Unit – 03 (Organizational Management)

LAKSHYA POLYTECHNIC
PLAN. EXECUTE. ACHIEVE
UNIT – 03
ORGANIZATIONAL MANAGEMENT

ORGANIZATIONAL MANAGEMENT
Organization is a group of persons united to achieve a common objective.
In other words, it may also be defined as a group of activities or resources which allows the
achieving of common goal.
Any institution may be considered to be an organization if, it has following characteristics.
➢ It has well defined common objective
➢ It has predetermined set of authorities and responsibilities.
➢ It has well defined structure
➢ It has a set of policies and plans

STEPS IN ORGANIZATION
The steps required in forming of an organization may be discussed as follows-
1. Identification of objectives
➢ The identification of objective defines the initial path of action and setting up of
guideline
2. Formulation of plans and policy
➢ The policies must be framed to provide a set of rules to achieve the objectives, whereas
plans initiate action to achieve objectives.
3. Identification and classification
➢ All the activities to achieve the objective are listed and then the necessary activities
among them are identified
➢ Once the necessary activities are identified they are classified on the basis of nature and
scope
4. Group of activities
➢ Grouping is done on the basis of availability of the source, priority of work and
importance of work.
5. Assignment of duties
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 Unit – 03 (Organizational Management)

➢ The duties are assigned on the basis of requirement of work and human needs.
➢ Overlapping, underutilization and overloading must be avoided during assignment of
duties.
6. Horizontal and vertical relationship of authority and responsibility
➢ For performing a duty authority is necessary and to complete a job responsibility is
essential, therefore an organization must clearly identify the authority and
responsibility.

TYPES OF ORGANIZATION
On the basis of the structure the organization may be of following types
1. Line organization
2. Functional organization.
3. Line and staff organization.
4. Project organization.

1. LINE ORGANIZATION

• It is also called scaler organization.

• It is a vertical type of organization structure.
• It is also called military type because, the army has similar structure.
• It has a chain of authorities one above the other.
• It is the oldest and simplest form of organization.

Chairman

Marketing manager Production manager HR manager

Assistant manager
. Production engineer
Supervisor
Foreman
Worker
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 Unit – 03 (Organizational Management)

Advantages of Line Organization

• It is simple and easy to understand
• Decision is quick
• Confusion is less.
• Level of discipline is high.

Disadvantages of Line Organization

• Authorities at the top may become dictator.
• There is a lack of specialization.
• There may be overlapping of activities.

Application
• Military organization
• small firms.

2. FUNCTIONAL ORGANIZATION.
• It is also called horizontal organization.
• There is grouping of activities on the basis of functions.
• Specialization in the function is key in this of organization.
• Each group performs a specific task even through the product is different.

Managing Director

CEO

General Manager

Production Quality In Maintenance Design In Store

In charge charge In Charge Charge Keeper

Worker
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 Unit – 03 (Organizational Management)

Advantages of Functional Organization

• Work performance is better.
• Correct decision is possible.
• Efficient utilization of people.
Disadvantages of Functional Organization
• Decision is slow.
• Discipline is lacking
• Everybody is smart, it is difficult to deal with expert.
• Confusion among the staff.
Application
• It is generally followed in research and development organization.

3. LINE AND STAFF ORGANIZATION.

• It is combination of line and functional organization.
• It is both horizontal and vertical structure.

CEO
General manager (1) General manager (2)

Marketing Finance HR Design

manager manager manager manager

plant manager
supervisor
worker

Advantages of Line and Staff organization

• It is discipline and specialized system.
• The structure of the organization may be modified as per the requirement.
• Productivity is better as compare to the other forms
• Decisions are quick and correct.
• Team work is effective.
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 Unit – 03 (Organizational Management)

Disadvantages of Line and Staff organization

• Cost of production is more
• Sometimes there is injustice to line person.
• Discipline is poor as compare to line organization.
Application
• They are generally applied to large and medium scale industry.

4. PROJECT ORGANIZATION
• It is a interorganizational team formed together for a specific purpose.
• This organizational structure is temporary in nature.
• It is formed for the project only.
• The different forms of project organization may be as follows-
a) Functional matrix
b) Balance matrix.
c) Project matrix.
a). Functional matrix-
A person is asked to oversee the project across different functional area.
b) Balance matrix-
A person is assigned to oversee the project and take advice from
functional managers whenever required.
c). Project matrix.:
A manager is put in charge of the complete group of persons working
on the project

DEPARTMENTATION
• It is also called the horizontal dimensions of organization.
• When an organization groups a number of employee and work then it is segmented into
different sections for better control and management. Each such section is called
department and the process is called departmentation.
• Similar activities and the people related to it are grouped together to form department.
• Examples of department may be store, maintenance marketing, purchase,
manufacturing etc.

CENTRALIZATION VS DECENTRALIZATION
The concentration of power and authority with respect to planning and decision making is
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called centralization whereas the distribution of power and authority with respect to planning
 Unit – 03 (Organizational Management)

and decision making is called de-centralization. The difference between the two can be seen
Basic Centralization Decentralization
1. Definition The concentration of power The distribution of power
and authority with respect and authority with respect
to planning and decision to planning and decision
making is called making is called de-
centralization. centralization.
2. Communication It is vertical It is open and free
flow
3. Decision making Slow Comparatively fast.
time
4. Advantages Good co – ordination and Authority is shared to
no confusion reduce monopoly.
5. Power of decision Lies with the top Distributed at different
making management. level of management
6. Application Small scale industries Medium and large-scale
industries.
below:

AUTHORITY AND RESPONSIBILITY

Authority is power or right to give order and take decision whereas responsibility is the sense
of duty. The Table below compares the two:
Basic Authority Responsibility
1. Definition Authority is power or right to Responsibility is the sense of
give order and take decision. duty.
2. Main function Sense of command is Sense of obedience is necessary.
necessary.
3. Direction of flow Vertically downwards Vertically upwards.

4. Delegation It can be delegated to others It cannot be delegated.

5. Examples Manager commanding, sub- Subordinates completing the

ordinates assigned work

SPAN OF CONTROL
➢ The span of control means- number of subordinates that can be commanded by the
manager effectively.
➢ There is limitation to this number i.e., the span of control for every manager is limited
to a number.
➢ It is not possible to control large number of sub-ordinates effectively.
➢ The span of control may be of two types.
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o Narrow span.
 Unit – 03 (Organizational Management)

o Wide span.
➢ Narrow span led to underutilization of managers capacity, whereas wide span results in
overloading of managers.
➢ handling and controlling efficiency go down when the number of sub-ordinates under
your command is more than the limit

FORMS OF OWERNSHIP
The organization may be classified into various types on the basis of their ownership.
The different types of ownership are as follows-
1. Sole proprietorship.
2. Partnership.
3. Joint stock company.
4. Co – operative society.
5. Government sector.
1. SOLE PROPRIETORSHIP

• It is business run by single person

• The person is the supreme authority.
• It is the simplest and the oldest form of business ownership.
• For everything good or bad the owner is responsible.
• Setting up of such business is quick and easy.

Advantages
• Easy to form a business.
• More flexibility in business.
• Decision making is quick.
• Own ideas and innovations all be utilized.
• No sharing in profit.

Disadvantages.
• No sharing of loss.
• High responsibility for everything.
• Business is restricted to small scale only.
• Limitation of capital available.
• Limitation of resources.

Application
• Small manufacturing units, service centres, maintenance shop, fabrication shop
etc.
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 Unit – 03 (Organizational Management)

2. PARTNERSHIP

• Partnership come into existence when two or more person started a business with a
common objective.
• The partner may be of different types-
o Active partner.
o Nominal partner.
o Sleeping partner.
o General partner.
o Secret partner.
o Minor partner. (Under 18 years)
• It is a joint business of many individuals.
• The minimum no. of partner is two and the maximum no. is 50
• Work is divided among the partners.
• Sharing of profit or loss.

Advantages

• No overlapping of single person as the work is divided.

• The arrangement of resources is easier as compare to single ownership.
• Decision making is more perfect.
• Decision making is also quick as compare to joint stock companies.
• Sharing of loss by all the partners.

Disadvantages

• Difficult to maintain relationship with partners.

• Less flexibility as compared to single ownership.
• Decisions are delayed as compared to single ownership.
• Business secrecy is low as compare to single ownership.

Application

• Medium scale industries.

• Service sector business likes hospitals, hotels etc.

3. JOINT STOCK COMPANY

• Investment in terms of shares is one of the sources finances for business.

• This money is also called joint stock and the company using such money is called
joint stock company.
• Joint stock company is collection of individuals called share holder.
• There are two types of joint stock companies-
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i) Private limited company.

 Unit – 03 (Organizational Management)

ii) Public limited company.

i) Private limited company

o In this company shareholders are private individuals.
o The maximum of members is two and maximum no is 50.
o Minimum number of directors is two.

ii) Public limited company

o Shareholders of such company are general public.
o The minimum number of directors is 3.

Advantages

• Large capital can be generated.

• Business growth is faster.
• Liability is limited.
• Effective decisions of work.
• Funds are always available for purchasing new updated technologies.

Disadvantages

• Formation process is lengthy.

• Legal formalities are complicated.
• Monopoly of big shareholders is possible.
• The main motive is profit instead of welfare.

Applications

• Automobile companies
• Chemical companies
• Pharma industry
• Telecom companies.

4. CO – OPERATIVE SOCIETY

An industry in which few members come together, extend their co-operation to start a
business which can serve their or social cause.
Such society is called a co-operative society.

Characteristics

• It’s a form of private ownership.

• Service is the main motive.
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• It works on the principles of democracy.

 Unit – 03 (Organizational Management)

• The minimum no. of members is 10 and maximum no. is unlimited.

• The members attained periodic meeting to take decisions.

Advantages

• Co-operative strengthen ruler tendency.

• Respect is given to the view of all members.
• It is by the members for the members.
• It is easier to form a co – operative as compared to other organizations.

Disadvantages

• Political interference is more.

• Professionalism is very poor.
• Decision making is slow.
• Corruption is unlimited.

Application.

• Housing co-operative society.

• Consumer co-operative society.
• Producer co-operative society.
• Credit co-operative society.
• Banking co-operative society.

5. GOVERNMENT SECTOR

• It is also called state enterprise.

• Government is involved completely or partially.
• The basic aim is to provide service to the society.
• Earning profit is not important.
• Profit is directly given to the government.
• The government is representative of the public therefore govt. sector is also called
public sector.

Advantages

• Huge capital can be raised

• Every action is as per the constitution of India.
• Service to the nation is main objective
• It is completely supported by the govt.
• Job security.
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 Unit – 03 (Organizational Management)

Disadvantages

• Productivity is less.
• Political interference is more.
• Corruption is more.
• Utilization of resources are less.
• Management is poor.

Government sector is of three types

i) Government department.
ii) Public corporation.
iii) Government companies.

Basic Government Public. Government

Department Corporation Companies.
1. Govt. control Highest Medium Minimum
2. Freedom in Minimum Medium Maximum
decision
making
3. Recruitment All post Many post Few post
4. Efficiency Least Medium Maximum.
5. Motive Service Service + profit Service + profit
6. Examples Railway, defence, LIC, ONGC, DVC HMT, BSNL, BE,
higher education, BHEL
PWD

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