Organising Class 12 Notes: CBSE Business Studies Chapter 5

Organising

• Organising refers to the process of the identification, classification, and coordination of work to be performed by establishing reporting relationships between the people and setting up their responsibilities and authorities to collectively integrate human efforts for the achievement of organisational objectives.

• Hence, Organising is responsible for:

• Implementation of plans into action.

• It decides by whom, how, and where a particular task will be performed.

Steps in The Process of Organising

1. Identification and division of work: Identifying and dividing work to be done into smaller and manageable tasks.

2. Departmentalisation: Grouping of activities similar in nature to the department.

3. Assignment of duties: Allocating work according to the skills and abilities of employees.

4. Establishing reporting relationship: Defines the authority, responsibility, and relationship clearly stating for each employee from whom they have to take orders and to whom they are accountable.

Importance of Organising

• Benefits of specialisation: Work is divided into smaller tasks and each task is performed by those employees who possess the required skills. Performing similar tasks leads to specialisation.

• Clarity in working relationships: It removes ambiguity and miscommunication as working relationships are clearly stated.

• Optimum utilisation of resources: It avoids duplication and overlapping of work which leads to minimum wastage of resources.

• Adaptation to change: It tries to incorporate the changes in the business environment by modifying organisational structures and revising interrelationships at managerial levels as and when required.

• Effective administration: Clarity in working relationships and proper execution of work bring effective administration.

• Development of personnel: Proper delegation reduces the employer’s burden, stimulates creativity, and motivates them to complete tasks efficiently.

• Expansion and growth: It helps in growth and expansion by incorporating changes in the business environment.

Organisational Structure

• Organisational structure refers to the structure or framework within which various operational and managerial tasks are performed. 

• It aids in the proper coordination of human, physical, and financial resources in the organisation to successfully achieve the organisational objectives.

• It is an indispensable means without which an organisation cannot work.

• The organisational chart shows the organisational structure of an enterprise.

• Span of management is the number of subordinates that a superior can manage.

• organisational structure ensures a smooth and efficient flow of operations within an enterprise.

Types of Organisational Structure

These are divided into two types:

1. Functional Structure:

• The organisational structure is where business is managed in the form of a separate department created based on the function each department performs.
  Suitability

Functional structure is suitable for large-scale businesses providing specialised services or performing diversified activities.

Advantages

• Specialisation: Employees perform similar tasks within a department and can improve performance which leads to occupational specialisation.

• Coordination: Similarity in the task being performed remote control and coordination.

• Operational efficiency: The managerial and operational efficiency reduces cost and results in higher profits. Division of work into smaller tasks leads to minimal duplication and lowers cost.

• Makes training easier: The range of skills is focused which makes training of employees easier.

• Higher Focus: Individuals performing similar and smaller tasks can focus better on the activities they are responsible for.

Disadvantages

• Deviation in interests: Department interest may be pursued at the cost of organisational interest to create a functional empire.

• Conflicts: Departmental interests may lead to conflicts of interest among departments and hinder interaction between them.

• Lack of Coordination: Conflicts of interest among departments may lead to problems in coordination.

• Rigidity: Employees performing similar tasks may not be open to ideas or newer methods resulting in a lack of flexibility.

2. Divisional Structure: 

• Divisional structure is a type of organisational structure that works as separate units or divisions. 

• Many units and divisions deal with various products. 

• Each division is accountable for its job and must consider its profit and loss. 

• Each division has its divisional manager who oversees and has power over the entire unit.

Suitability

Divisional structure is suitable for organisations producing a variety of products for performing diversified activities.

Advantages: 

• Product Specialisation: Product specialisation contributes to the development of diverse abilities in a divisional head, preparing him for higher roles. This is because he obtains experience in all functions relating to a specific product.

• Accountability: Divisional heads are held accountable for profits since revenues and costs associated with various departments are identifiable and attributed to them. This gives a solid foundation for measuring performance. It also aids in the assignment of blame in times of poor division performance, allowing appropriate corrective action to be performed.

• Flexibility: It encourages flexibility and initiative because each division operates as an autonomous unit, resulting in faster decision-making.

• Expansion: It allows for expansion and growth by allowing for the addition of new divisions without disrupting present operations by simply adding another divisional head and personnel for the new product line.

• Prepare for future positions: Experience in a variety of operations prepares managers for higher positions.

• Better Initiatives: The dependent and independent functioning of divisions encourages managers to take the initiative to find better means and ways to perform the best.

Disadvantages

• Conflicts: Conflicts may emerge between different divisions on the allocation of cash, and a specific division may aim to maximise its profits at the expense of other divisions.

• Duplication of efforts: It may result in cost increases due to duplication of efforts across products. Providing each division with its own set of equivalent functions raises costs.

• Misuse of power: It gives managers the authority to oversee all activities relating to a specific division. Over time, such a manager may develop influence and, in an attempt to establish his independence, may disregard organisational interests.

Difference Between Functional Structure and Divisional Structure:

Formal and Informal Organisations

a. Formal Organisations: 

• A formal organisation lays down job descriptions, rules, and procedures for each task that is performed.

• It coordinates, interlinks, and integrates the efforts of various departments and different activities to achieve organisational goals.

• It specifies the formal relationships between the employees, who have to report whom, the nature and extent of their relationship, etc,

• It prioritises work over interpersonal and informal relationships.

Advantages

• Easy to fix responsibility.

• No ambiguity in instructions.

• Maintains unity of command.

• Focus on organisational goals.

• Provide stability.

Disadvantages

• Procedural delays due to long formal chains of communication.

• No recognition for creativity, as everyone has to follow a certain specified structure.

• No understanding of human relationships.

b. Informal Organisation

• An informal organisation is a structure formed as a result of a network of social relationships among employees.

• It allows employees to interact beyond officially defined roles.

• It originates within the formal organisation as frequent interaction among employees in a formal organisation creates an informal organisation.

Advantages

• Quick communication and faster feedback due to informal communications.

• Fulfils social needs of friendship and affinity.

• Makes up for the inadequacies of formal organisation.

Disadvantages

• Disrupts the formal setups.

• Resistance to change.

• Group interest may supersede organisational interest.

• Differences in opinion of people in an informal group may lead to conflicts and clashes.

Difference Between Formal and Informal Organisation

Delegation

• Delegation refers to the downward transfer of authority from a superior to a subordinate to enable subordinates to perform their responsibilities effectively and efficiently.
  
  

Elements of Delegation

Delegation means assigning responsibility and authority to subordinates and creating accountability for work.

• Authority:
  It refers to the right of an individual to command his or her subordinate and take action within the scope of his or her position. Authority flows in a downward direction, that is top to bottom, as the superior has authority over his subordinate. Also, the level of authority increases as one moves higher in the management hierarchy.

• Responsibility:
  Responsibility is the obligation of a subordinate to properly perform the duties assigned by the superior. It always flows in an upward direction, as the subordinate is responsible for his superior.

• Accountability:
  Accountability means being answerable for the outcome of the assigned work. It flows from bottom to top, that is in an upward direction, as a subordinate is accountable for his work and performance to his superior.

Difference Between Authority, Responsibility, and Accountability

Importance of Delegation

• Effective Management: Sharing responsibilities with subordinates allows managers to concentrate on important matters.

• Employee Development: Provides opportunities for employees to develop their skills to handle complex tasks and to improve their career prospects.

• Motivation of Employees: Receiving responsibilities and authority from superiors builds confidence and motivates subordinates to perform well.

• Facilitation of Growth: Receiving responsibilities from superiors trains and prepares the subordinates for new projects or ventures.

• Basis of Management Hierarchy: The degree and flow of authority and responsibility provide the basis for management hierarchy.

• Better Coordination: Predetermined authority, responsibility and accountability of each position bring clarity and avoid duplication which leads to coordination.

Centralisation

• All powers and authority of decision-making are retained by the top-level management in this concept. 

• All the decisions are taken by the higher level management in a centralised firm.

• An organisation cannot be completely centralised, as it may disrupt production efficiency as well as discourage departments and employees from performing to the best of their abilities. Hence for this, a balance between centralisation and decentralisation is needed.

Decentralisation

• The power and decision-making authority are delegated or shared among all the levels of management and all departments.

Importance

• Initiative: Develop initiative among subordinates as they feel motivated to make decisions on their own. It gives lower management levels a sense of autonomy by allowing them to make their own decisions. Furthermore, it fosters a sense of self-confidence and self-reliance in them. When power is given to lower-level managers, they learn to face new difficulties and solve problems on their own. 

• Managerial Competence: Decentralisation allows them to demonstrate their abilities and prepare for higher-level positions, and develops managerial talent for the future, as the subordinates focus on developing their skills, and making decisions based on their knowledge. This helps in shaping their professional careers.

• Quick decision making: It facilitates quick decision making as no formal structure or long formal chains of approval need to be followed while making decisions.

• Control: Decentralisation aids in better evaluating the organisation's effectiveness. Decentralisation aids in the analysis and evaluation of each department's performance separately. As a result, the level of achievement of each department, as well as their contribution to the general objectives of the organisation, can be analysed.

• Growth: Decentralisation helps to increase managerial efficiency to a considerable extent. Lower-level managers gain more authority as a result of decentralisation. It encourages healthy competition among managers from various departments. In a contest to exceed one another, they give it their all, increasing overall productivity and efficiency. The organisation benefits from improved overall performance and so grows.

• Reduced Workload of Top Managers: Delegation of authority gives top-level managers more latitude. It assists them in delegating work to subordinates and allows them to focus on more critical and higher-priority tasks, such as policy decisions. Furthermore, direct monitoring by top-level management is reduced as subordinates are given the authority to make their judgments.

Difference between Delegation and Decentralisation

Difference between Centralisation and Decentralisation

5 Important Topics of Business Studies Class 12 Chapter 5 You Shouldn’t Miss!

Importance of Business Studies Chapter 5 Organising Class 12 Notes PDF

• The Chapter 5 Organising Class 12 Notes PDF is a vital resource for students studying Business Studies. 

• This PDF provides a thorough understanding of how businesses structure their operations, manage authority, and ensure effective coordination. 

• By covering key topics such as organisational structure, delegation, and centralisation versus decentralisation, the notes offer a clear framework for understanding the importance of organising in business management. 

• The PDF format ensures easy access and efficient review, making it an essential tool for exam preparation and mastering the principles of effective organisational practices.

Tips for Learning the Class 12 Business Studies Chapter 5 Organising Notes

• Familiarise yourself with different types of organisational structures, such as functional, divisional, and matrix structures. Understand how each structure impacts the flow of authority and communication within a business.

• Focus on the process of delegation, including assigning tasks, granting authority, and ensuring accountability. Learn how effective delegation can improve efficiency and employee performance.

• Study the concepts of centralisation and decentralisation, and understand their advantages and disadvantages. This will help you grasp how decision-making authority is distributed within organisations.

• Create diagrams or flowcharts to visualise organisational structures, delegation processes, and coordination mechanisms. Visual aids can help you better understand and remember complex concepts.

• Relate the concepts from the chapter to real-world businesses and organisational practices. Analysing how companies structure their operations and manage authority will make the concepts more tangible and easier to understand.

Conclusion

Chapter 5, Organising, is a fundamental part of Class 12 Business Studies that focuses on the essential elements of structuring and managing a business. This chapter covers key topics such as organisational structures, a delegation of authority, and the balance between centralisation and decentralisation. Understanding these concepts is important for appreciating how businesses operate efficiently and effectively. 

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