situation coordination is established among different activities and departments. It puts an end ot overlapping and wasteful activities.

4. Planning provides Direction: Under the process of planning the objectives of the organization are defined in simple and clear words. The outcome of this is that all the employee’s important role in the attainment of the objectives of the organization.

 

5 Planning establishes Standards for controlling: By determining the objectives the objectives of the organisation through planning all the people working in the organization and all the departments are informed about when, what and how to do things. Standards are laid down about their work, time and cost. Under controlling ,at the time of completing the work,the actual work done is compared with the standard work and deviations are found out and if the work has been done as desired the person concerned is held responsible.

 

Importance of Planning :-

1. Planning provides directions : By Stating in advance how work to be done planning provides direction for action.

2. Planning reduces the risk of uncertainty :- Planning is an activity which enables a manager to look ahead.

3. Planning reduces wasteful activities :- Planning serves as the basis of coordinating the activities and efforts of different departments and individuals useless and redundant activities are minimised. 

4. Planning promotes innovative ideas : Planning is the first function of management new ideas can take the shape of concrete plans.

5. Planning facilities decision making :- The manager has to evaluate each alternative and select the most viable proposition.

6. Planning establishes standards for controlling :- Planning provides the standards against which he actual performance can be measured and evaluated. Control is blind without planning. Thus planning provides the basis for control.


Features of Planning :-

1. Planning focuses on achieving objectives :- Planning function of management starts with determination of objectives. Once the objectives are set up, the next step is to determine the step that are to be followed to achieve these objectives.

2. Planning is the primary function of management : - Planning precedes organising, directing and controlling. It serves as the basis of all other function of management.

3. Planning is pervasive : Planning is required in all types of organisations and at all levels of management..

4. Planning is continuous :- Planning is a continuous process.

5. Planning is futuristic : Planning is deciding in the present what to do in the future.

 

6. Planning is a mental exercise : Planning requires application of the mind involving creative thinking and imagination, therefore this is a mental exercise.

Limitations of Planning

1. Planning leads to rigidity a well defined plan is drawn up with specific goals to be achieved within a specific time frame. There plans then decide the future course of action. This kind of rigidity in plan may create difficulty.

2. Planning may not work in a dynamic environment :- The business environment is dynamic, nothing is constant.

3. Planning reduces creativity : Planning is an activity which is done by the top management therefore it reduced other level creativity.

4. Planning involves huge costs : When plans are drawn up, huge cost involved in their formulation.

5. Planning is a time consuming : Sometime plans to be drawn up take so muck of time that there is not much time left for their implementation.

 

6. Planning does not quarantee of success :-


KEY CONCEPTS IN NUTSHELL

Meaning It is the process of setting objectives and targets for a given time period and formulating an action plan to achieve them effectively and efficiently. It concerns itself with both ends and means that is what is to be done and how it is to be done 

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Definition

Planning seeks to bridge the gap between where we are and where we want to go. Planning isa trap to capture the future.

Importance of planning

i) Provides directionBy stating in advance the future course of action of what is to be done and how it is to be done. By stating in advance it facilitates unity of direction.

ii) Reduces the risk of uncertaintyBy predicting future events and preparing the organization to anticipate the future and face unexpected events.

iii) Facilitates decision makingplanning helps the manager to look into the future and make a sound judgment or choice from among thel various aternatives.

iv) Reduces overlapping and wasteful activitiesThrough elimination and minimization of useless and re
dundant activities facilitating clarity.

v) Promotes innovative ideasThrough better new methods, ideas and procedures to reach the objectives and goals of the enterprise. It induces the management to predict the changes in the environment and accordingly plan the strategies for the same .

vi. Establishes standard for controlling“control is blind without planning”. It helps provide standard against which the actual performance are compared and evaluated o estimate the deviations.

Limitations of planning:

i. Planning does not work in a dynamic environment Planning also has to work amidst the influence of external environment which can render even the most effective plan inoperative.

ii. Planning is a time consuming process as it requires collection of information, its analysis and interpretation. It becomes a difficult exercise in times of unexpected emergencies.

iii. It involves huge cost in its formulation. As a lot of money needs to be expended in the collection, analysis and interpretation of data

iv. It creates rigidity in the mode of functioning. As the employees are required to function as per the dictates of the predetermined policy.

v. It does not guarantee success, as a wrong or a misconceived plan or a well drawn plan when not implemented can lead to failure.

vi. It reduces creativity as the middle level managers and the other decision makers have to only follow and are nos.

vii. The human element can give way to errors or mistakes through wrong assumptions.

viii. It is prone to external influences which can reduce its impact like natural calamity, technology changes, policy changes, competition.

CBSE Class 12 Business Studies Planning Notes Set A

LIMITATIONS OF PLANNING Planning is needed both in the business and non business organizations. Some people think that planning is based on the future and nothing can be said certainty about future. Therefore, it is for all the situations before and which now requires immediate decision. In such situation if the useless process. If planning has to be successful and purposeful, the managers should be aware of these difficulties and limitations of planning.Following are the limitations of planning.

1 Planning does not work in Dynamic Environment: Planning is based in the future happenings. Since future is uncertain and dynamic. Generally, a longer period of planning makes it less effectives. Therefore, it can be said that planning does not work in dynamic environment.

2 Planning reduce creativity: Under the planning All the activities connected with the attainment of objectives of the organization are pre-determined. Everybody works as they have been directed to do and it has been made clear in the plans. it means that they do not think about appropriate ways of discovering new alternatives.

3 Planning involves huge costs: Planning is small work but its process is really big. Planning becomes meaningful after a long path. It takes a lot of time to cover this path. During this entire period the managers remain busy in collecting a lot of information and analyzing it. In this way the organization is bound to face huge costs.

4 Planning is time consuming process: Planning is blessing in facing a definite situation but because of long process it can not f ace sudden emergencies. Sudden emergencies can be in the form of unforeseen problems or some opportunity of profit is and there has been no planning manager thinks of completing the planning process before taking some decision. Thus, planning is time consuming process.

 

5. Planning does not guarantee of success: Some times the manager think that planning solves all their problems. Such a think makes them neglect their real work and adverse effect of such an attitude has to be faced by the organization. In this way, planning planning offers the managers a false sense of security and makes them careless. So, we can that mere planning does not ensure successs,rather efforts have to be made for it.


PLANNING PROCESS When we look at planning in the context of management process, it is called activity , it is being a part of management. But on the other hand, when it is studied separately it is called a process because to complete one has to clear many steps one after the other. So far as the number of steps included in the planning process is concerned it depends on the size of the organization. Different organization can have different planning process.The following steps are generally taken in the business organization during the planning process.

1. Setting the objectives; Objectives are those end points for whose attainment all the activities are taken. In the planning process objectives are determined and defined first of all so that all the employees concerned can be informed about them to get their complete cooperation. Objectives have a hierarchy of their own organizational objectives, departmental objectives, and individual objectives.

2. Developing the premises: the basis of planning is those factors which influence the possible results of different alternatives. Before taking a final decision about any alternative a forecast of this assumption is made. The rate of success of planning will be in direct proportion to the rate of the success of forecasting. The assumption of planning is two types: (1)Internal premises: capital, labour, raw material, machinery ect.
(2) External premises; Government polices, business competition, taste of customer rate of taxes. ect.

3. Identifying alternative course of action: Generally, there is no work which has no alternative method of doing it. On the basis of the objectives of the organization and limitations of planning, alternative course of doing a particular work can be discovered.

4 Evaluating alternative courses: All those alternative courses which are up to the expectations of the minimum preminary criteria are selected for intensive study. it will be seen as to what extent a particular alternative course can help in the attainment of the objectives of the organizations. There is however, one problem which confronts us while analysing these alternative courses. Every alternatives course has its merits and demerits.

5 Selecting an alternative: alternative a careful analysis of different alternatives the best one is selected. Sometimes the analysis yields more than one alternative course with similar merits. Keeping in view the uncertainties of future it is justifiable to select more than one good alternative course One of such alternative is adapted and other is kept in reserve.

6 Implementing the plan: After having decided the chef plan and the subsidiary plans, they are to be implemented. After implementing the plans the sequence of different activities has to be decided. In other words, it is decided as to who will do a particular job and at what time.

 

7. Follow up Action: the process of planning does not end with the implementation of plans. plans are formulated for future which is uncertain. It is of great importance that there is a constant review of plans so as to ensure success in the uncertain future. The moment there appears to be changes in the plans also. In this way we can say planning is Continuously moving process.

TYPES OF PLANS Planning is a process and plan is its outcome. Plan is a sort of commitment to accomplish all the activities needed for the attainment of special results, from this point of view there are many plans. The following study will help in understanding different kinds of plans.

1Objectives: objectives are those end points for the attainment of which all the activities are Undertaken.

Following are the examples of objectives:

(I )To improve the communication system to hold regular staff meeting and publish a newsletter.

(2)To cross the 20,0 00 crore mark in turnover of soaps.

(3) To make available the employment to 100 people every year.

(4) To reduce quality rejects to 3%

2. Strategies: Strategies refer to those plans which are prepared in view of the move of the competitors and whose objective is to make possible the optimum utilization of resources.

3. Policies; Polcies are those general statements which are decided for the guidance of the employees while taking decision. Their purpose is laying down a limit within which a particular work can be done or decision taken. Objectives decide what is to be achieved and the policies tell us how it can be achieved.

4. Procedures : Procedures are those plans which determine the sequence of any work performance. For example, the recovery of money from the debtors can be done in the following order:
(a) Writing letters,
(b) connecting on telephone,

(c) Meeting personally,(d0 taking legal action. This is the procedure of collecting money from all the debtors. There is a difference between policies and procedures.. There can be two policies of the organization regarding the recovery of money from the debtors. (A) Tight collection policy, and

(B) Lenient collection policy. Under the first policy an effort is made to recover money from debtors is by treating him harshly. Under the second policy the debtors will be given enough time for the payment of money while treating him leniently.

5. Methods: Methods is that plan which determines how different activities of the procedure are completed. Methods is not related to all steps but only to one step of the procedure . it is more detailed than procedure . there may be many methods to do a particular work. After extensive study, a method has to be selected from which a worker feels minimum fatique, increase in productivity and there is reduction in costs.

6. Rules: Rules till us what is to be done and what is not to be done in particular situation. In the absence of rules there is no need to take any decision. Whatever is said in the rules has to be followed without any thinking. For example, the rule “ No smoking in the factory “is applicable to everybody and it must be observed. Provision for punishment in case of non observing of the rule can also be made.

7. Budget: Budgets describe the desired results in numerical terms. A budget is that planning which provides detailers about estimated money, material time and other resources for the achievement of pre determined objectives of various departments. For example, the sales departmen’sbudget gives estimated figures about the type of material that will be purchased, its quantity, the time of purchase and the amount to be spent on it. Similarly, budget of other departments are also prepared.

 

8. Programmers: a programme means a single-use comprehensive plan laying down the what, how who and when of accomplishing a specific job. through program me the managers are informed in advance about various needs so that there is no problem in future. The programmers can be different types-production programme, Training programme Sales promotion programme management developing programme.etc.




Steps in planning process
i. Setting up objectives: The process begins with identifying and setting up of objectives. It determines where to reach. The organizational objectives arrived at should be measurable, understandable, clear and attainale.

ii. Developing planning premises Premises involve making assumptions relating to future conditions. It provides relevant facts and information relating to future conditions. Hence sound estimates or fore nbcasteed to e made.

iii. Identifying alternative course of action : The planner now arrives at the various alternatives for performance of a task and evaluate the probable consequence of each option.

iv. Evaluating the alternative course The positive and negative impact of each option in light of cost, risk and benefits is worked out.

v. Selecting the best alternative This is actually the stage of decision making where the most suitable course of action is selected .The selected alternative is obviously the one which is most feasible, profitable and has least negative impact.

vi. Implementing the plan : The plan is transformed into action by activating the other managerial function involving organizing various resources and securing cooperation and participation of other members of the organization.

vii. Follow up plan : This final culminating step involves reviewing the existing plan for its relevance and effectiveness.

CBSE Class 12 Business Studies Planning Notes Set A

 

Types of plans:
(A) Standing or Repeatedly used Plans: As their name indicates that these plans are formulated once and they are repeatedly used. These plans continuously guide he managers. That is why it is said that a standing plan is a standing guide to culems. These plans include :

1. Objectives

2. Strategies

3. Policies

4. Procedures

5. Methods and

6. Rules

(B)Single –use or Special or Adhoc Plans: These plans are connected with some special problem. These plans end the moment the problems are solved. After having been used once there is no importance of these plans and in future, whenever they are needed they are re‐created. These plans include 

  1. Budget and
  2. Programme.
CBSE Class 12 Business Studies Planning Notes Set A
CBSE Class 12 Business Studies Planning Notes Set A

1) Objectives ­ Are the ends which the management seeks to achieve by its operation.

Represent the end point of management.

 Set by top management.

 Defines the future state of affairs.

 Guides the overall business planning.

 Can be expressed in specific terms. They can be measured .

2) Strategy ­ Provides broad shape of organization’s business, refers to the future decisions defining the organization’s directions and scope in the long run.

  • It involves a comprehensive plan which covers the determination of long term objectives, adoption of a particular course of action and allocation of resources.

3) Policies ­ are general statements which guide thinking in decision making.

  • They are based on objectives.
  • They guide managerial action and decisions.
  • They exist at all levels and departments of the organization.

4) Procedures ­ Are a chronological sequence of routine steps on how to carry an activity.

They detail the exact manner in which the work is to be performed.

  • It is meant for the insiders to follow.
  • Policies and procedures are interlinked.

5) Rules ­ Are specific statements that inform what is to be done.

  • Reflects managerial decision.
  • Simplest plan.
  • They are to be enforced rigidly.

6) Methods ­ Are standardized ways or manners in which a task has to be performed considering the objectives.

  • Selection of a proper method saves time, money and effort.


 

 

 

CONCEPT AND IMPORTANCE, .
STEPS IN THE PROCESS OF ORGANIZING.

"Organising is the process of defining and grouping the activities of the enterprise and establishing the authority relationships among them."
According to Louis Allen,
"Organising is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives."

STEPS IN THE PROCESS OF ORGANISING
Organising is a step-by-step process. At each step, an important task is performed by the administrators working at the top-level of management.

While organising, the top managers carry out following important tasks:-
1. In this general eight-stepped process, the top management first fixes the common objectives of the organisation.
2. In the second step, they (top management) identify all the activities (i.e. works or jobs) which are required to achieve these predefined objectives.
3. In the third step, they group similar (related) activities and make their individual departments.
4. In the fourth step, they define the responsibilities (duties) of all the staff members (employees and managers).
5. In the fifth step, they delegate authority to staff members.
6. In the sixth step, the authority relationships between superiors and subordinates are established.
7. In the seventh step, they provide the staff members with all the essential requirements like money, machines, materials, etc., which are used for achieving the objectives.
8.In the eighth final step, they co-ordinate the efforts of all staff members and direct it towards achieving the common objectives of the organisation.

STRUCTURE OF ORGANIZATION - FUNCTIONAL AND DIVISIONAL.

When businesses get large enough to need an organized company structure, they traditionally segregate personnel by work function. This setup lets people with similar jobs communicate easily and share resources. A divisional structure, meanwhile, puts employees together to serve a common cause -- a certain product or service, customer type or geographical location. Both structures are vertical, stacking a middle- and upper-management hierarchy atop a base of employees, and having characteristics such as a tendency toward rigidity. The two structures also have important differences.

RESPONSIVENESS The marked management hierarchy of vertical structures means an established, powerful bureaucracy. Bureaucracies stifle adaptability and responsiveness, resulting in rigid, mechanistic companies with tight controls and clear chains of command. This is most true of the functional structure. The divisional structure is less rigid. Being organized around a common market focus increases the structure's responsiveness, with the vertical structure still retaining some of the strong controls evident in the functional structure.

ORGANIZATIONAL FLEXIBILITY Organizing around a common market focus also means each division may be arranged according to the needs of its particular focus. Once divisions are created, work is often further subdivided by functions, but that isn’t required. A division may, for instance, group personnel into teams to accomplish work. The functional structure locks in organization, this stability allowing it to build a strong momentum toward a desired end. This lets companies mass-produce and standardize services and products. MANAGEMENT FOCUS Middle management has a chance to shine in the divisional structure. That's because each division operates as if it were an autonomous business; divisions often are known as strategic business units, or SBUs. Upper management continues to oversee things at the parent company, leaving middle managers in charge of the divisions. In effect, managers run SBUs as if they were business owners or CEOs. Divisions thus serve as a training arena for future company executives. This strategic training is lacking in the functional structure, where upper management holds the reins.

EFFICIENCY AND COST-EFFECTIVENESS Sharing expertise and resources within departments makes the functional structure highly efficient and cost-effective. It also allows for job specialization, repetition and assembly line operations. These features give companies the opportunity to capitalize on economies of scale that diminish in the divisional structure. That structure must spend to duplicate personnel and resources for each division -- workspace, support staff and supplies, for instance.

COORDINATION, COOPERATION AND COMMUNICATION Interdepartmental communication, cooperation and coordination can become problematic in the functional structure. The segregated workers may not understand the issues and priorities of other functional areas. The problem isn’t as acute within a divisional structure’s SBUs because, regardless of function, everyone is devoted to the market or product around which the division is formed. The divisional structure doesn’t avoid problems altogether, though. Communication, cooperation and coordination between SBUs may develop problems that are exacerbated by distance.

Difference between Functional and Divisional Organisation Structure (Image12)

FORMAL AND INFORMAL ORGANIZATION
Formal Organisation is formed when two or more persons come together. They have a common objective or goal. They are willing to work together to achieve this similar objective.

Formal Organisation has its own rules and regulation. These rules must be followed by the members (employees and managers). A formal organisation has a system of co-ordination. It also has a system of authority. It has a clear superior subordinate relationship. In a formal organisation, the objectives are specific and well-defined. All the members are given specific duties and responsibilities. Examples of formal organisation are:- a company, a school, a college, a bank, etc.

Informal Organisation exists within the formal organisation. An informal organisation is a network of personal and social relationships. People working in a formal organisation meet and interact regularly. They work, travel, and eat together. Therefore, they become good friends and companions. There are many groups of friends in a formal organisation. These groups are called informal organisation.

An informal organisation does not have its own rules and regulation. It has no system of co-ordination and authority. It doesn't have any superior-subordinate relationship nor any specific and well-defined objectives. Here in informal organisation, communication is done through the grapevine.

2. Formed by Whom? A formal organisation is formed by the top level management.
An informal organisation is formed by social forces within the formal organisation.

3. Rules and Regulations The members of a formal organisation have to follow certain rules and regulations. These rules are available in writing (documented). They are made by a formal authority (superiors). If the members follow these rules properly, then they will be rewarded. However, if they do not follow these rules, they will be punished. The members of an informal organisation do not have to follow any rules and regulations.

4. Duties and Responsibilities In a formal organisation, the duties, responsibilities, authority and accountability of each member is well-defined. In an informal organisation, there are no fixed duties, responsibilities, authority, accountability, etc. for the members.

5. Objectives or Goals In a formal organisation, the objectives or goals are specific and well-defined. The main objectives of a formal organisation are productivity, growth, and expansion. In an informal organisation, the objectives are not specific and well-defined. The main objectives of an informal organisation are friendship, security, common interest, individual and group satisfaction, etc.

6. Stability A formal organisation is stable. An informal organisation is not stable.

7. Channels of Communication A formal organisation uses formal channels of communication. An informal organisation uses informal channels of communication (i.e. grapevine)

8. Organisation Chart A formal organisation is shown on the organisation chart. An informal organisation is not shown on the organisation chart.

9. Superior-Subordinate Relationship In a formal organisation, there exist a superior-subordinate relationship. In an informal organisation, there is no such superior-subordinate relationship.

10. Benefits for Members The members of the formal organisation get financial benefits and perks like wages or salaries, bonus, travelling allowances, health insurance, etc. The members of informal organisation get social and personal benefits like friend circle, community, groups, etc

DELEGATION: CONCEPT, ELEMENTS AND IMPORTANCE. A manager alone cannot perform all the tasks assigned to him. In order to meet the targets, the manager should delegate authority. Delegation of Authority means division of authority and powers downwards to the subordinate. Delegation is about entrusting someone else to do parts of your job. Delegation of authority can be defined as subdivision and sub-allocation of powers to the subordinates in order to achieve effective results.

Elements of Delegation
Authority - in context of a business organization, authority can be defined as the power and right of a person to use and allocate the resources efficiently, to take decisions and to give orders so as to achieve the organizational objectives. Authority must be well- defined. All people who have the authority should know what is the scope of their authority is and they shouldn’t misutilize it. Authority is the right to give commands, orders and get the things done. The top level management has greatest authority. Authority always flows from top to bottom. It explains how a superior gets work done from his subordinate by clearly explaining what is expected of him and how he should go about it. Authority should be accompanied with an equal amount of responsibility. Delegating the authority to someone else doesn’t imply escaping from accountability. Accountability still rest with the person having the utmost authority.

Responsibility - is the duty of the person to complete the task assigned to him. A person who is given the responsibility should ensure that he accomplishes the tasks assigned to him. If the tasks for which he was held responsible are not completed, then he should not give explanations or excuses. Responsibility without adequate authority leads to discontent and dissatisfaction among the person. Responsibility flows from bottom to top. The middle level and lower level management holds more responsibility. The person held responsible for a job is answerable for it. If he performs the tasks assigned as expected, he is bound for praises. While if he doesn’t accomplish tasks assigned as expected, then also he is answerable for that.

Accountability - means giving explanations for any variance in the actual performance from the expectations set. Accountability can not be delegated. For example, if ’A’ is given a task with sufficient authority, and ’A’ delegates this task to B and asks him to ensure that task is done well, responsibility rest with ’B’, but accountability still rest with ’A’. The top level management is most accountable. Being accountable means being innovative as the person will think beyond his scope of job. Accountability, in short, means being answerable for the end result. Accountability can’t be escaped. It arises from responsibility.

For achieving delegation, a manager has to work in a system and has to perform following steps : -
1. Assignment of tasks and duties
2. Granting of authority
3. Creating responsibility and accountability

Delegation of authority is the base of superior-subordinate relationship, it involves following steps:-

Assignment of Duties - The delegator first tries to define the task and duties to the subordinate. He also has to define the result expected from the subordinates. Clarity of duty as well as result expected has to be the first step in delegation.

1. Granting of authority - Subdivision of authority takes place when a superior divides and shares his authority with the subordinate. It is for this reason, every subordinate should be given enough independence to carry the task given to him by his superiors. The managers at all levels delegate authority and power which is attached to their job positions. The subdivision of powers is very important to get effective results.

2. Creating Responsibility and Accountability - The delegation process does not end once powers are granted to the subordinates. They at the same time have to be obligatory towards the duties assigned to them. Responsibility is said to be the factor or obligation of an individual to carry out his duties in best of his ability as per the directions of superior. Responsibility is very important. Therefore, it is that which gives effectiveness to authority. At the same time, responsibility is absolute and cannot be shifted. Accountability, on the others hand, is the obligation of the individual to carry out his duties as per the standards of performance. Therefore, it is said that authority is delegated, responsibility is created and accountability is imposed. Accountability arises out of responsibility and responsibility arises out of authority. Therefore, it becomes important that with every authority position an equal and opposite responsibility should be attached.

Therefore every manager ,i.e.,the delegator has to follow a system to finish up the delegation process. Equally important is the delegatee’s role which means his responsibility and accountability is attached with the authority over to here. 

Relationship between Authority and Responsibility
Authority is the legal right of person or superior to command his subordinates while accountability is the obligation of individual to carry out his duties as per standards of performance Authority flows from the superiors to subordinates,in which orders and instructions are given to subordinates to complete the task. It is only through authority, a manager exercises control. In a way through exercising the control the superior is demanding accountability from subordinates. If the marketing manager directs the sales supervisor for 50 units of sale to be undertaken in a month. If the above standards are not accomplished, it is the marketing manager who will be accountable to the chief executive officer. Therefore, we can say that authority flows from top to bottom and responsibility flows from bottom to top. Accountability is a result of responsibility and responsibility is result of authority. Therefore, for every authority an equal accountability is attached. (Image)

DECENTRALIZATION: CONCEPT AND IMPORTANCE The term "decentralization" embraces a variety of concepts which must be carefully analyzed in any particular country before determining if projects or programs should support reorganization of financial, administrative, or service delivery systems. Decentralization—the transfer of authority and responsibility for public functions from the central government to subordinate or quasi independent government organizations and/or the private sector—is a complex multifaceted concept. Different types of decentralization should be distinguished because they have different characteristics, policy implications, and conditions for success.

Types of Decentralization
Types of decentralization include political, administrative, fiscal, and market decentralization. Drawing distinctions between these various concepts is useful for highlighting the many dimensions to successful decentralization and the need for coordination among them. Nevertheless, there is clearly overlap in defining any of these terms and the precise definitions are not as important as the need for a comprehensive approach. Political, administrative, fiscal and market decentralization can also appear in different forms and combinations across countries, within countries and even within sectors.

Political Decentralization
Political decentralization aims to give citizens or their elected representatives more power in public decision-making. It is often associated with pluralistic politics and representative government, but it can also support democratization by giving citizens, or their representatives, more influence in the formulation and implementation of policies. Advocates of political decentralization assume that decisions made with greater participation will be better informed and more relevant to diverse interests in society than those made only by national political authorities. The concept implies that the selection of representatives from local electoral jurisdictions allows citizens to know better their political representatives and allows elected officials to know better the needs and desires of their constituents. Political decentralization often requires constitutional or statutory reforms, the development of pluralistic political parties, the strengthening of legislatures, creation of local political units, and the encouragement of effective public interest groups.

Administrative Decentralization
Administrative decentralization seeks to redistribute authority, responsibility and financial resources for providing public services among different levels of government. It is the transfer of responsibility for the planning, financing and management of certain public functions from the central government and its agencies to field units of government agencies, subordinate units or levels of government, semi-autonomous public authorities or corporations, or area-wide, regional or functional authorities. The three major forms of administrative decentralization -- deconcentration, delegation, and devolution -- each have different characteristics.

Deconcentration. Deconcentration--which is often considered to be the weakest form of decentralization and is used most frequently in unitary states-- redistributes decision making authority and financial and management responsibilities among different levels of the central government. It can merely shift responsibilities from central government officials in the capital city to those working in regions, provinces or districts, or it can create strong field administration or local administrative capacity under the supervision of central government ministries.

Delegation.
Delegation is a more extensive form of decentralization. Through delegation central governments transfer responsibility for decision-making and administration of public functions to semi-autonomous organizations not wholly controlled by the central government, but ultimately accountable to it. Governments delegate responsibilities when they create public enterprises or corporations, housing authorities, transportation authorities, special service districts, semi-autonomous school districts, regional development corporations, or special project implementation units. Usually these organizations have a great deal of discretion in decision-making. They may be exempt from constraints on regular civil service personnel and may be able to charge users directly for services.

Devolution. A third type of administrative decentralization is devolution. When governments devolve functions, they transfer authority for decision-making, finance, and management to quasi-autonomous units of local government with corporate status. Devolution usually transfers responsibilities for services to municipalities that elect their own mayors and councils, raise their own revenues, and have independent authority to make investment decisions. In a devolved system, local governments have clear and legally recognized geographical boundaries over which they exercise authority and within which they perform public functions. It is this type of administrative decentralization that underlies most political decentralization.

Fiscal Decentralization Financial responsibility is a core component of decentralization. If local governments and private organizations are to carry out decentralized functions effectively, they must have an adequate level of revenues –either raised locally or transferred from the central government– as well as the authority to make decisions about expenditures. Fiscal decentralization can take many forms, including a) self-financing or cost recovery through user charges, b) co-financing or co-production arrangements through which the users participate in providing services and infrastructure through monetary or labor contributions; c) expansion of local revenues through property or sales taxes, or indirect charges; d) intergovernmental transfers that shift general revenues from taxes collected by the central government to local governments for general or specific uses; and e) authorization of municipal borrowing and the mobilization of either national or local government resources through loan guarantees. In many developing countries local governments or administrative units possess the legal authority to impose taxes, but the tax base is so weak and the dependence on central government subsidies so ingrained that no attempt is made to exercise that authority.

Economic or Market Decentralization
The most complete forms of decentralization from a government's perspective are privatization and deregulation because they shift responsibility for functions from the public to the private sector. Privatization and deregulation are usually, but not always, accompanied by economic liberalization and market development policies. They allow functions that had been primarily or exclusively the responsibility of government to be carried out by businesses, community groups, cooperatives, private voluntary associations, and other non-government organizations.

Privatization.
Privatization can range in scope from leaving the provision of goods and services entirely to the free operation of the market to "public-private partnerships" in which government and the private sector cooperate to provide services or infrastructure. Privatization can include: 1) allowing private enterprises to perform functions that had previously been monopolized by government; 2) contracting out the provision or management of public services or facilities to commercial enterprises indeed, there is a wide range of possible ways in which function can be organized and many examples of within public sector and public-private institutional forms, particularly in infrastructure; 3) financing public sector programs through the capital market (with adequate regulation or measures to prevent situations where the central government bears the risk for this borrowing) and allowing private organizations to participate; and 4) transferring responsibility for providing services from the public to the private sector through the divestiture of state-owned enterprises.

Deregulation. Deregulation reduces the legal constraints on private participation in service provision or allows competition among private suppliers for services that in the past had been provided by the government or by regulated monopolies. In recent years privatization and deregulation have become more attractive alternatives to governments in developing countries. Local governments are also privatizing by contracting out service provision or administration.

Choosing the Most Appropriate Form of Decentralization
Under appropriate conditions, all of these forms of decentralization can play important roles in broadening participation in political, economic and social activities in developing countries. Where it works effectively, decentralization helps alleviate the bottlenecks in decision making that are often caused by central government planning and control of important economic and social activities. Decentralization can help cut complex bureaucratic procedures and it can increase government officials' sensitivity to local conditions and needs. Moreover, decentralization can help national government ministries reach larger numbers of local areas with services; allow greater political representation for diverse political, ethnic, religious, and cultural groups in decision-making; and relieve top managers in central ministries of "routine" tasks to concentrate on policy. In some countries, decentralization may create a geographical focus at the local level for coordinating national, state, provincial, district, and local programs more effectively and can provide better opportunities for participation by local residents in decision making. Decentralization may lead to more creative, innovative and responsive programs by allowing local "experimentation." It can also increase political stability and national unity by allowing citizens to better control public programs at the local level.

But decentralization is not a panacea, and it does have potential disadvantages. Decentralization may not always be efficient, especially for standardized, routine, network-based services. It can result in the loss of economies of scale and control over scarce financial resources by the central government. Weak administrative or technical capacity at local levels may result in services being delivered less efficiently and effectively in some areas of the country. Administrative responsibilities may be transferred to local levels without adequate financial resources and make equitable distribution or provision of services more difficult. Decentralization can sometimes make coordination of national policies more complex and may allow functions to be captured by local elites. Also, distrust between public and private sectors may undermine cooperation at the local level.

Project and program planners must be able to assess the strengths and weaknesses of public and private sector organizations in performing different types of functions. Before developing elaborate plans for decentralization, they must assess the lowest organizational level of government at which functions can be carried out efficiently and effectively and -- for functions that do not have to be provided by government -- the most appropriate forms of privatization. Even program planners who do not see ‘decentralization’ as their primary motive must carefully analyze the types of decentralization already present in a country in order to tailor policy plans to existing structures. 

 

Centralization and decentralization are not "either-or" conditions. In most countries an appropriate balance of centralization and decentralization is essential to the effective and efficient functioning of government. Not all functions can or should be financed and managed in a decentralized fashion. Even when national governments decentralize responsibilities, they often retain important policy and supervisory roles. They must create or maintain the "enabling conditions" that allow local units of administration or non-government organizations to take on more responsibilities. Central ministries often have crucial roles in promoting and sustaining decentralization by developing appropriate and effective national policies and regulations for decentralization and strengthening local institutional capacity to assume responsibility for new functions. The success of decentralization frequently depends heavily on training for both national and local officials in decentralized administration. Technical assistance is often required for local governments, private enterprises and local non-governmental groups in the planning, financing, and management of decentralized functions.


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