MCOB

UNIT 2
Types of Organisations- Organisation Structure
Organisation- meaning:
 Organisation refers to a collection of people who are working towards a
common goal and objective. In other words, it can be said that
organisation is a place where people assemble together and perform
different sets of duties and responsibilities towards fulfilling the
organisational goals.
Types of Organisation and their Structure
 There are two broad categories of organisation, which are:
 1. Formal Organisation
 2. Informal Organisation
Formal Organisation
 Formal organisation is that type of organisation structure where the
authority and responsibility are clearly defined. The organisation
structure has a defined delegation of authority and roles and
responsibilities for the members.
 The formal organisation has predefined policies, rules, schedules,
procedures and programs. The decision making activity in a formal
organisation is mostly based on predefined policies.
 Formal organisation structure is created by the management with
the objective of attaining the organisational goals.
Features of Formal Organisation

 1. Deliberately created structure:

It is a deliberately created structure that defines official relationships amongst
people working at different job positions.
 2. Job-oriented:
It focuses more on jobs than people. It allocates jobs to people and defines the
structure of relationships to achieve the formal organisational objectives.
 3. Division of work:
Work is divided into smaller units and assigned to individuals on the basis of
their skills and abilities. Division of work results in specialisation and
increases organisational output.
 4. Departmentation:
Departmentation is the foundation of organisation structure, that is, organisation structure depends
upon departmentation. Departmentation refers to division of work into smaller units and their re-
grouping into bigger units (departments) on the basis of similarity of activities. The functional
departmentation divides organisation structure into production, finance, personnel and marketing
departments. Departmentation helps in fixing responsibility of various departmental heads.
 5. Formal authority:
People exercise authority by virtue of their position in the organisational hierarchy. Authority is
linked to position and through it, in the person occupying the position. It involves the right to
command, to perform, to make decisions and spend resources.
 6. Delegation:
Work is officially delegated from top to lower levels. The work load is divided into units, a part is
assigned to subordinates with authority to carry out the assigned task. The concept of division of
work and its assignment to people down the scalar chain is called delegation.
“Delegation is the process by which a manager assigns tasks and authority to subordinates who
accept responsibility for those jobs.”
“Delegation is a process the manager uses in distributing work to the subordinates.”
 7. Coordination:
Managers integrate the activities of individuals and units into a concerted effort so
that departments and individuals work towards a common goal. Managers
coordinate the activities of organisation by communicating organisational goals to
each department, setting departmental goals and linking the performance of each
department with others so that all the departments collectively contribute to
organisational goals. Coordination is “the process of linking the activities of the
various departments of the organisation”.
 8. Principles of organising:
Formal organisation is based on formal principles of organising, that is, unity of
objectives, organisational efficiency, division of labour, authority – responsibility,
delegation, scalar chain, span of control, unity of command, balance, flexibility,
continuity, exception, simplicity, departmentation, decentralisation, unity of
direction and co-operation.
Let us learn about these organisation structures in detail in the
following lines.
Line Organisation:
Line organisation is the simplest organisation structure and it also
happens to be the oldest organisation structure. It is also known as
Scalar or military or departmental type of organisation.
 In this type of organisational structure, the authority is well defined
and it flows vertically from the top to the hierarchy level to the
managerial level and subordinates at the bottom and continues
further to the workers till the end.
 There is a clear division of accountability, authority and
responsibility in the line organisation structure.
Advantages of Line organisation
 1. Simple structure and easy to run
 2. Instructions and hierarchy clearly defined
 3. Rapid decision making
 4. Responsibility fixed at each level of the organisation.
Disadvantages of Line organisation:
 1. It is rigid in nature
 2. It has a tendency to become dictatorial.
 3. Each department will be busy with their work instead of focusing on
the overall development of the organisation.
Line and Staff Organisation:
Line and staff organisation is an improved version of the line organisation. In line and
staff organisation, the functional specialists are added in line. The staff is for assisting
the line members in achieving the target effectively.
Advantages of Line and Staff organisation
 1. Easy decision making as work is divided.
 2. Greater coordination between line and staff workers.
 3. Provides workers the opportunity for growth.
Disadvantages of Line and Staff Organisation
 1. Conflict may arise between line and staff members due to the improper
distribution of authority.
 2. Staff members provide suggestions to the line members and decision is taken by
line members, it makes the staff members feel ignored.
 Functional Organisation: Functional organisation structure is the type
of organisation where the task of managing and directing the employees
is arranged as per the function they specialise. In a functional
organisation, there are three types of members, line members, staff
members and functional members.
Advantages of Functional organisation
 1. Manager has to perform a limited number of tasks which improves
the accuracy of the work.
 2. Improvement in product quality due to involvement of specialists.
Disadvantages of Functional organisation
 1. It is difficult to achieve coordination among workers as there is no
one to manage them directly.
 2. Conflicts may arise due to the members having equal positions.
Project Organisation:
 A project organisation is a temporary form of organisation structure that is
formed to manage projects for a specific period of time. This form of
organisation has specialists from different departments who are brought
together for developing a new product.
Advantages of Project organisation
 1. The presence of many specialists from different departments increases
the coordination among the members.
 2. Each individual has a different set of responsibilities which improves
control of the process.
Disadvantages of Project Organization
 1. There can be a delay in completion of the project.
 2. Project managers may find it difficult to judge the performance of
different specialists.
Matrix Organisation:
 Matrix organisation is the latest form of organisation that is a combination of
functional and project organisation. In such organisations there are two lines of
authority, the functional part of the organisation and project management part of the
organisation and they have vertical and horizontal flow of authority, respectively.
Advantages of Matrix Organisation
 1. Since the matrix organisation is a combination of functional and project
management teams, there is an improved coordination between the vertical and
horizontal functions.
 2. Employees are motivated as everyone will be working towards one project.
Disadvantages of Matrix Organisation
 1. Due to the presence of vertical and horizontal communication, there will be
increased cost and paperwork.
 2.Having multiple supervisors for the workers leads to confusion and difficulty in
control.
Informal Organisation:

 Informal organisations are those types of organizations which do not have a defined
hierarchy of authority and responsibility.

 In such organisations, the relationship between employees is formed based on common

interests, preferences and prejudices.

 According to Chester Barnard, "an informal organization is an aggregate of

interpersonal relationships without any conscious purpose but which may contribute to
joint results.“

 According to Schein, an informal organization exists in the sense that it has no legal
existence, no legal boundaries, no membership roster, no tangible assets, no formal
structure, and no official leadership. The distinguishing feature of an informal
organization is the social fabric that binds its members together with a common identity.
Types Of Informal Organization
• Horizontal Group- People who work at the same level in an organization belong to
a horizontal group. Such groups promote mutual support and information sharing
among the members. It is often found that people share the same problems,
concerns, and interests. They solve problems without depending on their bosses or
higher or lower hierarchical members. For example, people working for different
departments like sales, operations, production, etc. but who are at the same level in
the organizational hierarchy form a horizontal group.

• Vertical Group- People working at different levels in an organization belong to the

vertical group. Such groups are formed through skip-level relationships. For
example, a top-level employee may be associated with a first-level employee, or a
group of first-level employees may establish a group with their bosses.Such groups
promote better communication and quick access to the issues arising in the
organization.
• Mixed Group- People from different levels and different departments create a
Mixed Group. The groups are created based on common interests like club
memberships, common interests or their backgrounds. For example, the president
of the sales department may bond with the director of technology.
Features of Informal Organization
• Informal organizations exist in every organization. They are built
spontaneously, over time, and not deliberately.
• Policies, procedures, or norms are not required to create such groups;
they are formed merely based on personal interactions and common
interests.
• There is no specific direction in the flow of information.
• It does not possess any definite structure or hierarchy.
• Another feature of informal organizations is that they are found in every
business. It is because social interactions are essential.
• Employees who do not get along well with one another may not be able to
work cooperatively. This affects the organization's financial profitability.
• Finally, managers can only regulate rather than prohibit informal
organizations. This regulation is significant because it has the potential to
influence the productivity and morale of everyone involved.
Difference Between A Formal and Informal Organization

• A formal organization is created by the management deliberately, whereas an

informal organization is created spontaneously by members.
• Formal organizations are stable and run long, but informal groups are unstable.
• The purpose of a formal organization is to accomplish its organizational goal,
as opposed to an informal organization, which fulfills the psychological and
social needs of its members.
• In a formal organization, the job of a member is clearly defined by the
management and is held accountable to the organization. This is in contrast to
an informal organization, which is formed based on interpersonal relationships
and has no defined responsibilities or roles.
• Formal organizations are bound by hierarchies, but informal group members
are equal.
• In formal organizations, the focus is on work performance, whereas in informal
ones, it's interpersonal relationships.
• Rules and regulations are well-defined in a formal organization, while informal
organizations have their norms, beliefs, and values.
• The size of formal organizations is large when compared to informal
organizations, which are small.
Importance of Informal Organization

• Information is exchanged between groups and people quickly

because the lines of communication are not defined.
• Quick feedback is received.
• Job satisfaction is attained because the social needs of the
members are fulfilled, thus leading to stability in the
organization.
• People in an organization are diverse, and so are their needs,
which cannot be fulfilled by the formal design of the
organization.
• They provide the members with an opportunity to build status
and social interaction and enable them to overcome identity
crises. It also provides an audience to listen to and reach out
to.
 Centralization and Decentralization of Authority in
an organization
 Centralization and Decentralization are two modes of working in any organization.
 In centralization, there is a hierarchy of formal authority for making all the important decision for
the organization.
 And in decentralization decision making is left for the lower level of organization.
 According to Henri Fayol,” Everything which goes to increase the importance of a
subordinate’s role is decentralisation, everything that goes to reduce it is centralisation”.
 There cannot be complete centralisation or decentralisation in a practical world.
 Absolute centralisation means each and every decision is taken by the top-level management,
which is not possible.
 Similarly, absolute decentralisation implies no control over the activities of subordinates, which is
also not possible.
 So a balance should be maintained between centralisation and decentralisation. A proper balance
between dispersal of authority among lower levels and adequate control over them should exist.
Advantages of Centralization

 1. A clear chain of command

 2. Focused vision
 3. Reduced costs
 4. Quick implementation of decisions
 5. Improved quality of work
Disadvantages of Centralization

 1. Bureaucratic leadership
 2. Remote control
 3. Delays in work
 4. Lack of employee loyalty
 Advantages of Decentralization
Decentralization refers to a specific form of organizational structure where the
top management delegates decision-making responsibilities and daily operations to middle and
lower subordinates. The top management can thus concentrate on taking major decisions with
greater time abundance. Business houses often feel the requirement of decentralization to
continue efficiency in their operation.

 Motivation of Subordinates
 Growth and Diversification
 Quick Decision Making
 Efficient Communication
 Better Supervision And Control
 Satisfaction of Human needs
 Relief to top executives
Disadvantages of Decentralization

 Difficult To Co-Ordinate at interdepartmental levels and

sometimes at organizational levels.
 Expensive
 Temporary Conflicts may arise in inter-department levels
 When it comes to any unforeseen contingencies or emergency
situations, the process of decentralization is not the best.
 There could arise a huge communication gap between the different
hierarchical levels of the organization.
Skills of an effective manager
1. Communication skills
2. Time management skills
3. Collaboration
4. Delegation
5. Problem-solving skills
6. Giving and receiving feedback
7. Emotional intelligence
8. Inclusivity
9. Interpersonal skills
10. Motivation
Management’s role in decision making
in an organization
Role of Decision making in management:
Management decision making is choosing a course of action after
considering different options to accomplish an organization's goals.
Mintzberg argues that making decisions is the most crucial part of any
managerial activity.
He identifies four roles which are based on different types of decisions;
namely, entrepreneur, disturbance handler, resource allocator and negotiator.
 As entrepreneurs, managers make decisions about changing what is
happening in an organisation. They may have to initiate change and take
an active part in deciding exactly what is done – they are proactive.
 This is very different from their role as disturbance handlers, which requires them to
make decisions arising from events that are beyond their control and which are
unpredictable. The ability to react to events as well as to plan activities is an
important aspect of management.

 The resource allocation role of a manager is central to much organisational analysis.

A manager has to make decisions about the allocation of money, equipment, people,
time and other resources. In so doing a manager is actually scheduling time,
programming work and authorising actions.

 The negotiation role is important as a manager has to negotiate with others and in the
process be able to make decisions about the commitment of organisational resources.
Organization structure of a start - up
 The two most common startup management structure types for small businesses just
getting started are the flat and hierarchical structures.
Flat
 When there are only a handful of employees and the owner has final approval over
most of all decisions, use a flat structure, with the boss at the top and all other
employees reporting to her/Him. Each person might have their own area of expertise or
specialty.
Hierarchical
 If one starts a business with several departments, such as accounting, sales, marketing
and IT, and each department has two or more people in it, One might use a hierarchical
structure. This is the common tiered structure with staff members, coordinators,
managers and directors.
Span of control
Span of control refers to the number of staff members that report to a particular manager. This means a
manager who supervises five employees would have a span of control of five.
 Businesses work to implement an ideal span of control which depends on the work being
completed. One business might consider a certain span of control as ideal, while others might find it
impractical.
 Span of control may also be referred to as span of management.

Implications of the Span of Control for a Manager

 Within an organization, the average span of control determines the width of the organization. A span
of control may be considered as either a wide span of management or a narrow span of management.
 A wide span of control implies that the structure is a flat structure, meaning there are fewer layers
of management or authority. A narrow span of control implies that the structure is a tall structure,
meaning there many levels of management within the organization.
Wide Span of Management

 In management, a wide span of control means that the manager has many direct reports.
Supervisors in a wide span of management are able to effectively oversee several employees at
once. Having a wide span or a higher span of control means fewer managers are needed overall in
the organization. This is typical of companies whose employees can work independently or don't
require a lot of direction from their manager.

 Advantages include faster decision-making, reduced cost, and improved communication with
higher-level managers. Decisions within a company can be made at a faster rate when the span of
control is wider. This is because there are fewer managers within the organization overall.
 With less management levels, there are also fewer levels of approvals when making business
decisions. Having less manager positions also reduces costs associated with salaries and payroll.
Since management is generally the higher paid employees within the organization, the salary costs
are cut as management is reduced.
 A wide span of control also promotes communication among higher-level
managers. With this open communication, the staff is informed about company
goals, and the higher-level managers understand issues faced by the staff.

 Disadvantages of a wide span of control, such as the lack of close supervision

and less opportunities for advancement. Employees who require direction or
supervision from their manager are at a disadvantage with the wide span of
control.
 Having more direct reports means less time instructing each employee about
the work. There are also fewer opportunities to advance in the company since
there are fewer management roles. Employees looking to move up and get
promoted within the company will have to face competition and may not be as
motivated.
Narrow Span of Management

 In management, a narrow span of control means the manager supervises fewer employees.
A narrow span of management is the opposite of a wide span of management. Having a
narrow span or lower span of control also depends on the work of the business. Some
employees will require more direction or assistance from their managers in their roles.
 The narrow span of control also has both advantages and disadvantages. Some advantages
include closer supervision and more opportunities to grow in the company.
 Having closer supervision allows for more open communication and collaboration between
employees and managers.
 This is beneficial for positions where the work is completed in teams. With less direct
reports, there is also a need for more managers overall.
 Unlike the wide span, the narrow span of control allows for more opportunities to grow into
a management position within the company since there are more available.
 Planning and controlling
Planning is looking ahead and controlling is looking back. - - This statement
is partially true.
Planning is a psychological process of 'thinking and deciding in advance' about 'what is to be done'
and 'how it is to be done'. It is a mental activity that includes deciding the goals and also the actions
through which they are to be accomplished. Thus, it is said that planning is looking ahead as it
involves predicting the future.
Controlling on the other hand, involves an assessment of the past performance and evaluating them
against the set standards. In this sense, controlling is said to be a backward-looking function.
 However, both these statements are only partially true.
 Though planning is a futuristic concept but it is based on past actions and experiences. Planning for
future cannot take place without peeping into the past.
 Similarly, though controlling involves assessment of past performance, it also aims at improving
the future performance by taking the required corrective actions.
 Hence, we can say that planning and controlling are backward looking as well as forward
looking functions.
Staffing
 According to Theo Haimann, “Staffing pertains to recruitment, selection,
development and compensation of subordinates.”
 According to Koontz and O’Donnell, “The managerial function of staffing involves
managing the organisation structure through proper and effective selection, appraisal
and development of personnel to fill the roles designed into the structure.”
 In a new enterprise, the staffing function follows the planning and organising
function. In the case of running an enterprise, staffing is a continuous process. So,
the manager should perform this function at all times. The staffing function includes
recruitment, selection, training, development, transfer, promotion and compensation
of personnel.
Nature of Staffing Function
1. Staffing is an important managerial function- Staffing function is the most
important managerial act along with planning, organizing, directing and controlling.
The operations of these four functions depend upon the manpower which is available
through staffing function.
2. Staffing is a pervasive activity- As staffing function is carried out by all mangers and in
all types of concerns where business activities are carried out.
3. Staffing is a continuous activity- This is because staffing function continues throughout
the life of an organization due to the transfers and promotions that take place.
4. The basis of staffing function is efficient management of personnels - Human
resources can be efficiently managed by a system or proper procedure, that is, recruitment,
selection, placement, training and development, providing remuneration, etc.
5. Staffing helps in placing right men at the right job. It can be done effectively through
proper recruitment procedures and then finally selecting the most suitable candidate as per
the job requirements.
6. Staffing is performed by all managers depending upon the nature of business, size of
the company, qualifications and skills of managers,etc. In small companies, the top
management generally performs this function. In medium and small scale enterprise, it is
performed especially by the personnel department of that concern.
Staffing - three aspects
 1. Recruitment – Recruitment is a positives process which aims to attract larger
number of people with desirable profile to apply for positions vacant in the
organisation. Higher the number of applicants, greater is the possibility of finding a
suitable employee.
 2. Selection – Selection is a negative process which scrutinizes the applications
received and selects only those who are most suitable for the vacant position.
Recruitment invites applications but selection rejects applications.
 3. Training – Training is another positive process which upgrades the knowledge and
skills of employees and enhances the ability to perform better.
Organisations follow the process of recruitment, selection and training to ensure that all
positions in the organisational structure remain occupied with qualified and talented
people. However, the business environment influences the way these processes are
carried out.
List of few factors which influence staffing
process
 1. Supply and demand of specific skills in the labour market
 2. Unemployment rate
 3. Labour market conditions
 4. Legal and political considerations
 5. Company’s image
 6. Company policies
 7. Human resource planning cost
 8. Technological developments
 9. General economic environment.
Elements of Staffing
It consists of many inter related activities such as:

 (i) Human Resource Planning – This is the first step in the process of staffing
in which a planner forecast and determine the number and kind of manpower
required by the organisation in future. It has two aspects viz., short term and
long term.
 (ii) Recruitment – It refers to identification of the sources of man power
availability.
 (iii) Selection – It is the process of choosing and appointing the right
candidates for various positions in the organisation.
 (iv) Placement – It involves placing the selected candidates on the right jobs
after given orientation training.
 (v) Training and Development – It involves improving job and work knowledge skills
and attitudes of employees on a regular basis so that they may perform their work
effectively and efficiently.
 (vi) Remuneration and Compensation – It is necessary to pay equitable amount of
wages and salaries to the employees. In order to achieve the objectives of the
organisation.
 (vii) Performance Evaluation – It is the appraisal system of various categories of
employees in terms of their behavior and work performance at the work place.
 (viii) Transfer – It is the moving of employees to similar positions in the other work
units.
 (ix) Promotion – It is the moving of employees from low position to higher position in
the organisation. It is also called vertical movement in upward direction.
 (x) Working Environment – It is the responsibility of personnel department to provide
good working conditions to the employees in the organisation. It certainly influence
the motivation and morale of the employees.
Staffing – 7 Important Functions
1. Manpower Planning:
 Manpower may be planned for short-term and long-term. The short-term manpower
planning may achieve the objectives of the company at present conditions. The long-
term manpower planning should be concerned with the estimation of staff members
required in future.
2. Development:
 Development is concerned with the development of staff members through adequate
and appropriate training programmes. The training is given only to the needy
persons.
3. Fixing the Employment Standards:
 It involves the job specification and job description. These enable the management to
select the personnel and train them scientifically. Job description is a systematic and
organised written statement of the duties and responsibilities in a specific job. Job
specification is a statement of personal qualities that an individual must possess if he
is to successfully perform the job.
4. Sources:
 It is concerned with the method by which the staff members are selected. The sources may be
internal and external sources. Internal source means that a vacancy is filled up by the company
out of the staff members available within the company. The external source means that a
vacancy is filled up by the company from outside the company. The person selected may be
unemployed or working in any other company.
5. Selection and Placement:
 It includes the process of selection of the staff members. The placement includes giving a job
to a person on the basis of his ability, education, experience and the like.
6. Training:
 The training may be arranged by the company itself. In certain cases, the staff members may
be sent out by the company to get the training. The expense is borne by the company. The
training may be required not only by the new staff members but also by the existing staff
members.
Other Functions:The other function of staffing includes co-ordination, promotion, transfer,
record maintenance regarding employees, rating of employees, motivation, etc.
Types of staffing
Temp to Hire Staffing
 In this form of staffing, hiring of an employee is done on a temporary basis,
and during that trial period, manager would have time to evaluate the
employee’s performance and to see whether or not he/she would be a good fit
for working with the company.
 At the end of the probationary period, manager could then make a decision on
whether or not he/she wants to extend an offer for full-time employment to the
individual
 This is a very beneficial approach to staffing because it allows the company to
fully evaluate an employee before taking them on full-time. As opposed to a
direct hire, this can result in fewer mistakes made on hiring.
Direct hire Staffing
 This means directly recruiting a candidate as a full term employee in an
organization. In the case of direct hires, mostly companies work with a staffing
agency that would handle all the hiring details, which would leave the
company personnel free to focus on more important business issues.
 It will also greatly benefit the company to work with a staffing agency on
direct hires because they will typically have a more extensive database of good
candidates so a company will have access to a higher quality of potential
employees.
 When working with a staffing agency on direct hires, a great many of the
responsibilities normally associated with the process fall to the agency itself.
 This includes evaluating job requirements and preparing a job description that
fully encapsulates the duties and responsibilities of the specific position which
has opened up in a company.
Payroll Services Hiring
 In this type of staffing, a company would actually choose the specific
worker, but the staffing agency would provide their pay and would
manage any documentation or paperwork which might be involved
with the actual hiring.
 There can be a number of benefits that accrue to a company when it
decides to outsource the payroll, that includes freeing up the company
employees to engage in more value-added activities, as well as those
which are more directly related to generating revenue.
Miscellaneous Staffing Methods
 A company can send recruiters to specific locations where it is aware
that there are a number of good candidates, one example being college
campuses where the major program relates to a business field.
 A boot camp with a modest pay incentive to entice people to develop
their skills can be set up by a company which would then be in line with
a need of the company.
 Job fairs are another good way of identifying candidates and setting up
interviews with those who appear to have the skills.
 Internships are another great way of finding viable candidates for an
organization, and an internship can work just like a temp-to-hire kind of
staffing initiative.
Recruitment
 Recruitment is the process of finding, screening, hiring and eventually
onboarding qualified job candidates.
 The recruiting process can be relatively straightforward, but advances in
technology, a tight labor market and a workforce pool that might span five
generations can make the first step -- finding potential candidates --
particularly challenging.
 Recruitment is a key part of human resource (HR) management and
supported by the hiring manager and others involved in the hiring process.
 Skilled recruitment efforts will make a company stand out and be more
attractive to potential employees, a strategy that can directly impact a
company's bottom line.
Importance of Recruitment
 Employees are the lifeblood of companies, so finding and attracting the best
candidates possible is of utmost importance.
 A poor recruitment effort can result in unfilled jobs and a loss of revenue, while
successful recruitment will bring in the right candidates on a timely basis, ensuring a
business is able to continue to move forward.
 Also, in a competitive hiring market, employee retention can be tricky, but an
effective recruitment strategy can minimize that risk by ensuring the right people are
hired into the right roles.
 When recruiting is done well, your workforce is engaged, employees are in the most
suitable position for them to succeed, your organization thrives, you can attract
better candidates, you have good ratings on sites such as Glassdoor, you can reduce
turnover, you can build a talent pipeline and more.
External and Internal sources of
recruitment
 There are different sources of recruitment which are classified
under two main categories

1. Internal Sources: All the sources of recruitment within the

company or organization.
2. External Sources: All the sources of recruitment outside the
company or organization.
 Internal Sources of Recruitment

• Transfers: means a change in place of employment without any change in the position,
status, salary and responsibility of the employee. Thus, the situation can be filled by
transferring an appropriate candidate from the same organization.
• Internal Advertisements: Now, the vacancy is promoted within the organization. The
current employees are requested to apply for the vacancy. Therefore, recruitment is done
from within the organization.
• Promotions: means to give a higher position, status, salary and responsibility to
employee. Therefore, the post can be filled by promoting an appropriate candidate from
the same organization.
• Recall from Long Leave: The organization might recall a manager who has gone on a
long leave. This is done when the company faces a problem which can only be solved by
that specific manager. After he resolves the problem, his leave is extended.
• Retired Managers: Sometimes, retired supervisors may be reminded for a short period.
This is done when the company cannot find an appropriate candidate.
Merits of Internal Sources

 The merits / benefits / advantages of using internal sources of recruitment:

• It rises the morale or confidence of the employees and it improves the
relationships in the organization.
• It decreases executive turnover.
• It develops loyalty, faithfulness and a sense of responsibility.
• It is time saving, cost-effective, simple and reliable.
• There is no need of orientation because the candidate already knows
everything about the company, the work, the employee, the rules and
regulations, etc.
• It motivates and encourages the employees to work hard in order to get
advanced jobs in the same company.
Demerits of Internal Sources
• It avoids new blood from entering the company. New blood takes
innovative ideas, fresh thinking and dynamism into the organization.
• It has limited scope because it is not possible to fill up all types of
vacancies from within the organization.
• Those who are not promoted will be unhappy.
• The right person may be transferred or promoted only if proper
confidential reports of all employees are maintained. This includes a lot
of time, energy and money.
• The position of the person who is transferred or promoted will be vacant.
• There may be partiality or bias in transferring or promoting persons from
within the organization.
 External Sources of Recruitment

• Management Consultants: are used for choosing higher-level staff. They act as representative
of the employer. They make all the essential arrangements for recruitment and selection. In
return for services, they take a commission or service charge.
• Public Advertisements: The Personnel branch of an organization advertises the vacancy in the
internet, newspapers, etc. This advertisement gives info about the company, the job and the
required qualities of the candidate. It offers applications from suitable candidates. This source is
the most common and popular source of recruitment. This is because it provides a very wide
choice. However, it is very expensive and time consuming.
• Recommendations: The company or organization may also recruit candidates based on the
recommendations received from present managers or from sister companies.
• Deputation Personnel: The company may also recruit candidates who sent on deputation by
the Financial institutions or Government or by holding or subsidiary companies.
• Campus Recruitment: The organization conducts interviews in the campuses of Engineering
Colleges and Management institutes. Final year students, who're soon to get graduate, are
interviewed. Suitable candidates are selected by the association based on their communication
skills, academic record, intelligence, etc. This source is used for recruiting qualified, trained but
inexperienced candidates.
Advantages of External Sources

The advantages / benefits / merits of using external sources of

recruitment:
• It boosts young blood with creative ideas to enter the
organization.
• It offers wide scope for selection. This is because a huge number
of suitable candidates will come for the selection procedure.
• Here there is no need to maintain confidential records.
• There are fewer chances of partiality or bias.
Limitations of External Sources

• It is very expensive. This is because test, advertisements,

medical examination etc., has to be conducted.
• It is very time consuming because the selection process is
very long.
• It may not develop loyalty amongst existing managers.
• The existing managers may leave the company if outsiders
are given higher position.