Skip to content
7 MIN LESSON · BUSINESS STUDIES

Class 12 Organising: Complete Concepts and Practice

Business Studies — Organising as arranging work, people and authority: the steps and importance of organising, span of management, functional and divisional structures with their merits, limits and suitability, formal and informal organisation, delegation and its elements, and decentralisation, with case-based practice.

Big picture

Once a plan is made, someone has to decide who does what, who reports to whom, and who decides what. That is organising: identifying and grouping the activities needed, assigning them, and establishing authority relationships.

The result of organising is an organisation structure, the framework within which managers and employees work. Exam questions often describe a company and ask which structure suits it, or present a manager handing over work and ask which element of delegation is involved.

Learning goals

  • Explain the concept, steps and importance of organising.

  • Explain organisation structure and span of management.

  • Compare functional and divisional structures and say which suits a given business.

  • Distinguish formal and informal organisation.

  • Explain delegation, its elements and importance.

  • Explain decentralisation, its importance, and how it differs from delegation.

Core ideas

1. Steps in the process of organising

  1. Identification and division of work: the total work is divided into manageable activities, avoiding duplication and sharing the burden. Example: a school divides work into teaching, admissions, accounts and transport.

  2. Departmentalisation: similar activities are grouped into departments or units, by function (production, finance) or by product, territory and so on.

  3. Assignment of duties: each job is given to the person best suited to it.

  4. Establishing reporting relationships: everyone knows whom to take orders from and to whom they are accountable, creating a hierarchy.

2. Importance of organising

  • Benefits of specialisation: repeated performance of a particular task makes workers experts.

  • Clarity in working relationships: lines of communication and authority are clear.

  • Optimum utilisation of resources: duplication and wastage are avoided.

  • Adaptation to change: a flexible structure allows the firm to adjust to changes in the environment.

  • Effective administration: a clear description of jobs and duties avoids confusion.

  • Development of personnel: delegation lets managers develop subordinates and frees them for innovation.

  • Expansion and growth: a sound structure allows the firm to add new products, markets and branches.

3. Organisation structure and span of management

The organisation structure is the framework that defines relationships between jobs, people and authority. It is usually shown in an organisation chart.

Span of management is the number of subordinates a manager can effectively supervise. A narrow span leads to a tall structure with many levels; a wide span leads to a flat structure with fewer levels.

4. Functional structure

Activities are grouped by major functions (production, purchase, marketing, finance, human resources), each under a functional head who reports to the managing director.

Advantages

Disadvantages

Benefits of specialisation

Emphasis on functional goals over organisational goals

Better control and coordination within a function

Coordination between departments becomes difficult

Helps increase managerial and operational efficiency

Conflicts of interest between departments

Avoids duplication of effort, so costs are lower

Inflexibility: people with narrow specialisation find it hard to see the whole

Easy training of employees on a narrow range of skills

Ensures that each function gets due attention

Suitable for: large organisations with one main product or a narrow product range, where operations need a high degree of specialisation. Example: a steel manufacturer.

5. Divisional structure

The organisation is divided into divisions by product line (or market), each with its own functional departments and a divisional head responsible for its profit or loss.

Advantages

Disadvantages

Develops varied skills in a divisional head and prepares them for top positions

Conflicts between divisions over allocation of funds and resources

Divisional heads are accountable for profit, so performance is easy to judge

Costs rise because functions are duplicated in each division

Promotes flexibility and initiative; each division works as an autonomous unit

Divisional managers may ignore organisational interests in favour of their own

Facilitates expansion: a new division can be added without disturbing others

Suitable for: organisations with a large variety of products made with different resources. Example: a group making cosmetics, garments and packaged foods.

6. Formal and informal organisation

Basis

Formal organisation

Informal organisation

Meaning

Structure of authority relationships designed by management

Network of social relationships that arises from personal interaction

Origin

Deliberately created by management

Arises naturally from friendships, interests and tastes

Authority

Arises from position

Arises from personal qualities

Behaviour

Governed by rules

Governed by group norms

Communication

Through the scalar chain

Through the "grapevine"; no fixed path

Purpose

Achieve organisational objectives

Satisfy social and psychological needs

Leadership

Managers are leaders by position

Leaders are chosen by the group

Nature

Stable and rigid

Unstable and flexible

Advantages of informal organisation: faster spread of communication, fulfilment of social needs, and support to formal organisation (it can be used to get feedback). Disadvantages: rumours spread, it may resist change, and group norms may go against organisational goals.

7. Delegation

Delegation is the downward transfer of authority from a superior to a subordinate. It is a compulsory process: no manager can do all the work alone.

Elements of delegation

Element

Meaning

Flows

Can it be delegated?

Authority

The right to give orders and take decisions

Downward

Yes

Responsibility

The obligation of a subordinate to perform the duty assigned

Upward

Arises from the superior–subordinate relationship

Accountability

Answerability for the final outcome

Upward

No; it cannot be passed on

A manager who delegates a task still remains accountable to their own superior for it. Authority should be commensurate with responsibility.

Example. The sales manager gives the regional manager authority to appoint salespeople and fixes a target. The regional manager is responsible for meeting it, but the sales manager remains accountable to the director for the region's sales.

Importance of delegation: effective management (managers focus on important matters), employee development, motivation of employees, facilitates growth, basis of management hierarchy, and better coordination.

8. Decentralisation

Decentralisation is the systematic delegation of authority at all levels, except what can be exercised only at the top. Decision-making authority is pushed down to the levels where decisions can best be made.

Importance of decentralisation

  • Develops initiative among subordinates and builds their self-confidence.

  • Develops managerial talent for the future, giving lower managers experience.

  • Quick decision-making, because decisions are taken close to the action.

  • Relief to top management from routine decisions, so they can focus on strategy.

  • Facilitates growth, since units have autonomy and compete with each other.

  • Better control, because performance of each unit can be evaluated separately.

Delegation and decentralisation compared

Basis

Delegation

Decentralisation

Nature

Compulsory; every manager must delegate

Optional; a policy decision of top management

Freedom of action

Limited; the superior keeps control

Greater freedom for lower levels

Status

A process

The result of a policy of extending delegation to all levels

Scope

Narrow; superior and immediate subordinate

Wide; whole organisation

Purpose

Reduce the manager's burden

Increase autonomy of lower levels

No organisation is completely centralised or decentralised; it needs a balance.

A reliable approach to case-based questions

  1. One main product with specialised tasks: functional structure. Many diverse products: divisional structure.

  2. Friendship groups, lunchtime talk, rumours: informal organisation.

  3. Handing over the right to decide: authority. Being obliged to do the task: responsibility. Answering for results: accountability.

  4. Authority spread across all levels by policy: decentralisation.

  5. For the process, match the case to the step: grouping similar jobs is departmentalisation.

Connections that matter

  • Principles of management: division of work, authority–responsibility, scalar chain and centralisation are applied here.

  • Staffing fills the positions created by organising.

  • Directing uses the communication channels and authority set up here.

Common mistakes

  • Saying accountability can be delegated. It cannot.

  • Recommending divisional structure for a single-product firm.

  • Treating decentralisation as compulsory. Delegation is compulsory; decentralisation is optional.

  • Calling informal organisation harmful only. It also speeds up communication and meets social needs.

Revision checklist

  • I can explain the four steps and seven points of importance of organising.

  • I can explain span of management.

  • I can compare functional and divisional structures and state when each suits.

  • I can distinguish formal and informal organisation.

  • I can explain the elements of delegation and why accountability stays with the delegator.

  • I can explain the importance of decentralisation and compare it with delegation.

Practise this topic →

Discussion

Sign in to join the discussion.

Sign in

No comments yet. Be the first to share your thoughts.