Class 12 Business Studies Chapter 5 Notes

The Business Studies Class 12 Chapter 5 Notes are aimed to lay the framework for students who want to pursue undergraduate commerce speciality courses following Class 12. It aids them in grasping the fundamentals needed to appreciate the subject’s higher concepts. Chapter 5 of Class 12 Business Studies teaches about ‘Organisation’, which is considered among the essential Chapters in the Business Studies curriculum.

This chapter discusses the concept of an organisation, its importance, benefits, and methods for attaining an organisational structure are discussed in depth in this Chapter. Students can use Extramarks’ Class 12 Business Studies Chapter 5 Notes, compiled comprehensively by subject-matter experts. These chapter notes will aid students in comprehending various essential elements of the chapter and enable them to answer questions coming from Chapter 5 during their final exams. 

After registering, Extramarks provides students with full access to the Class 12 Business Studies Chapter 5 Notes via their official website. Students can revise the entire Chapter 5 in minutes using the revision notes included with the chapter notes and other study materials offered by the Extramarks team.

Key Topics Covered in Class 12 Business Studies Chapter 5 Notes

Organising becomes a very important chapter in running a business. In the article below we have given a brief overview of the chapter. However, to gain full access to our Class 12 Business Studies Chapter 5 Notes, students are required to register on our website first. 

Organising:

Organising is identifying, Classifying, and coordinating work by establishing reporting relationships between people, establishing their responsibilities, and establishing their authorities to integrate human efforts to achieve organisational goals collectively.

As a result, Organising is in charge of putting plans into action and determining who will perform a task, how they will do it, and where they will do it.

Steps in the Process of Organising:

• Work identification and division: 

The first step in the organising process is to identify and divide the work by following the plans. The task is separated into manageable activities to avoid duplication of efforts and evenly distribute the staff’s workload.

• Departmentalisation: 

Similar and related jobs are grouped into discrete activities after work has been broken. For Example, departmentalisation is based on region, products, etc.

• Assignment of responsibilities: 

It is critical to clearly define the responsibilities of various job titles and assign tasks to employees under those responsibilities.

1. Individual department heads are appointed for each department after departments are constituted.
2. The task should be assigned to people who are best suited to complete it.

For example, finance jobs should be assigned to those with finance qualifications and experience, such as CAs or MBA finance.

• Establishing a reporting relationship: 

Establishing authority and responsibility relationships aids in the creation of a hierarchical structure as well as departmental coordination. Unique subordinate relationships between different people and job roles must be established so that everyone knows who to take commands from and who to issue orders to.

These four steps in the process of organising are explained at length with real-life examples in Extramarks Class 12 Business Studies Chapter 5 Notes.

Importance of Organising:

• Benefits of specialisation: Work is broken down into smaller tasks, with each lesson being completed by people who have the necessary expertise. Specialisation occurs as a result of performing related jobs.
• The clarity in working relationships: It eliminates uNCERTainty and miscommunication by explicitly stating working relationships.
• Optimal resource utilisation: It prevents duplication and overlap of work, resulting in minimal resource waste.
• Change adaptation: It attempts to accommodate changes in the business environment by adjusting organisational structures and revising interrelationships at managerial levels as needed.
• Effective administration: Effective administration is based on the clarity of working relationships and the proper execution of tasks.
• Personal development:  Effective delegation relieves the strain on the employer, encourages innovation, and inspires employees to finish duties on time.
• Expansion and growth: By absorbing changes in the corporate environment, it aids in growth and expansion.

Organisational Structure:

• The structure or framework within which various operational and management duties are conducted is organisational structure. As covered in Extramarks Class 12 Business Studies Chapter 5 Notes, organisational structure assists in properly coordinating the organisation’s people and physical and financial resources to fulfil its goals. It is a necessary tool without which an organisation cannot function. 
• The organisational chart depicts a company’s organisational structure. 
• The number of subordinates that a superior can supervise is referred to as the span of management.
• An enterprise’s organisational structure enables a smooth and effective flow of operations.

Types of Organisational Structure:

They are of two types:

1. Functional structure:

Business is handled in a separate department, which is developed based on each department’s role.

Suitability:

Large-scale enterprises that provide specialised services or engage in various activities will benefit from a functional structure.

Advantages:

• Specialisation: 

Occupational specialisation occurs when employees in a department undertake similar duties and can increase their performance.

• Coordination: 

The task at hand is similar. Hence remote control and coordination are used.

• Operational efficiency: 

Improved management and operational efficiency lower costs and increase profitability. Work is divided into smaller jobs, which results in less repetition and lower prices.

• Makes employee training easier: 

The spectrum of abilities is narrowed, making employee training more manageable.

• Higher Focus: 

Individuals executing similar and smaller tasks might concentrate more on the activities they are accountable for.

Disadvantages:

• Deviation in interests: 

To build a functional empire, departmental interests sometimes may be prioritised at the expense of organisational objectives.

• Conflicts of Interest: 

Departmental interests can lead to conflicts of interest among departments, making it difficult for them to work together.

• Lack of Coordination: 

Departmental conflicts of interest can cause coordination issues.

• Rigidity: 

Employees who perform similar activities may be closed to new ideas or solutions, resulting in a lack of flexibility.

2. Divisional Structure:

The divisional organisation structure divides the entire business according to the principal items to be manufactured (metal, plastic, cosmetics, etc.).

• A divisional structure is an organisational structure in which units or divisions work independently.
• Several different units and divisions deal with different types of merchandise.
• Each section is responsible for its work and must weigh in on its profit and loss.
• Each division has its divisional manager, who is in charge of the entire unit and oversees it.

Suitability:

Organisations producing various products and engaging in multiple activities should use a divisional structure.

Advantages:

• Product specialisation: 

Product specialisation helps a divisional head develop various skills, preparing him for higher jobs. This is because he gains experience in all aspects of a product’s operation.

• Accountability: 

Divisional heads are held responsible for profits since the revenues and costs linked with distinct departments are identified and attributed. This provides a good platform for performance evaluation. It also helps allocate blame when a division performs poorly, allowing for necessary corrective action.

• Flexibility: 

Because each division acts as an autonomous unit, it encourages flexibility and initiative, resulting in faster decision-making.

• Expansion: 

It enables expansion and growth by permitting the addition of new divisions without affecting current operations by simply appointing a new divisional head and people to handle the new product line.

• Prepare for higher jobs: 

Managers who have worked in various operations are better prepared for higher positions.

• Better Initiatives: 

Managers are encouraged to take the initiative to create better means and ways to operate at their best when divisions are dependent and autonomous.

Disadvantages:

• Conflicts: 

On the allocation of funds, conflicts may arise between different divisions, with one division attempting to maximise its earnings to the detriment of others.

• Duplication of efforts: 

Duplication of efforts across products may result in a rise in the costs. Costs are increased by providing each division with its own set of equivalent functions.

• Misuse of power: 

It gives managers the authority to control all actions connected to a particular division, which is a misuse of power. Such a manager may gain strength over time and may disregard organisational interests to assert his independence.

Difference between Functional Structure and Divisional Structure as stated in the Class 12 Business Studies Chapter 5 Notes:

To further understand the definitions, differences, advantages, and disadvantages between Functional and Divisional structure we recommend students to get access to our Class 12 Business Studies Chapter 5 Notes. The topic is covered with many case studies to give better insight into how the two modes of structure works.

Formal and Informal Organisations:

1. Formal organisations:

The term “Formal Organisation” refers to the framework created by management to achieve organisational objectives. In a formal organisation, authority and responsibility boundaries are clearly defined, and various tasks are coordinated methodically to meet organisational goals.

• Job descriptions, rules, and procedures for each work to be completed in an organisation are laid down in a formal organisation.
• To achieve organisational goals, it organises, interconnects, and integrates the work of numerous departments and activities.
• It outlines the formal relationships between employees, including who reports to whom, the type and scope of their relationship, etc.
• It places a greater emphasis on work than on interpersonal and informal interactions.

Advantages:

• Easy to fix responsibility.
• No ambiguity in instructions.
• Maintains unity of command.
• Focus on organisational goals.
• Provide stability.

Disadvantages:

• Long formal communication chains cause procedural delays.
• There is no room for originality because everyone must adhere to a strict protocol.
• There is a lack of awareness of human relationships.

1. Informal Organisations:

The informal organisation is formed when people interact at work and develop a “network of social interactions among employees.” The psychological happiness of employees with common interests is the primary goal of this organisational system. Employees who share a common interest in books, films, religion, or other topics may organise their informal clubs.

• An informal organisation is a structure that emerges from a web of social connections among personnel.
• It permits employees to engage outside of their formal roles.
• It begins in a formal organisation, where frequent interaction among employees leads to the formation of an informal organisation.

Advantages:

• Because of informal conversation, there is faster communication and feedback.
• Social needs, such as friendship and affinity, are met.
• Compensates for lack of formal organisation.

Disadvantages:

• The formal settings are disrupted.
• Change is met with resistance.
• Organisational interest may take precedence over group interest.
• Conflicts and confrontations can arise when members of an informal group hold opposing viewpoints.

Difference between Formal and Informal Organisation as stated in the Class 12 Business Studies Chapter 5 Notes:

 Delegation:

Delegation is the downward transfer of authority from a superior to a subordinate for the subordinate to successfully and efficiently carry out their tasks. It’s an important aspect of managing a business. Learn more about various forms of delegation by referring to the Extramarks Class 12 Business Studies Chapter 5 Notes.

Elements of Delegation:

Delegation entails entrusting subordinates with responsibility and authority and establishing work accountability.

• Authority: 

The right of an individual to command their subordinates and take action within the boundaries of their job is referred to as authority. As the superior controls his subordinate, power flows downhill, from top to bottom. As one rises to the managerial ranks, so does one’s level of control.

• Responsibility: 

The obligation of a subordinate to adequately complete the obligations assigned by the superior is known as responsibility. It constantly flows upward. 

• Accountability: 

Accountability entails being responsible for the results of one’s assigned to labour. It flows upward from the bottom to the top, as a subordinate is accountable to his superior for his job and performance.

Difference between Authority, Responsibility, and Accountability as stated in Class 12 Business Studies Chapter 5 Notes:

Importance of Delegation:

• Effective management: 

By delegating work to subordinates, managers can focus on more critical issues.

• Employee development: 

This allows employees to hone their abilities to manage more complicated duties and advance their careers.

• Employee motivation: 

Receiving duties and power from a superior instil confidence in subordinates and drives them to perform well.

• Facilitation of growth: 

Receiving duties from superiors trains and prepares subordinates for new projects or enterprises, facilitating progress.

• Basis of management hierarchy: 

The degree and flow of authority and responsibility serve as the foundation for the management hierarchy.

• Better Coordination: 

Each position’s authority, responsibility, and accountability are predetermined, providing clarity and eliminating redundancy, resulting in better coordination.

Centralisation:

In this approach, top-level management retains all decision-making abilities and authority. In a centralised company, higher-level management makes all decisions.

Although, a company cannot be entirely centralised since it would disrupt production efficiency and prevent departments and individuals from performing to their full potential. As a result, a balance of centralisation and decentralisation is required.

Decentralisation:

All management and departments have power and decision-making authority, which is delegated or shared.

Importance:

Subordinates will feel motivated to make decisions independently if they are allowed to do so. It provides a sense of autonomy to lower management levels by enabling them to make their own decisions. It also instils in them a sense of self-assurance and self-reliance. When lower-level managers are given more power, they learn to deal with new challenges and solve problems independently.

Decentralisation allows them to demonstrate their ability and prepare for higher-level roles while also creating managerial talent for the future, as subordinates focus on growing their skills and making decisions based on their knowledge—this aids in the development of their professional careers. 

• Quick decision making: 

It allows speedy decision-making because there is no formal structure or long formal permission channels to follow when making decisions.

• Control: 

Decentralisation allows for a more accurate assessment of an organisation’s effectiveness. Decentralisation makes it easier to analyse and evaluate the performance of each department separately. As a result, each department’s achievement and contribution to the organisation’s overall goals can be easily assessed.

• The reduced workload of top managers: 

Delegation of authority offers top-level managers more leeway, which reduces their workload. It enables them to delegate work to subordinates and focus on more vital and high-priority activities, such as policy choices. Furthermore, top-level management’s direct monitoring is minimised when subordinates are given the authority to make their own decisions.

Difference between Delegation and Decentralisation as stated in Class 12 Business Studies Chapter 5 Notes:

Difference between Centralisation and Decentralisation as stated in Class 12 Business Studies Chapter 5 Notes:

 Class 12 Business Studies Chapter 5 Notes – Exercise and Solutions

Extramarks has prepared various study materials that will help students study and revise for their board examination. Class 12 Business Studies Chapter 5 Notes comes with revision notes, questions and answer solutions that will further help students in their exam preparation.

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Click on the below links to view details about Class 12 Business Studies Chapter 5 Notes and various questions and answer solutions covered in it:

• Class 12 Business Studies Chapter 5 Notes
• Business Studies Class 12 Chapter 5: Very Short Answer Type Questions
• Business Studies Class 12 Chapter 5: Short Answer Type Questions
• Business Studies Class 12 Chapter 5: Long Answer Type Questions

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Key Features of Class 12 Business Studies Chapter 5 Notes

This chapter covers the fundamentals of Organising, beginning with its definition. The topic has been described simply and systematically in the Extramarks Class 12 Business Studies Chapter 5 Notes. Below are key benefits available for the students:

• These Notes give an in-depth explanation of every topic in the Chapter. All the topics are written in simple and easy-to-understand language. 
• Our subject matter experts team have divided the chapter sub-topics into sections for each concept, and each one is described with pertinent labelled diagrams, flowcharts, and tables. 
• Students can refer to Notes, Solutions, Question Papers, or any study material through the Extramarks website.