Organising Question Answers: NCERT Class 12 Business Studies

The network of social relationship which arises spontaneously due to interaction at work is called Informal organisation.

Span of management refers to the number of subordinates that can be effectively managed by a superior. This determines the levels of management in the structure.

The two circumstances under which the functional structure will be an appropriate choice are:

1. Size of the organisation is large.
2. Operations require a high degree of specialization.

They should adapt the Functional organisation structure to achieve their target.

The following steps are involved in the organising process:

1. Identification and division of work: The first step in the process of organising involves identifying and dividing the work that has to be done in accordance with previously determined plans. Work is divided into managerial tasks, so that duplication can be avoided and workload can be shared among employees.

2. Departmentalisation: In this step the activities which are similar in nature, are grouped together. And this process is known as departmentalisation. The departments are created on the basis of products, functions and territory. This provides specialisation in operations.

3. Assignment of duties: Once the departments are created, each department is placed under the charge of an individual, called departmental head. Then, each job is allocated to an individual, according to his knowledge and skill.

4. Establishing Reporting relationships: In the organisation, each employee has some authority as well as responsibility. It is necessary that every individual must know whom they have to take orders from and to whom they are answerable. This creates superior subordinate hierarchy and helps in coordinating various activities in the organisation.

Following are the essential elements of Delegation:

1. Authority: Authority refers to the right of an individual to take decisions and to command his subordinates. The concept of authority arises from the position in the scalar chain, which is highest at the top and declines as we move down the hierarchy. Thus, it flows from top to bottom. It helps to maintain order in the organisation and determine superior subordinate relationships.

2. Responsibility: It is the obligation of a subordinate to perform properly the assigned duty. It arises from a superior subordinate relationship because the subordinates are bound to perform the duty assigned by their superior. Thus, it flows upward because a subordinate is always responsible to his superior. Granting authority is necessary to create responsibility and facilitate its fulfillment.

3. Accountability: It refers to being answerable for the final outcome. Once authority has been delegated and responsibility accepted, one cannot deny accountability. It is the obligation to carry out responsibility and exercise authority. A subordinate is always accountable to his superior, generally enforced through regular feedback.

Informal organisation supports formal organisations in many ways, some of them are as follows:

1. Quick feedback: Prescribed lines of communication are not followed. Thus, the informal organisation leads to faster spread of information as well as quick feedback.

2. Social needs: It helps to fulfill social needs of the members. This enhances their job satisfaction, since it gives them a sense of belongingness in the organisation.

3. Flexibility: In formal organisation, rules and policies are fixed, thus it is rigid in nature. On the other hand, in informal organisations, no such rules are there, thus it leads to flexibility.

No, a large sized organisation cannot be totally centralised or decentralized because every organisation must have a blend of centralisation and decentralisation. While complete centralisation means concentration of authority in a few hands and complete decentralisation means greater autonomy to the lower levels of management. Therefore, an organisation cannot be completely centralised or decentralised. As an organisation grows, there is a tendency to move towards decentralisation. At the same time, decisions need to be centralised in priority and key result areas.

Decentralisation is extending delegation to the lowest level. Decentralisation explains the manner, in which decision-making responsibilities are divided among hierarchical levels. Decentralisation refers to delegation of authority throughout all the levels of the organisation.

Decision-making authority is shared with lowest levels and is consequently placed nearest to the point of action.

In other words, decision-making authority is pushed down the chain of command. Delegation is the process and decentralisation is the end result. For example, if the director gives the responsibility to the production head to complete the target of 32000 units and authorises him to hire the workers, the production head further shares his responsibility with the manager to select the workers. And the manager shares his responsibility with supervisors, who are dealing with workers, authorises them to select workers. Here, the responsibility is distributed at every level. That’s why we say systematic delegation leads to decentralisation.

Divisional structure is recommended for Neha’s expanded organisation. Because it provides equal importance to all its products and other benefits are:

1. It facilitates expansion and growth as new divisions can be added without interrupting the existing operation.
2. It enables her to determine the profit margin of each product line and help her to plan accordingly.

No, the production manager cannot blame the foreman, if he is not able to achieve the desired target, as the authority delegated to a subordinate should be equal to his responsibility. Authority and responsibility of a subordinate should go hand in hand.

This principle suggests that if a subordinate is given the responsibility to perform a particular task in a proper manner, he should be given adequate authority to perform the task. Similarly, if a subordinate is given authority to do a particular task, he should be equally held responsible for doing the task in the proper manner.

In the above case, the production manager has not given authority to the foreman for the requisition of tools and materials from the stores department. Therefore foreman cannot be held responsible for not achieving the desired result. But, the directors can blame the production manager for not achieving the target.

Delegation refers to the transfer of authority from superior to subordinate for the completion of the tasks. It is a pre-requisite to the efficient functioning of an organisation because it enables a manager to use his time on high priority activities. It is essential for effective organising because of its benefits:

1. Effective Management: By empowering the employees, the managers are able to function more efficiently as they get more time to concentrate on important matters.

2. Employee Development: Delegation provides more opportunities to the employees to utilize their talent and develop their abilities. It helps to make them better leaders and decision makers, thus, creating future managers.

3. Motivation of employees: Delegation provides a feeling of status and recognition to subordinates, as it is not only a process of sharing workload, but also involves trust of the superior on his subordinate. Entrustment of responsibility builds up the self-esteem of the employees and encourages them to perform better.

4. Facilitation of growth: Delegation helps in the expansion of an organisation by providing a ready workforce to take up leading positions in new ventures. Trained and experienced employees are able to play a significant role in launching new projects of the organisation.

5. Basis of management hierarchy: Delegation of authority establishes superior subordinate relationships, which are the basis of hierarchy of management. This helps employees to know ‘who has to report to whom’. Thus, duties and powers of each individual become clear.

6. Better coordination: The elements of delegation namely authority, responsibility and accountability helps to define the powers, duties and responsibilities related to various positions in an organisation. This helps to avoid overlapping and duplication of work and facilities coordination, as it gives a clear picture of the work being done at various levels.

An organisation structure in which various departments are created on the basis of products, territory or region, is called divisional structure.

Each unit has a divisional manager, who is responsible for performance and has authority over their division. Each division is further divided into functional units like production, sales, finance, etc.

Advantages of divisional structure

Divisional structure has the following advantages:

1. All the activities related to one type of product are grouped under one division, which brings integration and coordination in the activities.
2. With more initiative and flexibility, decisions are taken much faster in divisional structure.
3. Fixation of responsibility and accountability is easy, as divisional heads are responsible for the profits and losses of their division.
4. It facilitates expansion and growth as new divisions can be added without interrupting the existing operations.
5. It helps the managers to develop varied skills related to a product and facilitates managerial development.

Limitations of divisional structure

Divisional structure has the following limitations:

1. There is a duplication of physical facilities and functions, which leads to increase in cost.
2. Greater autonomy to divisional heads may lead to misuse of authority.
3. Managers in each divisional focus on their own objectives, without thinking of the organisational goals.
4. Conflict may arise between different divisions on allocation of funds and other resources.

Yes, decentralisation is an optional policy, yet it is important in the organisation. It refers to systematic delegation of authority at all levels of management and in all departments of organisation to take decisions.

An organisation should choose to be decentralised because of its following importance:

1. Develops initiative among subordinates: It helps to promote self-reliance and confidence amongst the subordinates. This is because, lower managerial levels have been given freedom to make their own decisions and they learn to depend on their own judgement. It also helps to identify those executives, who have the potential to become dynamic leaders.

2. Develops managerial talent for the future: Formal training along with experience of handling independent assignments helps to create a reservoir of qualified and capable managers, who can take up more challenging positions in the upcoming ventures of the organisation.

3. Quick Decision-making: Under decentralisation, authority to make decisions is placed in the hands of those, who are responsible for executing the decisions. Since decisions are taken at levels nearest to the point of execution, there is no delay or distortion of information.

4. Relief to top management: It helps to reduce the amount of direct supervision over subordinates by giving them freedom to take decisions and act on their own. This reduces the workload of top executives and they can devote their time and attention to important policy matters.

5. Facilitates Growth: It provides greater autonomy to lower level managers and departmental heads. This encourages them to function more efficiently to prove their supremacy, and facilitate expansion and growth of the organisation.

6. Better Control: It makes it possible to evaluate performance at each level and make the departments accountable for their own results. Feedback is quick and leads to better control.

Difference between centralisation and decentralisation:

Difference between a functional structure and a divisional structure:

In the above situation, organisation should shift from functional structure to divisional structure as the company wants to diversify, by adding a new product line.

The reasons and benefits are:

1. The performance of each unit can be easily assessed.
2. New product lines can be easily added without disturbing the existing units.
3. Decision making is faster.
4. Divisional structure maintains a short line of communication with customers and provides better services to them.

The suggestions are:

1. To overcome the limitations of formal organisation, the management should encourage workers to interact and socialize with each other through get- togethers and outings. In this way, everyone will interact and like minded people will come closer. The net result will be a more satisfied workforce.

2. The management should also introduce employee suggestion systems so that good suggestions can be implemented and rewarded. The communication channels should be open so that a sense of belongingness is created in the company.

3. The management should try to decentralise organisation structure.

4. The suggested area where the business can be diversified is textile machineries like embroidery units, sequencing units, buttoning units.

Benefits the company will derive from these changes:

1. Introduction of informal interaction between employees will help in fulfilling social needs of the employees. It will enhance their job satisfaction and give them a sense of belongingness in the organisation.
2. Quick decision making will also take place since prescribed lines of communication will not be followed and faster spread of information will give quick feedback.
3. Introduction of employee suggestion systems will result in increased motivation for those employees who make good suggestions. This also helps in reduction of labour turnover. Introduction of decentralisation will also help in this.
4. All the above will help in fulfilling organisational objectives and eliminate the inadequacies of formal structure.

The organisation structure changes should the company brings to retain its market share are:

1. The company should increase delegation and decentralisation of authority to allow decision-making at all levels.
2. Since, the company is dealing in FMCG (Fast Moving Consumer Goods Sector), the lower level staff should be given more power to clinch deals like giving them authority to give customers more discounts on bulk orders, etc. This is done because the FMCG sector characterises dynamic customer preferences and frequent change in taste which can be judged easily by people at action points.
3. Development of a good communication system from lower levels to top level, to help top management take strategic decisions on changing situations.
4. Suggestion systems should be initiated and good suggestions should be rewarded.
5. Maximum participation in decision-making should be ensured to motivate staff and achieve good results for the company.

Benefits that the company would derive from these changes are:

1. Developing initiative among subordinates.
2. Development of managerial talent for future.
3. Quick decision-making.
4. Relief to the top management.
5. Better control, since each department or individual can be held accountable for his/her results, it would facilitate better control.

Organizing refers to the process of defining and grouping activities, assigning responsibilities, and establishing authority relationships among employees to achieve organizational goals efficiently.

Key steps include:

• Identification of tasks: Defining what tasks need to be performed.
• Departmentalization: Grouping similar tasks into departments or units.

Delegation involves a manager assigning specific responsibilities to a subordinate, while decentralization refers to systematically dispersing decision-making power to lower levels of the organizational hierarchy.

Organizing is a critical function in management because it brings clarity and structure to the organization. It involves grouping similar activities, establishing authority relationships, and assigning roles to achieve goals effectively. The key importance of organizing in business management includes:

• Clarity in Working Relationships: Organizing establishes clear reporting relationships among employees. This ensures that each employee knows who they are accountable to, leading to effective communication and minimizing conflicts.
• Efficient Resource Use: By defining roles and responsibilities, organizing helps in the optimal utilization of human and material resources. Employees perform tasks specific to their skills, reducing wastage and overlapping activities.
• Specialization and Division of Work: When tasks are grouped according to their nature (such as marketing, finance, production), specialization occurs. Each employee becomes proficient in their specific role, leading to enhanced productivity.
• Coordination and Teamwork: Different departments within the organization work toward common goals. Organizing ensures that there is coordination between various departments and individuals, avoiding duplication of efforts.
• Adaptability to Change: Organizing allows businesses to adapt to changing environments. It creates flexibility in work processes, enabling the organization to restructure departments or tasks when necessary.
• Growth and Expansion: An organized structure allows a business to scale operations efficiently. As the organization grows, new tasks and responsibilities are added without creating confusion, ensuring smooth expansion.

Organizational structures define how tasks are divided, coordinated, and controlled within a company. The two main types of structures used in businesses are functional and divisional.

• Functional Structure: This is one of the most common organizational structures where the company is divided into functional departments such as marketing, finance, human resources, and production. Each department performs specialized tasks. The key benefits include:
  • Specialization: Employees focus on their specific functional areas, leading to expertise and high efficiency.
  • Clear Career Paths: Employees have a clear trajectory for career advancement within their function.
  • Operational Efficiency: Since employees in each function perform similar tasks, resources are used efficiently.

However, one drawback of the functional structure is that it may lead to poor coordination between departments, as employees may prioritize their department’s goals over the organization’s overall objectives.

• Divisional Structure: In this structure, the organization is divided into divisions based on products, services, or geographic areas. Each division operates almost like a separate entity, with its functional departments. The key benefits are:
  • Focus on Products/Markets: Each division focuses on specific products or geographic regions, making it more responsive to market demands.
  • Accountability: Divisional heads are responsible for the profitability and success of their respective divisions, which fosters accountability.

However, this structure can lead to resource duplication as each division has its own departments, increasing operational costs.

• Matrix Structure: A more complex structure where employees report to both functional managers and project managers. It allows for flexibility and better resource allocation, especially in project-based industries.

In conclusion, while both functional and divisional structures have their merits, the choice of structure depends on the organization’s size, nature, and objectives. A functional structure suits organizations focusing on efficiency, while a divisional structure is more appropriate for businesses with diverse products or regions.

• Formal organization is the official, structured system of tasks and authority. It is essential for ensuring efficiency and clarity of responsibilities. For instance, the hierarchical structure in a corporate office where specific roles are defined.
• Informal organization emerges naturally among employees. It plays a vital role in enhancing communication, providing social support, and filling the gaps in formal communication. For example, employees may form informal groups based on shared interests.

Organizing is a systematic process of arranging resources and tasks to achieve the organizational goals. The steps involved in the organizing process are as follows:

• ​Identification of Activities: The first step in organizing is to identify all activities that need to be performed. For instance, a manufacturing company would need to identify activities like production, marketing, sales, inventory management, and financial planning. Each activity is broken down into specific tasks that contribute to the organization’s overall objectives.
• Departmentalization: Once tasks are identified, they are grouped into departments based on their similarity. For example, activities related to customer service, sales, and marketing could be grouped into the marketing department, while activities related to budget control and accounting could be grouped into the finance department. This allows for specialization, where employees can focus on their area of expertise.
• Assignment of Duties: After grouping the tasks, specific duties are assigned to employees. This step involves matching the tasks with employees based on their skills, experience, and expertise. For instance, in a retail store, the duty of managing customer queries would be assigned to the customer service executive, while maintaining stock levels would be assigned to the inventory manager.
• Establishing Reporting Relationships: Once tasks are assigned, it is essential to establish a clear chain of command. This step defines who reports to whom and ensures that employees know their direct supervisors and to whom they are accountable. A clear reporting structure also facilitates smooth decision-making and communication.
• Coordination among Departments: The final step in the organizing process is ensuring coordination among different departments. Since various departments perform interconnected tasks, it is essential to establish communication channels and ensure that all departments work in harmony to achieve common goals.

For instance, in a product launch, the marketing department needs to coordinate with the production team to ensure that the product is ready for sale. Simultaneously, the finance team ensures that funds are available for production and marketing efforts. Coordination ensures that all departments contribute effectively to the success of the launch. Example: In an automobile company, activities such as design, engineering, procurement, production, marketing, and after-sales service are identified and grouped into specific departments. Engineers are responsible for design, while the marketing team focuses on promoting new models. All departments work together, ensuring a seamless flow from production to market delivery. Conclusion: The organizing process is essential for establishing a solid framework for efficient operations. By carefully identifying tasks, grouping them, assigning responsibilities, and ensuring coordination, organizations can achieve their goals effectively.

Delegation is an important management function, but there are several barriers that can prevent effective delegation. These barriers include:

• Lack of Trust: Managers may hesitate to delegate tasks if they do not trust their subordinates to complete the work to the required standard. They may fear that the task will not be performed well, which could lead to poor outcomes.
• Fear of Losing Control: Some managers feel that by delegating tasks, they are giving away their authority, and this may cause them to lose control over the work. This fear can prevent them from effectively delegating important tasks to their team members.
• Inability to Communicate Clearly: Effective delegation requires clear communication of expectations, goals, and responsibilities. If a manager cannot convey these clearly, the employee may become confused or demotivated, leading to poor performance.
• Insecurity about Job Performance: Managers who feel insecure about their own job performance may avoid delegation. They may believe that if they delegate important tasks to subordinates and the subordinates perform them well, their own position may be threatened.

Overcoming Barriers:

• Develop Trust: Managers need to build trust in their team by gradually delegating smaller tasks and monitoring performance. Over time, as subordinates demonstrate their capabilities, managers can delegate more critical tasks.
• Train Subordinates: Providing employees with the necessary training and development opportunities will increase their competence and confidence, making delegation more effective. It also ensures that subordinates can handle the responsibilities delegated to them.
• Establish Clear Guidelines: When delegating, managers should provide clear instructions and define the boundaries within which subordinates must operate. This minimizes confusion and empowers employees to make decisions confidently within their scope of work.
• Encourage Open Communication: Managers should foster a culture of open communication, where employees feel comfortable asking questions and seeking clarification when needed. Regular feedback also helps ensure that the task is progressing as expected.

Conclusion: Effective delegation is key to managerial efficiency and organizational growth. By overcoming the barriers of trust, fear, and communication, managers can delegate tasks more effectively, empowering their team and focusing on higher-level strategic tasks.