Need Importance Of Organization Commerce Essay

Organization is the foundation upon which the whole construction of direction is erected.Organization is associated with developing an lineation where the overall work is divided into manageable constituents in order to ease the accomplishment of aims or ends. Therefore, organisation is the construction or mechanism that enables populating things to work together. In a inactive sense, an organisation is a construction or machinery manned by group of persons who are working together towards a common end.

Examples of organisation: Corporations, authoritiess, non-government organisations, armed forces, non-profit organisations etc.

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The term organisation has been used in four different senses ;

Organization as Framework of Relationships: Organization refers to the construction and interactions among assorted occupation places which are created to recognize certain aims.

Organization as a procedure: Organization is viewed as a dynamic procedure and a managerial activity which is critical for be aftering the use of company ‘s resources.

Organization as a System: Organization is besides viewed as a system. System concepts acknowledge that organisations are made up of constituents, each of which has sole belongingss, abilities and reciprocated associations. The constitutional elements of a system are linked together in such complex ways that actions taken by one person have far making effects on others.

Organization as a Group of Persons: Organization is really frequently viewed as a group of individuals lending their attempts towards certain ends.


“ Organizations may be defined as a group of persons big or little thatare collaborating under the way of executive leading in achievement of certain common object. ” -Keith Davis

“ Organization is a system of concerted activities of two or more individuals. ” -Chester Barnard

“ Organization is the signifier of every human association for the attainment of a common intent. ” -Mooney and Reily

“ Organization is a harmonious accommodation of specialised parts for the achievement of some common intent or intents. ” – Haney

“ In its broadest sense, organisation refers to the relationship between the assorted factors present in the given enterprise. Factory organisation concerns itself chiefly with the internal relationships within the mill such as duties of forces agreement and grouping of machines and stuff control. From the point of view of endeavor as a whole, organisation is the structural relationship between assorted factors in an endeavor. “ – Spriegel

1.1 Need / Importance of Organization

A celebrated industrialist of U.S.A Andrew Carnegie when sold his company ‘United States Steel Corporation ‘ , showed his assurance in organisation by stating “ Take away our mills, take away our workss, our avenues of transit, our money, leave nil but our organisation and we shall set up better mills. “ Since ages and all walks of life, organisation has been playing a important function. The importance of organisation is every bit stated below.

A tool for accomplishing aims: Organization is an of import tool in the custodies of direction for carry throughing the aims of an endeavor.

It facilitates disposal and direction: A sound organisation additions efficiency, avoids duplicate of work, avoids delay in work, improves managerial accomplishments and motivates employees to execute their responsibilities.

It ensures optimal usage of human resource: Good organisation establishes persons with involvements, cognition, accomplishments, abilities and point of views.

It enhances creativeness: A well-conceived and comprehensive organisation is the beginning of originative thought and induction of new thoughts.

Prevents Corruptness: Enterprises which lack sound organisation most of the times have job of corruptness. Sound organisation helps to forestall corruptness by raising morale of the employees. As a consequence of which employees are encouraged to work with higher efficiency, committedness and honestness.

Stephen fosters growing of endeavor: Good organisation plays a cardinal function non merely in growing but besides in the enlargement and variegation of an endeavor.

Eliminates overlapping and duplicate of attempts: In a state of affairs, where the distribution of work is non clearly identified and the work is performed in a haphazard mode there will be duplicate and imbrication of attempts. As a good organisation requires that the work be clearly assigned amongst employees, such imbrication and duplicate is to be eliminated.

Coordination: Assorted occupations and places are linked together by structural relationship of the organisation. The organisational procedure exercises its due and balanced accent on the coordination of different activities.

1.2 Principles of Forming

For seasonably and systematic completion of work it is must for every organisation to follow some techniques or rules. Thus these rules would be the determinant factor for the success or failure of an organisation.

Principle of Objective: All the endeavors whether big or little, set certain cardinal aims. Every component of the organisation and organisation as whole should be geared to the cardinal aims identified by the endeavor.

Principle of Specialization: Precise division of work facilitates specialisation. Harmonizing to this rule, division of work among the employees should be based on their cognition, accomplishments, abilities, capablenesss and involvements. This would take to specialisation which would in bend lead to efficiency, quality and riddance of wastage of resources.

The Scalar Principle: This rule is sometimes referred to as the concatenation bid. There must be clear lines of authorization running from the top to bottom of the organisation and associating all the persons in the organisation.

The Principle of Authority: Authority is an of import ingredient of the organisation construction. It is the tool by which the director can make an environment where an person can execute with greater efficiency.

The Principle of Span of Control: This rule states that there is a bound to the figure of subsidiaries that report to one higher-up. Supervision of excessively many people can take to problem and confusion. Besides the higher-up will non be able to save clip to oversee each of his subsidiary. It will besides take to increased complexness of the organisation construction.

The span of control depends upon a figure of considerations. It is easy to oversee a big figure of subsidiaries involved in everyday occupations and working in the same room, whereas it is hard to oversee extremely diverse and specialised forces scattered widely. The ability of the employee, their willingness to presume duty and the attitude of direction towards deputing and decentalisation should besides be analyzed in item while doing a determination on span of control.

The Principle of Unity of Command: This rule is fundamentally about avoiding double coverage. It states that every single employee working in the organisation should be kept in the supervising of one foreman merely. This rule eliminates the possibility of struggles in instructions and Fosters a feeling of personal duty for work.

The Principle of Definition: Each person in the organisation should be made cognizant about his / her duties, responsibilities, governments and dealingss with the other occupation places in the organisation construction.

Principle of Unity of Direction: The basic motivation for the being of organisation is the attainment of certain aims. Major aims should be split into functional activities and there should be one nonsubjective and one program for each group of people.

The Principle of para of Authority and Responsibility: The duty for executing of work must be accompanied by the authorization to command and direct the agencies of making the work.

The Principle of Supremacy of Organizational Aims: The organisational ends and aims should be given broad promotion within the organisation. The people lending to it should be made to understand that endeavor aims are more valuable and important and one should give higher precedence to organisation ‘s aims in comparing to personal motivations.

1.3 The Procedure of Forming








Fig. 4.1 Stairss in Forming

From the Fig. 1.1 it is clear that forming is a procedure affecting multiple activities. The inside informations of all these activities are as follows:

Repairing the aims of the organisation: The top degree direction holds the duty of repairing the overall aims of the organisation whereas the in-between degree direction fixes the departmental aims and lower degree direction fixes the daily aims. The aims decided by each of the degree of direction should be both specific every bit good as realistic.

Finding activities must for accomplishing aims: Once the aims are fixed, the strategic degree of direction determines different activities that are required to be performed in order to carry through the set aims. This is a important phase as it helps to extinguish duplicate, overlapping and wastage of attempts.

Grouping the similar activities: All the activities which are similar in nature are grouped together to organize sections. This is besides termed as departmentalization. This leads to specialisation. Ex-husband: All the activities that are straight or indirectly related to direction or development of the human resource like preparation, public presentation assessment, enlisting are grouped together to organize the Human Resource Department.

Specifying duties of each employee: At this measure the duties of all the persons working in the organisation are clearly defined. This would finally take to choice of right campaigner for the right occupation. This brings about efficiency since each person is cognizant about what he/ she has to make.

Delegating authorization to employees: In a state of affairs where two or more persons are working together for a common intent it becomes necessary to clearly specify the authorization relationship among them. Each subsidiary should cognize whom he has to describe. Besides each higher-up should be cognizant of the authorization he has over his subsidiaries.

Supplying employees with needed resources: After specifying authorization relationships, the employees must be provided with all the resources that are required for accomplishing the aims of the organisation.

Organizing attempts of all to accomplish ends: This is the last and most of import measure in the procedure of forming. Here the attempts of all single employees, groups and sections are fetched together and coordinated towards the common aim of the organisation.

Ex-husband: Let us see a simple illustration where a company has decided to hold one twenty-four hours field day for its employees. Here it is clear that the aim is set uping field day. The HR section would so name all the activities to be carried out for the successful executing of picnic. These activities would so be grouped based on the similarity, for case arrangement for breakfast, tiffin and dinner on the twenty-four hours of field day. Each of the members of this commission would in bend be assigned a peculiar duty like choosing the bill of fare and so on. Each of the members will besides be given authorization with the assigned duty for efficient executing. Each of the commission formed, like the refreshment commission will so be allocated a budget to enable them to transport out the assigned responsibilities. And most significantly attempts of all the commissions or persons must be coordinated to run into the cardinal aim that is successful agreement of field day.

1.4 Organization Structure

An organisation construction specifies the assorted occupation places and depicts how the same are officially divided, grouped and coordinated. It provides an appropriate model for authorization relationships. It is a agency to assist the direction to accomplish the organisational aims. It can besides be considered as the sing glass or position through which persons see their organisation and its environment. An organisation can be structured in many different ways, depending on their aims. The construction of an organisation will specify the ways in which it maps and executes. Organization construction allows the uttered allotment of responsibilities for different maps and processes to different entities such as subdivision, section, workgroup and single.

Organization construction affects organisational action in two major ways. First, it provides a footing on which the criterion operating processs and modus operandis remainder. Second, it determines which persons get to take part in which determination devising procedure and therefore to what degree their positions shape the organisation ‘s actions.

There are several grounds why planing an organisational construction is such an of import facet. Organization construction has a important impact on the organisations ability to

Deal with eventualities

Achieve a competitory advantage

Efficaciously manage diverseness

Increase its efficiency and ability to introduce new goods and services

1.4.1 FormalOrganization

The formal organisation refers to the construction that is designed and prescribed by the direction of the endeavor. It is defined as a “ hierarchal construct of subordination of entities that collaborate and contribute to function a common end. “ A formal organisation has its ain set of regulations and ordinances that are to be followed by each person in the organisation. It depicts clear lines of authorization and the superior-subordinate relationship besides each of the person is assigned specific responsibilities and duties. In a formal construction there are predefined aims and the single attempts are diverted towards accomplishing these aims.

Harmonizing to Barnard, “ Any organisation shall be considered formal at the phase when the activities of two or more individuals are coordinated consciously to accomplish the definite aim. ”

Ex-husband: College, Hospital, Company etc.

Features of Formal Organization

Governments and duties are clearly defined.

It does non see the emotional facet.

It is predetermined and purposefully created.

Based on deputation of Authority.

It provides for division of labour.

Organizational charts are followed.


It promotes subject in the organisation.

It provides a basic construction of division of work and duty. Without such a construction it becomes really hard for employees to hold between themselves on the responsibilities and duties of every person.

It gives a clear cut thought about the authorization and duty of the persons. Therefore formal construction reduces confusions and brings lucidity in working.

The dependence is non on a individual individual.

Decreases the possibilities and occasions of struggle.

The formal organisation helps to maintain the house runing despite of the alterations in the work force.

Eliminates duplicate of work which in bend leads to effectual use of resources.


At times the formal organisation causes decrease in enterprises of the individual working in the organisation.

It does non see the emotions aspect.

It may do hold in work.

1.4.2 Informal Structures

This is a shadow organisation made up of the informal, but frequently critical, relationships between members of the organisation. The informal construction has its presence in all the formal constructions. Informal construction depicts the manner in which persons communicate and associate themselves with others beyond the formal construction. The informal construction develops through assorted frequent cases like holding regular interaction, tiffin, java with co-workers.

Harmonizing to J.L Massie, “ Informal organisation is any human group interactions that occur spontaneously and of course over long period of clip. ”

Features of Informal Organization

The informal organisations are non depicted in the organisational chart.

The informal organisations do non hold any peculiar construction.

It denotes human relationships beyond the formal organisational construction.

Informal organisations are outcome of voluntary associations.

The informal organisations develop out of personal penchants, beliefs, wonts and apprehension.


It is effectual channel of communicating in certain instances.

It develops a sense of belongingness among the persons.

The spreads and lacks that exist in the formal organisations can be filled up by the informal organisation.

The members of informal organisations help each other in instance of unanticipated events or exigencies.

Informal group forces the director to program and act more carefully than he would otherwise. Informal organisation is a cheque and balance on limitless usage of authorization by a director.


It operates based on the group psychological science.

The involvements of the formal and informal groups may collide, taking to conflict doing the occupation of directors hard.

The informal organisations may fall quarry to rumours.

It may do jobs by defying altering at certain occasions.

Fig. 4.2 Formal and Informal Organization

Difference between formal and Informal Organization:

Sr. No.


Formal Organization

Informal Organization







Formal Relationss

Personal Relationss



To accomplish organisational aim

For societal satisfaction








Voluntarily chosen











Departments in the organisation

Group of trekkers

1.5 Types of Organization Structures

Functional Structure

The construct of functional organisation was proposed by F.W. Taylor. In functional constructions, persons holding indistinguishable accomplishments and executing similar undertakings are grouped together into formal work units, by and large called sections. Members of functional sections portion proficient know-how, involvements and duties. Employees within the functional division of an organisation tend to execute in countries of their expertness. The functional construction may differ harmonizing to the major maps of a concern.

Fig. 4.3.1 Functional Structure for Business Entity

Fig. 4.3.2 Functional Structure for a Hotel

Fig. 4.3.3 Functional Structure for a College


Specialization: The organisational efficiency additions as each of the employee performs the undertaking as per his specialisation.

Reduced Workload: As each of the functional caput is responsible for merely one map work burden is reduced.

Flexibility: It is easier to suit a alteration with small or no trouble.

Improved Control: As each employee is in charge of one map merely, it is easier to save clip to oversee all his / her subsidiaries.

Mass Production: Due to specialisation and standardisation it becomes executable to travel for big scale production.


Complex Relationships: An person has several higher-ups due to which answerability for consequences can non be easy fixed. Besides cross functional relationships create confusion.

Inefficient Administration: As same groups are controlled by assorted specializers, there is inefficient disposal.

Expensive: As big figure of specialist demand to be hired it adds to increase in cost.

Ineffective Coordination: Each of the functional directors is bound to believe merely from the position of his / her section instead than the whole organisation.

Delay in determination devising: Several functional specializers are involved in the procedure of determination devising as a consequence of which determinations may be delayed.

Divisional Structure

In the divisional construction the organisation is organized into assorted divisions based on four standards merchandise, market, procedure and location. Thus divisional construction is most suited for the organisations holding a broad scope of merchandises, country of operation, work procedures or clients. Each of the division has its ain set of functional units like selling, fabrication, finance, HR etc. and is self-contained.





Goods Provided / Servicess Catered


Target Customers / Clients


Location at which activities are carried out


Activities of same procedure

Fig. 4.4 Divisional Structure based on merchandise, market, location and procedure


Highly Flexible: Divisional construction can react more rapidly to the altering environment.

Specific: Expertness focused on specific merchandise, market, procedure or location.

Coordination: The divisional construction leads to better coordination across functional sections.

Clear Accountability: Divisional structuring provides clear correlativity between the disbursal and net income of the single divisions. The concern aims of the divisions can be formulated more objectively and the outlooks can be better agreed.

Ease of operation: Greater easiness to modify the size by adding or canceling divisions.


Decreased economic systems of graduated table: Duplicate of attempts across divisions leads to increase in the operating and administrative cost.

Competition: Divisional constructions may besides ensue into competition as the divisions compete for resources.

Divisional Affiliations: The employees feel more attached towards their ain divisions and would still miss association to the organisation as whole.

Domination of divisional ends: The divisional ends may hold precedence over the organisational ends.

Matrix Structure:

The matrix construction comes into being when one organisation construction is superimposed by the other. In this construction an employee is answerable to two immediate supervisors: a functional supervisor and a divisional supervisor. The functional supervisor is charged with supervising employees in a functional country such as selling or technology. Divisional supervisors manage specific undertakings. They absorb employees from assorted functional countries to finish their undertaking squads. The diagram below depicts the soaking up of employees from Operations, Finance, and Marketing for undertaking A and B. These employees study to both Directors at that point of clip.


Manager -Finance

Manager – Selling

Manager – Operationss

Manager – Undertakings

Project – Angstrom

Project – Bacillus

Fig. 4.5 Matrix Organization Structure


Flexibility: Increased flexibleness in adding, taking or altering the activities to run into the altering demands.

Motivation: If it is identified that a peculiar undertaking is missing proper motive so it is provided to the concerned section.

Development of accomplishments: Since cross functional squads are formed, it leads to development of accomplishments of the employees.

Better Service: There is ever a merchandise or undertaking director answerable to the questions.

Improved Strategic Management: Top degree directors are freed from everyday undertakings to concentrate on strategic issues.


Power Struggle: Conflicts occur as there is overlapping of duty and authorization.

Slow determinations: The velocity of determination devising idiots as there is shared determination devising in the matrix construction.

Increased Confusion: As there is double coverage in matrix construction, it causes confusion.

Increased Administrative and Managerial Operating expense: Due to the duplicate of everyday activities the administrative cost additions and as specialised directors are hired for each of the undertakings and maps the managerial cost besides increases.

Professional Developed sidelined: Professional development is non given a precedence due to clip restraints of the undertaking, so team members forgo chances to develop and better.

Network Structure:

A web construction is a bunch of assorted organisations that coordinates its actions through understandings and contracts alternatively of hierarchy of authorization. Rather than engaging persons to execute all of its concern activities, a company utilizing the web construction depends on outside companies. The organisations utilizing a web construction own merely the nucleus or indispensable constituents of the concern and outsource the remainder. It may, for case, engage an outside advertizer to publicize its merchandises. The web construction reduces costs and brings in flexibleness because it utilizes external aid as and when required. Making a network-based company, nevertheless, means losing control over whatever processes the company has outsourced.


Fiscal Consultancy

Information Technology

Core Group

Ad Agency

Training Consultancy

Fig. 1.6 Network Organizational Structure


Flexible: The most of import advantage of web construction is that, it can rapidly react to the altering environment. As the concern grows, organisations can come in into new partnerships and vice-a-versa.

Cost Effective: As merely the indispensable portion of concern is owned by the company and the other operations are outsourced, less figure of persons need to be hired taking to decrease in operating expenses.

Efficiency: The overall efficiency of the organisation increases as the undertakings are outsourced to expert organisation.


Coordination Problems: As the concern maps are outsourced to different companies sometimes it would go hard to organize all of these activities.

Loss of control: There is ever a fright of losing control over the nucleus activities which would take to uncertainnesss in the relationship.

Political Pressure: The alteration in political scenario affects the organisations bearing web construction to a big extent.

Increased Pressure: If there are jobs of unemployment in the parent company due to outsourcing there are likely to be force per unit areas on authorities to consequence policy alterations in this regard.

Line and Staff Organization:

The oldest and simplest signifier of organisation is line organisation. Line maps are those which have direct duty of accomplishing the aim of the venture. In this signifier of organisation, a supervisor exercises direct control over a subsidiary, authorization flows from top to bottom of the organisation. Here the main executive heads the organisation. This type of organisation is besides called as scalar organisation.

The construct of staff organisation was developed by F.W Taylor. The aim of functional organisation is to offer specializer services in the organisation. Under this program, specific maps common to all the sections are placed in the custodies of an expert of that map.

The line-and-staff organisation combines the line organisation with staff sections that support and direct line sections. Most medium and large-sized houses exhibit line-and-staff organisational constructions. The separating characteristic between simple line organisations and line-and-staff organisations is the multiple beds of direction within line-and-staff organizations.A

Company Secretary

Chief executive officer

Manager – Selling

Manager -Finance

Manager – Operationss

Line Authority

Staff Authority

Fig. 1.7 Line and Staff Organization


Top directors relieved from everyday work: In this organisation line governments focus on executing of work and are relieved from believing map.

Adept Advice: Line governments are non tyrants as they are to take the advice from the experts or staff place.

Efficiency: This consequences greater efficiency as the line directors spend much of their clip on line maps. The line directors function more expeditiously as they get support from staff places.

Easy Coordination: Thisorganization ensures co-ordination automatically as the line director ‘s work along with staff officers.


Confusion: Line and staff organisation are equivocal in footings of organisational relationships, duty and authorization.

Conflict: Conflicts are common in line and staff organisations owing to ill-defined definition of authorization the construction entails.

Ineffective and erroneous Decision Devising: It is non uncommon for line directors to experience threatened by the advice of staff members. In this instance, line directors are apt to do determinations without staff member audience. Such determinations are non ever successful.

Slower determination devising: Decision devising is slower in a line and staff organisation due to its complexness and layers.A

Costly: Most of the line and staff executives are experts in their Fieldss and their assignment leads to heavy outgo.

Virtual Organizations

The practical organisation is a web of independent endeavors, providers, clients linked by Information Technology. The practical organisation webs are normally impermanent in nature. The important properties of practical organisations are as mentioned below:

Technology: The geographically spread spouses connect to each other via electronic webs.

Flexibility: It offers flexibleness as the spouses can associate up every bit and when required. The construction evaporates every bit shortly as the demand is over.

Efficiency: As each spouse brings in his nucleus proficiency the overall efficiency of the organisation is bound to increase.

Borderless: The boundaries that traditionally separate a house from its clients, rivals and providers are eliminated.


Boundary lupus erythematosus: They are appropriate for affinity groups that are geographically dispersed.

Suitable for short term enterprises: They are suited and tailored for short-run enterprises with clearly defined aims.

Flexible: Virtual organisations are extremely antiphonal to altering environment.

Cost effectual: As there is no physical being there is small or no organisational operating expense.


Dependence on Technology: As the practical organisations depend on Information Technology for coordination and interaction their efficiency may be affected by the restrictions and jobs built-in to these engineerings.

Difficult to pull off: Since there is no physical being, it becomes hard to pull off practical organisations in some state of affairss.

Tall Organizational Structure:

The organisations that require close monitoring of all its concern activities opt for tall organisational construction. In this type the determination doing authorization is the top degree direction. This consequences in one long concatenation of bid similar to military organisations. As the organisation expands the operations, the degrees of direction besides go on increasing which finally consequences in tall organisational construction. In tall organisation construction the span of control is narrow.

Fig. 1.8 Tall Organizational Structure


Improved Performance and Discipline: The quality of public presentation additions as the tall construction facilitates close supervising of activities being carried out. Similarly the subject in the organizationis besides maintained.

Affable Relationss: As there is narrow span of control, the higher-ups get clip to interact with their subsidiaries and work out their jobs as a consequence of which the superior-subordinate dealingss improve.

Narrow span of control: The narrow span of control facilitates easy supervising and control.

Easy Coordination: The attempts of subsidiaries can be easy coordinated.

Development of Staff: Tall organisations encourage development of the staff. As there is narrow span of control the superior can easy place the countries in which the subsidiary deficiencies and arranges for preparation for his / her development.


Delay in determination: As there are several degrees of direction it causes hold in the determination doing procedure every bit good as deformation in communicating.

Cost inefficiency: As there are increased degree of direction the tall construction adds to the cost of disposal.

Coordination Problems: As the construction grows taller it leads to coordination jobs.

No freedom: There is rigorous supervising. Thus the subsidiaries have no freedom at all.

Laterality: The troughs may go more dominating as a consequence of which subordinates may go disloyal.

Flat Organizational Structure

The organisations that require more autonomy and self – control have level organisational construction. In this construction there are fewer degrees of direction. The level organisational construction is normally adopted by little concern houses. Here the direction shows assurance in the determination doing capableness of the employees. It focuses on authorising the employees instead than following the concatenation of bid. In the level organisational construction the span of control is broad.

Fig. 1.9 Flat Organizational Structure


Cost effectual: This construction proves to be cost effectual as compared to tall construction since there is less figure of directors.

Decision devising: Quick determination devising is possible as there are fewer degrees of direction.

Communication: The level construction facilitates easy and fast communicating as there are fewer degrees.

Suitability: It would be suited where modus operandi and standardized occupations are performed.

Freedom: The subsidiaries enjoy some sum of freedom as there is no rigorous supervising as in instance of tall construction.


Loose control: As there are big figure of subsidiaries describing to a superior there is loose control. Keeping the subject besides becomes hard at times.

Coordination Problems: It becomes hard to organize the activities of big figure of subsidiaries.

Suitability: It may non be suited for complex organisations.

Decreased quality of public presentation: As there is no close monitoring it can take to reduced public presentation.

1.6 Span of Control


Harmonizing to Louis Allen, “ Span of control refers to the figure of people that a director can oversee. ”

Harmonizing to Prof. Dimock, ” The span of control is the figure and scope of direct, accustomed communicating contacts between the Chief Executive of an endeavor and his chief fellow officers. ”

Span of control refers to the figure of subsidiaries a higher-up has. The more is the figure of people describing to a director, broader is the span of control and vice-a-versa. This construct emphasizes that there should be appropriate figure of persons describing to one trough since a big figure would take to confusion and troubles.

Harmonizing to the direction experts the span of control should non transcend 1:6 at the top degree and at the lower degree 1:20. However these are merely theoretical figures. The span of control depends on assorted factors as mentioned below:

Capability of the Superior

Capability of Workers

Nature of the undertaking to be performed

Geographic Dispersion

Other undertakings to be handled

The span of control can be either narrow or wide, each of which has its ain pros and cons as mentioned below:

Advantages of narrow span of control

Narrow span of control facilitates better communicating among the foreman and the subsidiaries.

Oversing fewer Numberss of people requires less managerial accomplishments.

Subordinates get an chance to discourse their jobs and supply feedback to their higher-ups.

Directors can exert better control over subsidiaries.

Disadvantages of narrow span of control

It tends to increase the degrees of direction because of which it becomes hard for top degree directors to be in touch with the land degree worlds.

It creates job of coordination.

It may cut down morale of the employees as they operate under a really tight control.

It leads to deformation of communicating when the communicating is across assorted degrees of direction.

Advantages of broad span of control

It is cost effectual since fewer directors are appointed.

Less confusion

Less control and supervising can make more positive attitude among employees.

Creates a more entrepreneurial civilization as workers can take duty for


Disadvantages of broad span of control

Fewer promotional chances so can be de-motivating.

Directors with broad span of control may acquire overloaded with work.

Lose control over subsidiaries.

1.7 Centralization and Decentralization of Authority


“ Centralization is systematic and consistent reserve of authorization at cardinal points within an organisation. Decentralization applies to systematic deputation of authorization in an organisational context. “ -Allen

“ Everything which goes to increase the importance of subsidiary ‘s function is decentralization and everything which goes to cut down is decentalisation. “ -Fayol


It is the procedure where the concentration of determination devising is in a few custodies. All the determinations and actions at the lower degrees are dependent on blessing by the top direction. Under centralisation, the critical and important determinations are taken by the top direction and the other degrees are into execution as per instructions of top degree.

Ex-husband: Suppose 1,2,3,4 and 5 are subsidiaries of A and X, Y and Z are subsidiaries of 4. Here X, Y and Z depend on 4 for the determinations to be made and 4 in bend depend on A. Neither of X, Y and Z nor 1,2,3,4 and 5 can do determinations without confer withing A. This called centralisation of authorization.










Fig. 1.10Centralization of Authority

Advantages of Centralization:

Reduced costs: The standardised procedures and techniques help in considerable decrease of costs incurred. The important ground for the decrease in cost is specialisation of activities to be performed.

Flexibility: In a state of affairs of exigency or crisis, standardisation of activities requires minimum attempts to revise all the activities at one time. This guarantees a greater grade of flexibleness in an organisation.

Avoids reproduction of work: Centralized preparation and standardisation of work leaves no possibility for reproduction of undertakings or actions. This eliminates extra outgo on inordinate labour for duplicate of work.

Better Coordination: Centralization accelerates better coordination among different operations. Direct control and supervising are facilitated which consequences in less possibility of struggle of authorization and duplicate of work.

Disadvantages of centralisation

Delay in work: Centralization consequences in loss of man-hours and hold in executing of work because of transmittal of records from and to the cardinal room. Quick determination is non possible which besides causes hold of work.

Dictatorship: An employee is ever expected to work in conformity to what has been dictated to him. No employee at the subsidiary degree is given the authorization to take a determination on any issue in the absence of the lead. This causes psychological reluctance and employee sees no growing or motive within the organisation which would sometimes ensue in disloyalty.

High Level of Dependency: The success of organisation depends wholly on the proficiency and determination doing ability of the top direction which might turn out to be hazardous at times.


Decentralization is systematic deputation of authorization at all degrees of direction. In decentalisation, authorization is retained by top direction for taking major determinations. Ex-husband: framing policies and processs sing organisation as whole. Rest of the authorization may be delegated to middle and lower degree direction.

Ex-husband: Suppose 1,2,3,4 and 5 are subsidiaries of A and X, Y and Z are subsidiaries of 4. Though X, Y and Z are supervised by 4, they can take determinations on everyday affairs and depend on determinations to be taken by 4 merely in instance of of import issues. Similar is the relationship between 1,2,3,4 and 5 and A. Here 1, 2,3,4,5 and X, Y, Z besides enjoy some portion of authorization apart from A. This denotes distributed authorization. This is called as decentalisation of authorization.










Fig. 1.11Decentralization of Authority

Advantages of Decentralization:

Reduces burden on top executives: Decentralization of authorization frees top executives from everyday work and minor inside informations so that they can concentrate on more of import maps like fixing the policies and processs, strategic determination devising, coordination and control etc. As the company expands to the degree that it goes beyond the range of the few top degree executives, decentalisation becomes indispensible. By deputing authorization, top direction can widen its leading over a elephantine endeavor.

Quick and better determinations: Decentralization Fosters prompt and more accurate determinations because determinations are made by those who are cognizant of all the worlds of the state of affairs. Decisions can be made near the point of action without confer withing higher degrees and without waiting for blessing of top executives over minor affairs.

Growth and Diversification: Decentralization enables growing and variegation of merchandises and markets. Under decentalisation each country of operation is treated as different division so that it can react rapidly to altering demands of its market.

Better Communication: Decentralization improves the degree of efficiency and communicating within the organisation as there are fewer degrees of authorization.

Development of executives: Decentralization provides an chance to subordinate directors to take enterprise and get leading qualities.Lower degrees of executives learn to pull off by exerting delegated authorization. A pool of promotable directors becomes available which simplifies direction sequences and support to justify continuity of direction.

Motivation and improved morale: Decentralizationincreases the occupation satisfaction and morale of subsidiaries. Juncture to do determinations offers sense of belonging and satisfies the demand of power, prestigiousness, position and independency. Competition environment is generated. High motive and morale aid in bettering end product and working relationships. Improvedutilization of endowments at lower degree can be made.

Effective supervising and control: Decentralization consequences in effectual supervising because directors at lower degrees have authorization to do alterations and recommendations. It besides promotes effectual control through comparative rating of public presentation and clear cut answerability for consequences.

Democratic Management: Decentralization makes leads to democratic direction and flexibleness of operations. Necessary alterations can be accommodated without luxating the full construction.

Disadvantages of decentralization

Suitability issues: In instances where the preparation, experience, instruction etc. of the employees are unequal, decentalisation of authorization would be harmful for the endeavor.

Not desirable for little endeavors: Decentralization is non suited for little endeavors because it would be easier and more economical to administrate the endeavor on a centralised footing.

Problematic in instance of exigency: In a state of affairs of exigency, decentralized disposal is uneffective. It is dearly-won and clip devouring to command an exigency state of affairs which affects a critical concern country under a decentralised program.

Lack of uniformity: There might be deficiency of uniformity and inconsistent processs as each section might hold the authorization to explicate its ain policies and processs.

Coordination Problems: As each section / division enjoys significant liberty it might take to coordination jobs.

Organization at a Glance:

Organization is a societal unit of people, consistently structured and managed to carry through a undertaking or to accomplish corporate ends on uninterrupted footing.

Organization viewed in four different senses:

As a model of relationships

As a procedure

As a system

As a group of individuals

Importance of Organization:

A tool for accomplishing aims

Facilitates disposal

Optimum usage of Human Resource

Enhances Creativity

Prevents corruptness

Stephen fosters growing of endeavor

Eliminates overlapping of work


Principle of Organizing: Includes rule of nonsubjective, specialization, authorization, span of control, integrity of bid, para of authorization and duty, domination of organizational aims and the scalar rule.

Procedure of organising:

Repairing the organizational aims

Finding activities which are must for accomplishing the set aims

Grouping the similar activities

Specifying duties of each employee

Delegating authorization to employees

Supplying employees the needed resources

Organizing attempts of all to accomplish ends

Formal Structure: A hierarchal construct of subordination of entities that collaborate and contribute to function a common end.

Informal Structure: Informal organisation is any human group interactions that occur spontaneously and of course over long period of clip.

Types of Administration Structure:

Functional Structure

Divisional Structure

Matrix Structure

Network Structure

Line and Staff administration

Virtual Administration

Tall and Flat constructions

Span of Control: Span of control refers to the figure of people that a director can oversee.

Narrow Span of Control

Broad Span of Control

Centralization and Decentralisation of Authority:

Centralization: Centralization is systematic and consistent reserve of authorization at cardinal points within an organisation.

Decentralization: Decentralization applies to systematic deputation of authorization in an organisational context.


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