NCERT Solutions Class 12 Business Studies Chapter 5

NCERT Solutions Class 12 Business Studies Chapter 5 – Organising

In Class 12, the subject of Business Studies is an integral part of the Commerce curriculum. This curriculum is designed to teach you about business administration and management. Organising is the fifth chapter of the Business Studies syllabus for Class 12 NCERT.  The Class 12 Business Studies Chapter 5 NCERT Solutions are written in such a way that students will be able to get hold of topics quickly. These NCERT Solutions Class 12 Business Studies Chapter 5 will help the students prepare for the forthcoming board examinations. 

Business Studies Class 12 Notes Chapter 5- Organising is written in simple language with point-by-point explanations. Students can access a variety of additional study tools on the Extramarks website in addition to the Class 12 Business Studies Chapter 12 Notes. Students get access to all materials, including NCERT books, CBSE revision notes,  sample papers, past years’ question papers, and so on.

Key Topics Covered in Class 12 Business Studies Chapter 5 Notes

The key topics covered in Extramarks Class 12 Business Studies Chapter 5 notes include

Organising
Steps Involved in the Process of Organising
Importance of Organising
Organisation structure
Types of Organisation structures
Formal and Informal Organisation
Delegation

Importance of Delegation
Decentralisation

Here’s the detailed information on each subtopic covered in NCERT Solutions Class 12 Business Studies Chapter 5 Organising.

Organising

Organising is a process that starts the implementation of plans by defining roles and working relationships, as well as effectively allocating resources to achieve the indicated and desired outcomes.

Organising is a process that involves coordinating human activities, gathering resources, and integrating them into a coherent whole that can be used to achieve specific goals.

Steps involved in the process of Organising

Organising includes a set of actions that must be completed in order to attain the intended result. Extramarks presents NCERT Solutions Class 12 Business Studies Chapter 5, which provide an overview of the steps involved in the process of Organising:

  • Identification and Division of Work: The first stage in the organising process is to identify and divide the work that needs to be done according to previously established plans. The task is broken down into manageable actions to prevent duplication and distribute the staff’s workload.
  • Departmentalisation: After the job has been broken down into tiny, manageable chunks, the activities that are similar in nature are grouped together. Specialisation is made easier using these sets. Departmentalisation is the term for this process of grouping.
  • Assignment of Duties: It is important to define the responsibilities of distinct job titles and assign tasks to the appropriate people. After departments have been established, each is assigned to a certain person. The personnel of each department are then assigned jobs based on their abilities and competencies.
  • Establishing Authority and reporting relationships: Each person should also be aware of who they must obey and to whom they are answerable.

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Importance of Organising

The following points prepared by the subject matter experts at Extramarks highlight the important role that Organising plays in any business enterprise:

  • Benefits of Specialisation: The process of organising results in a systematic distribution of positions among the workforce. Because a particular employee does a certain job on a regular basis, this decreases workload and increases productivity.
  • The clarity in working relationships: The formation of working relationships establishes clear lines of communication and identifies who is responsible for what. This eliminates the ambiguity in the transmission of data and commands.
  • Optimum utilisation of resources: Organising allows you to make the most use of all of your resources, including material, financial, and human. The correct assignment of jobs prevents work overlap and allows for the most efficient use of resources.
  • Adaptation to Change: A business enterprise’s ability to adapt to changes in the business environment is enabled by the organising process. It provides for the appropriate modification of the organisation structure as well as the revision of inter-relationships among management levels, paving the way for a seamless transition.
  • Effective administration: Organising gives a detailed definition of occupations and their responsibilities. This eliminates ambiguity and redundancy. The clarity in working connections allows for good task performance.
  • Development of Personnel: Organising encourages managers to be more creative. Managers can lessen their burden by delegating ordinary tasks to their employees with effective delegation. Delegation reduces the burden not just because of an individual’s limited ability but also because it allows the management to create new methods and ways of accomplishing duties.
  • Expansion and Growth: Organising allows a business to expand and diversify by deviating from established patterns and taking on new challenges.

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Organisation structure

The outcome of the organising process is the structure of the organisation. The enterprise’s profitability will expand as a result of a well-designed structure. An appropriate organisational structure is required to maintain a seamless flow of information and improve control over a corporate enterprise’s activities.

By controlling and coordinating the roles of employees and departments, an organisation’s structure offers the framework that enables the firm to function as an integrated entity.

Types of Organisation structures

Extramarks NCERT Solutions Class 12 Business Studies Chapter 5 provides students with easy and  well prepared notes on different types of organisational   structures. They are classified  into two categories:

  1. Functional Structure: A functional organisation is created by grouping work of a similar kind under functional headings and organising these key functions into different departments. A coordinating head oversees all departments.

Advantages: 

  • The duties are similar, fostering control and coordination within a department.
  • It aids in the improvement of management and operational efficiency, resulting in an improved profit.
  • It results in little duplication of work, resulting in economies of scale and cost reduction.
  • Because the focus is primarily on a small set of abilities, it makes staff training easy.
  • It ensures that distinct functions are given the attention they need.

Disadvantages: 

  • The overall corporate goals are less important in a functional organisation than the goals pursued by a functional head.
  • Because information must be shared between functionally distinct departments, it may cause coordination issues.
  • When the interests of two or more departments are incompatible, a conflict of interests might occur.
  • It can lead to rigidity because people with similar skills and knowledge bases develop a restricted viewpoint and find it difficult to appreciate diverse points of view.

Suitability: It is most suitable when the organisation is large, has a wide range of activities, and operations necessitate a high level of specialisation.

  1. Divisional Structure: A divisional structure is a framework that divides work into various departments. Each department has its own leader, and there are no overlapping tasks in such a system. The work environment is well defined.

Advantages: 

  • Managers and employees have several opportunities to advance within their departments and become product experts. It helps in enhancing the workforce  efficiency.
  • The performance of each division or department may be tracked separately. It enables the top and bad performing sections to be identified.
  • The divisions are self-contained, allowing them to make their own decisions, which speeds up the decision-making process. The ability to make quick decisions allows for speedier implementation, which is helpful to the company.
  • Having a divisional structure allows you to create new divisions without affecting the activities of the organisation.

Disadvantages: 

  • When it comes to allocating finances and resources, there might be disagreements amongst departments.
  • Costs may grow as a result of task duplication between departments. There may be some activities that all departments share, and hiring different staff for each department to do these tasks might increase costs.
  • There’s a danger that putting greater emphasis on enhancing specific departments would stifle the organisation’s overall growth.

Suitability: A divisional structure is suitable for businesses that manufacture a wide range of products with a diversity of productive resources. When a company expands and wants to hire more people, develop new divisions, and add additional management levels, it will choose to use a divisional structure.

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Formal and Informal Organisation

Extramarks NCERT Solutions Class 12 Business Studies Chapter 5 are especially designed by the subject matter experts, and they provide  notes as desired by the students.. 

Formal Organisation

The term “formal organisation” refers to the framework created by management to fulfil a certain purpose. It clearly defines authority and responsibility boundaries, and it ensures that various activities are coordinated in order to achieve organisational goals.

Advantages: 

  • Because mutual interactions are clearly defined, it is easy to assign accountability.
  • There is no misunderstanding about what function each member is expected to play because responsibilities are clearly defined. This also aids in the reduction of effort duplication.
  • A well-established chain of command is used to ensure command unity.
  • It gives the company a sense of security.

Disadvantages:

  • Because the established line of command must be followed, formal communication may cause procedural delays, lengthening the time it takes to make a decision.
  • Because it does not allow any deviations from clearly drawn out policies, poor organisational procedures may not offer enough acknowledgement of innovative potential.
  • Because an organisation focuses a greater emphasis on structure and labour, it isn’t easy to comprehend the human ties inside it.

Informal Organisation

The informal organisation is formed when individuals interact at work and develop a “network of social interactions among workers.” Informal organisations have no written rules, are flexible in form and scope, and lack set communication routes.

Advantages: 

  • Prescribed communication channels are not followed. As a result of the unstructured organisation, information is disseminated more quickly and feedback is received more quickly.
  • It assists participants in meeting their social requirements and allows them to meet like-minded people. This improves their job happiness by giving them a sense of belonging in the company.
  • It aids in the achievement of organisational goals by compensating for shortcomings in the formal structure.

Disadvantages: 

  • When an informal organisation spreads rumours, it becomes a destructive force that works against the formal organisation’s best interests.
  • If the informal organisation rejects the changes, management may struggle to execute them. Resistance to change can stifle or stifle growth.
  • It forces members to adhere to the expectations of the group. This can be damaging to the organisation if the group’s norms are incompatible with the organisation’s goals.

Get on board with Extramarks and get access to NCERT Solutions Class 12 Business Studies Chapter 5, which will come in handy during your upcoming examination preparation.

Delegation

Delegation can be defined as the downward transfer of authority from a superior to a subordinate. It is a requirement for an organisation’s efficient operation since it allows management to focus on high-priority tasks. It also satisfies the subordinate’s desire for recognition while also allowing them to grow and exercise initiative. Extramarks NCERT Solutions Class 12 Business Studies Chapter 5 provides a pointwise explanation of the topic.

Elements of Delegation:

  • Delegation gives a person the authority to command or control a subordinate. This allows them to make judgments about what needs to be done and who will be responsible for accomplishing it. The chain of command begins at the top of the organisation and ends at the bottom. The delegation of authority aids in the maintenance of discipline and compliance.
  • The section when the subordinate has to stick to the work at hand is called responsibility. The subordinate should do an excellent job on the assigned task. A subordinate’s responsibility is to his superior.
  • The superior must be held responsible for the results of the task that he has delegated to his subordinate. The superior should maintain track of the subordinate’s job and ensure that it is completed successfully.

Importance of Delegation:

  • Managers are able to work more effectively as a result of employee empowerment since they have more time to focus on essential issues.
  • Delegation aids in the development of future managers. Employees are empowered by delegation because it allows them to put their abilities to use, gain experience, and advance to higher positions.
  • Employees’ self-esteem and confidence grow as a result of their job responsibilities. They are motivated and strive to enhance their performance.
  • Delegation aids an organisation’s expansion by offering a ready workforce to take on leadership roles in new endeavours.
  • Delegation of authority creates superior-subordinate relationships, which are the foundation of the management hierarchy. The degree and flow of power determine who has to report to whom.

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Decentralisation

The division of decision-making tasks among hierarchical levels is referred to as decentralisation. Simply put, decentralisation refers to the delegation of authority at all levels of a company. Lower levels share decision-making authority and, as a result, are closest to the sites of action. NCERT Solutions Class 12 Business Studies Chapter 5 by Extramarks explains decentralisation.

Importance of Decentralisation:

  • Decentralisation encourages subordinates to be self-sufficient and confident.
  • It is a method of management education as well as a chance for trained personnel to put their skills to use in real-world scenarios.
  • Decisions are made at the levels closest to the action points, and because there is no need for permission from many levels, the process is significantly faster. Information is also less likely to be corrupted because it does not have to go via extensive routes.
  • Because they are given the freedom to act and decide within the constraints specified by the superior, decentralisation reduces the degree of direct control conducted by a superior over the actions of a subordinate.
  • Productivity levels rise as each department strives to outperform the others, and the organisation is able to earn greater profits, which may be utilised for expansion.
  • Decentralisation allows for evaluation of performance at each level, and departments may be held individually accountable for their outcomes.

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By referring to Extramarks NCERT Solutions Class 12 Business Studies Chapter 5, students can easily understand the Nature and Significance of Management.f

Key Features of NCERT Solutions Class 12 Business Studies Chapter 5

Students must study all previous concepts in order to do well in the exam. As a result, NCERT Solutions Class 12 Business Studies Chapter 5 provides a detailed answer to all questions. Extramarks is the best option for a variety of reasons:

  • It covers all the chapter end questions along with their comprehensive answers explained in detailed with appropriate examples.
  • These notes have been prepared as per the  latest CBSE guidelines.
  • The solutions are prepared by faculty experts in the field of Business Studies.
  • These notes will prove beneficial for students during their final revision and  clarify all their doubts ahead of the exam.

Q.1 Identify the network of social relationships which arises spontaneously due to interaction at work.

Ans. Informal organisation provides its employees the platform to share their feelings and viewpoints. Informal organisation helps an employee to feel connected with the organisation where as formal organisation is based on formal structure based on superior subordinate relationship.

Q.2 What does the term ‘Span of management’ refer to?

Ans. Span of management refers to the number of subordinates under a superior.

It can be classified as:

  • Narrow span of management: This leads to tall organization structure.
  • Wide span of management: This leads to flatter organisational structure.

Q.3 State any two circumstances under which the functional structure will prove to be an appropriate choice.

Ans. Functional structure would prove to be most suitable when the size of the organisation is large, has diversified activities and operations require a high degree of specialisation.

For example, an organisation can have departments such as production, manufacturing, human resource, marketing, technology, etc. Each department in turn report to one coordinating head.

Functional structure promotes efficiency in utilisation of manpower as employees perform similar tasks within a department and are able to improve performance.

Q.4 Draw a diagram depicting a functional structure.

Ans. Divisional structure recognises each product line as a separate department It Ensures product specialisation.

Q.5 Company has its registered office in Delhi, manufacturing unit at Gurgaon and marketing and sales department at Faridabad. The company manufactures the consumer products. Which type of organisational structure should it adopt to achieve its target?

Ans. The type of organizational structure that company should adopt is functional structure.

Functional structure has following advantages:

  • Under functional structure, each major function of business is organised as a separate department. An expert can manage each department. It ensures efficiency in operations.
  • Under functional structure, coordination within the department is easier since departmental managers being specialists understand the perfect nature of job involved.

Q.6 What are the steps in the process of organising?

Ans. Steps in the process of organising are:

  • Division of work.
  • Grouping jobs and departmentation.
  • Establishing authority relationships

Q.7 Discuss the elements of delegation.

Ans. Delegation of authority has three inter-related elements. These are assignment of tasks and duties, grant of authority, and creation of responsibility and accountability.

  • Assignment: In the process of delegation, every superior has to define the jobs to be performed by his subordinates. He must also define the results expected. He has further to decide on the allocation of duties to the subordinates.
  • Authority: Grant of authority implies giving the right to subordinates to decide and act, to use necessary resources and represent the superior. Every subordinate needs authority to carry out the tasks and perform the duties assigned to him.
  • Responsibility and accountability: Along with the tasks to be performed and grant of authority, the subordinates are entrusted with the responsibility or obligation to carry out the duties assigned.

Q.8 How does informal organisation support the formal organisation?

Ans. Informal organisation supports the formal organisation. Informal organization is created out of the social interaction.

The features of informal organization that support formal organization are:

Common interest: The purpose of an informal organisation is to satisfy the social and psychological needs of its members. Members join informal organisation on the basis of common interest.

Informal communication: Informal organisation has informal communication known as grapevine. Information spreads faster in informal organisation.

No clear-cut structure: Informal organisation does not have a clear-cut structure. It is based on informal authority. Any person of the group may be designated as its leader.

  • Free flow of communication: This structure allows the workers to form informal relation outside the organisation.
  • Coordination: This type of structure ensures better coordination and cooperation.

Q.9 Can a large sized organisation be totally centralised of decentralised? Give your opinion.

Ans. Centralisation means concentration of all decision making functions at the apex of the management hierarchy, managers have less freedom of action. The pattern of authority in which people at all levels of management are involved in decision-making is called decentralisation.

A large sized organisation cannot be totally centralized or decentralised. An organization move towards decentralisation as it grows in size. It allows for better control of tasks at each level of management.

Q.10 Decentralisation is extending delegation to the lowest level.Comment.

Ans. In decentralisation, authority is transferred to the bottom of the hierarchy so that every part of the workforce can take their own decisions effectively without any delay. When authority is delegated to every department and to every level of management, authority is said to have been decentralised. Decentralisation is the end result of all the delegation of authorities among all the managers and employees of the organisation.

Q.11 Neha runs a factory wherein she manufactures shoes. The business has been doing well and she intends to expand by diversifying into leather bags as well as western formal wear thereby making her company a complete provider of corporate wear. This will enable her to market her business unit as the one stop for working women. Which type of structure would you recommend for her expanded organisation and why?

Ans. The organisational structure that Neha shall follow is ‘divisional structure.’ Divisional structure is one in which the departments are formed on the basis of product divisions is called divisional or product structure of organisation. Each department in it looks after the production, sale, marketing and finance function of a product.

Divisional structure is suitable where the number of main products is more than one, where different manufacturing technologies and marketing methods are required, where the size of the organisation is very large. Each department functions separately and the decision making is quick.

Q.12 The production manager asked the foreman to achieve a target production of 200 units per day, but he doesn’t give him the authority to requisition tools and materials from the stores department. Can the production manager blame the foreman if he is not able to achieve the desired target? Give reasons.

Ans. No, the foreman cannot be blamed in this case as the foreman was given the responsibility but he was not given the authority. Authority and responsibility must be given together. When responsibility is given, authority is required for smooth functioning.

Q.13 Why delegation is considered essential for effective organising?

Ans. Delegation is essential for effective organising as it has following benefits:

  • Benefits of specialisation: Under organising all the activities are sub divided into various parts. Each individual is assigned a particular task. He continuously does that same job time and again and hence gains specialisation in that particular work.
  • Clarity in working relationship: Organising defines the line of work and specifies who has to report to whom which results in effective communication and helps in fixing accountability.
  • Optimum utilisation of resources: The proper allocation of work avoids any overlapping and hence results in better utilisation of all the resources like human, material and financial resources.
  • Adaptation to change: Organising function of management helps the organisations in adapting the change as there is a proper line of authority and responsibility.
  • Development of personnel: As a manager delegates his work to his subordinates, he gets ample time to work on some other project and to apply his creativity and knowledge in developing new methods and ways of performing tasks.

Q.14 What is a divisional structure? Discuss its advantages and limitations.

Ans. When the organisation is large in size and is producing more than one type of product then activities related to one product are grouped under one department which is called divisional structure.

Divisional structure has the following advantages:

  • Product Specialisation: A divisional head becomes expert in the product that he handles and better prepared for higher roles.
  • Greater Accountability: The costs and benefits accruing from a department can be easily identified and hence a divisional head can be held accountable.
  • Flexibility and Initiative: In this each division functions separately and decisions are quick.
  • Managerial efficiency: This structure facilitates the development of managers and workers by providing them opportunities.

A divisional structure has the following limitations:

  • Costly: Due to duplication of resources in different departments, it becomes a costly affair for an organisation as a whole.
  • Conflicts: Conflicts may arise on the issue of allotment of funds to different departments and on common policy matters.
  • Ignoring organisational interests: Due to the autonomy with divisional heads, the probability of their considering divisional interest and ignoring organisational interest increases.

Q.15 Decentralisation is an optional policy. Explain why an organisation would choose to be decentralised.

Ans. Decentralisation is the process of redistributing or dispersing functions and powers away from central authority. In the process of decentralisation, authority is delegated to subordinates so that they can take quick decisions regarding urgent assignments.

An organisation would choose to be decentralized as it has following advantages:

  • Develops the spirit of initiative among subordinates: Under decentralisation, authority is delegated by the superiors to their subordinates. This inculcates the feeling of sense of responsibility in the subordinates and helps them in taking initiative.
  • Facilitates decision making: As the work is delegated, so the burden of all the managerial decisions is not confined to limited people. This results in better and quick decision making.
  • Relief to top management: With the help of delegation, the top level management takes care only of the important issues. All the small issues or issues or problems of less importance are dealt by the middle and the lower level management which reduces the burden of the top level management.

Q.16 Distinguish between centralisation and decentralisation.

Ans.

Basis of Distinction Centralisation Decentralisation
Authority Concentrated in few hands Delegated to lower level of management
Creativity Restricts the scope of creativity at middle and lower level. Product creativity at all levels
Scope of delegation Limited scope. Wide scope.
Decision making Delay in decisions Quick decision making.

 

 

 

 

 

 

 

 

 

 

Q.17 How is a functional structure different from a divisional structure?

Ans. Distinction between functional structure and division structure:

Basis of Distinction Functional Structure Divisional Structure
Nature Recognises each major function as a separate department Recognises each product line as a separate department
Specialisation Ensures occupational specialisation Ensures product specialisation
Cost It is economical in terms of cost. It is expensive in terms of cost.
Duplication of work Due to functional specialisation overlapping of work is minimised Each department has same functions so overlapping is increased.
Suitable More suitable for companies that focus on operational specialisation More suitable for multi products company

 

 

 

 

 

 

 

 

 

 

 

Q.18 A company, which manufactures a popular brand of toys, has been enjoying good market reputation. It has a functional organisational structure with separate departments for

Production, Marketing, Finance, Human Resources and Research and Development. Lately to use its brand name and also to cash on to new business opportunities it is thinking to diversify into manufacture of new range of electronic toys for which a new market is emerging. Which organisation structure should be adopted in this situation? Give concrete reasons with regard to benefits the company will derive from the steps it should take.

Ans. For the organisation that is diversifying, divisional structure is suitable. Divisional structure is one in which the departments are formed on the basis of product divisions is called divisional or product structure of organisation. Each department in it looks after the production, sale, marketing and finance function of a product. Divisional structure is suitable where the number of main products is more than one, where different manufacturing technologies and marketing methods are required, where the size of the organisation is very large. Each department functions separately and the decision making is quick.

Following are the benefits of divisional structure of organisation:

  • In divisional structure, one department is formed for one product. All the decisions regarding that product are taken in that department itself. This fastens the process of decision-making.
  • Responsibility of profit & loss is on the head of the division. This also helps in taking corrective actions.

Q.19 A company manufacturing sewing machines set up in 1945 by the British promoters follows formal organisation culture in totality. It is facing lot of problems in delays in decision making. As the result it is not able to adapt to changing business environment. The work force is also not motivated since they cannot vent their grievances except through formal channels, which involve red tape. Employee turnover is high. Its market share is also declining due to changed circumstances and business environment. You are to advise the company with regard to change it should bring about in its organisation structure to overcome the problems faced by it. Give reasons in terms of benefits it will derive from the changes suggested by you.

Ans. The change that is required to correct the situation is moving towards informal organisational structure. Informal organisation is a part of the formal organisation and the two cannot be separated from each other. Any organisation is a mixture or combination of formal and informal organisation.

Benefits of informal organisation:

  • In an informal organisation, employees share their personal views on things they like and they don’t like. In this way, they get relieved of the routine tension and the boredom of doing repetitive work.
  • Independent channels of communication: Under this type of communication, no flow of communication can be defined as a person working at the lower rank can have direct contact or communication with the person at the higher level.
  • The company should diversify and technology up gradation is required. It should manufacture sewing machine that requires less efforts to operate and maintain.

Q.20 A company X limited manufacturing cosmetics, which has enjoyed a preeminent position in business, has grown in size. Its business was very good till 1991. But after that, new liberalised environment has seen entry ofmany MNC’s in the sector. With the result the market share of X limited has declined. The company had followed a very centralized business model with Directors and divisional heads making even minor decisions. Before 1991 this business model had served the company very well as consumers had no choice.

But now the company is under pressure to reform. What organisation structure changes should the company bring about in order to retain its market share? How will the changes suggested by you help the firm? Keep in mind that the sector in which the company is FMCG.

Ans. To retain its market share, an organisation should move towards decentralisation. The pattern of authority in which people at all levels of management are involved in decision-making is called decentralisation.

Benefits of decentralisation are:

  • Develops the spirit of initiative among subordinates: Under decentralisation, authority is delegated by the superiors to their subordinates. This inculcates the feeling of sense of responsibility in the subordinates and helps them in taking initiative.
  • Facilitates decision making: As the work is delegated, so the burden of all the managerial decisions is not confined to limited people. This results in better and quick decision making.
  • Relief to top management: With the help of delegation, the top level management takes care only of the important issues. All the small issues or issues or problems of less importance are dealt by the middle and the lower level management which reduces the burden of the top level management.

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Related Chapters

Chapter 1 - Nature and Significance of Management

Chapter 2 - Principles of Management

Chapter 3 - Business Environment

Chapter 4 - Planning

Chapter 6 - Staffing

Chapter 7 - Directing

Chapter 8 - Controlling

Chapter 9 - Financial Management

Chapter 10 - Financial Markets

Chapter 11 - Marketing

Chapter 12 - Consumer Protection

Chapter 13 - Entrepreneurship Development

FAQs (Frequently Asked Questions)

The downward transmission of authority from a superior to a subordinate is referred to as delegation. It is a requirement for an organisation’s efficient operation since it allows management to focus on high-priority tasks.

 A divisional structure is a framework that divides work into various departments. Each department has its own leader, and there are no overlapping tasks in such a system.