RAAK ARTS AND SCIENCE COLLEGE

(Affiliated to Thiruvalluvar University)

Perambai

DEPARTMENT OF COMMERCE
REGULATION CBCS 2020
II Year – III Semester

BNBA 37 MANAGEMENT CONCEPTS

BY
Dr. D. BARANITHARAN
ASSISTANT PROFESSOR
DEPARTMENT OF COMMERCE
 RAAK ARTS & SCIENCE COLLEGE

PREFACE OF THE COURSE FILE

DEPARTMENT OF COMMERCE

Batch : 2020- 2021

Branch : COMMERCE

Year & Semester : II & III

Regulation : CBCS 2020

Subject code : CNBA37

Name of the subject : MANAGEMENT CONCEPTS

Unit : III

Faculty in-charge : Dr. D. BARANITHARAN

Approved by
Prepared by

HOD VICE - PRINCIPAL

Signature

Name Dr. D. BARANITHARAN V. ANBUKARASI Mr. AROKIYANATHAN

Designation Assistant Professor

TCF COORDINATOR PRINCIPAL

 BNBA 37- MANAGEMENT CONCEPTS
UNIT III- ORGANISING

SL.NO CONTENTS PAGE NO:

3 INTRODUCTION 1
3.1 ORGANISING- MEANING 1
3.2 DEFINITION OF ORGANISING 1
3.3 CHARACTERISTICS OF ORGANISING 1
3.4 IMPORTANCE OF ORGANISING 2
3.5 TYPES OF ORGANISATION STRUCTURE 3
3.6 AUTHORITY AND RESPONSIBILITY 5
3.7 COMPARISON BETWEEN AUTHORITY AND 5
RESPONSIBILITY:
3.8 CLASSICAL THEORY OF ORGANIZATION. 6
3.9 DIFFERENCES BETWEEN DELEGATION AND 6
DECENTRALIZATION
3.10 NATURE AND CHARACTERISTICS OF 7
DELEGATION OF AUTHORITY.
3.11 CENTRALISATION 7
3.12 DECENTRALISATION 8
3.13 DEPARTMENTATION 9
3.13.1 NEED AND IMPORTANCE OF 9
DEPARTMENTATION
3.14 BASES OF DEPARTMENTATION 9
3.15 DELEGATION 10
3.15.1 MERITS OF DELEGATION 10
3.15.2 DEMERITS OF DELEGATION 11
3.16 PRINCIPLES OF ORGANISATION 11-12
 BNBA 37 MANAGEMENT CONCEPTS UNIT III

3.INTRODUCTION
Organizing is the function of management that involves developing an organizational
structure and allocating human resources to ensure the accomplishment of objectives. The
structure of the organization is the framework within which effort is coordinated.

3.1. ORGANISING- MEANING

Organising in management refers to the relationship between people,work and
resources used to achieve the common objectives. Organizing, like planning, must be a
carefully worked out and applied process. This process involves determining what work is
needed to accomplish the goal, assigning those tasks to individuals, and arranging those
individuals in a decision‐making framework (organizational structure).

3.2.DEFINITION OF ORGANISING
“Organising is the process of defining and grouping the activities of the entire process
and establishing the authority and relationship among them”- Theo Haimann
Organising is the establishing of effective authority relationship among selected work, persons,
and work places in order for the group to work together efficiently-G.R.Terry.

3.3. CHARACTERISTICS OF ORGANISING

3.3.1.Effective Sharing of Goals
A healthy organization shares its business goals with employees at every level of the
organization. Management shares goals with employees and gets them on board with the mission
and vision of the organization. Employees and managers understand what is required to reach
these shared goals and make every effort to achieve them.
3.3.2.Great Teamwork
Another characteristic is teamwork. Healthy companies know how to develop teams that
collaborate to achieve common goals. Employees and managers readily offer their assistance to
each other to meet corporate objectives.

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 BNBA 37 MANAGEMENT CONCEPTS UNIT III

3.3.3.High Employee Morale

Healthy organizations possess high employee morale. Employees value their positions in
the organizations and desire to work there for a long time. Productivity is high and
organizational events are enjoyable and successful.
3.3.4.Offers Training Opportunities
Companies provide on-the-job training and opportunities for employees to enhance their
work-related skills. Organizations bring in other individuals to provide necessary departmental
and corporate-wide training. Companies also offer opportunities to pursue certification and
continual education.
3.3.5.Strong Leadership
Good leadership is one of the main characteristics of a healthy organization. Employees
have good relationships with management that are based on trust. Managers know how to get
employees to function together. When correction is needed, employees readily accept the
constructive criticism offered by leaders.
3.3.6.Handles Poor Performance
Companies confront poor performance instead of ignoring it. Organizations take
corrective actions to improve performance. Upper-level management values the input of
employees who make suggestions on how to improve productivity and achieve high
performance rates. Companies may even bring in specialists to detect problems and offer
solutions.
3.3.7.Understands Risks
Healthy organizations understand the risks they are open to and take the necessary steps
to protect themselves against them. When an event happens due to organizational risks, a healthy
organization learns from the event. Companies use precaution but understand that risks are
necessary to facilitate growth.
3.3.8. Adapts to Opportunities and Changes
Healthy organizations know how to recognize and seize good opportunities. Healthy
organizations always look for opportunities to grow. They also know how to adapt to
technological or operational changes. They try to stay ahead or inline with changes in the
industry and business environment.

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 BNBA 37 MANAGEMENT CONCEPTS UNIT III

3.3.9.Clearly Defined Structure

Companies possess a sense of order and organizational structure. The structure and order
of the organization does not limit innovation and growth. Employees do not mind complying to
the company's order because they understand it and see the benefits of its implementation.

3.3.10.Well-Known Company Policies

Organizations create and implement company policies that are readily available to their
employees. Healthy organizations follow the policies and regulations of local, state and federal
governments. When employees or managers break policies, the issue is dealt with immediately
and in a professional manner.
3.4.IMPORTANCE OF ORGANISING
3.4.1. Provides framework to perform management functions:
Organisational structure provides a framework within which various management
functions can be performed by the managers more efficiently. It is only through relationship of
superior and subordinate, which is created by organising process that the manager plans, directs
and controls activities of his subordinates.
3.4.2. Facilitates coordination:
Organising process may also be used as a device of maintaining and achieving
coordination. In organising, the activities performed by an individual employee are related to the
functioning of his department, and then functioning of various departments is harmonised for
seeking common goals.
3.4.3. Leads to specialisation:
Organising is based on the concept of division of work that ultimately leads to
specialisation. Through it, activities are divided, grouped-up and assigned to the concerned
department having requisite competence, and resources, and the department develops as a
specialised centre for those activities.
3.4.4. Helps in achieving efficiency:
Organising process aims at achieving higher efficiency because it helps in making
efficient utilisation of both human as well as physical resources.

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 BNBA 37 MANAGEMENT CONCEPTS UNIT III

3.4.5. Promotes Employee development:

In a highly decentralised organisational structure, each position is strengthened by
delegating required authority. As a result of it, each manager makes decisions, solves problems
and tackles the situation that ultimately leads to overall development in his personality.
3.4.6. Increases clarity of authority and responsibility:
Division of work and delegation of authority among employees, through the process of
organising, gives them a precise idea of what they are expected to perform and within what
limits of authority they have to perform. It helps in boosting an employee’s morale and he feels
comfortable in the work- setting.
3.4.7. Facilitates adaptation:
Organisational structure also provides a useful means to cope with changing
environment. In the event of change, necessary modification may be made in the organising
process, organisational structure and organisational goals, so as to bring them in conformity with
the change. It may be done by maintaining flexibility in the structure and making it adaptive to
changes.

3.5.TYPES OF ORGANISATION STRUCTURE

A Formal organization is an organization with a fixed set of rules of intra-
organization procedures and structures. As such, it is usually set out in writing, with a
language of rules that ostensibly leave little discretion for interpretation.
The informal organization is the interlocking social structure that governs how people work
together in practice. It is the aggregate of behaviors, interactions, norms, and personal
professional connections through which work gets done and relationships are built among
people.
Formal organisational structures are categorised as
3.5.1.Line Organisational Structure:
A line organisation has only direct, vertical relationships between different levels in the
firm. There are only line departments-departments directly involved in accomplishing the
primary goal of the organisation. For example, in a typical firm, line departments include
production and marketing. In a line organisation authority follows the chain of command.

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 BNBA 37 MANAGEMENT CONCEPTS UNIT III

3.5.2.Staff or Functional Authority Organisational Structure

The jobs or positions in an organisation can be categorized as:
(i) Line position:
a position in the direct chain of command that is responsible for the achievement of an
organisation’s goals and
(ii) Staff position:
A position intended to provide expertise, advice and support for the line positions.
The line officers or managers have the direct authority (known as line authority) to be exercised
by them to achieve the organisational goals. The staff officers or managers have staff authority
(i.e., authority to advice the line) over the line. This is also known as functional authority.
3.5.3.Line and Staff Organisational Structure:
Most large organisations belong to this type of organisational structure. These
organisations have direct, vertical relationships between different levels and also specialists
responsible for advising and assisting line managers. Such organisations have both line and staff
departments. Staff departments provide line people with advice and assistance in specialized
areas (for example, quality control advising production department).
The line functions are production and marketing whereas the staff functions include personnel,
quality control, research and development, finance, accounting etc. The staff authority of
functional authority organisational structure is replaced by staff responsibility so that the
principle of unity of command is not violated.
3.5.4.Divisional Organisational Structure:
In this type of structure, the organisation can have different basis on which departments
are formed. They are:
(i) Function,
(ii) Product,
(iii) Geographic territory,
(iv) Project and
(iv) Combination approach.

3.5.5.Project Organisational Structure:

A project organisation is a temporary organisation designed to achieve specific results by
using teams of specialists from different functional areas in the organisation. The project team

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 BNBA 37 MANAGEMENT CONCEPTS UNIT III

focuses all its energies, resources and results on the assigned project. Once the project has been
completed, the team members from various cross functional departments may go back to their
previous positions or may be assigned to a new project. Some of the examples of projects are:
research and development projects, product development, construction of a new plant, housing
complex, shopping complex, bridge etc.
3.5.6.Matrix Organisational Structure:
It is a permanent organisation designed to achieve specific results by using teams of
specialists from different functional areas in the organisation.
3.5.7.Hybrid Organisational Structure:
Used in organisations that face considerable environmental uncertainty that can be met
through a divisional structure and that also required functional expertise or efficiency.

3.6.AUTHORITY AND RESPONSIBILITY

Authority is the power to give orders and get it obeyed or in other words it is the power
to take decisions. Responsibility means state of being accountable or answerable for any
obligation, trust, debt or something or in other words it means obligation to complete a job
assigned on time and in best way.

3.7.COMPARISON BETWEEN AUTHORITY AND RESPONSIBILITY:

Authority Responsibility

Authority is the power or right to give Responsibility is the state or fact of having
Definitions orders, make decisions, and enforce a duty to deal with something, or of having
obedience. control over someone.

Basis Power. Duty.

Orders and commands play a vital

Main functions Duties and obedience play a vital role.
role.

It stays for a longer period as It gets completed with the completion of the
Time duration
compared to responsibility. task so it has a shorter period.

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 BNBA 37 MANAGEMENT CONCEPTS UNIT III

Direction Flow It flows downwards. It flows upwards.

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

The right of a manager to command The obligation of a subordinate to complete

Example
his subordinates. an assigned work.

3.8.CLASSICAL THEORY OF ORGANIZATION.

The classical theory has been developed by F.W Taylor, Henri Fayol, Mooney Reiley and
others.
Division of Labour:
It is concerned with dividing the total work into a number of processes,each of which
will be performed by different individuals.
Scalar and functional processes:
The scalar principle explains the superior subordinate relationship in the organizational
hierarchy.
Structure:
The organization structure is one which is deliberately and consciously created for the
Sake of attaining the organizational objectives.
Span of Control:
The span of control is also known by certain other names like span of supervision span
of management and so on.

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 BNBA 37 MANAGEMENT CONCEPTS UNIT III

3.9.DIFFERENCES BETWEEN DELEGATION AND DECENTRALIZATION

Delegation Decentralizations
It means concentration of authority in the It means dispersal of authority throughout the
hands of a few at the top. organization.

It is a process It is the end result of delegation.

It refers to the relationship between a It refers to the relationship between the top
superior and his subordinate management and the different the department
and divisions of an enterprise.

Delegation is important to get things done by Decentralizations is optional.

the subordinates
The particular superior who has delegated The top management exercise overall control
authority to his subordinates exercise
control over him.

3.10.NATURE AND CHARACTERISTICS OF DELEGATION OF AUTHORITY.

1.Delegation is authorization to a manager to act in a certain manner. The degree of delegation
prescribes the limits within which a manager has to decide the things.
2. Delegation has dual characteristics. As a result of delegation, a subordinate employee receives
authority from his superior, but, at the same time, his superior still retains all his original
authority. Delegation does not imply reduction in the authority of a manager.
3. Delegation does not mean a manager loses control and power. Authority once delegated can
be enhanced, reduced or withdrawn depending on the situation or requirement. For example,
change in the organisation structure, policy, procedure, methods etc. may require change in the
degree of delegation of authority.
4. A manager delegates authority out of the authority vested in him. He cannot delegate which
he himself does not possess. Moreover, he does not delegate his full authority to his
subordinates, because if he delegates all his authority, he passes his position to the subordinates.

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 BNBA 37 MANAGEMENT CONCEPTS UNIT III

5. Delegation of authority is always made to the position created through the process of
organising. The authority is recovered fully from the individual when he moves from the
particular position.
6. The extent of authority to be delegated depends upon several factors, like the ability and
willingness of the executive to delegate, the ability of the subordinates to accept delegation, the
confidence of the superior in his subordinates, the philosophy of management, etc.
7. Delegation of authority may be specific or general. It is specified when the courses of action
for particular objectives are specified. It is general when these are not specified, though
objectives may be specified.
3.11.CENTRALISATION
According to Louis A. Allen, “Centralisation is the systematic and consistent reservation of
authority at central points within an organisation.
3.11.1. Merits / Advantages of Centralisation:
a. Effective utilisation of talents of the top Leader.
b. All parts move together.Aunifying force that integrates all operations.
c. A strong co-ordinated top management team is developed.
d. Uniformity of policy and plans.
e. Resources and information can be mobilised quickly and effectively.
f.. Duplication of functions and facilities are minimised.
3.11.2.Demerits / Disadvantages of Centralisation:
a. Delays in decision-making and Communication.
b. Centralised power and authority may be abused.
c. Inhibits development of lower level people.
d. Low motivation and morale of lower level people.
e. Fortunes of the enterprise depend on the health and vitality of top executives.

3.12. DECENTRALISATION
Decentralisation refers to the systematic effort to delegate to the lowest levels of authority
except that which can only be exercised at central points.It means dispersal of authority throughout
the organization.It is the end result of delegation.It refers to the relationship between the top
management and the different the department and divisions of an enterprise.Decentralizations
is optional.The top management exercise overall control.

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 BNBA 37 MANAGEMENT CONCEPTS UNIT III

3.12.1.Advantages of decentralization
1. Motivation of subordinates
Decentralisation helps to improve the job satisfaction and morale of lower level manager by
satisfying their needs for independence participation and status. It also fosters team spirit and
group cohesiveness among the subordinates.
2. Effective communication
Under decentralisation the span of management is wider and there are fewer levels of
organisation.Therefore communication system becomes more effective.Intimate relationships
between superior and subordinates can be developed.
3. Executive development
When authority is decentralised subordinates get the opportunity of exercising their
own judgement.They learn how to decide and develop managerial skills.As a result the
problem in succession is overcome and the continuity and growth of organisation are
ensured. There is better utilisation of lower level executives.
3.12.2. Disadvantages of decentralisation
1. Uniform policies not Followed:
Under decentralisation, it is not possible* to follow uniform policies and standardised
procedures. Each manager will work and frame policies according to his talent.
2. Problem of Co-Ordination:
Decentralisation of authority creates problems of co-ordination as authority lies dispersed
widely throughout the organisation.
3. More Financial Burden:
Decentralisation requires the employment of trained personnel to accept authority, it
involves more financial burden and a small enterprise cannot afford to appoint experts in various
fields.
4. Require Qualified Personnel:
Decentralisation becomes useless when there are no qualified and competent personnel.
5. Conflict:
Decentralisation puts more pressure on divisional heads to realize profits at any cost.
Often in meeting their new profit plans, bring conflicts among managers.

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 BNBA 37 MANAGEMENT CONCEPTS UNIT III

3.13.DEPARTMENTATION
Departmentation is the process of dividing and grouping the activities and employee of
an enterprise into departments.The total work of an enterprise is divided into function and sub-
functions.
3.13.1.NEED AND IMPORTANCE OF DEPARTMENTATION
3.13.1.1.Specialisation:
The basis desired must give scope for specialization.
Specialiation leads to efficiency in performance saves time and also helps to increase output.
3.13.1.2.Effective Control:
The Particular pattern of departmentation should facilitate control and evaluation of the
activities performed by different individuals.
3.13.1.3.Co-Ordination:
Although the activities performed by different departments and individuals are different
they are inter-relateD and inter-dependent.
3.13.1.4.Cost effective:
Departmentation necessitates creation of additional facilities.
3.13.1.5.Avoidance of duplication of work:
Departmentation must help to avoid duplication of work and overlapping of activites.
It means that no two individuals or deparments should be doing the same type of work.
3.13.1.6.Reduction in work burden:
It is also important that the proposal should not become and undue burden on the
employees.
In fact it should help to reduce the existing work burden of the staff.

3.14.BASES OF DEPARTMENTATION
3.14.1. Departmentation by Functions:
It is the most natural approach to divide the activities and employees of an enterprise.It
recognizes the importance of the basis activities of a concern.It provides ample scope for
specialization.
3.14.2.Departmentation by Product:
Each division focuses attention on the production and marketing of specific product
line.

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 BNBA 37 MANAGEMENT CONCEPTS UNIT III

It fixes responsibility on individual department or divisions for the promotion of specific

product lines.
3.14.3.Departmentaion by Territory:
It enable the organization to cater to the needs of the customer in different places.
Obviously this approach provides scope for geographical expansion of business.
3.14.4.Departmentation by Customer:
The business is able to fulfil the specific needs of the customers.
It offers scope for specialization as well.
3.14.5.Departmentation by Numbers and time:
In the case of departmentation by numbers grouping of activities is done based on the
number of persons engaged for the purpose
3.15.DELEGATION
Delegation means transfer of authority from one individual to another.
3.15.1.MERITS OF DELEGATION
1.Vital for every organization:
Delegation of authority is important for every organisation. No individual, in any
organisation, can perform all the tasks by himself.He needs the support of a team of
individuals. The task of sharing the work and accomplishing the same is done through the
process of delegation.
2. Relief to Managers:
The manager of each department is able to divide the entire work of his department
among his subordinates. The manager, thus, is able to concentrate on more important duties.
The routine work is being attended by his subordinates.
3. Specialisation:
The every division of the work of a business enterprise into production, marketing,
finance, personnel, etc.,
4. Prompt Decisions:
Delegation of authority to subordinates enables them to make decisions within the scope
of their authority. For example, a foreman has the authority to make certain decisions within his
level of authority.It is, therefore, not necessary to refer every matter to the superior and to await
his decisions.
5. Improvement of Job Satisfaction :

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 BNBA 37 MANAGEMENT CONCEPTS UNIT III

A subordinate showing good results should definitely be rewarded.The reward may come
to him in the form of tangible or intangible benefits.Such a person, therefore, is bound to have
a higher level of job satisfaction.
6. Scope for business expansion:
As the subordinates of the organisation are well versed in performing their tasks the
business can successfully undertake expansion or diversification activities
3.15.2.DEMERITS OF DELEGATION
Delegation of authority may create the following problems :
1. Desire of domination :
Some managers have the desire for domination. They have a feeling that delegation of authority
to subordinates would result in loss of control. Such managers want their subordinates to come to
them always for getting approval.
2. Lack at confidence in subordinates :
Sometimes a manager may think that his subordinate may take a bad decision and a result his
department may have to suffer. Because of such a fear he may show hesitation.
3. Fear of criticism :
A subordinate may not accept authority for the fear of being criticised if he fails to performs to
the expected level.
4. Lack of incentives :
Suitable incentives must be provided to encourage those subordinates who prove their
mettle.Lack of incentives is another reason why subordinates do not show any preference for authority.
5. Lack of resources :
Assignment of work to subordinates alone is not enough. The authority gives to the
subordinates must enable them to have access to the various resources, namely men machines
materials and money.If the organisation lacks these resources the subordinates will not be able to perform
their tasks effectively. Delegation of authority will fail in such a case.
6. Absence of proper control system :
The success of delegation can be measured only if the organisation has a proper control system.
The absence of such a system would only make delegation a futile exercise.

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 BNBA 37 MANAGEMENT CONCEPTS UNIT III

3.16.PRINCIPLES OF ORGANISATION
The following principles are helpful in developing a sound organisation structure.
1. Unity of Objectives
Every part of the organisation should be designed to facilitate the achievement of common
objectives. Therefore, the objectives must be stated in clear and concise terms.
2. Division of work
The total work should be divided in such a way that as far as possible every individual
performs a single function.
3. Span of control
No executive in the organisation should be required to supervise more subordinates than he
can effectively manage.
4. Scalar principle
The line of authority (called the chain of command) from the top executive to the lowest level
should be clear and unbroken.
5. Principle of Exception
Every manager should take routine decision himself. Only exceptional matters beyond the
scope of authority should be refered to higher authorities.
6. Unity of command
Each individual should receive orders from and be accountable to only one boss.
7. Functional definition
The authority and responsibility of every individual should be clearly defined. The relation-
ships between different jobs should be clearly specified.
8. Unity of Direction
There must be one head and one plan for a group of activities directed towards the same
objectives.
9. Delegation
Authority delegated to an individual should be adequate to enable him to accomplish the
results expected of him.
10. Correspondence
Authority and responsibility must be equal. Authority delegated to a position should be
commensurate with responsibility of that position and vice-ver
11. Absoluteness of Responsibility

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No superior should be allowed to avoid his responsibility by delegating authority to his

subordinates. He must be held accountable for the acts of his subordinates.
12. Simplicity
The organisation structure should be kept simple with minimum numbers of levels.
13. Flexibility
The organisation structure should be adoptable to changing circumstances.There should be
scope for expansion without disrupting the basic design
14. Efficiency
The organisation structure should enable the enterprise to function efficiently and to achieve
its objectives with minimum cost and effort.
15. Continuity
The organisation structure should be continued for a long period of time

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 BNBA 37-MANAGEMENT CONCEPTS UNITIII
Type: 100% Theory
Question Bank

UNIT 3: Organising – Meaning – Definition – characteristics – Importance – Types –

Authority and Responsibility – Centralisation and Decentralisation and Departmentation.

SECTION – A

1. Define Organisation.(NOV/DEC-2011,APR/MAY2018)
2. What is division of labour? (NOV/DEC2015)
3. Write a note on informal organisation.
4. What is meant by organization manual?(NOV-2014,2017)
5. Define the word authority.(NOV/DEC-2011)
6. What is committee organization?(NOV/DEC-2013)
7. What is organization chart? (April-2012)
8. What is organizational design?(April-2012,NOV/DEC2017)
9. Define responsibility. (April-2012)
10. Write a note on Decentralization. (NOV/DEC-2013,APR/MAY2018)
11. Write a note on Centralization.
12. What is meant by Formal Organization? (NOV/DEC-2015,2016)
13. What is meant by Grouping of activities?
14. Short notes on Communication
15. Short notes on Coordination. (NOV/DEC-2014,2016)
16. What is meant by Unity of command?
17. Short notes on Span of control.

SECTION – B

1. Explain about the decentralization.(Nov-2014,2015)

2. Explain the importance of departmentation.(APR/MAY2018)
3. What are the advantages of line organization? (APRIL/MAY 2014)
4. Distinguish between delegation and decentralization? (APRIL/MAY 2014,2015,2016)
5. Explain the merits and demerits’ of line and staff organization? .(NOV/DEC-2011)

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 BNBA 37-MANAGEMENT CONCEPTS UNITIII
6. Explain the various factors influencing departmentation.(APR/MAY2018)
7. Explain the merits and demerits of centralization.

SECTION – C

1. Explain the various basis of departmentation together with their merits and
demerits.(NOV/DEC-2013)
2. Discuss the limitations of authority.(April-2012)
3. What are the pros and cons of decentralization of authority?(NOV-
2012,APR/MAY2018)
4. Explain the benefits of delegation.(NOV-2012,2015).
5. Briefly explain the Principles of Organization(NOV 2016,2017)

2 DEPARTMENT OF COMMERCE-RASC-Dr.D.BARANITHARAN