Unit 2

Unit-2: Organisational Structures and Leadership 2.
UNIT – II
ORGANISATIONAL STRUCTURES AND LEADERSHIP
BASIC CONCEPTS OF ORGANISATION

The term 'organisation' connotes different meanings to different people. Many writers
have attempted to state the nature, characteristics and principles of an organisation in their
own may. The word 'organisation' is also used widely to connote a group of people and the
structure of relationships. The term ‘organisation’ is used in many ways. It means different
things, different people. Currently, the following uses of the term are popular.
A group of people united by a common purpose.
An entity, an ongoing, business unit engaged in utilizing resources to create a result.
A structure of relationships between various positions in an enterprise.
A process by which employees, facilities and tasks are related, to each other, with a
view to achieving specific goals.
Definition:
According to Koontz and O'Donnel, "It is a grouping of activities necessary to attain
enterprise objectives and the assignment of each grouping to a manager with authority
necessary to supervise it".
Steps in Organizing:
Organizing involves the following interrelated steps:
1. Determination of Objectives: Organisation is always related to certain objectives.
Therefore, it is essential for the management to identify the objectives before starting
any activity. It will help the management in the choice of men and materials with the
help of which it can achieve its objectives.
2. Identification and Grouping of Activities: If the members of the group are to pool
their efforts effectively, there must be proper division of the major activities. Each job
should be properly classified and grouped. This will enable the people to know what
is expected of them as members of the group.
3. Assignment of Duties: After classifying and grouping the activities, each individual
should be given a specific job to do according to his ability and made responsible for
that. He should also be given adequate authority to do the job, assigned to him.
4. Developing Authority, Responsibility and Relationships: Since so many
individuals work in the same organisation, it is the responsibility of management to
lay down the structure of relationships in the organisation. This will help in the
smooth working of the enterprise by facilitating delegation of responsibility and
authority.
PRINCIPLES OF ORGANISATION
Effective and efficient working of any organisation depends on how the managerial
function of an organisation is being performed. The function of an organisation can be carried
effectively with the help of under mentioned principles:
1. Division of work: While structuring organisation, division of work, at the very outset,
should be considered as the basis of efficiency. It is an established fact that a group of
individuals can secure better results by having a division of work. This is also called
the principle of specialization.
Organisational Structure and Human Resource Management

Unit-2: Organisational Structures and Leadership 2.2
2. Attention to objectives: An organisation is a mechanism to accomplish certain goals

or objectives. The objectives of an organisation play an important role in determining
the type of structure which should be developed.
3. Span of Management: Span of management also refers to the span of control
signifying the number of subordinates reporting directly to any executive. It is an
established fact that the larger the number of subordinates reporting directly to the
executive, the more difficult it tends to be for him to supervise and coordinate them
effectively.
4. Unity of Command: Organisation structure should also be designed in such a way
that there exists unity of command in the sense that a single leader is the ultimate
source of authority.
5. Flexibility: While designing the organisation it should be kept in mind that
organisational structure should not be regarded as static. Every organisation is a living
entity in a living environment which is fast changing.
6. Proper balance: It is important to keep various segment or departments of an
organisation in balance. The problem of balance basically arises when an activity or a
department is further divided and subdivided into smaller segments
7. Efficiency: The organisation should be able to attain the predetermined objectives at
the minimum cost. From the point of view of an individual, a good organisation
should provide maximum work satisfaction.
8. Decentralization: This principle is of great significance to big organisations.
Decentralization implies selective dispersal of authority to help departments and units
to run effectively and efficiently without frequent interruptions from the top of the
enterprise.
9. Scalar principle: Scalar chain refers to the vertical placement of superiors starting
from the chief executive at the top through the middle level to the supervisory level at
the bottom. Proper scalar chain or line of command is prerequisite for effective
organisation.
10. Continuity: The form of organisation structure should be such which is able to serve
the enterprise to attain its objectives for a long period of time.
11. Coordination: The principal of coordination underlines that there should be proper
liaison and cooperation between different departments and units of work. Unity of
efforts for the accomplishment of the desired objectives is the main aim of the
organisation.
12. Authority and Responsibility: Authority should commensurate with responsibility.
While assigning the responsibility, the authority should also be assigned. If authority
is not granted, the subordinates cannot discharge their responsibility properly.
TYPES OF ORGANISATION
Formal Organisation:
A formal organisation is deliberately designed to achieve some particular objectives.
It refers to the structure of well-defined jobs, each bearing a definite measure of authority,
responsibility and accountability. The structure is consciously designed to enable the
organisational members to work together for accomplishing common objectives. The
individual must adjust to the formal organisation. It tells him to do certain things in a
specified manner, to obey orders from designated individuals and to cooperate with others.
The formal organisation is built around four key pillars. These may also be called the
principles of formal organisation; namely,

a. division of labor,
b. scalar and functional processes,
c. structure, and
d. span of control.
The basic characteristics of formal organisation are as follows:
1. Organisation structure is laid down by the top management to achieve organisational
goals.
2. Organisation structure is based on division of labor and specialization to achieve
efficiency in operations.
3. Organisation structure concentrates on the jobs to be performed and not the
individuals who are to perform jobs.
4. The organisation does not take into consideration the sentiments of organisational
members.
5. The authority and responsibility relationships created by the organisation structure are
to be honored by everyone.
6. The position in the organisation hierarchy determines the relative status of the
incumbent.
Informal Organisation
Informal organisation refers to the relationship between people in the organisation
based on personal attitudes, emotions, prejudices, likes, dislikes, etc. These relations are not
developed according to procedures and regulations laid down in the formal organisation
structure; generally, large formal groups give rise to small informal or social groups. These
groups may be based on same taste, language, culture or some other factor. These groups are
not preplanned, but they develop automatically within the organisation according to its
environment.
The salient features of informal organisation are as follows:
1. Informal relations are unplanned. They arise spontaneously.
2. Formation of informal organisations is a natural process.
3. Informal organisation reflects human relationships.
4. Informal organisations are based on common taste, problem, language, religion,
culture, etc.
5. The membership of informal organisations is voluntary. At the same time, a person
may be a member of a number of informal groups.
Formal Vs. Informal organisation:

Point Formal organisation Informal organisation
Origin and goals Deliberately created; reflects Arises spontaneously; reflects
organisational goals. Basic purpose individual and group goals. Basic
is to achieve organisation goals. purpose is to improve human
relations.
Structure It has a definite structure and is Structure less, organisation chart
reflected in an organisation chart built around
built around group Positions. People.
Integrating Formal organisation is held together Held together by feelings of
Mechanisms by rules, regulations, and friendship, mutual help and trust,
procedures. and so on; it has unwritten rules and
is bound by group norms rather than
Organisational goals.

Communication Formal organisation depends on The informal organisation designs

formal, official channels of its own communication popularly
communication to sell the ideas of known as grapevine, for both
management to the organisation; organisational and social
Communication is a one-way traffic. communication process;
communication is a two-way traffic.
size Tends to be large in size, generally Tends to be small and manageable.
unwieldy and unmanageable.
Durability Tends to be permanent and stable. Characterized by instability.
Orientation It is more or less, an impersonal and A highly flexible structure designed
arbitrary structure, to which to satisfy social and psychological
individuals must adjust. needs of individuals.
AUTHORITY & RESPONSIBILITY
Authority means right and power to act. Authority is the right empowers the superior
to make a subordinate to do the work. It is the right to make decisions, direct the work of
others and give orders. It is the right to direct, act and control.
Authority is a legal power which is possessed by a person from his superior officers
and with the help of which he succeeds in getting the things done by his sub-ordinates. If the
managers do not possess required authority, they will not be able to perform their duties
properly. A manager is in a position to influence his subordinates only by the use of his
authority. It is the authority which enables him to discharge the important functions of
planning, coordination, motivation and controlling etc., in an enterprise.
Definition: According to Henry Fayol, "Authority is the right to give order and the
power to exact obedience".
Responsibility is the work assigned to a position. Responsibility refers to the mental

and physical activities which must be performed to carry out a task or duty. It arises from a
superior-subordinate relationship, from the fact that the superior has the authority to take
specified service from the subordinate.
DELEGATION OF AUTHORITY
Delegation is the process by which an individual manager transfers part of his
legitimate authority to a subordinate but without passing on the ultimate responsibility which
has been entrusted to him by his own superior.
In the words of F.G. Moore, "Delegation means assigning work to others and gives
them authority to do it."
Delegation of authority means conferring authority to another to accomplish a
particular assignment while operating with prescribed limits and standards established.
Delegation of authority is the key to organisation. An executive confers authority on the
subordinates to accomplish specific tasks which may not be able to do alone. That means a
manager can get things done through others by sharing authority with them.

Methods of Delegation:
In a big manufacturing concern, the following may be the methods of the delegation
of authority to ensurea better result, unified direction and command and effective delegation:
1. Administrative Delegation: When a few of the administrative functions are
delegated to sub-ordinate staff it is called administrative delegation. These functions
are generally of routine nature, e.g. to maintain discipline, to supervise the work, to
recommend for the reward or punishment etc.
2. Geographical Delegation: When the work of the enterprise is located at different
distant places it is not possible for an executive to manage the whole affairs single-
handed. He then proceeds to delegate his authority to those who are posted at the
places where physically he cannot be present around the year. This is known as the
geographical method of delegating the authority.
3. Functional Delegation: When the enterprise is organized on the basis of the
functional organisation, the delegation of authority is also done on a functional basis.
All the heads are given to manage their departments according to their skill,
knowledge and experience of course; they are accountable to the chief executives.
4. Technical Delegation: This method of the delegation of authority is based on
technical knowledge and skill. Here the authority is delegated in order to get the
advantages of expert and experienced hands and their technical skill.
Principles of Delegation of Authority:

The following principles are guides to successful delegation:
1. Parity between authority and responsibility: There should be complete parity
between authority and responsibility. If authority is more than responsibility, people
will make misuse of their authority and if responsibility is more than authority, the
results can never be achieved.
2. Responsibility in terms of results: To be effective, a delegation of authority should
always be in terms of exact results of responsibility. In other words, responsibility
should be specific to a specific person, because everybody’s responsibility is
nobody’s responsibility.
3. Principle of Unity of command: To avoid confusion, conflicts and duplication of
work-orders, instructions and guidelines should flow to a subordinate from a single
particular executive only.
4. Delegation of responsibility: Authority can be delegated, but responsibility cannot
be delegated. By delegating authority, an executive does not escape from
responsibility. He is, in addition, responsible for the actions of his subordinates also.
5. Overlapping of responsibilities: While delegating authority, it must be ensured that
the duties and responsibilities of subordinates do not overlap.
6. Free flow of information: In the delegation of authority, there should be free two-
way communication between an executive and a subordinate.
7. Delegated authority: Authority delegated to a subordinate should be adequate,
enough and as per the status and position of the subordinate, in order to achieve
optimum results.

DEPARTMENTATION
It is a part of the organisation process. Departmentation means dividing and grouping
the activities and employees of an enterprise into various departments. It operates under the
control of a manager known as Department Head. He has adequate authority over the
activities and responsible for the smooth functioning of the department.
President
Vice President Vice President Vice President

Sales Production Finance
Manager Manager Manager

Plant-1 Plant-2 Plant-3
Purchasing Purchasing Purchasing
Research Engineering Research
Cost Standards Standards
Methods of Departmentation:
Different methods of creating departments in an organisation are:
1. By Function: In departmentalization by function, the activities of an organisation are
divided into the primary functions to be performed i.e. manufacturing, marketing,
research and development, employee relations, and finance. This arrangement has the
advantage of the specialization and concentration of similar activities within a
departmental unit. The major problem with this form is the coordination of
specialized activities.
2. By Product: Product departmentalization has become increasingly important,
especially for large, complex organisations. In this method, the product lines are
segregated and each product line has its own manager, it's own manufacturing,
selling, etc.
3. Customers or Markets: In this method, sales are the exclusive field of its
application. To give individual attention to the diverse groups of buyers in the market,
sales activities are often split into several parts and distributes through numerous
channels and outlets, according to the needs of the customers.
4. By Territory: Market area is broken up into sales territories and a responsible
executive is put in charge of each territory. The salesmen in each territory report to
their territorial manager who in turn is in communication with the sales manager.
5. By Process: The manufacturing activities may be sub-divided on the basis of their
process of production. Similar machines such as lathes, all drilling machines, all
shapers, etc, are grouped into separate sections, each kept at one place and used for a
distinct operation on the job.
In actual practice, no single method of grouping activities is applied throughout the
organisation structure. In reality, a single organisation may employ one or all of the bases of
departmentalization at the same of various hierarchical levels.

CENTRALIZATION
Centralization refers to the process in which activities involving planning and

decision-making within an organisation are concentrated to a specific leader or location. In a
centralized organisation, the decision-making powers are retained in the head office, and all
other offices receive commands from the main office. The executives and specialists who
make critical decisions are based in the head office. Centralization refers to a setup in which
the decision-making powers are concentrated in a few leaders at the top of the organisational
structure. Decisions are made at the top and communicated to lower-level managers for
implementation. Similarly, in a centralized government structure, the decision-making
authority is concentrated at the top, and all other lower levels follow the directions coming
from the top of the organisation structure.
Centralization represents certain attitude and approach, which the management
follows. The major implication of centralization is the reservation of decision-making power
in regard to planning, organizing, directing, and control at the top level. The other
implications will depend on the philosophy of management for instance, in a company where
the top management is very particular about the use of authority; it will make all the
operations and decisions at lower levels subject to its approval.
The top management of a company may prefer to reserve maximum authority with
itself for the following reasons:
1. To Facilitate Personal Leadership: Personal leadership is an important factor for the
success of small enterprises. Personal leadership is also important during the early
stages of big enterprises. In both the cases, the operation is relatively on a small scale
and the top manager can concentrate entire authority with himself. This will result in
quick decisions and enterprising and imaginative action, which are essential for the
success of the business.
2. To Promote Uniformity of Action: Where a company wishes all operative units to do
the same things in the same way and at the same time there must be centralization of
appropriate decision making. Only the top management having central authority to
make decisions can bring uniform of action by the operating units.
3. To Provide for Integration: A certain degree of centralization an authority is
necessary to unite and integrate the total operations of the enterprise. This is the
coordination function of management. If the management has to perform this function
better, it must reserve some authority with it set Centralized control is needed to keep
all the parts of the enterprise moving harmoniously towards a common objective.
4. To Handle Emergencies: Centralization of decision making ii essential when the
business conditions are uncertain and there are chance that emergency conditions may
develop to endanger the very existence of a company. Centralization will help in taking
rational decisions from both should as well as long-term perspectives to meet such
uncertainties.
Advantages of Centralization
An effective centralization offers the following advantages:
1. A clear chain of command: A centralized organisation benefits from a clear chain of
command because every person within the organisation knows who to report to.
Junior employees know who to approach whenever they have concerns about the
organisation. On the other hand, senior executives follow a clear plan of delegating
authority to employees who excel in specific functions. The executives also gain the
confidence that when they delegate responsibilities to mid-level managers and other

employees, there will be no overlap. A clear chain of command is beneficial when the
organisation needs to execute decisions quickly and in a unified manner.
2. Focused vision: When an organisation follows a centralized management structure, it
can focus on the fulfillment of its vision with ease. There are clear lines of
communication and the senior executive can communicate the organisation’s vision to
employees and guide them toward the achievement of the vision. In the absence of
centralized management, there will be inconsistencies in relaying the message to
employees because there are no clear lines of authority. Directing the organisation’s
vision from the top allows for a smooth implementation of its visions and strategies.
The organisation’s stakeholders such as customers, suppliers, and communities also
receive a uniform message.
3. Reduced costs: A centralized organisation adheres to standard procedures and
methods that guide the organisation, which helps reduce office and administrative
costs. The main decision-makers are housed at the company’s head office or
headquarters, and therefore, there is no need for deploying more departments and
equipment to other branches. Also, the organisation does not need to incur extra costs
to hire specialists for its branches since critical decisions are made at the head office
and then communicated to the branches. The clear chain of command reduces
duplication of responsibilities that may result in additional costs to the organisation.
4. Quick implementation of decisions: In a centralized organisation, decisions are
made by a small group of people and then communicated to the lower-level managers.
The involvement of only a few people makes the decision-making process more
efficient since they can discuss the details of each decision in one meeting. The
decisions are then communicated to the lower levels of the organisation for
implementation. If lower-level managers are involved in the decision-making process,
the process will take longer and conflicts will arise. That will make the
implementation process lengthy and complicated because some managers may object
to the decisions if their input is ignored.
5. Improved quality of work: The standardized procedures and better supervision in a
centralized organisation result in improved quality of work. There are supervisors in
each department who ensure that the outputs are uniform and of high quality. The use
of advanced equipment reduces potential wastage from manual work and also helps
guarantee high-quality work. Standardization of work also reduces the replication of
tasks that may result in high labor costs.
Disadvantages of Centralization
The following are the disadvantages of centralization:
1. Bureaucratic leadership: Centralized management resembles a dictatorial form of
leadership where employees are only expected to deliver results according to what the
top executives assign them. Employees are unable to contribute to the decision-
making process of the organisation, and they are merely implementers of decisions
made at a higher level. When the employees face difficulties in implementing some of
the decisions, the executives will not understand because they are only decision-
makers and not implementers of the decisions. The result of such actions is a decline
in performance because the employees lack the motivation to implement decisions
taken by top-level managers without the input of lower-level employees.
2. Remote control: The organisation’s executives are under tremendous pressure to
formulate decisions for the organisation, and they lack control over the
implementation process. The failure of executives to decentralize the decision-making
process adds a lot of work to their desks. The executives suffer from a lack of time to

supervise the implementation of the decisions. This leads to reluctance on the part of
employees. Therefore, the executives may end up making too many decisions that are
either poorly implemented or ignored by the employees.
3. Delays in work: Centralization results in delays in work as records are sent to and
from the head office. Employees rely on the information communicated to them from
the top, and there will be a loss in man-hours if there are delays in relaying the
records. This means that the employees will be less productive if they need to wait
long periods to get guidance on their next projects.
4. Lack of employee loyalty: Employees become loyal to an organisation when they are
allowed personal initiatives in the work they do. They can introduce their creativity
and suggest ways of performing certain tasks. However, in centralization, there is no
initiative in work because employees perform tasks conceptualized by top executives.
This limits their creativity and loyalty to the organisation due to the rigidity of the
work.
DECENTRALIZATION
An organisation is said to be decentralized when managers at the middle level and
lower level are given the authority to make decisions on matters relating to their functions.
They are required to take a decision keeping in view the overall policies of the company. For
instance, the production manager and the factor manager are authorized to decide the quantity
and quality of the product, the technology and materials to be used, etc. They are also
responsible for the top management for achieving the targets set in advance. The top
management retains the authority for overall coordination and control of operations.
According to Allen, "Decentralization refers to the systematic effort to delegate to the
lowest levels all authority except that which can only be exercised at central points." Thus,
decentralization means the reservation of some authority (power to plan, organize, direct and
control) at the top level and delegation of authority to make decisions at points as near as
possible to where actions take place.
Advantages of Decentralization:
The main advantages of decentralization are:
1. Reduction in the Burden of Chief Executive: Decentralization of authority reduces
the burden of the chief executive, as he delegates a major part of his authority to his
subordinates and this will enable him to devote more time on important functions.
2. Quick Decisions: Decentralization avoids red-tapism in making decisions as it places
responsibility for decision making as near as possible with the place where actions
take place. It also minimizes the delay in transmitting information from and to the
workplace.
3. Diversification of Activities: With the addition of new product lines, an organisation
may grow complex and pose a challenge to the top executives. The challenge can be
met effectively by decentralizing the authority under the overall coordinating purview
of the top management.
4. Development of Managerial Personnel: When authority is decentralized, the
subordinates get the opportunity of taking the initiative to develop their talents and to
enable them to develop qualities for managerial positions. They learn how to decide
and depend on their own judgment and how to manage.
5. Effective Control and Supervision: The greater the degree of decentralization, the
more effective becomes the span of control. It leads to effective supervision as

managers at the lower levels have complete authority to make changes in work
assignment, to change production schedules, to recommend promotions and to take
disciplinary actions.
6. Effective Coordination: Under decentralization, coordinated efforts are required
only at the levels of segments created by decentralization. This makes coordination
more effective.
7. Improvement of Motivation and Morale: Decentralization of authority fulfils the
human needs of the power, independence and status. It gives the local executives an
opportunity to take initiative and to try new ideas. This improves their motivation and
heightens their morale.
8. Miscellaneous Economies: In addition to the above advantages, decentralization also
achieves several internal and external economies. Internal economies include speedier
communication, better utilization of lower level and middle-level executives, greater
incentive to work and greater opportunities for training. These make possible for the
management to reduce the cost of production and meet competition effectively.
Limitations of Decentralization:
1. Increase administrative expenses: Decentralization increases the administrative
expenses because it requires the employment of trained personnel to accept authority.
The services of such highly paid personnel may not be fully utilized particularly in
small organisations.
2. Not possible for small concerns: Decentralization requires the product lines of the
concern to be broad enough to allow the creation of autonomous units, which is not
possible in small concerns.
3. Coordination problems: Decentralization of authority may create problems in
bringing coordination among the various units.
4. External factors: Decentralization may not be possible because of external factors. If
a company is subject to uncertainties, it will not be able to meet these under
decentralization.
5. Inconsistencies: Decentralization may bring about inconsistencies in the company.
SPAN OF MANAGEMENT
The term 'span of management' is also known as 'span of control,' 'span of supervision'
and 'span of authority'. It represents a numerical limit of subordinates to be supervised and
controlled by a manager. It is an important principle of sound organisation. This principle is
based on the theory of relationships propounded by V.A.Graicunas, a French management
consultant. Graicunas analyzed superior-subordinate relationship and developed a
mathematical formula based on the geometric increase in complexities of managing as the
number of subordinates’ increases.
He classified superior and subordinate relationship into the following:
1. Direct single relationship: Direct single relationships arise from the direct individual
contacts of the superior with his subordinates. Here three single relationships. Ex:
A,B,C are subordinates to X.
2. Direct group relationships: Direct group relationships arise between the superior and
subordinates in all possible combinations. Thus the superior may consult his
subordinates with one or more combinations. Ex: A with B, B with C, A with C, etc..
3. Cross relationships: Cross relationships arise because of mutual interaction of
subordinates working under the common superior such as A and B, B and C, A and

C, C and A etc.. The relationship is quite different between A and B than B and A
from management point of view because the type of interaction will be different in
both cases.
Gracuna has given formula to find various relationships with varying number of
subordinates. Gracuna suggest that most ideal span for a manager is 6 subordinates with 222
relationships.
Number of subordinates = n,
Direct single relationship = n,
Direct group relationship = n(2n-1-1)
Cross relationship = n(n-1)
Total relationship = n(2n/2+n-1) (or) n(2n-1 +n-1)
No. of sub ordinates No. of relationships

1 . 1
2 . 6
3 . 18
4 . 44
5 . 100
6 . 222
8 . 1080
10 . 5210
The number of persons an executive supervises has an important influence on the
nature of organisation structure. If the span is large, it means that fewer levels are needed in
the organisation. The structure would tend to be flat and wide. If the span is small, the
structure would be narrow and deep. There would be more levels in the organisation.
Wide Span of Management:

When the span of supervision is wider, the number of executives needed to supervise
the workers will be less. Such a structure would be less expensive because of less overhead
costs of supervision. Since the number of levels is less, there will be better communication
between the worker and the management and better coordination. However, the quality of
performance is likely to deteriorate because one executive cannot effectively supervise a
large number of subordinates.
Chief Executive
Executive-1 Executive-2 Executive-3 Executive-4
64 W 64 W 64 W 64 W
Flat Structure (Span of control=64)
Narrow Span of Management:

The narrow span of supervision will lead to a tall structure and it facilitates tight
control and Close supervision. Tall organisation structure gives sufficient to an executive for
developing relations with the subordinates. There will also be a problem of effective
coordination of the activities of different persons in the organisation because of more levels

of executives. However, the narrow span of supervision has the benefit of better personal
contacts between the supervisors and the subordinates is shown below:
Chief Executive-1
II Level Executives=4
III Level Executives=16
Tall Structure (Span of control=4workers)
Factors Determining Span of Management:

The span of control varies from individual to individual, time to time and place to
place. The factors, which determine the span of control, are discussed below:
1. Ability of the Managers: Individuals differ in various qualities like leadership,
decision-making and communication. The span may be wider if the manager possesses
these skills in greater degree as compared to others.
2. Time available for Supervision: The span should be narrow at the higher levels
because top managers have less time available for supervision. They have to devote the
major portion of their time to planning, organizing, directing, and controlling. Each top
manager will delegate the task of supervision to his subordinates who have to devote
comparatively less time on the important functions of management.
3. Nature of Work: When the spans are narrowed, the levels in the organisation increase.
This involves delegation of authority and responsibility. If the work is of a routine and
repetitive nature, it can easily be delegated to the subordinates.
4. Capacity of Subordinates: If the subordinates are skilled, efficient and knowledgeable,
they will require less supervision. In such a case, the superior may go in for a wider
span.
5. Degree of Decentralization: Under decentralization, the power to make decisions is
delegated to the lower levels. The span of management will be narrow in such cases so
as to exercise more and more control.
6. Effectiveness of Communication: An effective system of communication in the
organisation favors large number of levels because there will be no difficulty in
transmission of information in spite of a large number of intervening layers.
7. Control Mechanism: The span of control also depends upon the control mechanism
being followed. Control may be followed either through personal supervision or
through reporting.
ORGANISATION STRUCTURE
An organisation structure shows the authority and responsibility relationships between
the various positions in the organisation by showing who reports to whom. It is a set of
planned relationships between groups of related functions and between physical factors and
personnel required for the achievement of organisational goals.

Organisation involves establishing an appropriate structure for the goal seeking

activities. The structure of an organisation is generally shown on an organisation chart or a
job- task pyramid. It shows the authority and responsibility relationships between various
positions in the organisation. It is significant to note that the organisation structure is directly
related to the attainment of the organisation objectives.
For instance, if an undertaking is in production line, the dominant element in its
organisation chart, would be manufacturing and assembling. A good organisation structure
should not be static but dynamic. It should be subject to change from time to time in the light
o f the changes in the business environment. While designing the organisation structure, due
attention should be given to the principles of sound organisation.
Significance of Organisation Structure:
Organisation structure contributes in the following ways to the efficient functioning of
organisations:
1. Clear cut Authority Relationships: Organisation structure allocates authority and
responsibility. It specifies who is to direct whom and who is accountable for what
results. The structure helps an organisation member to know what his role is and how it
relates to other roles.
2. Pattern of Communication: Organisation structure provides the patterns of
communication and co-ordination. By grouping activities and people, structure
facilitates communication between people centered on their job activities.
3. Location of Decision Centers: Organisation structure determines the location of
decision making in the organisation. A departmental store, for instance, may follow a
structure that leaves pricing, sales promotion and other matters largely up to individual
departments to ensure that varied departmental conditions are considered.
4. Proper Balancing: Organisation structure creates the proper balance and emphasis of
activities. Those more critical to the enterprise's success might be placed higher in the
organisation. Research in a pharmaceutical company, for instance, might be singled out
for reporting to the general manager or the managing director of the company.
5. Stimulating Creativity: Sound organisation structure stimulates creative thinking and
initiative among organisational members by providing well defined patterns of
authority.
6. Encouraging Growth: An organisation structure provides the framework within which
an enterprise functions. If it is flexible, it will help in meeting challenges and creating
opportunities for growth. A sound organisation structure facilitates growth of enterprise
by increasing its capacity to handle increased level of activity.
7. Making Use of Technological Improvements: A sound organisation structure, which
is adaptable to changes, can make the best possible use of latest technology. It will
modify the existing pattern of authority - responsibility relationships in the wake of
technological improvements.
TYPES OF ORGANISATION STRUCTURES

An organisation structure shows the authority and responsibility relationships between
the various positions in the organisation by showing who reports to whom. It is a set of
planned relationships between groups of related functions and between physical factors and
personnel required for the achievement of organisational goals.
Organisation involves establishing an appropriate structure for the goal-seeking
activities. The structure of an organisation is generally shown on an organisation chart or a
job- task pyramid. For instance, if an undertaking is in the production line, the dominant

element in its organisation chart, would be manufacturing and assembling. A good

organisation structure should not be static but dynamic. It should be subject to change from
time to time in light of the changes in the business environment. While designing the
organisation structure, due attention should be given to the principles of sound organisation.
There are two types of structural variables, namely;

a) The basic structure involves such central issues as how the work of the organisation
will be divided and assigned among positions, groups, departments, divisions, etc. and
how the coordination necessary to achieve organisational objectives will be brought
about.
b) Operating mechanism includes such factors as an information system, control
procedures, rules and regulations, a system of reward and punishment, etc.
In order to organize the efforts of individuals, any of the following types of

organisational structures may be set up:
1. Line organisation
2. Line and staff organisation
3. Functional organisation
4. Matrix organisation
5. Committee organisation
6. Inverted Pyramid structure
7. Virtual organisation
8. Team structure
9. Boundaryless organisation
10. Lean and Flat organisation

LINE ORGANISATION
It is also known as scalar or military or vertical organisation and perhaps is the oldest
form. In this form of organisation, managers have direct responsibility for the results; line
organisation can be designed in two ways:
a) Pure Line Organisation: Under this form, similar activities are performed at a
particular level. Each group of activities is self – contained unit and is able to perform
the assigned activities without the assistance of others.
Production Manager
Foreman-A Foreman-B Foreman-C
Worker Worker Worker
b) Departmental Line Organisation: Under this form, entire activities are divided into
different departments on the basis of similarity of activities. The basic objective of
this form is to have uniform control, authority and responsibility.
Production Manager
Foreman-A Foreman-B Foreman-C

(Body Moulding) (Seating) (Finishing)
Worker Worker Worker
Suitability:
This type of organisational structure is suitable for small scale organisations where the
number of subordinates is quite small.
Advantages:
1. Simplicity: Line organisation is very simple to establish and can be easily understood
by the employees.
2. Discipline: Since each position is subject to control by its immediate superior position,
often the maintenance of discipline is easy unity of command and unity of direction
foster discipline among the people in the organisation.
3. Co-ordination: The hierarchy in management helps in achieving effective coordination.
4. Effective communication: There will be a direct link between superior and his
subordinate; both can communicate properly among him or herself.
5. Economical: Line organisation is easy to operate and it is less expensive.
6. Unity of command: In this, every person is under the command of one boss only.
7. Prompt decision: Only one person is in charge of one division or department. This
enables the manager to take quick decisions.
8. The overall development of the managers: The departmental head has to look after all
the activities of his department; therefore, it encourages the development of all-round
managers at a higher level of authority.

Disadvantages:
1. The ability of Manager: The success of the enterprise depends upon the calibre and
ability of a few departmental heads, loss of one or two capable men may put the
organisation in difficulties.
2. Personnel limitations: In this type of organisation an individual executive is
supposed to discharge different types of duties. He cannot do justice to all different
activities because he cannot be specialized in all the trades.
3. Overload of work: Departmental heads are overloaded with various routine jobs
hence they cannot spare time for managerial functions like planning, budgeting, etc.
4. Dictatorial way: Inline organisation, too many authorities centre on line executive.
Hence it encourages a dictatorial way of working.
5. Duplication of work: Conflicting policies of different departments result in
duplication of work.
6. Unsuitable for large concerns: It is limited to small concerns.
7. Scope of favouritism: As the departmental heads have the supreme authority, there is
a chance of favouritism.
LINE AND STAFF ORGANISATION

It refers to a pattern in which staff specialists advise line managers to perform their
duties. When the work of an executive increases its performance requires the services of
specialists which he himself cannot provide because of his limited capabilities on these
matters. Such advice is provided to line managers by staffs personal who are generally
specialists in their fields. The staff people have the right to recommend but have no authority
to enforce their preference for other departments.
Features:
1) This origin structure clearly distinguishes between two aspects of administration viz.,
planning and execution.
2) Staff officers provide advice only to the line officers; they do not have any power of
command over them.
3) The staff supplements the line members.
Suitability: It can be followed in large organisations where specialization of activities is

required because it offers ample opportunities for specialization.

Advantages:
1. Planned specialization: The line and staff structure are based upon the principle of
specialization. The line managers are responsible for operations contributing directly to
the achievement of organisational objectives whereas staff people are there to provide
expert advice on the matters of their concerns.
2. Quality decisions: Decisions come after careful consideration and thought each expert
gives his advice in the area of his specialization which is reflected in the decisions.
3. Prospect for personal growth: Prospect for efficient personal to grow in the
organisation not only that, but it also offers the opportunity for concentrating in a
particular area, thereby increasing personal efficiency
4. Less wastage: There will be less wastage of material.
5. Training ground for personnel: It provides a training ground for the personnel in two
ways. First, since everybody is expected to concentrate on one field, one’s training
needs can easily be identified. Second, the staff with expert knowledge provides
opportunities to line managers for adopting a rational multidimensional approach
towards a problem.
Disadvantages:
1. Chances of Mis-interpretation: Although the expert advice is available, yet it reaches
the workers through line supervisors. The line officers may fail to understand the
meaning of advice and there is always a risk of misunderstanding and
misinterpretation.
2. Chances of friction: There are bound to be occasions when the line and staff may
differ in opinion may resent in a conflict of interests and prevents harmonious
relations between the two.
3. Ineffective Staff in the absence of authority: The staff has no authority to execute
their own advice. Their advice is not binding on the line officers. Therefore the advice
given by specialist may be ignored by line heads.
4. Expensive: The overhead cost of the product increases because of high salaried
specialized staff.
5. Loss of initiative by line executives: If they start depending too much on staff may
lose their initiative drive and ingenuity.
FUNCTIONAL ORGANISATION
It is the most widely used organisation structure in the medium and large scale
organisations having a limited number of products. This structure emerges from the idea that
the organisation must perform certain functions in order to carry on its operations. Functional
structure is created by grouping the activities on the basis of functions required for the
achievement of organisational objectives. For this purpose, all the functions required are
classified into basic, secondary and supporting functions according to their nature &
importance.
Features:
1) The whole activities of an organisation are divided into various functions.
2) Each functional area is put under the charge of one executive.
3) For any decision, one has to consult the functional specialist.
Suitability: The functional organisational structure is suitable for large scale organisations.

General Manager
Marketing Finance Personnel Production

Manager Manager Manager Manager
Branch Manager Office Manager Factory Manager
Line of authority
Functional authority
Advantages:
1. Separation of work: In a functional organisation, work has been separated from
routine work. The specialist has been given the authority and responsibility for
supervision and administration pertaining to their field of specialization unnecessary
overloading of responsibilities is thus avoided.
2. Specialization: Specialization and skilled supervisory attention are given to workers
the result is increased in the rate of production and improved quality of work.
3. Ease in selection and training: Functional organisation is based upon expert
knowledge. The availability of guidance through experts makes it possible to train the
workers properly in a comparatively short span of time.
4. Reduction in prime cost: Since for every operation expert guidance is there, wastage
of material is reduced and thus helps to reduce prime cost.
5. Scope of growth and development of business: This type of organisation presents
ample scope for the growth and development of business.
Disadvantages:
1. Indiscipline: Since the workers receive instructions from a number of specialists it
leads to confusion to which they should follow. Therefore, it is difficult to maintain
discipline
2. Shifting of responsibility: It is difficult for the top management to locate
responsibility for the unsatisfactory work everybody tries to shift responsibility on
others for the faults and failure.
3. Kills the initiative of workers: As the specialized guidance is available to the workers
will not be using their talents and skills, therefore, their initiative cannot be utilized.
4. Overlapping of authority: The sphere of authority tends to overlap and gives rise to
friction between the persons of equal rank.
5. Lack of coordination between functions: except the function in which he is
specialized he is absolutely indifferent to other functions. Therefore, there is a lack of
coordination of function and efforts.

MATRIX ORGANISATION
It is also called the project organisation. It is a combination of all relationships in the
organisation, vertical, horizontal and diagonal. It is mostly used in complex projects. The
main objective of Matrix organisation is to secure a higher degree of coordination than what
is possible from the conventional, organisational structures such as line and staff. In a matrix
organisation structure, a project manager is appointed to co-ordinate the activities of the
project. Under this system, a subordinate will get instructions from two or more bosses, Viz.,
administrative head and his project manager.
General Manager
Production Personnel Finance Marketing
Project A
W W W W
Manager
Project B W
W W W
Manager
Project C
W W W W
Manager
Suitability: It can be applicable where there is a pressure for dual focus, pressure for high
information processing, and pressure for shred resources. Ex: Aerospace, chemicals,
Banking, Brokerage, Advertising etc.
Advantages:
1. It offers operational freedom & flexibility
2. It focuses on end results.
3. It maintenance professional Identity.
4. It holds an employee responsible for the management of resources.
Disadvantages:
1. It calls for a greater degree of coordination,
2. It violates the unity of command.
3. Difficult to define authority & responsibility.
4. The employee may be demotivated.
COMMITTEE ORGANISATION
A committee does not represent a separate type of organisation like line and staff, or
functional. It is rather a device which is used as supplementary to or in addition to any of the
above types of organisations. A committee may be defined as a group of people performing
some aspects of Managerial functions. Thus, a committee is a body of persons appointed or
elected for the Consideration of specific matters brought before it.

Suitability:
It is suitable for educational organisations and universities.
Merits:
1. Pooling up of opinions.
2. It facilitates coordination.
3. It enhances communication.
4. It gives better motivation.
Demerits:
1. It is highly expensive.
2. It makes compromised decisions.
3. Lack of secrecy.
4. Domination by a few members.
VIRTUAL ORGANISATION
The concept of a virtual organisation or corporation along with the virtual team and
office has entered the management field very recently. The meaning of virtual is having the
efficacy without the material part; unreal but capable of being considered as real for the
purpose. It works in a network of external alliances, using the Internet. This means while the
core of the organisation can be small but still, the company can operate globally is a market
leader in its niche.
Employees in a virtual organisation will become emasculate and ineffective in the
absence of information and knowledge. Therefore, virtual organisations use a seamless web
of electronic communication media. The main components of this web are as follows:
1. Technology: The traditional ways of working has been transformed through new
technology.
2. E-mail integration: The whole organisation can take advantage of SMS products
such as ‘ExpressWay’ by integrating SMS into the existing e-mail infrastructure.
3. Office systems integration: SMS technology can greatly enhance existing or new
office systems. For example, phone messages can be sent via SMS rather than
returning it in a message book.
4. Voice Mail Alert: Addition of SMS technology to the existing voice mail system
builds an effective method of receiving voice mail alerts.
5. Mobile Data: This enables a laptop to retrieve information anywhere through the
mobile phone network. In the past corporate information has been inaccessible from
many places where it is needed. One can keep connected to his/her virtual
organisation from anywhere by linking a laptop to a mobile phone.

Advantages:
1. Saves time and travel expenses.
2. Provides excess to outside experts, without downtime and travel or lodging expenses.
3. Ability to organize in teams even if members are not in proximity to each other.
4. Firms can expand their potential labour markets. They can hire and retain the best
people irrespective of their physical locations.
5. Employees can accommodate both personal and professional lives.
6. Employees can be assigned to multiple concurrent teams.
7. Dynamic team membership allows people to move from one project to another.
8. Team communication and work reports are available on-line to facilitate swift
responses to the demands of a global market.
Disadvantages:
1. Lack of physical interactions.
2. Lack of synergies arising from face-to-face interaction.
3. Non-availability of verbal and non-verbal cues such as voice, eye movement, facial
expression and body language which make communication more effective.
BOUNDARY LESS ORGANISATION

It may be defined as an organisational structure that can avoid all the barriers
(vertical, horizontal, external, geographic) much more permeable than they are now.
Boundaryless organisation allows free flow of ideas/information/resources throughout the
organisation and into others. The boundaries are:
1. Vertical: Boundaries between layers within an organisation.
2. Horizontal: Boundaries which exist b/w organisational departments.
3. External: Barriers between the organisation and the outside world. (Customers,
suppliers other govt. committees).
4. Geographic: Barriers among organisation units located in different countries.
A boundaryless organisation is the opposite of a bureaucracy with numerous barriers
and division. In contrast, the organisation without boundaries offers interaction and
networking among professionals inside and outside the organisation. It is characterized by
teamwork and communication. The purpose of this initiative was to remove barriers between
the various departments as well as between domestic and international operations. To reward

people for adopting the “integration model”, bonuses were awarded to those who not only
generated new ideas but also shared them with others.
Advantages:
1. It allows the free flow of ideas of information or resources throughout the
organisation and others.
2. Boundaryless organisation is able to achieve greater integration and coordination.
3. They are able to adapt to environmental changes.
4. It is highly flexible and responsive.
5. It reduces effectiveness.
6. Creativity, quality, timeliness.
7. Increase in speed and flexibility.
Disadvantages:
1. Lack of flexibility to changing mission needs/rapidly changing world.
2. Slow/poor in responding to customer requirement.
3. Failure to get things to do.
4. Customer/vendor has a hard time dealing with the organisation.
TEAM STRUCTURE
One of the newest organisational structures developed in the 20th century is the team.
In small businesses, the team structure can define the entire organisation. Teams can be both
horizontal and vertical. While an organisation is constituted as a set of people who synergies
individual competencies to achieve newer dimensions, the quality of organisational structure
revolves around the competencies of teams in totality.
For example, every one of the Whole Foods Market stores, the largest natural-foods
grocer in the US developing a focused strategy, is an autonomous profit centre composed of
an average of 10 self-managed teams, while team leaders in each store and each region are
also a team. Larger bureaucratic organisations can benefit from the flexibility of teams.
Suitable: Xerox, Motorola, and Daimler Chrysler are all among the companies that actively
use teams to perform tasks.
Advantages:
1. Team-based organisations filter decision making down to all levels of management.
2. Team-based organisations require that all employees participate in the decision-
making process.
3. Employees feel they are part of the total organisation, rather than members of an
individual department.
4. Team-based organisations run more efficiently and effectively, giving them a
competitive edge in today's global market.

Disadvantages:
1. Recognition for individual achievement within a hierarchical organisation is a
motivator and a factor in determining compensation.
2. Team-based organisations value team performance over individual performance.
3. Lack of focus on the individual in team-based organisations.
4. Motivating individuals in a team-based organisation can be more challenging.
5. Team-based organisations are decentralized rather than hierarchical.
INVERTED PYRAMID STRUCTURE

This is an alternative to the traditional chain of command. This is a structure which is
narrow at the top and wide at the base. It includes few levels of management i.e. salespeople
and sales support staff sit at the top as they are key decision-makers for all issues related to
sales and dealings with customers. Since they are in touch with customers, they are given all
the freedom to follow their own judgment at all levels.
Suitable:
This organisation structure is suitable for sales associates, journalism, etc.
Advantages:
1. In this structure, the customers are given the first preference.
2. It becomes simple to know their preferences and plan the strategies of the
organisation accordingly.
3. Front line employees are given more responsibility and authority in the organisation
than the top management because they are closest to the customers.
4. Decentralization of authority and responsibility place a very important role in prompt
and timely decisions.
5. The inverted pyramid structure motivates the employees as they are placed in a better
position than the top management.
Disadvantages:
1. This structure may be dangerous because the role of top management is shifted to
supporting one from that of commanding one which ultimately leads to the direction
less-organisation.
2. In this structure, there is an absence of clear authority and responsibility levels as a
result of which people become confused and business veers out of control.
3. The frontline supervisor cannot make strategies regarding organisations even though
they have a proper understanding of the customers because they are not equipped to
do so.

FLAT AND LEAN ORGANISATION

Flat Organisations are those, which have few or even one level of management. For
example, a service organisation with equal partners and 30 employees. Flat organisations are
known by their wider span of management of control. Each manager controls a number of
employees at a given point of time.
Managing Director
Sales Manager Production Manager Personnel Manager Finance Manager
Tall/Lean organisations may have many levels of management. It focuses on vertical

communication through the levels of grades. It involves a narrow span of management.
Generally the greater the height of the organisational chart, the smaller is the span of control,
vice versa.
Managing Director
General Manager
Sales Manager Production Manager Personnel Manager Finance Manager
Advantages:
1. It is simple to understand.
2. Easy supervision & control.
3. Quick decisions are possible.
4. It sets clearly the direct lines of authority and responsibility of a line manager.
Disadvantages:
1. Lack of specialization
2. Low – Morale
3. Autocratic approach
4. Overburden to manager
LEADERSHIP
Leadership is one of the most important aspects of studies of human behaviour inthe
organisation. It is the leader who creates working environment. The success of an
organisation depends upon the efficiency of the leader. It is the attributes, positive approach
and the ability to solve problems that make a person leader. A leader should be able to turn
the hopeless situation in favour. In the environment of tough competition in the market where
it is undergoing financial recession, layoffs are the order of the day, market is facing poor
demand for product because everybody has enough and poor or no growth situation persists.
In this situation leader should not lose his balance but turn the situation in hisfavour. He
should be able to evolve techniques and lead the organisation to win-win strategy.

A leader should be able to motivate employees. All leaders are not managers as they
have to work in non-organised sectors while the managers work in the organised sectors. All
managers should be leaders so that they are able to work efficiently.
• Sccording to Alford and Beatty "Leadership is the ability to secure desirable actions
from a group of followers voluntarily, without the use of coercion".
• According to Koontz and O'Donnell - Managerial leadership is "the ability to exert
interpersonal influence by means of communication, towards the achievement of a
goal. Since managers get things done through people, their success depends, to a
considerable extentupon their ability to provide leadership".
CHARACTERISTICS OR FEATURES OF LEADERSHIP

1. Leadership implies the existence of followers: We appraise the qualities of
leadership by studying his followers. In an organisation leader are also followers, for
example, Supervisor works under a branch head. Thus, in a formal organisation a
leader has to be able to be both a leader as well as a follower and be able to relate
himself both upward and downward.
2. Leadership involves a community of interest between the leader and his
followers: In other words, the objectives of both the leader and his men are one and
the same. If the leader strives for one purpose and his team of workers work for some
other purpose, it is no leadership.
3. Leadership involves an unequal distribution of authority among leaders
andgroup members: Leaders can direct some of the activities of group members, i.e.,
the group members are compelled or are willing to obey most of the leader's
directions. The group members cannot similarly direct the leader's activities, though
they will obviously affect those activities in a number of ways.
4. Leadership is a process of Influence: Leadership implies that leaders can influence
their followers or subordinates in addition to being able to give their followers or
subordinates legitimate directions.
5. Leadership is the function of stimulation: Leadership is the function of
motivatingpeople to strive willingly to attain organisational objectives. A successful
leader allows his subordinates (followers) to have their individual goals set up by
themselves in such a way that they do not conflict with the organisational objectives.
6. A leader must be exemplary: In the words of George Terry - "A Leader showsthe
way by his own example. He is not a pusher, he pulls rather than pushes". According
to L.G. Urwick - "it does not what a leader says, still less what he writes, that
influences subordinates. It is what he is. And they judge what he is bywhat he does
and how he behaves". From the above explanation, it is clear that aleader must set an
ideal before his followers. He must stimulate his followers forhard and sincere work
by his personal behaviour.
7. A Leader ensures absolute justice: A leader must be objective and impartial.
Heshould not follow unfair practices like favouritism and nepotism. He must show
fairplay and absolute justice in all his decisions and actions.

LEADERSHIP STYLES
Leadership styles refer to a leader’s behaviour. The behavioural pattern which the
leader reflects in his role as a leader is often described as the style of leadership. It is the
result of the philosophy, personality and experience of the leader. Important leadership styles
are as follows:
1. Autocratic Leadership Style:

This is also known as authoritarian, directive style. In this style, the manager
centralizes decision-making power in him. He structures the complete work situation for his
employees. He does not entertain any suggestions or initiative from subordinates. He gives
orders and assigns tasks without taking subordinates opinion.
There are three categories of autocratic leaders.

1. Strict Autocrat: He follows autocratic styles in a very strict sense. His method of
influencing subordinates’ behaviour is through negative motivation that is by
criticizing subordinates, imposing penalty etc.
2. Benevolent Autocrat: He also centralizes decision making power in him, but his
motivation style is positive. He can be effective in getting efficiency in the main
situations. Some like towork under strong authority structure and they drive
satisfaction by this leadership.
3. Incompetent Autocrat: Sometimes, superiors adopt autocratic leadership style just to
hide their incompetence, because in other styles they may exposed before their
subordinates. However, this cannot be used for a long time.
Advantages:
1. It provides strong motivation and reward to the manager.
2. It permits very quick decisions.
3. Less competent subordinates also have scope to work in the organisation.
Disadvantages:
1. People in the organisation dislike it, especially when it is strict and the motivational
style is negative.
2. Employees lack motivation frustration, low morale and conflict develop in the
organisation.
3. There are more dependence and less individuality in the organisation.
2. Participative Leadership Style:

It is also called as a democratic, consultative or idiographic leadership style. In this
style the manager decentralizes his decision-making process. Instead of taking unilateral
decision he emphasizes consultation and participation of his subordinates. He can win the
cooperation of his group and can motivate them effectively and positively.

Advantages:
1. Employees are highly motivated.
2. The productivity of employees is very high.
3. Subordinates share the responsibility with superior & try to safeguard them also.
Disadvantages:
1. Complex nature of organisation requires a thorough understanding of its problems
which lower-level employees may not be able to do.
2. Some people in the organisation want minimum interaction with their superior.
3. Some leaders may use this style as a way of avoiding responsibility.
3. Free-rein Leadership:
A free-rein leader does not lead but leaves the group entirely to itself as shown in the
following figure. In this style, manager once determines policy, programmes, andlimitations
for action and the entire process is left to subordinates group membersperform everything and
the manager usually maintains contacts with outside persons tobring the information and
materials which the group needs. Free rein style of leadership may be appropriate when the
subordinates are welltrained, highly knowledgeable, self-motivated and ready to assume
responsibility.
Advantages:
1. Positive effect on job satisfaction and morale of subordinates.
2. It gives the chance to take initiative to the subordinates.
3. Maximum possible scope for the development of subordinates.
Disadvantages:
1. Under this style of leadership, there is no leadership at all.
2. Subordinates do not get the guidance and support of the leader.
3. Subordinates may move in different directions and may work at cross purposewhich
may create a problem for the organisation.

4. Paternalistic Leadership
Under this type of leadership, the leader assumes that his function is fatherly. His
attitude is that of treating the relationship between the leader and his groups that of the family
with the leader as the head of the family. The leader works to help to work to help, guide,
protect and keep his followers happily working together as members of a family. He provides
them with good working condition, fringe benefits and employee services. It is said that
employees under such leadership well work harder out of gratitude.
5. Transactional Leadership
This style of leadership starts with the premise that team members agree to obey their
leader totally when they take a job on. The “transaction” is usually that the organization pays
the team members, in return for their effort and compliance. As such, the leader has the right
to “punish” team members if their work doesn’t meet the pre-determined standard. Team
members can do little to improve their job satisfaction under transactional leadership. The
leader could give team members some control of their income/reward by using incentives that
encourage even higher standards or greater productivity. Managers using the transactional
leadership style receive certain tasks to perform and provide rewards or punishments to team
members based on performance results. Managers and team members set predetermined goals
together, and employees agree to follow the direction and leadership of the manager to
accomplish those goals. The manager possesses power to review results and train or correct
employees when team members fail to meet goals. Employees receive rewards, such as
bonuses, when they accomplish goals.
6. Transformational Leadership
Transformational leadership is a leadership style that is defined as leadership that
creates valuable and positive change in the followers. A transformational leader focuses on
“transforming” others to help each other, to look out for each other, to be encouraging and
harmonious, and to look out for the organization as a whole. In this leadership, the leader
enhances the motivation, morale and performance of his follower group. A person with this
leadership style is a true leader who inspires his or her team with a shared vision of the
future. Transformational leaders are highly visible, and spend a lot of time communicating.
They don’t necessarily lead from the front, as they tend to delegate responsibility amongst
their teams. While their enthusiasm is often infectious, they can need to be supported by
“detail people”.
7. Servant Leadership
This term, coined by Robert Greenleaf in the 1970s, describes a leader who is often
not formally recognized as such. When someone, at any level within an organization, leads
simply by virtue of meeting the needs of his or her team, he or she is described as a “servant
leader”. Servant Leadership’s focus was on the leader as a servant, with his or her key role
being in developing, enabling and supporting team members, helping them fully develop their
potential and deliver their best. In many ways, servant leadership is a form of democratic
leadership, as the whole team tends to be involved in decision-making.
Supporters of the servant leadership model suggest it is an important way ahead in a
world where values are increasingly important, and in which servant leaders achieve power
on the basis of their values and ideals. Others believe that in competitive leadership
situations, people practicing servant leadership can find themselves “left behind” by leaders
using other leadership styles. Followers may like the idea of servant leadership so there’s
something immediately attractive about the idea of having a boss who’s a servant leader.

People without responsibility for results may like it for its obviously democratic and
consensual approach.
8. Charismatic Leadership
The Charismatic Leader and the Transformational Leader can have many similarities,
in that the Transformational Leader may well be charismatic. Their main difference is in their
basic focus. Whereas the Transformational Leader has a basic focus of transforming the
organization and, quite possibly, their followers, the Charismatic Leader may not want to
change anything. A charismatic leadership style can appear similar to a transformational
leadership style, in that the leader injects huge doses of enthusiasm into his or her team, and
is very energetic in driving others forward.
However, charismatic leaders can tend to believe more in themselves than in their
teams. This can create a risk that a project, or even an entire organization, might collapse if
the leader were to leave because in the eyes of their followers, success is tied up with the
presence of the charismatic leader. As such, charismatic leadership carries great
responsibility, and needs long-term commitment from the leader.
9. Bureaucratic Leadership
This is style of leadership that emphasizes procedures and historical methods
regardless of their usefulness in changing environments. Bureaucratic leaders attempt to solve
problems by adding layers of control, and their power comes from controlling the flow of
information. Bureaucratic leaders work “by the book”, ensuring that their staff follow
procedures exactly. This is a very appropriate style for work involving serious safety risks
such as working with machinery, with toxic substances, at heights or where large sums of
money are involved such as cash-handling. In other situations, the inflexibility and high
levels of control exerted can demoralize staff, and can diminish the organization’s ability to
react to changing external circumstances.
DECISION MAKING
Decision-making is an essential aspect of modern management. It is a primary
function of management. Decision-making is the key part of manager's activities. Decisions
are important as they determine both managerial and organizational actions. A decision may
be defined as "a course of action which is consciously chosen from among a set of
alternatives to achieve a desired result." It represents a well-balanced judgment and a
commitment to action.
Decision is a choice from among a set of alternatives. The word 'decision' is derived
from the Latin words de ciso which means 'a cutting away or a cutting off or in a practical
sense' to come to a conclusion. Decision-making is a process by which a decision (course of
action) is taken. Decision-making lies embedded in the process of management.
According to Trewatha& Newport, "Decision-making involves the selection of a
course of action from among two or more possible alternatives in order to arrive at a solution
for a given problem".
Decision Making Process:

Decision-making involves a number of steps which need to be taken in a logical
manner. Decision-making process prescribes some rules and guidelines as to how a decision
should be taken or made. This involves many steps logically arranged. Drucker recommended

the scientific method of decision-making which, according to him, involves the following six
steps as shown below:
Identify/Define the Problem
Analyzing the Problem
Developing Alternative Solutions
Selecting the Best Solution
Implementation of Decision
Feedback & Follow up Action
1. Identify/Define the Problem: Identification of the real problem before a business

enterprise is the first step in the process of decision-making. It is rightly said that a
problem well-defined is a problem half-solved. Information relevant to the problem
should be gathered so that critical analysis of the problem is possible. In brief, the
manager should search the 'critical factor' at work. It is the point at which the choice
applies.
2. Analyzing the Problem: After defining the problem, the next step in the decision-
making process is to analyze the problem in depth. This is necessary to classify the
problem in order to know who must take the decision and who must be informed
about the decision taken.
3. Developing Alternative Solutions: After defining the problem and analyzing its
nature, the next step is to obtain the relevant information/ data about it. Using this
data the manager has to determine available alternative courses of action that could be
used to solve the problem at hand. If necessary, group participation techniques may be
used while developing alternative solutions as depending on one solution is
undesirable.
4. Selecting the Best Solution: After preparing alternative solutions, the next step in the
decision-making process is to select an alternative that seems to be most rational for
solving the problem. The alternative thus selected must be communicated to those
who are likely to be affected by it. Acceptance of the decision by group members is
always desirable and useful for its effective implementation.
5. Implementation of Decision: After the selection of the best decision, the next step is
to convert the selected decision into an effective action. Without such action, the
decision will remain merely a declaration of good intentions. Here, the manager has to
convert 'his decision into 'their decision' through his leadership.
6. Ensuring Feedback: Feedback is the last step in the decision-making process. Here,
the manager has to make built-in arrangements to ensure feedback for continuously
testing actual developments against the expectations. It is like checking the
effectiveness of follow-up measures.

IMPORTANT QUESTIONS
1. Explain the meaning of organisation and state its principles.

2. Write brief notes and merits and demerits of the following.
a. Line & staff organisation
b. Line organisation
c. Functional organisation
3. What are the different organisational structure designs in modern trends?
4. What is departmentation? Explain the methods of departmentation.
5. Describe centralization. Discuss its merits and demerits.
6. Describe decentralization. Discuss its merits and demerits.
7. What is a delegation of authority? Explain its methods and principles.
8. Explain the span of management.
9. Define leadership. Explain the features of leadership.
10. Discuss the various leadership styles.
11. Discuss the decision making process in detail.

Unit 2

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Unit 2

Uploaded by

Copyright:

Available Formats

Unit-2: Organisational Structures and Leadership 2.

BASIC CONCEPTS OF ORGANISATION

Organisational Structure and Human Resource Management

2. Attention to objectives: An organisation is a mechanism to accomplish certain goals

Organisational Structure and Human Resource Management

Formal Vs. Informal organisation:

Organisational Structure and Human Resource Management

Communication Formal organisation depends on The informal organisation designs

AUTHORITY & RESPONSIBILITY

Responsibility is the work assigned to a position. Responsibility refers to the mental

Organisational Structure and Human Resource Management

Principles of Delegation of Authority:

Organisational Structure and Human Resource Management

Vice President Vice President Vice President

Manager Manager Manager

Purchasing Purchasing Purchasing

Research Engineering Research

Cost Standards Standards

Organisational Structure and Human Resource Management

Centralization refers to the process in which activities involving planning and

Organisational Structure and Human Resource Management

Organisational Structure and Human Resource Management

Organisational Structure and Human Resource Management

Organisational Structure and Human Resource Management

No. of sub ordinates No. of relationships

Wide Span of Management:

Executive-1 Executive-2 Executive-3 Executive-4

Narrow Span of Management:

Organisational Structure and Human Resource Management

III Level Executives=16

Tall Structure (Span of control=4workers)

Factors Determining Span of Management:

Organisational Structure and Human Resource Management

Organisation involves establishing an appropriate structure for the goal seeking

TYPES OF ORGANISATION STRUCTURES

Organisational Structure and Human Resource Management

element in its organisation chart, would be manufacturing and assembling. A good

There are two types of structural variables, namely;

In order to organize the efforts of individuals, any of the following types of

Organisational Structure and Human Resource Management

Foreman-A Foreman-B Foreman-C

Worker Worker Worker

Foreman-A Foreman-B Foreman-C

Worker Worker Worker

Organisational Structure and Human Resource Management

LINE AND STAFF ORGANISATION

Suitability: It can be followed in large organisations where specialization of activities is

Organisational Structure and Human Resource Management

Organisational Structure and Human Resource Management

Marketing Finance Personnel Production

Branch Manager Office Manager Factory Manager

Organisational Structure and Human Resource Management

Production Personnel Finance Marketing

Organisational Structure and Human Resource Management

Organisational Structure and Human Resource Management

BOUNDARY LESS ORGANISATION

Organisational Structure and Human Resource Management

Organisational Structure and Human Resource Management

INVERTED PYRAMID STRUCTURE

Organisational Structure and Human Resource Management

FLAT AND LEAN ORGANISATION

Sales Manager Production Manager Personnel Manager Finance Manager

Tall/Lean organisations may have many levels of management. It focuses on vertical