Organising
Meaning
After planning the activities and objectives, the next step in the management process is Organising. Organising is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority, and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives.
In simple terms, organising involves bringing together physical, financial, and human resources and developing productive relationships among them for the achievement of organisational goals.
It involves:
1. Division of work: Breaking down the total work into smaller tasks.
2. Grouping of activities: Combining similar tasks into departments or units.
3. Assigning duties: Giving specific tasks to individuals or groups.
4. Establishing relationships: Defining who reports to whom and outlining communication channels.
Essentially, organising creates the organisational structure, which is the framework within which managerial and operating tasks are performed.
Steps In The Process Of Organising
Organising is a systematic process that involves several steps:
Identification And Division Of Work
The first step in the organising process is to identify the total work that needs to be done to achieve the organisational objectives. This total work is then divided into specific tasks or jobs. This division of work facilitates specialisation, where each person performs a specific part of the job, leading to increased efficiency.
Example: In a car manufacturing company, the total work might be divided into tasks like engine assembly, body fabrication, painting, quality testing, etc.
Departmentalisation
Once the work has been divided into various jobs, tasks of a similar nature are grouped together into departments or divisions. This grouping process is called departmentalisation. Departmentalisation simplifies the management process by grouping related activities under one head.
Common bases for departmentalisation are:
a) Functional Departmentalisation: Grouping jobs based on similar functions or activities. Examples: Production Department, Marketing Department, Finance Department, Human Resources Department.
b) Divisional Departmentalisation: Grouping jobs based on products, territories, or customers. Examples: Footwear Division, Apparel Division (product); North India Division, South India Division (territory); Corporate Accounts Division, Retail Accounts Division (customer).
Assignment Of Duties
After the formation of departments, each individual working in a department is assigned duties corresponding to their skills, capabilities, and qualifications. This step involves assigning specific jobs to individuals based on their expertise and ensuring that the right person is placed on the right job.
The work assigned to an individual is defined clearly, and resources needed to perform the job are provided.
Establishing Authority And Reporting Relationships
The final step in the organising process is to define the hierarchical structure of the organisation. This involves establishing authority-responsibility relationships and defining who will report to whom. This step creates a clear line of command and helps in coordinating the efforts of different individuals and departments.
Each manager is granted the necessary authority to perform their duties effectively, and every employee is aware of their reporting relationship (who they are accountable to).
Example 1. A new software development company in Pune plans to create an application for managing small businesses. They break down the work into designing the user interface, coding the backend, testing, and marketing. They assign groups of developers to coding, a separate team for testing, and another for marketing. The coding team reports to the Development Manager, who reports to the CTO. Identify the steps of the organising process involved.
Answer:
- Identification and Division of Work: Breaking down the work into designing UI, coding, testing, marketing.
- Departmentalisation: Grouping developers for coding, a team for testing, and another for marketing (functional grouping).
- Assignment of Duties: Assigning coding tasks to the development group, testing tasks to the testing team, etc.
- Establishing Authority and Reporting Relationships: Defining that the coding team reports to the Development Manager, who reports to the CTO.
Importance Of Organising
Organising is a vital function of management that contributes significantly to the success of an organisation:
1. Benefits of Specialisation: Organising involves dividing the total work into smaller tasks. Performing the same task repeatedly makes a person specialised in that task, leading to improved efficiency and productivity.
2. Clarity in Working Relationships: Organising establishes clear reporting relationships and defines who reports to whom. This reduces confusion and ambiguity, leading to smoother operations.
3. Optimum Utilisation of Resources: The organising process involves proper allocation of jobs and resources, avoiding duplication of work and ensuring that resources (human, financial, physical) are used effectively and efficiently.
4. Adaptation to Change: A properly designed organisational structure can facilitate adaptation to changes in the business environment. It provides the necessary flexibility to modify the structure and reassign duties as needed.
5. Effective Administration: Organising provides a clear description of jobs and related duties, which helps in avoiding confusion and duplication. Clarity in working relationships enables proper execution of work, leading to effective administration.
6. Development of Personnel: Delegation of authority, which is part of organising, enables managers to share their workload and provides opportunities for subordinates to develop new skills and gain experience. This leads to the growth of personnel.
7. Expansion and Growth: Organising helps an enterprise to grow and diversify by adding more job positions, departments, and even new product lines or markets. A sound organisational structure provides the necessary framework for expansion.
Example 2. A medium-sized manufacturing company in Chennai implemented a new organisational structure that clearly defined job roles, departments for production, sales, and accounts, and reporting lines from workers up to the Managing Director. How would this likely impact the company?
Answer:
This would likely lead to Clarity in Working Relationships and Effective Administration. Employees would understand their roles and who to report to, reducing confusion and improving accountability. It would also likely lead to Optimum Utilisation of Resources by reducing duplication and assigning tasks based on specialisation.
Organisation Structure
Organisation structure is the framework within which managerial and operating tasks are performed. It specifies the relationships between people, work, and resources. It is the arrangement of activities and people in an organisation to achieve objectives.
A good organisational structure is essential for efficient and effective operations. It provides a clear hierarchy, defines channels of communication, and establishes reporting relationships.
Span of management (or span of control) is an important concept related to organisation structure. It refers to the number of subordinates that can be effectively managed by a superior.
The organisation structure can be broadly classified into different types, commonly functional and divisional structures.
Types Of Organisation Structures
The most common types of organisation structures are Functional Structure and Divisional Structure.
Functional Structure
A functional structure is an organisational design that groups jobs for employees who perform similar or related functions. This leads to the formation of departments based on functions like Production, Marketing, Finance, Human Resources, etc.
This structure is most suitable for small to medium-sized organisations producing a limited range of products.
Advantages:
1. Specialisation: Promotes efficiency through specialisation as employees perform tasks within a limited functional area.
2. Better Control and Coordination: Within a department, it leads to better control and coordination due to similarity of tasks.
3. Increased Efficiency: Repetitive performance of tasks leads to increased operational efficiency.
4. Reduced Cost: Reduces duplication of effort as resources are shared within the functional area.
5. Training Facilitation: Makes training of employees easier as the focus is only on a limited range of skills.
Disadvantages:
1. Functional Empire: Managers may focus solely on their own department's objectives, ignoring overall organisational goals.
2. Difficulty in Coordination: Coordination across different departments can be challenging.
3. Conflict of Interests: Conflicts may arise between different departments.
4. Inflexibility: Can be less flexible and adaptive to changes, especially for diversified organisations.
5. Hinders Development: May lead to narrow specialisation and hinder the development of managers for higher-level, broader responsibilities.
Divisional Structure
A divisional structure is an organisational design that groups jobs based on product lines, geographical areas, or types of customers. Each division is largely self-contained with its own functional departments (like production, marketing, finance) operating within that division.
This structure is suitable for large organisations producing a diversified range of products or operating in multiple geographical regions.
Advantages:
1. Product/Area Specialisation: Each division head focuses on their specific product, territory, or customer group, leading to specialisation within the division.
2. Greater Accountability: Performance of each division can be assessed easily, as results can be calculated for each division. This makes division heads accountable for profits/losses.
3. Flexibility and Initiative: Divisions are semi-autonomous, allowing for greater flexibility and quicker decision making within the division.
4. Faster Decision Making: Decisions are taken at the divisional level, reducing delays.
5. Facilitates Expansion and Growth: New divisions can be added without disrupting existing operations.
6. Managerial Development: Provides opportunities for managers to gain experience in all functions within a division, preparing them for top-level positions.
Disadvantages:
1. Conflict between Divisions: Conflict may arise among different divisions over allocation of funds and resources.
2. Duplication of Functions: Each division has its own set of functional departments, leading to duplication of resources and increased costs.
3. Ignoring Overall Organisational Interests: Divisional heads may prioritise their own division's interests over the overall objectives of the organisation.
Example 3. Reliance Industries Limited operates in various sectors like petrochemicals, refining, oil & gas, retail, and digital services (Jio). What type of organisational structure is most likely used by RIL?
Answer:
Given its diversified operations across distinct sectors, Reliance Industries Limited most likely uses a Divisional Structure, with each major sector (petrochemicals, retail, Jio) potentially operating as a separate division with its own functional departments.
Example 4. A small company manufacturing only furniture has departments for Wood Cutting, Assembly, Painting, and Sales. What type of organisational structure does it have?
Answer:
This company has a Functional Structure as departments are created based on the different activities (functions) involved in manufacturing and selling furniture.
Formal And Informal Organisation
Within any organisation, two types of relationships exist: formal and informal. These give rise to formal and informal organisations.
Formal Organisation
The Formal Organisation structure is deliberately created by the management to achieve organisational objectives. It is defined by the organisation chart, manuals, and job descriptions, specifying the relationships between different positions and the flow of authority and responsibility.
Features:
1. Created Deliberately: It is consciously designed by top management.
2. Objective-Oriented: Formed to achieve the specific objectives of the organisation.
3. Based on Rules and Procedures: Functioning is governed by formal rules and procedures.
4. Impersonal: Places emphasis on positions, not individuals.
5. Authority Relationship: Clearly defines the line of authority and responsibility.
6. Communicates through Chain of Command: Communication flows through the prescribed scalar chain.
Advantages:
1. Fixes Responsibility: Authority and responsibility are clearly defined, fixing accountability.
2. Unity of Command: Ensures that subordinates receive orders from one superior.
3. Easy to Achieve Objectives: Coordination of activities becomes easier, facilitating goal achievement.
4. Stability: Provides stability to the organisation.
5. Orderly Working: Ensures smooth and orderly functioning.
Disadvantages:
1. Delay in Action: Following the scalar chain can lead to delays in decision making and action.
2. Ignores Social Needs: Does not consider the psychological and social needs of employees.
3. Emphasis on Work Only: Focuses more on work and structure rather than human relationships.
Informal Organisation
The Informal Organisation arises spontaneously from social interaction among employees. It is not deliberately created by management but develops within the formal structure based on friendships, common interests, and social needs.
Features:
1. Originates from Social Interaction: Arises automatically as people interact with each other.
2. No Written Rules and Procedures: It has its own unwritten norms and social rules.
3. Personal: Emerges from the personal relationships among employees.
4. Not Deliberately Created: It is unplanned and arises naturally.
5. Communication through Grapevine: Communication often spreads rapidly through the informal network (grapevine).
Advantages:
1. Faster Communication: Information spreads quickly through the grapevine.
2. Fulfils Social Needs: Provides a sense of belonging and satisfies the social and psychological needs of employees.
3. Provides Feedback: Can provide quick feedback to management on various issues.
4. Supports Formal Organisation: Can support the formal organisation by spreading information and fostering a sense of cooperation, if managed well.
Disadvantages:
1. Spread of Rumours: The grapevine can spread false information and rumours.
2. Resistance to Change: The informal group can resist change if it feels its interests are threatened.
3. Pressure on Members: Can put pressure on members to conform to group norms, even if they are against organisational goals.
4. May Act Against Organisational Interests: If not properly aligned with formal goals, the informal organisation can work against the interests of the company.
Comparison between Formal and Informal Organisation:
| Basis | Formal Organisation | Informal Organisation |
|---|---|---|
| Origin | Result of official structure | Result of social interaction |
| Purpose | To achieve organisational objectives | To satisfy social and psychological needs |
| Structure | Planned and deliberate | Unplanned and spontaneous |
| Authority | Arises from position | Arises from personal qualities/popularity |
| Behaviour | Governed by rules and procedures | Governed by social norms and group standards |
| Communication | Through scalar chain | Through grapevine |
| Nature | Rigid and stable | Flexible and dynamic |
Example 5. In a large bank, employees from different departments meet during lunch breaks and discuss various topics, including work issues and company policies. Information (both accurate and rumours) spreads quickly among them. This group sometimes forms opinions that can affect the mood and behaviour of employees regarding new directives. Identify the type of organisation represented by this lunch group and its communication network.
Answer:
This lunch group represents the Informal Organisation. Its communication network is known as the Grapevine.
Delegation
Delegation is the process of entrusting responsibility and authority to a subordinate and creating accountability for performance. It involves a superior granting authority to a subordinate to perform a specific task within certain limits.
Delegation is essential because a manager alone cannot perform all the tasks. It helps in reducing the manager's workload and provides opportunities for subordinates to develop their skills.
Elements Of Delegation
Delegation involves three main elements:
1. Authority: The right of an individual to command his subordinates and to take action within the scope of his position. Authority flows downwards from superior to subordinate. It is the right to make decisions and give orders.
2. Responsibility: The obligation of a subordinate to properly perform the assigned duty. Responsibility flows upwards from subordinate to superior. It is the duty to complete the task assigned.
3. Accountability: The obligation of a subordinate to answer for the outcome of the assigned task. Accountability cannot be delegated and remains with the superior. It flows upwards from subordinate to superior. Although a manager delegates responsibility and authority, they remain accountable for the final result.
The principle of parity of authority and responsibility states that there should be a balance between the authority granted and the responsibility assigned. Granting authority without commensurate responsibility or vice versa can lead to inefficiency and frustration.
Relationship between elements:
Delegation of Authority $$ \implies $$ Creation of Responsibility $$ \implies $$ Imposition of Accountability.
Importance Of Delegation
Effective delegation is beneficial for the organisation, the manager, and the employees:
1. Effective Management: By delegating routine tasks, managers can focus on more important strategic issues, leading to more effective management.
2. Employee Development: Delegation provides employees with opportunities to use their skills, gain experience, and develop new competencies. This enhances their career prospects.
3. Motivation of Employees: Entrusting responsibility and authority to subordinates motivates them. It shows trust and confidence in their abilities, leading to increased morale and commitment.
4. Facilitation of Growth: By providing trained and experienced employees and reducing the burden on managers, delegation helps the organisation expand its operations.
5. Basis of Management Hierarchy: Delegation of authority establishes superior-subordinate relationships, which form the basis of the management hierarchy (scalar chain).
6. Better Coordination: Delegation helps to avoid overlapping of duties and provides clarity in authority-responsibility relationships, leading to better coordination.
Example 6. The Marketing Manager of a company assigns the task of preparing a market survey report for a new product launch to a subordinate, Priya. She gives Priya the right to collect necessary data from the sales team and interview potential customers. Priya is expected to complete the report and submit it. However, the Marketing Manager is ultimately answerable to the Director for the quality and timeliness of the report. Identify the elements of delegation in this scenario.
Answer:
- Authority: The right given to Priya to collect data and interview customers.
- Responsibility: Priya's obligation to prepare and submit the market survey report.
- Accountability: The Marketing Manager's obligation to the Director for the report (Priya is also accountable to the Marketing Manager for her part of the task).
Decentralisation
Decentralisation refers to the systematic dispersal of authority to the lowest level of management, except for the authority to make strategic decisions and policies which are retained by the top management. It is an extension of delegation.
Decentralisation is a philosophy of management that implies selective dispersal of authority as per the need of the situation.
Centralisation And Decentralisation
Centralisation refers to the concentration of authority at the top level of management. In a centralised organisation, most decisions are made by top management.
Decentralisation is the opposite of centralisation. It means delegating decision-making authority to lower levels of management. It is not merely delegation to a few individuals, but delegation to every possible level.
No organisation can be completely centralised or decentralised. There must be a balance. Top management retains authority for critical decisions (strategic planning, policy formulation) while delegating operational and routine decisions to lower levels.
Importance
Decentralisation offers significant benefits:
1. Develops Initiative Among Subordinates: By giving decision-making authority, it helps in developing initiative and confidence among employees at lower levels.
2. Develops Managerial Talent for the Future: It provides subordinates with valuable experience in decision making, helping them prepare for higher responsibilities and act as a training ground for future managers.
3. Quick Decision Making: Decisions can be made closer to the point of action by those who have direct knowledge, leading to faster decisions compared to seeking approval from higher levels in a centralised setup.
4. Relief to Top Management: Top executives are relieved from making routine decisions and can focus on strategic planning and critical issues.
5. Facilitates Growth: Decentralisation allows different divisions or units to operate independently within overall policy guidelines, facilitating expansion and diversification.
6. Better Control: Although decision making is decentralised, evaluation of performance at each level is possible. Decentralisation allows for performance accountability at lower levels, making control more effective through techniques like Management by Objectives (MBO).
Example 7. A large retail company with stores across India allows regional managers to decide on pricing strategies and product mix for their specific regions based on local demand and competition, while major financial and expansion decisions are made at the head office. Is this company centralised or decentralised?
Answer:
This company is demonstrating Decentralisation. While some strategic decisions are centralised, operational decisions like pricing and product mix are delegated to regional managers at lower levels.
Delegation And Decentralisation: A Comparative View
Delegation and Decentralisation are related concepts but are not the same. Decentralisation is an extension of delegation to the lowest levels of management throughout the organisation.
Key Differences:
| Basis | Delegation | Decentralisation |
|---|---|---|
| Nature | Compulsory act | Optional policy decision |
| Scope | Narrow; limited to a superior and his immediate subordinate | Wide; extension of delegation to the lowest level |
| Purpose | To reduce the burden of the manager | To increase the role of lower level management in the organisation |
| Responsibility | Remains with the superior | Shared by the superior and the subordinate |
| Authority | Shared between superior and subordinate | Systematically dispersed to the lowest levels |
| Relationship | Process of distributing work and authority | Result of policy decision by top management |
Every decentralised organisation must have delegation, but every delegated organisation need not be decentralised. Delegation is a tool or technique, while decentralisation is a philosophy or policy adopted by top management.
Example 8. A Marketing Head of a company gives her assistant the task of preparing a presentation for a client meeting, granting her the authority to collect necessary data. The assistant is responsible for completing the task and accountable to the Marketing Head. Is this delegation or decentralisation?
Answer:
This is an example of Delegation. It is a transfer of specific authority and responsibility from a superior to a subordinate for a particular task, not a systematic dispersal of authority throughout lower levels of the organisation.
Example 9. The CEO of a company decides to allow all department heads to approve expenditures up to ₹5,00,000 without requiring approval from higher management, provided the expenditure is within the allocated budget. Is this delegation or decentralisation?
Answer:
This is an example of Decentralisation. It is a systematic dispersal of decision-making authority regarding expenditure to multiple department heads at a lower level within the organisation's policy framework.