CBSE Class XII Business Studies Fundamental Concepts

Chapter 5

Meaning and Process of Organizing

Explain briefly the meaning of organizing. 4 marks

Define organizing as a function of management. 3 marks

Define organizing as a process. 3 marks

Organization is an important management function. Organization can be viewed as process as well as a structure. As a process it identifies the essential resources for the achieving organizational goals. Organization brings together physical, financial and human resources or a business. Thus organization involves finding out the detailed sets of activities, grouping them into jobs and grouping the jobs into sections and departments. It establishes a working relationship between the available resources to bring out best results. It creates inter-relationships between different parts positions and jobs in an organization. Organization also involves establishing authority responsibility relationships.

Organization can be viewed as a structure or framework within which a business should function. Organization creates jobs and positions, formulates rules and delegates authority to fulfill responsibilities. The aim of organising is to enable the people to work together for a common purpose. Thus the structure of organization regulates and coordinates the activities in the business. The organized group of people in a collective sense is known as organization.

Explain the steps involved in the process of organizing. 6 marks

The most important aim of organization is to establish a working relationship between various factors with clarity. It breaks down the overall task into individual jobs and assigns them to departments and sections. The organization process involves the following steps.

1 Division of work

The first step in the process of organization is to divide the work into specific activities. Dividing the work is essential to because one individual cannot perform the entire work. It also facilitates specialization.

2. Grouping of jobs and departmentation

The second function of organisation is to group identical jobs under formal departments. This grouping process will enable coordination and unity of efforts. The deportments are linked together on the basis of their interdependence. There are different ways of grouping the departments. Departments can be organized on the basis of function such as finance, production, marketing etc. There can be departmentation on the basis of products such as textiles division, cosmetics department etc.

3. Establishing authority relationships

The third function in the organization process is the establishment of authority relationship among job holders or job positions. The authority relationship specifies who is accountable to whom in the organization. The authority structure creates superior-subordinate relationships as well as channels of communication. The decision making authority varies from position to position. The owner of a business has the ultimate authority to make decisions which is delegated to subordinates. Thus the scope of authority reduces at lower levels of management.

The levels of authority are called organizational hierarchy. The chain of authority runs through these levels. Organizational hierarchy implies a definite ranking order.

Importance and Objectives of Organizing

Explain the importance of organization as a function of management. 3 marks

Why is organizing considered as an important function of management? Give the answer in about 60 words 3 marks

How does organization function brings in administrative efficiency? 3 marks

The organization process creates the structure of organization. It establishes the authority relationship in a business. It provides the basic framework for the various managers and other staff. The importance of organization is outlined as follows:

i. Specialization

As part of the organization process, similar jobs are grouped together to easy coordination. It enables speedy completion of work. Employees in a department get more chance to do the same work over and over again. They will gain skill and specialization.

ii. Clarity of roles

Organization defines the managerial and non managerial jobs. The tasks and activities associated with each job are clearly described. It clarifies what a person holding a position is supposed to do. It also enables the selection of right employees for the right job.

iii. Establishes authority and responsibility

The authority responsibility structure is extremely important for the smooth running of a business. The organization structure specifies the authority available at each level and position in the organization. Every manager knows his exact position in the organization structure. The responsibilities of each position are also clearly stated. This reduced the tendency of passing the blame for mistakes. It minimizes conflict and confusion about the respective powers and privileges of managers.

iv. Avoiding duplication of work

Organization helps avoiding duplication of work and overlapping in responsibilities among various employees and departments. Jobs and responsibilities of each department and individuals are clearly stated as part of the organization process.

v. Coordination

The authority and responsibility of each position is distributed and shared in the organization through a well designed system. Each department and job position functions as part of large system. Each individual is aware of his position and responsibility. Thus the work can be shared in the right balance in good harmony.

vi. Source of support and security

Organization is a source of support, security and satisfaction ot mangers and employees. It recognizes their relative status in the establishment.

vii. Adaptation

Proper organization enables easy changes according to requirement. When jobs and responsibilities are well defined it is easy for a new employee to adjust with the jobs he is supposed to do. When an employee is promoted to higher position or transferred to a different section, it would be easier for him to adjust with the new job and different set of responsibilities.

Organization Structure – Functional Structure, Divisional Structure

Define Organization as a structure.  2 marks

Explain different types of organizational structure. 3 marks/ 5 marks / 7 marks

The process of organization leads to the creation of organization structure. The term organization structure may be defined as a system of job positions, the roles assigned to them and the authority relationships among the various positions. The structure provides a basis or a framework for the managers and other employees for performing their functions. Organization structure can be developed and customized according to the specific need of a business. The two most commonly found organization structures are functional and divisional organizational structures.

Functional structure

Functional structure is formed by organizing the entire work to be done into functional departments. In functional organization all identical works are placed together under one functional head. For example production, marketing, finance and marketing are considered essential functions of a manufacturing enterprise. For a retail store, purchase, sales and warehousing are the major functions. The major functions may be further subdivided into sub functions or departments. For example production function can be divided into material store, components manufacturing, assembly unit, quality control etc. These departments can be further divided into sections and sub sections. There is no hard and fast rule as to how the division is to be carried out. Companies can tailor the organizational structure according to their requirement and resources and facilities available. Even manufacturing units in the same line of production can have different forms of functional structure.

Divisional Structure

In many organisation activities and personnel are grouped on the basis of products manufactured. This kind organization structure is known as divisional structure. Divisional structure enables the personnel to develop expertise in the business activity. Divisional structure allows further sub divisions into production marketing and finance. Group executives are responsible to coordinate manufacturing, sales. Group managers are responsible for profits of the divisions also.

Give considerations to be kept in mind while building an organization structure.

Following are the important considerations to be kept in mind while selecting an organization structure:

i.. Job Design

Since the manger has to get jobs done he must specify what activities and related tasks must contain each of these jobs. The individual responsibility should be predetermined. The task and role of individual should be organized to avoid duplication of work.

ii. Departmentation

Once the jobs are defined they have to be grouped together to form a department. Coordination becomes easier when identical jobs are grouped together in one department. Production, fnance, marketing and every other function can be organized into separate departments.

iii. Span of control

Span of control refers to the number of employees or jobs that are arranged under one manager. This also clarifies the chain of command and established who will report to whom. Some jobs are specialized requiring lot of interaction between manger and employees. In such cases span of control will be restricted to enable the manager to provide adequate attention to details of the job.

iv. Delegation of authority

The content of each job should be analyzed to delegate adequate authority to subordinates. Responsibility without authority is meaningless. When a sales target is given to a sales-representative he should also have the authority to decide terms of sales or delivery schedules within limits.