OrganizingFoundation Course Semester 4- Prof. Karishma Shetty

PROF. KARISHMA SHETTY
ORGANIZING

“
▷ The term "organization" is derived from the word "organism" which means a
structure of body divided into parts that are held together by a fabric of
relationship as one organic whole.
Eg: In an enterprise, many departments, managers and employees work
together for achieving common objectives. It is the organisation structure which
binds them together and brings proper coordination in their work.
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FACT

MEANING/CONCEPT OF
ORGANIZATION/ ORGANIZING
▷Organizing means arranging the ways and means for the execution of a business plan
▷It is the creation of administrative set-up for the execution of the business plan.
▷It suggests the framework within which the management functions.
▷An organization provides mechanism for integrated and co-operative action by two or more
persons with a view to implementing plan.
▷An organization deals with a number of elements which define the relationships between the
members of a group.
▷The central theme of organisation relates to the process of harmonization between the worker
and the work.
▷It develops a useful relation at various stages of the business.
▷As lifeless body is static, so business without organisation is stationary.
▷As such, organisation is called the heart of the management
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DEFINTIONS OF ORGANIZATION
▷ George Terry defines
the process of
organising as "the
establishing of
effective authority
relationships among
selected work,
persons and work
places in order for the
group to work
together effectively."
▷ According to Louis A. Allen,
organisation is the process of
identification 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.
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NATURE/ FEATURES
OF AN ORGANIZATION
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NATURES/ FEATURES OF AN
ORGANIZATION:
▷ CO-ORDINATION OF EFFORT
▷ COMMON PURPOSE
▷ DIVISION OF LABOUR
▷ EFFECTIVE COMMUNICATION
▷ HIERACHY OF AUTHORITY
▷ RULES AND REGULATIONS
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SIGNIFICANCE/ IMPORTANCE
OF ORGANIZING
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SIGNIFICANCE/ IMPORTANCE OF
ORGANIZING
▷ ENSURES OPTIMUM UTILIZATION OF HUMAN RESOURCE
▷ FACILITATES CO-ORDINATION
▷ FACILITATES DIVISION OF WORK
▷ FACILITATES GROWTH, EXPANSION AND DIVERSIFICATION
▷ STIMULATES CREATIVITY
▷ FACILITATES EFFECTIVE COMMUNICATION
▷ BALANCED EMPHASIS ON VARIOUS ACTIVITIES
▷ FACILITATES ADMINISTRATION
▷ OPTIMUM USE OF TECHNOLOGY
▷ ORGANIZATIONS PINPOINTS INDIVISUAL’S RESPONSIBILITY AND WHAT IS
EXPECTED FROM HIM
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PROCESS OF
ORGANIZING
9

PROF. KARISHMA SHETTY 10
PROCESS
OF
ORGANIZING
ESTABLISHING OF FORMAL
REPORTING SYSTEM
MEASUREMENT OF
PERFORMANCE
DETERMINATION OF ACTIVITIES
ENUMERATION OF ACTIVITIES
IDENTIFICATION OF ACTIVITIES
ALLOCATION OF DUTIES
DELEGATION OF
AUTHORITY

PRINCIPLES OF
ORGANIZING
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PRINCIPLES OF ORGANIZING
▷ UNITY OF OBJECTIVES : Objectives of an enterprise influences the organization
structure and hence the objectives of the enterprise should be decided clearly and
firmly and there should be unity among the objectives to be decided.
▷ SPECIALIZATION : Specialization is necessary for raising the efficiency of the whole
organization structure. Employees should be assigned duties to different departments
as per qualifications, qualities and so on. The functions given to each department
should be preferably only of one category.
▷ DELEGATION OF AUTHORITY: Delegation is useful for getting the things done
through others. The basic idea behind delegation is to see decision-making power is
placed at a proper place. A successful manager delegates the authority and
responsibility to his sub-ordinates and also motivates them and make sure that they
take initiative, work efficiently and contribute for achieving organizational objectives.
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▷ CO-ORDINATION: Due to co-ordination one clear-cut direction is given to
people/departments and efforts will not be wasted or misdirected. Coordination also
brings integration in the basic functions of management. The principle of co-ordination
is important as it facilitates achievement of overall objectives of a business
organization and brings unity of action in the organization.
▷ UNITY OF COMMAND: Unity of Command as a principle of organization, suggests
that each subordinate should have only one superior whose command he has to obey.
▷ FLEXIBILITY: According to the principle of flexibility, the organization structure
should be flexible and not rigid. Such structure is adaptable to changing situations and
permits expansion or replacement without any serious dislocation and disruption.
▷ SIMPLICITY: The organization structure should be easy to manage and simple as far
as possible for clear understanding for all employees. The levels of management
should also be limited.
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▷ SPAN OF CONTROL: The span of control, as far as possible, should be fair. This means a manager
should not be asked to keep supervision on a large number of sub-ordinates. The span of control
should be balanced, narrow and manageable.
▷ SCALAR PRINCIPAL (CHAIN OF COMMAND): This principle suggests that the line of authority
from the chief executive to the first line of superiors should be clearly defined so as to avoid any
confusion as regards to the authority. This principle suggests that as far as possible, the chain of
authority should be short and not broken.
▷ EXCEPTION PRINCIPLE: It is not desirable to take routine matters to the top level managers
frequently. Very crucial and exceptionally complex problems should be referred to the top
executives and routine matters should be dealt by the junior executive at lower levels. The time of
the top executives is saved and they can use their time for dealing with more important and complex
problems.
▷ AUTHORITY AND RESPONSIBILITY: Authority acts as a power tool by which a manager can
achieve a desired objective. Authority of every manager should be clearly defined. Moreover, it
should be adequate to discharge the responsibilities assigned. The superior should be held
responsible for the acts of the sub-ordinates. He cannot run away from responsibility simply by
delegating authority to his sub-ordinates.
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▷ EFFIENCY: The organization structure should enable the enterprise to function
efficiently and in an orderly manner. This will enable the enterprise to accomplish its
objectives quickly and also at the lowest cost.
▷ PROPER BALANCE: Proper balance is necessary in different aspects of the
organization. This means there should be reasonable balance in the size and functions
of department, centralizations and decentralization of the organization, span of control
, chain of command and finally in between human and material resources. The
principle suggests that the top management should see that the vertical and
horizontal dimensions of the organization should be fairly balanced.
▷ SEPARATION OF LINE AND STAFF FUNCTIONS: Line functions are directly
connected with operations while staff functions are auxiliary to the line functions. Line
functions should be separated from staff functions even when they are supplementary
in character. These function should be coordinating when necessary but normally they
should be kept separate.
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FORMAL AND INFORMAL
ORGANIZATION AND
STRUCTURE

FORMAL
ORGANISATION
STRUCTURE:
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▷ Formal organization refers to the organization structure deliberately created by
management for achieving the objectives of an enterprise.
▷ Such organisation structure contains a pattern of activities, processes, human
relationships and roles carefully planned and structured in order to achieve
organisational objectives.
▷ Formal organisation is a network of official authority responsibility relationships.
▷ Formal organisation structure has official status/recognition.
▷ It is a carefully prepared/ rational structure with reasonable stability.
▷ It consists of those relationships that are relatively stable and change only slowly
when required.
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MEANING/CONCEPT OF
FORMAL ORGANIZATIONAL SECTOR

DEFINTIONS OF FORMAL ORGANIZATIONAL
STRUCTURE
▷ According to Chester Bernard,
"an organisation is "formal" when
the activities of two or more
persons are consciously
coordinated towards common
objective". Such formal
organisation comes into
existence when: (a) Two or more
persons come together, (b) They
share one common purpose/
objective, and (c) They are willing
to work together in order to
achieve a common objective.
▷ According to Allen,
"The formal
organisation is a system
of well defined jobs,
each bearing a definite
measure of authority,
responsibility and
accountability":
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FEATURES OF FORMAL ORGANISATION
STRUCTURE:
▷ A formal organisation is a group of people working together towards
objectives which mutually benefit the participants and the organisation.
▷ Formal groups exist in all organisations. Such groups are created in order
to carry out specific duties.
▷ Formal groups are in the form of committees, task force, project teams,
etc.
▷ Formal groups are given proper official status and operate as per certain
rules and procedures.
▷ In a formal organisation, the structure of jobs and their positions are
clearly defined. Each job has definite measure of authority, responsibility
and accountability.
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MERITS OF FORMAL ORGANISATION:
▷ Members show confidence in the formal
organisation structure.
▷ The objectives are easily achieved.
▷ The efforts of employees are well coordinated.
▷ The subordinates are made accountable for
the work.
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LIMITATIONS OF FORMAL ORGANISATION
▷ Formal organisation is found to be rigid.
▷ Individual objectives often influence organisational
objectives.
▷ Employees get limited opportunity to show
initiative.
▷ Decision-making becomes time-consuming
because of constant consultations.
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INFORMAL
ORGANISATION
STRUCTURE:
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MEANING OF INFORMAL
ORGANISATION STRUCTURE:
▷ Informal organisation structure refers to the pattern of activities, interactions and
human relationships developed spontaneously (not officially as in the case of
formal organisation) due to social and psychological forces operating at the work
place.
▷ This organisation structure develops in a natural way. It is a type of unintended and
non-planned network based on unofficial human relationships.
▷ Informal organisation suggests the interpersonal and intergroup relations
developed within the formal organisation structure.
▷ Common language or common habits may also create such informal groups. It is
an unofficial and social pattern human interactions.
▷ Such informal groups support official/formal groups in achieving organisational
objectives
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DEFINITIONS OF INFORMAL
ORGANISATION STRUCTURE
▷ According to Keith
Davis, "Informal
organisation is a
network personal and
social relations not
established or required
by the formal
organisation but arising
spontaneously as
people associate with
one another."
▷ According to Chester
Barnard, "Informal
organisation is joint
personal activity
without conscious
common purpose
through contributing
to joint results."
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FEATURES OF INFORMAL
▷ Informal organization is unwritten and develops unconciously
▷ It is not governed by any established rules.
▷ It exists within a formal organisation.
▷ It uses grapevine as a means of communication.
▷ It brings people together to realise common interests.
▷ Informal organisation helps to develop close relationship within
the group through personal and social ties.
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MERITS OF INFORMAL
▷ Informal organisation reinforces each member's individual
personality.
▷ It protects one another from authoritative action.
▷ It provides opportunity to display creativity.
▷ It reduces the burden of supervision.
▷ Informal organisation provides feedback to the managers.
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DEMERITS OF INFORMAL ORGANISATION
STRUCTURE:
▷ Informal organisation structure puts up resistance to change.
▷ It spreads rumours through grapevine.
▷ It bounds an individual by group decisions.
▷ It may use the group as a protective shield against the
management
▷ It may wipe out individual identity because group dominates.
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Context Formal organization Informal Organization
(1) Formation: Formal organization is created by the top
management deliberately and conciously. It is
a prescribed strurcture.
Informal organization develops social forces
existing within the formal organization. It is a
natural and spontaneous organization.
(2) Focus It is built around jobs It is built around people and their roles.
(3) Communication Communation is normally through formal
channels.
Communication is normally through
grapevine.
(4)Relationship The superior-subordinate relationship is clearly
defined.
The superior-subordinate relationship is
absent.
(5) Suitability It is suitable to large business enterprises. It is suitable to small business enterprises.
(6) Behaviour Norms Formal Organization operates through as per
rules, systems, systems and procedures.
Informal organizations prepare as per
informal understanding and conventions
(7) Authority The members get authority through delegation
or through their official position
Some members may command more
authority by the virtue of their personal
qualities
(8)Operations Formal organization exists and operates
independently
Informal organization exists and operates
within a formal organizational structure
(9) Termination Formal groups may be terminated by
organizational process or automatically when
formed for specific purpose or period
Informal groups are difficult to terminate by
organizational process. They may be
terminated automatically when the
relationships become sour

CENTRALIZATION

MEANING OF CENTRALISATION OF AUTHORITY
▷ The term centralisation is defined in different ways.
▷ According to Henri Fayol, "Everything that goes to increase the importance of the subordinate's
role is decentralisation, everything that goes to reduce it is centralisation."
▷ Thus, in a centralised set-up, the decision-making power or authority is concentrated in a few
hands at the top level.
▷ On the other hand, in a decentralised set-up, the decision-making authority is delegated to the
lower levels where the work is to be actually performed.
▷ Here, the terms, "centralisation" and "decentralisation" are not used in absolute sense but in
relative sense. This is because, absolute centralisation is not possible except in one-man
enterprise (sole proprietorship).
▷ Similarly, there cannot be complete decentralisation of authority as the manager at the higher
level cannot delegate all his authority without surrendering his position as a manager.
▷ Centralisation of decision-making was quite common in the early period when business
activities were simple and were conducted on a small scale. Such centralisation is neither
possible nor desirable in the present complex business world.
▷ Centralisation offers certain advantages such as secrecy in business operations, quick decisions
and prompt actions. However, absolute centralisation is not a workable proposition whereas
decentralisation and delegation are the realities of present business world. 31

“
“Centralisation is the systematic and consistent
reservation of authority at central points within
the organisation."
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DEFINITION OF CENTRALISATION OF AUTHORITY:
ACCORDING TO LOUIS ALLEN

▷ UNIFORMITY OF POLICY
▷ SIGNIFICANCE OF THE DECISIONS
▷ IMPACT OF DECISIONS
▷ COST AND RISK
▷ DEGREE OF INVOLVEMENT
▷ ORGANIZATIONAL CULTURE
▷ LACK OF CONFIDENCE ON SUBORDINATES
▷ RESERVATION OF ACTIVITIES
▷ PERSONAL LEADERSHIP
▷ FACILITATE INTEGRATION
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FACTORS AFFECTING CENTRALIZATION:

▷ ECONOMICAL
▷ PROMPT DECISIONS AND ACTIONS
▷ DECISIONS TAKEN ARE FAVOURABLE TO THE ENTIRE
ORGANIZATION
▷ PROMOTES UNIFORMITY OF ACTIONS
▷ LESS PAPERWORK
▷ SUITABLE TO SMALL BUSINESS
▷ FACILITATES CO-ORDINATION
▷ FACILITATES SUCCESSFUL HANDLING OF EMERGENCIES
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ADVANTAGES OF CENTRALIZATION
OF AUTHORITY

▷ RESTRICTS THE PROCESS OF DELEGATION
▷ IMPOSES HEAVY BURDEN ON TOP EXECUTIVES
▷ SUBORDINATES SUFER
▷ LIMITED DEDICATION AND MOTIVATION
▷ COMMUNICATION DIFFICULTIES
▷ LACK OF TRAINING
▷ DISSATISFACTION OF EMPLOYEES
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DISADVANTAGES/ LIMITATIONS OF
CENTRALIZATION OF AUTHORITY

DECENTRALISATION

MEANING OF DECENTRALISATION OF
AUTHORITY:
▷ The decentralisation concept is closely related to delegation of authority.
▷ The delegation of authority by an individual manager is closely related to
organisation's decentralisation of authority.
▷ Decentralisation of authority means conscious or systematic effort to bring dispersal
of decision making power to the lower levels of the organisation. In decentralisation,
only broad powers will be reserved at the top level. Such powers include power to
plan, organise, direct and control and maximum powers will delegated to the
authority at the lower level.
▷ Decentralisation is just opposite to centralisation.
▷ Under centralisation, authority is mostly concentrated at the top level management.
▷ Centralisation and decentralisation are mutually dependent. In a large organisation,
the process of centralisation and decentralisation co- exist and reinforce each other.
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“
“Decentralisation refers to the systematic effort to delegate to the
lowest levels all authority except that which can only be
exercised at central points."
This definition makes it clear that even in decentralisation,
delegation to the lowestlevels is not complete as the basic
functions in the management process are centralised.
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DEFINITION OF DECENTRALISATION:
ACCORDING TO LOUIS ALLEN,

WHY IS DECENTRALISATION
NEEDED/NECESSARY?
▷ Decentralisation is needed in order to introduce democratic spirit in an
organisation. Democratic management is possible only through
decentralisation.
▷ Decentralisation is needed along with the expansion and
diversification of business activities for efficient and orderly
functioning of an organisation.
▷ Decentralisation is needed as it facilitates the process of delegation of
authority.
▷ Decentralisation is a modern, progressive and democratic concept.
Experience has proved its superiority. Naturally, it needs to be
introduced to the extent possible in every organisation/enterprise.
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FACTORS AFFECTING DECENTRALIZATION:
▷ PHILOSOPHY OF THE TOP MANAGEMENT
▷ AVAILIBILITY OF COMPETENT MANAGERS
▷ WILLINGNESS OF SUBORDINATES
▷ ADEQUACY OF COMMUNICATION SYSTEM
▷ DESIRE OF UNIFORMITY
▷ SIZE OF THE ORGANIZATION
▷ NATURE OF ENTERPRISE (OLD/NEW)
▷ DESIRE FOR INDEPENDENCE
▷ OPERATIONS OF AN ENTERPRISE
▷ HISTORY OF THE ORGANIZATION
▷ COST AND ITS IMPORTANCE IN DECISION-MAKING
▷ INFLUENCE OF EXTERNAL FACTORS
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ADVANTAGES/BENEFITS OF
DECENTRALIZATION
▷ HELPS TO IMPROVE THE QUALITY OF DECISIONS/ DECISON-MAKING AT
THE TOP MANAGEMENT
▷ FACILITATES DIVERSIFICATION OF ACTIVITIES PRODUCTS AND MARKETS
▷ ENOCURAGES DEVELOPMENT OF MANAGEMENT
▷ IMPROVES MOTIVATION
▷ MAKES DECISION-MAKING QUICKER AND BETTER
▷ PROVIDES OPPURTUNITY TO LERAN BY DOING
▷ FACILITATES EFFECTIVE SUPERVISION AND SUPERVISION CONTROL
▷ LEADS TO HEALTHY CLIMATE WITHIN THE ORGANIZATION
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LIMITATIONS OF DECENTRALIZATION
▷ MAY LEAD TO PROBLEM TO CO-ORDINATION
▷ MAY LEAD TO INCONSISTENCIES
▷ IS COSTLY
▷ CREATES SPECIAL PROBLEMS IN
EMERGENCY SITUATION
▷ UNSUITABLE TO SMALL BUSINESS
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Context Centralization Of Authority Decentralization of Authority
(1) Meaning: Decision-making process is mostly
concentrated at top-level and is not passed on
to lower levels.
There’s delegation and dispersal of authority for
decision-making throughout the decentralization.
(2) Quality of
decision-
making:
Quality of decision-making is good as
competent, matured and skilled executives
take decisions.
Quality decision may not be good as decisions are
taken by many with varied skills and maturity.
(3)Sustainability: Centralization is suitable in the case of small
enterprises operating at one place.
Decentralization is suitable in the case of large
enterprises operating plants, branches, etc. at
different places.
(4)Cost: It is economical. It is costly.
(5)Control: It maintains strict control on the employees. It cannot always maintain strict control in
employees because business units may be widely
scattered.
(6)Scope for
Management
Development
Junior managers do not get opportunity of self
government.
It gives opportunities of self development to
executives working at lower levels. Decentralization
favours executive development.
(7)Motivation
and Morale
There is limited scope for motivation of
managers at lower levels. Their manage is low.
There is ample source for motivation of managers
and morale is high.
(8)Burden on
executives
There is heavy burden of work on the top
executives.
The burden on top executives is limited as managers
at lower levels share work.
(9)Specialization It lacks specialisation It prospers because of specialization.

DEPARTMENTATION

MEANING OF DEPARTMENTATION:
▷ Departmentation is a process of dividing an organisation into convenient smaller units called
departments.
▷ It is the grouping of activities and the employees into departments for convenience and
effective coordination of activities at the enterprise level.
▷ Such departments are created for the division of work and also for the smooth and efficient
working of the whole business unit.
▷ For example, production department will look after the production of goods or services. Thus,
departmentation suggests the pattern of grouping of activities for efficient and orderly
handling managing. In addition, the activities of different departments are properly
integrated and coordinated through the medium departmentation
▷ Departmentation is a normal practice in large business organisations.
▷ The term 'Departmentation' refers to the process of grouping of activities into units for the
purpose of easy and efficient functioning.
▷ Departmentation leads to division of work and specialisation as regards performance of
activities.
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DEFINITIONS OF DEPARTMENTATION:
▷ According to Pearce and Robinson,
"Departmentation is the grouping of
jobs, processes and resources into
logical units perform some
organizational task.”
▷ According to James and Stoner,
"Departmentalization is the
grouping of work functions so that
similar and logically related
activities occur together.
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FACTORS DETERMINING/PROCESS OF
DEPARTMENTATION:
▷ SPECIALIZATION
▷ COST INVOLVED
▷ ELIMINATION OF DUPLICATION
▷ COORDINATION
▷ CONTROL
▷ SUISTAINIBILITY TO LOCAL CONDITIONS
▷ HUMAN FACTOR
▷ OBJECTIVES SET
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ADVANTAGES/ BENEFITS/IMPORTANCE OF
DEPARTMENTATION:
▷ DIVISION OF WORK
▷ EFFICIENCY AND CO-ORDINATION
▷ FIXED RESPONSIBILITY
▷ LEADS MANAGEMENT DEVELOPMENT
▷ OPTIMUM USE OF RESOURCES
▷ QUICK SERVICE
▷ FACILITATES PERFORMANCE APPRAISAL
▷ EFFECTIVE CONTROL
▷ FACILITATES EXPANSION
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LIMITATION OF DEPARTMENTATION
▷ COSTLY
▷ PROBLEMS RELATING TO CO-ORDINATION
AND CONTROL
▷ AUTONOMY TO DEPARTMENT IS
DANGEROUS
▷ CENTRALISATIONS OF AUTHORITY IS
AFFECTED
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BASES OF DEPARTMENTATION:
▷ Departmentation is possible on different bases considerations.
▷ Such bases include functions performed, process or of production, products manufactured,
locational pattern, customers served and finally on the basis of composite considerations.
▷ A single pattern of departmentation is not suitable to all organisations.
▷ Every organisation has to introduce departmentation is not suitable to all organisation.
▷ Every organisation has to introduce departmentation which is most suitable to its operations as
departmentation is a means for achieving overall organisational objectives.
▷ The different bases of departmentation:
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• DEPARTMENTATATION BY FUNCTIONS
•DEPARTMENTATION BY PROCESS
•DEPARTMENTATION BY PRODUCTS
•DEPARTMENTATION BY GEOGRAPHICAL LOCATION/ AREA
•DEPARTMENTATION BY CUSTOMERS
•COMPOSITE/COMBINED/HYBRID DEPARTMENTATION

DEPARTMENTATATION BY FUNCTIONS
Board Of Directors
Managing Director/
General Manager
Personnel
Department
Finance
Department
Production
Department
Marketing
Department

Merits/Advantages Of Departmentation by Functions:
(1) Functional departmentation is a logical and time-tasted method.
(2) The available manpower in the departments is utilized fully.
(3) It is suitable and convenient for creating major departments.
(4) It facilitates intra-departmental coordination. It also promotes and provides the
benefits of occupational specialization.
(5) Functional departmentation facilitates performance appraisal and effective control
of functional departments.
Demerits/Limitations Of Departmentation by Functions :
(1) In functional departmentation, the decision-making process is delayed due to
specialisation.
(2) It is not conducive to overall organisational strength and survival.
(3) Functional departmentation may not be suitable when the area covered by business
activities is rather wide.
(4) Conflicts between departments are possible if mechanism for cooperation and
coordination is not instituted.

DEPARTMENTATION BY PROCESS
Board of Director
Managing Director
Finance Manager General Manager
Processing Spinning Weaving Bleaching Printing
Sales Manager

Merits/Advantages of Departmentation by Process:
(1) Departmentation by process ensures specialisation.
(2) It is possible to appoint experts at each stage.
(3) It can use costly equipments.
(4) It provides economical repairs and maintenance because similar machines are put
together.
(5) Process departmentation is suitable
to concerns manufacturing products requiring a number of processes.
Demerits/Limitations of Departmentation by Process:
(1) It is difficult to compare the performance of different process based departments
because their nature of work differs.
(2) It faces the problem of coordinating processes between different departments.
(3) It may create conflicts among managers of different processes.
(4) It is unsuitable where manufacturing activity does not involve distinct processes.
(5) It provides little scope for managerial developments.

DEPARTMENTATION BY PRODUCTS
Board of Director
Managing Director/General Manager
Finance Manager General Manager
Processing Spinning Weaving Bleaching Printing
Sales Manager

Advantages of Departmentation by Products:
(1) It motivates departmental managers to take more initiative for raising efficiency
and productivity of their departments.
(2) As the comparison of different departments is possible, the management can make
investment in the profit making departments and can even close loss-making
departments.
(3) It provides training and development opportunities to managerial staff. In addition,
it facilitates growth and diversification of products at the departmental level.
Disadvantages of Departmentation by Products:
(1) Departmentation by products is costly as service functions are duplicated.
(2) It is not convenient to small and medium-sized concerns due to cost factor.
(3) The top management finds it difficult to have effective control on the departments.
The chart given below explains departmentation by products in the case of an
automobile manufacturing company.

DEPARTMENTATION BY GEOGRAPHICAL
LOCATION/AREA
Board Of Directors
Managing Director/General Manager
Overseas
Division
Western
Zone
Northern
Zone
Eastern
Zone
Southern
Zone

Merits/Advantages of Geographical Departmentation:
(1) It motivates each regional head to achieve high performance.
(2) It can adapt to local conditions.
(3) It provides training to middle level executives.
(4) It facilitates expansion of business to various regions.
Demerits/Limitations of Geographical Departmentation:
(1) It cannot avoid duplication of activities e.g., service functions performed by
regional units can be performed centrally by the head office.
(2) It is likely that each regional unit may give higher importance a to its unit and
neglect the overall interest of the organisation.
(3) It may lead to conflicts between regional managers.
(4) It is difficult to control different branches from the head office.

DEPARTMENTATION BY CUSTOMERS
Board of Director
Managing Director
General Manager
Finance Production Marketing
Foreign Buyers Manufacturers Dealers/Retailers
Defence
Department
Public
Undertakings
Personnel

Merits/Advantages of Departmentation by Customers:
(1) It ensures full attention to customers.
(2) It provides benefits of division of work.
(3) It is possible to know likes and dislikes of customers.
(4) It helps organisation to each higher goodwill through better service.
Demerits/Limitations of Departmentation by Customers:
(1) It may result in under-utilisation of resources.
(2) It may create duplication of facilities.
(3) It may face heavy overheads.
(4) It may give special treatment to certain class of customers.

COMPOSITE/COMBINED/HYBRID
DEPARTMENTATION:
Any base can be used for departmentation provided the
departmentation introduced in the organisation is useful for
achieving organisational objectives. Here, the relative advantages
and limitations of various types of departmentation should be
analysed in the context of needs of particular enterprise. That
base of departmentation is the best which facilitates the
achievement of organisational objectives efficiently and
economically.

Stage I
• Assignment of Duties to
Subordinates
Stage II
• Transfer Of Authority
Stage III
• Acceptance Of Assignment
Stage IV
• Creation Of Responsibility
A
B
C
D
Reject

Content Delegation Of Authority Decentralization Of Authority
Meaning Transfer of certain duties and
authority from the superior to his
subordinate
Systematic effort to bring dispersal of
decision-making power to the lower
levels.
Type Of Concept It is a narrow concept as it takes place
between superior and sub-ordinates.
It is a broad concept as it involves
spreading of decision making power
throughout the organization.
Essential or Optional Essential aspect of management
process
An optional aspect of organization
structure.
Position Of
Responsibility
Even after delegation, the superior
continues to be held responsible for
the work delegated by him.
The superior is not responsible for the
work given to the subordinate.
Control On Delegate The delegator exercises control over
the delegatee as he is responsible for
the performance of the delegatee.
The top-level management keeps
minimum control on departmental
managers as responsibilities are fixed
on them.
Acceptance A subordinate may accept or refuse
delegation of authority
A manager has to accept
decentralization when introduced.

OrganizingFoundation Course Semester 4- Prof. Karishma Shetty

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