Organising Chapter Notes | Business Studies (BST) Class 12 - Commerce PDF Download

Introduction

• After planning and setting the objectives, the next step is to organise resources effectively to achieve these goals, with considerations such as resource optimisation, division of work into achievable tasks, and employee empowerment.
• The structuring of an organisation's work is critical for adapting to a dynamic business environment and successfully implementing plans.
• The importance of organisation is evident in Wipro's journey towards becoming a globally successful technology company. Wipro’s strategy included focusing on customer orientation, diversifying product lines, and modifying management relationships to align with their goals.
• Effective organisation is a crucial management function as it directs efforts towards goal attainment, ensures optimal resource use, and fosters collective, effective work towards a common purpose.
• The organising function creates an organisational structure, designing roles for appropriately skilled individuals and defining inter-role relationships to eliminate ambiguity in performing duties.
• This is essential for productive cooperation, clarity of authority and responsibility, and logical grouping of activities.

Meaning

• Organising, as a process, involves the coordination of human efforts and resources towards achieving set objectives. 
• This can be illustrated with the example of a school fete. The event is divided into task groups such as the food, decoration, and ticketing committees, all overseen by an appointed official. 
• Coordinating relationships are established between these groups to ensure seamless interaction and understanding of each group's role in the event. 
• This process of organising facilitates the implementation of plans by defining jobs, establishing work relationships, and effectively allocating resources to achieve desired goals.

'Organizing is the systematic process of identifying and categorizing tasks, delineating and assigningresponsibilities and authority, and establishing connections to enhance collective efficiency in achieving objectives.'

Steps Involved in the Process of Organizing

• Identification and Division of Work: This initial step involves breaking down the overall work into specific, manageable tasks, ensuring clarity and focus in execution.
• Departmentalisation: Grouping similar activities into departments or units for specialization and efficiency. This can be based on functions, products, or geographical areas.
• Assignment of Duties: Allocating specific tasks to individuals or departments, aligning them with appropriate responsibilities based on skills and competencies.
• Establishing Reporting Relationships: Defining clear lines of authority and communication, clarifying who reports to whom, and establishing a hierarchical structure for accountability and coordination.

Steps to Effective Organisation

Importance of Organizing

• Specialisation: Encourages expertise in specific functions, leading to efficiency and quality in task execution.
• Clarification of Work Relationships: Establishes clear authority lines, reducing confusion and facilitating effective communication.
• Optimum Utilisation of Resources: Ensures resources, including human, financial, and physical, are used effectively without duplication.
• Adaptability to Change: Provides a flexible structure that can adapt to environmental changes while maintaining stability.
• Effective Administration: Facilitates clear job roles and responsibilities, improving decision-making and coordination.
• Development of Personnel: Encourages innovation and creativity among employees, enhancing their skills and career growth.

Organizational Structure

• Organisational structure is a result of the organising process and plays a crucial role in a company's profitability.
• Businesses need to adapt their organisational structure as they grow in size and complexity.
• Businesses that don't evolve their structure may face stagnation and potential closure.
• The organisational structure is a framework that defines relationships between people, work, and resources, facilitating the coordination needed to achieve business goals.
• An organisation chart typically illustrates a firm's organisational structure.
• The span of management, or the number of subordinates a supervisor can effectively manage, significantly influences the organisational structure.
• A well-designed organisational structure is crucial for seamless communication and effective control over business operations.

Types of Organisation Structures

1. Functional Structure

Advantages

1. Skill Specialization: A functional structure emphasizes specialized roles, leading to greater efficiency as employees hone their skills in specific functions.
2. Improved Coordination: This structure enhances control and coordination within a department due to the similarity of tasks, leading to smoother operations.
3. Enhanced Efficiency: The functional structure can boost both managerial and operational efficiency, leading to higher profits.
4. Economies of Scale: The minimal duplication of efforts in a functional structure can lead to economies of scale, which can reduce costs.
5. Simplified Training: With a narrower range of skills to focus on, employee training becomes easier and more focused.
6. Balanced Attention: The functional structure ensures all functions receive adequate attention, ensuring no area is neglected.

Disadvantages

1. Functional Structure Drawbacks: A functional structure can sometimes overemphasize a single function, leading to "functional empires." This can result in departments prioritizing their own goals over the organization's objectives and limit interdepartmental collaboration.
2. Coordination Problems: Information exchange between different departments can be difficult in a functional structure, leading to coordination challenges.
3. Conflict of Interests: In a functional structure, conflicts can arise when departmental interests clash, such as when a sales department's customer-friendly design request complicates production.
4. Inflexibility and Limited Training Opportunities: A functional structure can foster a narrow perspective among staff with similar skills and knowledge, limiting their ability to understand differing viewpoints.

Suitability

• Large enterprises manufacturing a single product line.
• Organizations need a significant level of functional specialization across diverse activities.

2. Divisional Structure

The organizational structure known as divisional structure involves organizing the entire enterprise based on the major products to be manufactured, such as metal, plastic, cosmetics, etc.

Advantages

1. Skill Development: The divisional structure encourages product specialization, enabling division heads to develop a wide range of skills. 
2. Accountability: Divisional heads are held responsible for profits since revenues and costs can be traced back to their respective departments.
3. Autonomy and Quick Decision-Making: Each division operates independently, fostering flexibility and initiative. This autonomy accelerates the decision-making process.
4. Facilitation of Expansion: The divisional structure supports growth, as new divisions can be incorporated without disturbing existing operations.

Disadvantages

1. Conflicts Arising from Resource Allocation: Divisions may experience conflicts when determining the allocation of resources among them.
2. Repetition of Functions: All divisions necessitate a complete set of functions, leading to redundant efforts across divisions and an associated increase in costs.
3. Self-Centric Behavior: Each division endeavours to showcase superior performance, occasionally even at the expense of other divisions, reflecting a self-centred attitude.

Suitability

• This structure is appropriate for organizations engaged in the production of multiple products or diverse product lines that demand a focus on product specialization. 
• Additionally, growing companies aiming to incorporate additional product lines in the future often choose to adopt this structure.

Formal and Informal Organisation

1. Formal Organisation

• Describes the organizational structure intentionally crafted by management to achieve organizational objectives.
• It distinctly outlines the limits of authority and responsibility, promoting systematic coordination among various activities to reach organizational goals.
• According to Louis Allen, it is a system comprising well-defined jobs, each carrying a specific level of authority, responsibility, and accountability.

Features

1. The formal organisation clearly defines the hierarchy of job positions and their interconnections, clarifying the reporting lines.
2. The formal organisation serves as a mechanism to achieve planned objectives by establishing necessary rules and procedures.
3. It ensures the coordination, linking, and integration of efforts across multiple departments.
4. Top management intentionally designs the formal organisation to enable smooth operations.
5. The focus of a formal organisation is more on the execution of tasks rather than interpersonal relationships among employees.

Formal Organisation

Advantages

1. Clear Definition of Responsibility: Responsibility is easily ascertainable as mutual relationships are precisely outlined.
2. Absence of Work Overlap: Work proceeds according to a well-defined plan, minimizing the occurrence of overlapping tasks.
3. Unity of Command: A clearly established chain of command ensures unity of command.
4. Facilitates Objective Achievement: Coordination and optimal utilization of human and material resources make it easier to achieve objectives.
5. Organizational Stability: Predictable employee behaviour is fostered by specific rules, contributing to organizational stability.

Disadvantages

1. Rule-Based Work Leading to Delays: The reliance on rules can result in unnecessary delays in the workflow.
2. Lack of Initiative: Employees are constrained to follow instructions without the opportunity for independent thinking or initiative.
3. Limited in Scope: Emphasis on structure and tasks makes it challenging to comprehend all human relationships within an enterprise.

2. Informal Organisation

Features

1. An informal organization stems from a formal one due to personal interactions among employees.
2. The behaviour standards evolve from group norms instead of official rules and regulations.
3. Group members develop independent channels of communication without a specified direction of information flow.
4. The informal organization emerges spontaneously, not deliberately created by the management.
5. The informal organization has no definite structure as it is a complex network of social relationships among members.

Advantages

1. Speed: Information spreads rapidly as it does not follow prescribed lines of communication.
2. Social Needs Fulfillment: Enhances job satisfaction, fostering a sense of belongingness in the organization.
3. Prompt Problem Resolution: Subordinates can openly discuss issues with officers, facilitating quick problem resolution.

Disadvantages

1. Rumour Creation: Informal discussions may lead to the spread of careless or incorrect information.
2. Resistance to Change: Tends to resist change and emphasizes adherence to traditional techniques.
3. Priority to Group Interests: Encourages conformity to group expectations, potentially limiting individual perspectives.

Difference between Formal and Informal Organisation

Delegation

Delegation involves entrusting subordinates with the authority to operate within specified limits. The manager delegating authority holds subordinates accountable for the proper execution of assigned tasks, ensuring effective and efficient performance. Accountability is established to guarantee that subordinates carry out their work as expected.

Elements of Delegation

• Authority: The power to make decisions that guide the actions of others. Authority is a force that influences the behaviour of individuals.
• Responsibility: The obligation of a subordinate to perform assigned duties correctly. When a superior issues directives, it becomes the responsibility of the subordinate to execute them.
• Accountability: When a superior assigns tasks to a subordinate, the subordinate is answerable to the superior for the success or failure of those tasks.

Difference between Authority, Responsibility and Accountability

Importance of Delegation

• Workload Reduction for Executives: Delegation lessens the workload for officers, enabling them to allocate their time to more crucial and creative tasks rather than routine activities.
• Employee Development: Delegating authority provides employees with increased opportunities to showcase their talents, allowing them to cultivate skills necessary for handling complex tasks.
• Facilitation of Quick and Informed Decisions: Subordinates, having been granted sufficient authority, can make decisions on routine matters without the need to constantly consult their superiors.
• Elevated Morale among Subordinates: Delegating authority to subordinates provides them with opportunities to showcase their efficiency and capabilities, boosting their morale.
• Improved Coordination:The components of delegation—authority, responsibility, and accountability—contribute to defining the powers, duties, and accountability associated with various job positions. This clarity fosters the development and maintenance of effective coordination.

Decentralization

• Authority decentralization involves distributing decision-making power across the organization, extending it to lower levels.
• It signifies the retention of some authority by top-level management while transferring the remaining authority to the lower organizational levels. This allows lower levels to autonomously address the challenges they encounter without constant recourse to higher levels.
• According to Allen, "Decentralization refers to organized endeavors aimed at entrusting nearly all authority to the lowest level, with the exception of that which can be wielded centrally."

Centralization

Centralization implies the concentration of authority at the top level, while decentralization involves the systematic delegation of authority at all levels and in all departments of a firm. A balanced approach between the two is essential for effective organizational functioning.

In a decentralized firm, the top level retains authority for:

• Formulating policies and making decisions concerning the entire firm.
• Exercising overall control and coordination.

Meanwhile, the middle and lower levels are granted the authority to make decisions related to the tasks assigned to them.

Centralization and Decentralization
Centralization and Decentralization refer to the distribution of authority among managers at various levels. Centralization involves consolidating decision-making power in a select few, limiting the delegation of authority to managers at middle and lower levels. Complete centralization or decentralization is impractical; instead, a balance between the two is necessary. As an organization expands, there is an inclination toward decentralization. Consequently, every organization exhibits elements of both centralization and decentralization.

Importance of Decentralization

• Fosters Initiative Among Subordinates: Encourages self-confidence as subordinates are empowered to make independent decisions.
• Swift and Improved Decision-Making: Distributes the responsibility of managerial decisions among various individuals, facilitating more efficient and rapid decision-making.
• Alleviates Excessive Workload for Top Executives: Delegates daily managerial tasks to subordinates, providing top-level executives with sufficient time to focus on developing new strategies.
• Managerial Development: Involves granting authority to subordinates at lower levels to make decisions regarding their work, contributing to organizational development.
• Enhanced Control: Enables the assessment of performance at each level, resulting in comprehensive control over all activities.

Difference between – Delegation and Decentralization