Organising

Written and reviewed by Rohit Singh, Computer Science & Commerce faculty at UniDrill (MCA, Osmania University · 6 years teaching). Based on NCERT Business Studies Class XII, Chapter 5.

Why does a two-person bakery need no org chart, but a bakery chain does?

Meera starts a bakery with one helper. They bake, sell, order flour and count cash together, and nobody needs to be told who does what. Two years later she has three outlets and 45 people. Cakes are baked twice because two shop managers ordered the same thing, nobody knows who should approve a discount, and the flour supplier gets three different phone calls a week.

Meera has made her plans. What she lacks is an arrangement of people and work that lets the plans happen. That arrangement is what this chapter is about. Organising is the function that turns a plan into a working machine, and it is the reason a business can grow beyond the founder's own two hands.

What organising is, and the four steps

Organising is the process of identifying and grouping the work to be done, defining and delegating authority and responsibility, and establishing relationships so that people can work together effectively. Louis Allen's definition says exactly this, and Theo Haimann puts it as defining and grouping the activities of the enterprise and establishing authority relationships among them. In plain words: it coordinates human effort and resources into one unit that can reach the objectives.

The process runs in a fixed order, because each step needs the one before it. You cannot group jobs you have not identified, and you cannot assign duties to departments that do not exist yet.

The process in one line: identify and divide the work → departmentalise → assign duties → establish reporting relationships.

Why organising matters

Each of the seven benefits below answers a problem that Meera's bakery would otherwise face.

Organisation structure and span of management

The organisation structure is the framework within which managerial and operating tasks are performed. It is the result of the organising process and is usually drawn as an organisation chart. Peter Drucker's warning is the line to remember: the wrong structure will seriously impair business performance and can even destroy it.

The span of management is the number of subordinates that a superior can effectively manage. It decides how many levels the structure has, not how many departments.

Pause and predict: Meera has 45 staff. If every manager can effectively handle 5 people, will her structure have more or fewer levels than if every manager can handle 15?

Check your answer: More levels. A narrow span means you need more managers to cover everyone, and managers need managers above them, so the chart grows taller.

Functional structure: group by what people do

In a functional structure, jobs of a similar nature are grouped together as departments such as production, purchase, marketing, finance and personnel. Each department is headed by a manager who reports to a coordinating head such as the managing director.

Take Kaveri Cycles, which makes one model of bicycle in very large numbers. All its welders, assemblers and quality checkers sit in Production. All its buyers sit in Purchase. All its sales staff sit in Marketing. Because the work is one product made repeatedly, grouping by function lets each department get very good at its own job.

Divisional structure: group by what the business sells

In a divisional structure the organisation is split into self-contained units, usually by product line. Each division has its own manager with authority over the unit, each is multifunctional (it has its own purchase, marketing, HR and so on) and each works as a profit centre.

Navrang Group sells cosmetics, garments and footwear. Instead of one purchase department for everything, each of the three divisions buys, markets and hires for itself. If footwear loses money, you know exactly whose numbers to look at.

The exam almost always asks you to compare the two. Learn the row labels, because the question usually changes only the structure named.

Beyond the textbook. For the exam: the two structures are presented as a choice between functional and divisional. In reality: most large firms are hybrids. A divisional company often keeps shared services such as finance, legal or HR at the centre to avoid duplication, while its divisions are still organised functionally inside. Why it matters: when a case describes a mixed arrangement, identify the main basis of grouping (function or product) rather than looking for a perfect fit.

Formal and informal organisation

Meera's bakery has an official chart. It also has a group of four counter staff who walk home together, cover each other's shifts and know all the news a day before the managers do. Both are real, and both shape how work gets done.

A formal organisation is the structure designed by management to achieve organisational goals. It specifies who has authority over whom, who is responsible for what, and how departments coordinate. An informal organisation is the network of social relationships among employees that arises spontaneously from their interaction, beyond the officially defined roles.

Each has strengths and weaknesses, and a good manager uses both.

Beyond the textbook. For the exam: informal organisation is a feature of every formal organisation, and the manager should recognise it. In reality: the famous Hawthorne studies at a Western Electric plant in the early twentieth century found that worker groups set their own informal output norms and that these could matter as much as pay or physical conditions. Why it matters: managers who treat informal groups as the enemy lose a valuable early warning system. Those who use them well spot problems before they appear in a report.

Delegation: sharing the work, keeping the answer

A manager cannot do everything. Delegation is the downward transfer of authority from a superior to a subordinate so that the work can be shared. Louis Allen describes it as the process by which a manager divides the work, performs the part only he can do effectively, and gets others to help with the rest.

Delegation has three elements, and the exam tests the differences between them again and again.

The summary line is worth memorising: authority is delegated, responsibility is assumed, accountability is imposed. Authority must also be commensurate with responsibility. If you hold a subordinate responsible for a result but give no authority to act, the arrangement fails.

Imran, a store manager, lets cashier Pooja approve refunds up to Rs 2,000. Pooja now has authority. She is responsible for approving refunds properly. If she approves a fake claim, Imran still has to answer to the regional manager for the store's refund losses. He cannot say "I delegated it".

Pause and predict: a manager delegates an entire task to a subordinate and then says, "Now it is no longer my problem." Which element has he forgotten about?

Check your answer: Accountability. Authority can be passed down and the subordinate takes on responsibility, but the manager remains answerable to his own superior for the final result.

Delegation is also what makes the hierarchy possible, and it pays off in six ways.

Decentralisation: delegation as a policy

Decentralisation is the systematic effort to delegate to the lowest level all authority except that which can be exercised only at central points. It is a philosophy of selective dispersal of authority, based on the belief that people lower down are competent and capable of taking decisions. The opposite, centralisation, keeps decision making authority with higher levels.

No organisation is entirely centralised or entirely decentralised. If everything were centralised, one person would take every decision, which is impossible beyond a very small business. If everything were decentralised, there would be no central direction left. Excessive centralisation causes slow decisions, overload at the top and loss of initiative below. Excessive decentralisation causes lack of unified action, conflict between units, duplication and loss of overall control.

Delegation and decentralisation are close cousins, but they are not the same thing.

Exam traps

60-second revision

Where this chapter connects

• Previous: Planning gives organising its objectives and plans. A structure is only useful if it serves a plan.
• Next: Staffing fills the positions that organising creates with the right people.
• Related: Principles of Management covers division of work, unity of command and the scalar chain, which are the ideas behind the structures in this chapter.