a.

Management as a process:-

Management is a process. It includes the process of planning, controlling, coordinating,

motivating, and staffing. These processes are the series of interrelated sequential functions.
Processes refer to accomplish these mentioned activities. Management is the efforts of
organizational members to accomplish the organizers objectives. This concept is very simple
because
i.

It is very simple and very easy to understand

ii.

It indicates functions of management as a process

iii.

It recognizes management as a universal process

b.

Management as a discipline

the term management is used as a subject of instructions. It is a specific branch of knowledge

which is studied in campuses and schools like economics, sociology, mathematics, political
science etc. the scholars of management have found that the information and management are
used in practical life for better functioning. The scope of managenent is being increased day to
day as a discipline

c.

Management as a noun:

The word management itself refers as a noun. There are many kinds of employees in an
organization . some people are involved in managerial function and some are involved in

operating functions. The individuals who manage the organization and departments are
managers. As a noun, the term management is used as single name of managers, board of
directors, managing directors, departmental managers etc are included in management.
Thus, theo haiman the leading management expert expiained the meaning and concept of
management.
Introduction 14 principles of management
In the last century, organizations already had to deal with management in practice. In the early
1900s, large organizations, such as production factories, had to be managed too. At the time there
were only few (external) tools, models and methods available. Thanks to scientists like Henri
Fayol (1841-1925) the first foundations were laid for modern management.
These first concepts, also called principles are the underlying factors for successful
management. Henri Fayol explored this comprehensively and, as a result, he synthesized the 14
principles of management. Henri Fayol s principles and research were published in the book
General and Industrial Management (1916).
14 Principles of management
14 principles of management are statements that are based on a fundamental truth. These
principles serve as a guideline for decision-making and management actions. They are drawn up
by means of observations and analyses of events that managers encounter in practice.Henri
Fayol was able to synthesize 14 principles of management after years of study, namely:
1. Division of Work
In practice, employees are specialized in different areas and they havedifferent skills. Different
levels of expertise can be distinguishedwithin the knowledge areas (from generalist to specialist).
Personal andprofessional developments support this. According to Henri Fayolspecialization
promotes efficiency of the workforce and increases productivity. In addition, the specialization of
the workforce increases their accuracy and speed. This management principle of the 14
principles of management is applicable to both technical and managerial activities.
2. Authority and Responsibility
In order to get things done in an organization, management has the authority to give orders to the
employees. Of course with this authority comes responsibility. According to Henri Fayol, the
accompanying power or authority gives the management the right to give orders to the

subordinates. The responsibility can be traced back from performance and it is therefore
necessary to make agreements about this. In other words, authority and responsibility go together
and they are two sides of the same coin.
3. Discipline
This third principle of the 14 principles of management is about obedience. It is often a part of
the core values of a mission and vision in the form of good conduct and respectful interactions.
This management principle is essential and is seen as the oil to make the engine of an
organization run smoothly.
4. Unity of Command
The management principle Unity of command means that an individual employee should
receive orders from one manager and that the employee is answerable to that manager. If tasks
and related responsibilities are given to the employee by more than one manager, this may lead
to confusion which may lead to possible conflicts for employees. By using this principle, the
responsibility for mistakes can be established more easily.
5. Unity of Direction3
This management principle of the 14 principles of management is all about focus and unity. All
employees deliver the same activities that can be linked to the same objectives. All activities
must be carried out by one group that forms a team. These activities must be described in a plan
of action. The manager is ultimately responsible for this plan and he monitors the progress of the
defined and planned activities. Focus areas are the efforts made by the employees and
coordination.
6. Subordination of Individual Interest7
There are always all kinds of interests in an organization. In order to have an organization
function well, Henri Fayol indicated that personal interests are subordinate to the interests of the
organization (ethics). The primary focus is on the organizational objectives and not on those of
the individual. This applies to all levels of the entire organization, including the managers.
7. Remuneration
Motivation and productivity are close to one another as far as the smooth running of an
organization is concerned. This management principle of the 14 principles of management argues
that the remuneration should be sufficient to keep employees motivated and productive. There

are two types of remuneration namely non-monetary (a compliment, more responsibilities,

credits) and monetary (compensation, bonus or other financial compensation). Ultimately, it is
about rewarding the efforts that have been made.
8. The Degree of Centralization
Management and authority for decision-making process must be properly balanced in an
organization. This depends on the volume and size of an organization including its hierarchy.
Centralization implies the concentration of decision making authority at the top management
(executive board). Sharing of authorities for the decision-making process with lower levels
(middle and lower management), is referred to as decentralization by Fayol. Henri
Fayolindicated that an organization should strive for a good balance in this.
9. Scalar Chain
Hierarchy presents itself in any given organization. This varies from senior management
(executive board) to the lowest levels in the organization. Henri Fayol s hierarchy
management principle states that there should be a clear line in the area of authority (from top to
bottom and all managers at all levels). This can be seen as a type of management structure. Each
employee can contact a manager or a superior in an emergency situation without challenging the
hierarchy. Especially, when it concerns reports about calamities to the immediate
managers/superiors.
10. Order
According to this principle of the 14 principles of management, employees in an organization
must have the right resources at their disposal so that they can function properly in an
organization. In addition to social order (responsibility of the managers) the work environment
must be safe, clean and tidy.
11. Equity
The management principle of equity often occurs in the core values of an organization.
According to Henri Fayol, employees must be treated kindly and equally. Employees must be in
the right place in the organization to do things right. Managers should supervise and monitor this
process and they should treat employees fairly and impartially.

12. Stability of Tenure of Personnel3

This management principle of the 14 principles of management represents deployment and
managing of personnel and this should be in balance with the service that is provided from the
organization. Management strives to minimize employee turnover and to have the right staff in
the right place. Focus areas such as frequent change of position and sufficient development must
be managed well.
13. Initiative
Henri Fayol argued that with this management principle employees should be allowed to express
new ideas. This encourages interest and involvement and creates added value for the company.
Employee initiatives are a source of strength for the organization according to Henri Fayol. This
encourages the employees to be involved and interested.
14. Esprit de Corps
The management principle esprit de corps of the 14 principles of management stands for
striving for the involvement and unity of the employees. Managers are responsible for the
development o9f morale in the workplace; individually and in the area of communication. Esprit
de corps contributes to the development of the culture and creates an atmosphere of mutual trust
and understanding.
In conclusion on the 14 Principles of management
The 14 principles of management can be used to manage organizations and are useful tools for
forecasting, planning, process management, organization management, decision-making,
coordination and control.
Although they are obvious, many of these matters are still used based on common sense in
current management practices in organizations. It remains a practical list with focus areas that are
based on Henri Fayol s research which still applies today due to a number of logical principles.

SCIENTIFIC MANAGEMENT

1. Replacing the rule of thumb with science:-it requires scientific study and analysis of each
element of job in order to replace the old rule of thumb approach. Only through scientific
investigation and standardization better way of work can be developed. Scientific selection of
employees requires that decisions to make on facts rather than on opinions and beliefs.
2. Harmony in group activities:- in the past there was only discord. Taylor has emphasized
harmony among employee and employer to attain common goals which could help to contribute
to the maximum limit.
3.
Cooperation:- cooperation between management and labor is the major foundation of
scientific management. It creates a sense of mutuality through which maximum prosperity can be
guaranteed.
4.
Development of employees:- personnel management must be backed up by scientific
selection of employees along with proper training to them. Efforts should be made to develop
each employee to achieve efficiency and prosperity.
5. Division of responsibility:- introduction of functional foremanship made division of
responsibility. Many foremen should be appointed out of which 4 for planning and 4 for doing.
In planning they were route clerk, instruction cord clerk, time and cost clerk and disciplinarian.
And for doing they were speed boss, gang boss, repair boss and inspector. This promoted
division of work which promoted division of responsibility

6. Maximum output:- Taylor was more concerned with continuous increase in production and
productivity. It maximum output is derived from optimum utilization of resources than surely it
will bring higher profits and better benefits to the employer and employees.
Advantages of scientific management :To employees
a.
Better utilization of resources through scientific techniques
b.
Scientific selection and training of employees leads to better workforce which ensures
increase in efficiency
c.
Harmonious relationship between the workers and the management
d.
Standardization of tools, materials, techniques , equipments for increasing efficiency
e.
Reduction of production cost
To workers
a.
Opportunity for scientific training and development to increase skills knowledge and
competency
b.
Better working conditions
c.
Application of scientific methods and techniques in better working conditions to reduce
fatigue
d.
Higher wages to the workers for higher productivity
To society
a.
People get better quality products at lower cost
b.
Increase productivity in the country by utilizing resources properly
c.
Improve standard of living of people through better products
d.
Scientific investigation promotes technological development

Limitations of scientific management:

a.
It is based upon one best way and is applicable for simple organizations than that for
todays dynamic and complex organization
b.
It focuses on individual performance than group efforts and divides the workers into
efficient and inefficient categories
c.
It is focused on specialization and repetition of jobs to increase the productivity which
reduces innovation and creativity and promotes monotony
d.
It neglects human factor because it motivates workers to work for monetary benefits rather
than human resource development and resources
e.
There is no scope for creativity of employees because they are developed by manager
which promotes frustration.
The following are the main reasons which highlight the importance of the principles of
Management:
Improving efficiency of managers: Management principles serve as a guideline for doing
work with greater efficiency. These principles help managers to take a more realistic view of
different managerial problems and to direct human behavior effectively. The conscious manager
can become more effective by using the established management principles to solve problems.
Improving art of management: Management principles help in improving the art of
management by suggesting how things should be done to get good results in an efficient manner.
These principles provide a means of organizing knowledge and experience in management.
Useful for research and practical guidance: The network of management principles represents
a key area for conducting research studies. These principles have expanded the horizons of
knowledge and promoted further research. These principles have provided new ideas,
imagination and vision to the organization.
Helpful in management training: Management principles are also needed to train managers.
These principles provide a conceptual framework for systematic training and development of
future managers. New techniques of management training make training programs more
meaningful and efficiency.
Useful for spreading knowledge: Management principles are useful for spreading knowledge
of management through teaching. The teaching of management principles continues to be an
integral part of management education. These principles help to develop an organized body of
knowledge by management practitioners, thinkers and philosophers.

Evaluating the behavior of managers: Management principles prescribe what one should
do to improve things in some ways. These principles attempt to prescribe and evaluate the
behavior of the managers of the organization.
Attaining social goals: Management principles have helped to attain the social goals by
increasing efficiency and productivity in the use of scarce resources. The supply of quality goods
at a reasonable price boosts social welfare.

Functions of Management

1.
Planning:- planning means the determination what is to be done, how and where is to be
done, who is to do it and how the results are to be evaluated. Planning consists of :a.
Establishing objectives
b.
Formulating rules and regulations
c.
Developing programs
d.
Scheduling
e.
Budgeting
2.
Organizing:- it means identification and grouping the activities to be performed and
dividing them among the individuals and creating authority and responsibility relationships
among then for the accomplishment of organizational objectives. It consists of :a.
Determination of objectives and identification of activities necessary to achieve the
objectives
b.
Delegation of authority and relationship among individuals.
c.
Coordination of activities and assignment of duties.
d.
Division of activities into different units or departments
3.
Staffing:- human resources management is a process consisting of the acquisition,
development, motivation and maintenance of human resources. it consists of :a.
Manpower planning to determine the quality and quantity of employees required for the
jobs to b done
b.
Recruitment for attracting qualified persons
c.
Selection of best candidate
d.
Placement of the right man for the right job
e.
Training and development to increase new skills, knowledge and competency to do job
f.
Motivation of employees
g.
Evaluation performance of employees
h.
Employees welfare
4.
Directing:- direction embraces those activities which are related to guiding and supervising
subordinates .it consists of :a.
Supervising the subordinates
b.
Communicating the information
c.
Providing effective leadership
d.
Motivating employees
5.
Controlling:- controlling is the process of monitoring activities to ensure that they are
being accomplished as planned and of correcting any significant deviations. It consists of :a.
Determination of standard performance
b.
Measurement of actual performance
c.
Compares the actual performance with the standard
d.
Analyzes deviations
e.
Take corrective actions if necessary.
Management Functions According to the functions approach managers perform certain activities
to efficiently and effectively coordinate the work of others.

They can be classified as

1) Planning involves defining goals, establishing strategies for achieving those goals, and
developing plans to integrate and coordinate activities.
2) Organizing involves arranging and structuring work to accomplish the organizations goals.
3) Leading involves working with and through people to accomplish organizational goals.
4) Controlling involves monitoring, comparing, and correcting work performance. Since these
four management functions are integrated into the activities of managers throughout the
workday, they should be viewed as an ongoing process and they need not the done in the above
sequence.
Resources are very limited in supply. All resources are to be managed by human. However,
human have unlimited wants. Therefore, there are limited resources and unlimited wants and
desire. Complete satisfaction is very necessary for better functioning of every aspect of the
society. Therefore, for complete satisfaction in life resources are to be managed properly in such
a way that human achieve complete utility and benefit simultaneously. Thus, to manage all
resources available in such a way that it gives complete satisfaction to human beings is the
theoretical meaning of management.

To go on a deeper level, management can be defined as art and skill of getting things done
through others is called management. More elaboration is given by George R Terry. According to
Terry-management is the distinct process consisting of planning, organizing, activating, and
controlling activities performed to determine and accomplishes the objectives by the use of
people and resources. If we give our attention towards the definition we find that terry perceives
the management as a process a systematic way of doing things. The four management activities
are included under the process and they are planning, organizing, activating and controlling.
MANAGEMENT = MANAGE+MEN+T (TACTFULLY)

Basically, there are 5 concepts of management. They are:

1.

Functional concept

Management basically is the task of planning, coordinating, motivating and controlling the
efforts of other towards the goals and objectives of the organization. According to this concept,
management is what a manager does (planning, executing, and controlling)

2.

Human relation concept

According to this concept, Management is the art o getting things done through and with people
in organized groups. It is the art of creating an environment in which people can perform and
individuals could cooperate towards attaining of group goals. It is an art of removing blanks to
such performance a way of optimizing efficiency in reaching goals.
3.

Leadership and decision making concept

According to this concept, management is the art and science of preparing, organizing, directing
human efforts applied to control the forces and utilize the materials of nature for the benefits to
man.
4.

Productive concept

According to this concept, management may be defined as the art of securing maximum
prosperity with a minimum effort so as to secure maximum prosperity and happiness for both
employer n employee and provide best services thereby.
5.

Integration concept

According to this concept, management is the coordination of human and material resources
towards the achievement of organizational objectives as well as the organization of the
productive functions essential for achieving stated or accepted economic goal.
These above definition of management, given by different writers and authorities, are found
giving different senses. Virtually, the five concepts are found developed by the authorities
emphasizing in different aspects. However, it has been realized by many that it will not be fair to
define management based upon any one aspect. Management can be taken as process-managerial
process or social process either engage in planning, organizing, staffing, directing and controlling
or mobilizing the group activities to achieve the corporate goals.

To overcome the limitations of the above concepts, Theo Haimann, the leading management
expert has explained three basic concepts of management as under:

8 Types of Organisational Structures: their Advantages and Disadvantages

Article shared by Smriti Chand
Types of Organisational Structures: their Advantages and Disadvantages!
All managers must bear that there are two organisations they must deal with-one formal and the
other informal.
The formal organisation in usually delineated by an organisational chart and job descriptions.
The official reporting relationships are clearly known to every manager.

Alongside the formal organisation exists are informal organisation which is a set of evolving
relationships and patterns of human interaction within an organisation that are not officially
prescribed.
Formal organisational structures are categorised as:
(i) Line organisational structure.
(ii) Staff or functional authority organisational structure.
(iii) Line and staff organisational structure.
(iv) Committee organisational structure.
(v) Divisional organisational structure.
(vi) Project organisational structure.
(vii) Matrix organisational structure and
(viii) Hybrid organisational structure.
These organisational structures are briefly described in the following paragraphs:
1. Line Organisational Structure:
A line organisation has only direct, vertical relationships between different levels in the firm.
There are only line departments-departments directly involved in accomplishing the primary goal
of the organisation. For example, in a typical firm, line departments include production and
marketing. In a line organisation authority follows the chain of command.
Exhibit 10.3 illustrates a single line organisational structure.

Features:
Has only direct vertical relationships between different levels in the firm.
Advantages:
1. Tends to simplify and clarify authority, responsibility and accountability relationships
2. Promotes fast decision making
3. Simple to understand.
Disadvantages:
1. Neglects specialists in planning
2. Overloads key persons.
Some of the advantages of a pure line organisation are:
(i) A line structure tends to simplify and clarify responsibility, authority and accountability
relationships. The levels of responsibility and authority are likely to be precise and
understandable.
(ii) A line structure promotes fast decision making and flexibility.

(iii) Because line organisations are usually small, managements and employees have greater
closeness.
However, there are some disadvantages also. They are:
(i) As the firm grows larger, line organisation becomes more ineffective.
(ii) Improved speed and flexibility may not offset the lack of specialized knowledge.
(iii) Managers may have to become experts in too many fields.
(iv) There is a tendency to become overly dependent on the few key people who an perform
numerous jobs.
2. Staff or Functional Authority Organisational Structure
The jobs or positions in an organisation can be categorized as:
(i) Line position:
a position in the direct chain of command that is responsible for the achievement of an
organisations goals and
(ii) Staff position:
A position intended to provide expertise, advice and support for the line positions.
The line officers or managers have the direct authority (known as line authority) to be exercised
by them to achieve the organisational goals. The staff officers or managers have staff authority
(i.e., authority to advice the line) over the line. This is also known as functional authority.
An organisation where staff departments have authority over line personnel in narrow areas of
specialization is known as functional authority organisation. Exhibit 10.4 illustrates a staff or
functional authority organisational structure.

In the line organisation, the line managers cannot be experts in all the functions they are required
to perform. But in the functional authority organisation, staff personnel who are specialists in
some fields are given functional authority (The right of staff specialists to issue orders in their
own names in designated areas).
The principle of unity of command is violated when functional authority exists i.e., a worker or a
group of workers may have to receive instructions or orders from the line supervisor as well as
the staff specialist which may result in confusion and the conflicting orders from multiple
sources may lead to increased ineffectiveness. Some staff specialists may exert direct authority
over the line personnel, rather than exert advice authority (for example, quality control inspector
may direct the worker as well as advise in matters related to quality).
While this type of organisational structure overcomes the disadvantages of a pure line
organisaional structure, it has some major disadvantages:
They are: (i) the potential conflicts resulting from violation of principle of unity of command and
(ii) the tendency to keep authority centralized at higher levels in the organisation.

3. Line and Staff Organisational Structure:

Most large organisations belong to this type of organisational structure. These organisations have
direct, vertical relationships between different levels and also specialists responsible for advising
and assisting line managers. Such organisations have both line and staff departments. Staff
departments provide line people with advice and assistance in specialized areas (for example,
quality control advising production department).

Exhibit 10.5 illustrates the line and staff organizational chart. The line functions are production
and marketing whereas the staff functions include personnel, quality control, research and
development, finance, accounting etc. The staff authority of functional authority organizational
structure is replaced by staff responsibility so that the principle of unity of command is not
violated.

Three types of specialized staffs can be identified:

(i) Advising,
(ii) Service and
(iii) Control.
Some staffs perform only one of these functions but some may perform two or all the three
functions. The primary advantage is the use of expertise of staff specialists by the line personnel.
The span of control of line managers can be increased because they are relieved of many
functions which the staff people perform to assist the line.
Some advantages are:
(i) Even through a line and staff structure allows higher flexibility and specialization it may
create conflict between line and staff personnel.
(ii) Line managers may not like staff personnel telling them what to do and how to do it even
though they recognize the specialists knowledge and expertise.
(iii) Some staff people have difficulty adjusting to the role, especially when line managers are
reluctant to accept advice.
(iv) Staff people may resent their lack of authority and this may cause line and staff conflict.
Features:
1. Line and staff have direct vertical relationship between different levels.
2. Staff specialists are responsible for advising and assisting line managers/officers in specialized
areas.
3. These types of specialized staff are (a) Advisory, (b) Service, (c) Control e.g.,
(a) Advisory:
Management information system, Operation Research and Quantitative Techniques, Industrial
Engineering, Planning etc
(b) Service:

Maintenance, Purchase, Stores, Finance, Marketing.

(c) Control:
Quality control, Cost control, Auditing etc. Advantages
(i) Use of expertise of staff specialists.
(ii) Span of control can be increased
(iii) Relieves line authorities of routine and specialized decisions.
(iv) No need for all round executives.
Disadvantages:
(i) Conflict between line and staff may still arise.
(ii) Staff officers may resent their lack of authority.
(iii) Co-ordination between line and staff may become difficult.
Committee Organizational Structure Features:
(a) Formed for managing certain problems/situations
(b) Are temporary decisions.
Advantages:
1. Committee decisions are better than individual decisions
2. Better interaction between committee members leads to better co-ordination of activities
3. Committee members can be motivated to participate in group decision making.
4. Group discussion may lead to creative thinking.
Disadvantages:
1. Committees may delay decisions, consume more time and hence more expensive.
2. Group action may lead to compromise and indecision.

3. Buck passing may result.

4. Divisional Organizational Structure:
In this type of structure, the organization can have different basis on which departments are
formed. They are:
(i) Function,
(ii) Product,
(iii) Geographic territory,
(iv) Project and
(iv) Combination approach.
Exhibit 10.6 illustrates organizational structures formed based on the above basis of
departmentation.

5. Project Organisational Structure:

The line, line and staff and functional authority organisational structures facilitate establishment
and distribution of authority for vertical coordination and control rather than horizontal
relationships. In some projects (complex activity consisting of a number of interdependent and
independent activities) work process may flow horizontally, diagonally, upwards and
downwards. The direction of work flow depends on the distribution of talents and abilities in the
organisation and the need to apply them to the problem that exists. The cope up with such
situations, project organisations and matrix organisations have emerged.
A project organisation is a temporary organisation designed to achieve specific results by using
teams of specialists from different functional areas in the organisation. The project team focuses
all its energies, resources and results on the assigned project. Once the project has been
completed, the team members from various cross functional departments may go back to their
previous positions or may be assigned to a new project. Some of the examples of projects are:
research and development projects, product development, construction of a new plant, housing
complex, shopping complex, bridge etc.
Exhibit 10.7 illustrates a project organisational structure.

Feature:

Temporary organisation designed to achieve specific results by using teams of specialists from
different functional areas in the organisation.
Importance of Project Organisational Structure:
Project organisational structure is most valuable when:
(i) Work is defined by a specific goal and target date for completion.
(ii) Work is unique and unfamiliar to the organisation.
(iii) Work is complex having independent activities and specialized skills are necessary for
accomplishment.
(iv) Work is critical in terms of possible gains or losses.
(v) Work is not repetitive in nature.
Characteristics of project organisation:
1. Personnel are assigned to a project from the existing permanent organisation and are under the
direction and control of the project manager.
2. The project manager specifies what effort is needed and when work will be performed
whereas the concerned department manager executes the work using his resources.
3. The project manager gets the needed support from production, quality control, engineering etc.
for completion of the project.
4. The authority over the project team members is shared by project manager and the respective
functional managers in the permanent organisation.
5. The services of the specialists (project team members) are temporarily loaned to the project
manager till the completion of the project.
6. There may be conflict between the project manager and the departmental manager on the issue
of exercising authority over team members.
7. Since authority relationships are overlapping with possibilities of conflicts, informal
relationships between project manager and departmental managers (functional managers)
become more important than formal prescription of authority.

8. Full and free communication is essential among those working on the project.
6. Matrix Organisational Structure:
It is a permanent organisation designed to achieve specific results by using teams of specialists
from different functional areas in the organisation. The matrix organisation is illustrated in
Exhibit 10.8.
Feature:
Superimposes a horizontal set of divisions and reporting relationships onto a hierarchical
functional structure
Advantages:
1. Decentralised decision making.
2. Strong product/project co-ordination.
3. Improved environmental monitoring.
4. Fast response to change.
5. Flexible use of resources.
6. Efficient use of support systems.

Disadvantages:
1. High administration cost.
2. Potential confusion over authority and responsibility.
3. High prospects of conflict.
4. Overemphasis on group decision making.
5. Excessive focus on internal relations.
This type of organisation is often used when the firm has to be highly responsive to a rapidly
changing external environment.
In matrix structures, there are functional managers and product (or project or business group)
managers. Functional manager are in charge of specialized resources such as production, quality
control, inventories, scheduling and marketing. Product or business group managers are incharge
of one or more products and are authorized to prepare product strategies or business group
strategies and call on the various functional managers for the necessary resources.
The problem with this structure is the negative effects of dual authority similar to that of project
organisation. The functional managers may lose some of their authority because product
managers are given the budgets to purchase internal resources. In a matrix organisation, the
product or business group managers and functional managers have somewhat equal power. There

is possibility of conflict and frustration but the opportunity for prompt and efficient
accomplishment is quite high.
7. Hybrid Organisational Structure:
Exhibit 10.9 (a) illustrates the hybrid organisational structure.

Exhibit 10.9 (b) illustrates a combination structure

Advantages:
1. Alignment of corporate and divisional goals.
2. Functional expertise and efficiency.
3. Adaptability and flexibility in divisions.
Disadvantages:
1. Conflicts between corporate departments and units.
2. Excessive administration overhead.
3. Slow response to exceptional situations.
Uses:
Used in organisations that face considerable environmental uncertainty that can be met through a
divisional structure and that also required functional expertise or efficiency
This type of structure is used by multinational companies operating in the global environment,
for example, International Business Machines USA. This kind of structure depends on factors
such as degree of international orientation and commitment. Multinational corporations may
have their corporate offices in the country of origin and their international divisions established
in various countries reporting to the CEO or president at the headquarters. The international

divisions or foreign subsidiaries may be grouped into regions such as North America, Asia,
Europe etc. and again each region may be subdivided into countries within each region.
While the focus is on international geographic structures, companies may also choose functional
or process or product departmentation in addition to geographic pattern while at the head
quarters the departmentation may be based on function.
The Informal Organisation:

An informal organisation is the set of evolving relationships and patterns of human interaction
within an organisation which are not officially presented. Alongside the formal organisation, an
informal organisation structure exists which consists of informal relationships created not by
officially designated managers but by organisational members at every level. Since managers
cannot avoid these informal relationships, they must be trained to cope with it
The informal organisation has the following characteristics
(i) Its members are joined together to satisfy their personal needs (needs for affiliation, friendship
etc.)
(ii) It is continuously changing:
The informal organisation is dynamic.
(iii) It involves members from various organisational levels.
(iv) It is affected by relationship outside the firm.
(v) It has a pecking order: certain people are assigned greater importance than others by the
informal group.
Even though an informal organisational structure does not have its own formal organisational
chart, it has its own chain of command:
Benefits of Informal Organisation:
(i) Assists in accomplishing the work faster.
(ii) Helps to remove weakness in the formal structure.

(iii) Lengthens the effective span of control.

(iv) Compensation for violations of formal organisational principles.
(v) Provides an additional channel of communication.
(vi) Provides emotional support for employees.
(vii) Encourages better management.
Disadvantages of informal organisation:
(i) May work against the purpose of formal organisation.
(ii) Reduces the degree of predictability and control.
(iii) Reduces the number of practical alternatives.
(iv) Increases the time required to complete activities.
Advantages of Functional Organization:
Functional organization has the following advantages:
1. Specialization:
This type of organization has the benefit of having specialists in each area. The work is
performed by those who have the specialist knowledge of that work. The workers have the
advantage of getting instructions from specialists. This makes possible the fullest use of energy
in the organization.
2. Increase in Efficiency:
There is a division of labour up to manager level. Planning and execution are also separated. This
helps to increase the overall efficiency in the organization. The workers get guidance from expert
supervisors and this enhances their performance at work.
3. Scope for Growth:
The functional organization provides wide scope for growth and mass production. The
employment of specialists at various levels of work enables the organization to grow as per the
needs of the situation.

4. Flexibility:
Functional organization allows changes in organization without disturbing the whole work. The
span of supervision can also be adjusted according to the requirements.
5. Relief to Top Executives:
Top executives are not unnecessarily burdened as happens in line organization. The line officer is
supposed to be a jack of all trades and is burdened with all types of works. On the contrary a
specialist is a master of his line and he has the expertise and capability of taking his own
decisions.
6. Economy of Operations:
The use of specialists helps in controlling the waste of materials, money and time. The
consolidation of activities leads to optimum use of facilities like office accommodation, plant
and machinery, etc.
7. Better Supervision:
Every superior is an expert in his own area and he will be successful in making proper planning
and execution. The superiors being well acquainted with the work, they will be able to improve
the level of supervision.
8. Democratic Control:
This type of organisation eliminates one man control. There will be a joint control and
supervision in the organization. This boosts the morale of employees and also enthuses a sense of
co-operation among them. The democratic approach motivates workers to go deep into their
work and make suggestions for work improvement.
Disadvantages of Functional Organization:
Following are the disadvantages of functional organization:
1. Conflict in Authority:
The principle of unity of command is violated in functional organization. A subordinate is
answerable to many bosses. Every superior considers his work important and wants the workers
to give top priority to his assignment. The workers feel confused and are unable to decide about
the priorities of their work.

2. Lack of Co-Ordination:
The appointment of several specialists creates problems of co-ordination, especially when the
advice of more than one is needed for taking decisions. Specialists try to give more importance
to their work as compared to other areas. This creates conflicts among specialists and coordination becomes a problem.
3. Difficulty in Fixing Responsibility:
Since there is no unity of command, it becomes difficult to fix responsibility for slackness in
work. So many persons are involved in completing a work and everybody tries to blame others
for low performance.
4. Delay in Taking Decisions:
The involvement of more than one person in decision-making process slows down it. The speed
or action tends to be hampered by the division of authority. Much time is taken in consulting
different specialists prior to decision-making.
5. Poor Discipline:
The division of authority creates problem of discipline. The workers have to obey many bosses,
their loyalty becomes divided. Discipline tends to break down not only among workers but also
among lower level supervisors.
6. Expensive:
Multiplicity of experts increases overhead expenses of the organization. A number of specialists
are appointed for manning various lines of work. These persons being specialists, they demand
much higher emoluments. Small units cannot afford to have functional organization.
7. Group Rivalries:
The emergence of many persons of equal status encourages group rivalries among executives.
Persons connected with different fields try to create their groups and then rivalry starts among
these groups. Every group tries to dominate the other. The growth of the unit is adversely
affected in a vicious atmosphere.

INDUSTRIAL OWNERSHIP

The terms industrial ownership, business organization, forms of ownership of industry, types of
business enterprise, types of ownership etc convey the same meaning. To start a business
enterprise
the
most
important
thing
required
is
capital.

Little capital is provided by single individual it is known as individual ownership,

individual entrepreneur organization, single ownership, individual proprietorship etc.

If the capital is provided by two or more persons, it refers to partnership organization.

If the capital is provided by many persons in the form of shares to an institute with a legal
entity it is called a joint stock company

There are other forms of organizations also. But they are manifestations of the three types
mentioned
above.

Types of ownership
Single ownership (Individual or Sole proprietorship)
Partnership
Joint stock companies
Corporations
Cooperatives
State or central government owned enterprises
Single ownership:
One man owns this type of business. The business man invests capital, employs labour and
machines. For example 1. Retail-shops. 2. Workshops etc. The single owner invests, maintains
and controls the entire business. Hence all gains or loss from business goes to him. It should be
noted that he is fully liable for all the debts associated with the business. This type of ownership
is easy to establish and simple to run with a minimum of legal restrictions.
Advantages

Easy formation: It is very easy to bring the business to existence

Prompt decision making: Owner is prompt in decision making since there is

to be consulted

Operational flexibility: The organization is easy to operate and it is extremely flexible

Maintains secrecy: secrecy in business can be maintained by the owner.

Easy to dissolve: The business can be dissolved at any time

No coordination. There is no problem of coordination in the organization

Coordination of effort and reward: efforts and rewards are directly related in this type of
ownership

Disadvantages

Limited Capital: The amount of capital that can be invested will normally be very
limited

Owner is not a Master of All: The owner of the business cannot be a master of all
techniques, like management, sales and engineering etc.

Expanding Business is difficult: It will be difficult to raise capital in order to expand the
business

Sole Responsibility: The owner is liable fore all obligations and debts of the business.

Limited opportunities for employees: There will be limited opportunities for employees
to get profit sharing, bonus etc.

Limited Life: The firm ceases to exist with the death of the owner

Unlimited Liability: When the business fails, the creditors take away the personal
property as well as business property to settle their claims.

Partnership

Partnership has been defined by the Indian partnership act 1932 as the relationship
between persons who have agreed to share profit of a business concern carried on by all
or any one of them acting for all.

When 2 and up to 20 persons in the case of non - banking business and up to 10 in case of
banking business enter into a contract to carry on a business allowed by law, with the
object of making profit, a partnership is said to be formed.

It should be noted that every partner is liable and responsible for the acts of other partners
in that business. To avoid complications at later stages. the constitution of partnership is

written in an agreement form. The partnership is usually optimal if the numbers of

partners are less than 6. Lesser is always better.

Usually persons with good ideas and experience in running a business make partnership
with people who are financially sound. Thus both money and knowledge are brought
together to earn profit

Partnership comes into existence by means of an agreement. This written agreement is

called a partnership deed.

AdvantagesofPartnership:

Easy formation: Formation involves less legal formalities. Registration expenditure and
stamp duty are considerably less.

Limited government restrictions: this kind of ownership is not subjected to strict

government supervision. Hence, it enjoys more freedom

More capital: More capital can be raised in comparison with sole proprietorship

Knowledge or skill: As the abilities and skills of each partner are different, more
knowledge is available to run the business.

Success pays; success of partnership pays high incentive

Legal status: there is a legal status for the firm and it can borrow money quiet easily from
banks.

Tax advantages: Partnership has tax advantages with it. As the total income is divided
among partners. Each partner is assessed separately for income tax

Losses are shared: for all losses, there is more than one person to share it.

Consent of all: no major decisions can be taken without the consent of all partners.

Disadvantagesofpartnership

Unlimited liability: Each partner has unlimited liability, therefore risk involved is more.

Limited period of existence after the death or retirement of any partners the partnership
comes to an end.

Limited partners means limited money: As there is a legal ceiling with respect to the
number of partners, the total money that can be raised is limited when compared to a joint
stock company

Unstable: If anything happens to a partner, the partnership comes to a halt. Hence,

partnership is unstable.

Misunderstanding: Misunderstanding and friction are common among partners and this
affects partnership.

Mistakes affects all partners; Any mistake of a partner leads to a loss for all the partners

Lack of public confidence: Partnership usually does not enjoy public confidence as it
lacks proper publicity of its affairs.

Joint Stock Company

A joint stock company is an association of individuals, called shareholders, who join together for
and agree to supply capital divided into shares that are transferrable for carrying on a specific
business other than banking business A joint stock company consists of more than 20 persons for
carryinganybusinessotherthanthebankingbusiness.
Therearetwotypesofjointstockcompanies
1.Privateimitedcompany
2.Publiclimitedcompany
A)Privatelimitedcompany

The capital is collected from private partners; some of them may be active while others
may be sleeping

Private limited company restricts the right to transfer shares; avoids public to take shares
or debentures.

The number of members is between 2 and 50, excluding employees and ex-employee
share holders.

The company need not file document such as consent of directors, list of directors etc
with the Registrar of Joint Stock companies

The company need not obtain from the Registrar, a certificate of commencement of
business.

The company need not circulate the Balance Sheet, profit or loss account

A private company must get its account audited.

A private company has to send certificate along with annual returns to the Registrar of
Joint stock companies stating that it does not have shareholders more than 50 excluding
the employees and ex employee share holders.

B)PublicLimitedCompany:

In public limited company, the capital is collected from the public by issuing shares
having small face value. (Rs .50, 20,100)

The number of shareholders should not be less than seven but there is no limit to their
maximum number

A public limited company has to file with the Registrar of joint Stock companies,
documents such as consent of directors, list of director directors contract etc. along with
memorandum of association of articles.

A public company has to issue a prospectus to the public

It has to allot shares within 180 days from the date of prospectus.

It can start only after receiving the certificate to commence business

It has to hold statutory meeting and to issue a statutory report to all members and also to
the registrar within a certain period.

There is no restriction on the transfer of shares.

Directors of the company are subject to rotation.

The public company must get the account audited every year

MemorandumofAssociation
This is the main document of a company which defines its objective and lays down its
fundamental conditions as per which the company is allowed to be formed.. It is the character of
the company. The company cannot act outside the scope of the powers given to it by
the memorandum. It gives information to the shareholders, creditors etc regarding the permitted
range of activities of the enterprise, it cannot be changed except by following all the prescribed
procedures.
Liquidation:
If liabilities of the company become much more than the assets and when creditors press for the
payment of loans it becomes difficult to run the company. At this time the company has to
dissolve and this is known as liquidation .Liquidation may be voluntary or compulsory or under
the supervision of the court the resources available do not permit the payment, the assets of the
company are sold and the amount left after the payment is distributed among the shareholders.

Public Sector
The industrial revolution gave birth to private capitalism. Since consumers and workers were
exploited there arose the need for state intervention in the industrial field. This intervention led to
the evolution of public sector or public enterprise. in India prior to independence there no public
sector barring the field of transport and communication. Railways, Post and telegraph etc were
managed by central government since pre independence period .Since independence a large
number of public enterprises have been established by both central and state government. The
Hindustan ship yard, the Hindustan steels, Hindustan Machine tools Bharat Heavy Electricals
Indian Telephone Industries; Indian airlines Life Insurance Corporation of India etc are few
examples
of
Public
Sector.
A public sector enterprise is one that is owned by the state or managed by the state or owned and
managed by the state. Public sector enterprises are controlled and operated by the state to
producer and supply the goods and services required by the society. Unlimited control of public
enterprises remains with the state and the state runs it with a service motto. But a public
enterprise is seldom as efficient as a private enterprise. Waste and inefficiency are very common
with
public
enterprises

Corporations

A corporation is very similar to a joint stock company. They are brought into existence by state
or central government by special law of the country defining the powers, functions and forms of
management and relationship to other government departments. Corporations are fully owned by
the Government and are financially self supporting .Chief executive members of the board are
nominated by the government. Corporations are formed due to the changed industrial policy of
India in April 1948. The manufacture of arms and ammunitions, atomic energy, railway services
post and telegraph, iron and steel production, aircraft manufacturing ship building etc. have fully
come
under
Government
control
and
ownership.
TypesofCorporations

Government departments: Railways, defense, post and telegraph dooradarshan etc.

Public Corporations: LIC of India, state power corporations, Indian airlines, State Road
transport corporations etc.

Government companies. HMT, BHEL, Hindustan Steel Etc.

Advantages:

It is an autonomous body and therefore it has the freedom of finance, management and
flexibility of operation.

Enjoys prompt attention and quick decisions as red tape and bureaucracy of departmental
organization are avoided

Ministerial directions and control ensures that the corporation is not run against public
interest.

Financial autonomy enables the firm to raise the required funds economically and
conveniently

Disadvantages:

Autonomy and flexibility are only in name sake as ministers and politicians often
interferer in the day today functioning of the organization

As the chief officers are from the government they do not take much interest in
improving the functioning of the enterprise.
Cooperative societies:

This is the most democratic form of business organization for the betterment of the general
public. These cooperative societies help to protect the interest of the customers, small and
independent producers and of the workers while fighting against monopolists and capitalists. The
members of society supply the capital through shares; they manage the business and share the
profitborloss.
Theformsofcooperativesocietiesarelistedbelow.

Customer cooperative societies: Its main objective is to eliminate the middleman's profit
by directly purchasing things at cheaper rate and then distributing among the members at
reasonable price

Producers' Cooperative society: This is a society for manufactured goods .The society
supplies raw materials tools and other things to the producers and takes up the output for
sale and for the distribution among the members

Marketing Cooperative society: These are voluntary organizations of independent

producers organizes for the purpose of arranging for the sale of their output.

Housing Cooperative societies: These are association of persons who are interested in
securing the ownership of the house of obtaining accommodation at a reasonable rate.

Credit Cooperative societies: These are voluntary associations of people with an

objective of extending short term loans and habit of saving among them. The funds of
these societies consist of share capital contributed by members.

Joint sector
Management is a big head ache in case of a government organization. Industrial unrest, strikes
and lockouts are the outcome s of ineffective management. Joint sector concept is one means to
overcome
these
difficulties

Joint sector means participation of both the government and private industry with respect
to the share capital and management of the unit.

Joint sector aims at achieving optimal use of the resources .the government finances and
the private enterprises maintains the effective working of the industry. Ex. Indian Oil
Company.

The share capital is usually in the ratio of 51:49 and in all cases the government holds
51% of the shares.

In this set up government nominates the chairman but the managing director is from the
collaborating private industry.