Unit: 5

Organising
Meaning of Organising
Organising includes appointing assignments, gathering tasks into offices, designating authority,
and distributing assets across the association. During the organising process, administrators
coordinate employees, assets, procedures, and policies to work with the objectives distinguished
in the plan. The organising function leads to the creation of an organisational structure which
includes the designing of roles to be filled by suitably skilled people and defining the inter
relationship between these roles so that ambiguity in performance of duties can be eliminated.
The aim of organizing is to enable people to work together for a common purpose.

Definitions
"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."
Louis A. Allen
"Organising is a system of consciously coordinated activities or forces of two or more persons."
Chester I. Barnard
"Organising involves the grouping of activities necessary to accomplish goals and plans, the
assignment of these activities to appropriate departments, and the provision for authority, delegation,
and coordination."
Koontz and O'Donnell
"Organising is the process of determining the tasks to be done, who will do them, and how those tasks
will be managed and coordinated."
Ricky W. Griffin:

1
Process of Organising

1. Identification & Division of Work:

The first step in the process of organizing involves identifying and dividing the work in
accordance with the predetermined plans. The work is divided into manageable activities so that
duplication of work can be avoided and the burden of work can be shared among the employees.
For example, in a bank every individual is assigned a job. One cashier accepts cash, one
cashier makes payments, one person issues cheque books, one person receives
cheques, etc. With division of work into jobs the banks work very smoothly and
systematically.
2. Departmentalization:
Once work is divided into small activities, similar and related jobs are grouped together. This
grouping is called departmentalization. E.g. departmentalization on the basis of territory,
products etc.
(a) Functional departmentation. Under this method jobs related to common function are grouped
under one department. For example, all the jobs related to production are grouped under
production department, jobs related to sales are grouped under sales department and so on.
(b) Divisional departmentation. When an organisation is producing more than one type of products
then they prefer divisional departmentation. Under these jobs related to one product are grouped
under one department. For example, if an organisation is producing cosmetics, textile and
medicines then jobs related to production, sale and marketing of cosmetics are grouped under
one department, jobs related to textile under one and so on.
3. Assignment Of Duties:

• It is important to state clearly the work of different job positions and allocate work
accordingly to employees.
• Once departments are formed, individual department heads are appointed for each
department.
• The work must be assigned to those who are best fitted to perform it well.
• E.g. finance job should be assigned to persons having qualifications and experience
in finance e.g. C.A‘s or MBA finance.

2
4. Establishing Reporting Relationships:

• Establishing authority and responsibility relationship helps to create a hierarchal structure

and also helps in coordination amongst various departments.
• Superior subordinate relations between different people and job positions is to be created,
so that everybody knows from whom he/she is to taking orders and to whom he/she can
issue orders.

Identification &
Division Of Work

Departmentalization

Assignment
Of Duties

Establishing
Reporting Relationships

Process of Organising

Importance of Organising
1. Benefits of specialization:
• Organizing leads to a systematic allocation of jobs amongst the work force.
• The division of work into smaller jobs reduces workload and enhance productivity and
repetitive performance leads to specialization.
2. Clarity in working relationships:
• Organising helps in defining all the jobs and also clarifying the limits of authority and
responsibility of each job.

• It helps in creating a hierarchical order thereby enabling the fixation of responsibility and
specification of the extent of authority to be exercised by an employee.
3. Optimum utilization of resources:
• Organisation leads to usage of all natural resources, financial resources and human
resources.
• The proper assignment of jobs avoids duplication of work and minimizes wastage of

3
 resources.
4. Effective Administration:
• It provides a clear description of jobs and related duties, which helps to avoid confusion
and duplication of work.
• Clarity in working relationships enables proper execution of work, which results
ineffective administration.
5. Adaption to Change:
• The process of organising is flexible which allows a business enterprise to accommodate
changes in the business environment.
• It also provides stability to an enterprise.
6. Development of Personnel:

• A well-designed organization structure encourages initiative and relative thinking on part

of the employees.
• When managers delegate their authority, it reduces their workload and thus can give time
on important areas of growth and opportunity to innovate thereby.
7. Expansion and growth:

• Organising helps in growth & diversification of an enterprise.

• By adding more job positions, departments, products lines, new geographical territories
etc. and thus will help to increase customer base, sales and profit.

4
 Benefits of
specialization

Clarity in
Expansion and
working
growth
relationships

IMPORTANCE
OF
ORGANISING
Optimum
Development of
utilization of
Personnel
resources

Adaption to Effective
Change Administration

Organisational Structure
The organizational structure can be defined as the framework within which managerial and
operating tasks are performed. It specifies the relationships between people, work and resources
in an organization. When the managers are performing organising function, an organisational
structure gets created automatically which defines the job positions, the authority,
responsibilities of different employees.
Organisational structure can be defined as "Network of job positions, responsibilities and
authority at different levels." Or it can be called as a frame work within which managerial and
operational tasks are performed. It specifies the relations between people, work and resources.
Span of management gives shape to organisational structure. Narrow span of management
results in tall structure whereas wide span result in flat structure. Span of management means
how many employees or subordinates can be effectively managed by one manager or how
many subordinates can be effectively controlled by one superior. When the authority and
responsibility relationships are established in organising process then the managers must keep in

5
mind the span of control. After deciding the span, a scalar chain is developed of all the superiors
and subordinates because the span of control clearly specifies who has to report to whom.

Under the organizational structure, various posts are created to perform different activities for
the attainment of the predetermined objectives of the enterprise. The structure provides a basis or
framework for managers and other employees to perform their functions.
Types of Organisational Structure
Whenever the manager is performing organising functions, it results in formation of an organisational
structure, which depicts the working style of an organisation. The organisational structure can be
defined as "A network of job positions, responsibilities and authority at different levels of
organisation." This structure shows the authority-responsibility relationship between the people
working at different job positions. This structure makes clear who is reporting to whom? Or who is the
boss and who is the subordinate?

The organisational structure can mainly be of two types which are:

(i) Functional Organisational Structure
(ii) Divisional Organisational Structure
1. Functional Organisational Structure:
In functional structure activities are grouped and departments are created on the basis of specific
functions to be performed. For example, all the jobs related to production are grouped under production
department, sales departments etc.
A functional structure groups employees based on their specialized skills, roles, or tasks. The
organization is divided into departments such as Marketing, Finance, Operations, Human Resources, and
IT. Each department reports to a functional head (e.g., CFO, CMO), who then reports to the top
management.
Analogy: Think of a symphony orchestra. It is divided into sections: strings, woodwinds, brass, and
percussion. Each section specializes in its own function but works together under a conductor to create a
harmonious performance.

6
 ADVANTAGES
DISADVANTAGES SUITABILITY
Functional structure
leads to occupational A Functional structure
specialisation since gives more importance Organizations which
emphasis is placed on to the objectives of require high degree of
specific functions. functional head than functional
Promotes efficiency in the objectives of specialization with
the utilisation of man organisation. diversified activities.
power. Lack of coordination Large organizations
Promotes control and among different producing one line of
coordination within a departments. product.
department. A conflict of interests
It helps in increasing will arise within
managerial and different departments.
operational efficiency. It may lead to
it reduces duplication inflexibility due to
of work. narrow perspective of
employees.
It helps in training
employees easily.
It ensures that
different functions get
due attention.

7
2. Divisional Organizational Structure
Dividing the whole enterprise according to the major products to be manufactured (like metal,
plastic, cosmetics etc.) is known as divisional organization structure.
A divisional structure groups employees based on products, projects, geographic locations, or customer
segments. Each division operates as a semi-autonomous unit with its own functional resources (like its
own marketing, finance, and HR teams).
Types:
Product-Based: e.g., Division for Laptops, Division for Smartphones, Division for Software.
Geographic-Based: e.g., North America Division, Europe Division, Asia-Pacific Division.
Customer-Based: e.g., Consumer Division, Business Division, Government Division.
Analogy: Think of a large university. It has different schools: the School of Engineering, the School of
Arts, and the School of Business. Each school has its own dean, faculty, administration, and budget, but
they all belong to the same university.

8
Advantages Disadvantages Suitability.
•Product specialization helps in • Conflicts may arise This structure is suitable in
the overall development of the among different divisions organizations producing
skills of departmental heads. on allocation of multi product or different
•It helps in the fixation of resources. lines of products
responsibility and
accountability of departmental • It may lead to increase in requiring product
heads costs since there may be specialization.
•provides a proper basis for a duplication of activities • Growing companies
assessing performance and in different product which intend to add
results of each division. divisions. more lines of products
•It facilitates expansion and • It provides managers in future adopt this
growth, as new divisions can with the authority to structure.
be added without
supervise all activities
interupting existing divisions
related to a particular
division.

Divisional Organisational Structure

9
Comparative view: Functional and Divisional Structure

Basis 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 specialization
Responsibility Difficult to fix on a department Easy to fix responsibility for
performance
Managerial Difficult, as each functional manager Duplication of resources in various
Development has to report to the top management departments, hence costly
Cost Functions are not duplicated hence Duplication of resources in
economical various departments, hence costly.
Coordination Difficult for a multiproduct Easy, because all functions related to a
company. particular product are integrated in one
department.

Formal Organisation
When the managers are carrying on organising process then as a result of organising process an
organisational structure is created to achieve systematic working and efficient utilisation of
resources. This type of structure is known as formal organisational structure. Formal
organisational structure clearly spells out the job to be performed by each individual, the
authority, responsibility assigned to every individual, the superior-subordinate relationship and
the designation of every individual in the organisation. This structure is created intentionally by
the managers for achievement of organisational goal. Formal organisation refers to the
organisation structure that is designed by the management to accomplish organizational goals. In
a formal organisation the boundaries of authority & responsibility are clearly defined and there
is a systematic coordination among the various activities to achieve organizational objectives.
Features of Formal Organisation:
1. The formal organisational structure is created intentionally by the process of organising.
2. The purpose of formal organisation structure is achievement of organisational goal.
3. In formal organisational structure, each individual is assigned a specific job.

10
 4. In formal organisation, every individual is assigned a fixed authority or decision-making power.
5. Formal organisational structure results in creation of superior-subordinate relations.
6. Formal organisational structure creates a scalar chain of communication in the organisation.
Advantages of Formal Organisation
1. Systematic working. Formal organisation structure results in systematic and smooth functioning
of an organisation.
2. Achievement of organisational objectives. Formal organisational structure is established to
achieve organisational objectives.
3. No overlapping of work. In formal organisation, structure work is systematically divided among
various departments and employees. So there is no chance of duplication or overlapping of work.
4. Coordination. Formal organisational structure results in coordinating the activities of various
departments.
5. Creation of chain of command. Formal organisational structure clearly defines superior
subordinate relationship, i.e., who reports to whom.
6. More emphasis on work. Formal organisational structure lays more emphasis on work than
interpersonal relations.
Disadvantages of Formal Organisation
1. Delay in action. While following scalar chain and chain of command actions get delayed in
formal structure.
2. Ignores social needs of employees. Formal organisational structure does not give importance to
psychological and social need of employees which may lead to demotivation of employees.
3. Emphasis on work only. Formal organisational structure gives importance to work only, it
ignores human relations, creativity, talents, etc.
Informal Organisation
In the formal organisational structure, individuals are assigned various job positions. While
working at those job positions, the individuals interact with each other and develop some social
and friendly groups in the organisation. This network of social and friendly groups forms
another structure in the organisation which is called informal organisational structure. The
informal organisational structure gets created automatically and the main purpose of such
structure is getting psychological satisfaction. The existence of informal structure depends upon
the formal structure because people working at different job positions interact with each other to
form informal structure and the job positions are created in formal structure. So, if there is no
11
formal structure, there will be no job position, there will be no people working at job positions
and there will be no informal structure.
Features of Informal Organisation
1. Informal organisational structure gets created automatically without any intended efforts
of managers.
2. Informal organisational structure is formed by the employees to get psychological
satisfaction.
3. Informal organisational structure does not follow any fixed path of flow of authority or
communication.
4. Source of information cannot be known under informal structure as any person can
communicate with anyone in the organisation.
5. The existence of informal organisational structure depends on the formal organisation
structure.
Advantages of Informal Organisation
1. Fast communication. Informal structure does not follow scalar chain so there can be
faster spread of communication.
2. Fulfills social needs. Informal communication gives due importance to psychological
and social need of employees which motivates the employees.
3. Correct feedback. Through informal structure the top level managers can know the real
feedback of employees on various policies and plans.
Strategic Use of Informal Organisation. Informal organisation can be used to get
benefits in the formal organisation in the following ways:
• The knowledge of informal group can be used to gather support of employees and
improve their performance.
• Through grapevine important information can be transmitted quickly.
• By cooperating with the informal groups, the managers can skillfully take the advantage
of both formal and informal organisation.
Disadvantages of Informal Organisation
1. Spread rumours. According to a survey 70% of information spread through informal
organisational structure are rumours which may mislead the employees.
2. No systematic working. Informal structure does not form a structure for smooth
working of an organisation.
12
 3. May bring negative results. If informal organisation opposes the policies and changes
of management, then it becomes very difficult to implement them in organisation.
4. More emphasis to individual interest. Informal structure gives more importance to
satisfaction of individual interest as compared to organisational interest.
Difference between Formal and Informal Organisation

Basis Formal organisation Informal Organisation

Meaning It refers to the structure of It refers to the network of social
well-defined authority and relationships arising out of interaction
among
employees
Origin As a result of company rules Arises as a result of social interaction
and policies
Authority Arises by virtues of positions Arises out of personal qualities.
in management
Adherence to rules Violations of rules may lead No such penalties and punishments.
to penalties and punishments.
Flow to Communication takes place Not through a planned route, it can take place
Communication through the scalar chain in any direction.
Purpose To achieve planned To satisfy social and cultural needs and fulfill
organizational objectives. common interests
Nature Rigid Flexible

Structure Well defined structure of No clear-cut structure because

tasks and relationships. of complex network of relationships.
Flow of Authority Authority flows from top to Authority flows vertically as well as
bottom i.e. downwards. horizontally.
Leadership Managers are leaders Leaders may or may not be managers. They are
chosen by the group.

13
Delegation
“Delegation of authority merely means the granting of authority to subordinates to operate within
prescribed limits.”
Theo Haimman

Delegation refers to the downward transfer of authority from a superior to a subordinate

employee. It is a pre-requisite to the efficient functioning of an organisation because it enables a
manager to use his/ her time on high priority activities. Importance of delegation is that it helps
in effective management, employee development, motivation, growth and coordination.
Elements of Delegation

1. Authority: Authority refers to the right to take decisions in order to guide the activities of
others. Authority determines the superior subordinate relationship. Laws and the rules
and regulations of the organisation restrict authority. Authority flows downward.
2. Responsibility: Responsibility is the obligation of a subordinate to perform properly the
assigned duty. If the subordinate has the responsibility for a job, he/ she must be given
necessary authority to carry out that task.
3. Accountability: Accountability implies being accountable for the final outcome. When a
superior assigns a work to a subordinate, he/she is answerable to the superior for its
outcome.
Difference between Authority, Responsibility and Accountability
Basis Authority Responsibility Accountability
Meaning Right to command Obligation to perform an Answerable for the outcome of
assigned task. the assigned task.
Origin Arises from formal Arises from delegated Arises from responsibility
position authority
Delegation Can be delegated Cannot be entirely Cannot be delegated at all
delegated
Flow Downward flow from Upward flow from Upward flow from subordinate
superior to subordinate to superior. to superior.
subordinate.

14
Importance of Delegation
1. Reduction of Executives’ work load: It reduces the work load of officers. They can thus utilize
their time in more important and creative works instead of works of daily routine.
2. Employee development: Employees get more opportunities to utilize their talent which allows
them to develop those skills which will enable them to perform complex tasks.
3. Quick and better decision are possible: The subordinate is granted sufficient authority so they
need not to go to their superiors for taking decisions concerning the routine matters.
4. High Morale of subordinates: Because of delegation of authority to the subordinates they get
an opportunity to display their efficiency and capacity.
5. Better coordination: The elements of delegation – authority, responsibility and accountability
help to define the powers, duties and answer ability related to various job positions which
results in developing and maintaining effective coordination.
Decentralisation
“Decentralisation refers to systematic efforts to delegate to the lowest level, all authority except
the one which can be exercised at central points”.
Louis Allen

Decentralisation means delegation of authority throughout all the levels of the organisation. This
empowers lower levels to take decisions regarding problems faced by them without having to go
to the upper levels. In other words, decision making authority is given to all the employees at all
levels depending on the job each one of them are handling

An organisation is centralized when the decision-making authority is retained by the top-level

management.
Importance of Decentralisation
1. Develops initiative among subordinates: It helps to promote confidence and self-reliance in the
subordinates as they are given freedom to take their own decisions.
2. Develops managerial talent for future: Training given by the organisation and the experience
gained from handling the projects increases the talent of the managers and employees.
3. Quick decision making: Since the managerial decisions are taken at all levels nearest to the
point of action helps them to take better and quick decisions.
4. Relieves the top management: By the delegation of work, the daily managerial jobs are

15
 assigned to the subordinates, which leaves enough time with the superiors to look into priority
areas.
5. Facilitates growth: It allows the departmental heads and employees to perform in the best
possible manner considering all the aspects of their department, which in turn increases
productivity, efficiency and facilitates growth.
6. Better Control: Evaluation of performance is possible at each level, which results in complete
control over all the other activities.
Difference between Delegation and Decentralization

Basis Delegation Decentralisation

Nature It is a compulsory act. Decentralisation is an optional policy
decision.
Freedom of action Less freedom to take Less control over executives
decisions due to more control by hence greater freedom of action.
the superiors.
Status It is a process followed to share It is the result of the policy decision of
tasks. the top
management.
Scope It has narrow scope, as it is It has wide scope as it implies
limited to superior and his extension of delegation to the lowest
immediate subordinate. level of management.
Purpose Narrow as it is confined to a To increase the role of the
superior and his immediate and subordinates in the
subordinate. organisation by giving them more
autonomy.

16
 Case Studies
Case Study 1: The Growing Pains of "Artisan Creations"
Scenario: Artisan Creations started as a small boutique handicraft store run by Mrs. Gupta. She handled
everything—buying raw materials, designing products, managing the single shop, and keeping finances.
As demand grew, she expanded to three stores across the city and hired 20 employees. However, chaos
ensued. Employees were confused about their roles; sometimes two people would do the same task
while other tasks were left undone. Mrs. Gupta was overworked, making all decisions, big and small.
There was no clear system for who reported to whom, leading to communication gaps and delays.
Questions:
1. Identify which step of the organising process was completely missing at Artisan Creations, leading to
the chaos.
2. Explain two benefits Mrs. Gupta can achieve by implementing a proper organisational
structure.
3. Suggest a suitable organizational structure for Artisan Creations and justify your answer.
Refer to page no:23
Case Study 2: "NexGen Electronics" Shifts its Structure
Scenario: NexGen Electronics was a successful company with a functional structure (Production,
Marketing, Finance, R&D departments). It manufactured only televisions. To diversify, it started
manufacturing laptops, smartphones, and headphones. Top management soon faced problems. The
Production head was overwhelmed with different product needs. Marketing found it difficult to create
unique strategies for each product. Profitability of individual products became difficult to assess.
Conflicts arose over resource allocation between product lines.
Questions:
1. Why did the existing functional structure become unsuitable for NexGen after diversification?
2. Which organisational structure should NexGen adopt now? List two advantages of this new structure.
3. State one disadvantage that might arise due to this structural change.
Refer to page no:24

Case Study 3: Delegation at "Green Earth Landscaping"

Scenario: Mr. Kapoor is the manager of Green Earth Landscaping. He believes in his team. He assigns a
project to his subordinate, Anjali: "Anjali, I want you to handle the landscaping project for the new
business park. You have the authority to hire two temporary gardeners and spend up to ₹50,000 on
17
plants and materials. Get it done within three weeks and keep me updated on the progress." Anjali
successfully completes the project but exceeds the budget by ₹5,000 due to an unexpected rise in plant
costs.

Questions:
1. Identify the three elements of delegation in Mr. Kapoor's instructions.
2. In this situation, who is accountable for the outcome of the project? Justify your answer.
3. If Mr. Kapoor had to take permission for every small decision from his own boss, what concept
would be lacking in the overall company? Explain it briefly.
Refer to page no:24

Case Study 4: The Informal "Book Club"

Scenario: At Innovate Software Solutions, the formal structure is strict, and communication must follow
the hierarchy. A group of five employees from different departments—coding, testing, and design—start
having lunch together every day. They discover a shared passion for classic science fiction. They start a
casual book club, sharing books and discussing them. Over time, this group begins to discuss work
challenges informally. A designer might get a quick solution to a codingrelated UI problem from a coder
in the club faster than through official channels.
Questions:
1. What is this book club an example of? Define it.
2. List two positive effects this group can have on the organisation.
3. List one potential negative effect management should be aware of.
Refer to page no:24-25

18
Test your knowledge
Multiple Answer Questions
1. What is the primary aim of organizing?
a) To maximize profit
b) To enable people to work together for a common purpose
c) To create a complex hierarchy
d) To eliminate all forms of communication
2. The first step in the process of organizing is:
a) Departmentalization
b) Establishing Reporting Relationships
c) Identification and Division of Work
d) Assignment of Duties
3. Grouping similar and related jobs together is known as:
a) Specialization
b) Departmentalization
c) Accountability
d) Decentralization
4. A Finance job should ideally be assigned to a person with a qualification in:
a) Marketing
b) Human Resources
c) Finance (e.g., CA, MBA Finance)
d) Production
5. Which of the following is NOT an importance of organizing?
a) Benefits of Specialization
b) Creates confusion in duties
c) Clarity in working relationships
d) Optimum utilization of resources
6. An organizational structure that groups activities based on functions like production and sales
is called:
a) Divisional Structure
b) Functional Structure
c) Informal Structure
19
d) Centralized Structure
7. A major disadvantage of the Divisional Structure is:
a) Functional Specialization
b) Duplication of activities, leading to higher costs
c) Difficult to fix responsibility
d) Hinders managerial development
8. The network of social relationships among employees is called:
a) Formal Organisation
b) Scalar Chain
c) Informal Organisation
d) Delegation
9. Which element of delegation refers to the right to take decisions?
a) Responsibility
b) Accountability
c) Authority
d) Leadership
10. Accountability arises from:
a) Authority
b) Responsibility
c) Centralization
d) Formal Position
11. Decentralization relieves the top management by:
a) Increasing their workload
b) Delegating daily managerial jobs to subordinates
c) Centralizing all decisions
d) Reducing employee initiative
12. Which of the following is a advantage of decentralization?
a) Quicker decisionmaking
b) Strict control by top management
c) No need for managerial talent
d) Hinders growth

20
13. Violation of rules in a Formal Organisation may lead to:
a) Promotions
b) Penalties and punishments
c) social boycott only
d) Nothing
14. Authority in an organization flow:
a) Horizontally
b) Upwards
c) Downwards
d) In all directions
15. The number of subordinates a superior can effectively manage is called:
a) Chain of Command
b) Span of Management
c) Delegation
d) Accountability
16. A structure suitable for a company producing multiproducts is:
a) Functional Structure
b) Informal Structure
c) Divisional Structure
d) Simple Structure
17. Which of the following cannot be entirely delegated?
a) Authority
b) Responsibility
c) Accountability
d) Both b & c
18. The purpose of an Informal Organisation is to:
a) Achieve organizational goals
b) Satisfy social and cultural needs
c) Create a rigid structure
d) Implement company policies
19. Organizing facilitates adaptation to change because it is:
a) Rigid

21
b) Flexible
c) Costly
d) Based on products
20. Establishing reporting relationships helps to:
a) Create ambiguity
b) Create a hierarchical structure and aid coordination
c) Avoid specialization
d) Duplicate work
Short Answer Type Questions (15 Questions)
1. Define the term 'Organising' as a process.
2. State the first step in the process of organizing. Why is it important?
3. What is meant by 'Departmentalization'? Give an example.
4. Why is it important to establish clear reporting relationships within an organization?
5. Explain how organizing leads to 'Benefits of Specialization'.
6. How does organizing provide 'Clarity in working relationships'?
7. Differentiate between 'Authority' and 'Responsibility' on any two bases.
8. List any two advantages of a Functional Structure.
9. List any two disadvantages of a Divisional Structure.
10. What is an 'Informal Organisation'? How does it originate?
11. Why is 'Delegation' considered essential for effective management?
12. What is meant by 'Accountability' as an element of delegation?
13. Give any two reasons why 'Decentralization' is important.
14. How does decentralization aid in the 'Development of managerial talent for the future'?
15. Differentiate between 'Delegation' and 'Decentralization' on the basis of scope.
Long Answer Type Questions (10 Questions)
1. Explain the steps in the process of organizing in detail.
2. "Organising facilitates administration and growth." Explain any five points highlighting the
importance of organizing.
3. Describe the Functional and Divisional structures of organization. Compare them on the basis of (i)
Formation, (ii) Specialization, and (iii) Responsibility.
4. Differentiate between Formal and Informal organisations on the basis of (i) Origin, (ii) Purpose, (iii)
Flow of authority, and (iv) Adherence to rules.

22
5. Define 'Delegation'. Explain the three essential elements of a good delegation.
6. "Delegation is the key to effective management." Do you agree? Justify your answer by explaining
the importance of delegation.
7. What is meant by 'Decentralization'? Discuss its importance in a large organization.
8. "Decentralization is an extension of delegation." Comment. Compare and contrast delegation and
decentralization.
9. How does a well-defined organizational structure lead to optimum utilization of resources and
effective administration?
10. Despite its advantages, a divisional structure can be expensive. Explain the drawbacks of a divisional
structure and state its suitability.
Explanation (Case Studies)
Case Study 1:
Answers:
1. The step of Departmentalization was missing. Mrs. Gupta hired employees but did not group similar
and related activities into departments (e.g., Purchase, Sales, Design, Finance). This lack of
grouping led to confusion and duplication of work.
2. Two benefits are:
Clarity in Working Relationships: A clear structure will define who is responsible for what and
who reports to whom, eliminating confusion and improving coordination.
Reduction in Workload (Effective Administration): By delegating authority to department heads,
Mrs. Gupta's workload will reduce, allowing her to focus on strategic decisions like expansion
and new designs.
3. A Functional Structure would be most suitable. Since the business is focused on a single product line
(handicrafts) but has grown in scale, departments can be created based on functions like
Production/Design, Purchasing, Marketing & Sales, and Finance. This would bring functional
specialization (e.g., a finance expert handling all money matters) and is economical for a
business of this size.
Case Study 2:
Answers:
1. The functional structure became unsuitable because it was difficult to focus on or hold anyone
accountable for the performance of each distinct product line (TVs, laptops, etc.). Coordination
for each unique product became complex within the rigid functional departments, and assessing

23
 which product was profitable was a challenge.
2. NexGen should adopt a Divisional Structure based on product lines (e.g., TV Division, Laptop
Division, Smartphone Division).
Advantages:
Easy Fixation of Responsibility: The head of each division can be held accountable for the profit
and loss of their specific product.
Product Specialisation: Each division can focus exclusively on the unique production,
marketing, and distribution needs of its product, leading to better performance.
3. One Disadvantage: It may lead to an increase in costs due to the duplication of activities (each
division might have its own separate marketing, HR, and finance teams).
Case Study 3:
Answers:
1. The three elements are:
Authority: "You have the authority to hire... and spend up to ₹50,000..."
Responsibility: "...handle the landscaping project... Get it done within three weeks..."
Accountability: "...keep me updated on the progress." (Implies she is answerable for the result).
2. Anjali is accountable. Even though Mr. Kapoor delegated the authority and responsibility,
accountability (being answerable for the final outcome) cannot be delegated. She must explain
the budget overrun to Mr. Kapoor.
3. The concept lacking would be Decentralization. The company would be centralized if all decisions,
even small ones, must be approved by top levels. Decentralization refers to systematically
pushing decision-making authority down to the levels where the work is being done.
Case Study 4:
Answers:
1. This is an example of an Informal Organisation. It is a network of social relationships that arises
naturally out of the interaction between employees based on common interests, attitudes, and
personal bonds, rather than official rules.
2. Positive effects:
Faster Communication: It leads to a faster spread of information and can bypass slow, formal
channels (as seen with the work problem solution).
Satisfies Social Needs: It provides a sense of belonging and social satisfaction, which can improve
morale and reduce boredom at work.

24
3. Potential negative effect: It can spread rumors or misinformation (grapevine) which can sometimes
lead to misunderstandings and negatively impact the work environment.

Answer Key
1. b) To enable people to work together for a common purpose
2. c) Identification and Division of Work
3. b) Departmentalization
4. c) Finance (e.g., CA, MBA Finance)
5. b) Creates confusion in duties
6. b) Functional Structure
7. b) Duplication of activities, leading to higher costs
8. c) Informal Organisation
9. c) Authority
10. b) Responsibility
11. b) Delegating daily managerial jobs to subordinates
12. a) Quicker decision-making
13. b) Penalties and punishments
14. c) Downwards
15. b) Span of Management
16. c) Divisional Structure
17. d) Both b & c (Responsibility & Accountability)
18. b) Satisfy social and cultural needs
19. b) Flexible
20. b) Create a hierarchical structure and aid coordination

25