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Organizing as a Process
The term ‘organizing” refers to the process of identifying and
grouping of activities to be performed and dividing them among the
individuals and creating authority and responsibility relationship
among them for the accomplishment of organizational objectives.
Characteristics of Organising:
1.Organising is a basic function and a sub-process of management:
The organising function follows the function of planning and the
other functions of management follow organising. Thus, organising is
a sub-process of management.
2. Organising is a continuous process:
An organization is a continuing entity. The need for organising
function is felt whenever new activities or functions are introduced,
or existing functions and activities are re-shuffled in the organization.
3. Organising is a function of all managers
4. Organising involves coordination
In order to create a balance and structure in the organisation, the
activities of members need to be well-coordinated.
5. Goal-oriented
Organising is designed on the basis of objectives and it aims at
achieving them smoothly.
6. Group effort
Organising deals with group efforts that are made for attaining
common goals.
7. Establishes authority-responsibility relationship
Organising establishes authority- responsibility relationship among
the organizational members.
Process of Organising – The steps
1. Identification and enumeration (listing) of activities
For example, an organisation producing and distributing washing
machines has to perform large number of activities that may be
related to production, distribution, finance, purchase and personnel,
etc.
2. Division of activities
After determining and enumerating activities, these are to be divided and
sub-divided into small components known as jobs and tasks.
3. Grouping-up of activities
For example, each job and task related to production is to be grouped up
into production group, and elements that are related to marketing, finance
and purchase are to be grouped-up in the respective groups.
4. Assignment of group of activities
5. Granting necessary rights
Assignment of group of activities among various departments is followed
by giving them adequate rights so that they can perform assigned work in a
satisfactory manner.
6. Coordinating the functioning of various departments
In the process of organising, attempts are also made for coordinating
working of individual with respective department, and finally to coordinate
functioning of various departments towards the achievement of common
goals.
Need and Importance of Organising
1. Provides framework to perform management functions
2. Facilitates coordination
3. Leads to specialization
4. Helps in achieving efficiency
5. Promotes Employee development
6. Increases clarity of authority and responsibility
Authority and Responsibility Relationships
•Authority is the power to give orders and get it obeyed or in other words
it is the power to take decisions.
•Authority is the right or power assigned to an executive or a manager in
order to achieve certain organizational objectives.
Definitions of Authority
According to Henri Fayol, "Authority is the right to give orders and the
power to exact obedience."
According to Mooney and Reily, "Authority is the principle at the root of
Organisation and so important that it is impossible to conceive of an
Organisation at all unless some person or persons are in a position to
require action of others."
AUTHORITY
A manager will not be able to function efficiently without proper authority.
Authority is the genesis of organizational framework. It is an essential
accompaniment of the job of management. Without authority, a manager
ceases to be a manager, because he cannot get his policies carried out
through others.
AUTHORITY IS RELATED TO YOUR POSITION WHICH YOU POSSES ..
POWER IS THE REAL INNER STRENGTH OF ANY INDIVIDUAL
Responsibility
Responsibility means state of being accountable or answerable for
any obligation, trust, debt or something or in other words it means
obligation to complete a job assigned on time and in best way.
Definitions of Responsibility
According to Davis, "Responsibility is an obligation of individual to
perform assigned duties to the best of his ability under the direction of
his executive leader."
In the words of Theo Haimann, "Responsibility is the obligation
(commitment) of a subordinate to perform the duty as required by his
superior".
McFarland defines responsibility as "the duties and activities assigned to
a position or an executive".
Characteristics of Responsibility
•The essence of responsibility is the obligation of a subordinate to
perform the duty assigned.
•It always originates from the superior-subordinate relationship.
•Normally, responsibility moves upwards, whereas authority flows
downwards.
•Responsibility is in the form of a continuing obligation.
•Responsibility cannot be delegated.
•The person accepting responsibility is accountable for the performance
of assigned duties.
•It is hard to conceive responsibility without authority.
Relationship between Authority and Responsibility
Authority and responsibility are closely related and this principle states
that these two must go hand in hand. It means that proper authority
should be delegated to meet the responsibilities.
Two main reasons
Firstly, if a person is given some responsibility without sufficient
authority he can’t perform better, and also could not accomplish
the desired goal.
Secondly, if there is excess authority being delegated to an
individual without matching responsibility then the delegated
authority will be misused in one way or the other.
Delegation of Authority
Definition: The Delegation of Authority is an organizational process
wherein, the manager divides his work among the subordinates and give
them the responsibility to accomplish the respective tasks. Along with the
responsibility, he also shares the authority, i.e. the power to take decisions
with the subordinates, such that responsibilities can be completed
efficiently.
Delegation is the downward transfer of formal authority from one
person to another. Superiors delegate authority to subordinates to
facilitate the accomplishment of the assigned work.
Features of Delegation of Authority
•Delegation means giving power to the subordinate to act independently
but within the limits prescribed by the superior. Also, he must comply
with the provisions of the organizational policy, rules, and regulations.
•Delegation does not mean that manager give up his authority, but
certainly he shares some authority with the subordinate essential to
complete the responsibility entrusted to him.
•Authority once delegated can be further expanded, or withdrawn by the
superior depending on the situation.
•The manager cannot delegate the authority which he himself does not
possess. Also, he can not delegate his full authority to a subordinate.
•The delegation of authority may be oral or written, and may be specific or
general.
•The delegation is an art and must comply with all the fundamental rules
of an organization.
Elements of Delegation
The following three elements are in the scheme of delegation
1. Assignment of duties or tasks.
2. Delegation of authority.
3. Accountability for performance of duties and exercise of authority.
Process of Delegation
The step, which is followed when delegating authority, is the process of
delegation. Normally four steps are used in the process of delegation. It can
be shown in the form of diagram.
Centralization of authority means the power of planning and decision
making are exclusively in the hands of top management.
Decentralization, the powers for the same has been disseminated by the
top management to the middle or low-level management. There is a never
ending debate between these two terms to prove which one is better. In
this article, significant differences between Centralization and
Decentralization is explained.
BASIS FOR COMPARISON CENTRALIZATION DECENTRALIZATION
Meaning The retention of powers
and authority with respect
to planning and decisions,
with the top
management, is known as
Centralization.
The dissemination of
authority, responsibility
and accountability to the
various management
levels, is known as
Decentralization.
Communication Flow Vertical Open and Free
Decision Making Slow Comparatively faster
Advantage Proper coordination and
Leadership
Sharing of burden and
responsibility
Power of decision making Lies with the top
management.
Multiple persons have the
power of decision making.
Reasons Inadequate control over
the organization
Considerable control over
the organization
Best suited for Small sized organization Large sized organization
Advantages of centralization
•Provide power and prestige for manager.
•Promote uniformity of policies, practices and decisions.
•Minimal extensive controlling procedures and practices.
•Minimize duplication of function.
Disadvantages of centralization
•Neglected functions for mid levels , and less motivated beside personnel.
•Nursing supervisor functions as a link officer between nursing director and
first line management
Three forms of decentralization
De-concentration: The weakest form of decentralization .decision making
authority is redistributed to lower or regional levels of the same central
organisation.
Delegation(handovering): Amore extensive form of decentralization.
Through delegation the responsibility for decision making are transferred to
semi autonomous organizations not wholly controlled by the central
organisation, but ultimately accountable to it
Devolution: A third type of decentralization is devolution. The authority for
decision making is transferred completely to autonomous organisation
units.
Advantages of decentralization
•Raise morale and promote interpersonal relationships
•Relive from the daily administration
•Bring decision making close to action
•Develop second line managers
•Promote employees enthusiasm and coordination
•Facilitate actions by lower level managers
Dis Advantages of decentralization
•Top level administration may feel it would decrease their status
•Mangers may not permit full and maximum utilization of highly qualified
personnel
•Increased costs .it requires more managers and large staff
•It may lead to overlapping and duplication of effort
Formal organisation
•A formal organisation is a consciously planned a deliberately designed
entity. It is based on superior and subordinate relationships which are
created by assignment of work and delegation of authority.
•It is through this formal relationship that members communicate with
each other and perform their duties . Thus , a formal organisation
functions within set boundaries and is capable of being disciplined and
controlled.
Informal organisation
When people work together in a formal relationship of superior and
subordinate , they come in contact with each other
This interaction provides them an opportunity to know each other and
develop personal and social relations.
Features of Formal organisation:
(1) The formal organisational structure is created intentionally by the
process of organising.
(2) The purpose of formal organisation structure is achievement of
organisational goal.
(3) In formal organisational structure each individual is assigned a specific
job.
4) In formal organisation every individual is assigned a fixed authority or
decision-making power.
(5) Formal organisational structure results in creation of superior-
subordinate relations.
(6) Formal organisational structure creates a scalar chain of
communication in the organisation.
Basis Formal Organisation Informal Organisation
1. Formation Formal Relationship that is personal and social in
nature.
2. Purpose /
objective
Legally Constituted rationally designed
and consciously planned.
It arises naturally and spontaneously and
is an integral dimension of formal
organisation
3. Relationship It is meant for achieving specific goals. It is
meant to engage in production of goods
and/or performing service required by
society.
Its purpose is to satisfy social and
personal needs of employees.
4. Rationality It has a high degree of rationality and
leaves no scope for personal, social and
emotional factors.
It is influenced by social, personal and
emotional factors.
5. Communication Line of authority and formal relationship
become channel of communication.
Communication takes place through
personal and social relationship.
6. Leadership Based on formal authority and position in
organisation.
Based on competence of individual and
group acceptance.
7. Boundaries It operates within set boundaries. It has no set boundaries; rather it
operates in different directions.
8. Nature It is normative and idealistic in nature. It is realistic reflecting actual functioning.
9. Systems and
procedures
It operates through predetermined
systems and procedures.
It operates through group norms, values
and standards.
Advantages of Formal Organisation:
1. Systematic Working:
Formal organisation structure results in systematic and smooth functioning of an
organisation.
2. Achievement of Organisational Objectives:
Formal organisational structure is established to achieve organisational objectives.
3. No Overlapping of Work:
In formal organisation structure work is systematically divided among various
departments and employees. So there is no chance of duplication or overlapping
of work.
4. Co-ordination:
Formal organisational structure results in coordinating the activities of various departments.
5. Creation of Chain of Command:
Formal organisational structure clearly defines superior subordinate relationship,
i.e., who reports to whom.
6. More Emphasis on Work:
Formal organisational structure lays more emphasis on work than interpersonal
relations.
Disadvantages of Formal Organisation:
1. Delay in Action: While following scalar chain and chain of command actions get
delayed in formal structure.
2. Ignores Social Needs of Employees : Formal organisational structure does not
give importance to psychological and social need of employees which may lead to
de motivation of employees.
3. Emphasis on Work Only: Formal organisational structure gives importance to
work only; it ignores human relations, creativity, talents, etc.
Features of informal organisation:
(1) Informal organisational structure gets created automatically without any
intended efforts of managers.
(2) Informal organisational structure is formed by the employees to get
psychological satisfaction.
(3) Informal organisational structure does not follow any fixed path of flow
of authority or communication.
(4) Source of information cannot be known under informal structure as any
person can communicate with anyone in the organisation.
(5) The existence of informal organisational structure depends on the
formal organisation structure.
Advantages of Informal Organisation:
1. Fast Communication:
Informal structure does not follow scalar chain so there can be faster
spread of communication.
2. Fulfills Social Needs:
Informal communication gives due importance to psychological and social
need of employees which motivate the employees.
3. Correct Feedback:
1. The knowledge of informal group can be used to gather support of
employees and improve their performance.
2. Through grapevine important information can be transmitted quickly.
3. By cooperating with the informal groups the managers can skillfully take
the advantage of both formal and informal organisations
Disadvantages of Informal organisation:
1. Spread Rumors:
According to a survey 70% of information spread through informal
organisational structure are rumors which may mislead the employees.
2. No Systematic Working:
Informal structure does not form a structure for smooth working of an
organisation.
3. May Bring Negative Results:
If informal organisation opposes the policies and changes of management,
then it becomes very difficult to implement them in organisation.
4. More Emphasis to Individual Interest:
Informal structure gives more importance to satisfaction of individual
interest as compared to organisational interest.
Basis of Departmentation in an Organisation
The basis are:
Departmentation by Function
2. Departmentation by Products
3.DepartmentationbyTerritory/Geographic Departmentation
4. Departmentation by Customers
5. Departmentation by Process
6. Combined Base
Departmentation by Function
This Departmentation is most widely used basis for organising activities and
is present in every organisation at some level
Merits of Departmentation by Function:
1. It suits well the small enterprises for creating major departments.
2. It promotes specialization.
3. It economizes operations and makes possible the adoption of logical and
comprehensible structure.
4. It facilitates inter-departmental co-ordination.
5. It suits well for those organizations which have single product line.
Demerits of Departmentation by Function:
1. It may lead to excessive centralization.
2. Decision making process is delayed.
3. Poor inter-departmental co-ordination.
4. It is rather difficult to set up specific accountability and profit centres within
functional departments so the performance is not accurately measured.
5. It hinders human development in all the areas.
Departmentation by Product
In a multiproduct organisation the Departmentation by product most suits. Here
the activities are grouped on the basis of produce or product lines. All functions
related to particular product are bought together under the umbrella of product
manager.
Merits of Departmentation by Product
1. Each product division can be taken as a viable profit centre for accountability
purposes. The performance of individual products can be easily accessed to
distinguish between profitable and unprofitable products.
2. Marketing strategy becomes more pragmatic.
3. Top management is relieved of operating task responsibility and can concentrate on
such centralized activities as finance, research etc.
4. It facilitates decentralization.
5. Attention is given to product lines, which is good for further diversification and
expansion.
Demerits of Departmentation by Product
(1) It increases management cost. Service functions are duplicated both at the top and
at the operating levels of management.
(2) High cost of operation prevents the small & medium sized concerns from adopting
this basis of classification, particularly for creating major units.
(3) There are problems at the top of co-ordination.
Departmentation by Territory
It is suitable for organisations having wide geographical market such as
pharmaceuticals, banking, consumer goods, insurance, railways etc. Here, the
market is broken up into sales territories and a responsible executive is put in
charge of each territory. The territory may be known as district, division or region.
Merits of Departmentation by Territory
1. It helps in achieving the benefits of local operations such as local
supply of materials & labour, local markets etc.
2. Full attention can be paid to local customer groups.
3. A regional division achieves a better co-ordination and supervision of
activities in a particular area.
4. It helps in reducing transportation and distribution costs.
5. It facilitates the expansion of business to different regions.
6. It provides an opportunity to a regional manager to gain broad
experience as he looks after the complete operation in a particular
territory
Demerits of Departmentation by Territory
1. It creates the problem of communication and co-ordination between
various regional offices.
2. It may be uneconomical due to costly duplication of personnel &
physical facilities.
3. It may be difficult to provide efficient centralized services to various
departments located in different areas.
4. Various regional units may become so engrossed in short term
competition among themselves that the overall long term interests of the
organisation as a whole may be overlooked.
5. The problem of top management control becomes difficult.
Departmentation by Customers
This type of classification is adopted by enterprises offering specialized services.
To give the attention to heterogeneous groups of buyers in the market, marketing
activities are often split into various several parts.
Merits of Departmentation by Customers
1. The main advantage of following this type of departmentation is that
particular needs of the particular- customers can be solved.
2. Benefits of specialization can be obtained.
Demerits of Departmentation by Customers
1. There may be duplication and underutilization of facilities and
resources.
2. It may be difficult to maintain co-ordination among the different
customer departments.
The production function may be further subdivided on the basis of the
process of production when the production process has distinct activity
groups, they are taken as the basis of departmentation.
Process departmentation is suitable when the machines or equipment’s
used are costly and required special skill for operating. It is useful for
organisations which are engaged in the manufacture of products which
involves several processes.
Merits of Departmentation by Process
1. It provides economy of operation
2. The benefits of specialization are available.
3. Efficient maintenance of equipment’s is possible.
4. It simplifies supervision and plant layout.
Demerits of Departmentation by Process:
1. There may be difficulties in coordinating the activities of different
departments
2. Due to specialized activity, the employee mobility is reduced.
3. Extreme specialization may reduce flexibility of operations.
4. This type of departmentation may not provide opportunity for the all-
round development of managerial talent.
5. Conflicts may arise among managers of different processes, particularly
when they loose sight of the overall company goals.

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Principles Of Management Unit 4

  • 1. Organizing as a Process The term ‘organizing” refers to the process of identifying and grouping of activities to be performed and dividing them among the individuals and creating authority and responsibility relationship among them for the accomplishment of organizational objectives. Characteristics of Organising: 1.Organising is a basic function and a sub-process of management: The organising function follows the function of planning and the other functions of management follow organising. Thus, organising is a sub-process of management.
  • 2. 2. Organising is a continuous process: An organization is a continuing entity. The need for organising function is felt whenever new activities or functions are introduced, or existing functions and activities are re-shuffled in the organization. 3. Organising is a function of all managers 4. Organising involves coordination In order to create a balance and structure in the organisation, the activities of members need to be well-coordinated. 5. Goal-oriented Organising is designed on the basis of objectives and it aims at achieving them smoothly.
  • 3. 6. Group effort Organising deals with group efforts that are made for attaining common goals. 7. Establishes authority-responsibility relationship Organising establishes authority- responsibility relationship among the organizational members. Process of Organising – The steps 1. Identification and enumeration (listing) of activities For example, an organisation producing and distributing washing machines has to perform large number of activities that may be related to production, distribution, finance, purchase and personnel, etc.
  • 4. 2. Division of activities After determining and enumerating activities, these are to be divided and sub-divided into small components known as jobs and tasks. 3. Grouping-up of activities For example, each job and task related to production is to be grouped up into production group, and elements that are related to marketing, finance and purchase are to be grouped-up in the respective groups. 4. Assignment of group of activities 5. Granting necessary rights Assignment of group of activities among various departments is followed by giving them adequate rights so that they can perform assigned work in a satisfactory manner.
  • 5. 6. Coordinating the functioning of various departments In the process of organising, attempts are also made for coordinating working of individual with respective department, and finally to coordinate functioning of various departments towards the achievement of common goals. Need and Importance of Organising 1. Provides framework to perform management functions 2. Facilitates coordination 3. Leads to specialization 4. Helps in achieving efficiency 5. Promotes Employee development 6. Increases clarity of authority and responsibility
  • 6. Authority and Responsibility Relationships •Authority is the power to give orders and get it obeyed or in other words it is the power to take decisions. •Authority is the right or power assigned to an executive or a manager in order to achieve certain organizational objectives. Definitions of Authority According to Henri Fayol, "Authority is the right to give orders and the power to exact obedience." According to Mooney and Reily, "Authority is the principle at the root of Organisation and so important that it is impossible to conceive of an Organisation at all unless some person or persons are in a position to require action of others."
  • 7. AUTHORITY A manager will not be able to function efficiently without proper authority. Authority is the genesis of organizational framework. It is an essential accompaniment of the job of management. Without authority, a manager ceases to be a manager, because he cannot get his policies carried out through others. AUTHORITY IS RELATED TO YOUR POSITION WHICH YOU POSSES .. POWER IS THE REAL INNER STRENGTH OF ANY INDIVIDUAL Responsibility Responsibility means state of being accountable or answerable for any obligation, trust, debt or something or in other words it means obligation to complete a job assigned on time and in best way.
  • 8. Definitions of Responsibility According to Davis, "Responsibility is an obligation of individual to perform assigned duties to the best of his ability under the direction of his executive leader." In the words of Theo Haimann, "Responsibility is the obligation (commitment) of a subordinate to perform the duty as required by his superior". McFarland defines responsibility as "the duties and activities assigned to a position or an executive".
  • 9. Characteristics of Responsibility •The essence of responsibility is the obligation of a subordinate to perform the duty assigned. •It always originates from the superior-subordinate relationship. •Normally, responsibility moves upwards, whereas authority flows downwards. •Responsibility is in the form of a continuing obligation. •Responsibility cannot be delegated. •The person accepting responsibility is accountable for the performance of assigned duties. •It is hard to conceive responsibility without authority.
  • 10. Relationship between Authority and Responsibility Authority and responsibility are closely related and this principle states that these two must go hand in hand. It means that proper authority should be delegated to meet the responsibilities. Two main reasons Firstly, if a person is given some responsibility without sufficient authority he can’t perform better, and also could not accomplish the desired goal. Secondly, if there is excess authority being delegated to an individual without matching responsibility then the delegated authority will be misused in one way or the other.
  • 11. Delegation of Authority Definition: The Delegation of Authority is an organizational process wherein, the manager divides his work among the subordinates and give them the responsibility to accomplish the respective tasks. Along with the responsibility, he also shares the authority, i.e. the power to take decisions with the subordinates, such that responsibilities can be completed efficiently. Delegation is the downward transfer of formal authority from one person to another. Superiors delegate authority to subordinates to facilitate the accomplishment of the assigned work.
  • 12. Features of Delegation of Authority •Delegation means giving power to the subordinate to act independently but within the limits prescribed by the superior. Also, he must comply with the provisions of the organizational policy, rules, and regulations. •Delegation does not mean that manager give up his authority, but certainly he shares some authority with the subordinate essential to complete the responsibility entrusted to him. •Authority once delegated can be further expanded, or withdrawn by the superior depending on the situation.
  • 13. •The manager cannot delegate the authority which he himself does not possess. Also, he can not delegate his full authority to a subordinate. •The delegation of authority may be oral or written, and may be specific or general. •The delegation is an art and must comply with all the fundamental rules of an organization. Elements of Delegation The following three elements are in the scheme of delegation 1. Assignment of duties or tasks. 2. Delegation of authority. 3. Accountability for performance of duties and exercise of authority.
  • 14. Process of Delegation The step, which is followed when delegating authority, is the process of delegation. Normally four steps are used in the process of delegation. It can be shown in the form of diagram.
  • 15. Centralization of authority means the power of planning and decision making are exclusively in the hands of top management. Decentralization, the powers for the same has been disseminated by the top management to the middle or low-level management. There is a never ending debate between these two terms to prove which one is better. In this article, significant differences between Centralization and Decentralization is explained.
  • 16. BASIS FOR COMPARISON CENTRALIZATION DECENTRALIZATION Meaning The retention of powers and authority with respect to planning and decisions, with the top management, is known as Centralization. The dissemination of authority, responsibility and accountability to the various management levels, is known as Decentralization. Communication Flow Vertical Open and Free Decision Making Slow Comparatively faster Advantage Proper coordination and Leadership Sharing of burden and responsibility Power of decision making Lies with the top management. Multiple persons have the power of decision making. Reasons Inadequate control over the organization Considerable control over the organization Best suited for Small sized organization Large sized organization
  • 17. Advantages of centralization •Provide power and prestige for manager. •Promote uniformity of policies, practices and decisions. •Minimal extensive controlling procedures and practices. •Minimize duplication of function. Disadvantages of centralization •Neglected functions for mid levels , and less motivated beside personnel. •Nursing supervisor functions as a link officer between nursing director and first line management
  • 18. Three forms of decentralization De-concentration: The weakest form of decentralization .decision making authority is redistributed to lower or regional levels of the same central organisation. Delegation(handovering): Amore extensive form of decentralization. Through delegation the responsibility for decision making are transferred to semi autonomous organizations not wholly controlled by the central organisation, but ultimately accountable to it Devolution: A third type of decentralization is devolution. The authority for decision making is transferred completely to autonomous organisation units.
  • 19. Advantages of decentralization •Raise morale and promote interpersonal relationships •Relive from the daily administration •Bring decision making close to action •Develop second line managers •Promote employees enthusiasm and coordination •Facilitate actions by lower level managers Dis Advantages of decentralization •Top level administration may feel it would decrease their status •Mangers may not permit full and maximum utilization of highly qualified personnel •Increased costs .it requires more managers and large staff •It may lead to overlapping and duplication of effort
  • 20. Formal organisation •A formal organisation is a consciously planned a deliberately designed entity. It is based on superior and subordinate relationships which are created by assignment of work and delegation of authority. •It is through this formal relationship that members communicate with each other and perform their duties . Thus , a formal organisation functions within set boundaries and is capable of being disciplined and controlled. Informal organisation When people work together in a formal relationship of superior and subordinate , they come in contact with each other This interaction provides them an opportunity to know each other and develop personal and social relations.
  • 21. Features of Formal organisation: (1) The formal organisational structure is created intentionally by the process of organising. (2) The purpose of formal organisation structure is achievement of organisational goal. (3) In formal organisational structure each individual is assigned a specific job. 4) In formal organisation every individual is assigned a fixed authority or decision-making power. (5) Formal organisational structure results in creation of superior- subordinate relations. (6) Formal organisational structure creates a scalar chain of communication in the organisation.
  • 22. Basis Formal Organisation Informal Organisation 1. Formation Formal Relationship that is personal and social in nature. 2. Purpose / objective Legally Constituted rationally designed and consciously planned. It arises naturally and spontaneously and is an integral dimension of formal organisation 3. Relationship It is meant for achieving specific goals. It is meant to engage in production of goods and/or performing service required by society. Its purpose is to satisfy social and personal needs of employees. 4. Rationality It has a high degree of rationality and leaves no scope for personal, social and emotional factors. It is influenced by social, personal and emotional factors. 5. Communication Line of authority and formal relationship become channel of communication. Communication takes place through personal and social relationship. 6. Leadership Based on formal authority and position in organisation. Based on competence of individual and group acceptance. 7. Boundaries It operates within set boundaries. It has no set boundaries; rather it operates in different directions. 8. Nature It is normative and idealistic in nature. It is realistic reflecting actual functioning. 9. Systems and procedures It operates through predetermined systems and procedures. It operates through group norms, values and standards.
  • 23. Advantages of Formal Organisation: 1. Systematic Working: Formal organisation structure results in systematic and smooth functioning of an organisation. 2. Achievement of Organisational Objectives: Formal organisational structure is established to achieve organisational objectives. 3. No Overlapping of Work: In formal organisation structure work is systematically divided among various departments and employees. So there is no chance of duplication or overlapping of work. 4. Co-ordination: Formal organisational structure results in coordinating the activities of various departments.
  • 24. 5. Creation of Chain of Command: Formal organisational structure clearly defines superior subordinate relationship, i.e., who reports to whom. 6. More Emphasis on Work: Formal organisational structure lays more emphasis on work than interpersonal relations. Disadvantages of Formal Organisation: 1. Delay in Action: While following scalar chain and chain of command actions get delayed in formal structure. 2. Ignores Social Needs of Employees : Formal organisational structure does not give importance to psychological and social need of employees which may lead to de motivation of employees. 3. Emphasis on Work Only: Formal organisational structure gives importance to work only; it ignores human relations, creativity, talents, etc.
  • 25. Features of informal organisation: (1) Informal organisational structure gets created automatically without any intended efforts of managers. (2) Informal organisational structure is formed by the employees to get psychological satisfaction. (3) Informal organisational structure does not follow any fixed path of flow of authority or communication. (4) Source of information cannot be known under informal structure as any person can communicate with anyone in the organisation. (5) The existence of informal organisational structure depends on the formal organisation structure.
  • 26. Advantages of Informal Organisation: 1. Fast Communication: Informal structure does not follow scalar chain so there can be faster spread of communication. 2. Fulfills Social Needs: Informal communication gives due importance to psychological and social need of employees which motivate the employees. 3. Correct Feedback: 1. The knowledge of informal group can be used to gather support of employees and improve their performance. 2. Through grapevine important information can be transmitted quickly. 3. By cooperating with the informal groups the managers can skillfully take the advantage of both formal and informal organisations
  • 27. Disadvantages of Informal organisation: 1. Spread Rumors: According to a survey 70% of information spread through informal organisational structure are rumors which may mislead the employees. 2. No Systematic Working: Informal structure does not form a structure for smooth working of an organisation. 3. May Bring Negative Results: If informal organisation opposes the policies and changes of management, then it becomes very difficult to implement them in organisation. 4. More Emphasis to Individual Interest: Informal structure gives more importance to satisfaction of individual interest as compared to organisational interest.
  • 28. Basis of Departmentation in an Organisation The basis are: Departmentation by Function 2. Departmentation by Products 3.DepartmentationbyTerritory/Geographic Departmentation 4. Departmentation by Customers 5. Departmentation by Process 6. Combined Base
  • 29. Departmentation by Function This Departmentation is most widely used basis for organising activities and is present in every organisation at some level
  • 30. Merits of Departmentation by Function: 1. It suits well the small enterprises for creating major departments. 2. It promotes specialization. 3. It economizes operations and makes possible the adoption of logical and comprehensible structure. 4. It facilitates inter-departmental co-ordination. 5. It suits well for those organizations which have single product line. Demerits of Departmentation by Function: 1. It may lead to excessive centralization. 2. Decision making process is delayed. 3. Poor inter-departmental co-ordination. 4. It is rather difficult to set up specific accountability and profit centres within functional departments so the performance is not accurately measured. 5. It hinders human development in all the areas.
  • 31. Departmentation by Product In a multiproduct organisation the Departmentation by product most suits. Here the activities are grouped on the basis of produce or product lines. All functions related to particular product are bought together under the umbrella of product manager.
  • 32. Merits of Departmentation by Product 1. Each product division can be taken as a viable profit centre for accountability purposes. The performance of individual products can be easily accessed to distinguish between profitable and unprofitable products. 2. Marketing strategy becomes more pragmatic. 3. Top management is relieved of operating task responsibility and can concentrate on such centralized activities as finance, research etc. 4. It facilitates decentralization. 5. Attention is given to product lines, which is good for further diversification and expansion. Demerits of Departmentation by Product (1) It increases management cost. Service functions are duplicated both at the top and at the operating levels of management. (2) High cost of operation prevents the small & medium sized concerns from adopting this basis of classification, particularly for creating major units. (3) There are problems at the top of co-ordination.
  • 33. Departmentation by Territory It is suitable for organisations having wide geographical market such as pharmaceuticals, banking, consumer goods, insurance, railways etc. Here, the market is broken up into sales territories and a responsible executive is put in charge of each territory. The territory may be known as district, division or region.
  • 34. Merits of Departmentation by Territory 1. It helps in achieving the benefits of local operations such as local supply of materials & labour, local markets etc. 2. Full attention can be paid to local customer groups. 3. A regional division achieves a better co-ordination and supervision of activities in a particular area. 4. It helps in reducing transportation and distribution costs. 5. It facilitates the expansion of business to different regions. 6. It provides an opportunity to a regional manager to gain broad experience as he looks after the complete operation in a particular territory
  • 35. Demerits of Departmentation by Territory 1. It creates the problem of communication and co-ordination between various regional offices. 2. It may be uneconomical due to costly duplication of personnel & physical facilities. 3. It may be difficult to provide efficient centralized services to various departments located in different areas. 4. Various regional units may become so engrossed in short term competition among themselves that the overall long term interests of the organisation as a whole may be overlooked. 5. The problem of top management control becomes difficult.
  • 36. Departmentation by Customers This type of classification is adopted by enterprises offering specialized services. To give the attention to heterogeneous groups of buyers in the market, marketing activities are often split into various several parts.
  • 37. Merits of Departmentation by Customers 1. The main advantage of following this type of departmentation is that particular needs of the particular- customers can be solved. 2. Benefits of specialization can be obtained. Demerits of Departmentation by Customers 1. There may be duplication and underutilization of facilities and resources. 2. It may be difficult to maintain co-ordination among the different customer departments.
  • 38. The production function may be further subdivided on the basis of the process of production when the production process has distinct activity groups, they are taken as the basis of departmentation. Process departmentation is suitable when the machines or equipment’s used are costly and required special skill for operating. It is useful for organisations which are engaged in the manufacture of products which involves several processes.
  • 39. Merits of Departmentation by Process 1. It provides economy of operation 2. The benefits of specialization are available. 3. Efficient maintenance of equipment’s is possible. 4. It simplifies supervision and plant layout. Demerits of Departmentation by Process: 1. There may be difficulties in coordinating the activities of different departments 2. Due to specialized activity, the employee mobility is reduced. 3. Extreme specialization may reduce flexibility of operations. 4. This type of departmentation may not provide opportunity for the all- round development of managerial talent. 5. Conflicts may arise among managers of different processes, particularly when they loose sight of the overall company goals.