UNIT 3

ORGANIZING
INTRODUCTION

Organisation is the foundation upon which the whole structure of management is built.
Organisation is related with developing a frame work where the total work is divided
into manageable components in order to facilitate the achievement of objectives or
goals. Thus, organisation is the structure or mechanism (machinery) that enables living
things to work together.
DEFINITION

According to Chester I. Barnard, "Organisation is a system of co-operative

activities of two or more persons."

According to Louis A. Allen, "Organisation is the process of identifying and

grouping the work to be performed, defining and delegating responsibility and
authority, and establishing relationship for the purpose of enabling people to work
most effectively together in accomplishing objectives."

According to Mooney and Railey, "Organisation is the form of every human

association for the attainment of a common purpose."
CONCEPT:
DIFFERENTIATION: It means that an organization is composed of units that work
on specialized tasks using different work methods and requiring employees with
unique competencies.
INTEGRATION: It means that the various units must be put back together so that
work is coordinated.
NATURE OF ORGANIZATION:

Group of Persons: An organization is a group of people working together for the

achievement of common objectives. The group may be large or small. An organization is a
system of cooperative relationships of two or more persons.

Common Objectives: Every organization has a common objectives distinct from personal
objectives of the members. The common goal is the basis of cooperation among the
members. The objectives of the organization are usually are made explicit

Division of Work: An organization comes into existence when the total task is divided
into the members of the group. Division of work is necessary not only because one
individual cannot do all the work but specialization results in efficiency and effectiveness.

Cooperative Efforts: The members of an organization are willing to help each other for
the achievement of desired goals. Cooperative relationships are stabilized both vertically
and horizontally among different units of the organization:

Communication: People who form an organization communicates with each other in

order to integrate or coordinate there efforts. The structure must be such that people can
perform together efficiently.

Central Authority: In an organization, there is a central directing authority which

controls the concerted efforts of the group. The chain of authority- responsibility
relationships is known as the chain of command.

Rules and Regulations: For the orderly and systematic working of the members, rules
and regulations are laid down and enforced by the central authority.

The Dynamic Element: An organization is not a mere mechanical structure but a living
organism arising out of the sentiments, attitudes, and behavior of people. The people are
the material of construction that holds the structure together and gives it vitality.

IMPORTANCE OF ORGANIZATION:

Organising helps Organisations

to reap the benefit of
specialization.
Organising provides for
Optimum utilization of
resources.
Organising helps in Effective
administration.
Organising
Expansion

channels for
and growth.

Organising achieves coordination among different

departments.
Organising creates scope for
new change.

FOR A GOOD ORGANIZATION:

Realization of Objectives: Organisation is tool of achieving objectives of an
enterprise. For this purpose, the organisation should be divided in several department,
sub-departments, branches and units etc.
Harmonious Grouping of Functions etc: For achieving the organisation
objectives there must be harmonious grouping of functions, jobs and sub-jobs in such a

way so that there is action, consultation and co-ordination without any delay and
difficulty.
Reasonable Span of Control: Another characteristic of organisation is that it
should have reasonable span of control. Ordinarily, a person (personnel) cannot
control more than five or six subordinates.
Clear-cut allocation of Duties and Responsibilities: There must be clear-cut
allocation of duties and responsibilities in any scheme of sound organisation. Every
executive must know his scope of activities, the ideal number is three.
Promotion of Satisfaction: The most important element of any human
organisation is the promotion of satisfaction of workers. Man works in a group or in an
organisation and hence the success or failure of any organisation depends on as to how
much the organisation is in a position to provide satisfaction to individuals or group
working under him.
Fullest Utilization of Manpower: Another important characteristic of an ideal
organisation is as to how far it is successful in making fullest and economical utilization
of the available manpower.
provision and Development and Expansion: Another important of an ideal
organisation is that there exists the necessary provision for development and expansion
so that it is possible to expand and develop any organisation according to needs and
requirements and necessary changes an alternatives may be made.
Coordination and cooperation: In order to achieve the objectives of the enterprise,
there must be close coordination and cooperation in the activities of everybody working
in the organisation. Further, there should also be active coordination and cooperation
amongst the various departments an sub-departments. It will also assist in elimination
the evil of red tapism.
Unity of Command: There must be unity of command. No one in any organisation
should report to more than one line supervisor, and everybody must know to whom he
reports and who reports to him. No subordinate should get orders from more than one
supervisor, otherwise it will lead to confusion, chaos and conflict.

Effective System of Communication: An ideal organisation must possess effective

system of communication. The inter-communication system should be clear and easier
and there should be no ambiguity at and level.
High Morale: An ideal organisation is that in which the workers possess high morale.
They work with full capacity, energy, enthusiasm, devotion and sincerity.
Flexibility: The last but not the least important characteristic of an ideal organisation
is that it should be flexible so that necessary changes an modifications in the the size of
the organisation as well as technology could be easily and conveniently effected.
The purpose of sound organization is :
i. to establish an activity-authority environment in which people can perform most
effectively.
ii. to make group action efficient and effective by providing centres for decision
making and a system of communication to effectively coordinate individual
efforts towards group- goals.
iii. to create relationships which minimize friction, focus on the objective, closely
define the responsibilities of all parts and facilitate the attainment of the
objective.
iv. to subdivide the management
process by which plans are translated
into actions so as to make management
most effective.

STRUCTURE OF ORGANIZATION:

Organisation structure is the pattern of relationships among various components or

parts of the organisation which prescribes the relations among various activities and
positions. An effective structure will result in increased profitability of the enterprise.
whenever an enterprise grows in size or complexity it needs an adequate organisation
structure.

Types of Organisation Structure

Line Organisation Structure: Hierarchy derived from a scalar process.
Organisation is quite simple in understanding and implementation. this does not offer
scope
for
specialization.
Line and Staff Organisation Structure: Staff personnel generally specialists in
their fields advice line managers to perform their duties. Staff personnel have right to
recommend,
but
have
no
authority.
Functional Organisation: Grouping of activities on the basis of functions required
for
the
achievement
of
ultimate
objectives.
Divisional Organisation Structure: Several fairly self-contained autonomous
units were created. Each unit was headed by a manager and is directly accountable to
the organisation.

Line Organization

It

General
Manager
Production
Finance
Manager
Manager
Superintendent Asstt.
Finance
Foreman
Accountants
Manager
Workers

Clerks

Marketing
Manager
Asstt.
Marketing
Sales
Manager
Supervisors
Salesmen

consists of an uninterrupted series of authority steps and forms a

hierarchical arrangement. It not only becomes the avenue of command to
operating personnel but also provides the channel of communication,
coordination and accountability in enterprise.
Line and staff organization

Board of
Managing -------Directors
Executive Director-- Cont Asstt.
Manager Manager Manager
---roller To
Division A Division B Division C
Committe
of Managi
e
ng
Fina Directo
nce r

1.
2.
3.
4.
5.
6.

Right to decide and command

Contributes
directly
to
the
accomplishment of objectives
Flows downward from a superior to
subordinate
Creates
superior-subordinate
relationship
Bears final responsibility for results
Provides channel of communication

Functional organization

Managing
Director
Production
Engineer Manager
Superinte
Chemist
ndent of
Productio Foreman
Forema
Foreman
Foreman
n
n
Workmen

Workmen

Workmen

This is based on the concept of functional

foremanship. In this Organization is divided
into a number of functional areas. Each
function is managed by an expert in that
area.
Project organization

1.
2.
3.

4.

5.

Oriented towards the completion of a

project
Molding the organization around a
specific project
It is usually structured to facilitate
planning and designing of the product,
completion of the task and phasing out
of the project
Need for project organization is felt
when an organization is to execute a
project which is subject to high
standards of performance
Assignment presents a unique or
unfamiliar change

Matrix organization

Division X
Producti Engine
ering
on
Proj.
Prod
Engg
Mgr. I
Grp
Grp
Proj Mgr Prod
Engg
II
Grp
Grp

Financ Person
e
nel
Fin
Pers. Grp
Grp
Pers. Grp
Fin
Grp

PROCESS

1.
2.
3.

4.

It is created by merging the two

complementary organizations the
project and the functional
projects cut across the functional line
project teams are composed of people
from functional departments who are
assigned to the project for a specific
period or for the duration of the project
After the project is finished they
return to the functional departments

OF ORGANIZATION:
Division of work: The first process of Organising includes identification
and division of work which shall be donein accordance with the plans that
are determined previously.
Departmentation: once the work of identifying and dividing the work has
been done those are similar are to begrouped.
Linking departments: When the process of departmentation was
completed, linking of departments has to be done sothat those
departments operate in a co-ordinated manner which gives a shape to
overall organisation structure.
Assigning Duties: On completion of departmentation process assigning
duties i.e. defining authority andresponsibilty to the employees on the
basis of their skills and capabilities has to be done, which in
consequencemagnifies efficiency with regard to their work.
Defining hierarchal structure: Each employee should also know from
whom he has to take orders and to whom he isaccountable/responsible.

PRINCIPLES OF ORGANIZATION:

Principle of Functional Definition

According to this principle, all the functions in a concern should be

completely and clearly defined to the managers and subordinates. This can
be done by clearly defining the duties, responsibilities, authority and
relationships of people towards each other.

Principle of Specialization

Principles of Span of Control/Supervision

According to this principle, span of control is a span of supervision which

depicts the number of employees that can be handled and controlled
effectively by a single manager

Principle of Scalar Chain

According to the principle, the whole work of a concern should be divided

amongst the subordinates on the basis of qualifications, abilities and skills. It
is through division of work specialization can be achieved which results in
effective organization.

Scalar chain is a chain of command or authority which flows from top to

bottom. With a chain of authority available, wastages of resources are
minimized, communication is affected, overlapping of work is avoided and
easy organization takes place.

Principle of Unity of Command

It implies one subordinate-one superior relationship. Every subordinate is
answerable and accountable to one boss at one time.

ORGANIZATION THEORIES:

Organization theories
CLASSICAL ORGANIZATION THEORY
Scientific Management approach
Weber's Bureaucratic approach
Administrative theory.

NEOCLASSICAL THEORY

MODERN ORGANIZATION THEORY

Systems approach
Socio-technical approach
Contingency or Situational approach

ELEMENTS oF ORGANIZATION:
a). Departmentation.
b). Linking Departments.

c) Defining authority and Responsibility

d) Presenting authority relationships.

Departmentation: The

first real task in designing

an organization

identification of activities and to group them properly.

structure is the

The process of grouping

the activities is commonly known as departmentation the terms used to denote

the department that rebut from departmentation very a great deal
Need and importance of departmentation:
The basis need for departmentation arises because of specialization of
work

and the limitation on the number

sub-ordinates

that can be directly

controlled by a superior.
Departmentation is essential because of the following reasons: 1. It permits an organization to take advantage of specialization
2. It enables each person to know the particular part he is expected to play in
the total activities of the company.
3. It facilitates communication, co-ordination and control and contributes to
the organizational success.
4. It provides an adequate platform around which the loyalties of
organizational members may be built
5. It enables a manager to locate the source of information, skills and
competence to take certain vital managerial decision.
Importance of departmentation: 1. Advantages of specialization.
2. Fixation of responsibility
3. Development of manages.
4. Facility in appraised
5. Feeling of autonomy

Advantages of Departmentation:
1. Advantage of managerial specialization.
2. Expansion and growth of enterprise facilitated.
3. Decentralization facilitated.
4. Fixation of responsibility facilitated.
5. Performance appraisal and managerial development.
6. Facilitates Inter departmental co-ordination
7. Administrative control facilitated.
Basics of Departmentation: 1. Function
2. Product or service
3. Customers
4. Location
5. Time
6. Process
7. Combination.
The following factors are to be considered in forming departments in an
organization.
1. Cost factor
2. Functional specialization
3. Control center
4. Integration of different activities.
5. Personnel factors.
Ideal principles of Departmentation:
1. Principle of attainment of enterprise objectives.
2. Principle of comprehensive departmentaion.
3. Principle of inter departmental co-operation.
4. Principle of promotion of specialization

5. Principle of cost benefit analysis

6. Principle of top management control
7. Principle of special attention to key result area.
8. Principle of best utilization of resources.
9. Principle of autonomous feasting to departmental heads.
10.Principle of flexibility.
11.Principle of human consideration.
Line & staff relationships:
Definition:
Line

functions are those which have

direct responsibility

for

accomplishing the objectives of the enterprise and staff refers to those elements
of the organization that help the line to work most effectively in accomplishing
the primacy objecti9ves of the enterprise - Allen.
The organizational objectives are the being determinant of line and staff
functions and with the change in objectives line and staff functions may change.
Thus what may be line function in the organization may be staff function
in
another. For example persona function in an employment agency is line but it is
staff in manufacturing origination.

In a manufacturing organization whose basic objectives is to produce and sell

goods, production and marketing are line functions and others such as finance,
personnel, legal etc., are staff functions.
Differentiation

between

line and staff is necessary

reasons:
1. To provide specialized services.
2. To Maintain adequate checks and balances
3. To maintain accountability.
Line Relationship:

for the following

A line manager has clearly defined role to play in the organization which
requires understanding of the nature of line authority. Line authority exists
between

superior and his sub-ordinate.

superior

The

direct relationship between

and his sub-ordinate is created through

the enforcement

of line

relationship such a relationship works as follows:

1. As chain of command
2. As a chain of communication.
3. As a carrier of responsibility.
Staff Relationship: The relationship between a staff man and the line manager with whom he
works depends in part on the staff duties.
checks

on performance

A man who only gathers facts or only

will have relationships with line manager that are

different from those of a man who has concurring authority.

Types of staff:
a) Personal staff
b) Specialized staff
c) General staff.
Evaluation.:
Merits:
a) Expert advice,
b) Relief to line.
c) Training of young staff executives.
Demerits:
a) Confusion
b) Expertise not aided by authority

c) Centralization
Decentralization Delegation of Authority:
To Delegate means to entrust authority to a deputy so as to enable him to
accomplish the task assigned to him.
Delegation is the dynamic of management. It is the process a manager
follows in dividing the work assigned to him so that he performs that
party
which only he because of his unique organizational placement, can perform
effectively and so that he can get others to help him with what remains -

A. Allen.

Process of Delegation:
Business is run for result. The tasks set for the delegates himself and
what he assigns (delegates) to the delegates, must accordingly be stated in term
of results No holder of a task can ever achieve the results that he is called upon
to yield without the means to do so. This Means is the authority. The means
must therefore match the ends: authority and the task-results, accountability
must go together.
Types of delegation:
Formal delegation:
The delegated assignment and the accompanying authority for each
delegate are spelt-out on a piece of paper.

It makes for clarity. It is all spelt out

there for all to see, It is circulated. Every body knows, who is what, what he
must do and achieve and authority possesses.
ambiguities.

It clears operations of doubts and

It hamstrings initiative, cubs, talents, stunts vitality, & rodes

adaptability to change.
Informal delegation: In the informal type the delegation goes by a climate of understanding
between the superior and the sub-ordinate.

A general delegation would perhaps

remove some of the inflexibility claimed against a formal delegation but could

add

some to the entertainments

of an informal delegation

in the field of

operation of the delegated task.

Principles of delegation: 1. Delegation to conform to desired objectives
2. Responsibility not delegatable.
3.. Authority to match duties.
4. Unity of Command
5. Limits to authority to be well defined.

Advantages:1. Basis of effective functioning

2. Reduction in managerial load
3. Benefit of specialized service .
4. Efficient running of branches.
5. Aid to employee development.
6. Aid to expansion and diversification of business.
Importance:
Delegation has a distant origin.
delegation are must to

It is a universal process .

The needs for

individual. It enables a person not only to discharge his

responsibility but also to discharge it efficiently. & economically.

It takes two parties for delegation to be effective a Superior willing to
delegate and give his sub-ordinates real freedom.
Limits of delegation: 1. Equal authority with responsibility too much authority may be abused too
little authority may frustrate the sub ordinates.
2. Restrain

any

inclination to override interfere with or undermine

delegation.
3. Some decisions are irreversible

the

4. Some decisions involve large commitments.

5. Certain decisions are apt to curate an uncomfortable precedent
6. Decisions where the personal judgment of the senior is called into play.
7. The

traditional makeup

of the enterprise in fluences

the degree of

decentralization and delegation.

8. In enterprises owned

and managed

by a dynasty

or familial group

decentralization tends to be comfier to members of the family.

Decentralization
According
reservation

to Allen, Centralization

is the systematic

of authority at central points

and consistent

with the organization.

Most

organizations start out centralization of authority initially.

But as the organizations to survive in a highly competitive world.
the organizations becomes

more complex

But as

in terms of increasing size, inter

dependence of work-flow, complexity of tasks and spatial physical barriers

within among and among groups, a function requisite for efficiency is to move
decision making centers to the operation level, Thus the larger the size of
an
organization, the more urgent is the need for decentralization. Centralization or
decentralization may be in part merely the result of expansions.
Decentralization is the systematic effort to delegate to the lowest levels
all authority except that which can be exercised at central points. It is the
pushing draw of authority except that which can be exercised of central points It
is the pushing down of authority and power of decision making to the
lower
levels of organization. The centers of decision making are dispersed thought
the organization.

However the essence of decentralization is the transference of

authority and power of decision making to the lower level of organization.

However the essence of decentralization is the transference of authority from a

higher level to a lower level.

Decentralization in recent years has come to b e

accepted as a golden calf of Management philosophy.

Said to be,
Decentralization is greater
a) When more decisions are made at lower levels
b) When more important decisions are made at lower levels.
c) When

more

functions are effected by decisions made

at lower

levels
d) When

the checking

on the decisions made

minimal.
Types of Decentralization:
a) Profit centres
b) Cost expenses centres.
c) Investment centres.
Advantages of Decentralization:
a) Relief to top executives
b) Motivations sub- ordinates
c) Intimate relationships
d) Sense of Competition
e) Effective control

Disadvantage of Decentralization:
a) Lack of Co-ordination
b) Costly
c) Lack of able managers.
Distinction between Delegation and decentralization

at lower

level is

Constitutes the source of delegation of authority.

Staff Selection Process Techniques:

In simple words staffing is the processing of obtaining and maintaining
capable and competent people to fill all positions from top Management to
operative level.
Staffing is the function by which managers build an organization through
the recruitment, selection, development of individuals as capable employees.
Staffing

is the executive function

selection, compensating

which involves

taking, promotion

the recruitment,

and retirement of sub-ordinate

managers.
Human resources have one unique feature. It is the only human resources
which

appreciate

with time if sufficient care is taken to impart skill and

knowledge. Human Resources become an asset in the long run.

Human Resources Planning:

Human Resources planning practically involves applying the fundamental
planning forces to the human source needs of an organization.

Aims and objectives of Human Resource Planning (HRP):

1. Obtains and retains the quality and quantity of man power it
needs.
2. Makes the best use of its man power resources.
3. It is able to anticipate the problems

arising from potential

surpluses or deficits of man power.

4. Determining the organizational objectives.
5. Determine

the skills and expertise required

to achieve the

organizational and departmental objectives.

6. Determining additional human resource departments in the light
of the organizations current human resources.
7. Developing action plans to meet anticipated human resource
need.

Selection Process:
Selection

is the process

of picking

individuals

with

requisite

qualifications and competence to fill jobs in the organization.

A formal definition of selection is it is the process of differentiating
between applicants in order to identify those with a greater likelihood of success
in a job. Recruitment and selection are the two crucial steps in the personnel
Management and are often used inter- changeably. However a fine distinction
between the two steps. Selection policy it lays down the guidelines for those
engaged in the
selection

process, Basically these policies comes under

broad categories.
1. Originated by the organization
2. Appealed by the employees.
3. Imposed by the government based on public policy.

the following three

Essentials of selection procedure:

1. Some one should have the authority to select .
2. There

must be standard of personnel with which a perspective

employee may be compared

3. There

must be a sufficient number of applicants from whom

the

required number of employees may be selected.

Steps in selection procedure:

a) Reception or preliminary interview or screening
b) Application blank a fact finder which help-as one in learning about
an applicants background and life. History
c) A well conducted interview to explore the facts and get at the attitudes
of the applicant and his family to the job.
d) A physical examination health and stamina are vital factors in success.
e) Physiological testing to explore the surface area
f) A reference check
g) Final selection approval by manager

and communication

of the

decision to the candidate.

FORMAL AND INFORMAL ORGANIZATION:
The

formal organization is deliberately designed to achieve some

particular objectives. It refers to the structure of well defined jobs, each bearing
a definite authority, responsibility and accountability.
The formal organization is built on four pillars.
1. Division of labour
2. scalar and functional processor
3. Structure and
4. Span of control.
These are also refereed to principles of organization.
1. Organization structure is designed by the top management
certain requirements.
2. It is based upon the principles of division of labour.
3. It concentration more on the insurance of jobs.

to fulfill

4. The authority and responsibility assigned to each job here to be a adhered

to by the job-holders.
5. Co-ordination

among members

and their control are well specified

through process, procedures, rules etc.,

Informal Organization :
It refers to the natural growing of people on the bases of some similarly in
an organization. It is viewed that the informal organization refers to people in
group associations at work, but these association are not specified in the blue
print of the formal organization Characteristics of informal organization:
1. Informal organization is a natural outcome at the work place.
2. It is created on the bases of some similarity among its members
3. Membership in an is formal organization is voluntary
4. Behaviors of members of the informal organization is co-ordinates.

SPAN OF CONTROL:
INTRODUTION

Span of management is also known as Span of control, Span of supervision, Span

of authority and Span of responsibility. It indicates the number for people directly
managed effectively by a single person.

A sound organization depends upon the effective performance of work by the

executives. So, the executives should neither be overloaded nor be idle

MEANING

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

DEFINITION
Span of management defines clearly the number of the subordinates can be
effectively control by the manager.
IMPORTANCE OFSPAN OFCONTROL
Better supervision and control
If there is an appropriate span of control, then the superior will have a limited number of
subordinates under him. This will result in better supervision and control
Increases efficiency
An appropriate span of control results in better supervision and control. This increases
the efficiency, productivity and profitability of the organization
Good professional relationship
If there is an appropriate span of control, then the superiors and subordinates will get
time to develop close and good professional relations between themselves.
Good communication and co ordination
If there is an appropriate span of control, then superiors will get time to communicate
with every single subordinate. This will improve the communication in the organisation.
Good communication results in good co-ordination. Therefore, an appropriate span of
control results in good communication and co-ordination.
Develops discipline and mutual trust
An appropriate span of control helps to develop discipline and mutual trust
FACTORS AFFECTING span OF CONTROL
Nature of work

Some of the work is repitative in nature and does not require special talent to
perform .In such a case the supervisor can control a large number of
subordinates
Capacity of superiors
The personnel capacity of superiors can influence the span of control .
If the superiors has more skill to control the subordinates , the span
management may be increased and vice versa.

of

Delegation of authority
If superiors delegates the authority he has to take fewer decisions , therefore
span of management can be increased .
On the other hand , if superior does not delegate the authority he has to take
more decisions , therefore span of management should be reduced.

Fixation of resposibity
In case the responsibility of the subordinate is clearly defined he need not to contact the
supervisor again and again for getting guidance and instruction . Then the supervise can
supervise large number of subordinates and vice versa .
Trust on sub ordinates
If the superior has good faith, trust and confidence in his subordinates then the span of
control can be wider.
If the superior has no faith, trust and confidence in his subordinates then the span of
control can be narrower.
Capacity of subordinates
If the subordinates have enough talent to perform the work assigned to them , the
manager or the supervisor can control more number of subordinates and vice versa.
Technique of communication
If face-to-face communication is used, then the span of control will be narrow. However,
if electronic devices are used for communication then the span of control will be wide.

Graicunas theory of span of management

A management expert named V.A. Graicunas contributed much to the Span of
Management Theory.
His theory identifies the relationship prevailing between the superior and the
subordinates.
The relationships are classified into three categories. They are given below:

Direct single relationship

Direct group relationship

Cross relationship

Direct single relationship

Direct single relationship is one in which a supervisor has direct relationship with
his subordinates individually.

Direct group relationship

In this case a supervisor has direct relationship with his subordinates jointly.

Cross relationship

In cross relationship, a subordinate has relationship with another subordinate

mutually.

TYPES :
Wide span of management(flat)

This means a single manager or supervisor is managing Large numbers of

subordinates . For example 7 -8 numbers of subordinates.

Merits
ECONOMICAL
DIRECT CONTACT WITH SUBORDINATES
OPPORTNITIES FOR SUBORDINATES DEVELOPMENT
Demerits
REDUCES QUALITY OF PERFORMANCE
HIGHLY QUALIFIED AND WELL EXPERIENCED STAFF IS NEEDED
ZEAL AND INITIATIVE OF THE WORKERS IS KILLED

Narrow span of management(tall)

This means a single manager or supervisor is managing Few number of

subordinates .
For example 2-3 number of subordinates.

Merits
OFFERS TIGHT CONTROL AND SUPERVISION
PERSONAL CONTACT BETWEEN MANAGERS
MANAGERIAL EFFECINCY IS INCREASED
Demerits
CREATES MORE LEVELS OF MANAGEMENT WHICH IS EXPENSIVE AS WELL AS TIME
CONSUMING
CREATES COMPLEXITY IN COMMUNICATION
LEADS TO EXCESSIVE ADMINISTRATIVE AND OVERHEAD COST
Centralization
Meaning
Centralization refers to the situation in which a minimum number of job activities and a minimum amount of
authority are delegated to subordinates.
Thus, Centralization refers to the concentration of authority at one point or at different levels. Centralization
reduces the importance of subordinates and makes them mechanical, as the subordinates are only to execute
whatever is ordered.
The two definitions of centralization given by Louis Allen and Henry Fayol are:
Centralization is the systematic and consistent reservation of authority at central points within the
organisation.
-Louis Allen.
Everything that goes to increase the importance of the subordinates role is decentralization, everything which
goes to reduce it is centralization. - Henry Fayol.
Factors determining
You are now aware with the term Centralization and Decentralization. You have also got the idea that the
extent of centralization and decentralization of authority in organizations depends on various factors. Now let

us discuss the various factors which determine the policy of centralization and decentralization. The
management policy for determining the level or degree of centralisation and decentralization depends on the
following factors

Size and dispersal of operation

Small enterprises prefer functional structures which provide economy in its operations. On the other hand, the
large size enterprises with dispersal operations prefer decentralization for better productivity, efficiency and
control.

Level of diversity of product-lines

Greater product diversity needs more decentralization as functional structure fails to pay balanced emphasis
on each product line.

Nature of growth
Growth of an enterprise takes place either by internal expansion or by mergers/ amalgamations. In case of the
internal growth of an enterprise, the functional structure may be retained till it becomes impossible to manage
and control. But in case of amalgamations and mergers, decentralization is preferable.

Nature of Business
Functions such as purchasing, production and marketing are subject to a greater degree of decentralization
than service functions. Service functions such as personnel, finance, research and development etc. are
subject to centralization for better control and improving the quality of service.

Quality of Executives
Unless the subsequent level executives are able and experienced, they can not be entrusted with the
responsibility of making important decisions. Therefore, the decentralization depends on the quality of lower
level executives appointed in an organisation.

Management by Exception
It advocates that the top management should concentrate its attention only on long-term and non-recurring
issues leaving all operational details to be taken care of by next level executives.

Effective Control System

Effective control system can motivate the top level management for decentralization of authority whereas
inadequate control system forces the top management for centralization of authority.
Advantages

Consistency in decision making

As decisions are taken only by a few experienced top level management people, it can retain consistency
and better co-ordination during decision the making process.

Lower administration costs

Centralization of authority reduces the administration costs as the organization can operate with a limited
number of managers. Particularly, centralization is recommended during highly inflationary conditions.

Reduces inter-departmental Conflicts

Centralization reduces inter-departmental conflicts as decisions are taken by top level management with an
orientation towards departmental co-ordination.

Improves policy control

Decentralization creates freedom of actions and diversity of decisions. Loose control may create some serious
losses for some enterprises and may lead to recentralization of authority. Centralization, on the other hand,
improves policy control.
Disadvantages

Delay in work

Remote control

No loyalty

No Secrecy

No special attention

Factors influencing centralization

Size and dispersal of operation

Level of diversity of product-lines

Nature of growth

Nature of Business

Quality of Executives

Management by Exception

Effective Control System

Committees

Advantages
Pooling of knowledge and experience
Improved communication
Facilityof coordination
Better motivation
Executive development
Democratic management
Representation of interests
Consolidation of authority
Avoidance of action

Disadvantages

 Indecisiveness
High cost
Compromised decision
Diffused responsibility
Domination by few
Perpetuation
Lack of secrecy

8 marks
Discuss the meaning and methods bases, need, types of departmentation.
Define organisation. Briefly explain its nature,types, forms, objectives, policies, principles
of organization.
State the merits and demerits of centralisation.
Describe the merits of decentralization.
What is d of authority, its concept, degree,elements, characteristics of the
Delegation.
What is span of control?
Differentiate between delegation and decentralization of authority.

15 marks
Explain the concept, impotance of span of control. Is there any impact of technology on span of
control?
Explain the factors influencing , merits and demerits decentralisation of authority.
Explain the line organisation. What are its merits and limitations?
What is Centralisation? What are its merits and demerits?
Explain various dimensions of organisational structure, witheg
.Explain

the

meaning

and

elements

of

delegation of authority. Also explain its

importance, obstacles in effective delegation

What do you mean by departmentation? Explain the merits and demerits of
departmentation.
Discuss in detail about the conflict between line and staff authorities. Suggest remedies.

Explain the theories of organisation and their applicability in modern business

environmen Discuss the issues involved in centralisation and decentralisation of
authority.
Advantages and disadvantages of committees
Diff btn authority and decentralization