CHAPTER V

ORGANISING
“Organising is the process of defining and grouping the activities of the enterprise and
establishing the authority relationships.” Theo Haimann

“Organisation is the form of every human association for the attainment of a common
purpose.” Mooney and Reily

Organizing refers to the relationship between people, work and resources used to achieve the
common objectives. It implies a process which coordinates human efforts, assembles
resources and integrates both into a unified whole to be utilized for achieving specific
objectives. It is a systematic process of structuring, integrating, coordinating task and
activities to resources in order to attain objectives.

STEPS IN THE ORGANISING PROCESS:

Organising involves a series of steps that need to be taken in order to form productive
relations among various organizational resources for the achievement of specific goals. These
steps are:

I. Identification and division of work:

The first step involves the identification of work activities in the light of overall
objectives of the organization and then dividing them into various manageable units
or specific jobs so as to avoid duplication.

II. Departmentalization:

Once all the activities are identified the next step is grouping of the related jobs,
known as departmentalization. This step leads to set up of the departments in the
 organization like purchase department, sales department, finance department,
marketing department etc.

III. Assignment of duties:

In this step efforts are made to bring one department under one head. It helps in
coordinating the activities of different departments and in allocating the jobs to all the
members of each department according to their skills and capabilities.

IV. Establishing reporting relationships:

In this step reporting relationships are established among various groups. Each
employee is made aware of his/her authority and he/she knows whom he/she has to
take orders from and to whom he/she is accountable. A clear organizational structure
is formed and all the employees are made aware of it.

IMPORTANCE OF ORGANISING

BENEFITS
OF
SPECIALIZ-
ATION
EXPANSION CLARITY IN
AND WORKING
GROWTH RELATIONS-
HIPS

IMPORTANCE
OF
ORGANISING OPTIMUM
UTILIZATION
DEVELOPME OF
-NT OF RESOURCES
PERSONNEL

EFFECTIVE ADAPTATION
ADMINISTRA- TO CHANGE
TION
 I. Benefits of specialization:

In organizing broad activities are divided into smaller activities and each person
performs only these smaller activities. As a result, he/she becomes specialized in
performing these activities. For eg, A teacher teaches only business studies because of
organizing and becomes a specialist in this field.

II. Clarity in working relationships:

Organizing clarifies the working relations among employees. It specifies who is to

report to whom. Therefore, communication becomes effective. It also helps in fixing
responsibility and accountability.

III. Optimum utilization of resources:

There is a different employee performing every job. By doing this, it can be ensured
that no task is left undone or overdone. It also reduces overlapping and duplication of
work. Therefore, there is optimum utilization of resources in the organization.

IV. Adaptation to change:

Organizing helps in adapting to changes in business environment quickly. Organizing

structure created through organizing process can be modified according to the
requirements of changes in business environment; persons can be substituted easily
because of clarity of authority and responsibility of various positions.

V. Effective administration:

The process of organizing clearly specifies the duties and tasks of every manager and
also their extent of authority. Everybody knows to whom he/she is accountable and
what activities he/she has to perform. Thereby makes administration more effective
and easier.

VI. Development of personnel:

Organizing allows the managers to reduce their workload by delegating routine jobs
to their subordinates. It gives them time to explore areas of growth and opportunity of
innovate. This also helps them to develop better personnel by helping them to grow
with experience at work.

VII. Expansion and growth:

Organizing provides the scope for expansion and growth. For eg, WIPRO was set up
in Maharashtra in 1945, dealing primarily in edible oils. Over the period, it has
diversified into the field of IT and homecare products. This diversification was
supported by sound organizational structure.

ORGANISATION STRUCTURE
It refers to the framework within which managerial and operating tasks are performed to
achieve desired objectives. It establishes relationships between people, work and resources. It
is important to ensure a smooth flow of communication and better control over the business
operations.

TYPES OF ORGANISATION STRUCTURE

1. FUNCTIONAL STRUCTURE:

It is a common type of organizational structure in which the organization is divided

into smaller groups based on specialized functional areas, such as finance, sales,
marketing etc. In this, organization’s reporting relationships are grouped on the basis
of specialty or functional area.

MANAGING
DIRECTOR

PURCHASING MARKETING FINANCE HUMAN

DEPARTMENT DEPARTMENT DEPARTMENT RESOURCE
DEPARTMENT

MERITS OF FUNCTIONAL STRUCTURE:

I. SPECIALIZATION: The whole organization is divided into many departments on

the basis of major activities to be performed. Each department is headed by an expert
manager. This results in more and better work and enables the organization to take the
benefits of specialization.

II. MORE EFFICIENCY: Managerial and operational efficiency is increased as the

managers and workers have to perform a limited number of operations.

III. COORDINATION IS ESTABLISHED: The presence of specialist with complete

knowledge of each and every aspect of a job facilitates effective coordination within
the department.

IV. TRAINING: It facilitates the training of personnel as the focus is limited to the
specified area of specialization.

V. MINIMAL DUPLICATION OF EFFORTS: In this unnecessary duplication of

efforts is eliminated.

VI. EQUAL WEIGHTAGE TO ALL FUNCTIONS: It ensures equal weight age or

attention to all the functions/activities of the organization.
DEMERITS:

I. IGNORANCE OF ORGANIZATIONAL OBJECTIVES: Each departmental head

works according to his/her sweet will. They always give more importance to their
departmental objectives. Hence, overall organizational objectives suffer.

II. DIFFICULTY IN COORDINATION: All departmental heads may work as per

their own wish. No doubt this facilitates coordination within the department but it
makes interdepartmental coordination difficult as the information flow is restricted.

III. CONFLICTS: Sometimes differences in interests of two or more departments may

lead to conflicts among them.

IV. INFLEXIBILITY: In functional structure, training related to one specific area or

function is provided to the employees so that they cannot be shifted to other
departments. Therefore, it leads to inflexibility in the organization.

2. DIVISIONAL STRUCTURE

In this an organization is divided into different units or divisions on the basis of products
or geographical areas. Each unit has a divisional manager responsible for its performance
and has authority over the unit. Here each unit is multifunctional as within each unit
different functions are performed together to achieve a common goal. This structure is
suited to very large enterprises particularly those that deal with multiple products.

MANAGING
DIRECTOR

PERSONAL HOME GARMENTS HEALTH

CARE UNIT CARE UNIT UNIT CARE UNIT

PURCHASING MARKETING FINANCE HUMAN

DEPARTMENT DEPARTMENT DEPARTMENT RESOURCE
DEPARTMENT

MERITS:

i. Development of divisional heads: The head of each division looks after all the
functions connected with his/her product i.e., purchases, sale, advertisement,
production, finance etc. It helps in the development of varied skills in a divisional
head.
 ii. Divisional results can be assessed: All the activities of each division are carried out
independently. Hence the divisional results can be easily assessed. On this basis, an
unprofitable division can be closed.

iii. Quick decision making: The divisional manager can take any decision regarding
his/her division independently without consulting other divisional managers.
Therefore decisions are quick and effective.

iv. Easy expansion: For every product a separate division is opened. If a company wants
to introduce a new product, it can be introduced easily without disturbing the existing
divisions. Hence it is easy to expand the concern.

DEMERITS:

i. High managerial cost: This structure involves high managerial cost as each product
division maintains separate facilities and personnel leading to duplication of
resources.

ii. Ignorance of organizational interest: Sometimes the divisional managers become

too engrossed with their own product line that they pay no heed to overall
organizational objectives.

iii. Conflict: Conflict may arise among various divisions for allocation of funds to them.

TYPES/FORMS OF ORGANIZATION:

A. FORMAL ORGANISATION:

An organization which is specially designed by the management to accomplish a

particular task is termed as Formal Organisation. It is a consciously and deliberately
designed system of well-defined jobs, each bearing a definite authority, responsibility and
accountability. It can be functional or divisional.

Features:

i. Authority and responsibility relationships: It clarifies the authority, responsibility

and superior-subordinate relationships in an organization.

ii. Coordinated efforts: It facilitates coordination and integration of the efforts of

various departments.

iii. Deliberately created: It is deliberately and intentionally created by the top

management for the smooth functioning of the organization.

iv. Job performance oriented: It is job performance oriented and does not take personal
sentiments, interpersonal relationships, etc., of employees into consideration.

v. Rules and procedures: It provides rules and procedures related to specific tasks to be
performed so that organizational objectives can be achieved effectively.
MERITS:

i. No overlapping of work: In formal organization work is systematically divided

among various departments and employees. So there is no chance of duplication or
overlapping of work.

ii. Stability: All the people work by observing rules and remain confined within the
domain of their authority. This leads to the establishment of good relationship which,
in turn, leads to stability to the organization.

iii. Responsibilities are fixed: It clearly specifies the authority and responsibility of
every job holder. Systematic coordination and pre defined relationships among
employees help to fix the responsibility.

iv. Unity of command: It establishes chain of command that helps the organization to
maintain unity of command.

v. Achievement of goals: It helps in achieving the organizational goals by defining a

framework regarding operations to be performed and ensuring that each employee
knows clearly about his/her job.

DEMERITS:

i. Delay in work: Formal organization puts emphasis on formal procedures, rules,

methods of performing jobs and chain of command in the organization which may
result in delayed decisions

ii. Lack of initiative: This type of organization may not provide adequate recognition to
create talent of employees which in turn leads to lack of initiative and creativity.

iii. Emphasis on work only: Formal organization gives importance to work only.
Therefore it ignores human relations in the organization.

B. INFORMAL ORGANISATION

It refers to the network of social relations among persons working together. It emerges
spontaneously as people interact and associate to fulfill their personal needs. This
organization is the pattern of social interactions of people at work which is not prescribed
formally. This type of organization is not formed deliberately by the top level
management.

FEATURES:

i. Unofficial: Informal organization is unofficial and emerges from the formal

organization to overcome those limitations which put constraints on social
relationships at the workplace.

ii. Natural grouping: It is a natural grouping of people in the organization and not based
on any formal prescriptions.
iii. Standards of behaviour: The standards of behaviour are coordinated and controlled
by group norms rather than officially laid down rules and regulations.

iv. Communication: It serves as a faster channel of communication as it does not follow

any direction for the flow of information.

v. No definite structure: It has no definite structure as it is a complex network of social

relationships among members.

MERITS:

i. Fast communication: It serves as a faster channel of communication as it does not

follow any direction for the flow of information.

ii. Social satisfaction: It helps to fulfill the social needs of people at the workplace as
the pattern of interaction is based on some similarity among members and hence
results in a sense of belongingness and job satisfaction.

iii. Fulfills organizational objectives: This type of structure helps in achieving

organizational objectives by compensating the limitations of the formal structure.

DEMERITS:

i. Against organizational norms: This organization may work against organizational

norms. This type of working is detrimental to the organization.

ii. Resistance to change: It is very difficult for the management to bring changes in the
organization if the informal organization opposes them. Such resistance may restrict
growth of the organization.

iii. Generation to rumours: It leads to generation of rumours which may not be based
on facts but on the personal interests of some members. Such rumours are harmful to
the organization.

iv. Group norms: To its members group norms matter a lot and they may not like to do
any act which leads to their rejection by other members, even if it is not in the interest
of the organization.

DIFFERENCE BETWEEN FORMAL AND INFORMAL ORGANIZATION

S.NO. BASIS FORMAL INFORMAL

ORGANISATION ORGANISATION

1 Formation It is formed consciously It is formed

and deliberately. spontaneously.

2 Nature It is official, therefore It is unofficial, therefore

 rigid in nature. flexible in nature.

3 Objective Its objective is to Its objective is to have

achieve organizational social satisfaction.
objectives.

4 Structure It has a definite It has no definite

structure. structure.

5 Flow of communication Communication takes Communication can take

place through the scalar place in any direction.
chain.

6 Authority Authority to a person is Authority to a person is

officially delegated. given by members.

7 Norms of behavior Norms of behaviour are Norms of behaviour are

officially prescribed. formed by members.

8 Origin Arises as a result of Arises as a result of

company rules and social interaction.
policies.

9 Leadership Managers are Leaders. Leaders may or may not

be managers.