business studies notes cbse class 12 -ORGANISING

5. Organizing

Summary

In general terms, ‘organizing’ refers to the systematic arrangement of things and activities. However, in the context of management, ‘organizing’ may be interpreted in two ways—as a structure and as a process.

Meaning of organizing As a process, organizing is concerned with the productive integration of human, physical and financial resources to meet the goals of an organisation. As a structure, organizing involves creating a structural framework within which the individual efforts are coordinated to meet the needs of an organisation.

Importance of organizing and organizational structure

•        Organizing lends to specialization, as the whole work is sub-divided into specific activities and allocated to different Individuals.

•        Organizing helps to create a well-defined structure of jobs, as the roles and responsibilities of each job position are clearly defined in the organizing process.

•        Organizational structure clarifies the authority and power associated with each job position in the organisation.

•        Organizing helps to avoid duplication of work through a clear-cut distribution of work between individuals and groups.

•        Organizing facilitates: coordination between the various levels of management by synchronizing the efforts of people at various levels.

•        Organizing serves as a source of support and security by assigning a definite job designation to each employee.

•        Organizing facilitates  adaptation of a business to changes in external environment.

Process of organizing

•        Division  of work is  the first  step in the organizing process.  It  involves subdivision of the total work to be done into specific jobs to promote specialization, efficiency and economy.

•        Grouping of jobs, or departmentation, is the second step in the organizing process. It relates to grouping similar jobs into departments on the basis of functions, type of product, geographical area, etc.

•        Establishing authority-responsibility relationships is the third step in organizing process, involving the linking  of  all jobs in a hierarchy by authority-responsibility relationships.

Structure of organisation

•        An organizational structure is a system of job positions reflecting the roles and responsibilities associated    with each job position and authority responsibility relation between them. The organizational structure appears like a pyramid with a narrow top and wide bottom.

•        The  following  factors  need   to  be  kept  in  mind  while  designing  an organizational structure job design, departmentation, span of control and delegation of authority.

Types of organizational structure

•        Functional structure is created by grouping the various activities of an organisation on the basis of basic functions to be performed, like finance, marketing, production and personnel.

• Divisional structure is created by grouping the various activities  to be performed in an organisation on the basis of various product lines. It is useful in large and diversified organisations.

Formal organisation

•         Formal organisation is a deliberately planned and created structure of activities and authority-responsibility relationships to meet the organizational goals.

Features of formal organisation

•        It is deliberately planned and created by management.

•        It strives to achieve organizational goals.

•        It is rigid in nature.

•        It contains a well-defined structure of authority and responsibility.

•        It follows the formal channel of communication, i.e., scalar chain.

Informal organisation

•                                Informal organisation is a network of social relationships which arises             

              spontaneously from within a formal organisation to meet the social and cultural     

              needs of its members.

Features of informal organisation

•        It arises spontaneously from within a formal organisation as a result of social interaction among members of the organisation.

•        It strives to meet social and cultural needs of the members.

•        It is flexible in nature.

•        It is a complex network of human relationships.

•        It follows informal channels of communication.

Delegation of Authority

         The process by which a manager shares some of his work and authority with his 

         subordinate is known as delegation of authority.

Importance of delegation of authority

•        Delegation of authority reduces the workload of managers, as through delegation the manager shares his workload with his subordinates.

•        It provides the basis for superior-subordinate relationships, as grant of authority by superior to subordinates gives meaning to superior-subordinate relationships.

•        It improves managerial effectiveness, as by delegating routine work to the subordinates, the managers can concentrate on important matters.

•        It motivates subordinates, as it gives them a sense of importance and also an opportunity to apply their creativity and skill to their job.

•        It helps to develop managers, as it gives the subordinates an opportunity to individually handle and solve managerial problems.

•        It facilitates the growth of the organisation, as it develops the potential of employees.

Elements of Delegation

•        The three elements in the process of delegation are the assignment of tasks, grant of authority and creation of responsibility and accountability.

•        The principle of delegation by results expected states that there should be a relation between the results expected from a subordinate and the amount of authority granted to him.

•        Principle of parity of authority and responsibility states that there should not be any disparity between  the authority granted  to a subordinate and responsibility imposed on him because responsibility without authority makes the person ineffective and grant of excessive authority to subordinates makes him misuse it.

•        The principle of absolute responsibility states that authority can be delegated but responsibility cannot be delegated by a superior. The superior remains responsible, or accountable, to his superior for the tasks which may be assigned to his subordinate. The responsibility of the superior is absolute.

•        The authority level principle states that before taking a decision, a manager should ensure that he has due authority to take a decision at his level and if he does not have authority to take decisions at his level, he should refer to his superior.

Centralization of authority

•                               Centralization of authority refers to concentration of authority for decision-

              making and actions in the hands of a few managers at the higher level.

Decentralization of authority

•                               Decentralization of authority refers to the systematic delegation of authority at all         

              levels of management and in all departments of the organisation for decision-  

              making and actions appropriate at the respective levels:

I             Importance of decentralization: Decentralization helps an organisation to cope                        

              with changes, reduces the workload of managers, facilitates growth of an      

              organisation, helps to develop managers, facilitates decision-making, ensures         

              smooth running of an organisation and promotes initiative and creativity.

Meaning and Importance of Organizing

Very-Short-Answer Questions

1.      What is meant by organizing?The managerial function of organizing refers to    

         the process of integrating human, physical and financial resources required to    

         meet the goals of an organisation. It also involves determining the various 

         activities / jobs to be performed, grouping similar jobs into departments, then 

         designing the organizational. Structure accordingly and establishing authority-

         responsibility relationships among various job positions.

BUSINESS STUDIES NOTES CBSE CLASS 12 -Nature and Significance of Management

BUSINESS STUDIES NOTES CBSE

1. Nature and Significance of Management

SummaryIn general terms, ‘management’ is concerned with seeing that the job gets done. A manager is one who does his work by getting other people to do theirs. In today’s world of growing size and complexities there is a need for effective management not only in business enterprises but also in non-profit enterprises like clubs, hospitals, schools, families, etc. Management may be good or bad, but it is universal and of great importance.

Meaning of management: - Management is the process of adopting a systematic and coordinated approach to achieve individual and organizational goals through efficient use of resources.

Features of Management

•Management is a goal-oriented activity, as all human efforts are directed towards attaining the predetermined goals of an organisation.
•It integrates human and material resources in a productive manner.
•It is a continuous ongoing activity, as it involves constant identification, analysis and solution of management problems.
•It is pervasive in nature, as it exists in all types of and at all levels of organisation.
•It is a group activity, as it involves the coordinated efforts of all the people in an organisation to achieve the objectives of that enterprise.
•It is intangible, as it cannot be seen but its presence or absence is reflected in the day-to-day working and success or failure of an organisation.
•It is considered to bo dynamic in nature as managers need to constantly review and revise techniques,methods and approaches due to the rapidly changing business environment.
•It is considered to be a composite process consisting of several interrelated and interdependent functions to be performed in close coordination.

Objectives of Management

•Management aims at achieving maximum results with minimum effort by following a focused approach.
•It helps to increase the efficiency of factors of production by eliminating duplication of human efforts and wastage of material resources.
•It ensures maximum prosperity for employers and employees by integrating the goals of individuals with the goals of the organisation.
•Management brings about human betterment and social justice, as efficient use of resources leads to the growth of the organisation, its employees, and society at large.

Types of Objectives

•The objectives of management can be categorized as individual, social and organizational objectives.
•Individual objectives are lucrative salary or wages, good growth prospects, peer recognition, personal training and development, etc.
•Social objectives include regular contribution towards society for development, health, labour welfare, price regulation, etc.
•Organizational goals signify market standing, innovation, productivity, profitability, workers performance and attitude, social responsibility, etc.

Importance of Management

•It helps in achieving group goals.
•It helps in optimum utilisation of resources.
•It helps to reduce cost of business operation.
•it facilitates establishment of a sound organisation.
•It helps to maintain equilibrium in a dynamic environment.
•It leads to prosperity of the society.
•It helps to maintain equilibrium by integrating an organisation internally with its employees and externally with its environment.

Dimensions of Management

Management as an activity As an activity, management refers to work undertaken by managers in the process of management. It includes informational activities, decisional activities and interpersonal activities.

Management as a process As a process management includes series of functions, i.e., planning, organizing, staffing, directing and controlling, undertaken to achieve the objectives of an enterprise. Management is considered to be a social, integrating and continuous process.

Management as a discipline Management is considered to be a discipline, as it is a systematized body of knowledge, which can be imparted to people through instructions and teaching and is gaining acceptability worldwide.

Management as a group Management as a group may be looked upon in two ways—(a) all managers taken together and (b) only top level management.

Nature of Management

Management as a science   Science   is   a   systematized   body   of   knowledge pertaining to a specific field of study, and contains general facts that explain a phenomenon. Science is characterized by certain features such as the existence of a systematized body of knowledge, use of scientific methods of observation, principles based on experiments, and universal validity.Management may be called an inexact science or a social science, as the application or use of its principles has to be modified according to the given situation. The degree of inexactness in case of management is quite high, as it deals with the behaviour of human beings, which is subject to constant changes and cannot be predicted on the basis of absolute laws and experiments.

Management as an art Art refers to the application of knowledge and personal skills to achieve the desired results. The main features of art are existence of theoretical knowledge, personalized application, and involvement of practice and creativity.Management possesses all the features of art. It is a full-fledged art, as the application of its principles depends on the experience and skill of the managers.

Management is both science and art Effective management is the result of judicious blend of art as well as science. As a science, management provides principles and theories which form the basis for management in practice. But the application of these principles in the light of a given situation is an art and depends greatly on the skill of the managers.

Management as a profession : Profession is concerned with rendering specialized services. Management as a profession is a systematic body of knowledge but neither the entry to management courses is restricted nor is there a universal code of conduct for managers. Thus, management cannot be considered to be a full-fledged profession; however efforts are being made to give it the status of profession due to the growing need of professional management in the complex, competitive and rapidly changing corporate world of today.

Management and administration Administration means the overall determination of policies, setting of major objectives, identification of the general purpose and laying out of broad programmes and major projects.The terms ‘management’ and ‘administration’ are broadly viewed in three different ways by different experts in context of usage, (a) Administration is a part of management, (b) administration is a wider term and includes management, (c) both the terms are synonymous.

Levels of Management

• Top-level management: The top management in an organisation consists of managers at the highest level in the management hierarchy. This level consists of the board of directors, the chief executive, the chairman, and the department heads.
•Middle-level management: The middle management in an organisation consists of departmental managers such as the sales manager, the purchase manager, the plant manager, the business manager, etc.

•Lower-level management: The lower-level management in an organisation consists of first-line supervisors. They generally have such designations as superintendent, section officer, supervisor, foreman, etc.

Functions of management The various functions of management, which are interrelated and interdependent, are as follows:

•Planning: Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. It bridges the gap between where we are and where we want to go.
•Organizing: Organizing is the process of identifying and grouping the work to be performed, defining and delegating responsibility and authority, and establishing relationships to enable people to work most effectively together in accomplishing objectives.
•Staffing: Staffing may be defined as the managerial function of hiring the appropriate personnel and developing them to fill in various positions in the organisation.
•Directing:   Directing  as  a   function  of  management  is  concerned  with instructing, guiding and inspiring people in the organisation to achieve its objectives.
•Controlling: Controlling is the process through which the management ensures that the actual activities conform to the planned activities.
•Coordination: Coordination as a function of management refers to the task of integrating the activities of separate units of an organisation to achieve the organizational goals efficiently. Coordination is, therefore, the essence of management.

Elements of coordination The three key elements of coordination are integration, balancing, and timing.

Nature of Coordination

•Coordination is regarded as the essence of management.
•It is a deliberate and conscious effort of the manager to integrate diverse organizational activities.
•It is a continuous and ongoing process.
•It is pervasive in nature.
•It relates to group efforts and not individual efforts.

Need for coordination Coordination is required in an organisation due to its large size, complex organizational structure, functional differentiation and specialization.

BUSINESS STUDIES NOTES CBSE CLASS 12

3. Business Environment

Summary

The survival and growth of a business concern greatly depends upon its capacity to adapt to its environment. A business draws all its resources—men, material, money, and machinery—from its environment. It also offers its products and services to its environment. The business environment may be said to consist of all the components that are likely to affect the supply of the business inputs and the demand for the output, i.e., suppliers, customers, government, technological level of economic development, social values, competition, money, market and political stability.The business environment is not considered to be dynamic in nature due to constant changes in its components. Therefore, in order to ensure the smooth running of a business concern it is important that managers constantly review and revise their plans in the light of changing conditions.

Meaning of Business EnvironmentThe term business environment refers to all forces external to a business under which it operates.

Categories of Business environment
•        Economic environment consists of monetary policy, fiscal policy, per capita income, level of economic development, etc.
•        Non-economic environment consists of social, cultural, political,  legal; technological factors.

Meaning of Environment Scanning
•        Environment scanning refers to the process of study of the business environment by  an enterprise  to identify forthcoming  challenges and opportunities.

Benefits of Environment Understanding
•        First movers advantage.
•        Warning signals.
•        Sensitization of the management.
•        Basis of strategy.
•        Source of intellectual stimulation.
•        Image building.
•        Continuous learning.

Levels of Business Environment

First level   General environment, consisting of economic, social, political, legal and technological  factors.

Second level   Operating    environment,    consisting    of    labour    relations, customers, competitors, suppliers and international economy.

Third level   Internal    environment   consisting   of   organizational   aspects, marketing aspects, financial aspects, personnel aspects and production aspects.

Components of the General Environment

•        Economic environment It consists of gross national product, corporate profits, inflation rate, per capita income, interest rates, tax rates, etc.
•        Social environment It consists of factors like literacy rates, educational levels, customers, beliefs, value, occupation of the people.
•        Political environment It consists of the outlook and policies of the ruling political party.
•        Legal environment  It includes the laws of the country which are likely to affect the working of an enterprise.
•        Technological environment It consists of the new technology and techniques for production of products.
•        Economic Changes Initiated by the government of India since 1991 New Industrial Policy, New Trade Policy, fiscal reforms, monetary reforms, capital market reforms, reduction in subsidies and removal of price controls.
•        Impact of changes in government policy on business and industry Removal of protective environment, threat from MNC, all-round competition, buyer’s market, export orientation, world-class technology, corporate vulnerability, restructuring of organisation.
•        Managerial responses to changes in business environment Acquisitions and mergers, diversification, consolidation of multinationals, brand building, innovative distribution and selling techniques, changes in capital structure, customer-oriented approach, enlarged production capacity, technological developments, better labour relations.

NOTES OF BUSINESS STUDIES CBSE CLASS 12

NOTES OF BUSINESS STUDIES CBSE CLASS XII

2. Principles of Management

SummaryMeaning of Principles of ManagementThe practice of management requires the knowledge of certain guidelines which provide the basis for managerial decision-making and action. These guidelines are known as principles of management.

Nature of Principles of Management
•        The principles of management are universal in nature as they are used by managers within organisations of varying size and types.
•        They are flexible in nature as they are applied in different situations with modifications.
•        They help to bring about desired change in the employees in terms of change in   their   outlook,   efficiency   and   attitude,   necessary   to   achieve   the organizational goals.
•        The principles of management determine the cause-and-effect relationships between different factors and thus help managers to foresee the consequences of their actions and decisions.
•        The  principles  of  management  are  evolved  on  the basis  of  personal observation and experiences of the experts.
•        The scope of application of principles of management may sometimes be limited due to human, physical or structural constraints.
•        The principles of management have to be relatively applied in the light of given conditions. Need and Importance of Principles of Management
•        The principles of management help to make the managers aware of the various aspects of management. This helps them to deal with the actual situations in a better way.
•        They are useful in training old and new managers, as the existence of some theoretical knowledge is necessary to impart education in any field.
•        The principles of management facilitate sound administration by clearly indicating the role and responsibilities of managers.
•        They serve as a guide to research in management by indicating the areas in which research should be undertaken to make the practice of management more useful.
•        The principles of management also lead to optimum utilisation of resources through effective management. Fayol’s Principles of Management
•        The principle of division of work suggests that both the operative and managerial work should be sub divided and allocated to a number of persons in an organisation. Division of labour facilitates specialization and efficiency.
•        The principle of authority and responsibility suggests that there should be a balance   between   authority   given   and   responsibility   entrusted   to   a subordinate for doing a particular job.
•        The principle of discipline states that both managers and workers should abide by the rules and regulations of the organisation and observe proper code of conduct towards each other and among themselves.
•        The principle of unity of command states that in order to avoid conflicts and confusions at the workplace a subordinate should receive orders and be accountable to one and only one superior.
•        The principle of unity of direction states that for a group of activities with similar objectives there should be only one plan and one head.
•        The principle of subordination of individual interest to general interest states that if the need be the interest of the organisation should be considered and given priority before individual interest.
•        The principle of fair remuneration to personnel states that fair and reasonable wages should be paid to workers. Provisions for special allowance should also be made to compensate them regularly for increasing cost of living.
•        The principle of centralization and decentralization states that the top-level management   is  generally  centralized  and   the  middle-and   lower-level managements may be decentralized.
•        The  principle  of scalar chain suggests  that  the  flow  of authority  and communication process within an organisation should be regulated by a well-defined chain of command and communication which binds together all people in the organisation from highest to lowest levels.
•        The principle of order states that both material order (function of place from availability of materials) and social order (allotment of specific place to each individual in an organisation) should be maintained for smooth functioning of an organisation.
•        The principle of equity states that the people at the same level in an organisation should be treated equally.

•        The principle of stability of tenure of personnel suggests that an employee should not be moved too frequently from one job to another as it takes considerable time to become familiar with the work.
•        The principle of initiative states that employees in the organisation should be encouraged to take initiative in their work-related methods, as increased involvement motivates them towards higher efficiency.
•        The principle of espirit de corps states that efforts should be made by managers to inculcate the feeling of togetherness and mutual understanding among employees.This will help to develop a healthy work environment.

Meaning of Scientific ManagementThe concept of scientific management was introduced by F W Taylor. He advocated that the process of management should have a scientific approach, i.e., the various elements of a task should be scientifically studied in terms of time, motion and fatigue study. The workers should also be selected and trained in a scientific manner. Moreover, the workers should be subject to multiple accountability to increase supervision on them. The method of scientific management was introduced primarily for the workers at operative level/industrial workers.

Principles of Scientific Management
•        The principle of science, not rule of thumb, emphasises the use of scientific approach rather than trial and error method for managerial decision-making and action.
•        The   principle   of   harmony,   not   discord,   suggests   that   workers   and management should work in harmony and coordination with one another.
•        The principle of cooperation, not individualism, advocates that workers should cooperate with one another and work towards the attainment of common goals, i.e., higher productivity.
•        The principle of maximum, not restricted, output suggests that both workers and managers should work with utmost efficiency to reach optimum level of output. The principle of separation of planning and operational  work indicates that in an organisation the planning function and operational functions should be performed by two different groups of people.
•        The principle of maximum prosperity for employees and employesstresses the need for giving due consideration to the prosperity of the employees besides the increasing profits for the employers.
•        The principle of development of a science for each element of a man’s work suggests that application of various techniques of scientific management will enable workers to increase their productivity by eliminating the possible wastage of time, effort and resources.
•        The principle of scientific selection, training and development of workmen emphasises the need to match the requirements of a job with the skill and competence of worker through scientific procedure of selection and training.
•        The principle of close cooperation between workers and  management suggests that since both workers and management share a common interest, i.e., higher wages and higher returns through higher productivity, they should work in close cooperation with one another.
•        The principle of division of responsibility between management and worker states that the responsibility of planning should be reserved with the managers and workers should be made responsible for execution of plans.

Techniques of Scientific Management 
•        The technique of functional foremanship is based on the concept of multiple accountability to increase supervision of workers for higher efficiency. Under this technique each worker is supervised by eight bosses. Also planning function is segregated from operational functions.
•        Standardization of work relates to strict adherence to input standards in terms of working conditions, raw material, tools and equipment and output standards in terms of size, quality, variety, etc., for adopting scientific management in practice.
•        Simplification refers to the process of cutting down the number,variety,design and quality-related specifications of output to cut down superfluous expenditure on time, effort and machines for producing output with varying features and utility.
•        Fatigue study relates to determining the amount and frequency of rest required by workers in between work in order to resume work with full potential towards completion of a task.
•        Method study is concerned with determining the best procedure for doing a particular job, to ensure optimum efficiency and control unnecessary wastage of resources.
•        Time study is the process of studying the time required by a worker of average skill and ability to perform the various elements of a job and to fix a suitable wage rate for it.

•          Motion study is a technique which involves close observation and analysis of the movements of workers and machines while doing a job in order to eliminate unnecessary movements and derive the best way of doing a job.
•          The technique of mental revolution suggests that a complete change in the outlook of workers and managers with respect to each other and their work is necessary for increasing efficiency and productivity. Instead of fighting for the division of profits they should act as a support mechanism for one another.
•          Differential piece rate’ method is an incentive bonus plan under which the wages of efficient and inefficient workers are differentiated on the basis of their output for similar work.