Please refer to the Organising Class 12 Notes for Business Studies given below. These revision notes and important question answers have been prepared based on the latest NCERT book for Class 12 Business Studies. Our teachers have developed these short notes and Important Questions Class 12 Business Studies as per the latest syllabus for Grade 12 Business Studies issued by CBSE. Read these notes and important questions to get better marks in examinations
Class 12 Business Studies Organising
Organizing : Definition Organizing is the process of defining and grouping the activities of the enterprise and establishing authority relationships among them for the realization of the desired goals.
Hierarchy: Definition Hierarchy is the ranking of job positions on the basis of relative roles and responsibilities.
Types of Organizations
• Formal organization refers to the organization structure which is designed by the management to accomplish a particular task.
• Informal organization emerges from within the formal organization when people interact beyond their officially defined roles
Steps Involved In The Process Of Organization
✔ Identification and division of work is done in accordance with predetermined plans to avoid duplication of activities and ensure that the burden of work is being shared among the employees.
✔ Departmentalization involves grouping of similar activities into departments, units, sections etc. using several criteria as a basis to facilitate specialization.
✔ Assignment of duties is done to the members as per their job positions. Once departments have been created, each of them is placed under the charge of an individual.
✔ Establishing reporting relationships While assigning jobs, each member is told that from whom he/she has to take orders and to whom he/she will be accountable. The establishment of such clear reporting relationships help to create a well defined hierarchical structure.
Importance Of Organizing
1. Organizing offers benefits of specialization as it leads to a systematic allocation of jobs amongst the workforce as the specific employees are assigned specific job on a regular basis.
2. It brings clarity in working relationships by establishing a hierarchical order thereby enabling the fixation of responsibility and specification of the extent of authority to be exercised by an individual.
3. It leads to optimum utilization of resources through proper allocation of jobs, and minimizing the wastage of resources and efforts.
4. It facilitates adaptation to change and helps to create a stable organization by incorporating changes in the organization structure as per the needs of the changing environment.
5. It leads to effective administration by providing a clear description of jobs and related duties which helps to avoid confusion and duplication.
6. It fosters development of personnel as delegation helps to build the ability of the subordinate to deal effectively with challenges and helps them to realize their full potential.
7. It leads to expansion and growth of an enterprise by enabling it to deviate from existing norms and taking up new challenges.
The organizational structure can be defined as the framework within which managerial and operating tasks are performed
Types Of Organisational Structure
1. Functional Structure
Features of Functional Structure
1. A functional structure is an organizational design that groups similar or related jobs together on the basis of functions like production, finance etc.
2. Each department has a functional manager responsible for performance and who has authority over the department.
3. All departments are under the charge of a coordinating head.
4. These departments may be further divided into sections.
Features of Divisional Structure
1. Different products manufactured in the organization. Structure comprise of separate business units or divisions.
2. Each department has a divisional manager responsible for the profit or loss of his division.
3. Each division is multi-functional because within each division functions like production, marketing, finance, purchase etc., are performed together to achieve a common goal
Advantages Of Functional And Divisional Structure
Advantages of Functional Structure
1. A functional structure emphasizes on specific functions and ensures that different functions get due attention.
2. Due to the similarity in the tasks being performed, it promotes control and coordination within a department.
3. It results in increased profit with the improvement in managerial and operational efficiency.
4. By focusing only on a limited range of skills, it facilitates the training of employees.
5. It leads to minimal duplication of effort and leads to economies of scale thereby reducing cost
Advantages of Divisional Structure
1. Product specialization helps a divisional manager to gain experience in all functions related to a particular product and this prepares him for higher positions.
2. It provides a proper basis for performance measurement and also helps in fixation of responsibility in cases of poor performance of the division as revenues and costs related to different departments can be easily identified.
3. It leads to faster decision making, promotes flexibility and initiative because each division functions as an autonomous unit.
4. It facilitates expansion and growth as new divisions can be added just by adding another divisional head and staff for the new product line without interrupting the existing operations
Disadvantages Of Functional And Divisional Structure
Disadvantages of Functional Structure
1. It gives less emphasis to overall enterprise objectives than the objectives pursued by a functional head.
2. It may lead to problems in coordination.
3. It may lead to conflict of interests if two or more departments are not compatible.
4. It may lead to inflexibility as the functional heads do not get training and experience in diverse areas.
Disadvantages of Divisional Structure
1. There may be conflicts among the different division heads, as in pursuit of higher profits, each of them may seek maximum allocation of resources at the cost of other divisions.
2. The cost is high as each division is provided with separate set of similar functions.
3. It provides the managers with the authority to supervise all activities related to a particular division , such a manager may gain power and in a bid to assert his independence may ignore organizational interest.
Difference Between Functional And Divisional Structure
|S.No||Basis||Functional Structure||Divisional Structure|
|1||Formation||It is based on functions.||It is based on product lines and is supported by functions.|
|2||Responsibility||It is difficult to fix on a department||It is easy to fix responsibility for performance.|
|3||Specialization||Functional specialization||Product specialization|
|4||Managerial Development||It is difficult, as each functional manager has to report to the top management||It is easier, autonomy as well as the chance to perform multiple functions helps in managerial development|
|5||Cost||It is economical as the functions are not duplicated.||It is costly as there is duplication of resources in various departments|
|6||Coordination||It is difficult for a multiproduct company.||It is easy, because all functions related to a particular product are integrated in one|
|7||Suitability||It is most suitable when the size of the organization is large, has diversified activities and operations require a high degree of specialization.||It is suitable for those business enterprises where a large variety of products are manufactured using different productive resources.|
Features of Formal Organization
• It specifies the reporting relationships among various job positions.
• It is a means to achieve the organizational objectives.
• It seeks to coordinate the efforts of various departments.
• It is deliberately created by the top management to facilitate smooth functioning of the organization.
• It places more emphasis on work to be performed rather than interpersonal relationships among the employees.
Advantages of Formal Organization
• It is easier to fix responsibility since reporting relationships are clearly specified.
• The role and duties of each employee are clearly defined.
• Unity of command is maintained through an ^ established chain of command.
• It leads to effective accomplishment of goals by providing a framework for the efficient operations.
• It provides stability to the organization as the behavior of the employees is guided by rules and regulations of the organization.
Limitations of Formal Organization
• It may lead to procedural delays as all communication has to take place through scalar chain only.
• It restricts the creativity and ^ recognisation of employees as it does not allow any deviations from rigidly laid down polices.
• It does not provide a complete picture of how an organization works as it is difficult to understand all human relationships in a formal structure.
Features of Informal Organization
• It originates from within the formal organization as a result of personal interaction among employees.
• Instead of the official rules and regulations, the standards of behavior evolve from group norms.
• The group members create independent channels of communication without specified direction of flow of information.
• It emerges spontaneously and is not deliberately created by the management.
• It is a complex network of social relationships among members and has no definite structure.
Advantages of Informal Organization
• It leads to faster spread of information as well as facilitates quick feedback.
• It helps to fulfill the social needs of the members by giving them a sense of belongingness in the organization and enhances their job satisfaction.
• It contributes towards the fulfillment of organizational objectives by compensating for inadequacies in the formal organization
Disadvantages of Informal Organization
• It may work against the interest of the formal organizations it leads to spreading of rumors.
• Sometimes it may restrict growth of the organization by strongly opposing to the proposed change.
• As it creates a peer pressure among the members to conform to group expectations, it can be harmful to the organization.
Difference between Formal Organization and Informal Organization
|S.No||Basis||Formal Organization||Informal Organization|
|1||Meaning||The structure of authority relationships created deliberated by the management to achieve its objectives.||It is a network of social relationships arising out of the interaction among employees within an organization.|
|2||Origin||It arises as a result of company rules and policies||It arises as a result of social interaction.|
|3||Authority||It arises by the virtue of position in the organization.||It arises out of personal qualities of the members.|
|4||Behavior||It is directed by rules of the organization.||There is no set behavior pattern for the members.|
|5||Flow of Communication||The communication takes place through the scalar chain.||The communication can take place in any direction as its flow does not follow a set pattern.|
|6||Nature||It is rigid.||It is flexible.|
|7||Leadership||Managers are leaders.||Leaders are chosen by the group so they may or not be the managers.|
Delegation of Authority
Delegation of authority merely means the subdivision and sub-allocation of powers to the subordinates in order to achieve effective results
Elements of Delegation
Importance of Delegation
1. It leads to effective management as by relieving the employees from doing routine work, it provides them with time to excel in new areas.
2. It promotes employee development as they are entrusted with more opportunities to utilize their talent, perform complex tasks and assume those responsibilities which are likely to improve their career prospects.
3. It helps to motivate employees as when a subordinate is entrusted with a task, it is not merely the sharing of work but involves trust on the superior’s part and commitment on the part of the subordinate.
4. It facilitates the growth of an organization as it seeks to enrich the quality of manpower and widens the scope of using internal recruitment by providing them with training and experience through exposure to varied jobs.
5. It provides the basis of management hierarchy as it establishes superior-subordinate relationships, which are the basis of hierarchy of management
6. It facilitates better coordination amongst the departments, levels and functions of management by providing clarity in reporting relationships.
Difference between Authority, Responsibility and Accountability
|1||Meaning||Authority refers to the right of an individual to command his subordinates and to take action within the scope of his position.||Responsibility is the obligation of a subordinate to properly perform the assigned duty.||Accountability implies being answerable for the final outcome, one authority has been delegated and responsibility accepted, one cannot deny accountability.|
|2||Delegation||Can be delegated.||Cannot be entirely delegated.||Cannot be delegated at all|
|3||Origin||Arises from formal position in the organization||Arises from delegated authority.||Arises from responsibility.|
|4||Flow||Flows downward from superior to subordinate||Flows upward from subordinate to superior.||Flows upward from subordinate to superior|
Decentralization refers to systematic dispersal of authority to the lowest level, except that which can be exercised at central points.
Caution in implementing a Decentralization Policy
1. Decentralization must always be balanced with centralization in areas of major policy decisions.
2. Complete centralization would imply concentration of all decision making functions at the apex of the management hierarchy find would eliminate the need for a management hierarchy.
3. Complete decentralization can lead to organizational disintegration as the departments may start operating on their own guidelines which may be contrary to the interest of the organization.
Need of Decentralization
As an organization grows in size and complexity, the departmental or branch heads are directly and closely involved with certain operations and are likely to have more knowledge about them as compared to the top management which may be associated with individual operations only indirectly.
• Reduce the burden of the top executive
• Facilitate diversification
• Permits quicker and better decisions
• Management development
• Environmental adaptation
• Improved teamwork
• Effective supervision and control
Importance of Decentralization
1. It seeks to develop initiative in the subordinates by promoting self-reliance and confidence amongst them and also helps to identify those executives who have the necessary potential to become dynamic leaders.
2. It provides relief to top management as the subordinates are allowed to operate independently within their area of jurisdiction. Consequently, the need for direct supervision is reduced.
3. It facilitates quick decision making as the employees are allowed to act independently within there are a jurisdiction without consulting others.
4. It develops managerial talent for the future by providing the employees with the necessary training and experience through exposure to varied challenging jobs and also facilitates identification of those employees who may and those who may not be successful in assuming greater responsibility.
5. It facilitates growth of the organization by increasing its productivity and profitability through assigning greater autonomy to the lower levels of management as well as divisional or departmental heads.
6. It facilitates better control by ensuring continuous evaluation of performance at each level and the contribution of each department so that they can be individually held accountable for their results.
Difference between Delegation of Authority and Decentralization
|S.No||Basis||Delegation of Authority||Decentralization|
|1||Nature||It is a compulsory act because no individual can perform all tasks on his own.||It is an optional policy decision and is only implemented at the discretion of the top management.|
|2||Freedom of action||The subordinates have less freedom to take own decisions as there is more control is exercised by the superiors||The control over executives is less hence they have a greater freedom of action.|
|3||Status||It is a process followed to share tasks.||It is the result of the policy decision of the top management.|
|4||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|
|5||Purpose||To lessen the burden of the manager.||To increase the role of the subordinates in the organization by giving them more autonomy.|
|6||Withdrawal of authority||Easy, as only two persons are involved in the process||Difficult, as it involves the extension of delegation to the lowest level of management.|
Case Study Organising Class 12 Business Studies
Question. Ramdas, aged 49 is working in an aviation company. He is the senior most employee in his division. He is even senior to the division manager, Kanaputti. Ramdas is considered one of the most committed, capable and hard-working employees. As a result of his abilities and seniority, he generally received the work assignments of his choice. Although there was no formal designation of various „special’ projects assigned to Ramdas, he handled them as a matter of routine. A problem developed when an able and intelligent person Nagarjuna, aged 33, was appointed by Kanaputti. Nagarjun’s previous three years’ experience in the closely related work, made it possible for him to catch on to the routine work of his new job more rapidly than was customary for a new employee. On several occasions, Kanaputti noticed the tension developing between the two employees. However, he didn’t want to get involved in their personal issues as long as the work was completed effectively and efficiently by them. One day, the tension between them reached the boiling point and Ramdas complained to Kanaputti stating that his duties were being largely taken over by Nagarjun. Kanaputti issued the order stating the clear allocation of the jobs and related duties between the two. He further clarified the working relationship between them by specifying who was to report to whom. This helped in reducing the workload, enhancing productivity and removing ambiguity.
1. Identify and state the step of organizing process which has not been carried out properly and contributed to this problem.
2. State the two steps of the organizing process which have been taken by Kanaputti to respond to the complaint of Ramdas.
3. Also state two points of importance of organizing as reflected in the above case.
Ans. 1. The step of organizing process which has not been carried out properly and contributed to this problem is Assignment of duties. Assignment of Duties: Once departments have been created each of them is placed under the charge of an individual and then jobs are allocated to the members as per their job positions.
2. The two steps of the organizing process which have been taken by Kanaputti to respond to the complaint of Ramdas are listed below:
• Assigning the duties
• Establishing reporting relationship.
3. The two points of importance of organizing as reflected in the above case are described below:
• Optimum utilization of resources: Organizing ensures best possible use of all forms of resources i.e. physical, financial and human resource. It ensures systematic assignment of jobs thereby curbing overlapping of work and avoiding possibilities of duplication of work. This helps in preventing confusion and minimizing the wastage of resources and efforts.
• Adaptation to change: The process of organizing provides stability to the enterprise as it can then continue to survive and grow inspire of changes in the business environment. It enables the organization structure to be suitably modified and the revision of inter-relationships amongst managerial levels to pave the way for a smooth transition.
Question. “Shan Spices Ltd.” are the manufacturer of different food specific spices like Rajmaa Masala, Cholley Masala, Aaloo Parantha Masala etc. Mr. Raghav, the owner of the company has created different departments for purchase, production, marketing, finance and human resource. There are thirty employees working in the organisation. Planning is of paramount importance to the company as Mr. Raghav believes that effective planning leads to achievement of organisational objectives. So in order to make employees focus on objectives, he issued instructions that during working hours only official matters will be discussed. He made certain rules and code of conduct for the employees to follow, according to which employees are not allowed to visit and talk to the employees of other departments except for official work. He emphasised on work performance which resulted in smooth functioning of the organisation.
1. Identify and state the type of organisation mentioned in the above para.
2. State one feature of the concept identified in part (a) as mentioned in the above para.
3. What was the purpose behind the formulation of rules for the employees that restricted their personal communication with the employees of other departments?
4. State two values violated by Mr. Raghav.
Ans. 1. Formal organisation is the type of organisation mentioned in the above paragraph. Formal organisation refers to the organisation structure which is deliberately created by the management to accomplish a particular task. It clearly defines the boundaries of authority and responsibility and facilitates systematic coordination among the various activities to achieve organisational goals.
2. One feature of formal organisation is that it clarifies who has to report to whom by specifying the relationships among various job positions and the nature of their interrelationship.
3. The purpose behind the formulation of rules for the employees that restricted their personal communication with the employees of other departments is to ensure discipline at workplace and avoid wastage of time. This is help to curb the emergence of informal organisation to a certain extend and increase work efficiency.
4. The two values violated by Mr. Raghav are :
• Liberty to employees
• Fulfilment of emotional needs
Question. Kiran Industries is a company dealing in office furniture. The company chose to diversify its operations to improve its growth potential and increase market share. As the project was important, many alternatives were generated for the purpose and were thoroughly discussed amongst the members of the organisation. After evaluating the various alternatives, Sukhvinder, the Managing Director of the company, decided that they should add ‘Home Interiors and Furnishings’ as a new line of business activity.
1. Name the framework, which the diversified organisation should adopt, to enable it to cope with the emerging complexity? Give one reason in support of your answer.
2. State any two limitations of this framework
Ans. 1. Divisional structure should be adopted by the diversified organisation to enable it to cope with the emerging complexity. Reason: It leads to faster decision making, promotes flexibility and initiative because each division functions as an autonomous unit.
2. The two limitations of divisional structure are as follows:
• There may be conflicts among the different divisions heads as in pursuit of higher profits, each of them may seek maximum allocation of resources at the cost of other divisions.
• The cost is high as each division is provided with separate set of similar functions.
Question. Rajeev, the owner of Pathways Constructions, decided to start a campaign to create awareness among people for developing clean surroundings in their area. He formed a team of 10 members to list the different ways for cleaning the surroundings. One suggested to take the help of local residents, another suggested that they may involve school-going children in their venture. One more suggestion was to take the help of the unemployed youth. On evaluation of different ways, it was decided to take the help of local residents. To achieve the desired goal, various activities are identified like
• Purchase of necessary items like dustbins, garbage bags, brooms, etc.;
• Collection of garbage;
• Disposal of garbage, etc. After identification of different activities, the work was allocated to different members.
1. Identify the concepts of management involved in the above situation and quote the lines which help in their identification.
2. Also identify the values which the company wants to communicate to society.
Ans. 1. The concepts of management involved in the above situation are outlined below:
• Planning: ” One suggested to take help of local residents, another suggested that they may involve school going children in their venture. One more suggestion was to take the help of the unemployed youth. On evaluation of different ways, it was decided to take help of the local residents.”
• Organising: ” To achieve the desired goal, various activities are identified like
• Purchase of necessary items like dustbins, garbage bags, brooms etc.
• Collection of garbage
• Disposal of garbage, etc. After identification of different activities, the work was allocated to different members.” The values which the company wants to communicate to society are:
Question 5. Alliance Ltd. is engaged in manufacturing plastic buckets. The objective of the company is to manufacture 100 buckets a day. To achieve this, the efforts of all departments are coordinated and interlinked and authority-responsibility relationship is established among various job positions. There is clarity on who is to report to whom. Name the function of management discussed above.