Organizational Structure - Management Principles PDF

(CHAP-5) ORGANISING INTRODUCTION Organising function of management follows the planning function. Once the objectives have been set up, management has to identify and establish productive relationships among various activities and resources required for implementing pla...

(CHAP-5) ORGANISING INTRODUCTION Organising function of management follows the planning function. Once the objectives have been set up, management has to identify and establish productive relationships among various activities and resources required for implementing plans. Organising means structuring of an organization. Q1. What do you mean by organizing? Ans: Organising refers to the process of identifying and grouping various activities and bringing together physical, financial and human resources and establishing productive relationship among them for the achievement of specific goals. Q2. Define organizing as a process and briefly explain the steps involved in the process of organizing. Ans: According to Theo Haimann, organizing is the process of defining and grouping the activities of the enterprises and establishing authority relationships among them. Steps in the process of organizing STEP 1 Identification and Division of work STEP 2 Departmentalisation STEP 3 Assigning of duties Establishing Authority and Reporting STEP 4 Relationships In order to complete the organizing function of management following steps are taken: 1. Identification and division of work. 2. Departmentalisation 3. Assigning of duties 4. Establishing Authority and Reporting Relationships. (1) Identification and Division of work: The first step of organizing is the identification and division of work. In this step, the total work is divided into various activities. Such division of work into jobs is necessary because of the following reasons:- a) One individual can’t perform the entire work. So, by dividing the work the burden of work can be shared among the employees. b) It facilitates specialization of work and skills. c) The work is divided into manageable activities. So the duplication can be avoided. d) This would also increase the efficiency of firm. (2) Departmentalisation: After various activities have been designed in order to achieve the objectives of the company, starts the grouping of activities. The same type of activities are grouped together and assigned to a particular department. Departments can be created using several criteria as basis. Examples of some of the most popularly used basis are:- a) Territory (North, South, East and West) b) Products (Cosmetics, clothes etc.) Choice of the basis of departmentalization depends upon the nature, objectives and size of an enterprise. (3) Assignment of duties: After all the activities have been assigned to different departments, the responsibility of each individual or post is decided. In other words, what functions they have to perform for the achievement of the objectives of the organization are clearly said them. E.g. Production manager, marketing manager, finance manager etc. they should also be given adequate authority so as to enable them to perform the assigned duties only. (4) Establishing authority and reporting relationships: When two or more than two persons work for the attainment of common goals their inter-relationship must be defined very clearly. Everybody should know who is his superior and who is his subordinate. This results in creation of a structure of various positions arranged in a chain of command from top level to operative level. The establishment of such reporting relationships helps in coordination among various departments. Q3. Describe the importance/significance of organizing. Ans: Importance of organizing: 1. Benefits of specialization: In the process of organising various related activities are grouped on the basis of similarity. When similar or related jobs are performed by one individual or one department it leads to specialization. Thus, it promotes speed and efficiency. Reduces work load. 2. Clarity in working relationships: Under the process of organising, the work of the managers and non-managers is clearly defined. Everybody is informed about the work that they are expected to do. Not only this, activities of all the departments are detailed in writing. It helps in avoiding duplication of work and overlapping in responsibilities. 3. Effective administration: Organising provides a clear description of jobs and related duties. This helps to avoid confusion and duplication. Clarity in working relationships enables proper execution of work. This brings effectiveness in administration. 4. Optimum utilization of resources: A sound organization helps in the optimum utlisation of technological and human resources by avoiding duplication of work and overlapping of efforts. There is also no possibility of any activity being left out. 5. Adaptation: Organisational structure facilitate adjustment to change in work load caused by changing conditions in the external environment related to technology and markets. Organising function helps the organization in adapting itself to various changes. For e.g. if the jobs are well defined the work is not effected when one person leaves the job as other person who takes over will not face any problem. 6. Coordination: The organization structure itself serves as a mechanism for coordination. All the activities are coordinated in advance at a time of creating organizational structure. All activities are clearly defined and linked together by establishing authority and responsibility relationship. Ultimately, it leads to coordination. 7. Development of Employees: Organising promotes creativity among the managers. Effective delegation allows the managers to reduce their work load by assigning routine jobs to their subordinates. This gives them time to explore areas for growth and thereby strengthening the competitive position of company. 8. Expansion and Growth: Organising helps in growth and diversification of an enterprise. It allows business enterprises to add more jobs, departments and even diversify their product lines. CONCLUSION:- Thus, organising is process by which the manger brings order out of chaos, removes conflicts among people over work and creates an environment suitable for team work. Q4. What do you mean by an organizational structure? Ans: Meaning- The process of organising leads to the creation of organizational structure. It can be defined as a system of job positions and authority relationships. The organizational structure provides the basic framework to managers. There are various factors which are to be considered for building an organizational structure. The most commonly found forms of the organizational structure are:- a) Functional Structure b) Divisional Structure Q5. What is ‘Span of Control’ or ‘Span of Supervision’ or ‘Span of Management’? Ans: Span of management:- It refers to number if subordinates that can be effectively managed by superior. It gives shape to the organizational structure. It determines the level of managements in the structure. Q6. Why a proper organizational structure is important? Ans: Importance of an appropriate organizational structure:- 1. Proper organizational structure is essential to ensure smooth flow of communication and better control over the operations of the business enterprise. 2. Organisational structure provides a basic framework to the managers. 3. An effective structure will lead to the profitability of the enterprise only. Conclusion:- As an organization grows, coordination becomes difficult due to introduction of new functions. Thus, for an organization to function smoothly and face environmental changes, it becomes necessary for the organization to pay attention to its structure. TYPES OF ORGANISATIONAL STRUCTURE The organizational structure can be of two types: Q7. What do you mean by functional structure? Ans: When activities or jobs are grouped keeping in mind the function (main) of the organization, then it is called functional structure. In functional structure each major function of business is organised as a separate department. Departments can further divided into various sub-departments or sections. For e.g. All the jobs related to production are grouped in production department, related to sales in sales department, related to purchase in purchase department. MANAGING DIRECTOR HUMAN RESOURCES MARKETING RESEARCH & PURCHASING DEVELOPMENT Q8. Explain advantages and disadvantages of this form of organization. Ans: ADVANTAGES 1. Specialisation: When the activities are grouped according to the types of functions then all the related activities are performed at on place (in one department). Each department is headed by an expert manager. This leads to high efficiency and specialization. 2. Easy Supervision: The supervisor becomes familiar with the type of task to be performed as all tasks are related to one function only. As a result, he can supervise and guide his employees very easily. 3. Efficiency: It helps in increasing managerial and operational efficiency which results in increased profits. 4. Minimizes cost: It leads to minimum duplication of the efforts which results in economies of scale and thus, reduces cost. For example: the function of finance is only carried out by finance department. There is no need to establish two or more departments. It makes possible to utilize the human and other resources effectively. 5. Attention: It ensures that different functions get due attention. As there are separate departments for separate functions. For example: Production department can take care of production function in a proper manner. 6. Ease in training employees: It makes training of the employees easier as focus is only on limited range of the skills. For example- If a new technique of production is to be introduced then all skills related to that technique are required to be imparted in production department only. DISADVANTAGES 1. Problems in coordination: When the departments become too large than the coordination decreases and results in delay of decisions. 2. Less emphasis on overall organizational objectives: Functional structure places less emphasis on overall organizational objectives than the objectives of the particular functional head. 3. Disputes: A conflict of interest may arise among departments when the interests of two or more departments are not matching. 4. Inflexibility: It creates inflexibility within the departments as people have some knowledge and skills may see only their work and fail to appreciate the work of others. 5. Less chance of managerial development: The functional heads do not get training for top management positions because they gain experience only in one type of function. Q9. Under what circumstances would functional structure prove to be an appropriate choice? Ans: The functional structure is most suitable when: i. The size of the business unit is large. ii. Where specialisation is required. iii. Where decentralization of authority is needed iv. When there is only one product that is sold. Q10. What do you mean by ‘Divisional Structure’ of an organization? Discuss briefly the merits and demerits of divisional structure. Ans: DIVISIONAL STRUCTURE: Dividing the whole organization according to the major products to be manufactured is known as divisional organization structure. Each unit or department has divisional manager responsible for the performance and who has the authority over the unit or the division. Each division is multifunctional because in each division functions like production, marketing, finance, purchase etc. are performed together to achieve a common goal. E.g. large company may have divisions like textile, cosmetics, skincare etc. MANAGING DIRECTOR COSMETICS GARMENTS FOOTWEAR SKINCARE HUMAN RESOURCES MARKETING RESEARCH AND PURCHASING DEVELOPEMNT ADVANTAGES OF DIVISIONAL STRUCTURE 1. Product Specialisation: Product specialisation helps in the development of the various skills in the divisional heads and this prepares him for higher position. This is because he gains experience in all functions related to a particular department. 2. Greater Accountability: Divisional heads are accountable for the profits. As their performance can be judged by revenue and cost related to their departments. 3. Flexibility: It promotes flexibility and initiative because each division functions as an independent unit which leads to faster decision making. 4. Expansion and Growth: It facilitates expansion and growth as new divisions can be added without interrupting the exciting operations by simply adding another divisional head and staff for the new division. DISADVANTAGES OF DIVISIONAL STRUCTURE 1. The Departmental Conflicts: Conflicts may arise among different divisions for getting maximum funds. Every division tries to display better performance even at the cost of other division. They show their selfish attitude. 2. Costly: As each department is performing same set of functions separately, It increases expenditure. 3. Ignoring Organisational Interest: It provides managers which the authority to supervise all activities related to particular division. In course of time, such a manager may gain power and then he may ignore organizational interest. The division structure is most suitable when (Suitability of divisional structure):- i. Where the number of main products is more than one. ii. Where size of the concern is large enough. iii. Where different manufacturing technologies and marketing methods are required. Q11. In an electrical goods manufacturing company these are main activities i.e. marketing, production, finance and human resources. The general manager is planning to structure the organization which type of the organizational structure should be adopted and why? Give reasons. Ans: In the given situation, the general manger should go for the functional structure because of the following reasons:- 1. The firm is dealing in electrical goods which requires services of the professionally trained experts. 2. All the activities of the similar nature are placed under one head which leads to specialisation. In the given situation, the firm may be producing different electrical goods, but still same functions would be required for them. So, functional structure will be best suited in this organization. Q12. XYZ Limited is manufacturing chemical and textiles. What type of orgnisational structure would suit the requirements of such an organization only? Ans: The divisional organization structure would suit the requirement of such an organization since the firm is dealing in two different types of products. By creating a separate department for products. By sharing a separate department for both products, the judgement of the performance becomes easier which help the management to take important decisions regarding cost control, quality control, expansion etc. Q13. What is the meaning of formal organization? State any five features of it. Ans: According to Louis Allen, “The formal organization refers to organizational structure which is designed by the management to achieve the organizational goals.” In this type of organization the responsibilities, authority and mutual relationships among all the employees working in an enterprise are clearly defined. This type of organization is created deliberately by top management. This organization is bound by rules and procedures. FEATURES:- 1. It has defined inter relationship- It clearly defines mutual relationship. Everybody knows their authority and responsibilities. This clearly shows who will be reporting whom. 2. Helps in achievement of organizational objectives- It is a means to achieve specified objectives i.e. formal organizational structure is designed in such a way that it leads to the achievement of organizational objective. It is deliberately created by top management to achieve the objectives of the organisation. 3. It is impersonal- Under it, personal feelings are ignored and strict discipline is observed. It is not the person but the work that happens to be important. It does not give importance to emotions and sentiments of employees. 4. It leads to coordination- Efforts of various departments are coordinated, interlinked and integrated through the formal organization. Q12. What are the merits and demerits of the formal organization? Ans: ADVANTAGES 1. Easy to fix responsibility: It is easier to fix responsibility since mutual relationships are clearly defined. As the authority and responsibility of all the employees have already been fixed, inefficient employees can be apprehended and in this way their accountability can be fixed. 2. No overlapping of work: In the formal organization, everything is clearly defined. Therefore, there is no possibility of any work being left out or unnecessarily duplicated. 3. Unity of command possible: It is possible to maintain unity of command through an established chain of command. Since the principle of scalar chain of authority is present. 4. Easy to achieve goals: Under the formal organization, it is easy to achieve the goals of organization because there is an optimum use of all the material and human resources. 5. Stability in the organization: It brings stability in the enterprise through policies, procedures, rules and regulations. The working of different departments continue despite leaving of the old employees and joining of the new employees. DISADVANTAGES 1. Delay in work: Every activity is bound by rules which causes unnecessary delay in the completion of work. All the information i.e. orders, instructions, reports etc. have to follow the scalar chain of command which leads to delay in decision-making. 2. It lacks creativity: In this organization, the employees have to do what they are asked to do and they do not have a chance of independent thinking and creativity. This, therefore kills initiative. 3. Rigidity: It emphasizes formal rules and regulations which may introduce rigidity in working. The members are required to follow the rules which reduces flexibility in the working of the organization and thus creates rigidity. 4. Ignores human relationship: It emphasizes on jobs and ignores the human relationship. An organization is incomplete without considering interpersonal relationships. Psychological and emotional satisfaction of human beings is not given importance. Q14. What is informal organization? Explain its features, advantages and limitations. Ans: Interaction among people at work gives rise to a network of social relationships among employees, which is called as informal organization. According to Keith Davis, “Informal organization refers to the relationships between the people in the organization based on personal attitudes, sentiments, emotions, likes, dislikes etc. An informal organization is that organization which is not established deliberately but comes into existence because of common interests, tastes and religious relations etc. These develop within the formal organization according to the needs of the people and the environment in the organization. FEATURES 1. Based on formal organization: This is based on formal organization where people also have informal relations. It means first formal organization is established and then informal organization is created out of it. 2. Independent channel of communication: In informal organization flow of information is not specified. The person at the lowest rank can have direct contact with the person at the highest rank. The flow of information is decided by group members itself. Informal organization is not deliberately created. It emerges out of mutual relationship and tastes. 3. It is not deliberately created: The membership of informal organization is voluntary. 4. It has no written rules and procedures: It has no written rules and regulations. But there are group norms which have to be observed unstable in nature. For example: Employees working in an organization and belonging to a particular community form a separate group in an informed way. Gradually some norms do emerge- like helping the members of the group to find solution to the problem related to his own work or own self. Members of the informal group are bound to abject group norms. 5. It has no definite structure: It has no definite structure because it is complex network of social relationships among the members formed by the members voluntarily. There is no scalar chain of authority. ADVANTAGES 1. Effective communication: It serves as a useful channel of the communication in the organization. It gives support to the formal organization. The informal communication is very fast as the communication does not follow scalar chain of authority. 2. Fulfills social needs: It helps to fulfill the social needs of the members. This enhances their job satisfaction. Since, it gives them a sense of the belongingness in the organisation. 3. Supports formal organization: It binds with formal organization to make it more effective. The informal leader reduces the burden of the formal manager and this to fill in the gap in the manager’s abilities. DISADVANTAGES 1. It creates rumours: All the persons in an informal organization talk carelessly and sometimes a wrong thing is conveyed to the other person. 2. Resistance: An informal organisation generally prefers status and existing work routine. Changes are regarded as a threat to its beliefs and values. Therefore, management has to face resistance to new work methods. 3. Pressure of group norms: Informal group always develop their norms or code of conduct which every member has to follow. Such norms may go against the interest of the enterprise. Q15. How does informal organization support formal organization? Ans: Relation between Formal and Informal Organisation Informal organization emerges in a nature manner within the framework of the formal organization to meet the cultural and social needs of the members of the organization. Formal organization does not always allows to fulfill social needs of the people. Informal organization serve the purpose of fulfilling the needs not satisfied by formal organization. Informal organization is the part of the formal organization. These are the two aspects of the same organization and are linked with each other. Informal organization cannot altogether be eliminated. Thus, it would be advantageous to the organization if importance is given to it. Informal organization provides the management with an additional channel of communication in the form of the Grape Vine to transmise useful information quickly. CONCLUSION The management should skillfully take advantage of both the formal and informal organization so that work continues smoothly. Q16. Explain the term ‘Delegation of Authority.’ Ans: Meaning: Delegation refers to the downward transfer of the authority from superior to subordinate. It is a means through which manager can multiply himself when his work grows beyond his limit. He can take help of his subordinates by assigning some task and giving necessary authority to them to perform various task. Delegation is a pre-condition to the efficient functioning of an organization because it enables a manager to use his time on high priority activities. Definition: According to Theo Haimann, “Delegation of Authority merely means the granting of authority to subordinates to operate within prescribed limits” Q17. Delegation of Authority is based on the elementary principle of division of work.” Explain. Ans: In division of work, the work is divided into small task. Similarly, in delegation the manager divides some of his work and authority to his subordinates. No manager can perform all the functions himself. So, to get the work done efficiently and in a specialized manner, the manager divides the work among his subordinates according to their qualification and skills. So, we can say that delegation is based on the elementary principle of division of work. In division of work, work is divided in different units and in delegation the work is divided between superior and subordinates. Q18. Explain briefly the process/elements of delegation. Ans: ELEMENTS OF DELEGATION According to Louis Allen, “Delegation is entrustment of the responsibility to another and the creation of accountability for the performance.” In the light of the above statement, the essential elements of delegation are as follows:- 1. Authority: Authority means the power to take decisions. Decision can be related to the use of resources, and to do or not to do something. Authority is required to discharge given responsibility. It flows from top to the bottom, that is, superior has authority over his subordinates. Authority relationships helps to maintain order and discipline in the organization. It determines the superior subordinate relationship where superior communicates his decision and the subordinate executes decision as per the guidelines of his superior. 2. Responsibility: Responsibility is the obligation of a subordinate to properly perform the assigned duty. When a superior assigns a job to his subordinate it becomes the responsibility of the subordinate to complete that job. So, responsibility flows upward, i.e. a subordinate will also be responsible to his superior. 3. Accountability: Accountability means the answerability of the subordinate to his superior for his work performance. Once authority has been delegated and responsibility accepted, one cannot deny accountability. It cannot be delegated and flows upwards i.e. a subordinate will be accountable to a superior for satisfactory performance of the work. It indicates that the manager has to ensure the proper completion of duties, by his subordinates. The subordinates will be expected to explain the consequences of his action. CONCLUSION:- When an employee is given responsibility for a job then he must also be given the necessary authority. So, for effective delegation the authority must be equal to responsibility. If the authority provided is more than the responsibility, then it may result in misuse of the authority on the other hand if responsibility assigned is more than authority it may make person ineffective. Q19. Distinguish between authority, responsibility and accountability on the basis of i. Delegation ii. Origin iii. Direction of flow Ans: BASIS AUTHORITY RESPONSIBILITY ACCOUNTABILITY 1. Meaning Right to command Obligation to perform Answerability for an assigned task. outcome of the assigned work. 2. Delegation Can be delegated Cannot be entirely Cannot be delegated delegated. at all. 3. Origin Arises from formal Arises from delegated Arises from position. authority. responsibility. 4. Flow Flows downward Flows upward from Flows upward from from superior to subordinate to subordinate to subordinate. superior. superior. Q20. “Authority can be delegated but responsibility or accountability cannot be delegated by a manager.” Explain. OR The marketing manager of an organisation has been asked to achieve target sales of the 100 refrigerators per day. He delegates the task to 10 sales manager working under him. Two of them could not achieve their respective targets. Is the marketing manager responsible? Briefly explain the relevant principle in support of your answer. Ans: “Authority can be delegated but responsibility or accountability cannot be delegated according to the principle of absolute responsibility or accountability” that is delegation doesn’t mean abdication. The manger shall still be accountable for the performance of the assigned task. The authority given to a subordinate can be taken back and redelegated to another person. The manager cannot escape from the responsibility for any mistake on part of his subordinate. Thus, irrespective of the extent of the delegated authority the manager shall still be accountable to the same extent as before delegation. E.g. The marketing manager of an organisation has been asked to achieve target sales of the 100 refrigerators per day. He delegates the task to 10 sales manager working under him. Two of them could not achieve their respective targets. In this case, the marketing manager is responsible and accountable to the directors for the failure of his sales manager to achieve the sales target. The process of delegation does not relieve the manager of his own responsibility only. Q19. Why delegation is considered essential for effective organising? Ans: Delegation of authority permits a manager to share his work load with his subordinates and to concentrate on more important work like planning, decision making and control. According to Louis Allen, “how well one delegates determines, how well one manages.” Effective delegation leads to following benefits: 1. Effective management: The managers who delegate authority can perform much more than the one who does not. Managers can concentrate on high priority work, if they get some of the work done by their subordinates. This would increase his effectiveness. 2. Employees Development: As a result of delegation, employees get more opportunities to utilise their talents. With the given authority, managers can take decision suitable in specific situations. Not only this but they even guide and motivate their subordinates. This type of practice add to their knowledge and experience. As a result, it helps by preparing better future managers. 3. Motivation of Employees: In the process of delegation of authority, both authority and responsibility are delegated to the subordinates. As a result subordinates have a sense of recognition. They are motivated to work for higher performance. They do their job to the best of their abilities and skills. 4. Facilitates Organisational Growth: Delegation of authority facilitates the development of organisation as a whole. As adequate number of able employees are available in an organisation to take decisions, it leads to expansion and modernisation of a business. Trained and experienced employees are able to perform important roles in the launch of new projects for organisation. 5. Better Coordination: Delegation of authority is a process to establish relation among responsibility, authority and accountability. Through this, employees get clarification with regard to their powers, duties and accountability for work performance. Such clarity in reporting relationships helps in developing and maintaining effective coordination amongst the departments, levels and functions of management. 6. Basis of management hierarchy: Delegation of authority provides a basis of superior-subordinate relations. It enables superior and subordinates come in contact with each other and get an opportunity to understand each other. This hierarchy is established through the process of delegation of authority. Under this, authority flows from top level to the bottom level. Thus, delegation is a key element in effective organising. INTRODUCTION- CENTRALISATION AND DECENTRALISATION In many organisations decision making power lies in the hands of top management only. However, there are other type of organisation also in which this power is given to lower level of management also. When there is concentration of decision making powers in top managerial position only then it is known as centralisation. But when such authority is shared with lower level manager it is known as decentralisation. Both centralisation and decentralisation are important for all the organisations and every organisation has to make a balance between the two. Q22. Explain the term ‘Decentralisation’ Ans: Decentralisation refers to systematic delegation or dispersal of authority at all levels of management (distribution) and in all departments of the organisation. According to Louis Allen, “Decentralisation refers to systematic effort to delegate to the lowest level all authority except that which can be exercised at central points.” Q23. Some indirect Questions: Q1. “The concept of the decentralisation is related to the concept of the delegation”? Explain the given statement in brief. Q2. Decentralisation is extending delegation to the lowest level. Comment. Q3. Explain through a suitable example how the delayed authority may be extended to decentralised authority? Q4. “If we delegate the authority, we multiply it by 2. If we decentralise it, we multiply it by many.” How? Q5. Explain the concept of delegation and decentralisation bringing out distinction. Ans: (Same for all the questions, only concluding part will be different) Delegation of the authority refers to providing authority by a superior to his subordinate. Therefore, its scope is limited to a manager and his subordinate. When we delegate authority, we multiply it by 2 i.e. the superior (who has delegated the authority) and his subordinate (to whom the authority is delegated). Decentralisation of authority is not limited to two individuals. It involves systematic delegation of authority at all levels and in all departments of the organisation. Therefore, scope of decentralisation is wider than delegation. Therefore, we can say that when we decentralise authority we multiply it by many. Example: If we a chief manager of a company assigns a job to the production manager for appointing employees needed for his division on salary less than Rs. 10,000 then this will be termed as delegation of authority. In the contrary, if this authority for appointing employees is delegated to every departmental head then it will be termed as decentralisation. If, departmental heads further delegate this authority to their deputy manager, it will lead to expansion of decentralisation. Conclusion:- (Depends on the statement of question). Q22. Explain the reasons why an organisation would choose to be decentralised or Explain in brief any six points which highlights the importance of decentralise in an organisation. Ans: When an organisation grows beyond the limits of top management (i.e. enlarge organisation) decentralisation is almost essential to cope up with the changes in the business environment. Decentralisation is a fundamental step and its importance can be understand from the following points:- 1. Develops initiative among subordinates: Decentralisation helps to promote confidence among employees and they also develop faith in themselves. This is because when lower managerial levels are given freedom to take their own decisions they learn to depend on their own judgement. 2. Develops managerial talent for future: Under decentralisation, decision making authority is given even to lower level managers. In this way, by getting opportunities to take decisions knowledge and experience of all levels of managers increases. This develop talent in the manager to bear extra responsibility in future. 3. Quick decision making: In decentralised organisation, the burden of making decisions is distributed among many people. This ensures quick as well as better decision making as decisions are taken at levels which are nearest to the points of action. 4. Relief to the top management: In decentralised organisations top level managers are not overburdened by routine problems. This reduces their work load and they can utilise their valuable time to important policy decisions and concentrate on coordination and control. 5. Facilitates Growth: Under decentralisation full freedom is given to lower level of management as well as departmental heads. This allows them to function in a way which is best suited to their departments. This increases the level of production and profit. As a result, development of an organisation is made possible. 6. Better control: Decentralisation helps to evaluate the performance of work at all levels and makes possible to fix accountability. Contributions from all the departments can be ascertained separately. Feedback from all levels helps to find out the reasons for deviations and improves performance. Decentralisation forces the management for innovative performance measurement system. CONCLUSION:- Inspite of its benefits decentralisation should be applied with caution as it can lead to lack of coordination in the organisation, if the departments start working on their own guidelines which might be against the interest of the organisation. Decentralisation must always be balanced with centralisation in areas of major policy decisions. FUNCTIONAL STRUCTURE v/s DIVISIONAL STRUCTURE BASIS FUNCTIONAL STRUCTURE DIVISIONAL STRUCTURE 1. Formation Formation is based on Formation is based on functions. product lines and is supported by functions. 2. Specialisation Functional specialisation Product specialisation 3. Cost Functions are not duplicated, Duplication of resources in hence economical various departments, hence costly. 4. Coordination Difficult for multi-product Easy, because all functions company related to a particular product are integrated in one department. 5. Responsibility Difficult to fix on a Easy to fix responsibility for department performance 6. Managerial Development Difficult, as each functional Easier, autonomy as well as manager has to report to the chance to perform multiple top management functions help in managerial development. 7. Structure Simple structure Complicated structure 8. Autonomy of operations Less More 9. Control Comparatively simple Comparatively complex 10. Suitability Suitable for medium sized Suitable for large firms having firms having a single product multiple products with or a small number of inter- distinct features. dependent products. FORMAL v/s INFORMAL ORGANISATION BASIS FORMAL ORGANISATION INFORMAL ORGANISATION 1. Meaning and It refers to the structure of It refers to the network of interrelationship well-defined authority and social relationships which responsibility relationships develop automatically when created by the management. people work together. It Therefore, it exists exists within the framework independently of informal of formal organisation organisation. 2. Formation/Origin Deliberately planned and Emerges spontaneously as a created by management. It result of social interaction arises as a result of company among employees rules and policies. 3. Purpose To achieve planned To satisfy social and cultural organisational goals needs and fulfil common interests 4. Behaviour of Members It is directed by rules There is no set behaviour pattern 5. Structure Has a well-defined structure Does not have a clear cut of tasks and relationships structure but forms a complex network of relations 6. Flow of Communication Communication takes place Flow of communication is not through scalar chain through a planned route. It can take place in any direction 7. Leadership Managers are leader Leaders may or may not be managers. They are chosen by group members 8. Adherence to rules Violation of rules may lead to No such punishments penalties and punishments 9. Nature Rigid Flexible 10. Flow of authority Authority flows from top to Authority flows vertically as bottom i.e. vertically well as horizontally. downwards 11. Authority Arises by virtue of position in Arises out of personal management qualities DELEGATION v/s DECENTRALISATION  BASIS DELEGATION OF DECENTRALISATION OF AUTHORITY AUTHORITY 1. Nature/ Essentiality/ Need Delegation of authority is a Decentralisation need not compulsory act because no necessarily be an essential individual can perform all feature of managing and tasks alone. An organisation organising. It is an optional cannot be functional without policy decision. It is a matter delegation of authority of choice and preference of the top management 2. Scope/ Parties involved Delegation of authority is Decentralisation of authority confined to a manager and his involves systematic immediate subordinates. delegation of authority at all Thus, it has narrow scope levels and in all functions of organisation. It is an extension of delegation to the lowest levels in the organisation. Thus, decentralisation is wider in scope than delegation 3. Significance/ Purpose Delegation of authority is Decentralisation is a vital required as a routine act of decision intended to increase managing. It is a means of the role of the subordinates in getting things done through the organisation by giving subordinates. Work is them more autonomy assigned to reduce the burden of managers 4. Freedom of Action More control of superiors; Less control over executives; hence less freedom to take hence greater freedom of own decisions action 5. Status It is a process followed to It is the result of the policy share tasks. decision of the top management.