ORGANISING

WHAT IS ORGANISING ?
According to Theo Haimann,,
"Organising is the process of defining
and grouping the activities of the
enterprise and establishing the
authority relationships among them."
In simpler words,
Organising is something you do before you do
something, so that when you do it it, is not all
mixed up

IMPORTANCE OF ORGANISING
(1) Benefits of Specialisation:
Under organising all the activities are subdivided into various
works or jobs. For all the sub works, competent people are
appointed who become experts by doing a particular job time and
again. In this way, maximum work is accomplished in the minimum
span of time and the organisation gets the benefit of specialisation.
(3) Optimum Utilisation of Resources:
Under the process of organising the entire work is divided into
various small activities. There is a different employee performing
every different job.
(4) Adaptation to Change:
Organising process makes the organisation capable of adapting to
any change connected with the post of the employees. This
becomes possible only because of the fact that there is a clear
scalar chain of authority for the manager’s right from the top to the
lower level.

(7) Expansion and Growth:
The process of organising allows the employees the freedom to take
decisions which helps them to grow. They are always ready to face new
challenges. This situation can help in the development of the enterprise.
This helps in increasing the earning capacity of the enterprise which in
turn helps its development.
(6) Development of Personnel:
Under the process of organising, delegation of authority is practiced. This
is done not because of the limited capacity of any individual, but also to
discover new techniques of work.
It provides opportunities of taking decisions to the subordinates. By taking
advantage of this situation, they try to find out the latest techniques and
implement them. Consequently, it helps them to grow and develop.
5. Co-ordination and effective administration:
In the organising function, the similar and related jobs are grouped under
one department which leads to unification of efforts and harmony in work.
The organising function establishes relation between different
departments keeping in mind the co-ordination among different
departments. By bringing clarity in working relationship administrative
efficiency improver

STEPS IN THE PROCESS OF
ORGANISING

STEP 1. IDENTIFICATION AND
DIVISION OF WORK
The organising function begins with the division of total work into
smaller units.Each unit of total work is called a job.
And an individual in the organisation is assigned one job only. The
division of work into smaller jobs leads to specialization because
jobs are assigned to individuals according to their qualifications
and capabilities. The division of work leads to systematic working.
For example, in a bank every individual is assigned a job. One
cashier accepts cash, one cashier makes payments, one person
issues cheque books, one person receives cheques, etc. With
division of work into jobs the banks work very smoothly and
systematically.

• organising function begins with the division of total work into smaller units
called jobs
• The division of work into smaller jobs leads to specialization. jobs are
assigned according to their qualifications and capabilities.
• division of work leads to systematic working.
• For example, in a bank every individual is assigned a job. One cashier
accepts cash, one cashier makes payments, one person issues cheque
books, one person receives cheques, etc.

STEP 2. GROUPING THE JOBS
AND DEPARTMENTALISATION:
• After dividing the work in smaller jobs, related and similar jobs are
grouped together and put under one department. The
departmentation or grouping of jobs can be done by the
organisation in different ways. But the most common two ways
are:
• a) Functional departmentation:
• b) Divisional departmentation:

(a) Functional departmentation:
Under this method jobs related to common function are grouped under
one department. For example, all the jobs related to production are
grouped under production department; jobs related to sales are
grouped under sales department and so on.
(b) Divisional departmentation:
When an organisation is producing more than one type of
products then they prefer divisional departmentation. Under this
jobs related to one product are grouped under one department.
For example, if an organisation is producing cosmetics, textile
and medicines then jobs related to production, sale and
marketing of cosmetics are grouped under one department, jobs
related to textile under one and so on.

Functional departmentation:
• jobs related to common function are grouped under one department
• . For example, all the jobs related to production are grouped under production
department; jobs related to sales are grouped under sales department and so
on.

b) Divisional departmentation:
• When an organisation is producing more than one type of products then they
prefer divisional departmentation.
• Under this jobs related to one product are grouped under one department
• For example, if an organisation is producing cosmetics, textile and medicines
then jobs related to production, sale and marketing of cosmetics are grouped
under one department, jobs related to textile under one and so on

STEP3. ASSIGNMENT OF DUTIES:
• After dividing the organisation into specialised departments each
individual working in different departments is assigned a duty
matching to his skill and qualifications
• Employees are assigned duties by giving them a document called
job description.
• This document clearly defines the contents and responsibilities
related to the job.

STEP 4.DELEGATION OF
AUTHORITY:
• When some work is assigned to someone then he must
be given some authority to do that work effectively.
• Assigning work and delegation goes parallel to each
other. Assigning work without proper authority is
meaningless.

STEP 5.COORDINATING ACTIVITIES
• All activities in organization are distinct but they are
interdependent so their must be coordination among the
departments.
• Success of the organization is fully dependent on better
coordination between the different divisions and
managers.

FORMAL ORGANISATION:
• When the managers are carrying on an organising process, then as a
result of the organising process an organisational structure is created
to achieve systematic working and efficient utilization of resources.
This type of structure is known as formal organisational
structure.Formal organisational structure clearly spells out the job to
be performed by each individual, the authority, responsibility assigned
to every individual, the superior- subordinate relationship and the
designation of every individual in the organisation. This structure is
created intentionally by the managers for achievement of
organisational goal.

FEATURES OF A FORMAL ORGANISATION:
• (1) The formal organisational structure is created intentionally by the process of
organising.
• (2) The purpose of formal organisation structure is achievement of
organisational goal.
• (3) In formal organisational structure each individual is assigned a specific job
(4) In formal organisation every individual is assigned a fixed authority or decision-
making power.
• (5) Formal organisational structure results in creation of superior-subordinate
relations.
• (6) Formal organisational structure creates a scalar chain of communication in the
organisation.

ADVANTAGES OF
• 1. Systematic Working:
• Formal organisation structure results in systematic and smooth functioning of an organisation.
• 2. Achievement of Organisational Objectives:
• Formal organisational structure is established to achieve organisational objectives.
• 3. No Overlapping of Work::
• In formal organisation structure work is systematically divided among various departments and employees. So there is no
chance of duplication or overlapping of work.
• 4. Co-ordination:
• Formal organisational structure results in coordinating the activities of various departments.
• 5. Creation of Chain of Command:
• Formal organisational structure clearly defines superior subordinate relationship, i.e., who reports to whom.
• 6. More Emphasis on Work:
• Formal organisational structure lays more emphasis on work than interpersonal relations.

DISADVANTAGES OF
• 1. Delay in Action:
• While following scalar chain and chain of command actions get delayed in formal
structure.
• 2. Ignores Social Needs of Employees:
• Formal organisational structure does not give importance to psychological and
social need of employees which may lead to demotivation of employees.
• 3. Emphasis on Work Only:
• Formal organisational structure gives importance to work only; it ignores human
relations, creativity, talents, etc.

WHAT IS INFORMAL ORGANIZATION?
• The informal organization is the interlocking social structure that
governs how people work together in practice. It is the aggregate
of behaviors, interactions, norms, and personal/professional
connections through which work gets done and relationships are
built among people. It consists of a dynamic set of personal
relationships, social networks, communities of common interest,
and emotional sources of motivation. The informal organization
evolves organically in response to changes in the work
environment, the flux of people through its porous boundaries, and
the complex social dynamics of its members.

FEATURES OF INFORMAL ORGANISATION:
• (1) Informal organisational structure gets created automatically without any
intended efforts of managers.
• (2) Informal organisational structure is formed by the employees to get
psychological satisfaction.
• (3) Informal organisational structure does not follow any fixed path of flow of
authority or communication.
• (4) Source of information cannot be known under informal structure as any
person can communicate with anyone in the organisation.
• (5) The existence of informal organisational structure depends on the formal
organisation structure.

ADVANTAGES OF
INFORMAL ORGANISATION:
• 1. Fast Communication:
• Informal structure does not follow scalar chain so there can be faster spread of
communication.
• 2. Fulfills Social Needs:
• Informal communication gives due importance to psychological and social need
of employees which motivate the employees.
• 3. Correct Feedback:
• Through informal structure the top level managers can know the real feedback
of employees on various policies and plans.

DISADVANTAGES OF
INFORMAL ORGANISATION:
• 1. Spread Rumours:
• According to a survey 70% of information spread through informal organisational
structure are rumors which may mislead the employees.
• 2. No Systematic Working:
• Informal structure does not form a structure for smooth working of an organisation.
• 3. May Bring Negative Results:
• If informal organisation opposes the policies and changes of management, then it
becomes very difficult to implement them in organisation.
• 4. More Emphasis to Individual Interest:
• Informal structure gives more importance to satisfaction of individual interest as
compared to organisational interest.

STRATEGIC USE OF
INFORMAL ORGANISATION.
• Informal organisation can be used to get benefits in the formal
organisation in the following way:
• 1. The knowledge of informal group can be used to gather support of
employees and improve their performance.
• 2. Through grapevine important information can be transmitted quickly.
• 3. By cooperating with the informal groups the managers can skillfully
take the advantage of both formal and informal organisations.

BASIS FOR COMPARISON FORMAL ORGANIZATION INFORMAL ORGANIZATION
Meaning An organization type in which the job of
each member is clearly defined, whose
authority, responsibility and accountability
are fixed is formal organization.
An organization formed within the formal
organization as a network of interpersonal
relationship, when people interact with each
other, is known as informal communication.
Creation Deliberately by top management. Spontaneously by members.
Purpose To fulfill, the ultimate objective of the
organization.
To satisfy their social and psychological
needs.
Nature Stable, it continues for a long time. Not stable
Communication Official communication Grapevine
Control mechanism Rules and Regulations Norms, values and beliefs
Focus on Work performance Interpersonal relationship
Authority Members are bound by hierarchical
structure.
All members are equal.
Size Large Small

FORMS OF ORGANISATIONAL
STRUCTURE: LINE , FUNCTIONAL, AND
LINE AND STAFF ORGANISANATION

1. LINE ORGANISATION:
• Line organisation is the simplest and the oldest type of organisation. It is also known
as scalar organisation or military type of organisation.
• An important characteristic of such type of organisation is superior-subordinate
relationship. Superior delegates authority to another subordinate and so on, forming
a line from the very top to the bottom of the organisation structure. The line of
authority so established is referred as “line authority.” Under this type of
organisation authority flows downwards, responsibility moves upwards in a straight
line. Scalar principle and unity of command are strictly followed in line organisation.
• For example-This type of organisation resembles with the army administration or
military type of organisation. As in case of military, commander-in-chief holds the top
most position and has the entire control over the army of the country, which in turn
is developed into main area commands under major-generals.

TYPES OF LINE ORGANIZATIONS
• Line organisation is of two type’s viz;
• a) Simple or Pure Line Organisation
• b) Departmental line organisation

(A) SIMPLE OR PURE LINE ORGANISATION:
• In the ‘Pure Line organisation’ the activities (at any level of management) are
the same with each man performing the same type of work and the divisions
primarily exist for the purpose of control and direction. In practice, such type
of organisation rarely exists.

B) DEPARTMENTAL LINE ORGANISATION:
• Under this type of organisation, an organisation is divided into various departments
headed by different departmental heads. All the departments operate under the
ultimate control of general manager. The orders flow directly from the general
manager to all the departmental heads that in turn pass on to their respective
subordinates.
• Likewise, the subordinates, in turn, communicate the orders to the workers under
them. The various departmental heads will be perfectly independent of each other
and they will enjoy equal status the central idea, in the formation of such
departments is not similarly or dis-similarity of functions or activities, but unity of
control and line authority and responsibility from the top of the organisation to the
bottom.

SUITABILITY OF LINE ORGANIZATION:
The line organisation can be successfully followed where
• scale of operations is limited or business is on small scale basis,
• work is simple and routine in nature,
• business is being done in continuous type of industries like oil refining,
sugar, spinning and weaving etc.,
• the labour management problems are not complex and can be easily
resolved
• the machinery is automatic, and
• the workers are disciplined.

CHARACTERISTICS OF LINE
ORGANIZATION:
The main features of line organisation are as follows:
• 1. Orders and instructions flow from top to the bottom, whereas requests and
suggestions move from bottom to top.
• 2. The principle of unity of command is the most salient feature of this type of
organisation. In simple words, the orders are received by the subordinates from one
boss.
• 3. The subordinates are accountable to their immediate superior.
• 4. There are limited numbers of subordinates under one superior.
• 5. This is simple to operate and control.
• 6. Co-ordination can be easily achieved.

ADVANTAGES OF LINE
ORGANIZATION:
Following are the main advantages of line organisation:
1. Simplicity:
• It is very simple to establish and operate. It can be easily understood by the employees.
2. Fixed responsibility:
• Duties and responsibilities are clearly defined for each individual with reference to the
work assigned to him. As a result everybody knows to whom he is responsible and who
are responsible to him. Nobody can avoid responsibility.
3. Discipline:
• This type of organisation ensures better discipline in the enterprise. Singleness of
responsibilities facilitates discipline in the organisation. The workers at the lower levels
will be more loyal and responsible to one single boss rather than to a number of bosses.
4. Flexibility:
• It is flexible in the sense that it is subject to quick adjustments to suit to changing
conditions. In the words of Wheeler, “It permits rapid and orderly decisions in meeting
problems at various levels of organisation”. In simple words, it is more adaptive to the
changed circumstances.

5. Co-ordination:
• It helps to achieve effective co- ordination. All the activities pertaining to single department are
controlled by one person.
6. Direct communication:
• As there will be direct communication between the superior and the subordinates at different levels
it would be helpful in achieving promptness in performance.
7. Unity of command:
• Every worker is accountable to one boss in the department under this type of organisation. In this
manner it is in accordance with the principle of unity of command.
8. Economical:
• It is not complex and expensive. It is simple and economical in operation. It does not need any
expert and specialised personnel.
9. Quick decisions:
• On account of its simple operation and unified control and responsibility, decisions can be taken
promptly. The process of decision-making is further quickened as the decision is taken by one
person.
10. Executive development:
• Under this organisation, the department head is fully responsible for every activity in his
department. He discharges his responsibilities in an efficient manner. He comes across many
problems and obstacles in performing his duties.
• This provides him an ample opportunity to enhance his capabilities and organisational abilities and
is greatly helpful in his overall development and performance.

DISADVANTAGES OF LINE ORGANIZATION:
• Following are the main drawbacks of line organisation:
1. Overloading:
• The main disadvantage of this system is that it tends to overload the existing executive with too many
responsibilities. The work may not be performed effectively on account of innumerable tasks before
the single executive.
2. Lack of specialization:
• Absence of managerial specialisation is the major drawback of this system. On account of many
functions and complexities it is very difficult for a single individual to control all the matters effectively.
• The executive may not be expert in all aspects of managerial activities. The burden of responsibilities
on the shoulders of the manager can crush him under the heavy workload.
3. Scope for favoritisms:
• There may be a good deal of favouritism and nepotism under this type of organization. As the
concerned officer will judge the performance of the persons at work according to his own norms, it is
possible that efficient people may be left behind and inefficient or ‘yes men’ may get higher and better
posts.

4. Lack of co-ordination:
• In reality it is very difficult to achieve proper coordination among various
departments operating in an organisation. This is because each departmental
manager or head carries the functioning of his department in accordance with the
ways and means suitable to him.
5. Lack of initiative:
• Under line organization, ultimate authority lies in the hands of top management
and departmental managers or heads have little powers. This adversely affects
their initiative and enthusiasm to motivate the subordinates working under them.
6. Lack of communication from lower ranks:
• Under line organisation suggestions move from down to upwards the superiors
usually do not pay attention to suggestions sent by lower ranks. This leads to
inadequacy of communication from subordinates to superiors.

LINE AND STAFF ORGANIZATION
• Line and staff organization is a modification of line
organization is more complex than line organization.
According to this administrative organization, specialized
and supportive activities are attached to the line of
command by appointing staff supervisors and staff
specialists who are attached to the line authority. The power
of command always remains with the line executives and
staff supervisors guide, advice and council the line
executives. Personal Secretary to the Managing Director is
a staff official.

MERITS OF LINE AND STAFF
ORGANIZATION
• Relief to line of executives- In a line and staff organization, the advice and
counseling which is provided to the line executives divides the work between the
two. The line executive can concentrate on the execution of plans and they get
relieved of dividing their attention to many areas.
• Expert advice- The line and staff organization facilitates expert advice to the line
executive at the time of need. The planning and investigation which is related to
different matters can be done by the staff specialist and line officers can concentrate
on execution of plans.
• Benefit of Specialization- Line and staff through division of whole concern into two
types of authority divides the enterprise into parts and functional areas. This way
every officer or official can concentrate in its own area.

• Better co-ordination- Line and staff organization through specialization is able to provide better
decision making and concentration remains in few hands. This feature helps in bringing co-
ordination in work as every official is concentrating in their own area.
• Benefits of Research and Development- Through the advice of specialized staff, the line
executives, the line executives get time to execute plans by taking productive decisions which are
helpful for a concern. This gives a wide scope to the line executive to bring innovations and go for
research work in those areas. This is possible due to the presence of staff specialists.
• Training- Due to the presence of staff specialists and their expert advice serves as ground for
training to line officials. Line executives can give due concentration to their decision making. This
in itself is a training ground for them.
• Balanced decisions- The factor of specialization which is achieved by line staff helps in bringing
co-ordination. This relationship automatically ends up the line official to take better and balanced
decision.
• Unity of action- Unity of action is a result of unified control. Control and its effectivity take place
when co-ordination is present in the concern. In the line and staff authority all the officials have
got independence to make decisions. This serves as effective control in the whole enterprise.

DEMERITS OF LINE AND STAFF
ORGANIZATION
• Lack of understanding- In a line and staff organization, there are two authority flowing at one time.
This results in the confusion between the two. As a result, the workers are not able to understand as to
who is their commanding authority. Hence the problem of understanding can be a hurdle in effective
running.
• Lack of sound advice- The line official get used to the expertise advice of the staff. At times the staff
specialist also provide wrong decisions which the line executive have to consider. This can affect the
efficient running of the enterprise.
• Line and staff conflicts- Line and staff are two authorities which are flowing at the same time. The
factors of designations, status influence sentiments which are related to their relation, can pose a
distress on the minds of the employees. This leads to minimizing of co-ordination which hampers a
concern’s working.
• Costly- In line and staff concern, the concerns have to maintain the high remuneration of staff
specialist. This proves to be costly for a concern with limited finance.
• Assumption of authority- The power of concern is with the line official but the staff dislikes it as they
are the one more in mental work.
• Staff steals the show- In a line and staff concern, the higher returns are considered to be a product
of staff advice and counseling. The line officials feel dissatisfied and a feeling of distress enters a
concern. The satisfaction of line officials is very important for effective results.

WHAT IS A FUNCTIONAL
ORGANIZATIONAL STRUCTURE?
• In a functional organizational structure , an organization's
reporting relationships are grouped based on specialty, or
functional area. For example, there might be separate
departments for marketing, accounting, and engineering.
Generally, all the functional heads will report directly to the
company president or CEO.

ADVANTAGES
• There are some definite advantages to grouping all staff by function:
• Staff is managed by a person with experience in their same specialty who can
adequately understand and review their work.
• Staffers have the opportunity to move up within their functional areas, which gives a
reason for them to stay long-term. The company gets the advantage of their
expertise and company knowledge over time.
• Staffers work with others in their field, which allows for knowledge sharing and
lateral job moves to learn new skills.

DISADVANTAGES
• The functional structure also has some disadvantages, including:
• Functional areas may have difficulties working with other functional areas.
There is often a perception that they are competing with other functional
areas for resources and a lack of understanding of what other areas do for
the company. So, the accounting department may be upset that its request
for an additional headcount is denied, but the company financial results point
to a need for additional sales people rather than accountants.
• As the company grows larger, the functional areas can become difficult to
manage due to their size. They can become almost like small companies on
their own, with their own cultures, facilities, and management methods.
• Functional areas may become distracted by their own goals and focus on
them, rather than on overall company objectives

WHAT IS A DIVISIONAL
ORGANISATIONAL STRUCTURE?
• A divisional structure is a manner of designing an organization so
that it is split up into semi-autonomous units called divisions. While
the divisions have control over their day-to-day operations, they
still are answerable to a central authority that provides the overall
strategy for the organization and coordinates its implementation
among the divisions. Large corporations, especially large
multinational corporations, utilize a divisional structure. For
example, General Motors was one of the first companies to
implement the divisional structure. This type of structure is also
referred to as a multidivisional structure or M-form organization.

ADVANTAGES OF
DIVISIONAL ORGANISATION
• (1) Development of Divisional Heads:
• The head of each division looks after all the functions connected with their product that is, purchase,
sale, advertisement, production, finance, etc. It helps in the development of varied skills in a
divisional head.
• 2) Divisional Results can be assessed:
• All the activities of each division are carried out independently. Hence, the divisional results
(profit/loss) can be assessed easily. On this basis, an unprofitable division can be closed.
• (3) Quick Decision Making:
• Every division is independent in itself. The divisional manager can take any decision regarding his
division independently without consulting other divisional managers. Hence, decisions are quick and
effective.
• (4) Easy Expansion:
• For every product a separate division is opened. If a company wants to introduce a new product, it
can be introduced easily without disturbing the existing division. Hence, it is easy to expand the
concern.

DISADVANTAGES OF DIVISIONAL
ORGANISATION STRUCTURE
• (1) Conflicts between Divisional Heads:
• Every divisional head wants to establish his supremacy. To satisfy ego each demands maximum
resources for his division. This situation leads to conflicts among the various divisional heads.
• (2) Duplicity of Functions:
• The entire set of functions (e.g., production, marketing, financial, personnel, etc.) is required for
all divisions. It gives rise to duplicity of efforts among divisions. Hence, resources are misused
and cost of operations is unnecessarily increased.
• (3) Selfish Attitude:
• Every division tries to display better performance sometimes even at the cost of other divisions.
This shows their selfish attitude. Consequently, it hits the interest of the concern as a whole.

KEY DIFFERENCES BETWEEN
CENTRALIZATION AND DECENTRALIZATION
The following are the major differences between centralization and
decentralization:
1. The unification of powers and authorities, in the hands of high-
level management, is known as Centralization. Decentralization
means dispersal of powers and authorities by the top level to the
functional level management.
2. Centralization is best for a small sized organization, but the large
sized organization should practice decentralization.

3. Formal communication exist in the centralized organization. Conversely,
in decentralization, communication stretches in all directions.
4. In centralization due to the concentration of powers in the hands of a
single person, the decision takes time. On the contrary, decentralization
proves better regarding decision making as the decisions are taken much
closer to the actions.
5. There is full leadership and coordination in Centralization.
Decentralization shares the burden of the top level managers.
6. When the organization has inadequate control over the management,
then centralization is implemented, whereas when the organization has full
control over its management, decentralization is implemented.

ADVANTAGES OF CENTRALIZATION:
Following are the advantages of centralization:
• 1. Standardization of Procedures and Systems:
• Centralization enables standardization of procedures and systems. It facilitates smooth working in the organization. There is
also a consistency in day-to-day working. The consumer service will also improve if standard policies are used.
• 2. Facilitates Evaluation:
• When same policies are used for all segments of the enterprise their performance can easily be evaluated. It also helps in
comparing the results of different departments. This will bring a sense of competition among various segments. Ultimately the
overall performance will improve.
• 3. Economies:
• Centralization of management will bring in economies of large scale. There will be a centralized buying and selling. This will
enable bulk buying resulting in discounts and savings in transportation expenses. When sales are done in large quantities then
customers are offered better terms and low prices. There will be an economy in managerial expenses also.
• 4. Co-ordination of Activities:
• Co-ordination of activities of various segments is also facilitated by centralized management. In the absence of centralization,
different segments may pursue their independent policies. This may result in disunity and disintegration. Different segments may
emphasize their own goals only without bothering about organizational objectives. Centralized management will help in
coordinating the work of different segments in such a way that organizational goals are achieved.

DISADVANTAGES OF CENTRALIZATION:
Centralization may be useful only up to a certain level and also under certain conditions. Beyond a
certain point it creates difficulties in day-to-day working and also restricts the growth of an
enterprise.
Following are some of the disadvantages of centralization:
1. Destroys Individual Initiative:
• Centralization revolves around one person only. One man takes all the decisions and decides the
modes of implementing them. Nobody is given the authority to use his own judgment even if
there are glaring lacunae in the decisions. It destroys initiative of subordinates. They do not make
any suggestions and just carry on with whatever has been conveyed to them.
2. Over Burden of Few:
• This system gives all responsibilities to few persons in the organization. They remain over-
burdened with routine work while sub-ordinates do not have sufficient work. The centralization of
all powers do not allow the chief executive to devote sufficient time for important tasks of
planning, coordinating and motivating. In a decentralized set-up routine matters are left to the
subordinates and manager concentrates on important administrative work only.

3. Slows Down the Operations:
• The operations of the enterprise are slowed down under centralized set-up. All decisions are taken
only by one person and his unavailability keeps the matters pending. Even clarifications about
decisions are referred to the top which destroys invaluable time in formalities. If the subordinates
have powers to interpret decisions then operations can be toned up. Things move very slowly in a
centralized set up because everything has to pass through the manager.
4. Distance from Customers:
• The customers do not come into contact with policy-makers. They meet only those officials who do
not have the powers to take decisions. Moreover one person cannot meet and know the reactions of
customers regarding products and service. This also comes in the way of intimate understanding of
market situations by the chief executive.
5. No Scope for Specialization:
• Centralization does not offer any scope for specialization. All decisions are taken by one person and
he may not be a specialist in all the areas. In the present competitive world there is a need for
employing the services of specialists. The specialists will be able to introduce new things in their
fields and they may improve the performance of the enterprise.
• Even if specialists may be employed under centralized set-up they will not be given a free hand in
their areas. They will keep on convincing the chief executive who is the ultimate decision-maker. The
specialists do not have any role in an organization with centralized authority.
•

ADVANTAGES OF DECENTRALISATION:
1. Reduces the burden on top executives:
• Decentralisation relieves the top executives of the burden of performing various
functions. Centralisation of authority puts the whole responsibility on the shoulders of
an executive and his immediate group. This reduces the time at the disposal of top
executives who should concentrate on other important managerial functions. So, the
only way to lessen their burden is to decentralise the decision-making power to the
subordinates.
2. Facilitates diversification:
• Under decentralization, the diversification of products, activites and markets etc., is
facilitated. A centralised enterprise with the concentration of authority at the top will
find it difficult and complex to diversify its activities and start the additional lines of
manufacture or distribution.
3. To provide product and market emphasis:
• A product loses its market when new products appear in the market on account of
innovations or changes in the customers demand. In such cases authority is
decentralised to the regional units to render instant service taking into account the
price, quality, delivery, novelty, etc.

4. Executive Development:
• When the authority is decentralised, executives in the organisation will get the opportunity to
develop their talents by taking initiative which will also make them ready for managerial positions.
The growth of the company greatly depends on the talented executives.
5. It promotes motivation:
• To quote Louis A. Allen, “Decentralisation stimulates the formation of small cohesive groups.
Since local managers are given a large degree of authority and local autonomy, they tend to weld
their people into closely knit integrated groups.” This improves the morale of employees as they
get involved in decision-making process.
6. Better control and supervision:
• Decentralisation ensures better control and supervision as the subordinates at the lowest levels
will have the authority to make independent decisions. As a result they have thorough knowledge
of every assignment under their control and are in a position to make amendments and take
corrective action.
7. Quick Decision-Making:
• Decentralisation brings decision making process closer to the scene of action. This leads to
quicker decision-making of lower level since decisions do not have to be referred up through the
hierarchy.

DISADVANTAGES OF DECENTRALISATION:
Some disadvantages of decentralisation are:
1. Uniform policies not Followed:
• Under decentralisation, it is not possible* to follow uniform policies and
standardised procedures. Each manager will work and frame policies
according to his talent.
2. Problem of Co-Ordination:
• Decentralisation of authority creates problems of co-ordination as
authority lies dispersed widely throughout the organisation.

3. More Financial Burden:
• Decentralisation requires the employment of trained personnel to
accept authority, it involves more financial burden and a small
enterprise cannot afford to appoint experts in various fields.
4. Require Qualified Personnel:
• Decentralisation becomes useless when there are no qualified and
competent personnel.
5. Conflict:
• Decentralisation puts more pressure on divisional heads to realize
profits at any cost. Often in meeting their new profit plans, bring
conflicts among managers.

CONCLUSION FOR CENTRALIZATION VS
DECENTRALIZATION
• The difference between centralization and decentralization is one of the
hot topics these days. Some people think that centralization is better
while others are in favor of decentralization. In ancient times, people
used to run their organization in a centralized manner, but now the
scenario has been changed completely due to rise in competition where
quick decision making is required and therefore many organizations
opted for decentralization.
• However, centralization still exists in some of the organizations. Coming
to the point, no organization is completely centralized or decentralized,
they are centralized or decentralized only up to the extent of the
delegation of authority.

DELEGATION AND DECENTRALIZATION
Delegation and Decentralization
Basis
Delegation
Decentralization
Meaning
Managers delegate some of their function and authority to their subordinates.
Right to take decisions is shared by top management and other level of management.
Scope
Scope of delegation is limited as superior delegates the powers to the subordinates on individual bases.
Scope is wide as the decision making is shared by the subordinates also.
Responsibility
Responsibility remains of the managers and cannot be delegated
Responsibility is also delegated to subordinates.
Freedom of Work
Freedom is not given to the subordinates as they have to work as per the instructions of their superiors.
Freedom to work can be maintained by subordinates as they are free to take decision and to implement it.
Nature
It is a routine function
It is an important decision of an enterprise.
Need on purpose
Delegation is important in all concerns whether big or small. No enterprises can work without delegation.
Decentralization becomes more important in large concerns and it depends upon the decision made by the enterprise, it is not compulsory.
Grant of Authority
The authority is granted by one individual to another.
It is a systematic act which takes place at all levels and at all functions in a concern.
Grant of Responsibility
Basis Delegation Decentralization
Purpose To lessen the burden of the manager. To increase the role of the
subordinates in the organisation
by giving them more authority
Scope It has a narrow scope as it is limited to
superior and his immediate subordinate
It has a wider scope as it implies
extension of delegation to the
lowest level of management.
Status It is a process followed to share tasks. It is the result of the policy
decision of top management.
Nature Delegation is a compulsory act because
no individual can perform all the tasks on
his own.
Decentralisation is an optional
policy decision. It is done at the
discretion of the top
management only.

BASIS FOR COMPARISON DELEGATION DECENTRALIZATION
Meaning Delegation means handing over an
authority from one person of high level
to the person of low level.
Dissemination of powers, authority
and responsibility of one person to
another person or persons is known
as Decentralization.
What it is? Cause Effect
Accountability Superiors are accountable for the acts
done by subordinates.
Department heads are accountable
for the acts of the concerned
department.
Parties Superior and Subordinate Top Management and Middle or Low
Level Management.
Requirement Yes, for all organization delegation of
authority is very necessary.
No, it is an optional policy which may
or may not be adopted by the
organization.
Liberty of Work Subordinates do not have full liberty. A substantial amount of freedom is
there.
Control The ultimate control is the hands of
superior.
The head of the department or
division have the control.

ORGANISING

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ORGANISING