CH 5 - Organising
CH 5 - Organising
CH 5 - Organising
INTRODUCTION
Once the plan has been laid down, the next step is to organize resources in a manner which
leads to the accomplishment of objectives. The activities of an enterprise must be organized
in such a manner that plans can be successfully implemented. The management function of
organizing ensures the efforts are directed towards attainment of goals laid down in the
planning function. Thus, it is a means for translating plans into action.
MEANING
Organizing is the process of identifying and grouping the work to be performed, defining and
delegating authority and responsibility and establishing relationships for the purpose of
enabling people to work most effectively together in accomplishing objectives.
DEINITION
According to Theo Haimann, “Organising is the process of defining and grouping the
activities of the enterprise and establishing authority relationships among them”
According to Henry Fayol, “To organize a business is to provide it with everything, useful
to its functioning - raw materials, machines, tools, capital and personnel.”
a. On the basis of function: The activities are grouped into different departments on
the basis of various functions. Example:
Purchase department for purchase activity,
Finance department for Finance activities.
b. On the basis of type of product manufactured: The activities we grouped into
different departments on the basis of products manufactured. Example:
Textile Division
Food Division
c. On the basis of territory: The activities are grouped on the basis of different
territory. E.g., North, South, East, West.
ORGANISATION STRUCTURE
Organisation structure is a system which defines the frame work with in which
managerial and operating functions are performed in an enterprise. This frame work
enables the enterprise to work as an integrated unit. It denotes the pattern of relationships
among positions and jobs with the object of accomplishment of objectives of an
enterprise.
The structure adopted by an organization will vary with the nature and type of activities
performed by an organisation. The organisational structure can be classified as follows:
Disadvantages:
1) It places less emphasis on overall enterprises objectives than the objectives pursued by
a functional heads.
2) It may lead to problems in coordination as information has to be exchanged across
functionality differentiated departments.
3) A conflict of interests may arise when the interests of two or more departments are not
compatible.
4) It may lead to inflexibility as people with same skills and knowledge base may
develop a narrow perspective and thus, have difficulty in appreciating any other point
of view.
Advantages:
1) Product specialisation helps in the development of varied skills in a divisional head and
this prepares him for higher positions.
2) Divisional heads are accountable for profits, as revenues and costs related to different
departments can be easily identified and assigned to them.
3) It promotes flexibility and initiative because each division functions as autonomous
unit which leads to faster decision making.
4) It facilitates expansion and growth as new divisions can be added without interrupting
the existing operations by merely adding another divisional head and staff for the new
product line.
Disadvantages:
1) Conflict may arise among different divisions with reference to allocation of funds and
further particular division may seek to maximize its profits at the cost of other
divisions.
2) It may lead to increase in costs. Providing each division with separate set of similar
functions increases expenditure.
SUITABILITY: Divisional Structure is suitable when:
An organisation is involved in production of different line of products.
Organisation needs product specialisation.
Organisation plans to produce more line of products in future.
A. FORMAL ORGANISATION
A formal organisation is one which has a system of well-defined positions, authority,
responsibility, policies, principles etc. Formal organizations are governed by rules and
regulations for its proper functioning. It results from planning and determined by top
management.
Definition
According to Louis Allen “The Formal Organisation is a system of well-defined jobs, each
bearing a definite measure of authority, responsibility and accountability”.
Features of Formal Organisation:
(a) It specifies the relationships among various job positions and the nature of their
interrelationship. This clarifies who has to report to whom.
(b) It is a means to achieve the objectives specified in the plans, as it lays down rules and
procedures essential for their achievement.
(c) Efforts of various departments are coordinated, interlinked and integrated through the
formal organisation.
(d) It is deliberately designed by the top management to facilitate the smooth functioning of
the organisation.
(e) It places more emphasis on work to be performed than interpersonal relationships among
the employees.
ADVANTAGES:(8MARKS)
Formal organisation offers many advantages. Some of the important ones are:
(a) It is easier to fix responsibility since mutual relationships are clearly defined.
(b) There is no ambiguity in the role that each member has to play as duties are specified.
This also helps in avoiding duplication of effort.
(e) It provides stability to the organisation. This is because behaviour of employees can be
fairly predicted since there are specific rules to guide them.
LIMITATIONS :( 8MARKS)
The formal organisation suffers from the following limitations:
(a) The formal communication may lead to procedural delays as the established chain of
command has to be followed which increases the time taken for decision making.
(b) Poor organisation practices may not provide adequate recognition to creative talent, since
it does not allow any deviations from rigidly laid down polices.
B. Informal organisation
Informal organisation refers to the relationships between the people working in an
organisation, established not by any formal authority, and also, not based on procedures and
regulations, but on personal attitudes, emotions, whims, prejudices, likes, dislikes etc. They
are not pre-planned they develop automatically within the organisation.
Definition
According to Keith Davis “Informal Organisation refers to the relationship between the
people in the organisation based on the personal attitudes, prejudices, likes and dislikes etc.”
FEATURES:
(a) An informal organisation originates from within the formal organisation as a result of
personal interaction among employees.
(b) The standards of behaviour evolve from group norms rather than officially laid down
rules and regulations.
(c) Independent channels of communication without specified direction of flow of
information are developed by group members.
(d) It emerges spontaneously and is not deliberately created by the management.
(e) It has no definite structure or form because it is a complex network of social relationships
among members.
ADVANTAGES:
The informal organisation offers many benefits. Important among them are given below:
(a) Prescribed lines of communication are not followed. Thus, the informal organisation
leads to faster spread of information as well as quick feedback.
(b) It helps to fulfill the social needs of the members and allows them to find like minded
people. This enhances their job satisfaction since it gives them a sense of belongingness
in the organisation.
(c) It contributes towards fulfillment of organisational objectives by compensating for
inadequacies in the formal organisation. For example, employees reactions towards plans
and policies can be tested through the informal network
DISADVANTAGES:
The informal organisation has certain disadvantages. Some of them are as follows:
(a) When an informal organisation spreads rumours, it becomes a destructive force and
goes against the interest of the formal organisation.
(b) The management may not be successful in implementing changes if the informal
organisation opposes them. Such resistance to change may delay or restrict growth.
(c) It pressurises members to conform to group expectations. This can be harmful to the
organisation if the norms set by the group are against organisational interests.
FORMAL AND INFORMAL ORGANISATION: A COMPARATIVE VIEW
IMPORTANCE OF DELEGATION
Delegation of authority is necessary for the smooth functioning of a
business. It increases the working capacity of a manager. Effective delegation can lead to the
following benefits:
1. EFFECTIVE MANAGEMENT: Delegation helps superiors to assign the routine
activities to the subordinates and he can concentrate on other important functions. Thus,
a manager can increase his effectiveness by using skills of his subordinates.
2. EMPLOYEE DEVELOPMENT: The employees get more opportunities to utilize
their talent. It motivates them to motivate themselves for higher positions, as they are
given opportunities to utilize their skills and talents for gaining excellence in their job.
3. FACILITATION OF GROWTH: Delegation facilitates growth and expansion by
providing trained and experienced personnel for taking up leading positions in new
project.
4. BASIS OF MANAGEMENT HIERARCHY: Delegation of authority determines
who has to report to whom. It creates the chain of superior - subordinate relationship,
which is the basis for hierarchy of management.
5. BETTER CO-ORDINATION: The elements of delegation namely, Authority,
Responsibility and accountability clearly defines power, duties and answerability
related to various departments. This helps to avoid overlapping of duties and brings
better co-ordination among various departments and functions of management.
6. QUICK DECISION MAKING: The subordinates are given authority to take
decisions. They need not to go to their superiors for taking decisions on routine matters.
This increases the speed of decision making.
CENTRALISATION
MEANING
Concentration of authority at top level for decision making with one or few-managers is
known as centralisation of authority. Thus, under centralisation the top level management
only takes the decisions. The lower levels of management have to follow it and they do not
have decision making power.
Definition: According to Louis A. Allen, "Centralisation is the systematic and consistent
reservation of authority at central point in an organisation.
DELEGATION AND DECENTRALISATION: A COMPARATIVE VIEW