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Organisation:
The particular place in which men and materials are assembled to undertake value addition activity
is generally termed as an organisation. It is one of the factors of production which creates relation
among men through duties, responsibilities and authority. Organisation is made up of people, who
are working together to achieve common goals.
Meaning:
Organisation is the process which is concerned with: i)determining the activities to be performed,
ii) dividing and grouping the activities, iii)Assigning the grouped activities to individuals
iv)delegating the authority according to responsibility v) Establishing co-ordinated relationship vi)
mobilising the capital, raw materials and tools
Definition:
According to Chester I Bernard, Organisation is a system of co-operative activities of two or more
persons.
According to Henry Fayol, To organise a business is to provide it with everything useful to its
functioning raw materials, tools, capital and personnel.
Nature or characteristics of organisation:
1.Division of labour: It means in an organisation the work must be divided among the individuals
according the specialisation to increase the effectiveness of work.
2. Co-ordination: This is the second process of organisation. The work which is divided must co-
ordinated properly to meet the objectives of organisation.
3. Accomplishment of goals and objectives: Organisation struggle to accomplish certain objectives.
The organisation structure should be built up properly so that it can help to achieve the organisation
objectives.
4.Authority and Responsibility: The organisation structure has various positions arranged in an
hierarchy with a clear definition of the authority and responsibility. The organisation can achieve
the
5. Co-operative relationship: An organisation creates structural or co-operative relationship between
the various departments and among the members of various groups. Therefore organisation
structure should be designed to motivate the employees to work with co-operation.
Importance of Organisation:
1. Facilitates Administration: A good organisation is an asset to the management as it helps the
management to achieve the goals smoothly. It also helps the management to work
efficiently and effectively with the help of other managerial functions.
2. Provides for optimum utilisation of Technology and Innovations: A sound organisation
provides for optimal utilisation of Technology and Innovations. It helps in time saving as
well as labour saving and also to increase the efficiency of the company. For Ex:
Computers etc.
3. Facilitates growth and diversification: A sound organisation helps in growth and
development process of a company i.e., expansion, modernisation and diversification etc. It
also helps to increase the productivity , capacity of an enterprise.
4. Facilitate co-ordination: Every organisation has different departments, sections, and sub-
sections with different duties and responsibility. S o there is a need of co-ordination in these
departments. A good organisation helps for co-ordination.
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5. Ensures optimum use of Human Resources: By proper division of labour, every individual
is assigned with that job in which he is specialised. Thus it helps in optimum utilisation of
resources.
6. Helps in creating opportunity for training and Development: The organisation facilitates
authority and responsibility which makes a way for training and development of personnel
to find out their talent and skills and improve the same.
Steps involved in Organisation:
Determination of activities: First and the foremost entire work of the enterprise is to be
divided into small parts. This will help to know the way in which the work process is there
Grouping of activities: All activities are grouped into divisions and departments.
Allocation of duties and fixation responsibilities
Delegation of authority
Formal and Informal Organisation:
On the basis of relationship organisation can be classified into two types:
1. Formal Organisation
2. Informal Organisation.
Both are very essential for every organisation to work effectively and efficiently.
1) Formal Organisation:
It is well defined jobs, each job having definite authority and responsibility. In other words it is a
group of people working together in co-operation to achieve the objectives. It is a pattern of
activities, processes, human relationships and roles planned and structured in order to accomplish
organisational goals.
Formal organisation is also known as Organisation Structure. Organisation structure is the
network of vertical and horizontal authority relationships among various positions and individuals.
According to Chester I Bernard, Formal organisation is a system of consciously co-ordinated
activities of two or more persons towards a common objective.
2) Informal Organisation:
It refers to the pattern of activities, interactions and human relationships which emerge
spontaneously due to social and psychological forces operating at the workplace. It arises naturally
on the basis of friendship or some common interest which may or may not be related with work.
It Is an unintended and non-planned network of unofficial and social patterns of human
relationships. Informal organisation represents the pattern of interpersonal and intergroup relations
that develop within the formal organisation. In simple words these organisation structures are not
planned but they develop on their own automatically.

Formal v/s Informal Organisation:

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Types of organisations:
1) Line Organisation
2) Functional Organisation
3) Line and Staff organisation
4) Committee form of organisation
1) Military or Line organisation:
Line Organisation (also called Military/Scalar Organisation) is the oldest and the simplest
form of internal Organisation structure. In the line Organisation, the line of authority moves
directly from the top level to the lowest level in a step-by-step manner. It refers to the fixing
of authority and responsibility in the direct chain of command.
According to J.L.Lundy, Such a type of organisation is characterised by direct line of
authority flowing from top to the bottom of the organisational hierarchy and the line of
responsibility is flowing in an opposite but equally direct manner.

Advantages of Line Organisation:
1) Simplicity: Line Organisation structure is easy to understand and follow by superiors and
subordinates. It is simple and clear as regards authority and accountability.
Points of
Differences
Formal Organisation Informal Organisation
Purpose Formed to achieve the defined
objectives of organisation
It comes into existence automatically
and it has no well defined objectives
Duties and
Authority
Formal organisation has well
defined duties and authorities
It does not have specific duties and
responsibilities
Tasks It has certain well defined tasks It does not have any defined tasks
Relationship The relationship among the
people will be Impersonal
The relation among people will be
inter-personnel and Social
Importance This gives importance for
efficiency, discipline and control
This gives importance for freedom,
homeliness
Communication
system
This leads to formal
communication which is pre-
determined
This leads to informal or grapevine
communication which is haphazard
and natural
Flexibility It is very rigid and inflexible It is flexible and adoptable at the
changing conditions

Aim Primary Aim is to achieve
organisational goals
The aim is to promote psycho-social
needs of workers
Breathes It breathes discipline and rules
and regulation in the
organisation
It breathes life good relation among the
workers
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2) Prompt decisions: Line Organisation facilitates prompt decision-making at all levels as the
authority given is clear and complete.
3) Discipline: It brings discipline in the Organisation due to unity of command, delegation of
authority and direct accountability.
4) Economical: Line Organisation is economical as experts are not appointed.
5) Attraction to talented persons: Line Organisation brings out talented workers and develops
in them quality of leadership. It offers opportunities of self-development to employees.
6) Unified Control: It facilitates the unity of control and command so that they can be
responsible next to their superiors.
7) Co-ordination: All the activities of single department are controlled by single person so it
helps to achieve co-ordination in the enterprise.
8) Flexible: It is flexible in character as it is easily adjustable with the changing requeirments.


Limitations of Line Organisation:
1) Heavy burden on line executives: The line executives are given too many duties and
responsibilities. Even the quality of the decisions of executives may suffer due to heavy
burden of duties and responsibilities.
2) Non-availability of services of experts: There is absence of skilled experts in line
organisation. Expert assistance is not available promptly when needed by line executives.
3) Favoritism: There is wide scope for favoritism and nepotism in the line organisation.
Leadership of departmental executive is autocratic due to heavy concentration of powers.
He may favour some employees at the cost of others.
4) Too much dependence on limited executives: In the line organisation, all powers are
concentrated in the hands of a few executives. Naturally, the success and stability of the
entire organisation depends on their personal skill, initiative and interest. Special difficulties
arise when one executive is to be transferred/replaced/promoted.
5) Rigidity: There is rigidity in the working of line organisation.
2) Functional Organisation:
The functional Organisation is suggested by F.W.Taylor. According to him the job of
management is divided according to specialization and according to functions. It is
placement of specialist in concerned position. Under this system subordinates take order not
from one superior but from several specialist, foreman or officers.

General
Manager
Production of
Work
Manager
Plan
Supretendent
Route Clerk
Instruction
Card Clerk
Time and
Cost Clerk
Disciplinarian Gang Boss Speed Boss Repair Boss Inspector
Office Specialist Work Specialist
Worker
s
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Advantages of Functional Organisation:
1) Facilitates specialization: Each boss has specialized knowledge of his functional area. He is
in a better position to guide and help the workers.
2) Benefits of large-scale operations: In this Organisation, one administrative unit
manufactures all products. The available machinery, equipment and facilities are used fully
for large-scale production.
3) Facilitates effective coordination: This is possible as one boss is in-charge of a particular
function and he looks after all activities, which come within that function.
4) Operational flexibility: Necessary changes can be introduced easily to suit the needs of the
situation without any adverse effect on the efficiency.
5) Ensures effective supervision: Due to specialization, they concentrate on the specific
functional area and also keep effective supervision on their subordinates.
Limitations of Functional Organisation:
1) Absence of unity of command: Unity of command is absent in the functional Organisation
as each worker gets orders and instructions from several bosses.
2) Fixing responsibility is difficult: In functional Organisation, responsibility is difficult to fix
on a specific person. This is because the responsibility itself is divided among many.
3) Unsuitable to non-manufacturing activities: Functional Organisation can be introduced in
the case of manufacturing activities. However, its application to non-manufacturing
activities such as marketing, etc. has not been successful.
4) Costly: Functional Organisation is costly, as more specialists are required to be appointed.
5) Creates confusion among workers: Functional Organisation is based on specialization as
function is taken as a base for dividing the work. The authority is overlapping the
responsibility is divided. This confuses workers.
6) Conflicts among foremen, delays in decision-making and limited discipline within the
departments are some more demerits of functional Organisation.
3) Line and Staff organisation:
In the line and staff Organisation, line executives and staff (specialists) are
combined together. The line executives are 'doers' whereas staff refers to experts and act as
'thinkers'.
The line executives are concerned with the execution of plans and Policies. They do
their best to achieve the organizational objectives. The staff concentrates their attention on
research and planning activities. They are experts and conduct advisory functions.
According to A. Allen, Line refers to those positions and elements of the
organisation, which have responsibility and authority and are accountable for
accomplishment of primary objectives, staff refers to those positions and elements of the
organisation, which have the responsibility and authority for providing advice to the line in
attainment of objectives.
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Characteristics of Line and Staff Organisation:
1) Planning and execution: There are two aspects of administration in this Organisation, viz.,
planning and execution.
2) Combining line and staff: Planning function is entrusted to staff specialists who are
'thinkers' while execution function is given to line executives who are 'doers'. The staff is
supportive to line.
3) Role of authority: The line managers have authority to take decisions as they are concerned
with actual production. The staff officers lack such authority.
4) Guidance from staff: The staff provides guidance and advice to line executives when asked
for. Moreover, line executives may or may not act as per the guidance offered.
5) Exercising control: The staff manager has authority over subordinates working in his
department.
6) Scope for specialization: There is wide scope for specialization in this Organisation as
planning work is given to staff and execution work is given to line executives.
7) Possibility of conflicts: Conflicts between line and staff executives are quite common in this
Organisation but can be minimized through special measures.
8) Suitability: Line and staff Organisation structure is suitable to large-scale business activities
Merits of Line and Staff Organisation:
1) Less burden on executives: Line executives get the assistance of staff specialists.This
reduces the burden of tine executives. This raises overall efficiency and facilitates the
growth and expansion of an enterprise.
2) Services of experts available: The benefits of services of experts are provided to line
managers. Highly qualified experts are appointed and they offer guidance to line executives.
3) Sound decision-making: Line and staff Organisation facilitates sound management
decisions because of the services of experts and specialists. The decisions are also taken in a
democratic method i.e. in consultation with the experts.
4) Limited tension on line managers: The pressure of work of line bosses is brought down as
they are concerned only with production management.
5) Benefits of specialization: There is division of work and specialization in this Organisation.
Naturally, the benefits of division of work and specialization are easily available.
6) Training opportunities to employees: Better opportunities of advancement are provided to
workers. The scope for learning and training for promotions are available
Demerits of Line and Staff Organisation
1) Delay in decision-making: The process of decision-making is delayed, as line executives
have to consult staff experts before finalizing the decisions. The decisions of line
managers are likely to be delayed due to this lengthy procedure.
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2) Buck passing among executives: The line bosses are concerned with actual execution of
work. However, they depend on staff experts for guidance. If something goes wrong, the
attempt is made to pass on the blame by one party to the other. Thus, there is shifting of
responsibility or buck-passing.
3) Conflicts between line and staff executives: In this Organisation, quarrels and conflicts
between line managers and staff specialists are quite common. The line managers are
generally not interested in the advice offered by experts. Secondly, specialists feel that
the line bosses lack knowledge of new ideas. Such conflicts lead to bitterness
4) Costly Organisation: Line and staff Organisation is a costly Organisation as the line
executives are supported by highly paid staff executives who are experts. All this adds
to the overhead expenses and the cost of production increases.
5) Complicated operation: This Organisation is too complicated in actual operation because
of dual authority, division of functions and too much dependence on staff. The unity of
command principle is violated.
6) Internal discipline is affected adversely: The internal discipline is likely to be affected
adversely due to decentralisation and division of loyalty of subordinates.
4) Committee Organisation:
In this structure a committee of experts is formed to make advise as well as to make suitable
suggestions for the organisation, instead of individual advisors.
A committee is a group of people assembled by the management to take decisions or advise on
a particular issue.
According to Louis A Allen, A committee is a body of persons appointed or elected to meet on an
organised basis for the consideration of matters brought before them.
Advantages of Committees :
1) Integrated Group Knowledge: Committees help to bring together a variety views,
interests, and expertise together for completion of task. It helps in improving the quality of
decisions.
2) Representative: Decisions taken by the committee are easily accepted by all departments,
because it represents the interest of the entire department.
3) Co-ordination of plans and policies: Committees makes all plans and policies involving
the activities of different departments. This helps in bringing coordination in all the
departments and considering the interest of all.
4) Establish teamwork: Committees believe in doing the work in team that leads to
conformity of the organization goals. It is further helpful in making personal interaction that
builds mutual understanding.
5) Participative: Sometimes committees involve the subordinates interest in the decision
making process. That leads to bring the participative approach and boost up the morale of
the employees.
6) Improved Communication: Committees provide more of face to face communication
rather than written reports or memoranda. It helps in solving the problems frequently.
Disadvantages of Committees:
1) Expensive: Committees involve large amount of time in taking the decisions and that
further increases the cost. It also takes time and cost in preparing the reports and
maintaining the staff.
2) Compromise: Sometimes decision made by the committee on the basis of majority that is
not justified because some of the group members have to compromise.
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3) Part time job: Work in a committee being part time and an additional responsibility beyond
normal responsibilities within parent department, members of the committee may not take
the work of committee very seriously.
4) Responsibility: Committees dilute the responsibility for a task. No single person can be
held responsible for poor results produced by committee.
Departmentation:
The process of dividing and grouping the activities of an enterprise into various units for the
purpose of administration. They may be Departments, Divisions, Sections, Branches.
According to Knootz O Donnel, A distinct area, division or branch, of an enterprise over which a
manager has authority for the performance of specified activities.
Thus, Departmentation facilitates the benefits of specialisation. It Aims at achieving unity of
direction, Co-operation, control and effective communication.
Need and Importance:
It leads to division of work and specialization
Helps for efficiency and productivity
It facilitates communication, Co-ordination and control
Helps in fixing responsibilities of individuals and departments
Helps in measuring the performance of individuals and departments
Process of Departmentation:
Identification of tasks and duties
Analysis of details of each tasks
Delegating the tasks to concerned specialists and providing suitable staff
Defining authority and responsibilities
Basis of Departmentation:
1) Departmentation by Functions:If the divisions are made according to the functions in the
organizations like production, sales, finance etc., then it is called as department by fuctions.

Departmentation by products: If the divisions are made on the basis of products
manufactured in company it is called as Department by product.

Departmentation by process:
BOD
Production
Manager
Purchase
Manager
Finance
Manager
Marketing
manager
Personnel
manager
Managing
Directors
BOD
Managing
Directors
Production
Manager
Cotton
division
Silk Division
Woolen
Division
Finance
Manager
Marketing
manager
Personnel
manager
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Departmentation by customers:

Departmentation by territory or area: MNCs , Banks go for this type of Departments

Span of Management
It is also called as Span of Control or Span of supervision or Span of Direction. Span of
management means the number of people managed effectively by a single officer in an
organization. In an average firm, an executive can efficiently control up to five or six subordinates.
Normally, the members exercising span of control are decreased at the top level management and
increased at the bottom level management. Ideal number of subordinates is four in case of higher
level management and eight to twelve in case of bottom level management.A sound organization
depends upon the effective performance of work by the executives. So, the executives should
neither be overloaded nor be idle.
According to Louis A Allen, Span of supervision refers to number of people that a manager can
supervise.
Graicunas Theory of Span of Control: He mentioned three types of Superior Subordinate
relationships, viz.,
Direct Single Relationships,
Direct Group Relationships, and
Cross Relationships
According to V.A. Graicunas, as the number of subordinates increases arithmetically (like 1, 2,
3, 4, 5, 6, etc.) the number of relationships which the superior has to control also increases
almost geometrically (like 1, 6, 18, 44, 100, 244, etc.). Therefore, a superior can only control a
limited number of subordinates, and anything beyond this limit is very hard
to control.

BOD
MD
Prodction
Manager
Ginning
Dept
Spinning
Dept
Weaving
Dept
Dyeing
Dept
Bleaching
Dept
BOD
MD
Marketing
Manager
Wholesale
purchaser
Retail
Customers
Foreign
Customers
Cash
customers
Credit
Customers
BOD
MD
General
Manager
Eastern
region
Western
Region
Southern
Region
Nothen
Region
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Types of Span of Management:
1) Wider Span of management: It also called as flat organization which contains fewer
levels. It is helpful for effective communication and co-ordination between superiors and
subordinates. In this type less number of subordinates are supervised which leads to better
performance.But the most important draw back is large no of subordinates cannot be
supervised by one executive so it may affect the performance of the company.
2) Narrow Span of Management: It is also called as tall or vertical organisation. In this case
each executive has small number of subordinates so that supervision, control and co-
ordination can be done properly. But it is having drawbacks like Requires large no of
managers, Increase in the cost of production, Control gets complicated etc.
Factors determining the Span of Management: The following are the factors affecting the
span of control:
1) Capacity of supervisor: Each manager has different ability, capacity in terms of leadership,
decision making, communication, control etc., which many affect in management of
subordinates. Therefore effective span of management is depend on the ability and capacity
of supervisor.
2) Capacity of Subordinates: If the subordinates are efficient and trained they may discharge
their function more effectively. Therefore along with the ability of supervisor , subordinates
ability is also very much important.
3) Nature of Work: Different types of work requires different pattern of management.
Therefore it is also important factor for span of control. If the work is of similar nature it
requires wider control and if work is complex the span of control will decrease.
4) Degree of Decentralisation: Decentralisation distributes the authority and responsibilities
to the lower levels. In this case narrow span of control will be used.
Wherein Centralisation increases the authority and responsibilities where wide span of
control is used.
5) Effectiveness of Communication: An effective system of communication is required for
better span of control.
6) Staff assistance: The assistance provided by the staff authority can reduce the span of
supervision.
DELIGATION:
The authority is to be assigned to the subordinates for carrying out their work efficiently. This
assignment of authority from superior to subordinates is known as delegation. In other words,
Delegation means to grant the authority from the superior to the subordinates to accomplish a
specific management.
According to F.C.Moore, Delegation means assigning work to the others and giving them
authority to do so.

Process of Delegation:
1) Assignment of duties and responsibilities to subordinates: This is the first step in the
delegation. The manager or superior assigns the duties to subordinates. Superior specifies
the duties and also specifies the targets that his subordinates should achieve.
2) Delegation of authority :Here superior assigns the authorities to the subordinates to perform
the duty assigned. No one can perform his duties unless he has required authority.
3) Creation of Obligation: In this step the obligation is created to the subordinates to perform
their duties.
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Principles of delegation of Authority
Principles are the fundamental guideline basis and theories on the basis of which the authorities are
delegated.
1) Principles of functional definition: This principle assures (conform) that delegation of authority
should be made to do shorten specific functions and the authorities can be delegated within the
functional areas or scope.
2) Principles of expected results: According this principle authority delegation is the goals,
objectives and expected results of the organization for the fulfillment of which authority
delegated it is called principles of expected results.
3) Principles of scalar chain: According to this principle authority is delegated to the immediate
sub-ordinates. The mgmt cant avoid the principle of scalar chain.
4) Principles of Unity of Command: While delegating the authority mgmt as well as sub-ordinates
should receive all the orders and instructions from one senior or any one authority.
5) Principles of absolutes: Absolute responsibilities of implementing any organizational job always
remains with top level management. Top level management should be responsible or
accountable towards the stake holders at all times. Such types of non-transferring
of responsibilities is known as principles of absolute responsibility.
6) Principles of parity of authority & responsibility: The parity principles says that the authority
and responsibility should be equal all times although we can see creations of responsibility at the
time delegation of authority but such types of creation is made to manage the regular operation
or internal practice only.
7) Dispersions of operations principles: The delegation of authority is practice in case of the
activities can be dispersed professions as specialized activities cant be delegated to the lower
level.

Advantages or Importance of Delegation:
1) It enables the manager to distribute their load of work to others
2) It enables to take quick decision at all levels
3) It motivates the people to give their best at work when they have authority with
responsibility.
4) It helps in developing managerial personnel for the future.
5) It improves work performance
6) It helps in effective management , supervision and control.

Delegation may be of the following types:
1. General or Specific Delegation: In general delegation, the subordinate is granted authority to
perform all the functions in his department or division. However, the subordinate exercises this
authority under the overall guidance and control of the superior.
Under specific delegation, a person is given authority regarding specific function or functions. For
example, a sales person may be given the authority to collect payments from debtors. Thus, specific
delegation is functional in nature. Specific delegation is precise and the subordinate clearly
understands what he is expected to do. But it may create inflexibility in the organisation.
2. Formal or Informal Delegation: When authority is delegated as per the organisation structure,
it is called formal delegation. Such delegation is effective because it leaves no option to the
subordinate but to obey the commands of the superior. For example, a sales person may be granted
authority to grant discount upto 5 per cent on the list price to customers buying goods worth Rs.
5,000 or more.
Informal delegation takes place when an individual or a group agrees to work under the direction of
an informal leader. Need for informal delegation arises due to procedural delays and red tape. When
people want to short circuit the formal procedures so as to perform the task quickly, they resort to
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informal delegation.
3. Written or Oral Delegation: Delegation made by written orders and instructions is known as
written delegation. Unwritten or oral delegation is based in custom and conventions.
4. Downward and Sideward Delegation: Downward delegation occurs when a superior assigns
duties and grants authority to his immediate subordinate. This is the most common type of
delegation.
Sideward delegation takes place when a subordinate assigns some of his duties and authority to
another subordinate of the same rank.

Differences between Authority and Responsibility
Authority Responsibility
It is the legal right of a person or a
superior to command his
subordinates.
It is the obligation of subordinate to perform the
work assigned to him.
Authority is attached to the
position of a superior in concern.
Responsibility arises out of superior-subordinate
relationship in which subordinate agrees to carry out
duty given to him.
Authority can be delegated by a
superior to a subordinate
Responsibility cannot be shifted and is absolute
It flows from top to bottom. It flows from bottom to top.