ORGANISING

MEANING OF ORGANISING
Organising is the process of identifying and grouping various activities,
bringing together physical, financial and other resources, and
establishing authority relationships among job positions.
The aim of organising is to enable people to work together for a common
purpose. It is related with building up a framework or structure of tasks
and authority relationships.
“Organising is the process of establishing effective authority
relationships among selected works, persons and workplaces in order for
the group to work together efficiently.” -George R. Terry
Thus, organising is a process consisting of a series of steps by which
managers create a network of authority-responsibility relationships.
IMPORTANCE OF ORGANISATION
Sound organisation is the backbone of effective management due to the
following reasons:
1. Specialisation: In the process of organising, work is divided into jobs.
Similar jobs are grouped together into departments divisions. Thus,
organising promotes specialisation which in turn leads to efficient and
speedy performance of tasks.

2. Optimum Use of Human Resources: All jobs are clearly defined and
differentiated. This helps selection of employees and fitting the right
person to the right job. Such matching of jobs and people enables better
use of human talent and provides job satisfaction to employees.

3. Coordination and Cooperation: The organisation structure serves as a

mechanism for unifying and harmonising the efforts of individuals and
work groups. Lines of authority prescribed in the organisation tructure
serve as channels of communication. Each manager knows to whom he is
responsible and to whom he can issue orders.
4. Security and Support: A sound organisation structure is a source of
security, support and satisfaction to managers and workers performing
their assigned tasks. It provides a definite status and position to each one
of them..
5. Growth and Diversification: Organisation provides the framework within
which an enterprise can expand and grow. Through organisation,
management can multiply its strength. Sound organisation helps in
keeping various activities under control.
6. Adaptation to Change: A properly designed organisation structure is
flexible It facilitates adjustment to changes in workload caused by
changes in external environment.

STEPS IN THE PROCESS OF ORGANISING

1. Division of Work: Divide the total work to be done into specific jobs.
Dividing the work into jobs is necessary because the entire work cannot
be done by one individual. Each job consists of certain related tasks
which can be performed by an individual.
For instance, there may be teaching, library, sports, office administration
and extra-curricular functions in a school. The teaching function may
further be divided into teaching of different subjects like Business
Studies, Mathematics, English, Economics, Accountancy, etc.
2. Grouping Jobs or Activities: Once jobs and activities are defined, the
next step classify or group them into manageable units and place each
group of activities under the charge of a manager. Similar or related
activities are combined and grouped into larger units called departments,
divisions or sections. This process of grouping activities called
departmentation.
3. Assigning Duties: Each group of activities is assigned to an individual
best suited to perform it. While assigning duties the qualifications,
experience and aptitudes of people should be given due consideration.
4. Delegation of Authority: After assignment of duties, appropriate
authority is delegated to each individual. Without such authority a person
cannot carry out the assigned job. A chain of command from the top
manager to the individual at the lowest level is created through delegation
of authority.
The various managerial positions are grouped in to different levels of the
authority which is called a hierarchy. It means a definite ranking order
5. Coordinating Activities: The activities and efforts of
different individuals are then properly synchronised.
Interrelationships between different positions are clearly
defined so that everybody knows from whom he is to take
orders and to whom he can issue orders. Coordination in
the working of different departments and individuals is
necessary for teamwork and efficient performance.

Types of Organisation
FORMAL ORGANISATION
It means the organisation structure designed and established by
management to achieve organisational goals. It is an official system of
clearly defined activities and relationships which are intended to divide
and integrate the activities of the organisation.
The basic characteristics of formal organisation are as follows:
(a) It is deliberately created by the top management.
(b) It is based on specialisation or division of labour.
(c) It defines clearly the authority and responsibility of every individual.
(d) It is developed through delegation of authority.
(e) It has written rules and procedures.
(f) It specifies the official lines of communication and official
relationships.

Advantages:
(i) The duties and role of each member is clearly defined. This helps to
avoid duplication of effort.
(ii) Unity of command is maintained through the scalar chain.
(iii) It is easy to fix responsibility as mutual relationships are clearly
defined.
(iv) It provides stability to the enterprise. There are specific rules to guide
the behaviour of members.
(v) It provides a framework for the performance of all the activities.
Disadvantages:
(i) It may create rigidity due to prescribed policies and rules.
(ii) Procedural delays may increase time to taken for decision-making.
(iii) Due to focus on structure and work, human relationships may not be
fully understood.
(iv) It does not provide a complete picture of how an organisation works.

INFORMAL ORGANISATION
Informal organisation is the system of social relationships among the
members of a formal organisation. It emerges on its own in a natural
manner within the formal organisation.
The salient features of an informal organisation are given below:
(a) It is unplanned and arises spontaneously due to coming together of
persons with common interests and attitudes.
(b) It reflects human or social relationships among people.
(c) It is based on common taste, language, religion, culture, etc.
(d) The membership of informal organisation is voluntary.
(e) It has no written rules and regulations. Group norms serve as the
standards of behavior.

Distinction between Formal and Informal Organisations

1. Formation: Formal organisation is deliberately designed and
established where as an informal organisation arises automatically from
social interactions among members.
2. Purpose: Formal organisation is established to achieve the
organisational goals like profits, growth, etc. An informal organisation, on
the contrary, originates to fulfil social and cultural needs of members.
3.Structure: A formal organisation has clear and well-defined structure
which is pyramid shaped where as an informal organisation has no clear
or definite structure .
4. Leadership: In a formal organisation, managers are leaders of their
work groups where as an informal organisation, the leaders are decided
by members themselves.
5.Communication: In the formal organisation, the direction and flow of
communication are fixed and predetermined where as In informal
organisation, members do not interact in a fixed manner.
6. Focus: Formal organisations emphasise efficiency of jobs and
functions. But informal organisations focus on needs and interests of
members.

Advantages/Functions of Informal Organisation

1. Sense of Belonging: In a formal organisation, an employee is one
among several people. He has little sense of belonging and personal
worth. Informal organisations provide a sense of belonging and self
worth. It recognises an individual's personality and boosts his self image.
2.Relief from Monotony: An informal organisation provides them an
opportunity to socialise with each other. Such socialisation helps to
improve their social satisfaction.
3. Solution of Work Problems: Members of informal organisations share
job knowledge and assist each other in performing jobs.
4. Protection from Outside Pressure: Informal organisations provide
protection to its members from pressure of top management. Informal
organisations serve as a check on arbitrary actions of managers.
5. Communication Channel: Members of an informal organisation share
their tensions, joys and frustration with one another. They have an outlet
for release of their emotions and feelings.

Limitations or Disadvantages of Informal Organisational

1. Resistance to Change: An informal organisation generally prefers
status quo and existing work routine. Changes are regarded as a threat to
its beliefs and values. Therefore, management has to face resistance to
new work methods.
3. Role Conflict: When an employee is a member of both formal and
informal groups he faces a conflict. For example, as a member of a formal
organisation he may be required to prevent any slackening of work. On
the other hand as a member of an informal organisation, he may be
expected to go slow in his work.
4. Conformity: An informal organisation forces its members to conform to
its norms and values even if it is harmful to the interests of the formal
organisation.
5. Rumour: An outbreak of rumour can cause serious harm to the
enterprise and its management.

Meaning of Organisation Structure

Organisation is a structure of relationships between various positions of
the enterprise. It is the structural framework of duties and responsibilities
required of the personnel in performing various functions within the
company.
Organisation structure means a system of job positions, the roles
assigned to them and the authority relationships between the various
positions. The structure facilitates the flow of work and communications
in the enterprise. It provides a framework wherein employees can perform
their respective tasks.

Features:
1. Two or More Persons: An organisation is a system of cooperative
relationships of two or more persons. The group may be large or small.
2. Common Objectives: An organisation exists to achieve some common
objectives. It is not an end in itself but a means to attain common
objectives.
3. Division of Work: The total work of the organisation is divided among
different persons to improve the efficiency of work.
4. Communication: People who form the organisation are in a position to
communicate with each other.
5. Cooperative Efforts: The members of an organisation are willing to
cooperate with each other for achievement of common objectives.
6. Rules and Regulations: Rules and regulations lay down the formal
structure of the organisation. They define the authority and responsibility
among the members.
LINE ORGANISATION
Line organisation refers to a direct chain of command through which
authority flows from top to bottom. There is a straight unbroken line
(scalar chain) and all orders and communications flow down the line.
Line organisation is also known as 'scalar' or 'hierarchical' organisation
due to a series of uninterrupted vertical relationships .
Line organisation is of two types:
1. Pure line organisation: In this type of
organisation, activities at a particular level
are similar. Every employee performs by
and large same type of work. The divisions
exist solely for convenience of supervision
and control.

2. Departmental line organisation: In a departmental line

organisation, the enterprise is divided into departments.
Each supervisor and workers under him perform similar
work but their work differs from that performed in other
departments. This makes for unity of control and
differentiation of work. In such organisation,
interdepartmental relationships should be clearly
defined to facilitate coordination and control.

Merits:
(i) Simplicity: Line organisation is the simplest and the oldest form. It is
easy to establish and simple to operate. There is clear-cut identification of
authority and responsibility.
(ii) Quick decisions: As each executive has full authority for a job,
required decisions can be made easily and quickly. Necessary
instructions can be quickly transmitted due to direct and simple lines of
communication.
(iii) Unified control: Line organisation facilitates unified supervision and
control because each subordinate reports to one superior. The superior
has direct and close contact with his subordinates. It also conforms to the
scalar principle of organisation.
(iv) Discipline: Unity of command and unified control promotes discipline
in the organisation. There is no division of loyalty and no danger of
conflicting orders. Each position is subject to control by its immediate
superior position.
(v) Fixed responsibility: There is clear-cut division of authority and
responsibility. Every member of the organisation knows from whom he
gets orders and to whom he is accountable. Therefore, every manager can
be held fully responsible for the results.
(vi) Economy: Line organisation is less expensive as there are no staff
specialists.

Demerits
1. Over-burdening: In line organisation, key executives are over-burdened
with administrative work. A single executive cannot meet the diversified
and varied demands of his department as his abilities are limited and no
staff support is available to him.
2.Lack of specialisation: A particular manager has to perform all types of
activities concerning his department. Therefore, there is absence of
expert advice in line organisation. Lack of specialisation reduces the
effectiveness of management and efficiency of operations. Every manager
is likely to become "jack of all trades and master of none".

3. Autocratic leadership: As one executive controls all the activities of a

department, there is danger of authoritarian rule. Red-tape, nepotism and
favouritism are likely to grow. There may be lack of team-spirit and
cooperation on the part of subordinates.
4. Difficulty in staffing: Over-emphasis on departmental goals may result
in lack of cooperation and coordination. In the absence of relationships
team-spirit may be low.
5. Instability: Line organisation is rigid or inflexible. Loss of key
executives may result in downfall of the organisation as their position
cannot be filled easily from existing personnel. Succession problems
arise at the top level of management.
Line organisation is sometimes described as 'military organisation' as it
originated in the army.
LINE AND STAFF ORGANISATION
Line executives stand in the primary chain of command and are directly
concerned with the accomplishment of primary objectives. But they are
generalists and, therefore, staff positions are created to provide advice.
Specialists are attached to line managers to provide specialised advice
and information on specific managerial problems. Staff personnel are
experts in their respective functions. They are purely of advisory nature
and have no power of command outside their own departments.
Generally, the substantive functions which directly contribute to the
overall goals of the organisation are classified as line and other as staff
positions. Staff serves as a supplement to line. Staff advice and counsel is
not binding on line managers. In the forgoing chart, the solid lines
indicate line positions and the dotted lines reflect staff positions.

Line and staff organisation is a combination of the line structure (which

concentrates control too much) and the functional structure (which
divides control too much). It is an attempt to combine the advantages of
specialisation and unity of command. The line position serves to maintain
unity of command while the staff wing provides expert advice and counsel
for efficient management. The need for staff positions arises when the
work of an executive increases and its efficient performance requires
expert guidance which he himself cannot provide due to limited
capabilities.
Merits: The advantages of the line and staff organisation are as follows:
1. Planned specialisation: The line and staff organisation provides the
benefits of planned specialisation. There is bifurcation of conceptual and
executive functions. Line managers are relieved of the housekeeping job,
for which they lack time and skills. They can concentrate on executive
functions and they get expert advice or counsel from staff specialists.
Expert knowledge is brought to bear upon managerial problems. There is
ample scope for creative thinking.
2. Balanced decisions: Staff specialists provide adequate information and
expert advice at the right time so that line executives can take better
decisions.
3. Discipline: Unity of command is maintained. Staff cannot issue
instructions to subordinates in line departments. There is a direct chain of
command which facilitates discipline and control.
4. Undivided responsibility: Each line officer is fully responsible for the
results of his department. There is clear flow of authority to those
responsible for operations.
5.Flexibility: There is greater scope for growth and expansion. General
and his depart ecialised staff can be employed at various levels to help
managers cope with additional rk New activities can be added without
disturbing the basic structure.
6. Executive development: Line and staff structure provides ample scope
for efficient personnel to grow in the organisation. Due to a larger number
of responsible positions, promotion prospects are high. Staff service
provides an excellent training ground for managers. There is, therefore,
continuity of management and stability in the organisation.
Demerits: Line and staff organisation suffers from the following
drawbacks:
(i)Conflicts: There is generally a conflict between line executives and staff
specialists. There is a danger that staff may encroach upon line authority
and line may ignore staff advice. Jealousies and friction between line and
staff reduce operational efficiency of the enterprise. There is a wide
difference between the orientations of line and staff. Line managers tend
to be practical while staff men tend to be more theoretical.
(ii) Lack of coordination: In practice, it is very difficult to make a clear-cut
allocation of duties between line and staff executives. Lack of well-defined
authority results in confusion and lack of coordination. Team-work and
harmony of effort may suffer.
(iii) Ineffective staff: Staff men may not perform their job well because
they are not accountable for the results. Staff may be ineffective because
it lacks authority to get its advice implemented. Line executives may
resent staff and may blame staff for their own failures in implementing
recommendations successfully.
(iv) Expensive: Line and staff structure is more expensive than the line
organisation because two separate sets of personnel are required.
(v) Lack of creativity: Line managers may depend too much on staff for
advice and guidance. This dampens original thought, judgement and
initiative on the part of line executives. Staff specialists may be blamed for
recommendations unsuccessfully implemented by the managers.
In practice, line and staff structure has become most popular in large
organisations. Often an enterprise begins with line structure and adds up
staff specialists as the business expands. The striking feature of line and
staff organisation is that each person receives specialised advice and
service without being asked to be accountable to more than one superior.
However, this structure is not economical for small organisations which
cannot take full advantage of the services of experts.

FUNCTIONAL STRUCTURE
Under functional structure each major or basic function is organised as a
separate department. Basic functions, are the functions the performance
of which is vital and essential to the survival of the organisation. For
example, production, sales, financing and personnel are basic functions
in a manufacturing enterprise.

Advantages of Functional Structure

(a) It is the most logical, time-proven and natural form of an organisation
structure.
(b) It provides occupational specialisation which makes optimum
utilisation of manpower and promotes efficiency in operations.
(c) It ensures the performance of all activities necessary for achieving
organisational objectives.
(d) It facilitates supervision because an individual manager becomes
familiar with related tasks and activities and delegation of authority.

(e) It permits effective control over performance.

(f) It removes costly duplication of effort.

Disadvantages of Functional Structure

(a) Specialists working in different departments may not be able to see the
perspective of the organisation as a whole. For example, the production
department may get so involved in producing a quality product without
regard to the fact that it might not sell at a high price.
(b) It becomes difficult to hold a particular department responsible for any
problem. For example, when sales are declining who is responsible, the
marketing department or production department for not producing a
quality product, it is difficult to determine.
c) Functional heads do not obtain experience required for top
management positions. Specialised skills and narrow perspective may
lead to inflexibility.
(d) As the organisation grows, departments may also become too large
causing delay in decision-making. Coordination between different
departments becomes difficult.
(e) Managers may try to build up their own functional empires leading to
interdepartmental rivalry and conflicts.

Suitability
The functional structure is more useful to large organisations wherein
operations require a high degree of specialisation.
DIVISIONAL STRUCTURE
In divisional organisation structure, the activities of the organisation are
grouped on the basis of products. Every major product is organised as a
separate division. Each division looks after the production, sales and
finance of one product line.
For instance, a big company with a diversified product line may have
three product divisions one each for plastics, chemicals and metals. Each
division may be sub-divided into purchasing production, sales and
personnel activities.

Advantages of Divisional Structure

(a) Product departmentation can reduce the problem of coordination
between departments. All activities concerning a particular product line
are integrated together.
(b) It focuses individual attention on each product line which facilitates
product expansion and diversification.
(c) It leads to specialisation of physical facilities and human talent.
(d) The performance of each division and its contribution to overall results
can be easily evaluated. Responsibility for the performance of divisions
can be fixed on divisional heads.
(e) It facilitates expansion and growth as new divisions can be added
without interrupting the existing operations.
(f) It is more flexible and adaptable to change. Decision-making is faster
and effective as each division functions as a semi-autonomous unit. It
promotes initiative.

Disadvantages of Divisonal Structure

(a) There is a duplication of physical facilities and functions. Each product
division maintains its own facilities and personnel due to which operating
costs may be high.
(b) Advantages of centralisation of certain activities like financing,
accounting, distribution, etc., are not available.
(c) There may be underutilisation of plant capacity when the demand for a
particular product is not adequate.
(d) Managers in each department may focus on their own product without
thinking of the total organisation.
(e) Conflict may arise between different divisions on allocation of funds
and other resources.

Suitability
On the whole, divisional structure is suitable for those big enterprises
which supply a wide variety of products with different manufacturing
technologies and marketing methods.
DELEGATION OF AUTHORITY
The process by which a manger shares some of his work and authority
with his subordinates is known as delegation of authority.
Meaning: The process of delegation involves assigning duties, entrusting
authority and imposing responsibility on subordinates.
Delegation of authority merely means granting of authority to
subordinates to operate within prescribed limits.-Theo Haimann

Characteristics of delegation of authority:

(a) Delegation involves sharing of work and authority with others. A
manager does not pass on his entire work and authority to his
subordinates.

(b) No manager can perform the entire work assigned to him. He gets
part of his work carried out by his subordinates. In fact, getting
things done by subordinates is an essential aspect of a manager's
job.

(c) Delegation is always done within certain limits. While delegating

authority, a manager defines the limits within which subordinates
can exercise their authority.

(d) Delegation never means abdication of responsibility. After

delegating authority, a manager remains responsible for the work
which he has assigned to the subordinates.

(e) Delegation does not imply reduction in the authority of the

superior. He can at any time take back or reduce the delegated
authority.

(f) Delegation involves downward transfer of authority from a superior

to a subordinate.
Advantages of delegation :
1. Relief to Top Executives: It reduces the burden of work on senior
executives. By transferring routine work to subordinates, a manager can
concentrate on important policy matters. He can, therefore, make better
use of his valuable time and ability.
2. Scalar Chain: Delegation of authority creates a chain of superior-
subordinate relationships among managers. It provides meaning and
content to managerial jobs. It also directs and regulates the flow of
authority from top to the bottom of organisation. It serves as a basis of
management hierarchy.
3. Specialisation: Delegation leads to division of work which results in
better utilisation of human and material resources.
4.Quick Decision: When authority is delegated, lower level employees can
take decision quickly without consulting senior executives.
5. Motivation of Subordinates: Delegation provides a feeling of status and
recognition to subordinates. Responsibility for work improves self-esteem
and confidence of employees. Thus, delegation promotes a sense of
initiative and responsibility among employees. It inspires employees to
make full use of their skills.
6. Growth and Diversification: Delegation of authority at all levels
facilitates expansion and growth of the organisation.

ELEMENTS OF DELEGATION
AUTHORITY
The term "authority' implies the right of an individual to take decisions
and to command his subordinates. It is the sum of rights and powers
entrusted to a person to enable him perform the assigned tasks.
Henri Fayol has defined it as "the right to give orders and the power to
exact obedience".
Features of Authority:
(a) It is the legitimate right of an individual.
(b) It is the right to command and control others, to take and enforce
decisions.
(c) It is bound by certain limits.
(d) It is used to achieve organisational objectives. It is needed to perform
the assigned task.

Authority is different from power.

An individual may derive his authority from three sources.

1.Formal-Authority: It is the official authority given to an individual by his
boss. It is delegated through the chain of command.
2. Competence Authority: It is the authority of knowledge. A person
having specialised knowledge and skill commands influence over others.
3. Acceptance Authority: It is the authority which an individual gets when
others accept or obey his orders and instructions.
Responsibility
Responsibility refers to the obligation to perform the assigned tasks or
duties to the best of one's ability.
According to Koontz and O'Donnell, responsibility is "the obligation of a
subordinate, to whom a duty has been assigned, to perform duty".

Distinction between Authority and Responsibility

1. Meaning: Authority is the legal right of the superior to command his
subordinates while responsibility is the obligation of a subordinate to
perform the duties assigned to him by his superior.
2. Origin: Authority arises either from a formal contract or from legal
provisions. It is attached to a particular position, and tends, therefore, to
be impersonalised. On the other hand, responsibility arises from a
superior-subordinate relationship. Responsibility is attached to a
particular person and it is, therefore, personalised.
3. Delegation: Authority can be delegated by a superior to his
subordinate. But responsibility is absolute and can never be delegated.
When a superior delegates his authority to a subordinate, he continues to
be responsible to his own superior.
4. Direction of flow: Authority always flows downwards, i.e., from a
superior to his subordinate. But the flow of responsibility is upward. A
subordinate is responsible for his acts to his superior.
Accountability
Accountability means personal answerability for the final outcome.

Features of accountability:
(a) Accountability is the obligation to carry out responsibility and
authority in items of established standards of performance.
(b) The extent of accountability depends upon the extent of authority and
responsibility. A person cannot be held answerable for the tasks not
assigned to him.
(c) Accountability always moves upward from a subordinate to a superior.
(d) Accountability cannot be delegated.
(e) Accountability requires a formal report by a subordinate to his
superior.
CENTRALISATION
An organisation is said to be centralised when top management retains
absolute authority for making almost all decisions on the functioning of
the organisation.
In a centralised organisation, all decisions on specific matters are taken
by one or a few managers at the top level.

Decentralisation
Decentralisation of authority means systematic dispersal of authority in
all departments and at all levels of management for taking decisions and
actions appropriate at the respective levels.
Decentralisation is much more than a mere transfer of authority to lower
levels. It is a philosophy involving selective dispersal of authority.
According to Henri Fayol "Everything which goes to increase the
subordinate's role is decentralisation; everything which goes to decrease
it is centralisation".
Merits of Decentralisation
1. Reduction in Burden of Top Executives: Decentralisation helps to
reduce the workload of top executives. They can devote greater time and
attention to important policy matters by decentralising authority for
routine operational decisions.
2. Motivation of Subordinates: Decentratlisation helps to improve the job
satisfaction and morale of lower level managers by satisfying their needs
for independence, participation and status.
3. Better Decisions: Under decentralisation, authority to make decisions is
placed in the hands of those who are responsible for executing the
decisions. As a result, more accurate and faster decisions can be taken as
the subordinates are well aware of the realities of the situation. This
avoids red-tapism and delays.
4. Innovation and Creativity: Each product division is given sufficient
autonomy for innovations and creativity. The top management can extend
leadership over a giant enterprise. A sense of competition can be created
among different divisions or departments. Decentralisation facilitates the
growth and diversification of the enterprise.
5. Development of Managers: When authority is decentralised,
subordinates get the opportunity of exercising their own judgement. They
learn the art of exercising decision-making authority. As a result, the
problem of succession is overcome and the continuity and growth of the
organisation are ensured. There is better utilisation of lower-level
executives.
Demerits
1. Lack of coordination: Decentralisation may create problems in
coordination among different units of the enterprise. Semi-autonomous
divisions tend to adopt narrow outlook and sectional interest may
overshadow the organisational objectives. There may be loss of control
and disintegration of the enterprise.
2. Lack of uniformity: Decentralised units may not follow uniform policies
and procedures. As a result inconsistencies may arise in organisational
activities.
3. Heavy overheads: Decentralisation may result in higher administrative
expenses as it requires employment of qualified managers for different
divisions. Moreover, many staff functions and facilities may have to be
duplicated..
4. Unsuitable for small firms: Creation of autonomous decentralised unit
requires broad product lines which is not possible in small firms.
Decentralisation may restrict timely action in case of emergencies. Some
activities cannot be decentralised, e.g., handling government authorities
or trade union negotiations.
5. External constraints: Decentralisation may not be possible due to
external constraints. A company may be subject to frequent uncertainties.
In recent years, increasing competition, growing power of trade unions,
government interventions, development of computerised information
systems, rising cost of executives, etc. have in some cases reduced the
extent of decentralisation.
Difference between delegation and decentralisation: