UNIT II: ORGANISATION

DEFINE ORGANISATION. GIVE THE PRINCIPLES OF ORGANISATION?

a) ORGANISTION - Almost any business manager will affirm that sound organization is highly
important to business success. Many will characterize organisation as the foundation upon which
the whole structure of management is built. Organisation is a mechanism or structure that
enables living things to work effectively together. Organisation may be defined as the process of
(i) Identifying and grouping the work to be performed,
(ii) Defining and delegating responsibility and authority and
(iii) Establishing relationships for the purpose of enabling people to work most effectively
together in accomplishing objectives. Organisation is the pattern of ways in which a large
number of people engaged in a complexity of tasks, relate themselves to each other in systematic
establishment and accomplishment of mutually agreed purposes.

PRINCIPLES – The process of organisation may be described as the managerial function of

organising. The important steps involved in the process of organisation are:
(a) Determination of objectives Objectives decide as to why the proposed organisation be set up
(purpose) and what will be the nature of work to be accomplished through the organisation.
(b) Deciding various activities "‘ To achieve the Objectives, the process of organisation is
divided into functions, sub functions and further sub-functions to be performed by an individual.
The principles of dimension of work, specialization etc. are followed. This avoids duplication,
confusion and wastage of men, machine, money and material.
(c) Grouping of activities of similar nature (or closely related ones) are grouped under
departments, sections or divisions. These may be grouped on the basis of use, coordination,
policy and control etc. There may be different departments in an enterprise like Personnel,
Finance, Purchase, Production, Sales etc.
(d) Assignment of responsibilities of definite persons Specific job assignments are made to
different persons (subordinates) for ensuring a certainty of work performance. Right man is put
on the right job.
(f) Delegation of Authority Corresponding to the responsibility given to a subordinate, authority
is delegated to him, to enable him to show work performance. (0 Providing physical facilities
and proper environment Provision of right type of physical facilities and environment is essential
for the smooth running and prosperity of the organisation. Physical facilities include Proper
machinery, tools etc. –
Right environment means proper lighting, ventilating and heating/cooling arrangements at the
place of work, reasonable hours of work, rest intervals, safety devices, Job security, job
satisfaction and above all human ap
LINE ORGANISATION:

• It is the simplest form of organisation structure,was called military organisation because

it resembled to olden military organisations.
• Line organisation is based upon relative authority and responsibility rather than on the
nature and kind of operatiOn or activities.
• The authority flows directly from the Works Manager (WM) to Superintendent to
Foremen (FM) and from them to workers.
• Line organisation is direct and people at different levels know to whom they are
accountable.
• The immediate superior (or boss) gives orders to the subordinates, assigns duties,
dismisses and takes disciplinary action against them.
• Any enterprise that starts small probably starts with a line type of organisation.

ADVANTAGES –

1. It is simple and easy to understand .

2. It is flexible , easy to expand and contract.
3. It makes clear division of authority.
4. It encourages speedy action.

DISADVANTAGES –

1. It neglects specialists .
2. It overloads a few key executives .
 3. It is limited to very small concerns.
4. It encourages the dictatorial way of working.
5. Small concerns free from all complexities.

LINE AND STAFF ORGANIZATION. STATE ITS ADVANTAGES AND

LIMITATIONS.

The line organisation gradually developed to shape as the line and staff organisation;
Taylor’s functional organisation hastened its development.

• As the industry grew in size and complexity, the line executives could not perform
properly all other functions such as R&D, planning, distribution, legal, public relations
etc. The necessitated the employing of special executives to assist line executives and
they are known as staff as they were recruited to perform staff or specialist functions.
• The final decision whether to accept and implement the recommendations of the staff
executive remain in the hands of the line executive.

• A variation of line and staff organisation is line and Functional organisation in which the
staff or specialist executive has full authority over the particular function which may be
inspection, work study, employment etc.
FUNCTIONAL ORGANISATION.

• F.W Taylor suggested functional organisation because I t was difficult to find all
round persons qualifies to work at middle management levels in the line
organisation.
• Functional organisation is also a line type of organisation with the difference that
instead of one foreman there are 8 functional foremen. Four of them located on
the shop floor and remaining four in the office, but everyone having direct and
equal authority over the workers.
• Each functional foreman who is specialist in an activity is in in charge of one
function. Example:
 1) Route Clerk or order of work and route clerk was in charge of issuing work orders and
routing the jobs.
2) Instruction clerk would issue specifications and instructions related to jobs to the
workers.
3) Time and cost clerk keeps records pertaining to the time.
4) Disciplinarian keeps personal records of the workers and handles cases of
insubordination.
5) Gang boss has the charge of preparation of all work up to the time that the work piece is
set in the machine.
6) Speed boss insures that proper cutting tools are being used, cut is started at right place in
the work piece, and the optimum speeds, feeds and depths of the cut are being employed.
7) Repair boss is responsible for adequate repairs and maintenance of equipment and
machinery.
8) Inspector or inspection boss looks after and is responsible of the quality of the product.

MERITS AND DEMERITS OF LINE AND FUNCTIONAL ORGANIZATION

LINE ORGANISATION.

MERITS.

(i) It IS simple and easy to understand.

(ii) It IS flexible: easy to expand and contract.
(iii) It makes-clear division of authority.
(iv) There 'is clear channel of communication, with no confusion at at.
(v) It encourages speedy action.
(vi) It is strong in discipline as it fixes responsibility on an individual.
 (vii) It is capable 0f developing the all-round executive at the higher levels of authority.

DEMERITS.

(i) It neglects specialists.

(ii) It overloads a few key executives.
(iii) It requires a high type 0f supervisory personnel to meet the challenges imposed in the
absence of specialists as advisors
(iv) It is limited to very small concerns.
(v) It encourages dictatorial way of working.
(vi) In line organisations provisions are seldom made to train, develop and replace top
executives.
(vii) Due to lack of specialisation perhaps there is more wastage of materials and man
hours;

Functional Organisation.

MERITS.

(i) Since a foreman is responsible for one function, he can perform his duties in a better
manner.
(ii) Functional organisation makes use of specialists to give expert advice to workers.
(iii) It relieves line executives of routine, specialised decisions. 4. Expert guidance
reduces the number of accidents and wastage of materials, man and machine hours.
(iv) It relieves pressure of need to search a large number of all-round executives.
(v) Quality of work is improved.

DEMERITS.

(i) Coordination of the efforts of various functional foremen is difficult.

(ii) It is difficult to maintain discipline as each worker is responsible to eight lemma
(iii) It is very difficult to fix up the responsibility to any one foreman in case something
goes wrong.
(iv) Workers always remain confused about the authority and activity of each foreman
(v) It makes industrial relationships more complex.
(vi) Workers are not given opportunity to make use of their ingenuity, initiative and drive.
SINGLE OWNERSHIP

Ownership when applied to an industrial enterprise means title to and possession of the assets of
the enterprise, the power to determine the policies of operation, and the right to receive and
dispose of the proceeds.
- It is called a single ownership when an individual exercises and enjoys these rights in his own
interest.
-A business owned by one man is called single ownership.
~Single ownership does well for those enterprises which require little capital and lend
themselves readily to control by one person.
-Examples of enterprises run by single owner are printing press, auto repair shop, wood working
plant, a small fabrication shop, etc, i.e, retail trades, service industries and small engineering
firms.
In single ownership, one person contributes the original assets to start the business, maintains
and controls business operations, reaps full benefit in terms of profit and is fully liable for all
debts associated with the business.

Advantages:
1.Easy to establish as it does not require to complete any legal formality.
2 Simplicity of organisation.
3 The expenses in starting the business are minimal.
4.Owner is free to make all decisions.
5.This type Of ownership is simple, easy to Operate and extremely flexible.
6. The owner enjoys all the profits, thus.
7. There is a great deal of personal motivation and incentive to succeed.
8. Minimum legal restrictions are associated with this form of ownership.
9. Owner can keep secrecy as regards the raw materials used, method of manufacture, etc
10. Single ownership associates with it the great ease with which the business can be
discontinued.

Disadvantages
1. The owner is liable for all obligations and debts of the business.
2. The business may not be successful if the owner has limited money, lacks ability and
necessary experience to run the business.
3. Because of relatively unstable nature of the business, it is difficult to raise capital for
expanding the business.
4. If the business fails, creditors can take the personal property as well as the business prpperty
of the (single) owner to settle their claims. This means single ownership involves unlimited
liability for debts and losses.
5. There is limited opportunity for employees as regards monetary rewards (eg, profit sharing,
bonuses, etc.) and promotions.
6. Generally, single ownership tirrn has limited life, tie. the firm may cease to exist With the
death of the proprietor. This is the cause of unstable nature of the firm.
Applications .
Single ownership is suitable
1. For retail trades, service concerns and small engineering firms which require relatively small
capital to start with and to run.
2. For those businesses which do not involve high risks of failure.
3. When the business can be taken care by one person.

PARTNERSHIP
A single owner becomes inadequate as the size of the business enterprise grows. He may not he
in a position to do away with all the duties and responsnailities of the grown business.
At this stage, the individual owner may wish to associate with him more persons who have either
capital to invest, or possess special skill and knowledge to make the eadsting business still more
profitabie
Such a combination of individual traders is called Partnership.
-Partnership may be defined as the relation between persons who have agreed to share the profits
of a business carried on by all or any of them acting for all.
individuals with common purposes join as partners and they put together their property. ability,
skill, knowledge. etc... for the purpose of making profits.

in brief, partnership is an association of two or more (up to 20) persons to carry any on as co
owners of a business for proiit.
Partnerships are based upon a partnership agreement on or which is generally reduced to
writing.
it shonld cover all areas of disagreement among the partners. It should define the authority, rights
and duties of each partner.
it should specify how profits and losses Will be divided among the partners, etc.

Kinds of Partners
(i) active Partners
who take active part in the management of the business enterprise.
(ii) Sleeping Partners
who do not take any active part in the conduct of the husmess. Both Active an Sleeping partners
are responsible for the debts of the Partnership.

General Duties of Partners Partners should

(i) Be just and faithful to one another.
(ii) Render true accounts and full information about every thing that affects any partner.
(iii) Cooperate and accommodate each other.
(iv) Have confidence in each other and better mutual understanding.
(v) Respect the views of one-another.

Types of Partnership (i) General Partnership. (ii) Limited Partnership.

(i) General Partnership

Whatever has been discussed above so far pertains to General Partnership ; besides that
In a general partnership, each partner has full agency powers and may bind the partnership by
any act, tie, each partner may act as though he were an individual proprietor. General partnership
differs from single ownership in that the actions of any partner not only affect himself but they
affect other partners also.
-As the partnership grows or personnel changes occur, additional partners can be had with the
consent of all old partners.
Advantages
(i) Large capital is available to the firm.
(ii) The firm possesses much better talents, judgement and skills.
(ii)General partnership is easy to form and is relatively inexpensive in terms of organization cost
(iv) Incentive for success is high.
(v) There is a definite legal status of the firm. .
(vi) Partners have full control of the business and possess full rights to all profits.
(vii) Partnership associates tax advantages with it.
(viii) partnership firms can borrow money quite easily from the banks.
(ix) For all losses. there are more than one person to share them.

Applications. General Partnership does very well in

Law firms,
Retail trade organisation,
Medical clinics,
Small engineering firms, etc.

Disadvantages
(i) Each partner has unlimited liability for the debts of the firm.
(ii) Danger of disagreement and distrust among the partners.
(iii) Authority being divided among the partners.
(iv)Partnership lacks permanence and stability; it has limited life. Partnership may dissolve if :
partner dies.
(v) Investors and lenders hesitate to provide money because of the lack of stability of a
partnership firm. ,
(vi) All partners suffer because of the wrong steps taken by one partner.
(ii) Limited Partnership -

Limited partnership type of ownership overcomes the two main disadvantages [eg number (i)
and (v) mentioned above] of general partnership.
-Limited partnership is an association of one or more general partners who manage the business
and one or more limited partners whose liabilityis limited to the capital they have invested in the
business.
-Limited partners share the profit but they do not participate or interfere with the eontrol or
management of the firm. Moreover limited partners have their liabilities limited to the amount
of their investment.
-Thus, those investors and lenders who used to hesitate investing in the venture can do so
without much risk.
- Limited partnership type of ownership is easy and less costly to form, and personal incentive to
succeed is retained.
A disadvantage associated with limited partnership is that the limited partner, though he invests
in the business, has no voice in the management.

SOLE PROPRIETORSHIP VS PARTNERSHIP

BASIS FOR
SOLE PROPRIETORSHIP PARTNERSHIP
COMPARISON

Meaning A type of business oganization, A business form in which

in which only one person is the
owner as well as operator of the
business is known as Sole
Proprietorship.
two or more persons agree
to carry on business and
share profits & losses
mutually is known as
Partnership.

Governing Act No specific statute Indian Partnership Act,

1932

Owner Known as sole trader or sole Individually known as

proprietor. partners and collectively
known as firm.
 BASIS FOR
SOLE PROPRIETORSHIP PARTNERSHIP
COMPARISON

Incorporation Not required Voluntary

Minimum Only one Two

members

Maximum Only one 100 partners

members

Liability Borne by the proprietor only. Shared by the partners.

Decision making Quick Delay

Duration Uncertain Depends on the desire and

capacity of the partners.

Profit & Loss Proprietor is solely responsible Shared in agreed ratio

for the profits & losses.

Secrecy Business secrets are not open Business secrets are open
to any person except the to each and every partner.
proprietor.

Finance Scope for raising capital is Scope for raising capital is

limited. comparatively high.

JOINT STOCK COMPANY.

There are two types of joint stock companies :

(a) Private limited company

(b) Public limited company.

(a) Private Limited Company

1 The capital 15 collected from the private partners; some of them may be active while
others being sleeping.
2 Private limited company restricts the right to transfer shares, avoids public to take up
shares or debentures.
3 The number of members is between 2 and 50, excluding employee and ex-employee
shareholders.
4 The company need not tile documents such as consent of directors,- list of directors, etc,
with the Registrar of Joint Stock Companies.
5 The company need not obtain from the Registrar, a certificate of commencement of
business.
6 The company need not circulate the Balance Sheet, Profit and Loss Account, etc.
,among its members; but it should hold its annual general meeting and place such
financial statements in the meeting.
7 A private company must get its accounts audited.
8 A private. company has to send a certificate along with the annual return to the Registrar
of Joint Stock Companies stating that it does not have shareholders more than lift
excluding the employee and ex-employee shareholders. .

(b) Public Limited Company

1 In Public limited company, the capital 15 collected from the public by issuing shares
having small face value (Rs. 50, 20, 10).
2 The number of shareholders should not be less than seven, but there is no limit to their
maximam number.
3 A public limited company has to tile with the Registrar of Joint Stock Companies,
documents such as consent of the directors, list of directors, director’s contract, etc.
,alongwith the memorandum of association and articles of association.
4 A public company has to issue a prospectus to the public. (y) It has to allot shares within
180 days from the date of prospectus. (vi) It can start only after receiving the certificate
to commence business.
5 it has to hold a Statutory Meeting and to issue 3 Statutory Report to all members and also
to the Registrar within a certain period.
6 There is no restriction on the transfer of shares.
7 Directors of the company are subject to rotation.
8 The public company must get its account audited every year by registered auditors
9 It has to send financial statements to all members and to the Registrar.
10 It has to hold a general meeting every year.
11 The Managing Agent gets a fixed percentage of net profit as remuneration.
(B). Private Limited Company

1. The capital 15 collected from the private partners; some of them may be active while
others being sleeping.
2. Private limited company restricts the right to transfer shares, avoids public to take up
shares or debentures.
3. The number of members is between 2 and 50, excluding employee and ex-employee
shareholders.
4. The company need not tile documents such as consent of directbrs,-elistiof directors, etc,
with the Registrar of Joint Stock Companies.
5. The company need not obtain from the Registrar, a certificate of commencement of
business.
6. The company need not circulate the Balance Sheet, Profit and Loss Account, etc among
its members; but it should hold its annual general meeting and place such financial
statements in the meeting.
7. A private company must get its accounts audited.
8. A private. company has to send a certificate along with the annual return to the Registrar
of Joint Stock Companies stating that it does not have shareholders more than lift
excluding the employee and ex-employee shareholders.
9. Actually, a private joint stock company resembles much with partnership and has the
advantage that big capital can be collected than could be done so in partnership.

Differences between Partnership Firm and Joint Stock Company

1. Minimum No. of Members
Minimum number of members is two in a Partnership firm. Whereas in Joint Stock Companies,
Minimum number is two in a private company and seven in a public company.

2. Maximum No. of Members

In a Partnership firm, maximum number of members is 20 in general business and 10 in banking
firms. In a Joint Stock Company, maximum number of members is 50 in a private company and
there is no maximum limit in public company.

3. Registration
Registration of a Partnership firm is not compulsory. Registration of Joint Stock company is
compulsory.

4. Separate Legal Existence

Partnership firms has no separate legal existence. Partnership Firm and partners are the same.
Joint Stock company has separate legal existence. It is an artificial person created by law.

5. Legislation
Partnership firm is regulated under the Partnership Act, 1932. Joint Stock Company is regulated
under the Companies Act, 1956.
6. Capital
Huge capital for partnership firm cannot be secured. There is possibility of securing huge capital
in case of Joint Stock company.

7. Liability
In a Parternship firm, liability of each partner is unlimited, joint and several. In a Joint Stock
Company, liability of each shareholder is limited.

8. Transfer of Shares
Transfer of shares is not possible without the consent of all the partners in a partnership firm. In
case of pubic limited companies shares can be transferred freely.

9. Management
Partnership Firm is managed by the partners themselves, in general. In a Joint Stock Company,
management will be in the hands of elected directors.

10. Audit of accounts

Audit of accounts of Partnership firm is not necessary. Audit of accounts of Joint Stock
Company is compulsory.

11. Flexibility
The objects of the Partnership firm can be changed easily. It is not so easy in case of a Joint
Stock Company.

12. Perpetual succession

Partnership firm has no continuous existence. Joint Stock Company has continuous existence.

COMPARISON BETWEEN COOPERATIVE ENTERPRISE AND PUBLIC SECTOR .

COOPERATIVE OWNERSHIP.

• It is a form of private ownership which contains features of large partnership as well as

some features of the corporation.
• The main aim of the cooperative is to eliminate profit and provide goods and services to
the members of the cooperative at cost.
• Members pay fees or buy shares of the cooperatiVe, and profits are periodically
redistributed to them.
• Since each member has only one vote (unlike in joint stock companies), this avoids the
concentration of control in a few hands.
• In a cooperative, there are shareholders, a board of directors and the elected officers
similar to the corporation.There are periodic meetings of shareholders, also.
 • Special laws deal with the formation and taxation of cooperatives.
• Cooperative organisation is a kind of voluntary, democratic ownership formed by some
moti. vated individuals for obtaining necessities of everyday life at rates less than those
of the market, The principle behind the cooperative is that of cooperation and self-help.

• Forms of Cooperative Enterprises.

(1) Consumer’ s Cooperatives, in retail trade and services.
(2) Producer Cooperatives, for group buying and selling such items as dairy products,
grain, fruit, etc.
(3) Cooperative farming for more and good quality yield from the farms.
(4) Cooperative housing for constructing and providing heuses to the members of the
association at relatively lesser rates.
(5) Cooperative credit society, to provide loans to the needy individuals.

PUBLIC SECTOR

• A public enterprise is one that is

(1) Owned by the state,
(2) Managed by the state, or
(3) Owned and managed by the state.
• The sector of public enterprises is popularly known as the Public Sector.
• Public enterprises are controlled and operated by the Government either solelyor 111
association with private enterprises.
• Public enterprises are controlled and operated by the Government to produce and supply
goods and services required by the society.
• Ultimate control of public enterprises remains with the state and the state runs it with a
service motto.
• Its sphere embraces all units, irrespective of risks involved and profit expected.
• There is no dearth of capital in public, sector and business expansion is not difficult.
• Public sector prevents concentration and unbalanced growth of industries.
• Public sectors are accountable in terms of their results to Parliament and State
Legislature.
• A public enterprise is seldom as efticient as a private enterprise; wastage and inefficiency
can seldom be reduced to a minimum.

Public Limited Company

1. In Public limited company, the capital 15 collected from the public by issuing shares
having small face value (Rs. 50, 20, 10).
 2. The number of shareholders should not be less than seven, but there is no limit to their
maximum number.
3. A public limited company has to tile with the Registrar of Joint Stock Companies,
documents such as consent of the directors, list of directors, director’s contract, etc.
,along with the memorandum of association and articles of association.
4. A public company has to issue a prospectus to the public.
(i) It has to allot shares within 180 days from the date of prospectus.
(ii) It can start only after receiving the certificate to commence business.
5. It has to hold a Statutory Meeting and to issue 3 Statutory Report to all members and
also to the Registrar within a certain period.
6. There is no restriction on the transfer of shares.
7. Directors of the company are subject to rotation.
8. The public company must get its account audited every year by registered auditors
9. It has to send financial statements to all members and to the Registrar.
10. It has to hold a general meeting every year.
11. The Managing Agent gets a fixed percentage of net profit as remuneration.

DEFINE ORGANISATION. DIFFERENTIATE BETWEEN JOINT STOCK COMPANY

AND PUBLIC SECTOR.

A social unit of people that is structured and managed to meet a need or to pursue collective
goals. All organizations have a management structure that determines relationships between the
different activities and the members, and subdivides and assigns roles, responsibilities, and
authority to carry out different tasks.

Organisation is a mechanism or structure that enables living things to work effectively together.

Organisation:

• Establishes the pattern of relationship by giving duties and responsibility to and

individual or group.
• Provides adequate communication.
• Demarcates the authority, responsibility and duties of each individual or group.

Joint Stock Company Public sector Company

• Association of individuals, called
shareholders.
• Consists of more than 20 persons.
• Managing body is the Board of
Directors elected by shareholders.
• Owned by the state.
• Sector of public enterprises.
• Controlled and operated by the
Government to produce supply goods
and services.
 • Liability of members is limited. • Capital, Raw material, fuel etc are
easily available.
• Profit is shared by all shareholders. • Profits earned may be used for
general welfare of the community.

What is the Difference between Private and Public Limited Company?

There are many types of companies, the most popular of which are Private (pvt. ltd.) and Public
(ltd.). Both private and public limited companies have it’s own advantages and disadvantages.
An entrepreneur has to choose the type based on his funding plans. Let’s take a look at the key
factors of both Private and Public ltd companies.
he common differences between a private and public limited company are as follows:
Public limited
Features Private limited company
company
Minimum members 7 2
Minimum directors 3 2
Maximum members Unlimited 200
Minimum capital 500000 100000
Invitation to public Yes No
Issue of prospectus Yes No
Quorum at AGM 5 Members 2 Members
Certificate for commencement of
Yes No
Business ( Mandatory)
Term used at the end of name Limited Private Limited
Can not exceed more than 11%
Managerial remuneration No restriction
of Net Profits
Statutory meeting (Mandatory) Yes No

WHAT IS A PRIVATE LIMITED COMPANY?

A private limited company is a business entity that is held by private owners. This type of entity
limits the owner’s liability to their ownership stake, and restricts shareholders from publicly
trading shares.

Advantages of a Private Limited Company

Members: You can start a private limited company with a minimum of only 2 members (and
maximum of 200), as per the provisions of the Companies Act 2013.
Limited liability: The liability of each shareholder or member is limited. This means that if the
company runs into a loss, the company shareholders are liable to sell their company shares to
clear the debt or liability. The individual or personal assets of shareholders or members are not at
risk.
Perpetual succession: As per company law, perpetual succession means that the company
continues its existence even any owner or member dies, goes bankruptcy, exits from the business
and transfers his shares to another person.

Prospectus: Prospectus is a detailed statement that must be issued by a company that goes
public. However, private limited companies do not need to issue a prospectus because the public
is not invited to subscribe for the shares of the company.

Number of directors: A private limited company needs a minimum of only 2 directors. At least
one director on the board of directors must have stayed in India for a total period of not less than
182 days in the previous calendar year. The directors and the shareholders can be the same
people.

Capital: Minimum share capital required is only Rs. 1 lakh.

Disadvantages of a Private Limited Company

• The shares in a private limited company cannot be sold or transferred to anyone unless
other shareholders agree on the same.
• There is no option to invite public to subscribe to the shares.
• It is mandatory that you should mention Pvt. Ltd. at the end of a company name.

WHAT IS A PUBLIC COMPANY?

A public company is a company that has permission to issue registered securities to the general
public through an initial public offering (IPO) and it is traded on at least one stock exchange
market. A public company is not authorised to begin its business operations just upon the grant
of the certificate of incorporation. In order to be eligible to run as a public company, it should
obtain another document called a trading certificate.
Advantages of a Public Limited Company

Members: In order for a company to be public , it should have a minimum of 7 members

(maximum unlimited).
Limited liability: The liability of a public company is limited. No shareholder is individually
liable for the payment. The public limited company is a separate legal entity, and each
shareholder is a part of it.
Board of Directors: A public company is headed by a board of directors. It should have a
minimum of 3 and can have a maximum of 15 board of directors. They are elected from among
the shareholders by the shareholders of the company in annual general meetings. The elected
directors act as representatives of the shareholders in managing the company and taking
decisions. Having a bigger board of directors therefore benefits all shareholders in terms of
transparency as well as fostering a democratic management process.
Transparency: Private limited companies are strictly regulated and are required by law to
publish their complete financial statements annually to ensure the true financial position of the
company is made clear to their owners (shareholders) and potential investors. This also helps to
determine the market value of its shares.

Capital: A public company can raise capital from the public by issuing shares through stock
markets. Public companies can also raise capital by issuing bonds and debentures that are
unsecured debts issued to a company on the basis of financial performance and integrity of the
company.
Transferable shares: A public limited company’s shares are purchased and sold on the market.
They are freely transferred among the members and the people trading on stock markets.
Disadvantages of going public:

Prospectus: For a public company, issuing prospectus is mandatory because the public is
invited to subscribe for the shares of the company.

Expensive: Going public is an expensive and time consuming process. A public company must
put its affairs in order and prepare reports and disclosures that match with SEBI regulations
concerning initial public offerings (IPO). The owner has to hire specialists like accountants and
underwriters to take the company through the process.
Equity Dilution: Any company going public is selling a part of the company’s ownership to
strangers. Each bit of ownership that the owner sells comes out of their current equity position. It
is not always possible to raise the amount of money that you may need to operate a public
corporation from shares, so company owners should hold at least 51 percent of the ownership in
their control.
Loss of Management Control: Once a private company goes public, managing the business
becomes more complicated. The owner of the company can no longer make decisions
independently. Even as a majority shareholder, they are accountable to minority shareholders
about how the company is managed. Also, company owners will no longer have total control
over the composition of the board of directors since SEBI regulations place restrictions on board
composition to ensure the independence of the board from insider impact.

Increased Regulatory Oversight: Going public brings a private company under the supervision
of the SEBI and other regulatory authorities that regulate public companies, as well as the stock
exchange that has agreed to list the company’s stock. This increase in regulatory oversight
significantly influences management of the business.
Enhanced Reporting Requirements: A private company can keep its internal business
information private. A public company, however, must make extensive quarterly and annual
reports about business operations, financial position, compensation of directors and officers and
other internal matters. It loses most privacy rights as a consequence of allowing the public to
invest in its stock.
Increased Liability: Taking a private company public increases the potential liability of the
company and its officers and directors for mismanagement. By law, a public company has a
responsibility to its shareholders to maximize shareholder profits and disclose information about
business operations. The company and its management can be sued for self-dealing, making
material misrepresentations to shareholders or hiding information that federal securities laws
require to be disclosed.

MATRIX ORGANIZATION
Introduction and Concept

Matrix organization is used when an organization has to handle a variety of protects, ranging
from small to large.

When a pure project structure is superimposed on a functional structure, the result is a matrix
structure.

In other words, the matrix organization is a project organization plus afimctional organization.

The project structure provides a horizontal lateral dimension to the traditional vertical orientation
of the functional organization structure

To conclude, matrix organization is created by merging (two complementary structures. namely)

pure project organization and functional organization.

The project teams are composed of persons drawn from the functional departments for the
duration of the project. When their assignment is over, they return to their respective
departments.

-~ During continuation of the project, such persons have two bosses one, from the functiona
department and second of the concerned project.
Advantages of matrix organization

(i) If effectively focuses resources on a single project, permitting better planning and control to
race deadline.
(ii) It is more flexible than a traditional functional hierarchy.

(iii) Services of specialists are better utilized as more emphasis is placed on the authority 0f
knowledge than rank of the individuals in the organizational hierarchy.

Limitations of matrix organization

(i') Matrix organization violates the principle of unity of command as a person works under twc
bosses e. g., project manager and functional boss. This may give rise to conflicts in the
organization.

(ii) Organisation relationships are more complex and they create problems of coordination.

(iii) Since persons are drawn temporarily from different departments, project manager does not
have line authority over them.

(iv) Project group is heterogeneous and due to which morale of the personnel may be low.

Use matrix organization

-The matrix organization is used in the following industries

Electronics
Aerospace
Chemicals
Banking
industrial products
Insurance
Advertising
Hospitals etc.
PROJECT ORGANISATION: DEFINITION, MERITS AND LIMITATIONS
A project organisation is one, in which a project structure is created as a separate unit or division
within a permanent functional structure; drawing specialists and workers from various functional
departments who work under the overall leadership, control and co-ordination of a project
manager to complete projects of a technical and costly nature.
George R. Terry defines a project organisation as follows:
“A project organisation is a preferred means whenever a well defined project must be dealt with
or the task is bigger than anything, the organisation is accustomed to.”
Functioning of Project Organization:
Under a project organisation, a team of specialists and workers is drawn from various functional
areas, out of the permanent functional structure of the organisation – to work on a project. The
project manager may taker assistance from outside sources also.
The project team functions under the overall control and leadership of the project manager.
During the continuance of the project, functional managers renounce their authority over
subordinates (comprised in the project team) in favour of the project manager.
Point of comment:
When the project completion is over; the project team is disbanded and team personnel go back
to their respective functional department. In fact, a project organisational system is a permanent
feature with many functional organisations. As such, after completion of one project, the old
project team members may be assigned roles towards softie new project.
Conditions Requiring a Project Organization:
Conditions requiring the creation of a project organisation are as follows:
(i) Project is of a technical nature, requiring utmost precision and accuracy e.g. ship-building,
designing and launching of satellites, aircraft manufacture etc.
(ii) Project completion requires huge cost.
(iii) Time factor is a critical factor; requiring project-completion within a limited prescribed time.
Any delays in completion of project within time may tell upon the reputation of the organisation.
Chart of Project Organization:
The following chart depicts a typical project organisational structure:
The chart illustrates the permanent functional structure of the organisation, consisting of
production, finance, marketing, engineering and research departments. There are two project
managers for project I and II. Each project manager has a project team consisting of personnel
drawn from various functional departments; and working under the leadership and control of
their project managers.
Merits and Limitations of the Project Organization:
(a) Merits:
Following are the chief merits of a project organisation:
(i) Concentrated attention on project work:
In a project organisation, there is full and concentrated attention of the project manager on
project work; as the project manager has no work other than attending to project management.
He has full powers to co-ordinate and control project activities. In fact, during continuance of the
project, functional managers renounce their authority over their project-team personnel, in favour
of the project manager.
(ii) Advantages of team specialization:
The project team formed for purposes of undertaking project work consists of specialists drawn
from many functional areas. This phenomenon makes available to the project organisation, the
advantages of team specialisation.
(iii) Ability to cope with environmental influences:
Due to the leadership of the project manager coupled with specialised knowledge of project team
members, the project organisation is in a better position to cope with environmental challenges.
In fact, one of the reasons for creating a project structure is to successfully combat environmental
forces.
(iv) Timely completion of the project:
The project organisation ensures a timely completion of projects; without disturbing the normal
functioning of the whole organisation.
(b) Limitations:
Following are the chief limitations of a project-organisation:
(i) Accentuated problems of co-ordination:
In a project organisation, there are increased problems of co-ordination; because of the diverse
viewpoints of team specialists. As a matter of fact, specialists have a tendency to over-emphasize
on their specialised viewpoints vis-a-vis the manner of project designing and implementation.
This tendency of specialists creates a serious headache for the project manager; who, all the time,
may be found busy in reconciling conflicting viewpoints of specialists getting little time for
attention towards project progress.
(ii) Unclearly defined relationship:
Usually, in a project organisation, the relationships between the project manager and functional
specialists are not very clearly defined. This situation may lead to tension between them;
resulting in poor human relations, in the project organisation. Ultimately, the project work
efficiency may be considerably reduced.
(iii) Feeling of insecurity among personnel:
Usually, there is a feeling of uncertainty in the minds of the project team personnel as to where
they will seek shelter; after a particular project (on which they were engaged) is over. This
feeling of uncertainty about assignment creates feeling of insecurity among personnel; and then
they tend to unduly stretch the existing project work-causing delays in timely completion of the
project.
(iv) Duplication of efforts:
A project organisation suffers from the limitation of duplication of efforts, involved in the
completion of project activities. When e.g. in a project organisation more than one or two
projects is/are undertaken; it is quite likely that the same types of activities might be duplicated,
during the completion of various projects. This phenomenon ultimately tells upon the overall
organisational efficiency and profitability.

Committee: Meaning, Types and Advantages | Organisation

Meaning of a Committee:
A committee is a group of people who work collectively, discuss, decide and recommend
solutions to the problems (of a concern) which possibly cannot be solved by an individual. A
committee consists of a group of men conversant with a subject; naturally their advice will be
much superior to that of one man.
Committees work very well in large complex corporate organisations having multifaceted
problems too big and too complex to be dealt effectively by one person. In a committee, ideas
put forth by several persons are pooled and offered for criticism; the ideas are developed and
thus recommendations are made as regards procedure and policies.
Principles of a Committee:
1. The number of persons in a committee should depend upon the need and be optimum
minimum (about 5 to 10 persons).
2. Responsibility, authority, objectives and duties of the committee should be clearly defined.
3. Agenda of the committee should be prepared and communicated to the committee members at
least a week before they meet for discussions.
4. Problems which can be taken care of by an individual should not be included in the agenda of
the committee.
5. Committee meetings should begin and end on prefixed timings.
6. Problems not related to the subject-matter at hand should not be discussed because it will
simply waste time.
7. The operation of the committee should be a cooperative development.
8. The recommendations made by the committee should be published and circulated to interested
and concerned persons.
The committee should be apprised of the action taken based upon its recommendations.
9. A committee must be dissolved after its purpose is over.
Types of Committee:
(a) A standing or permanent committee is needed in a complex organisation experiencing
multifaceted problems almost all the times.
(b) A temporary committee is formed to face and solve problems arising occasionally.
(c) The committee in control has full powers to act and may assume a position that could be
manned by one individual.
(d) The coordination and discussion committee discusses problems and gives its advice. It has no
power to act.
(e) The advisory committee explores various aspects of a problem and suggests courses of action
to the concerned executive, thereby helping him to reach the decisions for which he is held
responsible. The committee does not have power to act. Advisory Committee is used extensively
in business.
(f) The educational committee aids in getting information about company problems, policies and
projects to major individuals concerned. It also gives an insight into the ultimate company
organisation, etc.
Advantages of a Committee:
1. A committee often performs worth-while tasks since two experts are better than one.
2. A committee coordinates the efforts of the departments which are represented (e.g., sales,
production and engineering) in development of a new product.
3. A committee is of special value in broad policy determination and rounding out plans.
4. A committee reduces the work load of management.
5. Committees are especially good at innovation or brain storming.
6. A committee helps securing co-operation of various personnel.
7. A committee is effectively used to appoint persons to fill vacant positions in the enterprise.
8. Committee meetings may be called to train younger executives and to give them a keener
insight into the operation of the business.
Limitations of a Committee:
1. Sometimes it turns out to be true that what a committee finishes in a week, a good individual
may complete in a day.
2. It may be said that committee operations are slow and committees tend to hang on for a
considerable time.
3. An executive afraid to stand behind his own decisions may use a rubber-stamp committee and
thereby share his responsibility with others.
4. In a committee, no individual can be held responsible for anything.
5. Committee decisions represent generally a compromised position and do not truly reflect the
real feelings of the individual committee (or group) members.

Define organisation. Differentiate between Partnership and joint stock company.

ORGANISTION - Almost any business manager will affirm that sound organization is highly
important to business success. Many will characterize organisation as the foundation upon which
the whole structure of management is built. Organisation is a mechanism or structure that
enables living things to work effectively together. Organisation may be defined as the process of
(i) Identifying and grouping the work to be performed,
(ii) Defining and delegating responsibility and authority and
(iii) Establishing relationships for the purpose of enabling people to work most effectively
together in accomplishing objectives. Organisation is the pattern of ways in which a large
number of people engaged in a complexity of tasks, relate themselves to each other in systematic
establishment and accomplishment of mutually agreed purposes
1.Minimum No. of Members
Minimum number of members is two in a Partnership firm. Whereas in Joint Stock Companies,
Minimum number is two in a private company and seven in a public company.

2. Maximum No. of Members

In a Partnership firm, maximum number of members is 20 in general business and 10 in banking
firms. In a Joint Stock Company, maximum number of members is 50 in a private company and
there is no maximum limit in public company.

3. Registration
Registration of a Partnership firm is not compulsory. Registration of Joint Stock company is
compulsory.

4. Separate Legal Existence

Partnership firms has no separate legal existence. Partnership Firm and partners are the same.
Joint Stock company has separate legal existence. It is an artificial person created by law.

5. Legislation
Partnership firm is regulated under the Partnership Act, 1932. Joint Stock Company is regulated
under the Companies Act, 1956.

6. Capital
Huge capital for partnership firm cannot be secured. There is possibility of securing huge capital
in case of Joint Stock company.

7. Liability
In a Parternship firm, liability of each partner is unlimited, joint and several. In a Joint Stock
Company, liability of each shareholder is limited.

8. Transfer of Shares
Transfer of shares is not possible without the consent of all the partners in a partnership firm. In
case of pubic limited companies shares can be transferred freely.

9. Management
Partnership Firm is managed by the partners themselves, in general. In a Joint Stock Company,
management will be in the hands of elected directors.

10. Audit of accounts

Audit of accounts of Partnership firm is not necessary. Audit of accounts of Joint Stock
Company is compulsory.
11. Flexibility
The objects of the Partnership firm can be changed easily. It is not so easy in case of a Joint
Stock Company.

12. Perpetual succession

Partnership firm has no continuous existence. Joint Stock Company has continuous existence