Organising

Informal Organisation.

Span of management (or Span of Control) refers to the number of subordinates that can be effectively managed by a superior. It determines the number of levels of management in the structure.

1. When the size of the organisation is large.
2. When the organisation has a diversified range of activities but produces only one line of product.
3. When operations require a high degree of specialisation.

[Image of functional organizational structure chart]
A functional structure groups jobs of similar nature under major functions (e.g., Production, Marketing, Finance, HR) reporting to a Managing Director.

The company should adopt a Functional Structure.
Reason: Since the company manufactures consumer products (implying a single product line) and needs coordination between distinct functions like manufacturing (Gurgaon) and sales (Faridabad), grouping based on functions is most efficient.

1. Identification and Division of Work: Identifying the work to be done and dividing it into manageable tasks.
2. Departmentalisation: Grouping similar tasks into departments (Functional or Divisional).
3. Assignment of Duties: Allocating work to employees based on their skills and competencies.
4. Establishing Reporting Relationships: Defining who reports to whom (creating a hierarchy).

Delegation has three key elements:

• Authority: The right to command subordinates and take action within the scope of one’s position. It flows downwards.
• Responsibility: The obligation of a subordinate to properly perform the assigned duty. It flows upwards.
• Accountability: The answerability for the final outcome of the assigned task. It cannot be delegated and flows upwards.

• Faster Communication: It uses the “grapevine,” which spreads information quicker than formal channels.
• Fulfills Social Needs: It provides a sense of belongingness and job satisfaction, which formal structures may lack.
• Compensates for Inadequacies: It helps solve procedural delays or problems that are difficult to handle through rigid formal rules.

No, it cannot be totally centralised or totally decentralised.

• Total Centralisation in a large organization blocks information flow, delays decisions, and creates a burden on top management.
• Total Decentralisation leads to a loss of control by top management and lack of coordination towards organizational goals.

Opinion: A balance is required. Key policy decisions should be centralised, while routine operational decisions should be decentralised.

This statement is true.

• Delegation involves sharing authority from one superior to one subordinate (two levels).
• Decentralisation is a policy decision where authority is systematically delegated down to the lowest levels of management across the entire organization.

Thus, decentralisation is essentially delegation carried out on a wider scale throughout the hierarchy.

Recommendation: Divisional Structure.
Reason:

• She is adding new product lines (Bags, Clothes) which have different manufacturing and marketing requirements than shoes.
• A divisional structure allows each product unit (Division) to function as a profit center with its own specialized resources, ensuring focus and accountability for each product line.

No, the production manager cannot blame the foreman.
Reason: This violates the Principle of Parity of Authority and Responsibility. If a subordinate is given the responsibility to produce 200 units, they must also be given the commensurate authority (to requisition tools) to carry out that task. Responsibility without authority makes the subordinate ineffective.

Delegation is essential because:

1. Effective Management: It relieves top managers of routine tasks, allowing them to focus on strategic matters.
2. Employee Development: It gives subordinates opportunities to learn new skills and handle responsibility.
3. Motivation of Employees: Trusting subordinates with authority improves their self-esteem and confidence.
4. Facilitation of Growth: It creates a pool of trained managers ready to take up leading positions during expansion.
5. Better Coordination: Elements of delegation (authority, responsibility, accountability) define powers and duties clearly, reducing overlap.

[Image of divisional organizational structure chart]
Divisional Structure: An organization structure where departments are created on the basis of products, territories, or projects. Each division is self-contained with its own functional departments (production, sales, etc.).

Advantages:

• Product Specialisation: Focuses on specific product lines.
• Accountability: Profit and loss can be easily calculated for each division.
• Flexibility: New divisions can be added without disturbing existing ones.

Limitations:

• Costly: Duplication of resources (e.g., separate HR for each division).
• Conflict: Divisions may fight for allocation of funds.
• Ignorance of Organizational Goals: Divisions may prioritize their own profits over the company’s overall goals.

While delegation is mandatory, decentralisation is a choice made by top management. An organization chooses it to achieve:

1. Develops initiative among subordinates: It promotes self-reliance and confidence.
2. Develops managerial talent for the future: Subordinates gain experience in handling independent assignments.
3. Quick decision making: Decisions are taken at the point of action, eliminating approval delays.
4. Relief to Top Management: They can focus on long-term strategy rather than daily operations.
5. Facilitates Growth: Decentralised units can compete more effectively and expand faster.
6. Better Control: Performance can be evaluated at each level/department scorecard.

Basis	Centralisation	Decentralisation
Authority Retention	Retained at top management levels.	Dispersed systematically to lower levels.
Decision Making	Slow (decisions travel up and down).	Fast (decisions taken near point of action).
Suitable for	Small organisations.	Large organisations.
Freedom of Action	Less freedom for subordinates.	More freedom for subordinates.

Basis	Functional Structure	Divisional Structure
Formation	Based on functions (Production, Sales).	Based on product lines or regions.
Specialisation	Functional specialisation.	Product specialisation.
Responsibility	Difficult to fix on a specific department.	Easy to fix (Profit centers).
Cost	Economical (no duplication).	Costly (duplication of resources).
Coordination	Difficult for multi-product companies.	Easy, as all functions are under one head.

Recommendation: Divisional Structure.
Reasons/Benefits:

1. Product Specialisation: Electronic toys require different technology and marketing than normal toys. A separate division ensures focus.
2. Accountability: The performance of the new electronic toy division can be measured separately. If it fails, it won’t drag down the profitable existing toy business.
3. Flexibility: The new division can be added and expanded without interrupting the operations of the existing functional departments.

Advice: The company should move towards Decentralisation and acknowledge the importance of the Informal Organisation.

Benefits of suggested changes:

• Quicker Decisions: Decentralisation will cut through the red tape, allowing faster response to the changing business environment.
• Better Communication: Encouraging informal channels will allow workers to vent grievances and satisfy social needs, reducing demotivation.
• Reduced Turnover: A more flexible and responsive environment improves job satisfaction.
• Adaptability: Lower-level managers can react to market changes faster than waiting for top-down orders.

Structural Change: The company must shift from a Centralised to a Decentralised structure.

How it helps (FMCG Sector Context):

• Fast Response: In FMCG, trends change daily. Decentralisation allows divisional/regional heads to take quick decisions on pricing and promotions to match MNCs.
• Local Market Sensitivity: Regional managers know local tastes better than a centralized head office. They can tailor strategies accordingly.
• Relief to Top Management: Directors can focus on strategic alliances and long-term survival strategies against MNCs instead of making “minor decisions.”
• Competitive Edge: It empowers employees to take initiative, making the organization agile and competitive.