NCERT Class 12 Business Studies Chapter 5 Organising

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NCERT Class 12 Business Studies Chapter 5 Organising

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Organising

Chapter: 5

PART – Ⅰ  PRINCIPLES AND FUNCTIONS OF MANAGEMENT

EXERCISE

VERY SHORT ANSWER TYPE

1. Identify the network of social relationships which arises spontaneously due to interaction at work.

Ans: The network of social relationships that arises spontaneously due to interaction at work is called the informal organization. It develops naturally as people interact with each other at work.

2. What does the term ‘Span of management’ refer to?

Ans: 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.

3. State any two circumstances under which the functional structure will prove to be an appropriate choice. 

Ans: A functional structure is appropriate under the following two circumstances:

(i) When the organization is large and has diversified activities.

(ii) When the organization requires a high degree of specialization.

4. Draw a diagram depicting a functional structure. 

Ans: 

5. Company has its registered office in Delhi, manufacturing unit at Gurgaon and marketing and sales department at Faridabad. The company manufactures the consumer products. Which type of organisational structure should it adopt to achieve its target?

Ans: The company should adopt a divisional structure to achieve its target.

SHORT ANSWER TYPE

1. What are the steps in the process of organising? 

Ans: From the above description, the following steps emerge in the process of organising:

(i) 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. The work is divided into manageable activities so that duplication can be avoided and the burden of work can be shared among the employees. 

(ii) Departmentalisation: Once work has been divided into small and manageable activities then those activities which are similar in nature are grouped together. Such sets facilitate specialisation.

(iii) Assignment of duties: It is necessary to define the work of different job positions and accordingly allocate work to various employees. Once departments have been formed, each of them is placed under the charge of an individual. 

(iv) Establishing authority and reporting relationships: Merely allocating work is not enough. Each individual should also know who he has to take orders from and to whom he is accountable. The establishment of such clear relationships helps to create a hierarchal structure and helps in coordination amongst various departments.  

2. Discuss the elements of delegation. 

Ans: Delegation refers to the downward transfer of authority from a superior to a subordinate. It is a prerequisite to the efficient functioning of an organisation because it enables a manager to use his time on high priority activities. A detailed analysis of Louis Allen’s definition brings to light the following essential elements of delegation:

(i) Authority: Authority refers to the right of an individual to command his subordinates and to take action within the scope of his position. The concept of authority arises from the established scalar chain which links the various job positions and levels of an organisation. Authority also refers to the right to take decisions inherent in a managerial position to tell people what to do and expect them to do it. 

(ii) Responsibility: Responsibility is the obligation of a subordinate to properly perform the assigned duty. It arises from a superior subordinate relationship because the subordinate is bound to perform the duty assigned to him by his superior. Thus, responsibility flows upwards, i.e., a subordinate will always be responsible to his superior.

(iii) Accountability: Delegation of authority, undoubtedly empowers an employee to act for his superior but the superior would still be accountable for the outcome: Accountability implies being answerable for the final outcome. Once authority has been delegated and responsibility accepted, one cannot deny accountability.

3. How does informal organisation support the formal organisation? 

Ans: Informal organisation emerges from within the formal organisation when people interact beyond their officially defined roles. When people have frequent contacts they cannot be forced into a rigid formal structure. Rather, based on their interaction and friendship they tend to form groups which show conformity in terms of interest. 

4. Can a large sized organisation be totally centralised or decentralised? Give your opinion. 

Ans: No, a large organization cannot be completely centralized or decentralized. An organisation is centralised when decisionmaking authority is retained by higher management levels whereas it is decentralised when such authority is delegated.

5. Decentralisation is extending delegation to the lowest level. Comment. 

Ans: Yes, decentralization is the process of extending delegation to the lowest level of an organization. It involves the systematic delegation of authority across all levels, enabling decision-making at different tiers. While delegation occurs from one individual to another, decentralization is a broader concept that distributes authority across departments or units, promoting efficiency and autonomy.

6. Neha runs a factory wherein she manufactures shoes. The business has been doing well and she intends to expand by diversifying into leather bags as well as western formal wear thereby making her company a complete provider of corporate wear. This will enable her to market her business unit as the one stop for working women. Which type of structure would you recommend for her expanded organisation and why?

Ans: Neha’s expanded organization, a divisional organizational structure would be the most suitable.

7. The production manager asked the foreman to achieve a target production of 200 units per day, but he doesn’t give him the authority to requisition tools and materials from the stores department. Can the production manager blame the foreman if he is not able to achieve the desired target? Give reasons.

Ans: No, the production manager cannot blame the foreman if he fails to achieve the target of 200 units per day. The reason for this lies in the principle of “Authority-Responsibility Balance” in management. The principle of authority responsibility says that there should be a balance between authority and responsibility.

LONG ANSWER TYPE

1. Why delegation is considered essential for effective organising? 

Ans: Delegation refers to the downward transfer of authority from a superior to a subordinate. It is a prerequisite to the efficient functioning of an organisation because it enables a manager to use his time on high priority activities. It also satisfies the subordinate’s need for recognition and provides them with opportunities to develop and exercise initiative.

Delegation helps a manager to extend his area of operations as without it, his activities would be restricted to only what he himself can do. However, delegation does not mean abdication. The manager shall still be accountable for the performance of the assigned tasks. Moreover, the authority granted to a subordinate can be taken back and redelegated to another person. Thus, irrespective of the extent of delegated authority ,the manager shall still be accountable to the same extent as before delegation.

Delegation helps by preparing better future managers. Delegation empowers the employees by providing them with the chance to use their skills, gain experience and develop themselves for higher positions. 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 significant roles in the launch of new projects by replicating the work ethos they have absorbed from existing units, in the newly set up branches. Delegation of authority establishes superior subordinate relationships, which are the basis of hierarchy of management. It is the degree and flow of authority which determines who has to report to whom. The extent of delegated authority also decides the power that each job position enjoys in the organisation.

2. What is a divisional structure? Discuss its advantages and limitations. 

Ans: A divisional structure which is more suited to their activities. This is particularly true of those enterprises which have more than one category of products to offer. This is because although every organisation performs a set of homogeneous functions, as it diversifies into varied product categories, the need for a more evolved structural design is felt to cope with the emerging complexity. In a divisional structure, the organisation structure comprises separate business units or divisions. Each unit has a divisional manager responsible for performance and who has authority over the unit. Generally, manpower is grouped on the basis of different products manufactured. 

Advantages: The divisional structure offers many benefits.

Prominent among these are as follows: 

(a) Product specialisation helps in the development of varied skills in a divisional head and this prepares him for higher positions. This is because he gains experience in all functions related to a particular product. 

(b) Divisional heads are accountable for profits, as revenues and costs related to different departments can be easily identified and assigned to them. This provides a proper basis for performance measurement. It also helps in fixation of responsibility in cases of poor performance of the division and appropriate remedial action can be taken. 

(c) It promotes flexibility and initiative because each division functions as an autonomous unit which leads to faster decision making. 

(d) 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: The divisional structure has certain disadvantages.

Some of them are as follows: 

(a) Conflict may arise among different divisions with reference to allocation of funds and further a particular division may seek to maximise its profits at the cost of other divisions. 

(b) It may lead to increase in costs since there may be a duplication of activities across products. Providing each division with separate set of similar functions increases expenditure. 

(c) It provides managers with the authority to supervise all activities related to a particular division. In course of time, such a manager  may gain power and in a bid to assert his independence may ignore organisational interests.

3. Decentralisation is an optional policy. Explain why an organisation would choose to be decentralised. 

Ans: Decentralisation explains the manner in which decision making responsibilities are divided among hierarchical levels. Put simply, decentralisation refers to delegation of authority throughout all the levels of the organisation. Decision making authority is shared with lower levels and is consequently placed nearest to the points of action. In other words, decision making authority is pushed down the chain of command.

Decentralisation is much more than a mere transfer of authority to the lower levels of management hierarchy. It is a philosophy that implies selective dispersal of authority because it propagates the belief that people are competent, capable and resourceful. They can assume the responsibility for the effective implementation of their decisions. Thus this philosophy recognises the decision maker’s need for autonomy. The management, however, needs to carefully select those decisions which will be pushed down to lower levels and those that will be retained for higher levels. Table 4 provides a comparative look between delegation and decentralisation.

Decentralisation is a fundamental step and its importance can be understood from the following points:

(i) Develops initiative among subordinates: Decentralisation helps to promote self reliance and confidence amongst the subordinates. This is because when lower managerial levels are given freedom to take their own decisions they learn to depend on their own judgment. It also keeps them in a state wherein they are constantly challenged and have to develop solutions for the various problems they encounter.

(ii) Develops managerial talent for the future: Formal training plays an important part in equipping subordinates with skills that help them rise in the organisation but equally important is the experience gained by handling assignments independently.

(iii) Quick decision making: The management hierarchy can be looked upon as a chain of communication. In centralised organisation because every decision is taken by the top management the flow of information is slow as it has to traverse many levels. Response also takes time. 

(iv) Relief to top management: Decentralisation diminishes the amount of direct supervision exercised by a superior over the activities of a subordinate because they are given the freedom to act and decide albeit within the limits set by the superior. Also, personal supervision is generally replaced by other forms of control such as return on investment etc.

(v) Facilitates growth: Decentrali sation awards greater autonomy to the lower levels of management as well as divisional or departmental heads. This allows them to function in a manner best suited to their department and fosters a sense of competition amongst the departments. 

(vi) Better control: Decentralisation makes it possible to evaluate performance at each level and the departments can be individually  held accountable for their results. The extent of achievement of organisational objectives as well as the contribution of each department in meeting the overall objectives can be ascertained. 

4. Distinguish between centralisation and decentralisation. 

Ans: 

Basic	Centralisation	Decentralisation
Meaning	Centralization refers to the concentration of management and decision-making power at the top of the organizational hierarchy for the purpose of coordinating financial, human, and other business resources.	Decentralisation refers to systematic effort to delegate to the lowest level all authority except that which can be exercised at central points.
Status	Authority remains with the central body or top management.	It is the result of the policy decision of the top management.
Scope	Narrow, as decision-making is concentrated in one place.	It has wide scope as it implies extension of delegation to the lowest level of management.
Purpose	To ensure uniformity, consistency, and strong control.	To increase the role of the subordinates in the organisation by giving them more autonomy.
Example	Indian Railways (controlled by the central government).	Panchayati Raj system in India (local governance).

5. How is a functional structure different from a divisional structure? 

Ans: 

Basic	Functional Structure	Divisional Structure
Formation	Formation is based on functions.	Formation is based on product lines and is supported by functions.
Specialisation	Functional specialisation.	Product specialisation.
Responsibility	Difficult to fix on a department.	Easy to fix responsibility for performance.
Managerial Development	Difficult, as each functional manager has to report to the top management.	Easier autonomy as well as the chance to perform multiple functions helps in managerial development.
Cost	Functions are not duplicated hence economical.	Duplication of resources in various departments, hence costly.
Coordination	Difficult for a multiproduct company.	Easy, because all functions related to a particular product are integrated in one department.

6. A company, which manufactures a popular brand of toys, has been enjoying a good market reputation. It has a functional organisational structure with separate departments for Production, Marketing, Finance, Human Resources and Research and Development. Lately to use its brand name and also to cash on to new business opportunities it is thinking to diversify into manufacture of new range of electronic toys for which a new market is emerging. Which organisation structure should be adopted in this situation? Give concrete reasons with regard to benefits the company will derive from the steps it should take. 

Ans: Many large organizations with diversified activities transition from a functional organizational structure to a divisional structure, as it is more suitable for managing multiple product lines. This shift becomes essential when a company expands into new product categories requiring distinct strategies, resources, and decision-making processes.

In this case, the company, which already has a strong market reputation in the toy industry, plans to diversify into electronic toys, an emerging market segment. Since electronic toys require different production technologies, marketing approaches, and R&D efforts, a divisional structure would be the most suitable.

Reasons for Adopting a Divisional Structure:

(i) Specialization and Efficiency: Allowing each division to focus on a specific product, market, or geographic area, which enables deeper expertise and tailored strategies within that segment, ultimately leading to improved performance and responsiveness to unique customer needs.

(ii) Faster Decision-Making: The divisional structure provides autonomy to each division, enabling quick responses to market trends and technological advancements.

(iii) Better Performance Evaluation: Focusing on clearly defined metrics specific to each division, allowing for independent tracking of their performance, while ensuring alignment with overall company goals.

Thus, it can be said that business operates in a dynamic environment and those enterprises which fail to adapt to change are unable to survive. Hence, management must continuously review its plans and objectives and accordingly the organisation structure of the enterprise should also be subjected to periodic review to determine if modification is required.

7. A company manufacturing sewing machines set up in 1945 by the British promoters follows formal organisation culture in totality. It is facing lot of problems in delays in decision making. As the result it is not able to adapt to changing business environment. The work force is also not motivated since they cannot vent their grievances except through formal channels, which involve red tape. Employee turnover is high. Its market share is also declining due to changed circumstances and business environment. You are to advise the company with regard to change it should bring about in its organisation structure to overcome the problems faced by it. Give reasons in terms of benefits it will derive from the changes suggested by you.

Ans: The company should adopt a more decentralised and flexible organisational structure to improve decision-making, enhance adaptability, boost employee motivation, reduce turnover, and regain market share. Decentralisation explains the manner in which decision making responsibilities are divided among hierarchical levels. Put simply, decentralisation refers to delegation of authority throughout all the levels of the organisation. Decision making authority is shared with lower levels and is consequently placed nearest to the points of action. In other words, decision making authority is pushed down the chain of command. When decisions taken by the lower levels are numerous as well as important an organisation can be regarded as greatly decentralised. 

8. A company X limited manufacturing cosmetics, which has enjoyed a preeminent position in business, has grown in size. Its business was very good till 1991. But after that, new liberalised environment has seen entry of many MNC’s in the sector. With the result the market share of X limited has declined. The company had followed a very centralised business model with Directors and divisional heads making even minor decisions. Before 1991 this business model had served the company very well as consumers had no choice. But now the company is under pressure to reform. What organisation structure changes should the company bring about in order to retain its market share? How will the changes suggested by you help the firm? Keep in mind that the sector in which the company is FMCG. 

Ans: The company X Limited should shift from a centralised to a decentralised and divisional structure to respond faster to market changes and competition from MNCs.

(i) Faster Decision-Making: Empowering lower levels of management will allow quicker responses to consumer trends and competition.

(ii) Enhanced Innovation: Decentralization encourages creativity by reducing bureaucratic hurdles and allowing quicker implementation of new ideas.

(iii) Better Customer Focus: A divisional approach enables each unit to tailor products and marketing strategies to regional preferences.

(iv) Increased Operational Efficiency: Operational efficiency is all about how businesses reduce waste, improve productivity, and improve the quality of their products and services.

(v) Improved Employee Morale: Delegation of authority will motivate employees and foster accountability.