Organising – Class 12 Business Studies Chapter 5 Notes & NCERT PDF

Introduction: The Wipro Story

The chapter opens with Wipro Technologies, which set out to compete with giants such as IBM and Accenture. To become customer-oriented, Wipro separated itself into several subsidiaries by product line (telecommunications, engineering, financial services, etc.) and shifted from a centralised to a decentralised management system. The lesson: once plans are made, it is organising that puts them into action.

"Organising is the process of defining and grouping the activities of the enterprise and establishing authority relationships among them." (Theo Haimann)

Louis Allen defines organising as the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority, and establishing relationships so that people work most effectively together in accomplishing objectives.

Steps in the Process of Organising

The NCERT example: twelve students must unload new library books, stock shelves and dispose of waste. If each works in their own way there is confusion; if one student groups them, divides work, assigns quotas and sets reporting relationships, the job is done faster.

Importance of Organising

Organisation Structure and Span of Management

Organisation structure is the framework within which managerial and operating tasks are performed. Peter Drucker warns: "organisation structure is an indispensable means; and the wrong structure will seriously impair business performance and even destroy it." Span of management refers to the number of subordinates that can be effectively managed by a superior; it determines the levels of management in the structure.

Functional Structure

Grouping jobs of similar nature into functions (production, purchase, marketing, accounts, personnel), all reporting to a coordinating head.

Divisional Structure

Separate business units or divisions, usually by product (for example cosmetics, clothing). Each division is multifunctional and self-contained and works as a profit centre under a divisional manager.

Case: ONGC

ONGC's system run by functional heads often meant delays exceeding a year in urgent field decisions. It sought help from McKinsey, and a new structure of 14 assets and 11 centralised services was rolled out.

Formal and Informal Organisation

Formal organisation is the structure deliberately designed by management, with defined authority and responsibility. Chester Barnard calls it "a system of consciously coordinated activities of two or more persons toward a common objective." Advantages: easy fixation of responsibility, no role ambiguity, unity of command, effective accomplishment of goals, stability. Limitations: procedural delays, may not recognise creative talent, does not show the complete picture of human relationships.

Informal organisation is a network of social relationships arising spontaneously from interaction (friends who play cricket on Sundays or meet for coffee). Keith Davis: "a network of personal and social relations not established or required by the formal organisation but arising spontaneously." It has no written rules and no fixed lines of communication; leaders are chosen by the group. Advantages: fast spread of information and quick feedback, fulfils social needs, compensates for inadequacies of formal structure. Disadvantages: rumours, resistance to change, pressure to conform to group norms. Management should use it, not try to eliminate it.

Delegation

Delegation is the downward transfer of authority from a superior to a subordinate. It is not abdication: the manager remains accountable. Louis Allen: delegation is "the entrustment of responsibility and authority to another and the creation of accountability for performance."

Authority must be commensurate with responsibility: more authority than responsibility invites misuse; more responsibility than authority makes a person ineffective. In short, authority is delegated, responsibility is assumed, accountability is imposed.

Importance: effective management, employee development, motivation, facilitation of growth, basis of management hierarchy, better coordination.

Decentralisation

Decentralisation is delegation of authority throughout all levels, placing decisions nearest to the points of action. Fayol: "Everything which goes to increase the importance of a subordinate's role is decentralisation, everything that goes to reduce it is centralisation." Complete centralisation or decentralisation is unrealistic; every organisation needs a balance.

Importance: develops initiative; develops managerial talent for the future; quick decision making; relief to top management; facilitates growth; better control. Johnson & Johnson operates as 190 smaller companies, combining the advantages of being big with the agility of small firms.

Delegation vs Decentralisation

Key-Facts Sheet

Board Exam Focus

Key Terms (Hindi)

Common Mistakes