CBSE Class 12 Business Studies Revision Notes Chapter 5: Organising 2026–27

Organising is the process of identifying and grouping work, assigning duties and establishing authority relationships to achieve organisational objectives.

In CBSE Class 12 Business Studies, Chapter 5 explains organisation structures, formal and informal organisation, delegation and decentralisation.

Organising converts plans into action by arranging work, people and resources in a coordinated manner. It defines who will perform each task, who will supervise the work and how different departments will work together.

These CBSE Class 12 Business Studies Revision Notes Chapter 5 cover the complete Organising chapter for 2026–27. Use them to revise the process and importance of organising, functional and divisional structures, formal and informal organisation, delegation of authority and decentralisation.

Key Takeaways

• Four organising steps: Work is identified, grouped, assigned and connected through reporting relationships.
• Two organisation structures: Functional structure groups similar functions, while divisional structure groups activities by product lines.
• Three delegation elements: Authority, responsibility and accountability establish clear managerial relationships.
• Decentralisation: Decision-making authority is systematically extended to lower management levels.

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Organising Class 12 Notes: Chapter Overview

The chapter begins with the meaning, process and importance of organising. It then explains how organisation structures define work, authority and communication.

The second half covers formal and informal organisation, delegation and decentralisation.

Access Class 12 Business Studies Chapter 5 Notes Organising in 30 Minutes

Begin with the meaning, four-step process and importance of organising. Then revise organisation structure, span of management and the differences between functional and divisional structures.

Next, study formal and informal organisation. Complete the chapter with delegation, authority, responsibility, accountability, centralisation and decentralisation.

Meaning of Organising in Class 12 Business Studies Notes

Organising is the process of coordinating human efforts, assembling resources and integrating them into a unified whole to achieve specified objectives.

It begins after planning. Once managers decide what the organisation wants to achieve, organising determines how the plan will be implemented.

Organising involves:

• Identifying the work
• Dividing work into manageable tasks
• Grouping similar activities
• Assigning duties
• Granting authority
• Fixing responsibility
• Establishing reporting relationships
• Coordinating people and resources

It answers four basic questions:

• What work has to be done?
• Who will perform it?
• Who will supervise it?
• Who will report to whom?

Organising and Organisation Structure in Class 12 Notes

Organising is a managerial process, while organisation structure is its result.

Organising helps implement plans, while the organisation structure provides the formal framework within which tasks are performed.

Process of Organising Class 12 Revision Notes

The process of organising includes four connected steps.

Steps in the Process of Organising

Identification and Division of Work

The first step is to identify the work required to implement the organisational plan.

The total work is then divided into smaller activities. This helps:

• Avoid duplication
• Share the workload
• Improve clarity
• Support specialisation
• Make complex tasks manageable

Each activity should contribute towards the achievement of organisational objectives.

Departmentalisation in Organising

After dividing the work, similar activities are grouped into departments.

This process is called departmentalisation.

Departments may be formed on the basis of:

• Functions
• Products
• Territories
• Customers
• Processes

For example, marketing, production, finance and human resources may be created as separate functional departments.

Departmentalisation encourages specialisation and simplifies coordination.

Assignment of Duties

Once departments have been created, duties are assigned to employees.

Managers should match:

• Nature of the job
• Employee skills
• Experience
• Competence
• Workload

A proper match improves efficiency because employees receive tasks they are capable of performing.

Establishing Authority and Reporting Relationships

Assigning work is not enough. Employees should also know:

• From whom they will receive instructions
• To whom they are accountable
• What authority they possess
• Who will supervise their work

Clear reporting relationships create a hierarchy and help different departments coordinate.

Process of Organising Quick Revision Notes

Importance of Organising Class 12 Notes

The importance of organising arises from its role in implementing plans and coordinating people and resources.

Benefits of Specialisation

Organising systematically allocates jobs among employees.

When an employee performs a specific task regularly:

• Skill improves
• Experience increases
• Productivity rises
• Workload becomes manageable

Division of work therefore leads to specialisation.

Clarity in Working Relationships

Organising defines:

• Who reports to whom
• Who gives instructions
• Who performs each duty
• Who is responsible for results

This removes ambiguity and creates a clear hierarchical order.

Optimum Utilisation of Resources

Organising helps use human, financial and material resources carefully.

Proper assignment of duties:

• Prevents duplication
• Reduces wastage
• Avoids overlapping work
• Improves resource use
• Reduces confusion

Adaptation to Change

An organisation structure may need modification when the business environment changes.

Organising helps management:

• Add new departments
• Revise authority relationships
• Adjust managerial levels
• Introduce new products
• Enter new markets

This supports organisational survival and growth.

Effective Administration

Clear jobs and reporting relationships make management easier.

Organising improves administration by:

• Reducing confusion
• Clarifying responsibilities
• Coordinating departments
• Improving execution
• Fixing accountability

Development of Personnel

Delegation allows managers to assign routine work to subordinates.

This gives managers time to focus on:

• Innovation
• Growth
• Strategic decisions
• Improved work methods

Subordinates also learn to handle responsibility and develop their abilities.

Expansion and Growth

Organising supports organisational expansion.

A business can:

• Add new job positions
• Create more departments
• Diversify product lines
• Enter new territories
• Increase its customer base

A suitable structure makes growth easier to manage.

Importance of Organising Quick Revision Table

Organisation Structure in Organising Class 12 Notes

Organisation structure is the framework within which managerial and operating tasks are performed.

It specifies relationships among:

• People
• Work
• Authority
• Responsibility
• Departments
• Resources

The structure allows coordination among human, physical and financial resources.

An organisation chart usually represents the structure visually.

Span of Management in Class 12 Business Studies

Span of management refers to the number of subordinates who can be effectively managed by one superior.

It influences the shape of the organisation structure.

Wide Span of Management

A wide span means one manager supervises many employees.

It may result in:

• Fewer management levels
• Faster communication
• Less close supervision
• A flatter structure

Narrow Span of Management

A narrow span means one manager supervises fewer employees.

It may result in:

• More management levels
• Closer supervision
• Longer communication channels
• A taller structure

The suitable span depends on the nature of work, employee ability and managerial capacity.

Types of Organisation Structure Class 12 Notes

The two organisation structures covered in this chapter are:

• Functional structure
• Divisional structure

The structure selected depends on organisational size, product variety, activities and need for specialisation.

Functional Structure in Organising Class 12 Notes

A functional structure groups jobs of a similar nature into separate departments.

Common functional departments include:

• Production
• Marketing
• Finance
• Human resources
• Purchasing
• Research and development

All departments report to a coordinating head.

Features of Functional Structure

• Activities are grouped by function.
• Similar jobs are placed in one department.
• Employees develop functional expertise.
• Department heads supervise specialised work.
• Functions support the organisation as a whole.

Advantages of Functional Structure

Occupational Specialisation

Employees perform related tasks within one department. Repeated performance builds expertise and efficiency.

Better Control and Coordination

Similar activities are performed within the same department. This simplifies supervision and coordination.

Higher Managerial and Operational Efficiency

Specialised managers and employees can improve performance and reduce errors.

Economies of Scale

Resources are not duplicated across different product lines. This lowers cost.

Easier Training

Employees need training in a limited range of functional skills.

Proper Attention to Every Function

Separate departments ensure that finance, marketing, production and other functions receive attention.

Limitations of Functional Structure

Functional Empires

Department heads may give greater importance to departmental goals than organisational goals.

Coordination Problems

Departments may find it difficult to exchange information and coordinate activities.

Conflict of Interest

The goals of two functions may differ. For example, marketing may demand greater product variety while production may prefer standardisation.

Inflexibility

Employees may develop a narrow functional perspective and fail to understand other departments.

Limited Managerial Development

Functional managers specialise in one area and may not gain experience across several business functions.

Suitability of Functional Structure

A functional structure is suitable when:

• The organisation is large.
• Activities are diverse but functionally related.
• Operations require specialisation.
• The organisation offers a limited product range.
• Avoiding resource duplication is important.

Divisional Structure in Organising Class 12 Notes

A divisional structure groups activities according to product lines or separate business units.

Each division performs all major functions related to its product.

For example, a company may have separate divisions for:

• Cosmetics
• Garments
• Footwear
• Skincare

Each division may contain its own production, marketing, finance and human resource functions.

Features of Divisional Structure

• Activities are grouped by product line.
• Each division operates as a separate unit.
• Every division has its own functional departments.
• A divisional manager is responsible for performance.
• Each division may function as a profit centre.

Advantages of Divisional Structure

Product Specialisation

Divisional managers gain experience in all functions related to one product.

This develops broader managerial skills.

Accountability for Performance

Revenue and costs can be linked to a particular division. Therefore, responsibility for profit or loss can be fixed easily.

Flexibility and Initiative

Each division operates with greater autonomy. This supports faster decisions.

Expansion and Growth

New product divisions can be added without disturbing existing operations.

Better Coordination

All functions related to one product are placed under one divisional head.

Limitations of Divisional Structure

Conflict Among Divisions

Different divisions may compete for funds and organisational resources.

Duplication of Activities

Each division may maintain separate marketing, finance and personnel departments, increasing cost.

Excessive Divisional Power

A divisional manager may focus on divisional goals and ignore wider organisational interests.

Higher Managerial Requirements

Each division requires managers capable of handling several functions.

Suitability of Divisional Structure

A divisional structure is suitable when:

• The organisation manufactures several products.
• Product lines use different resources.
• Each product requires separate attention.
• The business is expanding or diversifying.
• Performance needs to be measured product-wise.

Functional Structure and Divisional Structure Comparison

Formal Organisation Class 12 Revision Notes

A formal organisation is the official structure deliberately designed by management to achieve organisational objectives.

It specifies:

• Jobs
• Authority
• Responsibility
• Accountability
• Communication
• Reporting relationships
• Rules and procedures

The formal organisation may follow a functional or divisional structure.

Features of Formal Organisation

• It defines relationships among job positions.
• It is created to achieve planned objectives.
• It coordinates departmental efforts.
• It is deliberately designed by management.
• It focuses more on work than personal relationships.
• It follows official communication channels.
• It establishes a chain of command.

Advantages of Formal Organisation

• Responsibility can be fixed easily.
• Duties are clearly defined.
• Duplication is reduced.
• Unity of command is maintained.
• Organisational goals are pursued systematically.
• Employee behaviour becomes more predictable.
• It provides stability.

Limitations of Formal Organisation

• The official chain may delay communication and decisions.
• Rigid procedures may restrict creativity.
• It may ignore personal and social relationships.
• It does not show the complete working of the organisation.
• Excessive formality may create inflexibility.

Informal Organisation Class 12 Notes

An informal organisation is the network of social and personal relationships that develops spontaneously among employees.

It arises when employees interact beyond their official roles.

Examples include groups formed through:

• Friendship
• Common interests
• Social interaction
• Shared activities
• Informal communication

Features of Informal Organisation

• It develops within the formal organisation.
• It arises through personal interaction.
• Group behaviour is guided by social norms.
• Communication can move in any direction.
• It develops spontaneously.
• It has no fixed structure.
• Informal leaders emerge through personal qualities.

Advantages of Informal Organisation

Faster Communication

Information and feedback can spread quickly without following formal channels.

Satisfaction of Social Needs

Employees interact with like-minded people and develop a sense of belonging.

Support to Formal Organisation

Informal groups may fill gaps in the formal system and help management understand employee reactions.

Limitations of Informal Organisation

Spread of Rumours

Informal communication may spread inaccurate information.

Resistance to Change

Groups may oppose new policies or working methods.

Pressure to Follow Group Norms

Employees may be forced to follow informal group expectations even when these conflict with organisational goals.

Management should recognise informal groups and use their support rather than trying to eliminate them.

Formal Organisation and Informal Organisation Comparison

Delegation of Authority Class 12 Notes

A manager cannot perform every task alone. Therefore, work and authority must be shared with subordinates.

Delegation refers to the downward transfer of authority from a superior to a subordinate.

Delegation allows a subordinate to act within prescribed limits.

However, delegation does not mean that the superior gives up final accountability. The manager remains answerable for the result.

Elements of Delegation in Organising Class 12 Notes

The three elements of delegation are:

• Authority
• Responsibility
• Accountability

Authority in Delegation

Authority is the right to command subordinates, take decisions and expect compliance.

Authority:

• Arises from a formal position
• Flows downward
• Can be delegated
• Is limited by organisational rules and law
• Increases at higher management levels

A subordinate must receive enough authority to perform the assigned task.

Responsibility in Delegation

Responsibility is the obligation of a subordinate to perform an assigned duty properly.

Responsibility:

• Arises from a superior-subordinate relationship
• Flows upward
• Cannot be transferred completely
• Must be matched with adequate authority

When responsibility is greater than authority, the employee may be unable to perform effectively.

Accountability in Delegation

Accountability means answerability for the final outcome of an assigned task.

Accountability:

• Arises after responsibility is accepted
• Flows upward
• Cannot be delegated
• Remains with the superior even after authority is delegated

The manager must ensure that the subordinate performs the assigned duty properly.

Authority, Responsibility and Accountability Comparison

Relationship Between Authority and Responsibility

Authority should be equal to responsibility.

• Excess authority may lead to misuse of power.
• Excess responsibility without authority may make the employee ineffective.

Effective delegation therefore requires a balance between both.

Importance of Delegation Class 12 Revision Notes

The importance of delegation comes from its role in sharing work, developing employees and creating an effective management hierarchy.

Effective Management

Delegation allows managers to focus on high-priority work.

Routine tasks can be assigned to subordinates while managers concentrate on:

• Policy decisions
• Planning
• Coordination
• Growth
• Control

Employee Development

Delegated authority gives employees practical experience.

They learn:

• Decision-making
• Problem-solving
• Responsibility
• Leadership
• Initiative

This prepares them for higher positions.

Employee Motivation

Authority and responsibility create trust and recognition.

Employees feel more confident when they are allowed to make decisions.

Facilitation of Growth

Delegation allows managers to extend operations beyond what they can perform personally.

Trained employees can take responsibility for new departments, branches and projects.

Basis of Management Hierarchy

Delegation creates superior-subordinate relationships.

The flow of authority determines:

• Who reports to whom
• Which position has decision-making power
• How management levels are formed

Better Coordination

Clear authority, responsibility and accountability reduce duplication and overlapping duties.

This improves coordination across departments and management levels.

Importance of Delegation Quick Revision Table

Centralisation and Decentralisation Class 12 Notes

Centralisation means retaining decision-making authority at higher management levels.

Decentralisation means systematically delegating authority to lower levels of management.

In a centralised organisation, major decisions remain with top management.

In a decentralised organisation, decision-making authority is pushed closer to the point of action.

Why Complete Centralisation or Decentralisation Is Impractical

No organisation can be completely centralised or decentralised.

Complete centralisation would place every decision with top management and make lower managerial levels unnecessary.

Complete decentralisation would transfer every decision to lower levels and reduce the need for higher management.

Organisations therefore maintain a balance.

Major policy decisions may remain centralised, while operating decisions may be decentralised.

Centralisation and Decentralisation Comparison

Importance of Decentralisation Class 12 Notes

The importance of decentralisation lies in developing lower-level managers and improving decision-making speed.

Develops Initiative Among Subordinates

Lower-level managers receive freedom to make decisions.

This builds:

• Confidence
• Independence
• Initiative
• Problem-solving ability
• Self-reliance

Develops Managerial Talent

Managers gain practical decision-making experience.

Decentralisation helps identify and prepare employees for higher managerial positions.

Quick Decision-Making

Decisions are taken closer to the point of action.

This reduces:

• Approval delays
• Long communication channels
• Information distortion
• Dependence on top management

Relief to Top Management

Top managers can focus on:

• Major policies
• Strategy
• Expansion
• Coordination
• Long-term decisions

Operational matters are handled at lower levels.

Facilitates Growth

Departments and divisions receive greater autonomy.

This supports:

• Expansion
• Higher productivity
• Healthy competition
• Improved performance
• Greater managerial efficiency

Better Control

Departments can be evaluated separately.

Management can compare:

• Targets and results
• Departmental contribution
• Costs and revenue
• Performance deviations

Decentralisation therefore requires stronger performance-measurement systems.

Importance of Decentralisation Quick Revision Table

Delegation and Decentralisation Class 12 Notes

Delegation and decentralisation both involve the transfer of authority. However, delegation occurs between a superior and subordinate, while decentralisation spreads authority throughout the organisation.

Delegation and Decentralisation Comparison

Organising Class 12 Notes: Complete Revision Summary

Important Terms from Organising Class 12 Notes

Useful Links for Class 12 Business Studies