Class 12th Business Studies Chapter Explaination

Chpater- Organising

Meaning of Organising:

Is the process which coordinates human efforts, assembles resources and integrates both into a unified whole for the achievement of the organisational objectives.

Steps of Organising Process:
  1. Identification and division of work: Division of work into manageable activities according to the plan.
  2. Departmentalisation: activities of a similar nature are grouped together.
  3. Assignment of duties: Allocation of job positions according to their skills and competencies.
  4. Establishing reporting relationships: that each individual knows from whom he has to take orders and to whom is he accountable.

Importance of Organising:
  1. Specialisation: systematic allocation of jobs reduces workload and enable higher productivity as a specific worker performs a specific job regularly.
  2. Clarity in working relationships: Clarifies line of communication and removes ambiguity in transfer of information.
  3. Optimum utilisation of resources: avoiding duplication of work and minimising wastage of resources and efforts.
  4. Adaptation to change: by allowing the enterprise to suitably modified itself according to the changes in business environment by providing a smooth transaction.
  5. Effective administration: as clear reporting relationships removes confusion and enables easy and effective administration.
  6. Development of personnel: as the delegation of work gives the manager time and opportunity to explore and develop better plans.
  7. Expansion and growth: by allowing a business enterprise to add more job positions, departments and even diversify their product lines.

Organisation Structure:

Organisation structure:

the framework within which managerial and operating tasks are performed.

Functional Vs Divisional
Basis Functional organisation Divisional organisation
Formation Formation is based on functions. Formation is based on product & supported by functions.
Specialisations Functional specialisation. Product specialisation.
Responsibility Difficult to fix on a department. Easy to fix for performance.
Managerial efficiency Difficult, as functional manager have to report to top. Easier, autonomy & chance to develop management.
Cost No duplication of function hence economical. Duplication of resources leads to operation costly.
Suitability For company with lesser different type of product. Multi-product company.

Meaning of Functional Structure:

It refers to grouping of jobs of similar nature under major functions and organising these as separate departments.

Advantages of Functional Structure:
  1. Functional Specialisation: as a person performs same task regularly.
  2. Better control and coordination within department: as there is similarity in task performed.
  3. Increases managerial and operational efficiency: as grouping is based on function (job/work) it becomes easier to perform managerial task.
  4. Minimizes duplication of work: grouping based on work/function reduces wastage of efforts and resources, more economic.
  5. Facilitates Training: as the focus is only on a limited range of skills.

Disadvantages of Functional Structure:
  1. Less Emphasis on Organisational: as the objectives pursued by the functional head will be given more importance.
  2. Coordination Problem between departments: as the departments are functionally different from each other.
  3. Inter-Departmental Conflicts.
  4. Inflexibility: people with same skill and knowledge base may not be able to reach to the top management.

Meaning of Divisional Structure:

organisational structure comprising of separate business units or divisions, created on a certain basis, e.g., product manufactured.

Advantages of Divisional Structure:
  1. Product Specialisation: in this type of structure the personnel have diversified skills and can opt for the higher position.
  2. Easy to fix Accountability: as groups are based on products, the divisional head is responsible for the performance of their division.
  3. Flexibility and Initiative: as each department is autonomous unit which leads to faster decision.
  4. Facilitates Expansion and Growth: enables to the organisation to add new division without disturbing the existing.

Disadvantages of Divisional Structure:
  1. Conflicts: on issues like allocation of resources.
  2. Expensive: as there is duplication of efforts and resources, it makes the operation of the organisation expensive.
  3. Negligence of Organisational objective: Divisional Interest are kept over the organisational objectives.

Meaning of Formal Organisation:

the organisation structure which is designed and established by the management to achieve organizational objectives.

Meaning of Informal Organisation:

Interaction among people at work gives rise to a 'network of social relationships among employees' called the informal organization.

Formal Vs Informal
Basis Formal organisation Informal organisation
Meaning Structure of authority relationship created by the management. Network of social relationships.
Origin Arises as a result of company’s rule and policies. Arises as a result of social interactions.
Behaviour It is directed by rules. No set of behaviour pattern.
Flow of communication Communication takes place through the scalar chain. Flow of communication is not through a planned route.
Nature Rigid. Flexible.
Leadership Managers are leaders. Leader are chosen by the group.

Meaning of Delegation

Delegation refers to transfer of authority from a superior to his immediate subordinate. Delegation refers to the downward transfer of authority from a superior to a subordinate.

Elements of Delegation:
  1. Authority: means right of an individual to command his subordinates and take action within the scope of his position.
  2. Responsibility: Responsibility means the obligation of a subordinate to properly perform the task assigned to him by his superior.
  3. Accountability: Accountability means answerability for the final outcome of the assigned work.

Importance of Delegation:
  1. Employee Development: Delegation gives opportunities to employees to learn new work and to show their skills.
  2. Effective Management: due to delegation work is distributed among employees, it allows managers more time to work on more important tasks of organisation.
  3. Motivation of Employees: as it assures the scope of promotion and appreciation, they feel themselves as a part of organisation which motivates them.
  4. Better Coordination: With the help of elements of delegation one can clearly define powers, duties, and answerability of each position in organisation.
  5. Facilitates Growth: Delegation helps in expansion of organisation as it helps in preparation of a ready force of employees to take up leading positions.

Meaning of Decentralisation:

Decentralisation means systematic delegation of authority throughout all the levels of the organization.

Importance of Decentralisation:
  1. Develops initiative among subordinates: as lower managerial level is given freedom to take decision it helps them to develop proper judgment and confidence on their own decision.
  2. Develops managerial talent for the future: decentralisation gives them insight to real world situations and experience of handling them help in development of managerial talent.
  3. Quick decision making: as the lower managerial level have freedom within a limit to take decision, it reduces decision taking time, as no need to follow entire communication chain for each decision.
  4. Relief to top management: It allows top managers to invest their valuable effort and time towards policy and higher-level decisions making rather than operational decisions.
  5. Facilitates growth: as operational divisional heads have better understanding of their department and foster competition among them which generates higher returns.
  6. Better Control: it makes possible to evaluate performance and contribution of each level and department towards organisational objectives.

Delegation vs Decentralisation:
Basis Delegation Decentralisation
Nature Delegation is compulsory act as no individual can perform all task on his own. Decentralisation is an optional policy decision.
Freedom of action Subordinates have less freedom to take the decision. Subordinate have greater freedom to take decision.
Status To share task. Result of policy decision.
Scope Narrow limited to the immediate subordinate. Wider as the authority is delegated throughout the organisation.
Purpose Lessen the burden of the manager. To increase the participation of subordinates.