Management Principles & Practice
IBMR- HIBMR- H
Concept of Organisation: The term ‘Organisation’ is used in management
literature in two different ways
1)Organisation as a Structure
2)Organisation as a Process
Nature of Organisation: The main characteristics of an Organisation are as
2)Division of Labour
8)Rules and Regulations
Definition of Organisation:
The organisation is defined as the rational coordination of
activities of a number of people for the achievement of some common
explicit purpose or goal, through division of labour and function, and
through a hierarchy of authority and responsibility.
The term ‘Organisation’ is defined as the process of identifying
and grouping of the work to be performed, defining and delegation the
responsibility and authority, and establishing relationships for the
purpose of enabling people to work most effectively together in
accomplishing their objectives.
Steps in Organising Process: The process of designing organisation structure
involves the following steps:
1. Identification of Activities
2. Grouping of Activities
3. Assignment of Duties
4. Delegation of Authority
a) Activities Analysis
b) Decision Analysis
c) Relations Analysis
Determinants of Organisation Structure: Organisation structure is not a static
frame. It undergoes change with changes in the external and internal conditions. While
designing the internal organisation structure, management should consider the
1. Unity of Objective
2. Specialisation or Division of Work
3. Span of Control
4. Scalar Principle
5. Functional Definition
6. Exception Principle
7. Unity of Command
12. Facilitation of Leadership
13. Authority and Responsibility
Principles of Organisation (Features of a Good Organisation Structure)
Formal and Informal Organisation
Formal Organisation: Formal organisation means the intentional structure of roles n
a formally organised enterprise. It furnish an environment in which individual
performance contributes most effectively to group goals.
Informal Organisation: Informal organisation can be described as a network of
personal and social relations not established or required by the formal organisation but
arising spontaneously as people associate with one another.
The Intrapreneur and the Entrepreneur
Intrapreneur: An Intrapreneur is a person who focuses on innovation and creativity
and who transforms a dream or an idea into a profitable venture by operating within
the organisational environment.
Entrapreneur: An Entrepreneur is a person who does similar things that of
Intrapreneur, but outside the organisational setting. They have the ability to see the
opportunity, obtain the necessary capital, labour and other inputs and the know how to
put together an operation successfully. They are willing to take the personal risk of
success and failure.
SPAN OF MANAGEMENT
The term ‘Span of Management’ is also known as ‘span of
control’ and ‘Span of Supervision’. Span of Management refers to the
number of subordinates that report directly to a single manager or
It is necessary decide the appropriate span for every executive.
If the no. of subordinates reporting directly to a manager is very large, he
may not be able to exercise effective supervision and control. On the
other hand, if the no. is too small, full use of manager’s abilities may not
be made and the subordinates may not get adequate autonomy on work.
There is a limit on the no. of subordinates that a manager can effectively
1. Nature of work
2. Type of technology
3. Ability of the manager
4. Capacity of subordinates
5. Degree of decentralisation
7. Staff assistance
8. Communication techniques
9. Time available for supervision
10. Geographical dispersion of subordinates
Factors Determining the Span of Management
1. Superiors are forced to delegate
2. Clear policies must be made
3. Subordinates must be carefully
1. Tendency of overloaded superiors to
become decision bottlenecks
2. Danger of Superior’s loss of control
3. Requires exceptional quality of
1. Close Supervision
2. Close control
3. Fast Communication between
subordinates and superiors
1. Superiors tend to get too
involved subordinates work
2. Many levels of management
3. High costs due to many levels
4. Excessive distance between
lowest level and top level
Organization Structure with narrow spans
Organization Structure with wide spans
Grouping of activities into departments, divisions or other
homogeneous units is known as departmentation.
Departmentation or departmentalisation is the process of
grouping tasks into jobs, the combining of jobs into effective work
groups and the combining of groups into identifiable segments or
departments. It involves horizontal differentiation of activities in an
A department is a division, branch, regiment or some other
organisational unit over which a manager has authority for performance
of task. Thus, departmentation is the process of dividing the work of
organisation into departments or other manageable units.
Need and Importance of Departmentation:
The basic purpose of departmentation is to make the size of each
departmental unit manageable and to secure advantages of specialisation.
Departmentation is necessary on account of the following reasons:
4. Fixation of Responsibility
6. Management Development
7. Administrative Control
Bases or Types of Departmentation (Patterns of Departmentation)
1. Departmentation of Functions
2. Departmentation by Products
3. Departmentation by Territory
4. Departmentation by Customer
5. Composite Departmentation (Matrix Organisation).
Line / Staff Authority
▪Power and Authority
Decentralisation of Authority
Decentralisation is the tendency to disperse decision-making authority in an
organised structure. It is a fundamental aspect of delegation; to the extent that
authority is not delegated, it is centralised.
Advantages of decentralisation:
1.Relieves top management of some burden of decision making and forces upper-
level managers to let go.
2.Encourages decision making and assumption of authority and responsibility.
3.Gives managers more freedom and independence in decision making.
4.Promotes establishment and use of broad controls which may increase
5.Makes comparison of performance of different organizations units possible.
6.Facilitates setting up of profit centres.
7.Facilities product diversification.
8.Promotes development of general managers.
9.Aids in adaptation to fast changing environment
Delegation of Authority (Personal Attitudes toward Delegation)
▪Willingness to let go
▪Willingness to let others to make mistakes
▪Willingness to trust subordinates
▪Willingness to establish and use broad controls
Limitation of decentralisation:
1.Makes it more difficult to have a uniform policy.
2.Increase complexity of coordination of decentralised organisational units.
3.May result in loss of some control by upper level managers.
4.Can be limited by the availability of qualified managers.
5.Involves considerable expenses for training managers.
▪Understanding Authority Relationships
▪Making Lines Listen to Staff
▪Keeping Staff Informed
▪Requiring Completed Staff Work
▪Making Staff work as a way of organisational life
▪Providing Organization Charts
Defining Organisational Culture
As it relates to organisations, culture is the general pattern of
behaviour, shared beliefs, and values that members have in common.
Culture can be inferred from what people say, do, and think within
an organisational setting . It often sets the tone for the company and
establishes implied rules for the way people should behave.
Promoting an appropriate Organisation Culture: The effectiveness of an organisation is also
influenced by the organisation culture, which affects the way the managerial functions of
planning, organising, staffing, leading, controlling are carried out.
Environment A Environment B
Goals are set in an autocratic manner.
Decision making is centralised.
Authority is centralised.
Authority is narrowly defined.
People are selected on the basis of friendship.
Training is in a narrowly defined speciality.
Managers exercise directive leadership.
Communication flow is primarily top down.
Superiors exercise strict control.
Focus is on financial criteria.
Goals are set with a great deal of participation
Decision making is decentralised.
Authority is decentralised.
Authority is broadly defined.
People are selected on the basis of performance.
Training is in many functional areas.
Managers practice participative leadership.
Communication flow is top-down, bottom-up,
horizontal and diagonal.
Individual exercise a great deal of self control.
Focus is on multiple criteria.