ORGANIZATIONAL

MANAGEMENT

MEANING OF ORGANIZATION
DEFINITION OF ORGZN AND
STEPS IN ORGANIZATION
 WHAT IS ORGANIZATION ?

• WHEN TWO OR MORE PEOPLE GET TOGETHER AND AGREE TO

COORDINATE THEIR ACTIVITIES IN ORDER TO ACHIEVE THEIR
COMMON GOALS.

• ORGANIZATION IS A SYSTEM WHICH PROVIDES STRUCTURE FOR

MAN, MACHINE, MATERIAL AND OTHER RESOURCES. AND ENSURES
THEIR FUNCTIONAL RELATIONSHIP.

• ORGANIZATION MEANS BUILDING, DEVELOPING, AND MAINTAINING

OF STRUCTURE OF WORKING RELATIONSHIPS IN ORDER TO
ACCOMPLISH THE ORGANIZATIONAL OBJECTIVES.
 IMPORTANCE OF ORGANIZATION

• 1. IT FACILITATES MANAGEMENT AND OPERATION OF

ENTERPRISE.

• 2. IT FACILITATES GROWTH AND DIVERSIFICATIONS.

• 3. IT HELPS TO USE MANPOWER AND RESOURCES

EFFECTIVELY.

• 4. IT CREATES THE IDENTITY OF COMPANY.

 THE PROCESS OF ORGANIZATION
(STEPS IN AN ORGANIZATION)

• DETERMINATION OF OBJECTIVES : OBJECTIVES IS AN AIM FOR WHICH

ORGZN IS TO BE DESIGNED. i.e., IN SHORT IT DEFINES WHY ORGZN IS FORMED?
OBJECTIVES ARE ACTS LIKE TORCH IN THE DARKNESS.THEY SHOW DIRECTION
TO THE ORGANIZATION WHERE TO GO.
• DECIDING VARIOUS ACTIVITIES : AFTER LISTENING OF OBJECTIVES, IT IS
NECESSARY TO CHECK OUT THE METHODS OR ACTIVITIES TO BE CARRIED OUT
IN ORDER TO ACHIECVE THESE OBJECTIVES.SO DIVISION OF WORK IS
ESSENTIAL.THIS AVOIDS DUPLICATION, CONFUSION AND WASTAGE OF MEN,
MACHINE, MONEY AND MATERIAL.
• GROUPING OF ACTIVITIES : SIMILAR ACTIVITIES ARE CLUBBED TOGETHER
AND ALLOTED TO ANY DEPARTMENT OR SECTION.THERE ARE DIFFERENT
DEPARTMENTS LIKE PERSONNEL, FINANCE, MARKETING, PRODUCTION, ETC.
• ASSIGNMENT OF RESPONSIBILITIES TO DEFINITE PERSON : RIGHT
PERSON IN RIGHT JOB, FOR RIGHT WORK. EX.ENGINEER RELATED WORK IS
GIVEN TO ENGINEERS.BECAUSE THEIR SPECIALIZED AREA OF THE INTREST IS
SAME.
• DELEGATION OF AUTHORITY : DELEGATION OF AUTHORITY ALLOWS A
PERSON TO WORK RESPONSIBLY AND GETS FREEDOM FOR DECISION MAKING
IN CRITICAL STAGES. THIS INCREASES THE PERFORMANCE OF THE INDIVIDUAL.
• PROVIDING PHISICAL FACILITIES AND PROPER ENVIRONMENT :

PHYSICAL FACILITIES CAN BE MACHINES, TOOLS OR ANY OTHER

EQUIPMENTS WHICH HELPS TO WORK.GOOD CONDITIONS OF TOOLS &
MACHINES MOTIVATES WORKER OR EMPLOYEES TO WORK IN PROPER
TIME AND METHOD.

THE SECOND FACTOR IS PROPER ENVIRONMENT.THIS INCLUDES

PROPER ARRANGEMENT OF LIGHTING, VENTILATION AND HEATING OR
COOLING, etc.

THE OTHER ARRANGEMENTS INCLUDES PLACE OF WORK,

REASONABLE HOURS OF WORK, REST INTERVALS, SAFETY DEVICES,
JOB SECURITY AND JOB SATISFACTION.
 ORGANIZATION CHART (TREE) & ITS NECESSARY

• ORGANIZATION CHART OR TREE IS SIMPLY A CHART WHICH GIVES

INFORMATION ABOUT ORGANIZATION, ITS AUTHORITY STRUCTURE,
VARIOUS DEPARTMENTS AND THEIR INTER-LINKING.IT CLEARLY SHOWS
LINE OF AUTHORITY AND GIVES IDIAS ABOUT WHICH INFORMATION WILL
BE GIVEN BY WHICH DEPARTMENT OR PERSON.

• NECESSARY : ORGANIZATION CHART IS ACTUALLY PREPARED FOR

OUTSIDERS TO GIVE INFORMATION ABOUT WORKING OF ORGZN. THE
FOLLOWING TYPES OF INFORMATION IS PROVIDED BY THE ORGZN CHART.

1. THE COMPLETE INFORMATION OF ORGZN & ITS VARIOUS DEPTS.

1. IT INDICATES WHO IS MANAGER, AND WHAT IS HIS PAN OF CONTROL.
2. IT SHOWS HOW AUTHORITY FLOWS FROM TOP TO BOTTOM
3. IT GIVES IDEA ABOUT HOW WORK IS TO BE COMPLETED BY CONTACTING
TO WHOM.
4. IT ALSO USED AS A GUIDE LINE FOR NEW COMER IN ORGANIZATION.
EXAMPLE OF ORGANIZATION CHART
 ORGANIZATION STRUCTURE
• ORGZN STRUCTURE IS NOT SAME FOR ALL THE BUSINESS ENTERPRISES.SOME
OF THE FACTORS THAT GOVERN THE STRUCTRE ARE :
• SIZE OF THE ORGZN : DEPENDING UPON THE NUMBER OF WORKERS THE
STRUCTURE IS DIFFERENT. IF MORE WORKER IT IS DIFF. & IF WORKERS MINIMUM
THEN THEIR STRUCTURE IS DIFFERENT.
• NATURE OF PRODUCT BEING PRODUCED : IF THE PRODUCT IS COMPLEX & IT
CONTAINS MANY SUB UNITS THEN ITS STUCTURE IS DIFFERENT. IF THE PRODUCT
IS A SINGLE UNIT, THEIR STRUCTURE IS DIFFERENT.

DEPENDING ON THESE FACTORS ORGZN STRUCTURE CAN BE CATEGORISED.

1. FORMAL ORGZN : THIS ORGZN IS A SYSTEM OF WELL DEFINED JOBS EACH
INDICATING THE LIMIT OF AUTHORITY & RESRONSIBILITY.THE TYPES OF FORMAL
ORGZN ARE :-- LINE ORGZN, LINE & STAFF ORGZN, FUCNTIONAL ORGZN,
COMMITTEE ORGZN.

2. NON-FORMAL ORGZN : IT IS THE COLLECTION OF PEOPLE WHO ARE HAVING

SAME LIKES & DISLIKES.

3. INFORMAL ORGZN : HERE PEOPLE WORK TOGETHER BECAUSE OF THEIR

PERSONAL LIKES & DISLIKES. INFORMAL ORGZN HAS NO CLEAR CUT
DIVISIONS.INFORMAL ORGZN RELATES TWO PERSONS WHEREAS FORMAL ORGZN
RELATES TWO POSITIONS.
 SOUND ORGANIZATION

• PROPER ORGZN FACILITIES THE EFFECTIVE USE OF THE MAN POWER

AND EVEN OTHER RESOURCES LIKE MATERIAL, MONEY AND MACHINES.
DUE TO THESE FACTORS THE SOUND ORGZN ALLOWS
ORGANIZATIONAL EXPANSION.

• SOUND ORGZN STRUCTURE PERMITS OPTIMUM USE OF TECHNICAL

AND HUMAN RESOURCES. THE ORGZN CAN INTRODUCE LATEST
TECHNOLOGICAL IMPROVEMENTS. EX : COMPUTER AND
COMPUTERIZED MACHINES.

• WELL ORGANIZED ORGANIZATION OR SOUND ORGZN MINIMIZES

CORRUPTION AND INEFFICIENCIES.

• THER IS LESS WASTAGES AND EXPENDITURE.

• THE SOUND ORGZN FACILITIES THE TRAINING AND MANAGIRIAL

DEVELOPMENT OF PERSONNEL.
 TYPES OF ORGANIZATION

• 1. LINE, MILITARY OR SCALAR ORGZN

• 2. FUNCTIONAL ORGANIZATION

• 3. LINE & STAFF ORGANIZATION

 LINE, MILITARY OR SCALAR ORGZN
• IT IS ONE OF THE SIMPLEST TYPE OF ORGZN,IT IS EVEN CALLED AS
MILITARY ORGZN B’COS IT RESEMBLED TO OLDEN MILITARY ORGZN.

WORK MANAGER

SUERINTENDENT (SUPTD-1) SUERINTENDENT (SUPTD-1)

FOREMEN (FM) FOREMEN (FM) FOREMEN (FM) FOREMEN (FM)

WORKERS WORKERS
•AS SHOWN IN THE FIGURE THE AUTHORITY DIRECTLY FLOWS FROM THE
WORKS MANAGER TO SUERINTENDENT (1 & 2) TO FOREMEN AND FROM THEM
TO WORKERS.

HERE AN IMMEDIATE BOSS ORDERS TO HIS SUBORDINATES,HE HAS FULL

CONTROL OVER THEM.THIS TYPE OF ORGZN IS SUITABLE FOR SMALL SCALE
INDUSTRIES. SUCH AS TEXTILE, SUGAR AND PAPER MILLS.
 ADVANTAGES AND DISADVANTAGES OF LINE ORGANIZATION
• MERITS :
1. IT IS SIMPLE AND EASY TO UNDERSTAND.
2. IT IS FLEXIBLE AND EASY TO EXPAND & CONTRACT.
3. DUE TO SIMPLE STRUCTURE THE DIVISION OF AUTHORITY BECOMES
CLEAR AND SIMPLE.
4. THIS STRUCTURE ALLOWS FAST OR SPEEDY WORK AS THERE IS NO
CONFUSION AMONG THE WORKERS.
5. DUE PERFECT FIXATION OF RESPONSIBILITIES THE DEGREE OF
DISCIPLINE IS VERY HIGH.
6. CLEAR CHANNEL OF COMMUNICATION IS ESTABLISHED.

• DEMERITS :
1. IT NOT FOCUS ON SPECIALIST OR IT NEGLECTS SECIALISTS.
2. SUPERIORS ARE OVER LOADED.
3. THE PERSONNEL REQUIRED SHOULD BE HIGHLY SKILLFUL AND
QUALIFIED TO MEET THE CHALLENGES.
4. MORE WASTAGES NAD MAN HOURS B’COS OF LACK OF SPECIALIZATION.
5. IT IS LIMITED TO SMALL CONCERNS.
 LINE AND STAFF ORGANIZATION
BOD-BOARD OF DIRECTORS
G.M-GENERAL MANNAGER
W.M-WORKS MANAGER
SECRETARY B.O.D LEGAL ADVISOR

ACCOUNT OFFICER SALES MANAGER

G.M
PERSONEL MANAGER PURCHASE ENGINEER

DESIGN ENGINEER W.M INDUSTIAL ENGINEER

SALES OFFICER

SUPTD-1 SUPTD-2

F/M F/M F/M F/M

WORKERS WORKERS

THIS TYPE OF ORGZN COMBINES THE LINE ORGZN WITH STAFF DEPT.THAT SUPPORT
AND ADVISE LINE DEPARTMENT.LINE ORGZN STEP BY STEP DEVELOP AS LINE & STAFF
ORGANIZATION.
 MERITS AND DEMARITS OF LINE &STAFF ORGZN
• ADVANTAGES :
1. DUE TO PROPER SRUCTURE AND SPECIALIZATION, QUALITY OF PRODUCT
IS IMPROVED.
2. MORE TIME IS AVAILABLE TO THE SUPERIORS TO DO THEIR NORMAL
WORK.
3. DUE TO PROPER DIVISION OF WORK THERE IS LESS WASTAGES OF
MATERIAL,MEN AND MACHINE HOURS.
4. MORE DISCILPINE CAN BE MAINTAINED.

DIS ADVANTAGES :
1. DUE TO INCREASE IN STAFF MEMBERS & DUE TO THEIR HIGH SALARIES
AND OTHER OFFICIAL EXPENSES THE COST OF PRODUCT INCREASED.
2. IF FUNCTIONS ARE NOT PROPERLY CLEARED BY LINE & STFF ORGZN MAY
GET CONFUSE.
3. DUE TO LACK OF RESONSIBILITY AT TOP LEVEL DISCIPLINE AT LOWER
LEVEL IS LESS.
4. MISTRUST CAN DEVELOP BETWEEN STAFF & LINE POSITION.

(THIS TYPE OF ORGZN IS APPLICABLE IN MEDIUM AND LARGE SCALE INDUSRIES)

 FUNCTIONAL ORGANIZATION

DIAGRAM FOR FUNCTIONAL ORGANIZATION

SUPERINTENDENT

OFFICE SHOP

INSTRCTION CLEARK TIME & COST CLEARK SPEED BOSS GANG BOSS

DISCIPLINARIAN
INSPECTOR
ROUTE CLEARK
REPAIR BOSS

WORKERS-WORKERS-WORKERS-WORKERS-WORKERS-WORKERS
• IN THE LINE ORGZN THER IS MISSING THE PART OF SPECIALIZATION. DUE TO
SPECIALIZATION IT IS POSSIBLE TO ASSIGN RIGHT JOB TO THE RIGHT PERSON.
THUS PRODUCTIVITY CAN BE INCREASED. F.W. TAYLOR SUGGESTED THE
FUNCTIONAL ORGANIZATION.

• HERE IN FUNCTIONAL ORGZN, THE PERSON WHO IS ALL ROUNDER IS

CONSIDERED. ALLROUDER MEANS, A PERSON WHO CAN DO ALL TYPE OF WORK
IN AN ORGZN.EX: A PERSON WHO WORKS ON SHOP FLOOR HE SHOULD KNOW
THE WORK IN OFFICE i.e., CLEARICAL JOB.

• IN THIS TYPE OF ORGZN INSTEAD OF ONE FOREMEN THERE ARE EIGHT

DIFFERENT FUNCTIONAL FOREMEN. OUT OF THESE EIGHT, FOUR OF THEM ARE
LOCATED IN SHOP FLOOR AND REMAINING FOUR IN THE OFFICE. BUT EVERYONE
HAVING DIRECT AND EQUAL AUTHORITY OVER THE WORKERS.

• EACH FUNCTIONAL FOREMEN WHO IS SPECIALIST IN A PARTICULAR AREA OR

ACTIVITY IS THE INCHARGE OR HEAD OF ONE FUNCTION.

1. ROUTE CLEARK :- HE WILL BE THE INCHARGE OF ISSUING WORK ORDERS AND

ROUTING TE JOB.
1. INSTRUCTION CLEARK :- HE WILL ISSUE THE SPECIFICATIONS AND
INSTRUCTIONS RELATED TO JOBS TO THE WORKERS.
2. TIME AND COST CLEARK:- HE KEEPS THE RECORDS PERTAINING TO THE
TIME(THE WORKERS HAVE SPEND IN DOING WORK) AND COST (i.e., WORKER’S
WAGES.)
1. DISCIPLINARIAN :- HE WILL KEEPS THE PERSONAL RECORDS OF THE
WORKERS.AND MAINTAIN DISCIPLINE IN AN ORGZN.

1. GANG BOSS:- HE WILL BE THE INCHARGE OF PREPARATION OF ALL

WORK UPTO THE TIME THAT THE WORK PIECE IS SET IN THE MACHINE.

1. SPEED BOSS:- HE ENSURES THAT PROPER CUTTING TOOLS ARE BEING

USED,CUT IS STARTED AT RIGHT PLACE IN THE WORK PIECE, AND THE
OPTIMUM SPEEDS, FEEDS & DEPTH OF CUT ARE BEING EMPLOYED.

1. REPAIR BOSS:- WHO TAKES CARE FOR THE ADEQUATE REPAIRS AND
MAINTAINANCE OF EQUIPMENT AND MACHINERY.

8. INSPECTOR OR INSPECTION BOSS:- THEY ARE RESPONSIBLE FOR THE

QUALITY OF THE PRODUCTS.THEY ENSURES THE QUALITY.
 ADVANTAGES AND DIS ADVANTAGES OF FUNCTIONAL ORGZN
ADVANTAGES:
1. AS SEPARATE PERSON IS APPOINTED FOR SEPARATE FUNCTION, SPEEDY
QUALITY WORK AND BETTER PERFORMANCE RESULTS.
2. IT IS MORE BETTER THAN LINE ORGZN B’COS HERE USING SPECIALIST.
3. DUE TO EXPERTS ,THEY GUIDE ,GIVE MORE TRAINING TO WORKERS.
HENCE LESS WASTAGE OF MATERIAL, MAN AND MACHINE HOURS.
4. QUALITY OF WORK IS GREATLY IMPROVED.
5. IT REDUCES NEED OF SEARCHING ALL-ROUNDER EXECUTIVE.

DISADVANTAGES:
1. VERY COSTLY TO APPOINT DIFFERENT SPECIALIST.
2. DISCIPLINE IS DIFFICULT AS EACH WORKER IS UNDER THE SUPERVISION
OF 8- FUNCTIONAL FOREMAN.
3. WORKERS GET CONFUSED ABOUT TE AUTHORITY AND ACTIVITY OF EACH
FOREMAN.
4. INDUSTRIAL RELATIONS BECOME MORE COMPLEX.
5. COST OF PRODUCTION INCREASES.
(IT IS FREQUENTLY USED IN SOME MOST MODERN & ADVANCE CONCERNS.)
 DEPARTMENTALIZATION
• TO MAKE THE ORGANIZATIONAL WORK BETTER,THE CONCEPT OF
DEPARTMENTLIZATION HAS COME INTO PICTURE.
• DERATMENTALIZATION IS THE PROCESS OF BREAKING DOWN AN ENTERRISE
INTO VARIOUS DEPARTMENTS DEPENDING ON THE REQUIREMENT OF
ORGANIZATION.

ADVANTAGES OF DEPARTMENTALIZATION:
1. IT ROVIDES A PLATFORM ON WHICH TOP MANAGEMENT CAN COORDINATE
THE ACTIVITIES OF DIFFERENT DEPTS.
2. IT FACILITAES IN INCRESE ENTRPRISES EFFICIENCY AND PRODUCT.
3. DEPT MANAGER GETS TIME TO CONTRIBUTE MORE IN MANAGIRIAL
WORK,THAN PARTICIPATING IN CORE OR ENGINEERING ACTIVITIES.
BOD
G.M

MANUFACTURING DEPT MARKETING DEPT ENGINEERING DEPT FINANCE DEPT

R AND D DEPT EMPLOYEE RELATIONS DEPT

 CENTRALIZATION OF AUTHORITY

• WHEN AUTHORITY IS VESTED IN ONE MAN’S HAND OR IN ONE

DEPARTMENT ONLY IS CALLED AS CENTRALIZATION OF AUTHORITY.

MERITS:
1. PROPER AND SYATEMMATIC WORKING.
2. CLEAR CUT OF LINE AUTHORITY.
3. SUITABLE FOR SMALL CONCERNS.
4. COMPACTNESS OF AUTHORITY IN ONE HAND.

DEMERITS:
1. NOT SUITABLE FOR BIG ORGANIZATION.
2. DESCISION MAKING IS LATE IN ABSENSE OF AUTHORITY PERSON.
3. MISUSE OF AUTHORITY DUE TO ONE MAN SHOW.
 DECENTRALIZATION OF AUTHORITY

• IF THE AUTHORITY IS DISTRIBUTED BETWEEN SPECIFIC EXECUTIVE OR

SPECIFIC DEPARTMENTS, IT IS KNOWN AS DECENTRALIZATION OF
AUTHORITY.
MERITS:
1. MORE TIME FOR EXECUTIVE TO LOOK AFTER OTHER DEVELOPMENTAL
WORK, DUE TO DELEGATION OF AUTHORITY.
2. SUITABLE FOR BIG AND SMALL FIRMS, IF WORKERS / SUBORDINATES ARE
SKILLFUL AND EXPERIENCED.
3. WORK IS FAST DUE TO DECENTRALIZATION.

DEMERITS:
1. MORE DELEGATION OF AUTHORITY MAY AUTOMATICALLY CREATE MORE
UNITY OF COMMAND WHICH CREATES CONFUSION.
2. EXECUTIVE IS ALSO MADE RESPONSIBLE FOR THE LAPSES MADE BY
SUBORDINATES (WHO HAS RECEIVED AUTHORITY).
3. DURING POLICY DECISION MEETING, THERE MAY BE CONFUSION,DELAY
ON ACCOUNT OF MORE AUTHORITY CENTERS.
 SPAN OF CONTROL

SPAN OF CONTROL:

SPAN OF CONTROL, ALSO KNOWN AS SPAN OF MANAGEMENT, IS AHUMAN

RESOURCES MANAGEMENT TERM THAT REFERS TO THE NUMBER OF
SUBORDINATES A SUPERVISOR CAN EFFECTIVELY MANAGE.

NUMBER OF SUBORDINATES REPORTINGTO ONE BOSS.IT SHOULD BE

LIMITED AS THERE IS LIMIT OF SUBORDINATES THAT A MANAGER CAN
EFFECTIVELY SUPERVISE AND CONTROL.

IT IS IMPORTANT TO UNDERSTAND SPAN OF CONTROL REFERS ONLY TO

DIRECT REPORTS, RATHER THAN TO AN ENTIRE CORPORATE HIERARCHY.EVEN
THOUGH A CEO MAY TECHNICALLY CONTROL HUNDREDS OF EMPLOYEES, HIS
OR HER SPAN OF CONTROL WOULD ONLY INCLUDE THE DEPARTMEN HEADS
OR FUNCTIONAL MANAGERS WHO REPORTED TO THE CEO DIRECTLY.
 FORMS OF OWNERSHIP
FORMS OF BUSINESS ORGANIZATION

• TO START A BUSINESS THE MOST IMPORTANT FACTOR IS

CAPITAL.DEPENDING UPON THE NATURE OF BUSINESS AS WELL
AS NEED OF CAPITAL AND OTHER RESOURCES ,THE DIFFERENT
TYPES OF OWNERSHIP HAVE BEEN EVOLVED.

• THEY ARE CATEGORISED AS;

1. SINGLE OWNERSHIP OR SOLE PROPRIETORSHIP

2. PARTENERSHIP OWNERSHIP OR JOINT OWNERSHIP
3. JOINT STOCK COMPANY (Public Ltd company & Private Ltd company)
4. CO-OPERATIVE ORGANIZATIONS
5. STATE AND CENTRAL GOVT OWNED ORGANIZATION.
 SINGLE OWNERSHIP OR SOLE PROPRIETORSHIP

• IF A CPITAL REQUIRED FOR BUSINESS IS INVESTED BY A SINGLE

PERSON AND THE WHOLE ACTIVITIES CONTROLLED BY HIM TO EARN
MAXIMUM PROFIT. IT IS KNOWN AS SINGLE, INDIVIDUAL
OWNERSHIP,OR SOLE PROPRIETORSHIP.

• GENERALLY SINGLE OWNERSHIP WORKS VERY WELL IF THE

BUSINESS IS SMALL OR MEDIUM IN SIZE.

• THE SIMPLE EXAMPLES OF ENTEPRISES RUN BY SINGLE OWNER

ARE SMALL PUBLISHING COMPANY, COMPUTER SALES AND
SERVICES, PRITING PRESS, AUTO REPAIR SHOP, WOOD WORKING
PLANT, RETAIL TRADERS etc.
 ADVANTAGE AND DISADVANTAGES OF SINGLE OWNERSHIP

ADVANTAGES :
1. EASY FORMATION AND NO LEGAL FOMALITIES.
2. STRUCTURE OF ORGANIZATION IS SIMPLE.
3. OWNER IS FREE TO MAKE DECISIONS.QUICK DECISIONS ARE TAKEN.
4. PROFITS ARE FULLY ENJOYED BY THIS SINGLE OWNER.
5. BUSINESS SECRETS CAN BE MAINTAINED.
6. DUE TO PERSONAL ATTENTION, QUALITY OF WORK IS EXCELLENT.
7. SINGLE OWNER CAN ANYTIME DISCONTINUE HIS OR HER BUSINESS.
DISADVANTAGES :
1. LIABILITY AND ALL DEBT OF THE FIRM IS RESPONSIBILITY OF THE SINGLE
OWNER. I.e., HIGH RISK IS INVOLVED IN BUSINESS.
2. RATE OF GROWTH IS LOW.
3. LIFE OF BUSINESS IS UNCERTAIN.
4. POSSIBILITY OF EXPANSION IS LESS.
5. IT IS LIMITED TO SMALL SCALE FIRMS.
6. DUE TO LIMITED FINANCE AVAILABLE, QUALIFIED PERSONS CAN NOT BE
EMPLOYED.
7. MODERN EQUIPMENT AND MACHINERY CANNOT BE MADE EASILY
AVAILABLE.
 PARTENERSHIP OWNERSHIP

• IF TWO OR MORE PERSONS INVEST A CPITAL IN BUSINESS IS KNOWN AS

PARTENERSHIP OWNERSHIP.
• IN OTHER WORDS PARTNERSHIP IS AN ASSOCIATION OF TWO OR MORE
(UPTO 20)
PERSONS TO CARRY ON AS OWNERS OF ABUSINESS FOR PROFIT .
GENERALLY CLOSED RELATIVES AND FRIENDS ARE PARTNERS.
IT IS APPLICABLE FOR MEDIUM SCALE BUSINESSES LIKE, DEALERS OF
HEAVY VEHICLES, MEDIUM SCALE ENGINEERING FIRMS, HOTEL BUSINESS
etc.

GENERAL DUTIES OF PARTNERS :

THEY SHOULD BE FAITHFUL TO ONE ANOTHER.

THEY SHOULD HELP AND ACCOMMODATE EACH OTHER.
THEY NEED TO HAVE CONFIDENCE IN EACH OTHER AND BETTER MUTUAL
UNDERSTANDING.
THEY SHOULD RESPECT THE VIEWS OF ONE ANOTHER.
 TYPES OF PARTNERS

• TYPES OF PARTNERS :

1. GENERAL PARTNER : ALL PARTNERS IN PARTNERSHIP ARE CALLED AS

GENERAL PARTNERS.

1. ACTIVE PARTNERS : THOSE WHO TAKE ACTIVE PART IN MANAGEMENT OF

BUSINESS ENTERPRISE.

1. SLEEPING PARTNER : WHO DO NOT TAKE ANY ACTIVE PART IN CONDUCT OF

BUSINESS.THEY ONLY INVEST MONEY AND SHARE PROFIT OR LOSS.

1. NOMINAL PARTNER : REPUTED PERSONS IN THE SOCIETY ARE REQUESTED TO

INCLUDE THEIR NAMES.THEY NEITHER INVEST MONEY NOR SHARE PROFIT OR
LOSS OF BUSINESS.

1. SECRET PARTNER: THESE PARTNERS WORK SECRETLY FOR THE FIRM.THEY

SHARE THE PROFIT AND LOSSES LIKE GENERAL PARTNERS.

1. MINOR PARTNER : PARTNERS HAVING AGE LESS THAN EIGTEEN(18)

YEARS.THEIR NAMES ARE INCLUDED FOR GETTING TAX BENEFITS.
 PARTNERSHIP DEED

THE MAIN DRAWBACK OF THE PARTNERSHIP IS LACK OF STABILITY i.e.,

VERY SHORT LIFE. TO OVERCOME THIS DRAWBACK, A WRITTEN
AGREEMENT IS SIGNED BY ALL PARTNERS FOR PROPER FUNCTIONING
OF FIRM AND AVOID ANY POSSIBLE CONFLICTS AND
MISUNDERSTANDINGS.THIS WRITTEN AGREEMENT IS KNOWN AS
PARTNERSHIP DEED. IT INVOLVES:-

1. NAME OF THE FIRM.

2. NUMBER OF PARTNERS AND NAME OF THE PARTNERS.
3. NATURE OF BUSINESS IS TO BE CARRIED OUT.
4. STARTING DATE OF THE FIRM.
5. CAPITAL INVESTMENT OF EACH PARTNER.
6. DURATION OF PARTNERSHIP.
7. RESPONSIBILITY OF EVERY PARTNER.
8. PAYMENT RULES FOR FIRM.
9. DISTRIBUTION OF PROFITS AND LOSSES AMONG THE PARNERS etc.

Thus , partnership deed gives stability to firm. It makes all tings clear and simple.
 TYPES OF PARTNERSHIP
1. GENERAL PARTNERSHIP:
HERE LARGE CAPITAL IS AVAILABLE TO THE FIRM. THIS TYPE OF THE FIRM
POSSESES MUCH BETTER TALENT, JUDGEMENT AND SKILLS. THIS TYPE
OF FIRM HAS LEGAL STATUS. IN THIS PARTNERSHIP, PARTNERS HAVE
FULL CONTROL OF THE BUSINESS AND FULL RIGHT TO ALL PROFIT. HERE
PARTNERS CAN ENJOY TAX ADVANTAGES DUE TO PARTNERSHIP.FOR ALL
LOSSES, THERE ARE MORE THAN ONE PERSON IS TO SHARE THEM, SO
EASY TO ARRANGE THE DEBTS OR LOSSES.

1. LIMITED PARTNERSHIP:
LIMITED PARTNERSHIP IS ASSOCIATION OF ONE OR MORE GENERAL
PARTNERS WHO MANAGE THE BUSINESS AND ONE OR MORE LIMITED
PARTNERS WHOSE LIABILITY IS LIMITED TO THE CAPITAL THEY HAVE
INVESTED IN THE BUSINESS.
LIMITED PARTENERS SHARE THE PROFIT BUT THEY DO NOT PARTICIPATE
OR INTERFERE WITH THE CONTROL OR MANAGEMENT OF THE FIRM.
LIMITED PARTNER TYPE OF OWNERSHIP IS EASY AND LESS COSTLY TO
FORM.
 ADVANTAGES AND DISADVANTAGES OF PARTNERSHIP

ADVANTAGES:
1. LARGE CAPITAL IS AVAILABLE TO FIRM, THAN THE INDIVIDUAL OWNERSHIP.
2. RISK IS DIVIDED ACCORDING TO INVESTMENT
3. LIMITED LIABILITY.
4. IT IS ASSOCIATED WITH TAX BENEFITS.
5. BANK LOANS ARE EASILY SANCTIONED.
6. PARTNERS HAVE GOOD CONTROL OVER BUSINESS.
7. PARTNERS POSSESS DIFFERENT SKILLS, EXPERIENCE AND KNOWLEDGE, SO
CORRECT DECISION CAN BE TAKEN AND INCENTIVE FOR SUCCESS IS HIGH.

DISADVANTAGES:
1. MOST IMPORTANT DRAWBACK IS SHORT LIFE.
2. ALL PARTNERS SUFFERS B’COS OF WRONG STEP TAKEN BY ONE PARTNER.
3. DEATH OF PARTNER MAY DISSOLVE PARTNERSHIP.
4. SECRETS OF BUSINESS CANNOT BE MAINTAINED.
5. CONFLICTS AND MISUNDERSTANDINGS MAY CREATES PROBLEMS.
6. NOT SUITABLE FOR LARGE SCALE INDUSTRY.
 JOINT STOCK COMPANY

 A JIONT STOCK CO-OPERATIVE SOCIETY IS AN ASSOCIATION OF

INDIVIDUAL, CALLED SHARE HOLDERS, WHO JION TOGETHER FOR
PROFIT AND AGREE TO SUPPLY CAPITAL DIVIDED INTO SHARES THAT
ARE TRANSFERABLE FOR CARRYING ON A SPECIFIC BUSINESS.

 A JIONT STOCK CO-OPERATIVE CONSISTS OF MORE THAN TWENTY(20)

PERSONS FOR CARRYING ANY BUSINESS OTHER THAN BANKING.

 THESE PERSONS GIVE A NAME TO THE SOCIETY, MENTION THE PUROSE

FOR WHICH IT IS FORMED, AND STATE TE NATURE AND THE AMOUNT OF
CAPITAL (SHARES) TO BE ISSUED, etc. AND SUBMIT THE PROPOSAL TO
REGISTRAR OF THE COMPANIES. AS THE REGISTRAR ISSUES A
CERTIFICATE IN THIS CONNECTION, THE COMPANY STARTS OPERATING.

 THE MANAGING BODY OF JIONT STOCK COMPANY IS THE BOARD OF

DIRECTORS (BOD) ELECTED BY THE SHARE HOLDERS.
 TYPES OF JOINT STOCK COMPANY
1. PRIVATE LIMITED COMPANY : THE MAXIMUM NUMBER OF MEMBERSHIP IN THIS
TYPE OF COMPANY IS 50. THE TRANSFER OF SHARES IS WITHIN THE MEMBERS
AND THE GENERAL PUBLIC IS NOT INVOLVED.USUALLY THE MEMBERS OF SUCH
COMPANY ARE THE FRIENDS & RELATIVES. HERE THE FINANCIAL CONDITION
NEED NOT BE MADE PUBLIC.THE GOVT. ALSO DEOS NOT INTERFERE WITH THE
WORKING OF THE COMPANY.
• DEFINITION :Type of incorporated firm which (like a public firm) offers limited liability
to its shareholders but which (unlike a public firm) places certain restrictions on its
ownership. These restrictions are spelled out in the firm's articles of association or
bylaws and are meant to prevent any hostile takeover attempt. The major restriction
are: (1) stockholders (shareholders) cannot sell or transfer their shares without
offering them first to the other stockholders for purchase, (2) stockholders cannot
offer their shares or debentures to the general public over a stock-exchange, (3)
number of stockholders cannot exceed a fixed figure (commonly 50)

1 PUBLIC LIMITED COMPANY : HERE MEMBERSHIP IS OPEN TO GENERAL PUBLIC

MINIMUM MEMBERS IS SEVEN( 7). BUT THERE IS NO UPPER LIMIT.THESE
COMPANIES ADVERTISE THE OFFER OF SHARE & THERE IS A GREAT GOVT.
CONTROL WHICH IS REQUIRED TO PROTECT THE GENERAL INTREST OF SHARE
HOLDERS. HERE SHARES ARE TRANSFERABLE IN PART OR IN FULL WITOUT ANY
REAL APPROVAL.THE AFFAIRS OF THE COMPANY IS MANAGED BY B.O.D. WHOSE
NO. IS LIMITED TO SEVEN (7)
DEFINITION: Incorporated, limited liability firm whose securities are traded on a stock
exchange and can be bought and sold by anyone. Public companies are strictly
regulated, and are required by law to publish their complete and true financial
position so that investors can determine the true worth of its stock (shares). Also
called publicly held company.
 DIFFERECES BETWEEN PRIVATE & PUBLIC LTD COMPANY
PRIVATE LTD COMPANY PUBLIC LTD COMPANY

1. MINIMUM MEMBERS -2 1. MINIMUM MEMBERS-7

MAXIMUM MEMBERS-50 MAX. MEMBERS-NO UPPER
2. GENERALLY CLOSE FRIENDS & LIMIT
RELATIVES 2. MEMBERSHIP IS OPENED TO
ARE MEMBERS. GENERAL PUBLIC.
3. SHARES ARE NOT 3. SHARES ARE TRANSFERABLE.
TRANSFERABLE. 4. HUGE CAPITAL IS COLLECTED.
4. THERE ARE LIMITS TO CAITAL 5. ALONG WITH EARNING
COLLECTED. PROFIT,IT WORKS
5. THE MAIN AIM IS TO EARN THE FOR SOCIETY ALSO.
PROFIT. 6. CERTIFICATE FROM
6. THE COMPANY NEED NOT REGISTRAR
OBTAIN CERTIFICATE IS COMPULSARY.
OF COMMENCEMENT OF 7. AS COMMON PERSON IS
BUSINESS. INVOLVED
7 .NO GOVT. CONTROL. GOVT. CONTROL EXISTS.
8. SUITABLE FOR MEDIUM SCALE 8. SUITABLE FOR LARGE SCALE
INDUSTRIES. INDUSTRY.
9. SHORT LIFE. 9. LONG LIFE.
10. PRIVATE LTD.CAN CONVERTED 10. PUBLIC LTD. CANNOT BE
INTO PUBLIC LTD. TRANSFER
TO PRIVATE LTD COMPANY.
 ADVANTAGES & DISADVANTAGES OF JOINT STOCK COMPANY

ADVANTAGES :
1. LARGE AMOUNT OF MONEY CAN BE RAISED.
2. IT ASSOCIATES LIMITED LIABILITY WITH IT.
3. SHARES ARE TRANSFERABLE.
4. COMPANY’S LIFE IS NOT AFFECTED DUE TO THE DEATH OF
SHAREHOLDERS.
5. RISK OF LOSS IS DIVIDED AMONG MANY SHARE HOLDERS.

DISADVANTAGES :
1. A GOOD DEAL OF LAGAL FORMALITIES IS REQUIRED FOR THE FORMATION
OF A JOINT STOCK COMPANY.
2. BIG SHAREHOLDERS MANAGE THE COMPANY.
3. DIFFICULT TO MAINTAIN SECRECY AS IN PARTNERSHIP.
4. OVERALL CONTROL AND DISCIPLINE IS DIFFICULT TO MAINTAIN.
5. LABOUR AND UNION PROBLEMS MAY ARISE.
 CO-OPERATIVE SOCIETY
IT IS A FORM OF PRIVATE OWNERSHIP WHICH CONTAINS FEATURES OF LARGE
PARTNERSHIP AS WELL AS FEATURES OF THE CORORATION. ITS AIM IS TO ELIMINATE
PROFIT AND PROVIDE GOODS AND SERVICES TO THE MEMBERS OF THE COOPERATIVES.
HERE THE MEMBERS BUY SHARES OR AT SOME FEES AND THE PROFITS ARE
DISTRIBUTED PERIODICALLY
SINCE EACH MEMBER HAS ONE VOTE IRRESPECTIVE OF HOLDING (SHARES). IT
AVOIDS CONCENTRATION OF POWER IN ONE HAND.
IT HAS SHARE HOLDERS, BOARD OF DIRECTORS AND OTHER ELECTED OFFICERS.
CO-OPERATIVE ORGANIZATION CAN BE DEFINED AS A VOLUTARY DEMOCRATIC
OWNERSHIP FORMED BY SOME MOTIVATED INDIVIDUAL FOR OBTAINING NECESSARIES
OF EVERYDAY LIFE AT LOWER RATES THAN THOSE IN THE MARKET.

You must have noticed that besides many differences in previous types of organizations
among them in respect of their formation, operation, capital contribution as well as
liabilities, one common similarity is that they all engage in business activities to earn profit.
Without profit it is impossible for them to survive and grow. But there are certain organizations
which undertake business activities with the prime objective of providing service to the
members. Although some amount of profit is essential to survive in the market, their main
intention is not to generate profit and grow. They pool available resources from the members,
utilize the same in the best possible manner and the benefits are shared by the members.
 TYPES OF CO-OPERATIVE SOCIETY

• 1. Consumers’ Co-operative Society: These societies are formed to

protect the interest ( TO ELIMINATE MIDDLE MAN’S PROFIT ). of general
consumers by making consumer goods available at a reasonable price.
They buy goods directly from the producers or manufacturers and thereby
eliminate the middlemen in the process of distribution.
Kendriya Bhandar, Apna Bazar and Sahkari Bhandar are the examples of
consumers’ co-operative society.

• 2. Producers’ Co-operative Society: These societies are formed to

protect the interest of small producers by making available items of their
need for production like raw materials, tools and equipments, machinery, etc.
In this type of association persons combine together to form a society for the
purpose of manufacturing goods. In india it is applicable to agricultural and
cottage industries like sugar mills, rice mills, Handloom societies,
Bayanika, Haryana Handloom, etc., are examples of producers’ co-operative
society.
• 3. Co-operative Marketing Society: These societies are formed by small
producers and manufacturers who find it difficult to sell their products
individually. The society collects the products from the individual
members and takes the responsibility of selling those products in the
market.
• Gujarat Co-operative Milk Marketing Federation that sells AMUL milk
products is an example of marketing co-operative society.

• 4. Co-operative Credit Society: These societies are formed to provide

financial support to the members. The society accepts deposits from
members and grants them loans at reasonable rates of interest in times
of their need. Its aim is to finance poor cultivation by advancing loans for
purchase of land and machineries.
Village Service Co operative Society and Urban Cooperative Banks are
examples of co-operative credit society.
• 5. Co-operative Farming Society: These societies are formed by
small farmers to work jointly and thereby enjoy the benefits of large-
scale farming.
• The object of this is to enlarge the size of agricultural land by forming
group of cultivators. it helps in use of modern implements technology
in agriculture which in turn increases the yield (production).
• Lift-irrigation cooperative societies and pani-panchayats are some of
the examples of co-operative farming society.

• 6. Housing Co-operative Society: These societies are formed to

provide residential houses to members. They purchase land,
develop it and construct houses or flats and allot the same to
members. Some societies also provide loans at low rate of interest to
members to construct their own houses.
• The Employees’ Housing Societies and Metropolitan Housing Co-
operative Society are examples of housing co-operative society.
 ADVANTAGES OF CO-OPERATIVE SOCIETY
• i. Easy Formation: Formation of a co-operative society is very easy compared to a
joint stock company. Any ten adults can voluntarily form an association and get it
registered with the Registrar of Co-operative Societies.
• ii. Open Membership: Persons having common interest can form a co-operative
society. Any competent person can become a member at any time he/she likes and
can leave the society at will.
• iii. Democratic Control: A co-operative society is controlled in a democratic manner.
The members cast their vote to elect their representatives to form a committee that
looks after the day-to-day administration. This committee is accountable to all the
members of the society.
• iv. Limited Liability: The liability of members of a co-operative society is limited to
the extent of capital contributed by them. Unlike sole proprietors and partners the
personal properties of members of the co-operative societies are free from any kind
of risk because of business liabilities.
• v. Elimination of Middlemen’s Profit: Through co-operatives the members or
consumers control their own supplies and thus, middlemen’s profit is eliminated.
• vi. State Assistance: Both Central and State governments provide all kinds of help
to the societies. Such help may be provided in the form of capital contribution,
loans at low rates of interest, exemption in tax, subsidies in repayment of loans, etc.
• vii. Stable Life: A co-operative society has a fairly stable life and it continues to
exist for a long period of time. Its existence is not affected by the death, insolvency,
lunacy or resignation of any of its members.
 DISADVANTAGES OF CO-OPERATIVE SOCIETY
• i. Limited Capital: The amount of capital that a cooperative society can raise from
its member is very limited because the membership is generally confined to a
particular section of the society. Again due to low rate of return the members do not
invest more capital. Government’s assistance is often inadequate for most of the
co-operative societies.
• ii. Problems in Management: Generally it is seen that co-operative societies do not
function efficiently due to lack of managerial talent. The members or their elected
representatives are not experienced enough to manage the society. Again, because
of limited capital they are not able to get the benefits of professional management.
• iii. Lack of Motivation: Every co-operative society is formed to render service to its
members rather than to earn profit. This does not provide enough motivation to the
members to put in their best effort and manage the society efficiently.
• iv. Lack of Co-operation: The co-operative societies are formed with the idea of
mutual co-operation. But it is often seen that there is a lot of friction between the
members because of personality differences, ego clash, etc. The selfish attitude of
members may sometimes bring an end to the society.
• v. Dependence on Government: The inadequacy of capital and various other
limitations make cooperative societies dependant on the government for support
and patronage in terms of grants, loans subsidies, etc. Due to this, the government
sometimes directly interferes in the management of the society and also audit their
annual accounts.
 STATE AND CENTRAL GOVT ORGANIZATION

• STATE GOVERNMENT OR CENTARL GOVERNMENT ARE CREATED TO

OVERCOME THE SHORT COMINGS ( DISADVANTAGES ) OF JOINT
STOCK COMPANIES.
• IT HA SGOT AN ADVANTAGE THAT RAW MATERIALS POWER, FUEL
TRANSPORTATION AND FINANCE IS EASILY MADE AVAILABLE TO
THEM.

• AIMS :

• 1. TO INCREASE EMPLOYMENT OPPORTUNITIES.

• 2. LOOK AFTER WELLBEING AND WELFARE OF THE PUBLIC.
• 3. MINIMISE EXPLOTATION OF WORKERS AND CONSUMERS.
• 4. IMPROVE ECONOMICAL BALANCE OF THE COUNTRY.
• 5. IT HELPS NATIONAL PROGRESS AND DEVELOPMENT.
 DIFFERENCE BETWEEN DEBENTURE HOLDER AND
SHARE HOLDER

DEBENTURE HOLDER SHARE HOLDER

1. HE IS A CREDITOR ONLY & HAS 1. HE IS A OWNER

NO CONTROL OF THE
OVER THE AFFAIRS OF THE COMPANY.
COMPANY. 2. DIVIDEND IS PAID
1. FIXED RATE OF INTREST IS PAID ON SHARES.
ON DEBENTURES. 3. THE DIVIDEND IS
2. INTREST IS PAID IRRESPECTIVE PAID DEPENDING
OF THE COMPANY ON THE TYPE OF
IS RUNNING UNDER PROFIT OR SHARES.
LOSS. 1. MONEY OF THE
1. HE GETS HIS MONEY AFTER THE SHARE HOLDER
STATED IS NOT
NUMBER OF YEARS. REFUNDED TO
THEM.
 QUESTIONS

1. COMPARE LINE ORGZN WITH FUNCTIONAL ORGZN.

2. DIFFERENTIATE BETWEEN SHARE HOLDER AND DEBENTURE HOLDER.
3. LIST FOUR ADVANTAGES OF GOVT. SECTOR.
4. STATE THE ADVANTAGES & DISADVANTAGES OF JOINT STOCK ORGZN.
5. EXPLAIN FUNCTIONAL ORGZN WITH ITS MERITS AND DEMERITS.
6. EXPLAIN PARTNERSHIP ORGZN WIT ITS MERITS & DEMERITS.
7. DIFFERENTIATE BETWEEN THE PRIVATE LTD COMPANY & PUBLIC LTD COMPANY.
8. WHAT IS ORGANIZATION ? STATE THE STEPS IN PROCESS OF ORGANIZATION.
9. EXPLAIN LINE ORGZN WITH ITS MERITS AND DEMERITS.
10. EXPLAIN LINE AND STAFF ORGANIZATION. WITH ITS ADVANTAGES &
DISADVANTAGES.
11. STATE FIVE ADVANTAGES & DISADVANTAGES OF CO-CPERATIVE SOCIETY.
12. EXPALIN CENTRALIZED AND DECENTRALIZED DEPARTMENT.
13. EXPALIN THE FORMS OF BUSINESS OWNERSHIP.
14. WRITE ASHORT NOTE OF THE FOLLOWINGS
• a) Sound organization b) Span of control c) Departmentalization
• d) Partnership deed
• 15. EXPLAIN STATE AND CENTRAL GOVT. ORGNZN WITH ITS MERITS AND
DEMERITS.