CBSE Class 12 Business Studies – Chapter 5: Organising- Lecture, Revision, Notes, Explanation

Organising

Hello friends, I am Sanjay. In this series, I am covering the Business Studies subject from the CBSE Class XII syllabus. We will be following the standard NCERT textbook for the topics that we need to discuss. This is the fifth part of the series, and we will cover the fifth chapter—Organising.

Introduction

In the first part of this series, we discussed the various functions of management:

1. 1. Planning: Deciding what is to be done, how it is to be done, and when it is to be done. Setting goals and strategies for the organization.
   2. Organising: Allocating resources (like time, money, people), deciding team structures, and assigning duties to different roles or positions.
   3. Staffing: Recruiting and hiring people to fill the roles or positions created during the organising phase.

In this chapter, we will focus on the Organising function. Organising involves arranging resources and tasks in a structured way to achieve the goals set during the planning phase. This includes determining roles, responsibilities, and the allocation of resources necessary to carry out the plan effectively.

Understanding Organising

Let’s start with a simple example to understand what organising is all about.

Example: Starting a Hospital

Suppose you are an entrepreneur and decide to start a hospital. You create a high-level plan and strategy on where you want to start the hospital, what kind of hospital it will be, and by when you want to start it.

To implement that plan or strategy, you first organise the:

• Financial Resources: Determine how much funding is required, where the money will come from, how much you can invest, and how much loan you need.
• Material Resources: Decide where the hospital will be constructed, what the design should look like, what equipment is required, and whether you will build, buy, or rent a building.
• Human Resources: Depending on the financial resources and the size of the hospital, decide how many doctors, nurses, helpers, and administrative staff are required. Determine the staff structure, departments, and how people will be distributed across these departments.

All of this is organising. After organising everything, you will start executing: securing financial resources, starting construction or renovation, and recruiting people for the teams.

Definitions of Organising

Theo Haimann, a management consultant and author, defines organising as:

“The process of defining and grouping the activities of the enterprise and establishing authority relationships among them.”

Louis Allen, another expert, provides a more detailed definition:

“Organising is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority, and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.”

Process of Organising

The process of organising involves four steps:

1. Identification and Division of Work: Breaking down the overall work into smaller, manageable tasks.
2. Departmentalisation: Grouping similar tasks and activities into departments or divisions.
3. Assignment of Duties: Assigning specific tasks to individuals based on their skills and competencies.
4. Establishing Authority and Reporting Relationships: Defining the hierarchy and establishing clear lines of authority and responsibility.

1. Identification and Division of Work

Convert high-level plans into actual work to be done. Break down the work into detailed processes, activities, and tasks.

2. Departmentalisation

Group together tasks and activities of similar nature. This can be based on:

• Nature of Work: Finance, marketing, production, etc.
• Geography: North India operations, South India operations, etc.
• Product Type: Air-conditioners, washing machines, etc.

3. Assignment of Duties

Within each department, assign duties based on the skills and abilities required. For example, in the marketing department, assign junior and senior marketing staff to specific activities.

4. Establishing Authority and Reporting Relationships

Create a hierarchy or organizational chart for each department. Define who reports to whom, clarify authority, responsibility, and accountability. This ensures coordination across different departments.

Importance of Organising

Organising is crucial for several reasons:

1. Benefits of Specialisation
2. Clarity in Working Relationships
3. Optimum Utilisation of Resources
4. Adaptation to Change
5. Effective Administration
6. Development of Personnel
7. Expansion and Growth

1. Benefits of Specialisation

Systematic allocation of jobs among teams and employees leads to specialization. Repetition of tasks leads to expertise, increasing productivity and improving both the quality and quantity of work.

2. Clarity in Working Relationships

Organising helps define hierarchy and working relationships, leading to better communication and efficient functioning.

3. Optimum Utilisation of Resources

Proper assignment of jobs avoids overlapping and duplication of work, preventing confusion and minimizing wastage of resources and efforts.

4. Adaptation to Change

Organising allows a business to accommodate and adapt to changes in the business environment. The organizational structure can be modified to deal with changes, providing stability and continuity.

5. Effective Administration

Creating clear descriptions of jobs and related duties helps avoid confusion among staff and duplication of work. It enables better monitoring of activities.

6. Development of Personnel

Organising allows for effective monitoring of employee performance, equitable distribution of work, and opportunities for personal growth and development.

7. Expansion and Growth

Properly organised businesses can leverage resources to quickly take advantage of emerging opportunities, leading to transparency regarding inefficiencies and better handling of expansion and growth.

Organizational Structure

An organizational structure shows how a business or company is organized. It is typically represented in an organizational chart or organogram. The structure is the outcome of the organising process and is usually dynamic, changing as the business and environment evolve.

Example: ONGC Organizational Structure

The CEO is at the top, with different corporate functions reporting directly to the CEO. There are production divisions, exploration divisions, and other departments like HR and Finance.

Span of Management

Span of Management, or Span of Control, refers to the number of subordinates under a manager. The span can be:

• Narrow Span: Fewer subordinates per manager, leading to more hierarchical levels.
• Wide Span: More subordinates per manager, resulting in a flatter organizational structure.

Types of Organizational Structures

The type of structure adopted by an organization varies with the nature and types of activities performed. There are two main types:

1. Functional Structure
2. Divisional Structure

1. Functional Structure

Jobs or roles of similar nature are grouped together as separate departments (e.g., Research and Development, Production, Marketing, Sales, Finance, HR). Each function performs specialized activities for all products or services.

Advantages of Functional Structure

• Functional specialization leading to expertise.
• Efficient utilization of manpower and better performance.
• Better control and coordination within functions.
• Increased managerial efficiency and better supervision.
• Minimal duplication of work and economies of scale.
• Focused training of employees.
• Equal attention to all functions from senior managers.

Disadvantages of Functional Structure

• Building of silos; departments may compete with each other.
• Issues in coordination and communication across departments.
• Departmental interests may overshadow organizational goals.
• Inflexibility and decreased mobility of personnel.

2. Divisional Structure

Different business lines or product categories are grouped under different divisions. Each division is multi-functional, having its own departments for functions like R&D, Production, Marketing, etc.

Advantages of Divisional Structure

• Better focus on specific business requirements.
• Management gets exposure to all functions.
• Performance of each division is measurable separately.
• Faster decision-making due to independent structures.
• Ease in adding or removing divisions.
• Better handling of expansion and growth.

Disadvantages of Divisional Structure

• Potential conflicts and competition between divisions.
• Increased costs due to duplication of activities.
• Divisional interests may supersede firm’s interests.
• Challenges in coordination across divisions.
• Difficulty in maintaining consistent corporate culture.

Comparison of Functional and Divisional Structures

Formal and Informal Organizations

Formal Organizations

Defined by management experts as a structured, officially recognized organization with defined roles and hierarchical relationships.

• Designed and established by senior management to work on specific activities.
• Specific and documented job descriptions, rules, and procedures.
• Clear authority, responsibility, and accountability.
• Focus on organizational goals rather than interpersonal relationships.

Advantages

• Clear responsibilities and accountability.
• Avoidance of duplication of work.
• Roles assigned based on skills and abilities.
• Ensures unity of command.
• Guided by formal rules and procedures.

Disadvantages

• Interpersonal relationships may not be prioritized.
• Rigidity may hinder innovation and creativity.
• Decision-making may be slowed due to hierarchy.

Informal Organizations

Informal organizations are networks of personal and social relationships that develop naturally among people within an organization.

• Spontaneously created through social interactions.
• Not officially recognized or imposed by management.
• No rigid structures or formal rules.
• Standards of behavior evolve from group norms.
• Membership is voluntary.

Advantages

• Multiple channels of communication.
• Faster information spread and feedback.
• Fulfills social needs of employees.
• Enhances job satisfaction and belongingness.
• Can test organizational plans and policies informally.

Disadvantages

• Unverified information and rumors can spread.
• Organizational priorities may be negatively affected.
• Group norms may conflict with organizational goals.
• Formal authority may be undermined.

Comparison of Formal and Informal Organizations

Delegation

Delegation is the downward transfer of authority from a superior to a subordinate. It involves assigning tasks, granting authority, and creating responsibility and accountability.

Elements of Delegation

1. Authority: The power to make decisions, allocate resources, and give orders.
2. Responsibility: The obligation to complete assigned tasks.
3. Accountability: The requirement to take ownership of the results.

Comparison of Authority, Responsibility, and Accountability

Importance of Delegation

1. Effective Management: Managers can focus on higher-level tasks.
2. Employee Development: Provides learning opportunities for subordinates.
3. Motivation of Employees: Builds trust and confidence.
4. Facilitation of Growth: Prepares employees for higher roles.
5. Basis of Management Hierarchy: Establishes structure for efficient work distribution.
6. Better Coordination: Allows for parallel activities and faster completion of work.

Centralisation and Decentralisation

Centralisation is when decision-making authority is concentrated at the top levels of management. Decentralisation is when authority is delegated to lower levels or departments.

Importance of Decentralisation

1. Develops Initiative Among Subordinates: Encourages independent decision-making.
2. Develops Managerial Talent for the Future: Prepares lower-level managers for higher roles.
3. Quick Decision Making: Reduces response time.
4. Relief to Top Management: Allows focus on strategic issues.
5. Facilitates Growth: Promotes healthy competition and innovation.
6. Better Control: Improves accountability and visibility.

Difference Between Delegation and Decentralisation

Conclusion

With that, we have come to the end of this chapter. If you have any questions or feedback, post a comment below. I will see you soon in the next video, where we will cover the next chapter.