NCERT Solutions for Class 12 Business Studies Chapter 5 Organising

NCERT
SOLUTIONS
CLASS - 12th

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Book : Business Studies Ncert Solutions | Chapter-5 Business Studies

Class : 12th
Subject : Business Studies
Chapter : 5
Chapter Name : Organising

Q1 Identify the network of social relationships which arises spontaneously due to interaction at
work.

Answer. The network of social relationships which arises spontaneously due to interaction at
work is the informal form of organization. In this form of organization, there are no set patterns
of communication or hierarchical chain. The superior subordinate relationship also doesn't exist.

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Q2 State any two circumstances under which the functional structure will prove to be an
appropriate choice?

Answer. The functional structure of an organization is appropriate in the following two cases -
i) Specialisation - When the organisation wants a high degree of functional specialisation, then
the functional structure is appropriate. Each department operates independently and specialise
in their functions.
ii) Varying functions - When the organisation deals in a large variety of functions, each requiring
a separate and independent unit then it may opt this structure.

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Q3 Draw a diagram depicting a functional structure.

Answer.

Image source - NCERT

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Q4 A company has its registered office in Delhi, manufacturing unit at Gurgaon and marketing
and sales department at Faridabad. The company manufactures consumer products. Which
type of organisational structure should it adopt to achieve its target?

Answer. The type of organisational structure which is suitable for such organisation is functional
structure. It is so because it has to perform different functions independently and requires
specialisation in all its activities.

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Q1 Define ‘Organising’.

Answer. Organising refers to the process of describing the jobs to be performed, defining the
working relationships and providing the resources necessary for the implementation of the plan
to achieve organisational goals and objectives. It includes all those activities which are required
to implement the course of action as defined at planning stage.

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Q2 What are the steps in the process of organising?

Answer. Organising is the managerial function in which all those steps are taken which are
necessary for the proper implementation of plans. The steps in organising are -
i. Identification and division of work - The first step in the process of organising is to identify the
work to be performed. Then the work is divided into small parts known as jobs.
ii. Departmentalisation - After the jobs are defined, similar types of jobs which relate to each
other are categorised and put under one department.
iii. Assignment of duties - After the jobs are grouped together, work is assigned to various
individuals as per their abilities and their skills. It leads to specialisation of activities.
iv. Establishing Reporting Relationship - The reporting relationship refers to the authority
responsibility relationship which is established in order to define who is to report to whom. The
employee comes to know whom he has to report and from whom he has to take orders.

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Q3 Discuss the elements of delegation.

Answer. Delegation has the following three elements -
i. Authority - It is the right of an individual to give orders to his subordinates and to take
necessary actions within the scope of his powers assigned. It flows from the top management to
the lower level of hierarchical structure.

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ii. Responsibility - It is the duty or obligation of an individual to perform the duties assigned to
him as per the instructions given. It arises due to the superior - subordinate relationship.
Responsibility flows from the subordinates to superiors.
iii. Accountability - It refers to the answerability of an individual for the work he performed or for
the work provided to him. It cannot be delegated. It flows upward from subordinates to
superiors.

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Q4 What does the term 'span of management' refer to?

Answer. Span of management refers to the number of subordinates which can be effectively
handled by a superior. It depends on the type of work to be performed as well as the efficiency
of superiors. It is responsible for giving shape to the organisational structure. In an organisation,
the number of lower level managers is more than the number of middle level managers since
the middle level managers can manage a large number of lower level managers. Thus the
organisational structure is in the form of a triangle whose base is broad compared to its top.

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Q5 Under what circumstances would functional structure prove to be an appropriate choice?

Answer. Functional structure of an organisation refers to the structure in which the various
activities which come under the same function of management are grouped under one head.
This structure proves to be beneficial in the following cases -
● Large size of organisation - The functional structure is helpful when the organisation
operates on a large scale. Various departments are created to categorise the activities.
● Different functions - When the firm performs a variety of functions and all of them are
required to be performed independently, then this structure proves to be helpful. It helps
in coordination of the functions.
● Requirement of specialisation - When the company needs to have a high degree of
specialisation in all its functions, then it may adopt this structure as it helps in
categorising all the activities pertaining to a particular function under one head.

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Q6 Neha runs a factory wherein she manufactures shoes. The business has been doing well
and she intends to expand by diversifying into leather bags as well as western formal wear
thereby making her company a complete provider of corporate wear. This will enable her to
market her business unit as the one stop for working women. Which type of structure would you
recommend for her expanded organisation and why?

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Answer. The functional structure suitable for her is divisional structure. Divisional structure is
majorly used when the company deals in diversified variety of products. Each product has its
own functional structure i.e. There is a different functional structure for each function. The
benefits of this structure is -
● It helps in categorising the activities of one product under the same head and
differentiates it from other product heads.
● It helps in performing the functions related to one product uniquely and they aren’t
merged with other products.
● The profits or losses related to one product can be recorded at one place and they can
be compared with the profits or losses of previous years for the same product.

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Q7 The production manager asked the foreman to achieve a target production of 200 units per
day, but he doesn’t give him the authority to requisition tools and materials from the stores
department. Can the production manager blame the foreman if he is not able to achieve the
desired target? Give reasons.

Answer. No, the production manager cannot hold the foreman responsible for the incomplete
work as the foreman was not given authority by the manager. The principle of authority
responsibility says that there should be a balance between the authority and responsibility. If the
authority given is more, then it leads to misuse of authority and if responsibility is more, then the
work will not be completed.

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Q1 Why delegation is considered essential for effective organising?

Answer. Delegation implies transfer of authority, from a superior to his subordinate. It is an
essential concept for effective organisation as it lowers the burden on the manager and thereby,
facilitates the manager to focus on activities that command high priority. Also, the managers can
extend his area of operations once he delegates the work to subordinates. In addition to this, it
provides the subordinates with more opportunities for growth. It helps in efficient completion of
tasks as the subordinates can now show their skills and exercise initiative. The following points
highlight the importance of delegation in effective organising.

(i) Managerial Efficiency: Delegation of the work to the subordinates, help the managers to
concentrate on other areas of concern. With delegation of routine work to the subordinates, the
manger can focus on other high priority areas. Besides, it provides them the opportunity to
explore and innovate into new areas. For example, if the manager delegates the basic work to
the subordinate he can put his mind into exploring ways to improve efficiency.

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(ii) Employee Proficiency: By delegating the work, managers empower his subordinates by
providing them opportunities to apply their skills. Herein, the subordinates get a chance to prove
his abilities, gain experience and develop his career. Thus, delegation in a way helps in
preparing future managers.

(iii) Motivation: Along with improving the managerial and employee efficiency, delegation
provides the employees with the psychological benefits. It acts as a motivational guide for the
workers. It imparts a feeling of mutual trust and commitment between the superior and
subordinate. With responsibility the employee gains confidence and he gets encouraged to give
their best to the organisation.

(iv) Growth: Delegation facilitates easy growth and expansion. Delegation helps in the
preparation of efficient and experienced mangers that can take up leading positions at times of
growth of the organisation. That is, workers trained and prepared through delegation contribute
to the expansion and growth of the organisation more efficiently.

(v) Hierarchical Structure: Delegation forms the basis of the hierarchical structure of an
organisation. It decides the superior-subordinate chain and determines who has to report to
whom. It clearly states down the reporting relationships which helps in smooth working of the
organisation.

(vi) Coordination: Delegation promotes coordination of work. It reduces overlapping of work by
defining the reporting relationships. All the elements of delegation such as authority,
responsibility and accountability helps in providing a clear working relationship, thereby,
increasing efficiency.

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Q2 What is divisional structure? Discuss its advantages and limitations.

Answer. A divisional structure comprises separate business units or divisions. Each unit has a
divisional manager responsible for performance and who has authority over the unit. Generally,
manpower is grouped on the basis of different products manufactured.
The merits of adopting divisional structure are as follows -
(i) Skill Development: Product specialisation helps in the development of varied skills in a
divisional head and this prepares him for higher positions as he gains experience in all
functions.
(ii) Accountability: Divisional heads are accountable for profits, as revenues and costs related to
different departments, can be easily identified and assigned to them. This provides proper basis
for performance measurement.
(iii) Quick Decision Making: It promotes flexibility and initiative because each division functions
as an autonomous unit which leads to faster decision making.
The demerits of divisional structure are as follows -

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(i) Conflicts: Conflicts may arise among different divisions with reference to allocation of funds.
Different divisions may claim more funds for their departments ignoring the interests of other
departments.
(ii) Higher Cost: Similar set of functions are performed under each division. This results in
repetition of efforts, money and time. Thus it leads to higher costs.
(iii) Ignoring Organisational Goals: It provides managers with the authority to supervise all
activities related to a particular division. In course of time, such a manager may gain power and
in a bid to assert his independence may ignore organisational interests.

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Q3 Decentralisation is an optional policy. Explain why an organisation would choose to be
decentralised.

Answer. Decentralisation refers to the dispersal of the decision making power among the middle
and lower level managers. It is an optional policy as it depends on the organisation how much
power the top level management wants to delegate to the lower levels. An organisation may
choose to be centralised or decentralised depending on the objectives and the decisions of the
top level managers. Following are a few factors that explain why an organisation would choose
to be decentralised.

(i) Initiative: Decentralisation allows a sense of freedom to the lower managerial levels as it lets
them take their own decisions. It gives them a higher degree of autonomy to take initiative.
Moreover, it promotes a feeling of self-confidence and self-reliance among them. When the
power is delegated to lower level managers, they learn to face new challenges and find
solutions for the problems themselves. This helps in spotting those potential managers who can
take the needed initiative.

(ii) Managerial Competence: Once the authority is delegated to the managers at lower levels, it
provides them the needed opportunity to develop themselves. It provides them with the
opportunity to gain experience and thereby, develop the skills and knowledge to face new
challenges. Decentralisation gives them a chance to prove their talent and get ready for higher
positions. It also helps in pre-identification of the future managers who are well-equipped with
the necessary talent required to deal with managerial problems.

(iii) Control: Decentralisation helps in evaluating the performance of the organisation in a better
manner. Decentralisation helps in analysing and evaluating the performances of each
department separately. Thus, the extent of achievement of each department and their
contribution to the overall objectives of the organisation can be easily can be easily evaluated.

(iv) Active Decision Making: Since through decentralisation, the authority of making decisions is
passed on to lower levels of management, decisions are taken quickly and timely. This is

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because the decision can be taken at the nearest points of action which thereby, helps in easy
adjudication of the problems.

(v) Growth: Managerial efficiency is developed to a large extent with the help of decentralisation.
Decentralisation results in greater authority to the lower level managers. It promotes competition
among the managers of various departments. In a race to outperform each other, they give their
best shot and thereby, increase the overall productivity and efficiency. The organisation gains
from the increased overall performance and thereby, grows.

(vi) Reduced Workload of Top Managers: Delegation of authority provides freedom to top level
managers. It helps them in shifting the workload to their subordinates and gives them time to
concentrate on more important and higher priority work such as policy decisions. Moreover,
direct supervision by the top level management is decreased, as the subordinates are given the
rights to take the decisions by their own.

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Q4 Distinguish between centralisation and decentralisation.

Answer.
Basis Centralisation Decentralisation

Meaning It refers to the concentration It refers to the delegation of
of the authority with the top the authority to the lowest
management. levels of management.

Authority The authority is concentrated The authority is
with the top management. systematically delegated
Middle and bottom level downwards to the lowest
management has very low level of management.
authority.

Suitability It is suitable for small It is suitable for large sized
organisations. organisations.

Freedom The lower level managers The lower level managers
have less freedom to deviate have more authority to take
from the plans made by the their own decisions and
top management. actions.

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Q5 How is functional structure different from a divisional structure?

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Answer. The difference between the functional structure and the divisional structure can be
summarised as follows -

Basis Functional structure Divisional structure

Meaning Functional Structure is one in An organizational structure
which the reporting wherein the organizational
relationships of the functions are classified into
organization are bifurcated divisions as per product or
according to their functional service lines , market, is
area. called Divisional Structure.

Basis Functional areas Products, geographical area
or other specialised fields

Responsibility Difficult to fix responsibility on Easy to fix responsibility for
a particular department. performance on departments.

Autonomy of decisions Managers do not have Managers have autonomy of
autonomy of decisions. decisions.

Cost Economical, as the functions Expensive as it involves
are not repeated. repetition of resources.

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Q6 A company, which manufactures a popular brand of toys, has been enjoying good market
reputation. It has a functional organisational structure with separate departments for Production,
Marketing, Finance, Human Resources and Research and Development.
Lately to use its brand name and also to cash on to new business opportunities it is thinking to
diversify into manufacture of a new range of electronic toys for which a new market is emerging.

Which organisation structure should be adopted in this situation? Give concrete reasons with
regard to benefits the company will derive from the steps it should take.

Answer. The company should adopt divisional structure for the establishment of a new
department for electronic toys. The benefits which it will derive from adopting divisional structure
are -
● The performance of each unit can be easily assessed,
● New product lines can be easily added without disturbing the existing units.
● Decision making is faster.
● Divisional structure maintains a short line of communication with customers and provides
better services to them.

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Q7 A company manufacturing sewing machines set up in 1945 by the British promoters follows
formal organisation culture in totality. It is facing lot of problems in delays in decision-making. As
the result it is not able to adapt to changing business environment. The work force is also not
motivated since they cannot vent their grievances except through formal channels, which
involve red tape. Employee turnover is high. Its market share is also declining due to changed
circumstances and business environment.

You are to advise the company with regard to change it should bring about in its organisation
structure to overcome the problems faced by it. Give reasons in terms of benefits it will derive
from the changes suggested by you.

Answer. To overcome the problems faced by the company by adopting the current
organisational structure, the company may adopt following measures -
● The management should encourage workers to interact and socialise with each other
through get together outings. In this way, everyone will interact and like minded people
will come closer. The net result will be more satisfied workforce.
● The management should try to decentralise organisation structure.
● The suggested area where the business can be diversified is textile machineries like
embroidery units, sequencing units, buttoning units.

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Q1 Which of the following is not an element of delegation?

(a) Accountability

(b) Authority

(c) Responsibility

(d) Informal Organisation

Answer. (d) Informal organisation isn't a part of delegation. Delegation of authority takes place in
a formal organisation in which the authority-responsibility relationship exists.

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Q2 A network of social relationship that arise spontaneously due to interaction at work is called:

(a) Formal Organisation

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(b) Informal Organisation

(c) Decentralisation

(d) Delegation

Answer. (b) Informal organisation

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Q3 Which of the following does not follow the scalar chain?

(a) Functional structure

(b) Divisional Structure

(c) Formal organisation

(d) Informal organisation

Answer.

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Q4 A tall structure has a

(a) Narrow span of management

(b) Wide span of management

(c) No span of management

(d) Less levels of management

Answer. Narrow Span of management

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Q5 Centralisation refers to

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(a) Retention of decision making authority

(b) Dispersal of decision making authority

(c) Creating divisions as profit centers

(d) Opening new centers or branches

Answer. (a) Retention of decision making authority

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Q6 For delegation to be effective it is necessary that responsibility be accompanied with
necessary

(a) Authority

(b) Manpower

(c) Incentives

(d) Promotions

Answer. (a) Authority

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Q7 Span of management refers to

(a) Number of managers

(b) Length of term for which a manager is appointed

(c) Number of subordinates under a superior

(d) Number of members in top management

Answer. (c ) Number of subordinates under a superior

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Q8 The form of organisation known for giving rise to rumours is called

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(a) Centralised organisation

(b) Decentralised organisation

(c) Informal organisation

(d) Formal organisation

Answer. (c ) Informal organisation

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Q9 Grouping of activities on the basis of product lines is a part of

(a) Delegated organisation

(b) Divisional organisation

(c) Functional organisation

(d) Autonomous organisation

Answer. (b) Divisional structure

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Q10 Grouping of activities on the basis of functions is a part of

(a) Decentralised organisation

(b) Divisional organisation

(c) Functional organisation

(d) Centralised organisation

Answer. (C ) Functional structure

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