BST Notes (Class 12)

CBSE Class 12 Business Studies Chapter Principles and Functions of Management Chapter 5 Organising

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Important Notes

1. Organizing Identifying and grouping different activities in the organization and bringing together the physical, financial and human resources to establish the most productive relations for the achievement of the specific goal of the organization.
According to Henry Fayol, “To organize a business is to provide it with everything useful to its functioning; raw materials, machines and tools, capital and personnel.”

2. Process of Organising

  1. Identification and division of work
  2. Departmentalization
  3. Assignment of duties
  4. Establishing reporting relationships

3. Importance of Organising

  1. Benefits of specialization
  2. Clarity in working relationships
  3. Optimum utilization of resources •
  4. Adaptation to change
  5. Effective administration
  6. Development of personnel
  7. Expansion and growth

4. Organization Structure It can be defined as “Network of job positions, responsibilities, and authority at different levels.”
The considerations to be kept in mind while farming the organizational structure are

  1. Job Design
  2. Departmentation
  3. Span of management
  4. Delegation of authority

5. Types of Organisation Structure The organizational structure can mainly be of two types which are
(i) Functional Structure When the activities or jobs are grouped keeping in mind the functions or the job then it is called a functional structure.
(a) Advantages

  • Specialization
  • Easy supervision
  • Easy co-ordination
  • It helps in increasing managerial efficiency
  • Effective training

(b) Disadvantages

  • Tho departments become specialized ill their own way only.
  • When departments become too large then the co-ordination decrease.
  • When the organizational goals are not achieved then it becomes very difficult to make anyone department accountable.
  • Employees get training of one function only i.e., the department to which they belong so they can not be shifted to another department.

(c) Suitability It is most suitable when the size of the organization is large, has diversified activities and operations require a high degree of specialization.
(ii) Divisional Structure When the organization is large in size and is producing more than one type of product then activities related to one product are grouped under one department.
(a) Advantages

  • Product specialization
  • Fast decision making
  • Accountability
  • Flexibility
  • Expansion and growth

(b) Disadvantages

  • Each department will require all the resources as every division will be working as an independent unit.
  • Conflict on the allocation of resources.
  • Each department focusses on their product only and they fail to keep themselves as a part of one common organisation

(c) Suitability

  • Organization producing a multi-product.
  • An organisation which requires product specialization.
  • Growing companies which plan to add more line of products in the future.

6. Formal Organisation When the managers are carrying on the organizing process than as a result of the organization process an organizational structure is created to achieve systematic working and efficient utilization of resources. This type of structure is known as the formal organizational structure.
(i) Advantages
(a) Systematic working
(b) Achievement of organizational objectives
(c) No overlapping of work
(d) Co-ordination
(e) Creation of chain of command
(f) More emphasis on work
(ii) Disadvantages
(a) Delay in action
(b) Ignores the social needs of employees
(c) Emphasis on work only

7. Informal Organisation It is a network of personal and social relations not established or required by the organization but arising spontaneously as people associate with one another.
(i) Advantages
(a) Fast communication
(b) Fulfils social needs
(c) Correct feedback

(ii) Disadvantages
(a) Spread rumours
(b) No systematic working
(c) May bring negative results
(d) More emphasis on individual interest

8. The delegation of Authority “A process of entrusting responsibility and authority to the subordinates and creating accountability on those employees who are entrusted responsibility and authority.”

9. Importance of Delegation

  1. Effective management
  2. Employee development
  3. Motivation of employees
  4. Facilitation of growth
  5. The basis of the management hierarchy
  6. Better coordination

10. Elements of Delegation
(i) Responsibility It means the work assigned to an individual. It includes all the physical and mental activities to be performed by the employees at a particular job position.
(ii) Authority It means the power to take the decision. To carry on the responsibility every employee need to have some authority.
(iii) Accountability It means subordinates will be answerable for the non-completion of the task.

11. Decentralization explains the manner in which decision-making responsibilities are divided among hierarchical level.

12. Importance of Decentralisation

  1. Develops initiative among subordinate
  2. Develops managerial talent for the future
  3. Quick decision making
  4. Relief to top management
  5. Facilitates growth
  6. Better control

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