Chapter 6- Organising

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Organsing is the process of establishing relationship among the members of the enterprise.

The various steps involved in this process are:

Chapter 6_1

Organisation Structure:

March and Simon have stated that – “Organisation structure consists simply of those aspects of pattern behavior in the organization that are relatively stable and change only slowly.

Peter F Drucker- “Organisation is not an end in itself, but a means to the end of business performance and business results. Organisation structure is an indispensable means; and the wrong structure will seriously impair business performance and may even destroy it.

Significance of Organisation structure:

  1. Well designed organization helps improve team work and productivity.
  2. Determines the location of decision making in the organization.
  3. Stimulates creative thinking and initiative.
  4. Well structured organization helps in systematic capacity building
  5. Provides the pattern of communication and co-ordination
  6. Helps a member understand what his role is and how it relates to others.

Determining the kind of organization structure:

Peter Drucker pointed out three specific ways of identifying what kind of structure a specific business needs:

  1. Activities Analysis:

Purpose: To discover the primary activity  of the proposed organization for it is around this that other activities will be built.

  1. Decision Analysis:

Purpose: Deciding which decision is to be considered at which layer of the orgaisation, it creates the number of levels the organization requires in an organization.

  1. Relations Analysis:

Purpose:Will include an examination of the various types of relationships that develop within the organization. These relationships are vertical, lateral and diagonal.

Principles of Organization Structure:

Following are the main principles of organization structure:

  1. Consideration of unity of objectives – There must be unity in objective as all efforts should be towards common goal.
  2. Specialization – Precise division of work develops specialization.
  3. Co-ordination – It is the orderly arrangement of group effort to provide unity of action in the pursuit of common purpose.
  4. Clear unbroken line of authority – (The chain of command) Line of authority flows from the highest executive to the lowest managerial level and the chain of command should not be broken.
  5. Responsibility – Authority should be equal to responsibility.
  6. Efficiency – Organization structure should enable attainment of objectives at minimum cost.
  7. Delegation – Decisions should be made from the lowest possible authority.
  8. Unity of Command – Each person should be accountable to a single superior.
  9. Span of management – No superior at higher level should have more than 6 immediate subordinates. The average human brain can effectively direct 3 to 6 brains.
  10. Communication – Smooth flow of information is important for effective communication and understanding in an organisation
  11. Flexibility – Organsition should provide built in devices for growth and expansion without dislocation. It should not be rigid or inelastic.

Formal Organisation v/s Informal Organisation.

Formal Organization Informal Organization
Purpose Refers to the structure of jobs and positions with clearly defined functions and relationships as prescribed by the top management Refers to the relationship between people

in the organisation based on personal attitudes, emotions, prejudices, likes, dislikes etc

Definition Chester I Bernard defines formal organisation as -“a system of

consciously coordinated activities or forces of two or more persons. It refers to the structure

of well-defined jobs, each bearing a definite measure of authority, responsibility and


Pillars The formal organisation is built around four key pillars. They are:

(a) Division of labour

(b) Scalar and functional processes

(c) Structure, and

(d) Span of control

These groups may be based on same taste, language, culture or some other factor. These groups are not pre-planned, but they develop automatically within the organisation according to its environment.
Characterisics ·         Structure laid by top management.

·         Prescribes relationships

·         Consciously designed

·         Concentrates on jobs to be performed.

·         Bound by rules, regulations and procedures

·         Based on division of labour and specialization

·         Co-ordination proceeds as per the prescribed pattern.

·         Unplanned and arises spontaneously

·         Reflects human relationships

·         Not based on rules and regualtions

·         Membership is voluntary

·         Can be overlapping

·         based on common taste, problem, language, religion, culture, etc. It is influenced by the personal attitudes, emotions, whims, likes and dislikes etc. of the people in the organisation

Advantages ·         Makes everybody responsible for given task.

·         Ensures law and order

·         Enables people to work together.

·         Blends well with formal organisaiton

·         Achievement tof sense of security and belonging.

·         Powerful influence on productivity and sense of satisfaction.

·         Helps members attain personal objectives.

·         Agency for social control on human behaviour

Criticism ·         Does not consider sentiments of member

·         Does not consider goals of the individual.

·         Makes organization rigid.


Forms of Organisation

Following are the forms of organization structure.

  1. Line Organisation:

Also known as “Military”, “Traditional”, “Scalar” or “Hierarchical” form of organization.

In the line organisation, the line of authority consists of an uninterrupted series of authority steps and forms a hierarchical arrangement. The line of authority not only becomes the avenue of command to operating personnel, but also provides the channel of communication, coordination and accountability in the organisation.

3 principles of Line Organisation:

  1. Commands should be given to subordinates through the immediate supervisor, there should be no skipping of links in the chain of command.
  2. There should be only one chain. That is command should be received from only one immediate superior.
  3. The number of subordinates whose work is directly commanded by the superior should be limited.

Chapter 6_2

Advantages of Line Organisation:

  1. Easiest to establish and simplest to explain to the employers
  2. Fixes responsibility for performance of the task
  3. Clear identification of authority and responsibility relationships.
  4. Most economical and effective
  5. Ensure discipline is organization as each employee knows whom he is responsible.
  6. Prompt decision making as there is definite authority at every level.


  1. With growth, superiors become overloaded with work.
  2. Being an autocratic system , it may be operated on an arbitrary, opinionated and dictatorial basis.
  3. Subordinates have to obey the orders of superior without expressing their opinion on orders.
  4. Good deal of nepotism and favoritism.
  5. Lack of specialized skill of experts.
  6. Organisation may become rigid and inflexible.
  7. Concentration of authority at the top.
  8. Red tapism and bureaucracy.


2. Line & Staff Organisation:

In line and staff organisation, the line authority remains the same as it does in the line organisation. Authority flows from top to bottom. The main difference is that specialists are attached to line managers to advise them on important matters. The ‘line’ maintains discipline and stability; the ‘staff’ provides expert information. The line gets out the production, the staffs carries on the research, planning, scheduling, establishing of standards and recording of performance.

Chapter 6_3

Types of Staff:

Staff could be classified:

  1. Personal staff: Here the staff is attached as a personal assistant or adviser to line manager.
  2. Specialised staff: Such staff act a fountainhead of expertise in specialized areas .
  3. General staff: This category of staff consists of a set of experts in different areas who are meant to advise and assist the top management on matters called for expertise.

Characteristics of Line and Staff Organization:

  1. Line officers who have authority and command over the subordinates and are accountable for the tasks entrusted to them. The staff officers are specialists who offer expert advice to the line officers to perform their tasks efficiently.
  2. the staff officers prepare the plans and give advise to the line officers and the line officers execute the plan with the help of workers.
  3. Based on the principle of specialization.

Advantages of Line and Staff Organisation:

  1. Brings expert knowledge to bear upon management and operating problems.
  2. As the staff officers look after the detailed analysis of each important managerial activity,
  3. It relieves the line managers of the botheration of concentrating on specialised functions.
  4. It makes possible the principle of undivided responsibility and authority, and at the same time permits staff specialisation.
  5. Based upon planned specialization.
  6. Line and staff organisation has greater flexibility, in the sense that new specialised activities can be added to the line activities without disturbing the line procedure.

Disadvantage of Line and Staff Organisation:

  1. A conflict between line and staff executives
  2. Line managers sometimes resent the work of staff executives.
  3. The staff experts may be ineffective because they do not get the authority to implement their recommendations.
  4. Becomes quite expensive due to expanded staff appointments
  5. Although expert information and advice are available, they reach the workers through the officers and thus run the risk of misunderstanding and misinterpretation.

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