CBSE Class 12 Business Studies Chapter 5 Organising Notes | Process, Delegation & Decentralisation
CBSE Class 12 Business Studies Unit 5 – Organising Notes
Organising – Complete Notes, Important Questions & Answers
Class: 12
Subject: Business Studies
Unit: 5 – Organising
Board: CBSE
Exam Focus: Concept + Process + Organisation Structure + Delegation + Decentralisation
1. Meaning of Organising
After planning the business activities, the next step is Organising.
Organising means identifying the activities, grouping similar activities, assigning duties, establishing authority and responsibility relationships, and coordinating the efforts of employees to achieve organisational objectives.
Simple Example
Suppose a school is organising an annual function.
Different activities are required:
Decoration
Food arrangement
Cultural programme
Invitation
Discipline
Finance
The school principal cannot perform all these activities alone. Therefore, activities are divided among different teachers and committees.
This is called Organising.
Easy Definition
Organising is the process of arranging resources and activities and assigning duties to people so that organisational objectives can be achieved effectively.
2. Importance of Organising
Organising is important for every business because it provides a systematic way of performing work.
1. Benefits of Specialisation
Organising divides the total work into different jobs.
When employees perform specialised jobs regularly, they become more skilled and efficient.
Example:
In a company, one employee handles recruitment while another handles salary administration.
2. Clarity in Working Relationships
Organising clearly defines:
Who has to perform the work?
Who will report to whom?
Who has authority?
Who is responsible for a particular task?
This reduces confusion among employees.
3. Optimum Utilisation of Resources
Organising helps in the proper utilisation of:
Human resources
Financial resources
Physical resources
Material resources
It reduces duplication and wastage of resources.
4. Adaptation to Change
Business conditions keep changing.
Organising provides flexibility to make changes in:
Jobs
Departments
Authority
Responsibilities
Organisational structure
Therefore, the organisation can adjust to changes in the business environment.
5. Effective Administration
Organising establishes relationships between different levels of management.
It helps managers coordinate the activities of different departments and employees.
6. Development of Personnel
Organising provides employees with opportunities to take responsibility.
Delegation of authority helps employees develop:
Skills
Confidence
Decision-making ability
Leadership qualities
7. Expansion and Growth
A well-organised business can easily expand its activities.
Proper division of work and delegation of authority make it easier for management to handle a larger organisation.
3. Organising Process
Organising is a systematic process.
The main steps are:
Step 1: Identification and Division of Work
The first step is to identify all activities necessary to achieve organisational objectives.
The total work is divided into smaller jobs.
Example:
Production, marketing, finance, human resources and sales.
Step 2: Departmentalisation
After dividing the work, similar activities are grouped together.
These groups are called departments.
Example:
Production Department
Finance Department
Marketing Department
Human Resource Department
Step 3: Assignment of Duties
After creating departments, specific jobs are assigned to employees according to their skills and abilities.
Example:
An accountant is given responsibility for maintaining financial records.
Step 4: Establishing Reporting Relationships
The next step is to establish relationships between employees and managers.
It decides:
Who will report to whom?
Who will give instructions?
Who will be responsible for the work?
Organising Process – Easy Flow
Identification of Work
↓
Division of Work
↓
Departmentalisation
↓
Assignment of Duties
↓
Establishing Reporting Relationships
4. Organisation Structure
Organisation structure refers to the framework within which managerial and operating tasks are performed.
It shows:
Different positions
Departments
Authority relationships
Responsibility
Communication relationships
Two important types of organisation structure are:
Functional Structure
Divisional Structure
5. Functional Structure
A functional structure groups similar activities into separate departments according to functions.
Example
A company may have:
Production Department
Marketing Department
Finance Department
Human Resource Department
Each department performs a specialised function.
Diagram
Top Management
↓
Production | Marketing | Finance | Human Resource
Features of Functional Structure
Activities are grouped according to functions.
Each department performs a specialised function.
Functional heads are responsible for their respective departments.
It promotes specialisation.
Coordination is required between different functional departments.
Advantages of Functional Structure
1. Specialisation
Employees perform specialised activities, which increases efficiency.
2. Better Coordination
Activities related to the same function are grouped together.
3. Easy Supervision
Functional managers can easily supervise employees performing similar activities.
4. Efficient Use of Resources
Resources are used efficiently because similar activities are grouped together.
5. Suitable for Small and Medium-Sized Organisations
It is particularly useful where the organisation deals with limited products or services.
Limitations of Functional Structure
1. Difficult Coordination
Different departments may focus mainly on their own objectives.
2. Conflict Between Departments
Departments may sometimes blame each other when organisational objectives are not achieved.
3. Delay in Decision-Making
Important decisions involving several departments may take more time.
4. Difficult to Fix Responsibility
When several departments are involved in a decision, fixing responsibility for poor performance may become difficult.
5. Not Suitable for Diversified Organisations
When a company has many different products or business lines, functional structure may become difficult to manage.
6. Divisional Structure
Under divisional structure, an organisation is divided into separate divisions based on:
Product
Territory
Customer group
Each division generally performs its own major business functions such as production, marketing and finance.
Example
A company manufactures:
Cars
Trucks
Motorcycles
It may create separate divisions for each product.
Company
↓
Car Division | Truck Division | Motorcycle Division
Each division may have its own:
Production
Marketing
Finance
Sales
Advantages of Divisional Structure
1. Product Specialisation
Each division focuses on a particular product or business area.
2. Faster Decision-Making
Divisional managers have greater authority to take decisions related to their division.
3. Fixation of Responsibility
Performance of each division can be measured separately.
4. Flexibility
Changes can be made within a particular division without disturbing the entire organisation.
5. Facilitates Expansion
New product divisions can be added relatively easily.
Limitations of Divisional Structure
1. Costly
Each division may have its own departments such as finance, marketing and HR. This can increase costs.
2. Duplication of Activities
The same activities may be performed separately in different divisions.
3. Conflict Between Divisions
Different divisions may compete with each other for resources.
7. Functional Structure vs Divisional Structure
| Basis | Functional Structure | Divisional Structure |
|---|---|---|
| Basis of grouping | Functions | Products/business lines |
| Suitable for | Limited product organisations | Diversified organisations |
| Specialisation | Functional specialisation | Product/divisional specialisation |
| Responsibility | Difficult to fix for final result | Easier to fix |
| Cost | Generally economical | Generally more costly |
| Duplication | Less duplication | More duplication possible |
| Decision-making | May be slower | Generally faster within divisions |
8. Formal Organisation
Formal organisation refers to the official structure of authority and relationships created by management to achieve organisational objectives.
It is deliberately created by management.
Example
In a company:
Managing Director → General Manager → Department Manager → Supervisor → Workers
This is a formal relationship because it is officially created by the organisation.
Features of Formal Organisation
Created deliberately by management.
Based on organisational objectives.
Clearly defines authority and responsibility.
Establishes official communication channels.
Relationships are relatively stable.
9. Informal Organisation
Informal organisation refers to the network of personal and social relationships that develops automatically among employees because of their interaction with one another.
It is not deliberately created by management.
Example
Employees from different departments may become friends and regularly discuss their work during lunch.
This relationship forms an informal organisation.
Features
Develops automatically.
Based on personal and social relationships.
Does not follow official organisational structure.
Communication can be faster.
It may support the formal organisation.
10. Formal Organisation vs Informal Organisation
| Basis | Formal Organisation | Informal Organisation |
|---|---|---|
| Formation | Deliberately created | Develops automatically |
| Purpose | Achievement of organisational objectives | Satisfaction of social and personal needs |
| Authority | Based on official position | Based on personal relationships |
| Communication | Official channels | Informal channels |
| Stability | Relatively stable | Less stable |
| Rules | Follows official rules | No fixed official rules |
11. Delegation
Delegation means giving authority to a subordinate to perform a particular task while the manager remains accountable for the final outcome.
Simple Example
A sales manager asks a sales executive to prepare the monthly sales report and gives him the authority to collect required information.
This is delegation.
Important Point
Delegation does not mean that the manager gives away all responsibility.
The manager remains accountable for the final result.
12. Elements of Delegation
There are three important elements of delegation:
Authority
Responsibility
Accountability
Easy Formula
Delegation = Authority + Responsibility + Accountability
1. Authority
Authority means the right to give orders and make decisions.
A subordinate needs sufficient authority to perform the assigned task.
Example:
A purchase manager is given authority to purchase materials up to ₹50,000.
2. Responsibility
Responsibility means the obligation of a subordinate to perform the assigned task properly.
When a manager assigns a task, the subordinate becomes responsible for completing it.
Example:
The purchase manager is responsible for arranging the required materials.
3. Accountability
Accountability means being answerable for the final outcome of the assigned work.
A subordinate is accountable to the superior for the performance of the assigned responsibility.
Key Relationship
Authority → flows downward
Responsibility → arises from assigned work
Accountability → flows upward
Very Important CBSE Point
Authority can be delegated, responsibility can be assigned, but accountability cannot be delegated.
13. Importance of Delegation
1. Effective Management
Delegation reduces the workload of managers and allows them to concentrate on important activities.
2. Employee Development
Subordinates get opportunities to make decisions and develop managerial skills.
3. Motivation of Employees
Delegation gives employees a sense of importance and encourages them to perform better.
4. Facilitates Growth
When managers delegate authority, they can handle more activities.
5. Basis of Management Hierarchy
Delegation establishes relationships between superiors and subordinates.
6. Better Coordination
Clear authority and responsibility relationships improve coordination.
14. Decentralisation
Decentralisation refers to the systematic dispersal of decision-making authority to lower levels of management.
In simple words:
Decentralisation means giving decision-making power to managers at different lower levels of the organisation.
Example
A company allows regional managers to decide:
Local advertising
Sales strategies
Customer offers
within certain limits.
This is decentralisation.
15. Importance of Decentralisation
1. Develops Managerial Talent
Managers at lower levels get opportunities to make decisions.
This helps develop future managers.
2. Quick Decision-Making
Decisions can be taken at the level where information is available.
This reduces delays.
3. Promotes Initiative
Managers get freedom to take decisions within their authority.
This encourages initiative.
4. Develops Managerial Skills
Lower-level managers gain experience by handling real business situations.
5. Promotes Growth
Top management can concentrate on major strategic issues while lower-level managers handle routine decisions.
6. Facilitates Control
Performance of different departments or divisions can be evaluated based on their results.
16. Delegation vs Decentralisation
| Basis | Delegation | Decentralisation |
|---|---|---|
| Meaning | Transfer of authority from superior to subordinate | Systematic dispersal of authority throughout the organisation |
| Scope | Narrow | Wider |
| Nature | Individual relationship | Organisation-wide policy |
| Necessity | Essential for management | Optional policy decision |
| Purpose | Sharing workload | Increasing participation in decision-making |
| Example | Manager gives authority to assistant | Company gives decision-making power to regional managers |
Remember
Delegation is a process.
Decentralisation is the result/policy of systematic delegation at different levels.
17. Important CBSE Class 12 Questions with Answers
Q1. What is meant by Organising?
Answer:
Organising is the process of identifying and grouping activities, assigning duties, establishing authority and responsibility relationships and coordinating the efforts of employees to achieve organisational objectives.
Q2. State any three points of importance of organising.
Answer:
Three points are:
Benefits of specialisation: Division of work allows employees to specialise in particular activities.
Clarity in working relationships: It clearly defines authority, responsibility and reporting relationships.
Optimum utilisation of resources: It helps in proper utilisation of human and physical resources.
Q3. Explain the steps involved in the process of organising.
Answer:
The organising process involves:
Identification and division of work
Departmentalisation
Assignment of duties
Establishing reporting relationships
These steps help in creating a clear and systematic organisational structure.
Q4. What is functional structure? State any two advantages.
Answer:
Functional structure is an organisational structure in which similar activities are grouped together according to functions.
Examples include:
Production
Marketing
Finance
Human Resource
Advantages:
It promotes functional specialisation.
It facilitates supervision because similar activities are grouped together.
Q5. What is divisional structure?
Answer:
Divisional structure is an organisational structure in which an organisation is divided into separate divisions based on products, territories or customer groups.
For example, a company may have separate divisions for cars, trucks and motorcycles.
Q6. State any three advantages of divisional structure.
Answer:
Product specialisation: Each division focuses on a particular product.
Quick decision-making: Divisional managers can take decisions relating to their division.
Fixation of responsibility: Performance of each division can be measured separately.
Q7. What is formal organisation?
Answer:
Formal organisation refers to the officially defined structure of authority and relationships created by management to achieve organisational objectives.
It clearly defines:
Authority
Responsibility
Reporting relationships
Communication channels
Q8. What is informal organisation?
Answer:
Informal organisation refers to the network of personal and social relationships that develops automatically among employees because of their interaction with one another.
Q9. What is delegation?
Answer:
Delegation is the process of assigning responsibility, granting authority and creating accountability for the performance of assigned work.
The three elements of delegation are:
Authority
Responsibility
Accountability
Q10. Explain the three elements of delegation.
Answer:
1. Authority
Authority is the right to give orders and make decisions.
2. Responsibility
Responsibility is the obligation of a subordinate to perform the assigned task.
3. Accountability
Accountability means being answerable for the final outcome of the assigned work.
Q11. Why is delegation important?
Answer:
Delegation is important because:
It reduces the workload of managers.
It develops employees.
It motivates employees.
It facilitates organisational growth.
It establishes management hierarchy.
It improves coordination.
Q12. What is decentralisation?
Answer:
Decentralisation refers to the systematic dispersal of decision-making authority to lower levels of management.
It allows managers at different levels to take decisions within their area of authority.
Q13. State any four importance of decentralisation.
Answer:
Develops managerial talent
Promotes initiative
Quick decision-making
Develops managerial skills
18. Case-Based Question
Question
ABC Ltd. manufactures different products such as refrigerators, washing machines and air conditioners. The company creates separate divisions for each product. Every division has its own production, marketing and finance departments.
Questions:
a) Identify the organisation structure.
Answer: Divisional structure.
b) State one advantage of this structure.
Answer: It provides product specialisation.
c) State one limitation of this structure.
Answer: There may be duplication of activities because each division may have its own production, marketing and finance departments.
19. Case-Based Question on Delegation
Question
The sales manager of XYZ Ltd. assigns the responsibility of preparing the monthly sales report to his assistant. He gives the assistant authority to collect sales information from different departments. However, the sales manager remains answerable for the final report.
Questions:
a) Identify the management concept involved.
Answer: Delegation.
b) Identify the authority given to the assistant.
Answer: The assistant has been given the right to collect sales information from different departments.
c) Which element cannot be delegated by the manager?
Answer: Accountability.
20. Case-Based Question on Decentralisation
Question
A large retail company allows its regional managers to take decisions regarding local advertising, customer offers and sales strategies within prescribed limits.
Questions:
a) Identify the concept involved.
Answer: Decentralisation.
b) State one benefit of this practice.
Answer: It facilitates quick decision-making because decisions can be taken at the appropriate level.
c) Name one more benefit.
Answer: It promotes initiative among lower-level managers.
21. Quick Revision – Organising at a Glance
Organising
Meaning: Arrangement of activities, resources, authority and responsibility.
Organising Process
Division of Work → Departmentalisation → Assignment of Duties → Reporting Relationships
Organisation Structure
Functional Structure → Grouping according to functions
Divisional Structure → Grouping according to products/territories/customer groups
Formal Organisation
Officially created structure
Informal Organisation
Naturally developed social relationships
Delegation
Authority + Responsibility + Accountability
Decentralisation
Systematic dispersal of decision-making authority
22. Most Important Topics for CBSE Board Exam
Students should prepare these topics particularly well:
Meaning and importance of organising
Steps in organising process
Functional structure – meaning, advantages and limitations
Divisional structure – meaning, advantages and limitations
Difference between functional and divisional structure
Formal and informal organisation
Delegation – meaning and elements
Importance of delegation
Decentralisation – meaning and importance
Difference between delegation and decentralisation
Case-study questions based on delegation
Case-study questions based on functional/divisional structure
Conclusion
Organising is an important function of management because it creates a systematic arrangement of work, authority and responsibility. A proper organisation structure helps employees understand their roles and improves coordination. Delegation helps managers share workload and develop employees, while decentralisation distributes decision-making authority across different levels of management.
For CBSE Class 12 Business Studies, students should focus not only on definitions but also on differences, advantages, limitations and case-study applications. Understanding the concepts with practical examples makes this chapter much easier to revise and score well in the board examination.
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