Business Studies Test - 7

The correct answer is None of the Above

Key Points

• 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 decisions for the organization.
• In decentralization decision making is left to the lower level of the organization

Centralization 

• Centralization is said to be a process where the concentration of decision-making is in a few hands.
• All the important decisions and actions at the lower level, all subjects, and actions at the lower level are subject to the approval of top management.

Decentralization

• Decentralization is a systematic delegation of authority at all levels of management and in all of the organization.
• In a decentralization, authority is retained by the top management for taking major decisions and framing policies concerning the whole concern.
• The rest of the authority may be delegated to the middle level and lower level of management. 

Additional InformationFormal Organisation:

1. The formal organizational structure is created intentionally by the process of organizing.
2. The purpose of formal organization structure is the achievement of organizational goals.
3. Informal organizational structure each individual is assigned a specific job.
4. In formal organization every individual is assigned a fixed authority or decision-making power.
5. Formal organizational structure results in the creation of superior-subordinate relations.

Informal Organisation:

1. Informal organizational structure gets created automatically without any intended efforts of managers.
2. Informal organizational structure is formed by the employees to get psychological satisfaction.
3. Informal organizational structure does not follow any fixed path of flow of authority or communication.
4. Source of information cannot be known under an informal structure as any person can communicate with anyone in the organization.
5. The existence of an informal organizational structure depends on the formal organization structure.

The correct answer is Performance appraisal

Key PointsThe following points highlight the importance of organising in an organization:

• Benefits of Specialization: Under organising, the whole work is systematically allocated and divided into different parts. The right man is put at the right job. It increases the efficiency of workers and motivates them to put their best into the work.
• The clarity in Working Relationships: Organising helps in establishing a working relationship and clearly defines the lines of communication and also specifies who is to report to whom. This further helps in the fixation of responsibility and also specifies the dimensions of authority that an individual can exercise.
• Optimum Utilization of Resources: Organising provides fuller and efficient use of all human, physical and financial resources. Proper allocation of jobs helps in avoiding overlapping of work and ensures optimum use of resources without any wastage.
• Adaptation to Changes: Organising helps business enterprises to adjust to environmental changes. In order to ensure the smooth functioning of the enterprise, organising suitably modifies the organisational structure and various inter-relationships existing in the enterprise.
• Effective Administration: 

1. ​It leads to specialization which brings effectiveness in administration
2. It clarifies centers of authority & power and thus results in proper execution of work.
3. It provides a clear description of jobs and related duties which results in avoiding duplication of work.

• Development of Personnel: Organising creates structure of an organisation. That structure provides a basis or framework for assigning and performing various functions efficiently.
• Expansion and Growth: Organising promotes growth and diversification of an enterprise. It enables the enterprise to take up new challenges e.g. more job positions, departments, new product lines and also new geographical territories etc. for increasing sales and profit.

The correct answer is Authority.

Key PointsThere are three elements of delegation :

• Responsibility - It is the obligation of a subordinate to perform the assigned job given to him effectively.
  • The subordinate is always bound to perform the duties assigned by the superior. He is always responsive to his superior.
• Accountability- It implies being answerable to the final outcome.
  • A subordinate is always accountable to his superior.
• Authority- Authority refers to the right of a person to command his subordinates and take action within his scope of position. 
  • It also refers to take a decision inherent in his position and tell people what to do and expect them to do it.

The correct answer is All of the Above

Key Points

• Organizing is the relationship between people, work, and resources used to achieve a common goal.
• Organizing is the process of defining and grouping the activities of the enterprise and establishing the authority relationships among them.
• In performing the organizing function, the manager defines, departmentalizes, and assigns the activities so that they can be effectively executed.”

Some Steps of organization:

1. Identification and division of work: The first step in organizing is dividing the work that has to be done or not which is previously determined plans.
2. Departmentalization: The work is divided into small activities is completed by grouped together and creating several criteria within a basis is called departmentalization.
3. Assignment of duties: The work of various job positions is allocated work to various employees and also jobs are allocated to each department in according to their skills and technologies are known. 
4. Establishing reporting relationships: Allocating work is not enough. Each individual team should also know who he has to take orders from and to whom he is accountable. The establishment of such clear relationships helps to create a hierarchal structure and helps in coordination amongst various departments.

Additional Information

• During the organizing process, administrators coordinate employees, assets, procedures, and policies to work with the objectives distinguished in the plans.

Organizing includes:

1. Appointing assignments
2. Gathering tasks into offices
3. Designating authority
4. Distributing assets across the association 

The correct answer is Organising

Key Points

• The organization is understood as a dynamic process and a managerial activity
• Which is necessary for bringing people together and tying them together in the pursuit of common objectives.
• It can be used in the sense, that it refers to the structure of relationships among positions and jobs
• which is built up for the attainment of common objectives or goals. 
   

Additional Information

Organizing involves the following four steps:​

1. Identification and grouping of the work,
2. Defining the responsibility,
3. Delegation of appropriate authority.
4. Establishment of structural relationships

The incorrect answer is Initiates action .

Key Points
Characteristics of organising:

• Division of Work: 
  • There can be no organisation without division of work.
  • Under division of work, the entire work of business is divided into many departments
  • The work of every department is further sub-divided into sub works
• Coordination: 
  • Under organisation, different persons are assigned different works but the aim of all these persons happens to be the some -The attainment of the objectives of the enterprise. 
  • The organisation ensures that the work of all the persons depends on each other’s work even though it happens to be different.
• The plurality of Persons: 
  • An organisation is a group of many persons who assemble to fulfill a common purpose. 
  • A single individual cannot create an organisation.
• Common Objectives:  
  • There are various parts of an organisation with different functions to perform but all move in the direction of achieving a general objective.
• Well-defined Authority and Responsibility: 
  • Under organisation, a chain is established between different posts right from the top to the bottom. 
  • It is clearly specified as to what will be the authority and responsibility of every post. 
  • Every individual working in the organisation is given some authority for the efficient work performance and it is also decided simultaneously as to what will be the responsibility of that individual in case of unsatisfactory work performance.
• The organisation is a Structure of Relationship: 
  • The relationship between persons working on different posts in the organisation is decided. In other words, it is decided as to who will be the superior and who will be the subordinate. 
  • Leaving the top-level post and the lowest level post everybody is somebody's superior and somebody's subordinate.
• The organisation is a Universal Process: 
  • The organisation is needed both in business and non-business organisations. 
  • Not only this, an organisation will be needed where two or mom than two people work jointly. 
  • The organisation has the quality of universality.
• The organisation is a Dynamic Process: 
  • The organisation is related to people and the knowledge and experience of the people undergo a change. 
  • The impact of this change affects the various functions of the organisations. 
  • the organisation is not a process that can be decided for all times to come but it undergoes changes according to the needs. 
  • The example, in this case, can be the creation or abolition of a new post according to the need.

The correct answer is Utilisation of resources.

Key Points

Decentralisation

• Decentralisation is much more than a mere transfer of authority to the lower levels of management hierarchy.
• It is a philosophy that implies selective dispersal of authority because it propagates the belief that people are competent, capable and resourceful. 
• Decentralisation is a fundamental step and its importance can be understood from the following points:
  • Develops initiative among subordinates: Decentralisation helps to promote self-reliance and confidence amongst the subordinates. 
  • Develops managerial talent for the future: Formal training plays an important part in equipping subordinates with skills that help them rise in the organisation but equally important is the experience gained by handling assignments independently.
  • Quick decision making: The management hierarchy can be looked upon as a chain of communication.
  • Relief to top management: Decentralisation diminishes the amount of direct supervision exercised by a superior over the activities of a subordinate because they are given the freedom to act and decide albeit within the limits set by the superior. 
  • Facilitates growth: Decentralisation awards greater autonomy to the lower levels of management as well as divisional or departmental heads.
  • Better control: Decentralisation makes it possible to evaluate performance at each level and the departments can be individually held accountable for their results.

The correct answer is Option 3

Key PointsThe divisional organizational structure is suitable in the following situations:

• Where the number of main products is more than one.
• Where different manufacturing technologies and marketing methods are required.
• Where the size of the concern is large enough.

Additional Information

• A divisional organizational structure gives a larger business enterprise the ability to segregate large sections of the company's business into semi-autonomous groups.
• While generally better suited to larger organizations, in some circumstances this formal structure may also benefit a smaller business.
• In a divisional structure, people are grouped together based on the product or service they provide, not the work they do.
• For example, a large corporation such as General Electric has divisions for electronics, transportation, and aviation, each with its own team of accountants, marketers, etc

The correct answer is All of the above.

Key Points

• A functional structure is a type of business structure that organizes a company into different departments based on areas of expertise. 
• These departments serve as functional units and are overseen by functional managers or department heads.
   

The features of functional organization structure are as follows-

• The functional organization structure determines the weakness and strengths of every individual and then places them in specific groups. 
• It assigns tasks after evaluating their capabilities and makes sure that every task utilizes their skill to maximum capability.
• The functional organizational activity is divided into definite functions and departments like marketing, accounting, and finance.
• The functional organization structure follows a vertical hierarchy system that requires the employee to report to one functional manager.
• An important feature of a functional organization is that it encourages healthy competition amongst its members.

The correct answer is Easier employee learning

Key Points

• In a functional structure grouping is based on functions.
• This means that similar jobs are integrated into functions and major functions are further categorized as departments that are handled by respective coordinating heads.
• These departments can further consist of sections.
• Note that functional structure is a basic and simple organizational structure.

Advantages

• Since functional structure revolves around functions, the division is such that an employee performs a specific set of tasks as a part of his routine. Effectively, this creates room for job specialization and efficient use of manpower.
• Again, as similar tasks are grouped together into a function and emphasis is laid on specific functions, this structure facilitates coordination and control.
• In a functional structure, we keep similar tasks together and different tasks away. This implies that there is no scope for duplication. Effectively, this lowers cost.
• As the focus is mostly on a specific and limited range of skills, training of employees becomes easier.
• This also leads to an increase in managerial efficiency which in turn increases profit margins.
• Lastly, it ensures that all the diverse tasks get a fair amount of attention.