Which is the FIRST step in the process of organising?

Identification and division of work

Establishing reporting relationships

When a manager delegates a task to a subordinate, which of the following can she NEVER pass on to the subordinate?

Accountability for the final outcome

Authority to take decisions on the task

Power to use the resources the task needs

Accountability for the final outcome

News of a likely bonus spreads through a factory within an hour, passed from worker to worker during tea breaks, before any official notice is issued. This channel of communication belongs to the:

Informal organisation, through the grapevine

Formal organisation, through the scalar chain

Informal organisation, through the grapevine

Divisional structure, through the division head

Functional structure, through the HR head

Which of the following statements about decentralisation is correct?

It is an optional policy decision taken by top management

It is compulsory whenever a manager assigns any work

It is a relationship between one superior and one subordinate

It transfers accountability to the lowest level

It is an optional policy decision taken by top management

A bank gave its branch managers the authority to sanction loans up to a limit. Over the years these managers learned to judge risk on their own, and when senior posts fell vacant the bank filled them from among its branch managers instead of hiring from outside. Which importance of decentralisation does this show?

Relief to top management from routine decisions

Better control through measuring each unit

Quick decision-making at the point of action

Organising — Structure, Formal and Informal Organisation, Delegation and Decentralisation

Once a plan says what is to be done, organising decides how the work will be divided, who will do each part, who reports to whom, and what resources each person gets. It is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority, and establishing relationships so that people can work together towards the plan’s objectives. The chapter then asks how those relationships are drawn — the organisation structure — and how far authority should be pushed down. CUET sets this unit mostly as comparison: functional against divisional, formal against informal, delegation against decentralisation.

The Steps of Organising and Why It Matters

Identification and division of work — break the total work into manageable activities so that duplication is avoided and the burden is shared.
Departmentalisation — group similar activities together into departments, by function (production, finance) or by product or territory.
Assignment of duties — allocate the work of each department to people according to their skills.
Establishing reporting relationships — make clear who takes orders from whom and who is accountable to whom; this creates the hierarchy.

The importance of organising follows from those steps: the benefits of specialisation, clarity in working relationships, optimum utilisation of resources (no duplication, no idle capacity), adaptation to change, effective administration, development of personnel (delegation frees managers and trains subordinates), and a base for expansion and growth.

ℹ️ Span of management sets the shape

The span of management is the number of subordinates one manager can effectively supervise. It decides how many levels the structure has: a narrow span means many levels (a tall structure); a wide span means fewer levels (a flat structure).

Functional and Divisional Structures

A functional structure groups jobs by the function they perform — production, purchase, marketing, finance, human resources — each under a functional head reporting to the top. A divisional structure groups them by product (or territory): each division, such as cosmetics, clothing or footwear, has its own production, marketing and finance, and its head is responsible for that division’s profit. The choice depends on what the firm makes. One main product line in a large firm that needs specialists suits the functional form; several distinct product lines suit the divisional form.

Functional against divisional
Basis	Functional	Divisional
Formation	Based on functions	Based on product lines, supported by functions within each
Specialisation	Functional specialisation	Product specialisation
Responsibility	Difficult to fix on one department for overall results	Easy — each division head answers for its own revenue and cost
Managerial development	Difficult — each head sees one function only	Easier — division heads handle all functions of their product
Cost	Economical — functions are not duplicated	Costly — each division duplicates functions and resources
Coordination	Difficult across departments for a multi-product firm	Easy within a division, since all its functions sit together

⚠️ Each structure’s weakness is a case of its own

The functional structure’s typical problems are functional empires — each head putting the department’s interest above the organisation’s — conflicts between departments, and inflexibility. The divisional structure’s typical problems are conflict among divisions over the allocation of funds, costly duplication of activities across divisions, and division heads gaining power and ignoring the organisation’s interest. A case describing two divisions fighting over the budget is a divisional weakness, not a functional one.

Formal and Informal Organisation

The two organisations inside every enterprise
Basis	Formal	Informal
Origin	Deliberately created by management	Arises on its own from social interaction among employees
Purpose	To achieve organisational goals	To satisfy social and psychological needs
Authority	Arises from position in the hierarchy	Arises from personal qualities
Communication	Follows the scalar chain	Flows in any direction — the grapevine
Nature	Rigid; rules and procedures	Flexible; no set rules

The informal organisation is not an enemy of the formal one. It spreads information fast, gives employees a sense of belonging, and fills gaps in the formal channels — so a wise manager uses it, for example to sound out reactions to a proposed change. Its drawbacks are rumours, resistance to change, and pressure on members to conform to group norms that may cut against the organisation’s interest.

Delegation and Decentralisation

The three elements of delegation
Element	Meaning	Can it be passed down?
Authority	The right to command and take decisions; flows downward	Yes — authority is delegated
Responsibility	The obligation of a subordinate to perform the assigned duty; flows upward	It is assumed by the subordinate, but cannot be entirely shifted away by the superior
Accountability	Answerability for the final outcome; flows upward	Never — accountability is imposed and cannot be delegated

🧠 Delegated, assumed, imposed

Authority is delegated, responsibility is assumed, accountability is imposed. A manager who hands a task to a subordinate along with the authority to do it is still answerable to her own superior if it goes wrong — she cannot say "it was my subordinate’s fault" and escape.

Decentralisation is the systematic delegation of authority to the lowest levels where decisions can sensibly be made, reserving only the most important decisions for the top. Its importance: it develops initiative among subordinates, develops managerial talent for the future, enables quick decision-making, gives relief to top management, facilitates growth, and allows better control because each unit’s performance can be measured. Delegation and decentralisation are not the same thing, and the paper tests the difference.

Delegation against decentralisation
Basis	Delegation	Decentralisation
Nature	A compulsory act — no manager can do everything	An optional policy decision of top management
Freedom of action	Limited — the superior keeps close control	Greater — subject to overall policy
Status	A process between a superior and a subordinate	The end result of delegation spread across the organisation
Scope	Narrow	Wide — extends to the lowest levels
Purpose	To lessen the burden on the manager	To increase the role of subordinates in the organisation

Key takeaways

Organising steps: identify and divide work → departmentalise → assign duties → establish reporting relationships.
Functional structure: grouped by function, economical, good for one main product; risks functional empires. Divisional: grouped by product, fixes responsibility, develops managers; costly duplication and fights over funds.
The formal organisation is created deliberately and follows the scalar chain; the informal organisation arises from social interaction and communicates through the grapevine.
Authority is delegated, responsibility assumed, accountability imposed — and accountability can never be delegated.
Delegation is compulsory, narrow and a process; decentralisation is optional, wide, a policy and an end result, and it develops initiative and future managers.

Practice questions (8)

Attempt each one before opening the answer. Every explanation names the tempting wrong option as well as the right one, because that is where marks are lost.

Which is the FIRST step in the process of organising?
1. Identification and division of work
2. Departmentalisation
3. Establishing reporting relationships
4. Assignment of duties
Show answer
Answer: A — Identification and division of work
Organising starts by identifying the total work and dividing it into manageable activities; only then can similar activities be grouped into departments, duties assigned within them and reporting relationships set up. Departmentalisation is the usual wrong answer because grouping feels like the start, but there is nothing to group until the work has been identified and divided.
A large company makes only one product, steel pipes, and needs a high degree of specialisation. It groups its jobs into production, purchase, finance, marketing and human resources, each under its own head. Which structure has it adopted?
1. Divisional structure
2. Informal organisation
3. Functional structure
4. Product-wise structure
Show answer
Answer: C — Functional structure
Grouping jobs by the function performed — production, purchase, finance, marketing, HR — is the functional structure, and a large firm with one main product needing specialists is exactly the situation it suits. A divisional or product-wise structure groups by product line and fits a firm with several distinct products. The informal organisation is not a structure management designs at all.
When a manager delegates a task to a subordinate, which of the following can she NEVER pass on to the subordinate?
1. Authority to take decisions on the task
2. The work itself
3. Power to use the resources the task needs
4. Accountability for the final outcome
Show answer
Answer: D — Accountability for the final outcome
Accountability is imposed and cannot be delegated: however a task is passed down, the manager remains answerable to her own superior for the result. The work, the authority to decide and the power to use resources are exactly what delegation passes on — authority is the element that is delegated. The trap is to think that handing over authority also hands over answerability.
News of a likely bonus spreads through a factory within an hour, passed from worker to worker during tea breaks, before any official notice is issued. This channel of communication belongs to the:
1. Formal organisation, through the scalar chain
2. Informal organisation, through the grapevine
3. Divisional structure, through the division head
4. Functional structure, through the HR head
Show answer
Answer: B — Informal organisation, through the grapevine
Information passed person to person through social contact, outside any official channel and ahead of the formal notice, is the grapevine of the informal organisation. The formal organisation communicates through the scalar chain and official notices, which the case says had not yet been issued. The two structures named in the other options are ways of grouping jobs, not channels of rumour.
In a company organised by product lines, each product unit keeps its own finance and HR departments, which has raised overall costs, and the unit heads regularly clash over how the head office should share out funds. These problems are typical of which form of organisation?
1. Functional structure
2. Divisional structure
3. Informal organisation
4. Centralised organisation
Show answer
Answer: B — Divisional structure
Costly duplication of functions across units and conflict among unit heads over the allocation of funds are the two textbook weaknesses of the divisional structure, and the case says the firm is organised by product lines. The functional structure avoids duplication — that is its economy — and its typical problem is functional empires within one firm-wide set of departments. Nothing here is informal, and a centralised firm would not leave each unit its own finance department.
Which of the following statements about decentralisation is correct?
1. It is compulsory whenever a manager assigns any work
2. It is a relationship between one superior and one subordinate
3. It transfers accountability to the lowest level
4. It is an optional policy decision taken by top management
Show answer
Answer: D — It is an optional policy decision taken by top management
Decentralisation is a policy decision of top management about how far to push authority down, and an organisation may choose more or less of it. Being compulsory and being a relationship between a superior and a subordinate both describe delegation, which is the confusion the question targets. No form of dispersing authority transfers accountability, which is never delegated.
A sales manager asks Ravi to handle the dealers in a new district and allows him to offer them discounts of up to 5% without asking first. Ravi must report his results every month. The permission to offer discounts of up to 5% is an example of:
1. Authority
2. Responsibility
3. Accountability
4. Span of management
Show answer
Answer: A — Authority
The right to take a decision — here, to grant a discount without asking — is authority, the element of delegation that flows downward. Handling the dealers is Ravi’s responsibility, his obligation to do the job, and reporting results monthly is his accountability for the outcome; both are in the case, which is why it needs reading precisely. Span of management is the number of subordinates a manager supervises.
A bank gave its branch managers the authority to sanction loans up to a limit. Over the years these managers learned to judge risk on their own, and when senior posts fell vacant the bank filled them from among its branch managers instead of hiring from outside. Which importance of decentralisation does this show?
1. Relief to top management from routine decisions
2. Better control through measuring each unit
3. Develops managerial talent for the future
4. Quick decision-making at the point of action
Show answer
Answer: C — Develops managerial talent for the future
Lower-level managers who gain experience by taking real decisions become a pool from which future senior managers can be drawn — the importance called developing managerial talent. Relief to top management and quick decisions are genuine benefits too, but the case is built around the managers being trained and later promoted, not around saving the top’s time or speed. Better control is about measuring each unit’s performance.