CHAPTER-5 ORGANISING

MEANING OF ORGANISING
 Organizing 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.
 According to Theo Haimman:
“Organizing is the process of defining and grouping the activities of the enterprise
and establishing authority relationships among them ’’

Steps Involved in the Process of Organizing

Identification & Division Of Work: –
The first step of organizing involves identifying and dividing the total work to be
done into manageable activities called jobs according to predetermined plans to
avoid duplication of efforts and resources and the burden of work can be shared
among the employees.
Departmentalization/ departmentation:
• It means grouping similar and related jobs into larger units called departments,
divisions or sections and placing them under a department head.
• It facilitates specialization.
• The departments are linked together and are interdependent.
• It aims at achieving co-ordination and facilitate unity of action.
• Departments can be created on the basis of:
•Functions: marketing, personnel, finance etc.
•Products: Textiles, chemical, power division etc.
•Territories: Western, northern, central, eastern etc.
Assignment Of Duties:
It is necessary to define the work of different job positions and allocate work accordingly
to various employees.
• Once departments are formed, the department is placed under the charge of an
individual.
• Jobs are then assigned to an individual according to their skills and competencies
.
• E.g. activities of finance should be assigned to persons having qualifications and
experience in finance e.g. C.A‘s.
Establishing Reporting Relationships:
• It involves establishing clear relationships for reporting of work.
• Superior subordinate relations between different people and job positions are
created, so that everybody knows from whom he has to take orders and and to
whom he can issue orders.
• Creates management hierarchy a chain of command from the top manager to the
individual at the lowest level. This helps in coordination.
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Importance of Organizing
1. Benefits of specialization: Organizing leads to systematic allocation of jobs amongst
the workforce.
This reduces the workload and ensures division of work into smaller units and repetitive
performance leads to gaining experience and specialization. Thus organizing promotes
specialization which in turn leads to efficient & speedy performance of tasks.
2. Clarity in working relationship: It helps in creating well defined jobs and also
clarifying the limits of authority and responsibility of each job. It helps in creating a
hierarchical order. The superior-subordinate relationship is clearly defined in organizing.
This removes ambiguity in transfer of information and instructions.
3. Effective Administration: It provides a clear description of jobs and related duties
which helps to avoid confusion and duplication.
Clarity in working relationships enables proper execution of work which results in
effective administration.
4. Optimum utilization of resources:
Organizing leads to the optimum utilization of all material, financial and human
resources .
The proper assignment of jobs avoids overlapping/ duplication of work. This helps in
preventing confusion and minimizing the wastage of resources and efforts.
5. Adaptation to Change:
Organizing helps in adaptation to change by allowing the organizational structure to be
suitably modified according to the changes in business environment
6. Development of Personnel: Organizing helps in development of personnel by
delegation of work to subordinates. Effective delegation allows the managers to reduce
their workload so that they can focus on more important issues related to growth &
innovation. This also develops the subordinates’ ability, helps him to exercise initiative
and realize his full potential.
7. Expansion and growth:
Organizing helps in growth & diversification of an enterprise by adding more job
positions, departments, products lines, new geographical territories etc. This will help to
increase customer base, sales and profit.

Meaning of Organizational Structure

 The organization structure can be defined as the framework within which
managerial and operating tasks are performed.
 Under the organizational structure, various posts are created to perform different
activities for the attainment of the objectives of the enterprise.
 Relations among persons working on different posts are determined. Thus,
organization structure is an outcome of the organizing process.
 The structure provides a basis or framework for managers and other employees
for performing their functions.
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Relation between Span of Management and Organization structure:
 Span of management refers to the number of subordinates that can be effectively
managed by a superior.
 The Span of management to a large extent gives shape to the organization
structure.
 This determines the levels of management in the structure. Narrow span of
management results in tall structure whereas wider span of management results
in flat/short structure.
 It specifies the relationship between people, work and resources
 It allows correlation and coordination among human, physical & financial
resources and this enables business enterprise to achieve their goals .
 A proper organization structure is essential to ensure a smooth flow of
communication and better control over the operations of a business enterprise .
 It enables the enterprise to function as an integrated unit by coordinating the
responsibilities of individuals and departments. This result in increase in
profitability of the enterprise.

The two most commonly found structure are

 Functional Structure
 Divisional Structure
Functional structure
 In functional Structure activities are grouped and departments are created on the
basis of specific functions to be performed.
 For example, all the jobs related to production are grouped under Production
Department, Marketing Department, Finance Department etc.
 Suitability
(1) Large organizations producing one line of product.
(2) Organizations which require high degree of functional specialization with
diversified activities.
• Managing director
• Human Resources Manager
• Marketing Manager
• Finance Manager
Advantages of Functional Structure
 It leads to Functional/ occupational Specialization since emphasis is placed on
specific functions. This promotes efficiency in utilization of manpower as
employees perform similar task within the department and are able to improve
performance .
 Control & Coordination is established as all the persons working within a
department perform similar tasks related to an aspect.
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 Helps in increasing managerial and operational efficiency which results in
increased profits. Managers of one department are performing same type of
function again and again which makes them specialized and improves their
efficiency.
 Minimizes cost: It leads to minimum duplication of effort which results in
economies of scale and thus lowers cost.
 It makes training of employees easier as the focus is on a limited range of skills
Disadvantages of Functional Structure
 1. Emphasis on departmental objective : Each departmental head works
according to his own wishes. They always give more preference to their
departmental objectives. Hence overall organizational objectives suffer.
 2. Difficulty in Inter-departmental Coordination: All departmental heads work as
per their own wishes which leads to easier coordination within the department,
but it makes inter-departmental coordination difficult.
 3. Difficult to fix responsibility : It may lead to problem in coordination between
departments. So it is difficult to fix responsibility for performance on a particular
department .
 It may lead to inflexibility as people with same skill and knowledge base may
develop narrow perspective and may not appreciate others point of view.
Functional heads do not get training for top management positions because they
are unable to get the experience in diverse fields.
DIVISIONAL STRUCTURE
 It is an organization structure comprising of separate business units or divisions
created on the basis of different products (like metal, plastic, cosmetics etc.),
geographical area, customer groups, etc.
 Each division is multi- functional and self- contained.
 Suitability: This structure is suitable in organizations producing multiple products
or different lines of products requiring product specialization. Also, growing
companies which intend to add more lines of products, more employees or create
more departments in future adopt this structure.

ADVANTAGES OF DIVISIONAL STRUCTURE

1. As divisional head gains experience in all functions related to a particular
product, it helps in the development of varied skills due to which a divisional head
can prepare him for higher positions. This leads to product specialization.
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2. It helps in fixation of responsibility as divisional heads are accountable for the
profits, revenues and costs of their respective division. It provides a proper basis
for the assessment of their performance.
3. It facilitates growth and expansion as new divisions and staff for the new
product line can be added without disturbing existing departments.
4.It promotes flexibility and initiative because each division functions as an
autonomous unit which leads to faster decision making.
5.Coordination is easy because all functions related to particular product are
integrated in one division.
DISADVANTAGES OF DIVISIONAL STRUCTURE
 Conflicts may arise among different divisions with reference to allocation of
resources. Every division may seek to maximise its profits at the cost of other
divisions.
 Organizational Interest may be ignored by different divisional heads as they may
gain excess power and authority to supervise all the activities related to their
respective divisions.
 It may lead to increase in cost because of duplication of activities across the
product. It involves more expenditure to provide functional staff to each division.
 The organization structure becomes complex with multiple divisions and
functions within each division.
Delegation of Authority
• Meaning: It means the granting of authority to subordinates to operate within the
prescribed limits. The manager who delegates authority holds his subordinates
responsible for proper performance of the assigned tasks.
• To make sure that his subordinates perform all the works effectively and
efficiently in expected manner the manager creates accountability.
• According to Louis Allen “ Delegation is the entrustment of reponsibility and
authority to another and the creation of accountability for performance “
Authority
The power of taking decisions in order to guide the activities of others that is to
tell people what to do and expect them to do it is called authority.
• Authority is that power which influences the conduct of others.
• Authority can be delegated.
• Arises from formal position.
• Flows Downward- from superior to subordinate
• Authority restricted by laws and the rules and regulation of the organization,
which limit its scope.
Responsibility
• It is the obligation of a subordinate to properly perform the assigned duty. When
a superior issues orders, it becomes the responsibility of the subordinate to carry
it out.
• Upward- from subordinate to superior.
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• Cannot be entirely delegated
Accountability
• Answerability for the final outcome of the assigned task is called accountability.
• Arises from responsibility.
• Flows from subordinate to superior(upward).
• Cannot be delegated at all

Principles of Delegation
1. For effective delegation , the authority granted must be commensurate with
the assigned responsibility: If authority granted is more than responsibility, it may
lead to misuse of authority , and if responsibilty assigned is more than authority ,
it may make a person ineffective. It is known as the Principle of Authority and
Responsibility.
2. Delegation does not mean abdication : The manager shall still be accountable/
answerable for the performance of the assigned task . He/ she cannot escape
from the answerability for any default or mistake on part of his or her
subordinates. Regular feedback must be sought on the extent of work
accomplished. This is known as the Principle of Absoluteness of Accountability
3. The authority granted to a subordinate can be taken back and re-delegated to
another person.
Importance of the Delegation of Authority
1. Effective management or Reduction of Executive’s work-load: It reduces the
work-load of officers. They can thus utilize their time in more important and
creative works instead of works of daily routine.
2. Employee development: Employees get more opportunities to utilize their
talent which allows them to develop those skills which will enable them to
perform complex tasks.
3. Facilitation of growth due to quick and better decisions: The subordinate are
granted sufficient authority so they need not to go to their superiors for taking
decisions concerning the routine matters.
4. Motivation of employees : Because of delegation of authority to the
subordinates they get an opportunity to display their efficiency and capacity.
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5. Better coordination: The elements of delegation – authority, responsibility and
accountability help to define the powers, duties and answerability related to
various job positions which results in developing and maintaining effective
coordination.
6. Basis of Management hierarchy: Delegation of work creates superior
subordinate relationship which creates hierarchy of management.
Relationship between Delegation and Decentralisation
• It is said that “When we delegate authority, we multiply it by two. When we
decentralize authority, we multiply it by many”.
• Decentralisation implies selective dispersal of authority and recognizes the
decision maker’s need for autonomy.
• For example; Mr. A is the General Manager of an organization who process all
leave applications. He feels over- burdened and transfers some of his authority of
leave processing to the Human Resource Manager. This is delegation of
authority.If the HR Manager also feels over –burdened and requests to give him
some relief, then the General Manager may disperse this authority to various
departmental heads throughout the organization. This shows how delegated
authority may be extended to decentralized authority.
Decentralization
• Decentralization of authority means dispersal of authority to take decisions
throughout the organization, up to the lower levels. Thus, it has wider scope than
delegation.
• It implies reservation of some authority with the top-level management and
transferring rest of the authority to the lower levels of the organization. This
empowers lower levels to take decisions regarding problems faced by them
without having to go to the upper levels.
• According to Allen,‘ Decentralization refers to systematic efforts to delegate to the
lowest level, all authority except the one which can be exercised at central
points.‟
Centralisation and Decentralisation
• The concentration of decision- making authority by the top management is called
centralization whereas its dispersal among more than one person is known as
decentralization.
• Complete centralization and complete decentralization are unrealistic scenarios.
• As an organization grows, it move towards decentralized decision- making.
• The degree of centralization depend upon the circumstances in which the
company is working. Generally, large organisations have more extent of
decentralization as compared to small organisations.
Importance of Decentralization
1.Develops initiative amongst subordinates: It helps to promote confidence
because the subordinates are given freedom to take their own decisions.
2. Quick and better decisions: The burden of managerial decisions does not lie in
the hands of few individuals but gets divided among various persons which helps
them to take better and quick decisions.
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3. Relieves the top executives from excess workload: The daily managerial works
are assigned to the subordinates which leaves enough time with the superiors
which they can utilize in developing new strategies.
4. Managerial Development: It means giving authority to the subordinates up to
the lower level to take decisions regarding their work. In this way the opportunity
to take decisions helps in the development of the organization.
5. Better Control: It makes it possible to evaluate performance at each level which
results in complete control over all the activities.
6. Facilitates Growth: When the employees’ abilities are developed, it results in
higher productivity, efficiency and profitability which are necessary for growth of
an organization.
Difference between Delegation and Decentralization

Basis Delegation Decentralization

1. Nature It is a compulsory act. It is an optional policy.

2. Freedom of Less freedom to take decisions due to More freedom of action due to less control
action more control by the superiors. by the top management.

It is a process of sharing tasks and It is the result of policy decisions taken by

3. Status
authority. top management.

Narrow- as it is confined to a superior Wide- It includes extension of delegation

4. Scope
and his immediate subordinate. to all the levels of management.

To reduce the burden of manager To increase the role and the autonomy of
5. Purpose
(superior). lower level of management.