Class 12 Business Studies Chapter 5 Notes (Organising)

Do you want Class 12 Business Studies Chapter 5 (Organising) notes?

If yes, then pull up your socks and get ready to read exclusive notes.

These revision notes are built by expert CBSE teachers to improve your knowledge level.

Before you proceed further, below are the quick details:

• Class : 12
• Subject : Business Studies
• Chapter Number : 5
• Chapter Name : Organising

Table of Contents

Meaning of Organising

↳ Steps in the Organising Process ↳ Importance/Significance/Benefits of Organising

Organisation Structure

↳ Types of Organisation Structure • Functional Structure • Divisional Structure ↳ Differences Between Functional and Divisional Structure

Formal and Informal Organisation

↳ Formal Organisation • Meaning of Formal Organisation • Features of Formal Organisation • Advantages of Formal Organisation • Disadvantages of Formal Organisation ↳ Informal Organisation • Meaning of Informal Organisation • Features of Informal Organisation • Advantages of Informal Organisation ↳ Differences Between Formal and Informal Organization

Delegation of Authority

↳ Meaning of Delegation ↳ Importance of Delegation ↳ Elements of Delegation

Centralisation and Decentralisation

↳ Importance of Decentralisation ↳ Differences between Decentralisation and Delegation

Organising Flowchart

Let's start.

Meaning of Organising

• Organizing refers to arranging everything in orderly form and making the most efficient use of resources.
• It can be defined as a process that initiates the implementation of plans by clarifying jobs and working relationships and effectively deploying resources for the attainment of identified and desired results (goals).

Steps in the Organising Process

1. Identification and Division of Work : The first step in the process of organizing involves identifying and dividing the work that must be done as per the plans.  The division of work make sure there is no duplication of work and there is no burden of work on one person. The manager divides the work into smaller unit, and each unit of work is called a job.
2. Departmentalization : After dividing the work in smaller jobs, related and similar jobs are grouped and put under one department. The departmentation can be done by the organization ways such as Functional Departmentation and Divisional Departmentation.
3. Assignment of Duties : After dividing the organization into specialized departments each individual working in different departments is assigned a duty matching to his skill and qualifications. The work is assigned according to the ability of individuals.
4. Establishing Reporting Relationship : In the fourth step of the organizing process all the individuals are assigned some authority matching to the job they must perform. The managers with maximum authority are considered as top level management and managers with minimum authority are grouped into lower-level management. So, everyone knows who will report to whom.

Importance/Significance/Benefits of Organising

1. Benefits of Specialisation: Every individual is assigned a part of the total work and not the whole task. Repetitive performance of a particular task allows a worker to gain experience in that area and leads to specialisation.
2. Clarity in a working relationship: Each employee knows very clearly to whom he can give order and from whom he must receive the order.
3. Effective Administration: Clarity in working relationships enables proper execution of work. Management of an enterprise thereby becomes easy, and this brings effectiveness in administration.
4. Adaption to Change: It allows the organisation structure to be suitably modified according to changes in business environment. Thus, provides stability to the enterprise as it can then continue to survive with changes.
5. Development of Personnel: Delegation allows the managers to reduce their workload by assigning routine jobs to their subordinates. It gives them the time to explore areas for growth and the opportunity to innovate.
6. Expansion and Growth: It allows an enterprise to add more job positions, departments and even diversify their product lines.
7. Optimum utilization of resources: It leads to the proper usage of all material, financial and human resources. Avoidance of duplication of work helps in preventing confusion and minimising the wastage of resources and efforts.

Organisation Structure

1. It is the framework within which managerial and operating tasks are performed.
2. It specifies the relationships between people, work and resources in an organization.
3. It allows correlation and coordination among human, physical and financial resources and accomplish desired goals.
4. It is essential to ensure a smooth flow of communication and better control over the operations of a business enterprise.
   

Span of Management refers to the number of subordinates that can be effectively managed by a superior. The Span of management largely gives shape to the organization structure. This determines the levels of management in the structure.

Types of Organisation Structure

Functional Structure

It is an organizational structure formed by grouping of jobs of similar nature according to functions and organizing these major functions as separate departments.

For example, all the jobs related to production are grouped under the production department, related to sales in sales department, related to purchase in purchase department.

Suitability for those enterprises which have the following:

• Only one category of product.
• The size of the organization is large.
• It has diversified activities.
• Operations require a high degree of specialization.

Advantages of Functional Structure

• Specialization
• Increase Managerial and Operational Efficiency
• Easy Coordination
• Effective Training

Disadvantages of Functional Structure

• Difficulty in Achieving Organizational Goals
• Inflexibility of employees in shifting to other departments
• Conflict of Interest
• Problems in Coordination

Divisional Structure

When the organization is large and is producing more than one type of product then activities related to one product are grouped under one department.

For example, a large company may have divisions like footwear, garments etc.

Suitability of Divisional Structure

• Organizations which require product specialization.
• Organizations producing multi product or different line of products.
• Growing companies which plan to add more line of products in future.

Advantages of Divisional Structure

• Product Specialization
• Expansion and Growth
• Flexibility

Disadvantages of Divisional Structure

• More Resources Required
• Conflicts
• Ignoring of Organizational Interests

Differences Between 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 specialisation.
Responsibility	Difficult to fix on a department.	Easy to fix responsibility for performance.
Managerial Development	Difficult, as each functional manager has to report to the top management.	Easier, autonomy as well as the chance to perform multiple functions helps in managerial development.
Cost	Functions are not duplicated hence economical	Duplication of resources in various departments, hence costly.
Coordination	Difficult for a multi-product company.	Easy, because all functions related to a particular product are integrated in one department.

Formal and Informal Organisation

1. Formal Organisation

Meaning of Formal Organisation

It refers to the organization which is designed by the management to accomplish a particular task. It specifies authority and responsibility.

Features of Formal Organisation

• Created intentionally by the process of organizing.
• Purpose is the achievement of organizational goal.
• Every individual is assigned a fixed authority (decision-making power).
• Creates a scalar chain of communication.

Advantages of Formal Organisation

• Systematic working
• Coordination
• Achievements of Organizational Goals

Disadvantages of Formal Organisation

• Delay in Action
• Emphasis on Work Only
• No Recognition of Creativity

2. Informal Organisation

Meaning of Informal Organisation

Interaction among people at work gives rise to a 'network of social relationships among employees. The informal organizational structure gets created automatically and the main purpose of such structure is getting psychological satisfaction.

Features of Informal Organisation

• Created automatically without any intended efforts of managers.
• Formed by the employees to get psychological satisfaction.
• Does not follow any fixed path of flow of authority or communication.

Advantages of Informal Organisation

• Fast Communication
• Fulfils Social Needs
• Disadvantages
• Spread Rumours
• No Systematic Working
• May Bring Negative Results

Differences Between Formal and Informal Organization

Basis	Formal organisation	Informal organisation
Meaning	Structure of authority relationships created by the management	Network of social relationships arising out of interaction among employees
Origin	Arises as a result of company rules and policies	Arises as a result of social interaction
Authority	Arises by virtue of position in management	Arises out of personal qualities
Behavior	It is directed by rules	There is no set behaviour pattern
Flow of Communication	Communication takes place through the scalar chain	Flow of communication is not through a planned route. It can take place in any direction
Nature	Rigid	Flexible
Leadership	Managers are leaders.	Leaders may or may not be managers. They are chosen by the group.

Delegation of Authority

Meaning of Delegation

Delegation of authority means the granting of authority to subordinates to operate within prescribed limits. Delegation helps a manager to extend his area of operations, as without it, his activities would be restricted to only what he himself can perform. However, delegation does not mean abdication. The manager shall still be accountable for the performance of the assigned tasks. Moreover, the authority granted to a subordinate can be taken back and redelegated to another person.

Importance of Delegation

• Effective management
• Employee development
• Motivation of employees
• Facilitation of growth
• Basis of management hierarchy
• Better coordination

Elements of Delegation

1. Responsibility means the work assigned to an individual. A subordinate must perform the assigned duty. Responsibility is the obligation of a subordinate to properly perform the assigned duty. Responsibility flows upward because a subordinate will always be responsible to his superior.
2. Authority means the power to make decisions. To carry on the responsibilities every employee needs to have some authority. So, when managers pass their responsibility to their subordinates, they also pass some of the authority to the subordinate. Authority flows downwards from superior to subordinate. The authority must be equal to the responsibility.
3. Accountability implies being answerable for the outcome of the assigned task. Once responsibility for the performance of an assigned task is accepted, one cannot deny accountability. Accountability arises from responsibility.  Accountability flows upwards i.e., a subordinate will be accountable to a superior for satisfactory performance of work. It cannot be delegated or passed.

Basis	Authority	Responsibility	Accountability
Meaning	Right to command.	Obligation to perform an assigned task.	Answerability for outcome of the assigned task.
Delegation	Can be delegated.	Cannot be entirely delegated.	Cannot be delegated at all.
Origin	Arises from formal position.	Arises from delegated authority.	Arises from responsibility.
Flow	Flows downward from superior to subordinate.	Flows upward from subordinate to superior.	Flows upward from subordinate to superior.

Centralisation and Decentralisation

• Centralization refers to the concentration of power or authority in a few hands, i.e., top level. An organization is centralized when the decision-making authority is in the hands of top-level management only.
• Decentralization is defined as a systematic distribution of authority at every level of management. Those organizations in which such authority is shared with lower levels are 'decentralized organizations. The decision-making authority is pushed down the chain of command.

Importance of Decentralisation

• Develops initiative among subordinates
• Develops managerial talent for the future
• Quick decision-making
• Facilitates Growth
• Better Control
• Relief to Top Management

Differences between Decentralisation and Delegation

Basis	Delegation	Decentralisation
Nature	Delegation is a compulsory act because no individual can perform all tasks on his own.	Decentralisation is an optional policy decision. It is done at the discretion of the top management.
Freedom of action	More control by superiors hence less freedom to take own decisions.	Less control over executives hence greater freedom of action.
Status	It is a process followed to share tasks.	It is the result of the policy decision of the top management.
Scope	It has narrow scope as it is limited to superior and his immediate subordinate.	It has wide scope as it implies extension of delegation to the lowest level of management.
Purpose	To lessen the burden of the manager.	To increase the role of the subordinates in the organisation by giving them more autonomy.

Are you looking for chapter-wise differences in Business Studies? Click here to view all chapter-wise differences.

Organising Flowchart

The End

👉

A List of Notes:

Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Chapter 10 | Chapter 11 | Chapter 12

---

👉

See More:

Click here to access more Business Studies Class 12 educational content (worksheets, case studies, MCQs, sample papers, and more).