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Chapter 5 Organising class 12th Commerce2

Concept: Meaning of organizing :

Organizing essentially implies a process which coordinates human efforts, assembles resources and integrates both into a unified whole to be utilised for achieving specified objectives.

Organising can be defined as a process that initiates implementation of plans by clarifying jobs and working relationships and effectively deploying resources for attainment of identified and desired results (goals).


Once the plans have been laid down and objectives specified therein, the next step is to organise resources in a manner which leads to the accomplishment of objectives.



Concept:  Steps in the Process of Organising

Organising involves a series of steps that need to be taken in order to achieve the desired goal.

steps emerge in the process of organising:



Identification and division of work:

The first step in the process of organising involves identifying and dividing the work that has to be done in accordance with previously determined plans.

The work is divided into manageable activities so that duplication can be avoided and the burden of work can be shared among the employees.




Once work has been divided into small and manageable activities then those activities which are similar in nature are grouped together.

Such sets facilitate specialisation.

This grouping process is called departmentalization.

Departments can be created using several criteria as a basis.

Examples of some of the most popularly used basis are territory (north, south, west, etc.) and products (appliances, clothes, cosmetics etc).

Case studies : CA INSTITUTES :



Assignment of duties:

It is necessary to allocate work to various employees.

Once departments have been formed, each of them is placed under the charge of an individual.

Jobs are then allocated to the members of each department in accordance to their skills and competencies.

It is essential for effective performance that a proper match is made between the nature of a job and the ability of an individual.

The work must be assigned to those who are best fitted to perform it well.



Establishing authority and reporting relationships:

Merely allocating work is not enough. Each individual should also know who he has to take orders from and to whom he is accountable.

The establishment of such clear relationships helps to create a hierarchal structure and helps in coordination amongst various departments.


Case studies Ways to go to Wipro: A venture of :Azim prem ji


Technology company

One of India’s largest IT solutions providers, Wipro Technologies by Azim prem ji



Wipro is  taking on the likes of IBM and Accenture in its effort to be included among the largest and most successful technology services companies in the world.



Restructuring Wipro was considered the most important step in becoming a global giant, driven by the goal towards improved customer- orientation.


Separated self sustainable subsidiaries

During the past few months, Wipro separated itself into several subsidiaries by product line: telecommunications, engineering, financial services, etc. Each subsidiary brings in about $300 million in annual earnings and is self-sufficient with their own accounting books, personnel and administrative functions.


Decentralization of Authority

Wipro shifted from a centralised to decentralised management system. All responsibilities for growth lay with the management of each entity.


Conclusion :

“We tried to de-layer the organisation and empower our business leaders with a much higher degree of growth responsibility,” said Premji. “We removed an entire layer [of executives]”





Concept: Importance of Organizing

Performance of the organizing function can pave the way for a smooth transition of the enterprise in accordance with the dynamic business environment.        The significance of the organizing function mainly arises from the fact that it helps in the survival and growth of an enterprise and equips it to meet various challenges. In order for any business enterprise to perform tasks and successfully meet goals, the organizing function must be properly performed. The following points highlight the crucial role that organizing plays in any business enterprise:





Benefits of specialisation:

Organising leads to a systematic allocation of jobs amongst the work force. This reduces the workload as well as enhances productivity because of the specific workers performing a specific job on a regular basis.

Repetitive performance of a particular task allows a worker to gain experience in that area and leads to specialisation.


Clarity in working relationships:

The establishment of working relationships clarifies lines of communication and specifies who is to report to whom. This removes ambiguity in transfer of information and instructions.

It helps in creating a hierarchical order thereby enabling the fixation of responsibility and specification of the extent of authority to be exercised by an individual.



Optimum utilization of resources:

Organising leads to the proper usage of all material, financial and human resources. The proper assignment of jobs avoids overlapping of work and also makes possible the best use of resources.

Avoidance of duplication of work helps in preventing confusion and minimising the wastage of resources and efforts.



Personal developments

Organising stimulates creativity amongst the managers. Effective delegation allows the managers to reduce their workload by assigning routine jobs to their subordinates.

The reduction in workload by delegation is not just necessary because of limited capacity of an individual but also allows the manager to develop new methods and ways of performing tasks.


Effective administration:

Organising provides a clear description of jobs and related duties. This helps to avoid confusion and duplication.

 Clarity in working relationships enables proper execution of work. Management of an enterprise thereby becomes easy and this brings effectiveness in administration.



Expansion and growth:

Organising helps in the growth and diversification of an enterprise by enabling it to deviate from existing norms and taking up new challenges.



Adaptation to change:

The process of organising allows a business enterprise to accommodate changes in the business environment.

It allows the organisation structure to be suitably modified and the revision of inter-relationships amongst managerial levels to pave the way for a smooth transition.



Concept: Meaning of Organization Structure:

Organization structure refers to flow of work through in throughout.

A proper organisation structure is essential to ensure a smooth flow of communication and better control over the operations of a business enterprise.

An organisation structure provides the framework which enables the enterprise to function as an integrated unit by regulating and coordinating the responsibilities of individuals and departments.


We can understand organization structure better through following points :


Out come of organisation process

Organisation structure is the outcome of the organising process. An effective structure will result in increased profitability of the enterprise.


When Sizes grow structure changes

The need for an adequate organisation structure is felt by an enterprise whenever it grows in size or complexity.


No change means no growth

It is only those enterprises which do not focus on growth that can maintain a particular structure for a long period of time. However, it is important to understand that such stagnancy may prove to be detrimental to an enterprise as those companies which do not change at all will close down or cease to grow.


Co-ordination issue in case of change in structure

As an organisation grows, coordination becomes difficult due to the emergence of new functions and increase in structural hierarchies. Thus, for an organisation to function smoothly and face environmental changes, it becomes necessary to pay attention to its structure.


Change in structure is compulsion

Peter Drucker emphasises on the importance of having an appropriate organisation structure when he says, “organisation structure is an indispensable means; and the wrong structure will seriously impair business performance and even destroy it.”


Organisation structure is framework

The organisation structure can be defined as the framework within which managerial and operating tasks are performed.


Relationship between people , work and resources.

It specifies the relationships between people, work and resources. It allows correlation and coordination among human, physical and financial resources and this enables a business enterprise to accomplish desired goals.


It is shown in the manual

The organisation structure of a firm is shown in an organisation chart.


Span of management

Span of management refers to the number of subordinates that can be effectively managed by a superior. This determines the levels of management in the structure.



Concept:  Types of Organisation Structures

The type of structure adopted by an organisation will vary with the nature and types of activities performed by an organsation.

The organisational structure can be classified under two categories which are as follows:

Functional structure and

Divisional structure.


Functional Structure : Grouping of jobs of similar nature under functional and organising these major functions as separate Departments creates a functional structure. All departments report to a coordinating head. For example, in a manufacturing concern division of work into key functions will include production, purchase, marketing, accounts and personnel. These departments may be further divided into sections. Thus, a functional structure is an organisational design that groups similar or related jobs together.






P-Purchase or production

H- Human Resource



Suitability of Functional Structure

It is most suitable when the size of the organisation is large, has a diversified activities and operations require a high degree of specialisation.



Advantages: The functional structure has many advantages to offer. Important among them are as follows:

SCODA –Training


occupational specialisation

A functional structure leads to occupational specialisation since emphasis is placed on specific functions. This promotes efficiency in utilisation of manpower as employees perform similar tasks within a department and are able to improve performance.


promotes control and coordination

 It promotes control and coordination within a department because of similarity in the tasks being performed.


increasing managerial and operational efficiency

 It helps in increasing managerial and operational efficiency and this results in increased profit.


minimal duplication

It leads to minimal duplication of effort which results in economies of scale and this lowers cost.


Attention TO each function

It ensures that different functions get due attention.


Training of employees easier

 It makes training of employees easier as the focus is only on a limited range of skills.


Disadvantages of Functional Structure:

The functional structure has certain disadvantages which an organisation must take into consideration before it adopts it. Some of them are as follows



problems in coordination

 It may lead to problems in coordination as information has to be exchanged across functionally differentiated departments.


Narrow perspective

It may lead to inflexibility as people with same skills and knowledge base may develop a narrow perspective and thus, have difficulty in appreciating by other point of view. Functional heads do not get training for top management positions because they are unable to gather experience in diverse areas.


less emphasis on overall enterprise objectives

A functional structure places less emphasis on overall enterprise objectives than the objectives pursued by a functional head. Such practices may lead to functional empires wherein the importance of a particular function may be overemphasised. Pursuing departmental interests at the cost of organisational interests can also hinder the interaction between two or more departments.


A conflict of interests

A conflict of interests may arise when the interests of two or more departments are not compatible. For example, the sales department insisting on a customer friendly design may cause difficulties in production. Such dissension can prove to be harmful in terms of fulfillment of organisational interest. Interdepartmental conflicts can also arise in the absence of clear separation of responsibility.





Concept: Divisional Structure:


Many large organisations with diversified activities have reorganised themselves away from the simpler and basic functional structure towards a divisional structure which is more suited to their activities. This is particularly true of those enterprises which have more than one category of products to offer. This is because although every organisation performs a set of homogenous functions, as it diversifies into varied product categories, the need for a more evolved structural design is felt to cope with the emerging complexity.

In a divisional structure, the organisation structure comprises of separate business units or divisions.

Each unit has a divisional manager responsible for performance and who has authority over the unit.

Generally, manpower is grouped on the basis of different products manufactured. Each division is multifunctional because within each division functions like production, marketing, finance, purchase, etc., are performed together to achieve a common goal.

Each division is self-contained as it develops expertise in all functions related to a product line.

In other words, within each division, the functional structure tends to be adopted. However, functions may vary across divisions in accordance with a particular product line.

Further, each division works as a profit center where the divisional head is responsible for the profit or loss of his division.

a large company may have divisions like cosmetics, clothing, etc

Suitability of divisional structure

Divisional structure is suitable for those business enterprises where a large variety of products are manufactured using different productive resources.

When an organisation grows and needs to add more employees, create more departments and introduce new levels of management, it will decide to adopt a divisional structure.

Hence, management must continuously review its plans and objectives and accordingly the organisation structure of the enterprise should also be subjected to periodic review to determine if modification is required.

An organisation structure, at all times should contribute towards the achievement of the enterprise’s objectives and should provide scope for initiative so that contribution of personnel can be maximum and effective.


Advantages: The divisional structure offers many benefits. Prominent among these are as follows




promotes flexibility

It promotes flexibility and initiative because each division functions as an autonomous unit which leads to faster decision making.


facilitates expansion and growth

It facilitates expansion and growth as new divisions can be added without interrupting the existing operations by merely adding another divisional head and staff for the new product line.


Divisional heads are accountable for profits,

Divisional heads are accountable for profits, as revenues and costs related to different departments can be easily identified and assigned to them. This provides a proper basis for performance measurement. It also helps in fixation of responsibility in cases of poor performance of the division and appropriate remedial action can be taken.


Development of varied skills

Product specialisation helps in the development of varied skills in a divisional head and this prepares him for higher positions. This is because he gains experience in all functions related to a particular product.


Disadvantages: The divisional structure has certain disadvantages. Some of them are as follows:



manager  may gain power and in a bid

It provides managers with the authority to supervise all activities related to a particular division. In course of time, such a manager may gain power and in a bid to assert his independence may ignore organisational interests.


increase in costs

It may lead to increase in costs since there may be a duplication of activities across products. Providing each division with separate set of similar functions increases expenditure.


Conflict may arise among different divisions

Conflict may arise among different divisions with reference to allocation of funds and further a particular division may seek to maximise its profits at the cost of other divisions.






Concept: Comparative view: Functional and Divisional Structure


Formation (of )CRM, Speacisation


Functional Structure

Divisional Structure


Formation is based on functions

Formation is based on product lines and is supported by functions.


Difficult for a multi­ product company.

Easy, because all functions related to a particular product are integrated in one department.


Functions are not duplicated hence economical

Duplication of resources in various departments, hence costly.


Difficult to fix on a department.

Easy to fix responsiblity for performance.

Managerial Development

Difficult, as each functional manager has to report to the top management.

Easier, autonomy as well as the chance to perform multiple functions helps in managerial development.


Functional specialisation.

Product specialisation



Concept : Formal and Informal Organisation

Forman means structured reporting system and informal organization is unstructerd reporting system. Indian army is formal organization, where as many mnc are informal organization.

In all organisations, employees are guided by rules and procedures.To enable smooth functioning of the enterprise, job description and rules and procedures related to work processes have to be laid down. This is done through the formal organisation.

Formal Organization :

Formal Organisation :-

The formal organisation is a system of well-defined jobs, each bearing a definite measure of authority, responsibility and accountability.

Louis Allen

Formal organisation is a system of consciously coordinated activities of two or more persons toward a common objective.

Chester Barnand


Formal organization refers to the organization structure which is designed by the management to accomplish a particular task. It specifies clearly the boundaries of authority and responsibility and there is a systematic coordination among the various activities to achieve organisational goals.


The structure in a formal Organisation can be functional or divisional. The formal organisation can be better understood by a study of its features which are as follows:

Features of Formal organization:



Clarifies who has to report to whom.

 It specifies the relationships among various job positions and the nature of their interrelationship. This clarifies who has to report to whom.


procedures essential

 It is a means to achieve the objectives specified in the plans, as it lays down rules and procedures essential for their achievement.


departments are coordinated,

Efforts of various departments are coordinated, interlinked and integrated through the formal organisation.


smooth functioning

 It is deliberately designed by the top management to facilitate the smooth functioning of the organisation.


Less interpersonal relationships among the employees.

It places more emphasis on work to be performed than interpersonal relationships among the employees.


Advantages of formal organization :

Advantages: Formal organisation offers many advantages. Some of the important ones are:



No  Ambiguity

There is no ambiguity in the role that each member has to play as duties are specified. This also helps in avoiding duplication of effort.


stability to the organization.

It provides stability to the organization. This is because behaviour of employees can be fairly predicted since there are specific rules to guide them.


Unity of command

Unity of command is maintained through an established chain of command.


Role of  each employee known  

It leads to effective accomplishment of goals by providing a framework for the operations to be performed and ensuring that  each employee knows the role he has to play.


Responsibility Fixed

 It is easier to fix responsibility since mutual relationships are clearly defined.


Limitation of formal organization :


Limitations: The formal organisation suffers from the following limitations:


procedural delays

The formal communication may lead to procedural delays as the established chain of command has to be followed which increases the time taken for decision making.


does not allow any deviations from rigidly laid down polices.

Poor organisation practices may not provide adequate recognition to creative talent, since it does not allow any deviations from rigidly laid down polices.


more emphasis on structure

It is difficult to understand all human relationships in an enterprise as it places more emphasis on structure and work. Hence, the formal organisation does not provide a complete picture of how an organisation works.






Concept : Informal organization :

Informal Organisation:-


An informal organisation is an aggregate of interpersonal relationships without any conscious purpose but which may contribute to joint results.

Chester Barnand


Informal organisation is a network of personal and social relations not established or required by the formal organisation but arising spontaneously as people associate with one another.

Keith Davis


Interaction among people at work gives rise to a ‘network of social relationships among employees’ called the informal organisation.


Informal organisation emerges from within the formal organisation when people interact beyond their officially defined roles. When people have frequent contacts they cannot be forced into a rigid formal structure. Rather, based on their interaction and friendship they tend to form groups which show conformity in terms of interest.


Examples of such groups formed with common interest may be those who take part in cricket matches on Sundays, meet in the cafeteria for coffee, are interested in dramatics, etc.

Features of Informal Organisation:

Informal organisation can be better understood with the help of the following features:


originates from within the formal organisation

 An informal organisation originates from within the formal organisation as a result of personal interaction among employees.


behaviour evolve from group norms

 The standards of behaviour evolve from group norms rather than officially laid down rules and regulations.


independent channels of communication

 Group members develop independent channels of communication without specified direction of flow of information.


emerges spontaneously

It  emerges spontaneously and is  not deliberately created by the management.


no definite strucure

 It has  no definite strucure or form because it is a complex network of social relationships among members.


Advantages of informal organization :


Advantages: The informal organisation offers many benefits. Important among them are given below:


like minded people

It helps to fulfill the social needs of the members and allows them to find like minded people. This enhances their job satisfaction since it gives them a sense of belongingness in the organisation.


informal network.-Employees reactions towards plans and policies can be tested through the informal network.

It contributes towards fulfillment of organisational objectives by compensating for inadequacies in the formal organisation. For example, employees reactions towards plans and policies can be tested through the informal network.


faster spread of information

Prescribed lines of communication are not followed. Thus, the informal organisation leads to faster spread of information as well as quick feedback.


Disadvantages of informal organaisation :

Disadvantages: The informal organisation has certain disadvantages. Some of them are as follows:



group Conformity  expectations.

It pressurises members to conform to group expectations. This can be harmful to the organisation if the norms set by the group are against organisational interests.


spreads rumours

When an informal organisation spreads rumours, it becomes a destructive force and goes against the interest of the formal organisation.


Resistance by groups

The management may not be successful in implementing changes if the informal organisation opposes them. Such resistance to change may delay or restrict growth.


Elimination not possible : 

cannot be altogether eliminated.

Informal organization cannot be altogether eliminated. Thus, it would be in the best interest of the organisation if the existence of such groups is recognised and the roles that their members play are identified. The knowledge of such groups can be used to gather their support and consequently lead to improved organisational performance. Such groups can also provide useful communication channels. Instead of confronting them, the management should skillfully take advantage of both the formal and informal organisation so that work continues smoothly.




Concept: Formal and informal Organisation:

 A Comparative view



Formal organisation

Informal organization



Structure of authority relationships created by the management

Network of social relationships arising out of interaction among employees



Arises as a result of company rules and policies

Arises as a result of social interaction



Arises by virtue of position in management

Arises out of personal qualities



It is directed by rules

There is no set behaviour pattern


Flow of Communication

Communication takes place through the scalar chain

Flow of communication is not through a planned

route. It can take place in any direction







Managers are leaders.

Leaders may or may not be managers. They are chosen by the group.


Concept: Delegation:

Meaning of Delegation:


Delegation refers to the transfer of authority from a superior to a subordinate the entrustment of responsibility and the creation of accountability for

performance, which helps a manager to extend his area of operations as without it, his activities would be restricted to only what he himself can do.


A manager, no matter how capable is?  He cannot manage to do every task on his own. The volume of work makes it impractical for him to handle it all by himself. As a consequence, if he desires to meet the organizational goals, focus on objectives and ensure that all work is accomplished, he must delegate authority:


Following points will bring clarity in delegation concept :


Delegation moves  Downward

Delegation refers to the downward transfer of authority from a superior to a subordinate.


Delegation is Pre-requisite to the efficient functioning

It is a pre-requisite to the efficient functioning of an organization because it enables a manager to use his time on high priority activities.


Delegation satisfies the recognition need :

It also satisfies the subordinate’s need for recognition and provides them with opportunities to develop and exercise initiative.


Delegation helps manager

Delegation helps a manager to extend his area of operations as without it, his activities would be restricted to only what he himself can do.


Delegation Can be taken back

Moreover, the authority granted to a subordinate can be taken back and redelegated to another person.


Accountability remains with manager

Thus, irrespective of the extent of delegated authority, the manager shall still be accountable to the same extent as before delegation.


Delegation of authority merely means the granting of authority to subordinates to operate within prescribed limits.



Concept: Elements of Delegation :










 Means this ijected .


HR DIRECTOR entrusted.

Accountability - Answerable


Manager will share his authority with Subordinates

Will make subordinates responsible to get the work done

But about accountability or work done correctly or not

Accountability is ownership and can not be deleted.

Accountability will be of manager. Manager cant run away from his jababdehi .

Sequence Responsibility is derived from authority and accountability is derived from responsibility.

Accountability is result focused

Responsibility is task focused





Authority refers to the right of an individual to command his subordinates and to take action within the scope of his position.

Following points can Explain Authority :



scalar chain


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The concept of authority arises from the established scalar chain which links the various job positions and levels of an organisation. In the formal organization authority originates by the virtue of an individual’s position and the extent of authority is highest at the top management levels and reduces successively as we go down the corporate ladder.  Thus, authority flows from top to bottom i.e, the superior has authority over the subordinate.


right to take decisions

Authority also refers to the right to take decisions inherent in a managerial position to tell people what to do and expect them to do it.



Position based

Expalin with reference of scalar chain

In the formal organisation authority originates by virtue of an individual’s position and the extent of authority is highest at the top management levels and reduces successively as we go down the corporate ladder.



Authority maintain order in the organisation


Authority relationships helps to maintain order in the organisation by giving the managers the right to exact obedience and give directions to the workforce under them.

It must be noted that laws and the rules and regulation of the organisation restrict authority, which limit its scope.

Authority determines the superior subordinate relationship wherein the superior communicates his decision to the subordinates, expecting compliance from him and the subordinate executes the decision as per the guidelines of the superior.




Responsibility is the obligation of a subordinate to properly perform the assigned duty.

We can understand the responsibility with following points:


 superior subordinate relationship

It arises from a superior– subordinate relationship because the subordinate is bound to perform the duty assigned to him by his superior.


Flow of responsibility

Responsibility flows upwards, i.e., a subordinate will always be responsible to his superior.


Authority  with delegation

An important consideration to be kept in view with respect to both authority and responsibility is that when an employee is given responsibility for a job he must also be given the degree of authority necessary to carry it out.

Thus, for effective delegation the authority granted must be commensurate with the assigned responsibility.


Misuse of authority

If authority granted is more than responsibility, it may lead to misuse of authority, and if responsibility assigned is more than authority it may make a person ineffective.



Delegation of authority, undoubtedly empowers an employee to act for his superior but the superior would still be accountable for the outcome.



Answerable to final outcome

Accountability implies being answerable for the final outcome of the assigned task.


Accountability can not be denied 

Once authority has been delegated and responsibility accepted, one cannot deny accountability.

Yes to the manager subordinates wil be responsible as well as accountable but for final out come manager who delegated will be Accountable



regular feedback

It indicates that the manager has to ensure the proper discharge of duties by his subordinates.

It is generally enforced through regular feedback on the extent of work accomplished.


Expectation of subordinates

The subordinate will be expected to explain the consequences of his actions or omissions.


authority is delegated, responsibility is assumed, accountability is imposed

In conclusion, it can be stated that while authority is delegated, responsibility is assumed, accountability is imposed.



Accountability flows upward

Accountability flows upward i.e, a subordinate will be accountable to a superior for satisfactory performance of work. The subordinate will be expected to explain the consequences of his actions or omissions.




Concept:  Overview of the elements of delegation






Right to command.

Obligation to perform an assigned task.

Answerability for outcome of the assigned task.


Can be delegated.

Cannot be entirely delegated.

Cannot be delegated at all.


Arises from formal position

Arises from delegated authority.

Arises from responsibility.


Flows downward from superior to subordinate.

Flows upward from subordinate to superior.

Flows upward from subordinate to superior


Concept: Importance of Delegation

Delegation ensures that the subordinates perform tasks on behalf of the manager thereby reducing his workload and providing him with more time to concentrate on important matters. Effective delegation leads to the following benefits:


CMD - Growth



Better Coordination:

The elements of delegation, namely authority, responsibility and accountability help to define the powers, duties and answerability related to the various positions in an organization.

This helps to avoid overlapping of duties and duplication of effort as it gives a clear picture of the work being done at various levels.

Such clarity in reporting relationships help in developing and maintaining effective coordination amongst the departments, levels and functions of management.


Effective management:

By empowering the employees, the managers are able to function more efficiently as they get more time to concentrate on important matters.

Freedom from doing routine work provides them with opportunities to excel in new areas.


Motivation of employees :

Delegation helps in developing the talents of the employees.

It also has psychological benefits.

When a superior entrusts a subordinate 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.

Responsibility for work builds the self-esteem of an employee and improves his confidence.

He feels encouraged and tries to improve his performance further.


Basis of management hierarchy:

Delegation of authority establishes superior-subordinate relationships, which are the basis of hierarchy of management.

It is the degree and flow of authority which determines who has to report to whom.

The extent of delegated authority also decides the power that each job position enjoys in the organisation.


Employee development:

As a result of delegation, employees get more opportunities to utilise their talent and this may give rise to latent abilities in them.

It allows them to develop those skills which will enable them to perform complex tasks and assume those responsibilities which will improve their career prospects.

It makes them better leaders and decision makers.

Thus, delegation helps by preparing better future managers.

DELEGATION empowers the employees by providing them with the chance to use4 skills, gain experience and develop themselves for higher position.


Facilitation of growth:

Delegation helps in the expansion of an organisation by providing a ready workforce to take up leading positions in new ventures.

Trained and experienced employees are able to play significant roles in the launch of new projects by replicating the work ethos they have absorbed from existing units, in the newly set up branches.




Concept:  Decentralization  

Case Studies :


Zuari head office : Gurgaon

Zuari Agro GOA





Decentralisation explains the manner in which decision making responsibilities are divided among hierarchical levels.

Put simply, decentralisation refers to delegation of authority throughout all the levels of the organisation.


In many organisations the top management plays an active role in taking all decisions while there are others in which this power is given to even the lower levels of management.

Those organisations in which decision making authority lies with the top management are termed as centralised organization whereas those in which such authority is shared with lower levels are decentralized organizations.

Decentralisation refers to systematic effort to delegate to the lowest level all authority except that which can be exercised at central points.

Decision making authority is shared with lower levels and is concequently placed nearest to the points of action.

In other words, decision making authority is pushed down the chain of command. When decision taken by the lower levels are numerous as well as important an organization can be regarded as greatly decentralized.


Everything which goes to increase the importance of a subordinate’s role is decentralisation, everything that goes to reduce it is centralisation.

Henri Fayol


Centralization and Decentralisation:




Centralisation and decentralisation are relative terms, as seen from the existing status of various business enterprises.


Power on top and on bottom

An organisation is centralised when decision-making authority is retained by higher management levels whereas it is decentralised when such authority is delegated.


Meaning of Complete centralisation

Complete centralisation would imply concentration of all decision making functions at the apex of the management hierarchy.

Such a scenario would obviate the need for a management hierarchy


Meaning of complete decentralization

On the other hand, complete decentralization would imply the delegation of all decision making functions to the lower level of the hierarchy and this would obviate the need for higher managerial positions. Both the scenarios are unrealistic.


Possibility of complete centralization or decentralization

An organisation can never be completely centralised or decentralised. As it grows in size and complexity , there is a tendency to move towards decentralised decision making.



Concept: Importance of Decentralization :

Decentralisation is much more than a mere transfer of authority to the lower levels of management hierarchy. It is a philosophy that implies selective dispersal of authority because it propagates the belief that people are competent, capable and resourceful


Control  – GRID




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