NCERT Solutions for class 12 Business studies Chapter 5 Organising

NCERT Solutions for class 12 Business studies Chapter 5 Organising

Very Short Answer Type:

Q. 1. Identify the network of social relationships which arises
spontaneously due to interaction at work.

Ans.

The network of social relationships that arises spontaneously due to interaction at work is called the informal organization.

Q. 2. What does the term ‘Span of management’ refer to?

Ans.

The term ‘Span of management’ refers to the number of subordinates that a manager can effectively oversee and control.

Q. 3. State any two circumstances under which the functional structure will prove to be an appropriate choice.

Ans.

Two circumstances under which the functional structure will prove to be an appropriate choice are:

1. When there is a need for specialization and efficiency in the organization.
2. When the organization is large and has a diverse range of activities or functions.

Q. 4. Draw a diagram depicting a functional structure.

Ans.

Sure, here’s a simple diagram depicting a functional structure:

                             CEO
                             |
          --------------------------------
          |              |              |              
   Finance        Marketing      Production
     Manager       Manager         Manager
          |              |              |
      Accounts     Sales         Manufacturing
        Team          Team             Team

In this structure, the CEO oversees different functional managers, such as Finance, Marketing, and Production managers, each managing their own specialized team.

Q. 5. company has its registered office in Delhi, manufacturing unit at Gurgaon and marketing and sales department at Faridabad. The company manufactures the consumer products. Which type of organisational structure should it adopt to achieve its target?

Ans.

The company should adopt a divisional structure based on geography to effectively manage its operations across different locations.

Short Answer Type:

Q. 1. What are the steps in the process of organising?

Ans.

The steps in the process of organizing are:

1. Identification of Activities: Determining the tasks to be performed.
2. Grouping of Activities: Classifying similar tasks into departments or units.
3. Assignment of Duties: Allocating specific tasks to individuals or teams.
4. Delegation of Authority: Granting necessary authority to individuals or teams to perform their tasks.
5. Establishing Relationships: Defining the hierarchy and reporting relationships within the organization.
6. Coordination: Ensuring that all activities and efforts are aligned towards achieving organizational goals.

These steps help in creating a structured and efficient organization.

Q. 2. Discuss the elements of delegation.

Ans.

The elements of delegation are:

1. Authority: The power granted to a subordinate to complete specific tasks. This involves making decisions and utilizing resources to achieve organizational goals.
2. Responsibility: The obligation of a subordinate to perform the assigned tasks to the best of their ability. It encompasses both the duties to be performed and the results expected.
3. Accountability: The obligation of a subordinate to report and justify the outcomes of the tasks performed. It ensures that the subordinate remains answerable to the superior for the completion and quality of the assigned tasks.

These elements help in ensuring that tasks are effectively delegated and managed within an organization.

Q. 3. How does informal organisation support the formal organisation?

Ans.

Informal organization supports the formal organization by fostering social relationships and communication channels, enhancing teamwork and morale, and providing flexibility in problem-solving and decision-making. It also helps in bridging gaps, resolving conflicts, and promoting a positive work environment.

Q. 4. Can a large sized organisation be totally centralised of decentralised? Give your opinion.

Ans.

In my opinion, a large-sized organization cannot be wholly centralized or decentralized. A balanced approach is crucial for effective management

Centralization for Strategic Consistency:-

Strategic decisions are centralized to maintain consistency and alignment with overall organizational goals.

Decentralization for Operational Flexibility:-

Operational decisions are decentralized to ensure flexibility, responsiveness, and adaptability to local needs.

Q. 5. Decentralisation is extending delegation to the lowest level. Comment.

Ans.

Concept of Decentralization:-

Decentralization involves extending delegation to the lowest levels of an organization. This process distributes decision-making authority to managers and employees at various levels, enabling them to take responsibility for their tasks and functions.

Benefits of Decentralization:-

By pushing decision-making closer to the point of action, decentralization enhances flexibility, responsiveness, and innovation. It empowers employees, improves morale, and reduces the burden on top management. This approach is particularly beneficial for large organizations operating in dynamic and diverse environments, ensuring that decisions are made quickly and effectively at the operational level.

Q. 6. Neha runs a factory wherein she manufactures shoes. The business has been doing well and she intends to expand by diversifying into leather bags as well as western formal wear thereby making her company a complete provider of corporate wear. This will enable her to market her business unit as the one stop for working women. Which type of structure would you recommend for her expanded organisation and why?

Ans.

Recommended Structure: Divisional Structure

I recommend a divisional structure for Neha’s expanded organization. This structure will allow her to manage each product line—shoes, leather bags, and western formal wear—separately, ensuring specialized focus and operational efficiency. It also supports effective marketing and targeted strategies, making her business a comprehensive provider of corporate wear for working women. This structure fosters flexibility and innovation within each division.

Q. 7. The production manager asked the foreman to achieve a target production of 200 units per day, but he doesn’t give him the authority to requisition tools and materials from the stores department. Can the production manager blame the foreman if he is not able to achieve the desired target? Give reasons.

Ans.

No, the production manager cannot blame the foreman for not achieving the target.

Reason: The foreman was not given the necessary authority to requisition tools and materials, which are essential to meet the production target. Without the required resources, the foreman is unable to perform his duties effectively. Authority and responsibility must go hand in hand to ensure successful task completion.

Long Answer Type

Q. 1. Why delegation is considered essential for effective organising?

Ans.

Importance of Delegation for Effective Organizing

Delegation is a critical management practice that involves assigning tasks and responsibilities to subordinates while granting them the necessary authority to accomplish these tasks. It is considered essential for effective organizing due to several reasons:

1. Efficient Utilization of Resources

Delegation helps in the efficient utilization of resources by distributing tasks among employees according to their skills and expertise. This ensures that work is done more effectively and efficiently, leading to better overall performance.

2. Empowerment and Motivation

When employees are given responsibilities along with the authority to make decisions, they feel empowered and motivated. This sense of ownership and responsibility enhances their job satisfaction and commitment to the organization, ultimately leading to increased productivity and performance.

3. Development of Subordinates

Delegation provides opportunities for employees to develop their skills and competencies. By taking on new tasks and responsibilities, they gain valuable experience and knowledge, which prepares them for higher roles and responsibilities in the future. This contributes to the overall growth and development of the workforce.

4. Reduction of Workload for Managers

Delegation helps in reducing the workload of managers, allowing them to focus on more strategic and high-priority tasks. This enables managers to utilize their time and energy more effectively, leading to better decision-making and overall organizational efficiency.

5. Better Decision-Making

Delegation allows for better decision-making as it involves employees at different levels in the organization. Employees who are closer to the actual operations often have a better understanding of the issues and challenges. By empowering them to make decisions, the organization can benefit from their insights and expertise, leading to more informed and effective decisions.

6. Flexibility and Adaptability

Delegation enhances the flexibility and adaptability of the organization. By distributing tasks and responsibilities, the organization can respond more quickly to changes and challenges in the environment. This agility is crucial for staying competitive in today’s dynamic business landscape.

7. Improved Communication and Coordination

Delegation fosters better communication and coordination within the organization. When tasks and responsibilities are clearly defined and assigned, it minimizes confusion and overlaps. This clarity improves teamwork and collaboration, leading to smoother and more efficient operations.

In conclusion, delegation is a vital practice for effective organizing as it ensures the optimal use of resources, empowers employees, aids in their development, reduces managerial workload, improves decision-making, enhances flexibility, and promotes better communication and coordination. By leveraging the benefits of delegation, organizations can achieve their goals more efficiently and create a positive and productive work environment.

Q. 2. What is a divisional structure? Discuss its advantages and
limitations.

Ans.

Divisional Structure

A divisional structure is an organizational setup in which the company is divided into semi-autonomous units or divisions. Each division operates as a self-contained entity with its own set of functions, such as production, marketing, finance, and human resources. The divisions are usually based on product lines, geographical regions, or customer segments. This structure allows for a more focused approach to managing the diverse range of activities within an organization.

Advantages of Divisional Structure

1. Focus and Specialization
   Each division focuses on a specific product line, geographical area, or customer segment, leading to greater specialization and expertise. This enhances the quality and efficiency of operations within each division.
2. Flexibility and Responsiveness
   Divisional structure allows for quick decision-making and adaptability to changing market conditions. Each division can respond to local demands and challenges more effectively, leading to better customer satisfaction and competitive advantage.
3. Accountability and Performance
   With clear division of responsibilities, managers and employees within each division are accountable for their performance. This promotes a sense of ownership and responsibility, leading to higher motivation and better results.
4. Decentralized Management
   The structure promotes decentralized management, empowering divisional heads to make decisions independently. This reduces the burden on top management and allows for more efficient and effective decision-making.
5. Innovation and Growth
   The focus on specific product lines or regions encourages innovation and growth. Divisions can experiment with new ideas, products, and strategies, fostering a culture of creativity and continuous improvement.

Limitations of Divisional Structure

1. Duplication of Resources
   Each division may require its own set of resources, such as finance, marketing, and human resources, leading to duplication and inefficiency. This can result in higher operational costs and resource wastage.
2. Coordination Challenges
   With multiple divisions operating independently, coordination and communication between divisions can become challenging. This may lead to inconsistencies and conflicts in organizational policies and practices.
3. Limited Central Control
   Decentralized decision-making can reduce the level of central control, making it difficult for top management to maintain uniformity and coherence across the organization. This may result in a lack of alignment with overall organizational goals.
4. Internal Competition
   Divisions may compete against each other for resources, market share, and recognition. This internal competition can create a fragmented organizational culture and hinder collaboration and synergy.
5. Complexity
   Managing multiple divisions can increase the complexity of the organizational structure. This may require additional layers of management and administrative processes, leading to bureaucratic inefficiencies.

In conclusion, while the divisional structure offers several advantages, such as focus, flexibility, and decentralized management, it also presents challenges like resource duplication, coordination difficulties, and internal competition. Organizations must carefully evaluate these factors to determine the suitability of a divisional structure for their specific needs and objectives.

Q. 3. Decentralisation is an optional policy. Explain why an organisation would choose to be decentralised.

Ans.

Why an Organization Would Choose to be Decentralized

Decentralization is an organizational policy where decision-making authority is distributed among various levels of management, rather than being concentrated at the top. While it is an optional policy, many organizations choose to adopt decentralization for several compelling reasons:

1. Enhanced Decision-Making

Decentralization empowers lower-level managers and employees to make decisions within their areas of responsibility. This leads to faster and more effective decision-making, as those closer to the actual operations have better insights into the specific issues and challenges. It allows the organization to be more agile and responsive to changes in the environment.

2. Improved Motivation and Morale

When employees are given the authority to make decisions, they feel valued and trusted by the organization. This sense of empowerment boosts their motivation and morale, leading to increased job satisfaction and commitment. Employees are more likely to take ownership of their tasks and strive for better performance.

3. Development of Managerial Talent

Decentralization provides opportunities for employees at various levels to develop their managerial skills and competencies. By taking on decision-making responsibilities, they gain valuable experience and knowledge, preparing them for higher roles in the organization. This contributes to the overall growth and development of the workforce.

4. Better Customer Service

With decision-making authority distributed across different levels, the organization can respond more quickly and effectively to customer needs and preferences. Decentralization enables local managers to tailor products and services to meet specific market demands, leading to improved customer satisfaction and loyalty.

5. Reduction of Managerial Workload

Decentralization reduces the burden on top management by delegating routine and operational decisions to lower-level managers. This allows top executives to focus on strategic planning, long-term goals, and overall organizational direction. It leads to more efficient use of managerial resources and better organizational performance.

6. Increased Innovation

Decentralized organizations encourage innovation and creativity by allowing employees to experiment with new ideas and approaches. With the freedom to make decisions, employees are more likely to take initiative and propose innovative solutions to problems. This fosters a culture of continuous improvement and adaptability.

7. Flexibility and Adaptability

Decentralization enhances the flexibility and adaptability of the organization. By distributing decision-making authority, the organization can quickly adjust to changes in the market, technology, and other external factors. This agility is crucial for staying competitive in today’s dynamic business landscape.

8. Enhanced Communication and Coordination

Decentralization promotes better communication and coordination within the organization. With decision-making authority spread across different levels, there is a greater need for collaboration and information sharing. This leads to improved teamwork and a more cohesive organizational culture.

9. Alignment with Local Conditions

In geographically dispersed organizations, decentralization allows local managers to make decisions that are aligned with local conditions and preferences. This leads to more effective operations and better alignment with regional markets.

10. Risk Distribution

Decentralization distributes risk across different levels of the organization. By allowing lower-level managers to make decisions, the organization can mitigate the impact of poor decisions and reduce the overall risk to the organization.

In conclusion, decentralization offers numerous benefits, including enhanced decision-making, improved motivation, development of managerial talent, better customer service, and increased innovation. While it is an optional policy, many organizations choose to adopt decentralization to leverage these advantages and achieve their organizational goals more effectively. By empowering employees and distributing decision-making authority, organizations can create a more agile, responsive, and innovative environment that drives success.

Q. 4. Distinguish between centralisation and decentralisation.

Ans.

Centralization vs. Decentralization

Centralization and decentralization are two contrasting approaches to organizational decision-making and authority distribution. Here are the key distinctions between the two:

1. Decision-Making Authority

• Centralization: In a centralized organization, decision-making authority is concentrated at the top levels of management. Top executives and senior managers make most of the important decisions, while lower-level managers and employees have limited authority.
• Decentralization: In a decentralized organization, decision-making authority is distributed across various levels of management. Lower-level managers and employees are empowered to make decisions within their areas of responsibility.

2. Control and Supervision

• Centralization: Centralized organizations have a high degree of control and supervision from top management. This ensures consistency and alignment with the overall organizational goals and policies.
• Decentralization: Decentralized organizations have a lower degree of direct control and supervision from top management. Local managers have the autonomy to make decisions, allowing for flexibility and responsiveness to local conditions.

3. Flexibility and Responsiveness

• Centralization: Centralized organizations may lack flexibility and responsiveness due to the concentration of decision-making at the top. This can lead to slower decision-making and reduced adaptability to changes in the environment.
• Decentralization: Decentralized organizations are more flexible and responsive. Local managers can quickly adapt to changes and make decisions that meet the specific needs of their regions or departments.

4. Employee Empowerment and Motivation

• Centralization: In centralized organizations, lower-level managers and employees may feel less empowered and motivated due to limited decision-making authority. This can lead to lower job satisfaction and reduced employee engagement.
• Decentralization: Decentralized organizations empower lower-level managers and employees, boosting their motivation and morale. Employees feel valued and trusted, leading to higher job satisfaction and commitment.

5. Communication and Coordination

• Centralization: Centralized organizations may experience efficient communication and coordination at the top level, but communication may be slower and less effective at lower levels. The hierarchical structure can create bottlenecks.
• Decentralization: Decentralized organizations promote better communication and coordination at all levels. Information flows more freely, and decision-making is closer to the point of action.

6. Risk Distribution

• Centralization: In centralized organizations, the concentration of decision-making authority can lead to higher risk if poor decisions are made at the top level. The impact of such decisions can be widespread.
• Decentralization: Decentralized organizations distribute risk across various levels of management. Local managers make decisions within their areas, reducing the overall risk to the organization.

7. Innovation and Creativity

• Centralization: Centralized organizations may stifle innovation and creativity due to the top-down approach to decision-making. Employees may be less likely to propose new ideas.
• Decentralization: Decentralized organizations encourage innovation and creativity by empowering employees to experiment with new ideas and approaches. This fosters a culture of continuous improvement.

Conclusion

In conclusion, centralization and decentralization are two distinct approaches to organizational decision-making and authority distribution. Centralization focuses on consistency, control, and alignment with organizational goals, while decentralization emphasizes flexibility, responsiveness, and employee empowerment. Organizations must carefully evaluate their specific needs and objectives to determine the most appropriate approach for their structure and operations. A balanced approach, combining elements of both centralization and decentralization, can often provide the best results.

Q. 5. How is a functional structure different from a divisional
structure?

Ans.

Functional Structure vs. Divisional Structure

Organizational structures define how tasks, responsibilities, and authority are distributed within a company. Two common structures are the functional and divisional structures. Here’s a detailed comparison of the two:

Functional Structure

Definition

A functional structure organizes a company based on specialized functional areas or departments, such as finance, marketing, production, and human resources. Each department focuses on its specific tasks and activities, and is managed by a department head or manager.

Key Features

• Specialization: Employees are grouped based on their specialized skills and expertise, leading to high levels of efficiency and proficiency.
• Clear Hierarchy: There is a clear chain of command within each functional area, with employees reporting to their functional manager.
• Centralized Decision-Making: Decision-making authority is often centralized at the top of each functional department, ensuring consistency in operations.

Advantages

• Expertise and Efficiency: Employees become highly skilled in their specific functions, resulting in increased efficiency and productivity.
• Clear Career Paths: Employees have well-defined career paths within their functional areas, which aids in professional development.
• Operational Consistency: Standardized procedures and policies within each department ensure consistent and reliable operations.

Limitations

• Communication Barriers: Functional silos can create communication barriers between departments, leading to a lack of coordination and collaboration.
• Slow Decision-Making: Centralized decision-making can slow down the decision-making process, especially when approvals are needed from higher levels.
• Limited Flexibility: Functional structures may be less adaptable to changes in the external environment, as departments may focus solely on their own objectives.

Divisional Structure

Definition

A divisional structure organizes a company into semi-autonomous units or divisions, each responsible for a specific product line, geographical region, or customer segment. Each division operates as a self-contained entity with its own set of functions, such as production, marketing, and finance.

Key Features

• Self-Contained Units: Each division operates independently, with its own resources and management team.
• Decentralized Decision-Making: Decision-making authority is decentralized, allowing division managers to make decisions relevant to their specific operations.
• Focus on Outputs: Divisions are focused on delivering specific products, services, or serving particular markets, ensuring a targeted approach.

Advantages

• Flexibility and Responsiveness: Divisions can quickly adapt to changes in the market or external environment, making the organization more agile.
• Accountability and Performance: Clear division of responsibilities ensures that division managers are accountable for their performance, leading to improved results.
• Innovation and Growth: Divisions can experiment with new ideas and strategies, fostering a culture of innovation and continuous improvement.

Limitations

• Duplication of Resources: Each division may require its own set of resources, leading to duplication and higher operational costs.
• Coordination Challenges: Managing coordination and communication between divisions can be complex and challenging.
• Internal Competition: Divisions may compete against each other for resources and recognition, potentially creating conflicts within the organization.

Conclusion

In summary, the functional structure focuses on specialization and efficiency within specific functional areas, while the divisional structure emphasizes flexibility, responsiveness, and accountability by organizing the company into semi-autonomous units. Each structure has its own set of advantages and limitations, and the choice between them depends on the organization’s size, goals, and operational needs. A balanced approach, combining elements of both structures, can help organizations leverage the benefits of both and achieve their strategic objectives effectively.

Q. 6. A company, which manufactures a popular brand of toys, has
been enjoying good market reputation. It has a functional
organisational structure with separate departments for
Production, Marketing, Finance, Human Resources and
Research and Development. Lately to use its brand name and
also to cash on to new business opportunities it is thinking to
diversify into manufacture of new range of electronic toys for
which a new market is emerging. Which organisation structure
should be adopted in this situation? Give concrete reasons
with regard to benefits the company will derive from the steps
it should take.

Ans.

Recommended Structure: Divisional Structure

Given the company’s plan to diversify into the manufacture of a new range of electronic toys, it is advisable to adopt a divisional structure. This structure will help the company manage the complexities and challenges associated with diversifying its product line while leveraging its strong brand reputation.

Benefits of Adopting a Divisional Structure

1. Focus on Product Lines

By adopting a divisional structure, the company can create separate divisions for its traditional toys and electronic toys. Each division can focus on its specific product line, allowing for specialized strategies and operations tailored to the unique needs of each market segment.

2. Enhanced Flexibility and Responsiveness

The divisional structure allows each division to operate as a semi-autonomous unit, making it easier to respond quickly to market changes and emerging opportunities. This flexibility is crucial in the fast-paced and dynamic electronic toys market.

3. Improved Accountability and Performance

With clear division of responsibilities, division managers are accountable for the performance of their respective units. This promotes a sense of ownership and responsibility, leading to improved performance and results within each division.

4. Better Resource Allocation

Resources can be allocated more effectively based on the specific needs and priorities of each division. This ensures that the electronic toys division receives the necessary resources and investment to develop and market the new product line successfully.

5. Increased Innovation

The divisional structure fosters innovation by allowing each division to experiment with new ideas and approaches. The electronic toys division can focus on research and development to create innovative products that meet the demands of the emerging market.

6. Enhanced Customer Focus

Each division can tailor its marketing and customer service strategies to the specific preferences and needs of its target market. This improves customer satisfaction and loyalty, helping the company build a strong reputation in the electronic toys market.

7. Decentralized Decision-Making

The divisional structure promotes decentralized decision-making, empowering division managers to make decisions relevant to their specific operations. This reduces the burden on top management and allows for more efficient and effective decision-making at the division level.

Steps to Implement the Divisional Structure

1. Establish Divisions: Create separate divisions for traditional toys and electronic toys, each with its own set of functions such as production, marketing, finance, and R&D.
2. Appoint Division Managers: Assign experienced managers to lead each division, with clear responsibilities and accountability for their unit’s performance.
3. Allocate Resources: Distribute resources, including budget, personnel, and facilities, based on the specific needs and priorities of each division.
4. Develop Division-Specific Strategies: Formulate strategies and plans tailored to the unique requirements and goals of each division, ensuring alignment with overall organizational objectives.
5. Monitor and Evaluate Performance: Regularly assess the performance of each division, providing feedback and support to ensure continuous improvement and success.

By adopting a divisional structure, the company can effectively manage its diversification into the electronic toys market, leveraging its strong brand reputation while ensuring specialized focus and operational efficiency within each product line. This approach will help the company achieve its strategic goals and maintain a competitive edge in the evolving market landscape.

Q. 7. A company manufacturing sewing machines set up in 1945 by
the British promoters follows formal organisation culture in
totality. It is facing lot of problems in delays in decision making.
As the result it is not able to adapt to changing business
environment. The work force is also not motivated since they
cannot vent their grievances except through formal channels,
which involve red tape. Employee turnover is high. Its market
share is also declining due to changed circumstances and
business environment. You are to advise the company with
regard to change it should bring about in its organisation
structure to overcome the problems faced by it. Give reasons
in terms of benefits it will derive from the changes suggested
by you.

Ans.

Recommended Changes: Adopting a Decentralized Structure and Informal Organization Elements

To overcome the challenges faced by the company, I recommend adopting a decentralized structure along with incorporating elements of an informal organization. This combined approach will help address delays in decision-making, improve employee motivation, reduce turnover, and enhance market adaptability.

Benefits of Adopting a Decentralized Structure

1. Faster Decision-Making

Decentralizing decision-making authority allows lower-level managers and employees to make decisions within their areas of responsibility. This leads to faster and more effective decision-making, enabling the company to respond quickly to changes in the business environment and seize new opportunities.

2. Enhanced Flexibility and Adaptability

A decentralized structure provides greater flexibility and adaptability. Local managers can tailor strategies and operations to meet the specific needs of their departments or regions. This responsiveness is crucial for staying competitive in a dynamic market.

3. Improved Employee Motivation and Morale

Empowering employees with decision-making authority boosts their motivation and morale. When employees feel valued and trusted, their job satisfaction increases, leading to higher commitment and productivity. This also helps in reducing employee turnover.

4. Development of Managerial Talent

Decentralization provides opportunities for employees to develop their managerial skills and competencies. By taking on decision-making responsibilities, they gain valuable experience and knowledge, preparing them for higher roles in the organization.

Benefits of Incorporating Informal Organization Elements

1. Open Communication Channels

Encouraging informal communication channels allows employees to freely share their ideas, concerns, and feedback. This reduces red tape and fosters a more open and transparent work environment, enhancing collaboration and problem-solving.

2. Strengthening Social Relationships

Informal organization elements help in building strong social relationships among employees. This camaraderie promotes teamwork, mutual support, and a positive work culture, which are essential for a motivated and engaged workforce.

3. Fostering Innovation

Informal networks encourage the exchange of ideas and creativity. Employees are more likely to share innovative solutions and suggestions in an informal setting, leading to continuous improvement and growth.

4. Enhanced Employee Well-being

Informal interactions provide employees with a sense of belonging and community. This emotional support enhances their overall well-being and job satisfaction, contributing to a more harmonious and productive work environment.

Steps to Implement the Changes

1. Decentralize Decision-Making: Distribute decision-making authority to lower-level managers and employees based on their areas of expertise and responsibility. Provide necessary training and resources to support this transition.
2. Encourage Informal Communication: Create opportunities for informal interactions, such as team-building activities, social events, and open-door policies. Encourage employees to share their ideas and feedback freely.
3. Develop Clear Guidelines: Establish clear guidelines and boundaries for decision-making at different levels. Ensure that all employees understand their roles, responsibilities, and the extent of their authority.
4. Promote Teamwork and Collaboration: Foster a collaborative work environment by promoting cross-functional teams and projects. Encourage employees to work together to achieve common goals.
5. Monitor and Evaluate Progress: Regularly assess the effectiveness of the decentralized structure and informal organization elements. Gather feedback from employees and make necessary adjustments to ensure continuous improvement.

By adopting a decentralized structure and incorporating informal organization elements, the company can address its current challenges and create a more dynamic, motivated, and adaptable organization. These changes will help the company regain its market share, improve employee satisfaction, and achieve long-term success.

Q. 8. A company X limited manufacturing cosmetics, which has enjoyed a pre-eminent position in business, has grown in size. Its business was very good till 1991. But after that, new liberalised environment has seen entry of many MNC’s in the sector. With the result the market share of X limited has declined. The company had followed a very centralised business model with Directors and divisional heads making even minor decisions. Before 1991 this model had served the company very well as consumers had no choice. But now the company is under pressure to reform. What organisation structure changes should the company bring about in order to retain its market share? How will the changes suggested by you help the firm? Keep in mind that the sector in which the company is FMCG.

Ans.

Recommended Changes: Adopting a Decentralized Structure

Given the entry of multiple MNCs and the liberalized business environment, company X Limited must adopt a decentralized structure to retain its market share. This shift will help the company become more agile, responsive, and innovative in the fast-moving consumer goods (FMCG) sector.

Benefits of Adopting a Decentralized Structure

1. Enhanced Decision-Making Speed

Decentralizing decision-making authority empowers lower-level managers and employees to make decisions within their areas of responsibility. This accelerates the decision-making process, allowing the company to respond swiftly to market changes and consumer preferences.

2. Increased Flexibility and Adaptability

A decentralized structure provides greater flexibility and adaptability. Local managers can tailor strategies and operations to meet the specific needs of their regions or departments. This responsiveness is crucial in the dynamic FMCG market, where trends and consumer demands can change rapidly.

3. Improved Employee Motivation and Engagement

Empowering employees with decision-making authority boosts their motivation and engagement. When employees feel valued and trusted, their job satisfaction increases, leading to higher commitment and productivity. This also helps in reducing employee turnover.

4. Fostering Innovation

Decentralization encourages innovation by allowing employees to experiment with new ideas and approaches. This fosters a culture of creativity and continuous improvement, enabling the company to introduce new and innovative products that cater to evolving consumer needs.

5. Better Customer Focus

With decision-making authority distributed across different levels, local managers can develop marketing and customer service strategies tailored to the specific preferences and needs of their target market. This improves customer satisfaction and loyalty, helping the company regain its market share.

6. Reduction of Managerial Workload

Decentralizing decision-making reduces the burden on top management, allowing them to focus on strategic planning and long-term goals. This leads to more efficient use of managerial resources and better overall organizational performance.

7. Development of Managerial Talent

Decentralization provides opportunities for employees to develop their managerial skills and competencies. By taking on decision-making responsibilities, they gain valuable experience and knowledge, preparing them for higher roles in the organization.

Steps to Implement the Decentralized Structure

1. Distribute Decision-Making Authority: Empower lower-level managers and employees to make decisions relevant to their areas of expertise and responsibility. Provide necessary training and resources to support this transition.
2. Create Regional or Product-Based Divisions: Establish divisions based on geographical regions or product lines to ensure focused and specialized operations.
3. Promote Open Communication: Encourage open communication channels to facilitate the exchange of ideas, feedback, and information across all levels of the organization.
4. Develop Clear Guidelines: Establish clear guidelines and boundaries for decision-making at different levels. Ensure that all employees understand their roles, responsibilities, and the extent of their authority.
5. Monitor and Evaluate Performance: Regularly assess the effectiveness of the decentralized structure. Gather feedback from employees and make necessary adjustments to ensure continuous improvement.

By adopting a decentralized structure, company X Limited can address its current challenges and create a more dynamic, motivated, and adaptable organization. These changes will help the company regain its market share, improve employee satisfaction, and achieve long-term success in the competitive FMCG sector.