Class XII Business Studies Fundamental Concepts
and Process of Organizing
briefly the meaning of organizing. 4 marks
organizing as a function of management. 3 marks
organizing as a process. 3 marks
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.
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.
the steps involved in the process of organizing. 6 marks
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.
Division of work
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.
Grouping of jobs and departmentation
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.
Establishing authority relationships
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
levels of authority are called organizational hierarchy. The chain of authority
runs through these levels. Organizational hierarchy implies a definite ranking
and Objectives of Organizing
the importance of organization as a function of management. 3 marks
is organizing considered as an important function of management? Give the answer
in about 60 words 3 marks
does organization function brings in administrative efficiency? 3 marks
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
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
Clarity of roles
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.
Establishes authority and responsibility
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.
Avoiding duplication of work
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.
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
Source of support and security
is a source of support, security and satisfaction ot mangers and employees. It
recognizes their relative status in the establishment.
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.
Structure – Functional Structure, Divisional Structure
Organization as a structure. 2 marks
different types of organizational structure. 3 marks/ 5 marks / 7 marks
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
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.
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
considerations to be kept in mind while building an organization structure.
are the important considerations to be kept in mind while selecting an
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.
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.
Span of control
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.
Delegation of authority
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.