Way To Go, Wipro!                                           ORGANISING                              5                     ...
Organising                                                                       113Once the plans have been laid down    ...
114                                                                              Business Studiescharge of the event. Coor...
Organising                                                                                        115                     ...
116                                                                          Business Studiesorganising plays in any busin...
Organising                                                                                      117                       ...
118                                                                                   Business Studiesand coordination amo...
Organising                                                                                    119                         ...
120                                                                   Business Studies          Functional Structure      ...
Organising                                                                                       121                      ...
122                                                                    Business Studies          Organisation Chart       ...
Organising                                                                         123     Providing each division with   ...
d                   Organisation Chart of ONGCBusiness Studies                                                            ...
Organising                                                                                           125                  ...
126                                                                             Business Studies   Formal organisation ref...
Organising                                                                                             127(a)	 The formal ...
128                                                                 Business Studies(d)	It emerges spontaneously and is   ...
Organising                                                                                           129(a)	 I n f o r m a...
130                                                                 Business Studies   Delegation helps a manager to      ...
Organising                                                                      131                                       ...
132                                                                 Business Studieswhich limit its scope. However, as    ...
Organising                                                                                            133expected to expla...
134                                                                 Business Studiesprevious page provides a summarised   ...
Organising                                                                                    135	(vi)	 B e t t e r c o o ...
136                                                                          Business Studies     duplication of effort as...
Organising
Organising
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Organising
Organising
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Organising

  1. 1. Way To Go, Wipro! ORGANISING 5 CHAPTER dIt’s not quite there yet, but the goal is certainly within reach. One of L E A R N I N G eIndia’s largest IT solutions providers, Wipro T echnologies, is taking OBJECTIVES hon the likes of IBM and Accenture in its effort to be included among After studying this chapterthe largest and most successful technology services companies in the T li s you should be able to:world. n Explainthe concept of R b Currently Wipro employs 45,000 people at a growth rate organising;of 30 percent annually over the coming years. “I don’t see Explain the process of n E ugrowing to 150,000 or 200,000 people as an insurmountable organising;challenge,” said Premji, Chairman, Wipro. He believes that if C pcompanies such as Accenture could grow by 20,000 people in Describe the importance n two years, Wipro’s growth projections are not impossible. of organising; N re Restructuring Wipro was considered the most important Explain the meaning, n step in becoming a global giant, driven by the goal towards advantages and disadvantages ofimproved customer-orientation. © e functional organisation; During the past few months, Wipro separated itself intoseveral subsidiaries by product line: telecommunications, Explain the meaning, n b advantages andengineering, financial services, etc. Each subsidiary brings in disadvantages ofabout $300 million in annual earnings and is self-sufficient with divisional organisation; totheir own accounting books, personnel and administrative Explain the meaning, n functions. advantages and Wipro shifted from a centralised to decentralised disadvantages of tmanagement system. All responsibilities for growth lay with formal and informal othe management of each entity. organisation; “We tried to de-layer the organisation and empower Distinguish between n nour business leaders with a much higher degree of growth formal and informalresponsibility,” said Premji. “We removed an entire layer [of organisation;executives]”. Explain the concept n Between 2002 and 2003, Wipro acquired two IT consulting of delegation andfirms to break into the U.S. market. Wipro is also moving decentralisation;from a service provider to a product developer. Today, it Describe the importance n partners with other companies to develop IT products to gain of delegation andexperience and achieve name recognition. decentralisation; and Adapted from an article by Heide B. Malhotra for Distinguish between n Epoch Times Washington D.C. May 01, 2006 delegation and decentralisation.
  2. 2. Organising 113Once the plans have been laid down directed towards the attainmentand objectives specified therein, the of goals laid down in the planningnext step is to organise resources function in such a manner thatin a manner which leads to the resources are used optimally andaccomplishment of objectives. A people are able to work collectivelycritical issue in accomplishing the and effectively for a common purpose. dgoals specified in the planning Thus, it is in the context of effective eprocess is structuring the work of an management that the organisationorganisation to adapt to the dynamic function earns due importance. It is hbusiness environment. The activities a means for translating plans into T li sof an enterprise must be organised action.in such a manner that plans can be The organising function leads to the R bsuccessfully implemented. creation of an organisational structure E u For planning to be fruitful a number which includes the designing of rolesof considerations like resources that to be filled by suitably skilled people C pwill be needed, optimum utilisation and defining the inter relationshipof the same translation of work between these roles so that ambi­ N reinto attainable tasks, empowering guity in performance of duties canthe workforce to accomplish these be eliminated. Not only is this impo­ © etasks etc., need to be understood rtant for productive cooperationand dealt with properly. between the personnel but also for b It is evident from the way Wipro clarification of extent of authority, ashas moved towards reaching for well as responsibility for results and toit’s goal of becoming a globally logical grouping of activities.successful technology company, thatorganising plays a significant role in Meaning timplementation of plans. Let us take an example to understand o What has Wipro done to become a how organising takes place. Have you ever paid attention to how, the ncontending force among other globalgiants? Are there lessons to be learnt school fete which you enjoy so much,from Wipro’s approach? actually takes place? What goes on Wipro organised itself in a manner that behind the scene to make it theallowed customer orientation to dominate desired reality you want? The wholeover other goals and diversified on the activity is divided into task groupsbasis of product lines. It also modified each dealing with a specific area likethe relationships within the management the food committee, the decorationhierarchy to suit the goals. committee, the ticketing committee The management function of and so on. These are under theorganising ensures that efforts are overall supervision of the official in
  3. 3. 114 Business Studiescharge of the event. Coordinating is carried out with the help of anrelationships are established among example.the various groups to enable smooth Suppose twelve students work forinteraction and clarity about each the school library in the summergroup’s contribution towards the vacations. One afternoon they areevent. All the above activities are a told to unload a shipment of new dpart of the organising function. releases, stock the bookshelves, and e Organising essentially implies a then dispose of all waste (packaging,process which coordinates human paper etc). If all the students decide hefforts, assembles resources and to do it in their own way, it will T li sintegrates both into a unified whole result in mass confusion. However,to be utilised for achieving specified if one student supervises the work R bobjectives. by grouping students, dividing the E u Organising can be defined as work, assigning each group theira process that initiates impleme- quota and developing reporting relat­ C pntation of plans by clarifying jobs ionships among them, the job will beand working relationships and done faster and in a better manner. N reeffectively deploying resources for From the above description, theattainment of identified and desired following steps emerge in the process © eresults (goals). of organising: (i) Identification and division of bSteps in the Process of work: The first step in the process of organising involves identifyingOrganising to and dividing the work that hasOrganising involves a series of steps to be done in accordance withthat need to be taken in order to previously determined plans. The tachieve the desired goal. Let us try work is divided into manageable oand understand how organising activities so that duplication can n Definition of Organising Organising is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority, and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives. Louis Allen Organising is the process of defining and grouping the activities of the enterprise and establishing authority relationships among them. Theo Haimman
  4. 4. Organising 115 Think About It Your school must have various societies for extra-curricular activities like the dramatics society, the quiz club, the economics society, the debating society and so on. Observe and list the way they have organised their activities using division of labour, chain of communication and the levels they have adopted for reporting on work. How far is this similar to the process you have read about? be avoided and the burden of the nature of a job and the e d h work can be shared among the ability of an individual. The work T li s employees. must be assigned to those who (ii) Departmentalisation: Once are best fitted to perform it well. R b work has been divided into small (iv) Establishing reporting and manageable activities then relation­ hips: Merely allocating s E u those activities which are similar work is not enough. Each C p in nature are grouped together. individual should also know Such sets facilitate speciali- who he has to take orders from N re sation. This grouping process and to whom he is accountable. is called departmentalisation. The establishment of such clear Departments can be created © e relationships helps to create a using several criteria as a basis. hierarchal structure and helps Examples of some of the most in coordination amongst various b popularly used basis are territory departments. (north, south, west etc.) and to products (appliances, clothes, Importance of Organising cosmetics etc). Performance of the organising iii) Assignment of duties: It is( function can pave the way for a t necessary to define the work smooth transition of the enterprise o of different job positions and in accordance with the dynamic n accordingly allocate work business environment. The signifi­ to various employees. Once cance of the organising function departments have been formed, mainly arises from the fact that it each of them is placed under helps in the survival and growth of the charge of an individual. an enterprise and equips it to meet Jobs are then allocated to the various challenges. In order for members of each department in any business enterprise to perform accordance to their skills and tasks and successfully meet goals, competencies. It is essential the organising function must be for effective performance that a properly performed. The following proper match is made between points highlight the crucial role that
  5. 5. 116 Business Studiesorganising plays in any business (iv) Adaptation to change: Theenterprise: process of organising allows a (i) Benefits of specialisation: business enterprise to accom­ Organising leads to a systematic modate changes in the business allocation of jobs amongst the environment. It allows the work force. This reduces the organisation structure to be d workload as well as enhances suitably modified and the revision e productivity because of the of inter-relationships amongst specific workers performing a managerial levels to pave the way h specific job on a regular basis. for a smooth transition. It also T li s Repetitive performance of a provides much needed stability particular task allows a worker to the enterprise as it can then R b to gain experience in that area continue to survive and grow E u and leads to specialisation. inspite of changes. (ii) Clarity in working relation­ (v) E f f e c t i v e a d m i n i s t r a t i o n : C p ships: The establishment of Organising provides a clear working relationships clarifies description of jobs and related N re lines of communication and duties. This helps to avoid confusion specifies who is to report to and duplication. Clarity in working © e whom. This removes ambiguity relationships enables proper in transfer of information execution of work. Management b and instructions. It helps in of an enterprise thereby becomes creating a hierarchical order easy and this brings effectiveness to thereby enabling the fixation of in administration. responsibility and specification (vi) Development of personnel: of the extent of authority to be Organising stimulates creativity t exercised by an individual. amongst the managers. Effective o iii) Optimum utilization of resou­( delegation allows the managers rces: Organising leads to the n to reduce their workload by proper usage of all material, fin­ assigning routine jobs to their ancial and human resources. subordinates. The reduction in The proper assignment of jobs workload by delegation is not avoids overlapping of work and just necessary because of limited also makes possible the best capacity of an individual but also use of resources. Avoidance allows the manager to develop new of duplication of work helps methods and ways of performing in preventing confusion and tasks. It gives them the time to minimising the wastage of explore areas for growth and the resources and efforts. opportunity to innovate thereby
  6. 6. Organising 117 Think About It Organising leads to specialisation in work. A pitfall of this is that repetitive performance of the same job may lead to monotony, stress, boredom and absenteeism. What can managers do to improve the scenario? d strengthening the company’s an enterprise whenever it grows in competitive position. Delegation size or complexity. It is only those e also develops in the subordinate enterprises which do not focus h the ability to deal effectively with on growth that can maintain a T li s challenges and helps them to particular structure for a long period realise their full potential. of time. However, it is important to R b vii) Expansion and growth: Organ­( understand that such stagnancy ising helps in the growth and E u may prove to be detrimental to an diversification of an enterprise enterprise as those companies which C p by enabling it to deviate from do not change at all will close down existing norms and taking up or cease to grow. N re new challenges. As an organisation grows, coordi­ It allows a business enterprise to nation becomes difficult due to the © eadd more job positions, departments emergence of new functions andand even diversify their product lines. increase in structural hierarchies. bNew geographical territories can be Thus, for an organisation to functionadded to current areas of operation smoothly and face environmental toand this will help to increase customer changes, it becomes necessary to paybase, sales and profit. attention to its structure. Thus, organising is a process by t Peter Drucker emphasises on thewhich the manager brings order out importance of having an appropriate oof chaos, removes conflict among organisation structure when hepeople over work or responsibility n says, “organisation structure is ansharing and creates an environment indispensable means; and the wrongsuitable for teamwork. structure will seriously impair busi­Organisation Structure ness performance and even destroy it.”Organisation structure is the The organisation structure canoutcome of the organising process. be defined as the framework withinAn effective structure will result which managerial and operatingin increased profitability of the tasks are performed. It specifies theenterprise. The need for an adequate relationships between people, workorganisation structure is felt by and resources. It allows correlation
  7. 7. 118 Business Studiesand coordination among human, over the operations of a businessphysical and financial resources and enterprise.this enables a business enterprise An organisation structure providesto accomplish desired goals. The the framework which enables theorganisation structure of a firm is enterprise to function as an integratedshown in an organisation chart. unit by regulating and coordinating d The span of management, to a large the responsibilities of individuals eextent gives shape to the organisatio- and departments. Let us try andnal structure. Span of management understand this through an example. hrefers to the number of subordinates For example: Smita opened her own T li sthat can be effectively managed by a travel agency, sometime back. Shesuperior. This determines the levels of assigned work to her three employees R bmanagement in the structure. in the following manner ‘Neha, you E u A proper organisation structure is are incharge of air plane, train andessential to ensure a smooth flow of bus reservations.’ ‘Karan, you will C pcommunication and better control take care of accommodation booking’ N re Honda to Strengthen Structure of its R&D Operations Corporate February 21, 2006 © e TOKYO, Japan, February 21, 2006 – Honda Motor Co. Ltd. announced plans, effective April 1, 2006, to launch a new organisational structure for Honda R&D Co. Ltd., a wholly b owned subsidiary of Honda responsible for research & development activities. Due to recent technological advancements and continued business expansion, the variety and complexity to of technological components and the number of vehicles under development at Honda R&D have increased dramatically. The new structure will be launched both in response to this situation and to prepare for further expansion of business in the future. The new structure t will enable each associate to demonstrate a high level of initiative, with more clear definition of roles and responsibilities and bold delegation of authority.  Moreover, the new structure is o designed to achieve smoother communication to help accelerate decision making within the n organisation.  The key elements of the new structure are as follows: Outline of the New Structure: 1. Existing R&D centers including Asaka R&D Center, Wako R&D Center, and Tochigi R&D Center, which are currently organised based on geographical location and will be reorganised into five centers based on specific functions. The names of the five centers will be Motorcycle Development Center, Automobile Development Center, Power Products Development Center, Aero Engine Development Center, and Basic Technology Research Center. 2. Each center will have separate offices for planning, product development, technology development and administration with clearly defined roles. 3. Primary authority to make operational decisions, currently held by the head of each center,
  8. 8. Organising 119 A Board member in charge of the Head Development Centre (Board member of Honda R&D) Planning Developing road- maps of technology d Head Head Head and product development e Administration Technology Development Product Development h All administrative Technology development Product development T li s roles including for each component of a including product general affairs, product such as engine and design R b HR, facility chassis E u management, etc. will be delegated to the head of each office within each center to achieve an autonomous C p operational structure through which each office can make more decisions. 4. A flat and less-layered organisational structure will be employed to ensure smooth and N re direct communications between the head of the office and each associate. 5. The product development function of the Automobile Development Center will be further © e separated between the Honda brand and Acura brand. This structural change is a part of Honda’s continuous effort to strengthen the core characteristics that makes Honda unique, and its purpose is to continue creating advanced b and creative technologies and products that are unique to Honda, which in turn will enable Honda to continue to be a company that society wants to exist. to http://world.honda.com/news/2006/c060221RandDOperations/ o t‘Sahil, you will keep track of onlinequeries and credit card payments’. I and types of activities performed by an organsation. The organisational nwant regular reports from the three structure can be classified under twoof you. Thus, in a few sentences an categories which are as follows:organisation structure has been (i) Functional structure andcreated specifying lines of authority (ii) Divisional structureand areas of responsibility. Functional structureTypes of Organisation Grouping of jobs of similar natureStructures under functional and organisingThe type of structure adopted by an these major functions as separateorganisation will vary with the nature departments creates a functional
  9. 9. 120 Business Studies Functional Structure Managing Director Research and e d h Human Resources Marketing Development Purchasing T listructure. All departments report to a R bcoordinating head. For example, in a s (d) It leads to minimal duplication of effort which results in economies E umanufacturing concern division of work of scale and this lowers cost.into key functions will include production, (e) It makes training of employees C ppurchase, marketing, accounts and easier as the focus is only on apersonnel. These departments may be limited range of skills. N refurther divided into sections. Thus, a (f) It ensures that different functionsfunctional structure is an organisational get due attention. © edesign that groups similar or related Disadvantages: The functionaljobs together. structure has certain disadvantages bAdvantages: The functional struc­ which an organisation must taketure has many advantages to offer. into consideration before it adopts it. toImportant among them are as follows: Some of them are as follows:(a) A functional structure leads to (a) A functional structure places less occupational specialisation since emphasis on overall enterprise t emphasis is placed on specific objectives than the objectives o functions. This promotes efficiency pursued by a functional head. in utilisation of manpower as Such practices may lead to n employees perform similar tasks functional empires wherein within a department and are able the importance of a particular to improve performance. function may be overemphasised.(b) It promotes control and coord­ Pursuing departmental interests ination within a department at the cost of organisational because of similarity in the tasks interests can also hinder the being performed. interaction between two or more(c) It helps in increasing managerial departments. and operational efficiency and (b) It may lead to problems in this results in increased profit. coordination as information has to
  10. 10. Organising 121 Think About It Read newspapers regularly and try to identify the structures various business organisations being mentioned in the news have adopted. Have their structures led to improved and desired results in any way? d be exchanged across functionally themselves away from the simpler and e differentiated departments. basic functional structure towards(c) A conflict of interests may arise a divisional structure which is more h when the interests of two or more suited to their activities. This is T li s departments are not compatible. particularly true of those enterprises For example, the sales department which have more than one category R b insisting on a customer friendly of products to offer. This is because E u design may cause difficulties in although every organisation performs production. Such dissension can a set of homogenous functions, as C p prove to be harmful in terms of it diversifies into varied product categories, the need for a more evolved N re fulfillment of organisational interest. Inter-departmental conflicts can structural design is felt to cope with the emerging complexity. also arise in the absence of clear © e In a divisional structure, the separation of responsibility. organisation structure comprises of(d) It may lead to inflexibility as people b separate business units or divisions. with same skills and knowledge Each unit has a divisional manager base may develop a narrow pers­ responsible for performance and who to pective and thus, have difficulty has authority over the unit. Generally, in appreciating any other point of manpower is grouped on the basis t view. Functional heads do not of different products manufactured. get training for top management o Each division is multifunctional positions because they are unable because within each division func­ n to gather experience in diverse tions like production, marketing, areas. finance, purchase etc, are performedSuitability: It is most suitable when together to achieve a common goal.the size of the organisation is large, has Each division is self-contained as ita diversified activities and operations develops expertise in all functionsrequire a high degree of specialisation. related to a product line. In order words, within each division,Divisional Structure the functional structure tends to beMany large organisations with adopted. However, functions may varydiversified activities have reorganised across divisions in accordance with a
  11. 11. 122 Business Studies Organisation Chart Managing Director Showing Divisional and Functional Structure Cosmetics Garments Footwear Skin care e d T li s h R b Research and Human Resources Marketing Development Purchasing E u C pparticular product line. Further, eachdivision works as a profit center where of the division and appropriate remedial action can be taken. N rethe divisional head is responsible for (c) It promotes flexibility and initiativethe profit or loss of his division. For because each division functions as © eexample, a large company may have an autonomous unit which leadsdivisions like cosmetics, clothing etc. to faster decision making. bAdvantages: The divisional structure (d) It facilitates expansion and growthoffers many benefits. Prominent as new divisions can be added toamong these are as follows: without interrupting the existing(a) Product specialisation helps in the operations by merely adding development of varied skills in a another divisional head and staff t divisional head and this prepares for the new product line. o him for higher positions. This is Disadvantages: The divisional stru­ n because he gains experience in all cture has certain disadvantages. functions related to a particular Some of them are as follows: product. (a) Conflict may arise among diffe­(b) Divisional heads are accountable rent divisions with reference to for profits, as revenues and costs allocation of funds and further related to different departments can a particular division may seek to be easily identified and assigned to maximise its profits at the cost of them. This provides a proper basis other divisions. for performance measurement. (b) It may lead to increase in costs It also helps in fixation of respons- since there may be a duplication ibility in cases of poor performance of activities across products.
  12. 12. Organising 123 Providing each division with adopt a divisional structure. Table 1 separate set of similar functions provides a comparison of functional increases expenditure. and divisional structure to provide(c) It provides managers with the further clarity on the topic. authority to supervise all activities Thus, it can be said that business related to a particular division. In operates in a dynamic environment d course of time, such a manager and those enterprises which fail e may gain power and in a bid to adapt to change are unable to assert his independence may to survive. Hence, management h ignore organisational interests. must continuously review its plans T li sSuitability: Divisional structure is and objectives and accordinglysuitable for those business enter­ the organisation structure of the R bprises where a large variety of pro­ enterprise should also be subjected E uducts are manufactured using diffe­ to periodic review to determinerent productive resources. When an if modification is required. An C porganisation grows and needs to add organisation structure, at all timesmore employees, create more depar­ should contribute towards the N retments and introduce new levels achievement of the enterprise’sof management, it will decide to objectives and should provide scope © e Comparative view: Functional and Divisional Structure b Basis Functional Structure Divisional Structure Formation Formation is based on Formation is based on product to functions lines and is supported by functions. Specialisation Functional specialisation. Product specialisation. t Responsibility Difficult to fix on a Easy to fix responsiblity for o department. performance. n Managerial Difficult, as each Easier, autonomy as well as Development functional manager the chance to perform multiple has to report to the top functions helps in managerial management. development. Cost Functions are not Duplication of resources in duplicated hence various departments, hence economical costly. Coordination Difficult for a multi- Easy, because all functions product company. related to a particular product are integrated in one department.
  13. 13. d Organisation Chart of ONGCBusiness Studies C & MD e h l Company Secretary l Corporate Affairs MD, ONGC Videsh Ltd. Chief Vigilance Officer s l T li Director Director Director Director Director Director Tech & Field ... To be filled ... Onshore R b Offshore Exploration HR Finance Services Mumbai Supply Ahmedabad E u Western HRD Chief Drill. Internal Chief Infocom Offshore IDT Audit High Bases Services C p Ankleshwar Western Functional IOGPT Drilling Commer- Chief Planning Bassein & Onshore HR Planning N re Uran Plant cial Projects & Cap. Satellite Mehsana IEOT Assam & Cementing Budget Assam-Arakan Employee Heera & Hazira Assam Relations Mud Explor. & Perfor- Chief MM Neelam Plant Cauvery Dev Tech mance Chief Well © e Karaikal ONGC mgmt & Chief Business Offshore (Cauvery) KG-PG Academy Services Bench- Devp., JVs & b PSC - JV marking Marketing GVK (Frontier) Security Workover Rajamundhry (KG) KDIMPE WSS Chief SHE Legal to Regional IPSEM Tripura Medical Well Labs Completion Chief EM. IRS Corporate & Drilling Technical Audit Comm & QA t GEOPIC Geophysical Services o Chief Logging Mainte- Chief Regional Geo- nance Engineering CBMMBP n physical Services Design Head, Regional Exploration Officer Directorate Works EX COM Adapted from www.ongc.com/archives1124
  14. 14. Organising 125 Structural Transformation at ONGC Since its inception, ONGC has been instrumental in transforming the country’s limited upstream sector into a large viable playing field, with its activities spread throughout India and significantly in overseas territories. The 1990s had begun on a grim note for ONGC. It took almost a decade for the Corporation d to sort things out in most uncertain of times. Among many problems, the Corporation was also suffering from the organisational atrophy. e In order to survive ONGC sought help from Mc Kinsey. h Mc Kinsey’s mandate was to evolve an organisational structure that was far more responsive to its business needs than that based on business groups. The ONGC system run T li s by functional heads often meant delays exceeding a year in matters requiring urgent decisions on fields. Also, since responsibilities were shared at production platforms between different R b business groups, the system degenerated into wrangling over responsibilities. Similarly, group E u loyalties often took precedence over the requirements of tasks. But, most importantly, it was found that the performance evaluation criteria based on business group yardstick were C p completely at loggerheads with requirements on fields. Mc Kinsey recommended an asset- based approach with clearly-defined responsibilities in its presentation titled ‘Organisation N re Transformation Project’ Though Mc Kinsey recommendations were broadly accepted, coordination issues concerning commonly-shared services needed to be sorted out. © e Finally, the first control over all service personnel working with asset teams was vested in asset managers, on grounds that being responsible for the performance of their strategic b business units they must rightfully exercise control over all personnel working with them. Even procurement powers were devolved. Finally, a new structure made up of 14 assets and to 11 centralised services was rolled out . t Do It Yourself o You have seen the structure of ONGC as an illustration in this text. n Browse the websites of other business organisations and study their organisational chart. Try to identify the structure they are using.for initiative so that contribution In all organisations, employees areof personnel can be maximum and guided by rules and procedures.effective. To enable smooth functioning of the enterprise, job description andFormal and Informal ormal rules and procedures related to workOrganisation rganisation processes have to be laid down. This is done through the formal organisation.
  15. 15. 126 Business Studies Formal organisation refers to (e) It places more emphasis onthe organisation structure which work to be performed thanis designed by the management interpersonal relationships amo­to accomplish a particular task. It ng the employees.specifies clearly the boundaries of Advantages: Formal organisationauthority and responsibility and offers many advantages. Some of the dthere is a systematic coordination important ones are: eamong the various activities to (a) It is easier to fix responsibilityachieve organisational goals. since mutual relationships are h The structure in a formal organ­ clearly defined. T li sisation can be functional or divis­ (b) There is no ambiguity in the roleional. The formal organisation can that each member has to play R bbe better understood by a study of its as duties are specified. This also E ufeatures which are as follows: helps in avoiding duplication of(a) It specifies the relationships effort. C p among various job positions (c) Unity of command is maintained and the nature of their inter- through an established chain of N re relationship. This clarifies who command. has to report to whom. (d) It leads to effective accomplish­ © e(b) It is a means to achieve the ment of goals by providing a objectives specified in the plans, as framework for the operations to b it lays down rules and procedures be performed and ensuring that essential for their achievement. each employee knows the role he to(c) Efforts of various departments has to play. are coordinated, interlinked and (e) It provides stability to the organ­ integrated through the formal isation. This is because behaviour t organisation. of employees can be fairly pre­ o(d) It is deliberately designed by the dicted since there are specific n top management to facilitate rules to guide them. the smooth functioning of the Limitations: The formal organisation organisation. suffers from the following limitations: Formal Organisation The formal organisation is a system of well-defined jobs, each bearing a definite measure of authority, responsibility and accountability. Louis Allen Formal organisation is a system of consciously coordinated activities of two or more persons toward a common objective. Chester Barnand
  16. 16. Organising 127(a) The formal communication may friendship they tend to form groups lead to procedural delays as the which show conformity in terms of established chain of command has interest. Examples of such groups to be followed which increases the formed with common interest may be time taken for decision making. those who take part in cricket matches(b) Poor organisation practices may on Sundays, meet in the cafeteria for d not provide adequate recognition coffee, are interested in dramatics e to creative talent, since it does not etc. Informal organisation has no allow any deviations from rigidly written rules, is fluid in form and h laid down polices. scope and does not have fixed lines of T li s(c) It is difficult to understand all communication. The Table in the next human relationships in an enter­ page compares informal organisation R b prise as it places more emphasis with the formal organisation to provide E u on structure and work. Hence, better understanding of both types. the formal organisation does not Informal organisation can be C p provide a complete picture of how better understood with the help of an organisation works. the following features: N re (a) An informal organisation orig­Informal Organisation inates from within the formal orga­ © eInteraction among people at work nisation as a result of personalgives rise to a ‘network of social interaction among employees. brelationships among employees’ called (b) The standards of behaviourthe informal organisation. evolve from group norms rather to Informal organisation emerges than officially laid down rules andfrom within the formal organisation regulations.when people interact beyond their (c) Independent channels of commu­ tofficially defined roles. When people nication without specified direc­ ohave frequent contacts they cannot tion of flow of information are nbe forced into a rigid formal structure. developed by group members.Rather, based on their interaction and Informal Organisation An informal organisation is an aggregate of interpersonal relationships without any conscious purpose but which may contribute to joint results. Chester Barnand Informal organisation is a network of personal and social relations not established or required by the formal organisation but arising spontaneously as people associate with one another. Keith Davis
  17. 17. 128 Business Studies(d) It emerges spontaneously and is (b) It helps to fulfill the social needs not deliberately created by the of the members and allows them management. to find like minded people. This(e) It has no definite strucure or form enhances their job satisfaction because it is a complex network since it gives them a sense of of social relationships among belongingness in the organisation. d members. (c) It contributes towards fulfillment eAdvantages: The informal orga­ of organisational objectives bynisation offers many benefits. Impor­ compensating for inadequacies in htant among them are given below: the formal organisation. For example, T li s(a) Prescribed lines of commu­ employees reactions towards plans nication are not followed. Thus, and policies can be tested through R b the informal organisation leads the informal network. E u to faster spread of information as Disadvantages: The informal orga­ well as quick feedback. nisation has certain disadvantages. C p Some of them are as follows: N re Formal and informal organisation: A Comparative view © e Basis Formal organisation Informal organisation Network of social Structure of authority b relationships arising outMeaning relationships created by the of interaction among management to employees Arises as a result of Arises as a result of socialOrigin company rules and policies interaction t Arises by virtue of position Arises out of personal oAuthority in management qualities n There is no set behaviourBehavior It is directed by rules pattern Flow of communication Communication takes place is not through a plannedFlow of Communication through the scalar chain route. It can take place in any directionNature Rigid Flexible Leaders may or may notLeadership Managers are leaders. be managers. They are chosen by the group.
  18. 18. Organising 129(a) I n f o r m a l o r g a n i s a t i o n m a y communication channels. Instead of become a disruptive force when it confronting them, the management spreads rumours. This may work should skillfully take advantage against the interest of the formal of both the formal and informal organisation. organisation so that work continues(b) The management may not be smoothly. d successful in implementing chan­ Delegation e ges if the informal organisation opposes them. Such resistance A manager, no matter how capable he h to change may delay or restrict is, cannot manage to do every task on T li s growth. his own. The volume of work makes(c) It pressurises members to conform it impractical for him to handle it all R b to group expectations. This can by himself. As a consequence, if he E u be harmful to the organisation if desires to meet the organisational the norms set by the group are goals, focus on objectives and ensure C p against organisational interests. that all work is accomplished, he Informal organisation cannot be must delegate authority. N realtogether eliminated. Thus, it would Delegation refers to the downwardbe in the best interest of the organi­ transfer of authority from a superior © esation if the existence of such groups to a subordinate. It is a pre-requisiteis recognised and the roles that to the efficient functioning of an btheir members play are identified. organisation because it enablesThe knowledge of such groups can a manager to use his time on high tobe used to gather their support priority activities. It also satisfies theand consequently lead to improved subordinate’s need for recognitionorganisational performance. Such and provides them with opportunities tgroups can also provide useful to develop and exercise initiative. no Delegation Delegation is the process a manager follows in dividing the work assigned to him so that he performs that part which only he because of his unique organisational placement, can perform effectively and so that he can get others to help with what remains. Louis Allen Delegation of authority merely means the granting of authority to subordinates to operate within prescribed limits. Theo Haimman
  19. 19. 130 Business Studies Delegation helps a manager to Elements of Delegationextend his area of operations as According to Louis Allen, delegationwithout it, his activities would be is the entrustment of respons-restricted to only what he himself ibility and authority to another andcan do. However, delegation does the creation of accountability fornot mean abdication. The manager performance. dshall still be accountable for theperformance of the assigned tasks. A detailed analysis of Louis Allen’s eMoreover, the authority granted to a definition brings to light the following hsubordinate can be taken back and essential elements of delegation: T li sredelegated to another person. Thus, (i) Authority: Authority refersirrespective of the extent of delegated to the right of an individual to R bauthority ,the manager shall still be command his subordinates andaccountable to the same extent as E u to take action within the scopebefore delegation. of his position. The concept C p N re © e No delegation leads to delays in b decision-making t to no
  20. 20. Organising 131 Creation of accountability for performance e d T li s h R b E u C p N re © e b of authority arises from the Authority relationships helps to maintain order in the organisation to established scalar chain which links the various job positions by giving the managers the right to and levels of an organisation. exact obedience and give directions t Authority also refers to the right to the workforce under them. o to take decisions inherent in a Authority determines the superior managerial position to tell people subordinate relationship wherein the n what to do and expect them to superior communicates his decision do it. to the subordinate, expecting In the formal organisation authority compliance from him and theoriginates by virtue of an individual’s subordinate executes the decisionposition and the extent of authority as per the guidelines of the superior.is highest at the top management The extent to which a superior canlevels and reduces successively as we exact compliance also depends ongo down the corporate ladder. Thus, the personality of the superior.authority flows from top to bottom, It must be noted that authorityi.e., the superior has authority over is restricted by laws and the rulesthe subordinate. and regulation of the organisation,
  21. 21. 132 Business Studieswhich limit its scope. However, as with the assigned responsibility.we go higher up in the management If authority granted is more thanhierarchy, the scope of authority responsibility, it may lead to misuseincreases. of authority, and if responsibility (ii) Responsibility: Responsibility assigned is more than authority it is the obligation of a subor- may make a person ineffective. d dinate to properly perform iii) Accountability: Delegation of ( the assigned duty. It arises authority, undoubtedly empowers e from a superior–subordinate an employee to act for his superior h relationship because the subor- but the superior would still be T li s dinate is bound to perform the accountable for the outcome: duty assigned to him by his Accountability implies being R b superior. Thus, responsibility answerable for the final outcome. flows upwards i.e., a subordinate Once authority has been delegated E u will always be responsible to his and responsibility accepted, one C p superior. cannot deny accountability. It cannot An important consideration to be delegated and flows upwards i.e., a N rebe kept in view with respect to subordinate will be accountable to aboth authority and responsibility superior for satisfactory performance © eis that when an employee is given of work. It indicates that the mangerresponsibility for a job he must also has to ensure the proper discharge bbe given the degree of authority of duties by his subordinates. It isnecessary to carry it out. Thus, for generally enforced through regular toeffective delegation the authority feedback on the extent of workgranted must be commensurate accomplished. The subordinate will be t Overview of the elements of delegation o Basis Authority Responsibility Accountability nMeaning Right to command. Obligation to Answerability for perform an assigned outcome of the task. assigned task.Delegation Can be delegated. Cannot be entirely Cannot be delegated delegated. at all.Origin Arises from formal Arises from Arises from position . delegated authority. responsibility.Flow Flows downward Flows upward from Flows upward from from superior to subordinate to subordinate to subordinate. superior. superior
  22. 22. Organising 133expected to explain the consequences bility is assumed, accountability isof his actions or omissions. imposed. Responsibility is derived from In conclusion, it can be stated that authority and accountability is derivedwhile authority is delegated, responsi­ from responsibility. The Table in the Interview with Azim Premji d knowledge.wharton.upenn.edu: April 20, 2006 e Azim Premji, owns more than 80 per cent of Bangalore-based Wipro, India’s third largest software exporter, which had annual revenues of US $ 1.8 billion in 2005. Forbes magazine h reckons that his net worth exceeds US $ 13 billion, and it places him at No. 25 in its most T li s recent ranking of the world’s richest people. Premji speaks with Ravi Aron, a professor of operations and information management at Wharton about Wipro’s reorganisation. R b Aron: After Vivek Paul [Wipro’s former CEO] left the company last year, you made radical E u changes in your organisational structure. How did they affect your markets and your vision for where Wipro is going? C p Premji: The most important thing you must appreciate is that, with the reorganisation, we tried to bring Wipro’s leadership closer to the customer. In the process, we tried to de-layer N re the organisation and empower our business leaders. That is why we removed an entire layer which was there previously. Our executives are seasoned enough in their jobs and they have performed long enough in their roles to be confident that they can deliver results through © e the new structure. Aron: As part of your new structure, have you started redefining the organisation with P&L b responsibility at the level of the vertical? [Editor’s note: Wipro’s vertical structure divides the company into units such as Telecom Service Providers, Product Engineering Solutions, to Finance Solutions, and Enterprise Solutions. These units further cater to industries such as banking, insurance, securities, and so on.] Premji: No. Each vertical is like a self-contained business. It is like a mid-sized company even t by U.S. standards, because each vertical generates about $300 million in annual revenues. o Though they work under a common structure, with resources such as Finance, HR, Quality and Marketing, each vertical has people who represent these functions. So, in effect, each n vertical is like a separate company. Aron: Does that mean you intend to delegate more authority and responsibility to these self-contained companies? Premji: Absolutely. Aron: What is your thinking behind this? Premji: It all goes back to leadership. It speeds things up and gets decisions made faster. It empowers people more, and it allows them to further empower those who report to them, because their jobs have suddenly become much more responsible. http://www.ibef.org/artdisplay.aspx?cat_id=105&art_id=11158
  23. 23. 134 Business Studiesprevious page provides a summarised iii) M o t i v a t i o n ( o fview of the elements of delegation. employees:Delegation helps in developing the talents ofImportance of Delegation the employees. It also hasDelegation ensures that the subordi­ psychological benefits. When anates perform tasks on behalf of superior entrusts a subordinatethe manager thereby reducing his d with a task, it is not merely theworkload and providing him with sharing of work but involves emore time to concentrate on important trust on the superior’s part and hmatters. Effective delegation leads to commitment on the part of thethe following benefits: T li s subordinate. Responsibility for (i) Effective management: By work builds the self-esteem of R b empowering the employees, the an employee and improves his managers are able to function E u confidence. He feels encouraged more efficiently as they get more and tries to improve his time to concentrate on important C p performance further. matters. Freedom from doing (iv) Facilitation of growth: Delega­ N re routine work provides them with tion helps in the expansion of opportunities to excel in new an organisation by providing areas. © e a ready workforce to take up (ii) Employee development: As a leading positions in new ventures. result of delegation, employees b Trained and experienced emp­ get more opportunities to utilise loyees are able to play significant their talent and this may give to roles in the launch of new rise to latent abilities in them. projects by replicating the work It allows them to develop those ethos they have absorbed from t skills which will enable them existing units, in the newly set o to perform complex tasks and up branches. assume those responsibilities (v) Basis of management hier­ n which will improve their career archy: Delegation of authority prospects. It makes them establishes superior-subordinate better leaders and decision relationships, which are the basis makers. Thus, delegation helps of hierarchy of management. It is by preparing better future the degree and flow of authority managers. Delegation empowers which determines who has to the employees by providing report to whom. The extent of them with the chance to use delegated authority also decides their skills, gain experience and the power that each job position develop themselves for higher enjoys in the organisation. positions.
  24. 24. Organising 135 (vi) B e t t e r c o o r d i n a t i o n : T h e powers, duties and answerability elements of delegation, namely related to the various positions authority, responsibility and in an organisation. This helps to accountability help to define the avoid overlapping of duties and Innovation at hcl d The world’s most modern management in India; HCL Technologies is empow­ e ering its employees and pointing the way to the future of business.Fortune, April 14, 2006. h Every employee rates their boss, their boss’ boss, and any three other company T li s managers they choose, on 18 questions using a 1-5 scale. Such 360-degree evaluations are not uncommon, but at HCL all results are posted online for every R b employee to see. That’s un-heard-of! And that’s not all. Every HCL employee can at any time create an electronic E u ‘ticket’ to flag anything they think requires action in the company. Amazingly, such tickets can only be ‘closed’ by the employees themselves. And Nayar [Vineet C p Nayar is president of India’s 30,000-employee HCL Technologies (Research)] is vigilant that managers not intimidate employees about creating or closing tickets. N re Managers are evaluated partly based on how many tickets their departments are creating - the more the better. © e In addition, every employee can post a question or comment on any subject in a public process called ‘U and I.’ About 400 come in each month, and questions and answers are all posted on the intranet. b “I want to be the company that gives superior service to my employees compared to everybody else,” he explains. He also firmly believes the ideas that will guide to HCL into the future will come not from him, but from below. Early signs suggest his bold strategy is working. Nayar has only been president for a year, a tumultuous t one in which most of these innovations have been implemented. But in that time the attrition rate has dropped in half, he says. HCL’s innovations are not only managerial. o The company aims to become a strategic partner with customers by working with them on business process management and by managing infrastructure remotely, n a business it has pioneered in India, says Nayar. The strategy has succeeded with AMD (Research), a marquee customer for which the company does the above mentioned business. Another key customer is Cisco (Research), a 10-year customer with whom HCL is now embracing another form of innovation- shared risk. Since February, HCL has been completely responsible for engineering one Cisco product. It gets paid based on how well the product sells. In engineering all this innovation, Nayar’s humility appears to be a potent managerial asset. Adapted from an article by David Kirkpatrick on: http://www.indianembassy.org/newsite/News/US%20Media/2006/115.asp
  25. 25. 136 Business Studies duplication of effort as it gives a of authority throughout all the levels clear picture of the work being of the organisation. Decision making done at various levels. Such clarity authority is shared with lower levels in reporting relationships help and is consequently placed nearest to in developing and maintaining the points of action. In other words effective coordination amongst decision making authority is pushed d the departments, levels and down the chain of command. e functions of management. When decisions taken by the Thus, delegation is a key element lower levels are numerous as well hin effective organising. as important an organisation can be T li s regarded as greatly decentralised.Decentralisation R bIn many organisations the top Centralisation and Decentralisation E umanagement plays an active rolein taking all decisions while there Centralisation and decentralisation C pare others in which this power is are relative terms, as seen from thegiven to even the lower levels of existing status of various business N remanagement. Those organisations enterprises.in which decision making authority An organisation is centralised © elies with the top management are when decision-making authoritytermed as centralised organisations is retained by higher management bwhereas those in which such levels whereas it is decentralisedauthority is shared with lower levels when such authority is delegated. toare decentralised organisations. Complete centralisation would Decentralisation explains the imply concentration of all decisionmanner in which decision making making functions at the apex of tresponsibilities are divided among the management hierarchy. Such a ohierarchical levels. Put simply, scenario would obviate the need for adecentralisation refers to delegation management hierarchy. On the other n Decentralisation Decentralisation refers to systematic effort to delegate to the lowest level all authority except that which can be exercised at central points. Louis Allen Everything which goes to increase the importance of a subordinate’s role is decentralisation, everything that goes to reduce it is centralisation. Henri Fayol

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