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Class 12 Commerce

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Organising

Organising

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Study Action Plan (Sorted by Difficulty)
Decentralization
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Delegation
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Divisional Structure
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Formal Organization
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Functional Structure
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Informal Organization
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Organizational Structure
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Span of Management
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Learning Objectives

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Learning Objectives

  • Explain the concept of organising.
  • Explain the process of organising.
  • Describe the importance of organising.
  • Explain the meaning, advantages and disadvantages of functional organisation.
  • Explain the meaning, advantages and disadvantages of divisional organisation.
  • Explain the meaning, advantages and disadvantages of formal and informal organisation.
  • Distinguish between formal and informal organisation.
  • Explain the concept of delegation and decentralisation.
  • Describe the importance of delegation and decentralisation.
  • Distinguish between delegation and decentralisation.

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Revision Notes & Summary

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Organising

Definition of Organising

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.

Steps in the Process of Organising

  1. Identification and Division of Work: Identify and divide the work that has to be done according to previously determined plans.
  2. Departmentalisation: Group similar activities together to facilitate specialisation.
  3. Assignment of Duties: Define the work of different job positions and allocate work accordingly to various employees.
  4. Establishing Reporting Relationships: Ensure each individual knows who to take orders from and to whom they are accountable.

Importance of Organising

  • Benefits of Specialisation: Leads to systematic allocation of jobs, reducing workload and enhancing productivity.
  • Clarity in Reporting Relationships: Helps in establishing authority and accountability.
  • Optimum Utilisation of Resources: Ensures resources are used effectively to achieve goals.
  • Growth and Better Administration: Facilitates the growth of an enterprise and improves administrative efficiency.
  • Greater Creativity: Encourages innovation and adaptability in a dynamic business environment.

Organisational Structure

  • Definition: The framework within which managerial and operating tasks are performed.
  • Types: Can be functional (grouped by functions) or divisional (grouped by products).
  • Span of Management: Refers to the number of subordinates under a superior.

Types of Organisation

Functional Organisation

  • Advantages: Specialisation, better control, managerial efficiency.
  • Disadvantages: Functional empires, conflict of interest, inflexibility.

Divisional Organisation

  • Advantages: Integration, product specialisation, greater accountability.
  • Disadvantages: Departmental conflicts, costly process, increase in general manager requirements.

Formal Organisation

  • Definition: Designed by management to achieve organisational goals.
  • Advantages: Clarity of roles, unity of command.
  • Disadvantages: Procedural delays, limited scope.

Informal Organisation

  • Definition: Arises from social interactions among employees.
  • Advantages: Speed, fulfillment of social needs.
  • Disadvantages: Resistance to change, may spread rumors.

Delegation and Decentralisation

Delegation

  • Definition: Transfer of authority from superior to subordinate.
  • Elements: Authority, Responsibility, Accountability.

Decentralisation

  • Definition: Distribution of decision-making authority to lower levels of management.
  • Comparison with Delegation:
    • Nature: Delegation is compulsory; Decentralisation is optional.
    • Freedom of Action: More control in delegation; greater freedom in decentralisation.
    • Scope: Narrow in delegation; wide in decentralisation.

Key Terms

  • Organising
  • Organisational structure
  • Departmentalisation
  • Delegation
  • Authority
  • Responsibility
  • Accountability
  • Functional structure
  • Divisional structure
  • Formal organisation
  • Informal organisation
  • Span of management
  • Centralisation
  • Decentralisation
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Practice Test – MCQs, True/False

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Multiple Choice Questions

A.

The number of subordinates a manager can effectively manage

B.

The number of managers in a company

C.

The total number of employees in an organization

D.

The number of departments in an organization
Correct Answer: A

Solution:

The span of management refers to the number of subordinates that can be effectively managed by a superior, influencing the organizational structure.

Chapter Concept:

Span of Management

A.

Faster spread of information

B.

Fulfillment of social needs

C.

Increased procedural delays

D.

Compensation for inadequacies in the formal organization
Correct Answer: C

Solution:

Increased procedural delays are not an advantage of informal organizations; they are typically associated with formal organizations.

Chapter Concept:

Informal Organization

A.

Increased costs due to duplication of activities.

B.

Lack of product specialization.

C.

Difficulty in fixing responsibility for performance.

D.

Limited scope for managerial development.
Correct Answer: A

Solution:

The divisional structure may lead to increased costs since there may be a duplication of activities across products, providing each division with a separate set of similar functions.

Chapter Concept:

Organizational Structure

A.

It centralizes decision-making authority.

B.

It promotes self-reliance and confidence among subordinates.

C.

It reduces the need for a management hierarchy.

D.

It limits the autonomy of lower-level managers.
Correct Answer: B

Solution:

Decentralization helps to promote self-reliance and confidence among subordinates by giving them the freedom to take their own decisions.

Chapter Concept:

Organizational Structure

A.

A company with a functional structure quickly adapts to market changes.

B.

Departments within a functional structure struggle to coordinate due to differing priorities.

C.

A functional structure allows for rapid decision-making across all levels.

D.

Employees in a functional structure have a broad understanding of all company operations.
Correct Answer: B

Solution:

In a functional structure, departments may face coordination problems as information has to be exchanged across functionally differentiated departments, leading to potential conflicts.

Chapter Concept:

Functional Structure

A.

Increased workload for managers.

B.

Improved employee motivation.

C.

Faster decision-making process.

D.

Development of future managers.
Correct Answer: A

Solution:

Delegation actually reduces the workload for managers by allowing them to focus on high-priority tasks, while subordinates handle routine tasks.

Chapter Concept:

Delegation

A.

It is deliberately designed by management.

B.

It arises spontaneously from personal interactions.

C.

It has a rigid structure.

D.

It follows a formal chain of command.
Correct Answer: B

Solution:

Informal organization emerges spontaneously from within the formal organization as a result of personal interaction among employees.

Chapter Concept:

Organizational Structure

A.

By strictly following the formal chain of command

B.

By resisting changes proposed by the formal organization

C.

By eliminating the need for formal communication

D.

By ensuring all employees adhere to formal rules
Correct Answer: B

Solution:

Informal organizations can resist changes proposed by the formal organization, which may delay or restrict growth.

Chapter Concept:

Informal Organization

A.

It facilitates quick decision-making.

B.

It leads to procedural delays due to the established chain of command.

C.

It encourages creativity and innovation.

D.

It allows for spontaneous decision-making.
Correct Answer: B

Solution:

A formal organization can lead to procedural delays as the established chain of command must be followed, which increases the time taken for decision making.

Chapter Concept:

Formal Organization

A.

It may lead to conflicts among divisions.

B.

It restricts managerial development.

C.

It reduces flexibility in decision making.

D.

It limits specialization within functions.
Correct Answer: A

Solution:

A divisional structure can lead to conflicts among divisions, particularly regarding resource allocation.

Chapter Concept:

Divisional Structure

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Organising

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True or False

Correct Answer: True

Solution:

Informal organization is a network of personal and social relationships that arise naturally among employees. These relationships can facilitate communication but may also resist change.

Chapter Concept :

Informal Organization

Correct Answer: True

Solution:

The span of management refers to the number of subordinates that can be effectively managed by a superior, which in turn influences the levels of management within the organizational structure.

Chapter Concept :

Span of Management

Correct Answer: True

Solution:

A functional structure, while promoting specialization and efficiency, can also lead to inflexibility and conflicts due to overemphasis on departmental goals and difficulties in inter-departmental coordination.

Chapter Concept :

Functional Structure

Correct Answer: False

Solution:

In a decentralised organisation, decision-making authority is distributed to lower levels, allowing decisions to be made closer to the points of action.

Chapter Concept :

Delegation

Correct Answer: True

Solution:

Decentralization refers to the systematic effort to delegate authority to the lowest levels, allowing decisions to be made closer to the point of action.

Chapter Concept :

Organizational Structure

Correct Answer: True

Solution:

The span of management is defined as the number of subordinates a manager can effectively manage, influencing organizational structure.

Chapter Concept :

Span of Management

Correct Answer: True

Solution:

A formal organization is structured by management to achieve specific goals and ensure clarity in roles and responsibilities.

Chapter Concept :

Formal Organization

Correct Answer: True

Solution:

Delegation is the process where authority and responsibility are transferred to a subordinate, but the superior remains accountable for the outcomes.

Chapter Concept :

Delegation

Correct Answer: True

Solution:

A functional structure groups activities based on functions, which promotes specialization and efficiency.

Chapter Concept :

Functional Structure

Correct Answer: False

Solution:

While the subordinate is responsible for the task, the superior remains accountable for the final outcome.

Chapter Concept :

Delegation

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