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Chapter 9 · Class 12 Business Studies

Organising — Important Questions

57 questions With answers CBSE format

SUMMARY: The chapter "Organising" in Class 12 Business Studies focuses on the process of defining and grouping activities, establishing authority relationships, and allocating resources to achieve organizational objectives.
KEY TOPICS: Importance of organising, steps in the organising process, organisational structure, types of organisational structures, formal and informal organisation, delegation of authority, decentralisation, importance of delegation, barriers to effective delegation.

Previous chapter Nature and Significance of Management Next chapter Planning
Multiple Choice Questions (MCQs) 15 questions
Q1 1 Mark

Organising means:

ADoing organic farming
BEstablishing structure of authority and responsibility
CHolding meetings
DCounting sheep
Check answerHide answer
Correct answer: Option 2 — Establishing structure of authority and responsibility
Q2 1 Mark

Span of management refers to:

ARange of products
BNumber of subordinates a manager can effectively manage
CTime of management
DDistance of office
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Correct answer: Option 2 — Number of subordinates a manager can effectively manage
Q3 1 Mark

Functional structure groups activities by:

AGeographic location
BFunction (production sales finance)
CProduct line
DCustomer type
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Correct answer: Option 2 — Function (production sales finance)
Q4 1 Mark

Centralisation means:

ADecision-making concentrated at top
BDecision-making spread across levels
CNo decision-making
DRandom decisions
Check answerHide answer
Correct answer: Option 1 — Decision-making concentrated at top
Q5 1 Mark

Delegation involves:

ADoing all work alone
BEntrusting work to subordinates with authority and responsibility
CAvoiding work
DOnly authority not responsibility
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Correct answer: Option 2 — Entrusting work to subordinates with authority and responsibility
Q6 1 Mark

What is the primary purpose of the organising function in management?

ATo define organizational goals
BTo group activities and allocate resources
CTo evaluate employee performance
DTo set marketing strategies
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Correct answer: Option 2 — To group activities and allocate resources
Q7 1 Mark

Which of the following is NOT a step in the organising process?

AIdentifying activities
BEstablishing authority relationships
CSetting objectives
DGrouping activities
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Correct answer: Option 3 — Setting objectives
Q8 1 Mark

A company uses a hierarchical structure where authority flows from top to bottom. This is an example of which type of organisational structure?

AFlat structure
BMatrix structure
CFunctional structure
DTraditional structure
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Correct answer: Option 4 — Traditional structure
Q9 1 Mark

Which of the following best describes a formal organisation?

AAn organization based on personal relationships
BAn organization with defined roles and responsibilities
CAn organization that is flexible and adaptive
DAn organization that operates without a set structure
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Correct answer: Option 2 — An organization with defined roles and responsibilities
Q10 1 Mark

Decentralisation in an organisation primarily refers to:

AConsolidating decision-making at the top level
BDistributing decision-making authority to lower levels
CEliminating middle management
DIncreasing control from the headquarters
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Correct answer: Option 2 — Distributing decision-making authority to lower levels
Q11 1 Mark

Which of the following is a barrier to effective delegation?

ATrust in employees
BFear of losing control
CClear communication
DProper training
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Correct answer: Option 2 — Fear of losing control
Q12 1 Mark

What is the importance of delegation in an organisation?

AIt reduces the workload of managers
BIt creates confusion among employees
CIt limits employee development
DIt centralizes authority
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Correct answer: Option 1 — It reduces the workload of managers
Q13 1 Mark

In a matrix organisational structure, employees report to:

AOne manager only
BMultiple managers
CThe CEO only
DTheir respective departments
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Correct answer: Option 2 — Multiple managers
Q14 1 Mark

Which of the following is a key benefit of having a well-defined organisational structure?

AIncreased employee turnover
BImproved communication and coordination
CReduced accountability
DIncreased operational costs
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Correct answer: Option 2 — Improved communication and coordination
Q15 1 Mark

Which of the following statements about informal organisation is true?

AIt is always detrimental to formal organisation
BIt can enhance communication and morale
CIt has no impact on formal structures
DIt is highly structured and regulated
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Correct answer: Option 2 — It can enhance communication and morale
Short Answer Questions 10 questions
Q16 3 Marks

Define organising and state any three of its features.

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Organising is the management function of identifying and grouping activities, assigning duties, delegating authority, and providing the necessary resources to achieve objectives. Features: (1) PROCESS — series of steps to organise; (2) STRUCTURE OF AUTHORITY — establishes who reports to whom; (3) DIVISION OF WORK — splits work into specialised parts; (4) GROUPING OF ACTIVITIES — similar activities grouped into departments; (5) AUTHORITY-RESPONSIBILITY RELATIONSHIPS — defines who has authority over what; (6) PROVISION OF RESOURCES — physical, financial, human resources allocated to departments; (7) FACILITATES COORDINATION — clear structure prevents conflicts.
Q17 3 Marks

Distinguish between functional and divisional organisation structure.

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FUNCTIONAL STRUCTURE — activities grouped by FUNCTION (Production, Marketing, Finance, HR). All marketing activities together under Marketing Manager, all production under Production Manager, etc. ADVANTAGES: specialisation, economies of scale, clear career paths within function. SUITABLE for small-to-medium firms with single product/service. EXAMPLE: a small textile factory has Production, Sales, Accounts, HR departments. DIVISIONAL STRUCTURE — activities grouped by DIVISION (product, geography, customer type). Each division has its own production, marketing, finance teams. ADVANTAGES: clear accountability for each division, better market response. SUITABLE for large firms with multiple products or markets. EXAMPLE: Tata has separate divisions for Steel, Motors, Communication (TCL); each is essentially a separate company. CHOICE depends on firm size, product diversity, geographic spread, and management philosophy.
Q18 3 Marks

Explain the steps in the process of organising.

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PROCESS OF ORGANISING: (1) IDENTIFICATION AND DIVISION OF WORK — total work needed to achieve objectives is identified and divided into manageable parts (specialisation). (2) DEPARTMENTATION — similar activities are grouped into departments (functional, divisional, customer-based). (3) ASSIGNMENT OF DUTIES — specific tasks assigned to individuals based on skills and qualifications. (4) ESTABLISHING REPORTING RELATIONSHIPS — clear chain of command; who reports to whom; defines authority and responsibility. (5) DELEGATION OF AUTHORITY — managers delegate appropriate authority to subordinates. (6) COORDINATION — different departments are coordinated to work together. (7) CREATION OF ORGANISATIONAL CHART — formal representation of the structure showing positions, reporting lines, departments. The PROCESS is iterative — restructured as the firm grows or strategy changes.
Q19 3 Marks

Distinguish between centralisation and decentralisation.

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CENTRALISATION — decision-making authority concentrated at TOP MANAGEMENT. Lower-level employees have limited discretion. Suitable for: small firms, crisis situations, strict regulatory environments. ADVANTAGES: uniform decisions, clear control, lower coordination costs. DISADVANTAGES: slow response to local conditions, demoralised middle management. DECENTRALISATION — authority distributed across MULTIPLE LEVELS. Lower-level managers and employees make decisions within their areas. Suitable for: large diverse firms, dynamic environments, geographically dispersed operations. ADVANTAGES: faster decisions, motivated lower management, better adaptation to local conditions, develops future leaders. DISADVANTAGES: potential inconsistency, requires capable middle management, harder to coordinate. MOST organisations balance the two — strategic decisions centralised; operational decisions decentralised. Modern trend: increasing decentralisation due to flat organisations, agile management, employee empowerment.
Q20 3 Marks

What is delegation? List its three elements.

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DELEGATION is the process by which a manager entrusts SOME OF HIS WORK and AUTHORITY to a subordinate. ELEMENTS: (1) AUTHORITY — the right to give orders, take decisions, and use resources within delegated scope; e.g., authority to spend up to ₹50000 without prior approval. (2) RESPONSIBILITY — the obligation to accomplish the delegated task; the subordinate becomes accountable for completing the work; cannot be transferred. (3) ACCOUNTABILITY — the subordinate must answer for the outcome of his actions; must report performance to the manager. PRINCIPLE: AUTHORITY can be delegated but RESPONSIBILITY cannot — the manager remains ultimately accountable. Effective delegation REQUIRES: (a) clear definition of task; (b) sufficient authority; (c) trust in subordinate's capability; (d) follow-up and feedback. Delegation reduces manager's workload, develops subordinates, speeds up decisions, and motivates the team.
Q21 3 Marks

What is the importance of organising in a business?

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Organising is crucial as it helps in defining roles and responsibilities, coordinating activities, and ensuring efficient resource allocation, which ultimately leads to achieving organizational objectives.
Q22 3 Marks

List the steps in the organising process.

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The steps in the organising process include identifying activities, grouping similar activities, assigning tasks, delegating authority, and establishing relationships among the various positions.
Q23 3 Marks

What are the key characteristics of a formal organisation?

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A formal organisation is characterized by a defined structure, established rules and procedures, clear authority relationships, and a systematic approach to task allocation and coordination.
Q24 3 Marks

Explain the difference between formal and informal organisation.

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Formal organisation refers to the officially established structure with defined roles and responsibilities, while informal organisation emerges from social relationships and personal connections among employees, often influencing communication and collaboration.
Q25 3 Marks

What are the different types of organisational structures?

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The different types of organisational structures include functional structure, divisional structure, matrix structure, team-based structure, and network structure, each serving different organizational needs and goals.
Long Answer Questions 6 questions
Q26 6 Marks

Discuss the various types of organisation structures with examples.

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TYPES OF ORGANISATION STRUCTURES: (1) FUNCTIONAL STRUCTURE — activities grouped by function (production, marketing, finance, HR). EXAMPLE: a small textile factory. ADVANTAGES: specialisation, economies of scale, clear career paths. LIMITATIONS: silos, slow decision-making, narrow perspective. (2) DIVISIONAL STRUCTURE — activities grouped by division (product, geography, customer). EXAMPLE: Tata Steel, Tata Motors, Tata Consultancy Services as separate divisions of Tata Group. ADVANTAGES: clear accountability, market focus, nimble. LIMITATIONS: duplication of resources, higher costs, internal competition. (3) MATRIX STRUCTURE — combines functional and divisional; employees report to two managers (functional + project). EXAMPLE: aerospace companies. ADVANTAGES: efficient resource use, cross-functional collaboration. LIMITATIONS: confusion of authority, conflicts. (4) FLAT STRUCTURE — few or no middle management layers; direct communication between top and front-line. EXAMPLE: Valve Corporation, smaller startups. ADVANTAGES: fast decisions, employee empowerment. LIMITATIONS: lack of clear authority. (5) HIERARCHICAL STRUCTURE — many levels of management; clear chain. EXAMPLE: military, large bureaucracies. ADVANTAGES: clear authority, structured decision-making. LIMITATIONS: slow, rigid. CHOICE depends on size, products, geography, and philosophy.
Q27 6 Marks

Discuss the importance of organising for the achievement of organisational objectives.

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ORGANISING is the foundation that enables planning to be implemented. IMPORTANCE: (1) BENEFITS OF SPECIALISATION — division of work allows individuals to specialise; increases productivity. (2) CLARITY IN WORKING RELATIONSHIPS — clear authority and reporting lines avoid confusion. (3) OPTIMUM UTILISATION OF RESOURCES — proper structure prevents duplication and underuse of resources. (4) ADAPTATION TO CHANGE — flexible structure helps the organisation respond to environmental changes. (5) EFFECTIVE ADMINISTRATION — clear authority and responsibility enables consistent decision-making. (6) DEVELOPMENT OF PERSONNEL — assigned roles develop specific skills; clear structure provides career path. (7) EXPANSION AND GROWTH — well-organised firms can scale by adding more functions, divisions, or geographies. (8) FACILITATES COORDINATION — proper grouping ensures related activities work together. (9) AUTHORITY-RESPONSIBILITY MATCH — those held responsible have necessary authority. (10) ENABLES COMMUNICATION — structured channels of communication. Without proper organisation, even brilliant strategies and dedicated employees produce chaotic results. Well-organised firms outperform poorly-organised peers consistently.
Q28 6 Marks

Explain the various principles of effective delegation.

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PRINCIPLES OF EFFECTIVE DELEGATION: (1) FUNCTIONAL DEFINITION — clearly define the duty assigned; eliminate ambiguity. (2) PRINCIPLE OF SCALAR CHAIN — clear hierarchy of authority; orders flow through proper channels. (3) PRINCIPLE OF EXCEPTION — manager personally handles only exceptional issues; routine work delegated. (4) PARITY OF AUTHORITY AND RESPONSIBILITY — sufficient authority to discharge the responsibility. Imbalance creates problems — too much authority breeds arrogance; too little prevents effectiveness. (5) ABSOLUTENESS OF RESPONSIBILITY — manager remains ultimately accountable for the work; cannot transfer responsibility. (6) DELEGATION SHOULD BE TO LOWEST COMPETENT LEVEL — delegate to the lowest level capable of doing the work; saves manager's time, develops subordinates. (7) UNITY OF COMMAND — each subordinate has only one supervisor. (8) FOLLOW-UP AND CONTROL — manager monitors progress and provides feedback. (9) APPROPRIATE COMMUNICATION — clear instructions and ongoing dialogue. (10) ENVIRONMENT OF TRUST — manager must trust subordinate; subordinate must feel confident to ask questions. Effective delegation reduces manager's workload, develops subordinates, speeds up decisions, motivates the team. POOR DELEGATION (micromanagement, unclear authority) demotivates and slows operations.
Q29 6 Marks

Compare functional and divisional structure: their advantages limitations and when each is appropriate.

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FUNCTIONAL STRUCTURE — groups activities by function. ADVANTAGES: (1) specialisation — staff become expert in their function; (2) economies of scale — pooled resources; (3) clear career paths within function; (4) lower coordination costs within function; (5) better functional output (R&D produces innovations, marketing develops campaigns); (6) cost-effective for single product. LIMITATIONS: (1) silos — departments can become inward-looking; (2) slow cross-functional decisions; (3) limited customer/market focus; (4) functional managers may pursue functional goals at expense of organisational; (5) rigid; (6) issues with accountability when problems span functions. APPROPRIATE FOR: small-to-medium firms; single product/market; stable environment; cost-driven competition. DIVISIONAL STRUCTURE — groups activities by division (product, geography, customer). ADVANTAGES: (1) clear accountability — each division has full P&L responsibility; (2) market focus — division dedicates to specific market; (3) faster response; (4) cross-functional collaboration within division; (5) develops general managers; (6) better suited for diverse portfolio. LIMITATIONS: (1) duplication of resources across divisions; (2) higher costs; (3) inter-divisional rivalry; (4) loss of functional specialisation. APPROPRIATE FOR: large diverse firms; multiple products or markets; geographic spread; differentiation strategy. HYBRID — many large firms use combined structures (functional + divisional + matrix).
Q30 6 Marks

Discuss the principle of 'unity of command' and 'span of management' in organising.

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UNITY OF COMMAND: each subordinate should receive orders from only ONE superior. Stated by Henri Fayol; one of his 14 principles. WHY: (1) avoids conflicting orders and confusion; (2) clarifies responsibility and accountability; (3) speeds up decisions; (4) reduces stress on subordinates; (5) prevents passing the buck. APPLICATION: in functional structure each employee has only one functional boss; in matrix structure, the dual reporting (functional + project) violates unity of command — must be carefully managed. SPAN OF MANAGEMENT (Span of Control): number of subordinates a manager can effectively manage. NARROW SPAN — few subordinates; close supervision possible; tall organisations with many levels; example: 4-6 subordinates per manager. WIDE SPAN — many subordinates; less supervision; flat organisations; example: 12-15 subordinates per manager. FACTORS DETERMINING OPTIMAL SPAN: (1) NATURE OF WORK — complex work needs narrow span; routine wider; (2) ABILITY OF MANAGER — capable managers can handle wider span; (3) ABILITY OF SUBORDINATES — competent subordinates need less supervision; (4) GEOGRAPHIC DISPERSION — distant locations need narrower span; (5) USE OF TECHNOLOGY — IT enables wider span. MODERN TREND: wider spans (flatter organisations) due to better communication tools and capable workforce. Both principles together create efficient organisation structure.
Q31 6 Marks

Compare functional and divisional structures of organisation with the help of a table.

Assertion–Reason Questions 8 questions
Q32 1 Mark

Assertion (A): Division of work is essential for organising.

Reason (R): Specialisation through division of work increases efficiency and expertise.

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Correct answer: Option 1 — Both A and R are true, and R is the correct explanation of A.
Q33 1 Mark

Assertion (A): Functional structure is suitable for small businesses.

Reason (R): It allows specialisation and economies of scale within each function.

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Correct answer: Option 1 — Both A and R are true, and R is the correct explanation of A.
Q34 1 Mark

Assertion (A): Authority can be delegated but responsibility cannot.

Reason (R): The manager remains ultimately accountable for the delegated work.

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Correct answer: Option 1 — Both A and R are true, and R is the correct explanation of A.
Q35 1 Mark

Assertion (A): Centralisation concentrates decision-making at the top.

Reason (R): It allows uniform decisions and clear control but may slow response.

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Correct answer: Option 1 — Both A and R are true, and R is the correct explanation of A.
Q36 1 Mark

Assertion (A): A wider span of management leads to flatter organisation.

Reason (R): With more subordinates per manager fewer management levels are needed.

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Correct answer: Option 1 — Both A and R are true, and R is the correct explanation of A.
Q37 1 Mark

Assertion (A): Organising is essential for achieving organizational objectives.

Reason (R): Organising helps in defining and grouping activities systematically.

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Correct answer: Option 1 — Both A and R are true, and R is the correct explanation of A.
Q38 1 Mark

Assertion (A): Decentralisation leads to a more flexible organisational structure.

Reason (R): Decentralisation involves distributing authority to lower levels of management.

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Correct answer: Option 1 — Both A and R are true, and R is the correct explanation of A.
Q39 1 Mark

Assertion (A): Formal organisations are more effective than informal organisations.

Reason (R): Informal organisations can lead to misunderstandings and conflicts.

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Correct answer: Option 3 — A is true, but R is false.
Statement-Based Questions 8 questions
Q40 1 Mark

Statement 1: Organising establishes structure of authority.

Statement 2: It defines who has the authority over what activities.

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Correct answer: Option 1 — Both statements are true.
Q41 1 Mark

Statement 1: Departments are formed by grouping similar activities.

Statement 2: Each department has a head responsible for its operations.

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Correct answer: Option 1 — Both statements are true.
Q42 1 Mark

Statement 1: Chain of command flows from top to bottom.

Statement 2: Each level has a clear authority and reporting relationship.

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Correct answer: Option 1 — Both statements are true.
Q43 1 Mark

Statement 1: Matrix structure combines functional and divisional.

Statement 2: Employees may report to both functional and project managers.

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Correct answer: Option 1 — Both statements are true.
Q44 1 Mark

Statement 1: Authority should match responsibility.

Statement 2: Without sufficient authority a manager cannot effectively discharge responsibilities.

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Correct answer: Option 1 — Both statements are true.
Q45 1 Mark

Statement 1: The process of organising involves defining and grouping activities.

Statement 2: Organising is not essential for achieving organizational objectives.

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Correct answer: Option 2 — Only Statement 1 is true.
Q46 1 Mark

Statement 1: Decentralisation refers to the systematic delegation of authority throughout all levels of management.

Statement 2: Centralisation means that decision-making is concentrated at the top levels of management.

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Correct answer: Option 1 — Both statements are true.
Q47 1 Mark

Statement 1: A formal organisation is characterized by a structured hierarchy and defined roles.

Statement 2: Informal organisations do not exist within formal structures.

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Correct answer: Option 3 — Only Statement 2 is true.
Case Study / Passage Questions 4 questions
Q48 3 Marks
GlowCare manufactures three product lines: skincare body care and haircare. Currently it has a functional structure (production marketing finance HR). Each function head supports all three product lines. Product launches are slow because product managers have no direct authority over functional staff. The board considers shifting to divisional structure (skincare division, body care division, haircare division — each with its own marketing finance HR).
  1. Currently GlowCare uses:
    AFunctional structure
    BDivisional structure
    CNo structure
    DMatrix only
  2. A divisional structure typically provides:
    AFaster launches
    BBetter cross-product sharing
    CSlower decisions
    DHigher costs
  3. Should GlowCare shift to divisional structure? Justify with pros and cons.
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1. Option 1 — Functional structure
2. Option 1 — Faster launches
3. Functional structure groups jobs by function (production marketing finance HR) — efficient when product range is narrow because each specialist is fully utilised. Suitable for smaller firms. Drawbacks: silo mentality, slow decisions when multiple functions must coordinate. Divisional structure groups jobs by product market or geography — each division has its own functions and a divisional head accountable for profit. Suitable for large diversified firms with multiple products markets or regions. Advantages: faster decisions (each division is self-contained), accountability (P&L owned), better customer focus, easier to identify under-performers. Drawbacks: duplication of resources (each division has its own HR finance), higher costs, conflict between divisions. For GlowCare with three distinct product lines and slow launches the divisional structure is likely better — but care must be taken to share knowledge and avoid wasteful duplication. Sometimes a hybrid (matrix) is used to combine benefits.
Q49 3 Marks
Mr Verma is the founder-CEO of MedPharma. He insists on signing every cheque and approving every purchase decision. Employees feel mistrusted and resign frequently. A consultant suggests delegation — assigning authority for routine decisions to managers — and decentralisation — pushing decision-making down to operational levels.
  1. Verma's current style is:
    ADelegation
    BDecentralisation
    CCentralisation
    DAll three
  2. Delegation involves transferring:
    AAuthority
    BResponsibility
    CAccountability
    DAll three
  3. Explain delegation and decentralisation; advise Verma on what to retain.
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1. Option 3 — Centralisation
2. Option 4 — All three
3. Delegation is the downward assignment of authority by a superior to a subordinate. Three elements: (1) Authority — right to decide; (2) Responsibility — obligation to perform; (3) Accountability — answerability for outcomes. Authority can be delegated; responsibility is shared; accountability stays with the superior. Decentralisation is the systematic delegation of authority across the entire organisation — moving decision-making down. Importance: (a) reduces top management workload; (b) trains future managers; (c) faster decisions; (d) higher motivation as employees feel trusted. Verma's centralisation has costs: he is overworked, decisions are slow, employees are demotivated and leaving. By delegating routine decisions (cheque-signing for amounts under ₹1 lakh; purchase approvals for routine items) and decentralising for operational matters, MedPharma will become more agile and retain talent. Verma should retain only strategic decisions.
Q50 3 Marks
At AutoServ each branch manager directly supervises 25 mechanics. Quality issues are common because the manager has no time for individual coaching. The MD considers two options: (a) reduce span to 8 by adding supervisor layer — taller structure; (b) keep 25 span but invest in better training and SOPs — flat structure. Both approaches have trade-offs.
  1. Span of management refers to the number of subordinates a manager:
    AWider
    BNarrower
    CNo change
    DEqual
  2. Adding a supervisor layer to reduce span creates a:
    ATall structure
    BFlat structure
    CMixed
    DRandom
  3. Compare tall and flat structures and recommend a span for AutoServ.
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1. Option 2 — Narrower
2. Option 1 — Tall structure
3. Span of management (or span of control) is the number of subordinates that can be effectively managed by one manager. Optimal span depends on: (1) nature of work (routine work permits wider span; complex needs narrower); (2) capability of manager and subordinates; (3) availability of training and SOPs (more training = wider span possible); (4) communication and IT support; (5) physical proximity. Tall structure — narrow span — many levels — closer supervision — slow communication — high cost. Flat structure — wide span — fewer levels — less supervision — fast communication — lower cost — needs capable subordinates. AutoServ's 1:25 span is too wide for technical work without adequate training. Option (a) tall structure: better quality but adds cost and lengthens chain. Option (b) flat with better training: maintains speed and cost but requires investment. Best may be a hybrid — moderately reduce span (1:8 or 1:10) while also investing in training and SOPs. The chosen design should fit the work nature and people capability.
Q51 4 Marks
Rajan recently joined as the General Manager of a mid-sized manufacturing company. He noticed that the company had no clear division of work, employees were confused about their roles, and there was frequent duplication of efforts. To address this, Rajan decided to implement a proper organising process. He began by identifying all the activities required to achieve the company's objectives, then grouped similar activities into departments, assigned duties to individuals, and finally established authority-responsibility relationships. He also ensured that adequate resources were allocated to each department. Within a few months, the company saw improved efficiency, reduced conflicts, and better coordination among departments.
  1. What is the FIRST step in the organising process that Rajan followed?
    AAssigning duties to individuals
    BIdentifying and dividing work
    CEstablishing authority relationships
    DAllocating resources to departments
  2. The process of grouping similar activities into departments is known as:
    ADelegation
    BDecentralisation
    CDepartmentalisation
    DCoordination
  3. Explain any two benefits of organising that Rajan's company experienced after implementing the organising process.
  4. Why is establishing authority-responsibility relationships an essential step in the organising process?
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1. Option 2 — Identifying and dividing work
2. Option 3 — Departmentalisation
3. Two benefits of organising experienced by Rajan's company: (1) Improved efficiency – By clearly dividing work and eliminating duplication of efforts, employees could focus on their specific tasks, leading to better productivity. (2) Better coordination – Grouping related activities and establishing clear authority relationships helped different departments work in harmony towards common objectives.
4. Establishing authority-responsibility relationships is essential because it clarifies who has the power to give orders and who is accountable for results. It ensures that every individual knows their position in the hierarchy, reduces confusion, prevents overlapping of duties, and creates a clear chain of command. This makes it easier to coordinate efforts and hold employees accountable for their performance.
Table-Based Questions 4 questions
Q52 3 Marks

Functional vs Divisional Structure:

AspectFunctionalDivisional
Basis of groupingFunctionProduct/region/market
SpecialisationFunctionalGeneral managerial
CostLower (no duplication)Higher (duplication)
AccountabilityFunctionalDivisional P&L
CoordinationDifficult across functionsEasier within division
SuitabilitySingle productMultiple products/markets
  1. A small bakery making one product line is best organised under:
    AFunctional structure
    BDivisional structure
    CBoth
    DNeither
  2. Cost of running a divisional structure is generally:
    ALower
    BHigher
    CSame
    DCannot say
  3. Compare functional and divisional structures and discuss when each is suitable.
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1. Option 1 — Functional structure
2. Option 2 — Higher
3. Functional structure groups by similar function — production marketing finance HR. Specialisation is deep within each function. Best suited to smaller firms with a narrow product range. Pros: efficiency through specialisation; lower cost (no duplication); easy supervision. Cons: weak inter-functional coordination; functional silos; managers grow narrowly. Divisional structure groups by product/region/market — each division has its own functions. Best suited to large diversified firms. Pros: clear accountability (each division is a profit centre); faster decisions; managerial development (each divisional head runs a mini-business). Cons: duplication of resources across divisions; rivalry between divisions; higher cost. Choice depends on size, diversity, and growth strategy. Many large companies use hybrid (matrix) structures combining functional expertise with divisional accountability.
Q53 3 Marks

Delegation vs Decentralisation:

AspectDelegationDecentralisation
NatureProcessResult/policy
ScopeLimited to two personsOrganisation-wide
Authority retainedMore by superiorSpread to lower levels
PurposeReduce manager workloadDevelop future managers
NecessityRequired in every orgOptional
ControlStays with delegatorStrategic only at top
  1. Delegation is essentially a:
    AProcess
    BResult
    CBoth
    DNeither
  2. Decentralisation is for the organisation:
    AYes always
    BOptional
    CForbidden
    DRandom
  3. Explain the difference between delegation and decentralisation; discuss importance of decentralisation.
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1. Option 1 — Process
2. Option 2 — Optional
3. Delegation is the act of a superior assigning authority to a subordinate to carry out specific tasks. It is a process between two individuals. Decentralisation is the systematic delegation of authority across the entire organisation — it is a managerial philosophy and result. Every organisation has some delegation but the degree of decentralisation varies. Importance of decentralisation: (1) reduces burden on top management; (2) develops initiative among subordinates; (3) develops future managers; (4) facilitates growth — only decentralised firms can grow large; (5) better control as each unit becomes accountable; (6) quick decisions at the point of action. Decentralisation does NOT mean abdication — top management retains strategic decisions and overall control while routine decisions move down. The right balance depends on size complexity and business environment. Highly dynamic environments favour decentralisation; stable environments may not need it.
Q54 6 Marks

Compare functional and divisional organisational structures across the criteria below.

CriterionFunctionalDivisional
Basis? Function? Product/region/market
Specialisation? Functional depth? General management
Cost? Lower? Higher
Coordination? Difficult cross-function? Easier within division
Suitability? Single product? Multiple products
Q55 6 Marks

The table below shows the number of subordinates reporting to each manager in two different companies. Which company demonstrates a wider span of control, and what does this imply about the number of hierarchical levels in that company?

Manager LevelNumber of Subordinates in Company ANumber of Subordinates in Company B
Top Level Manager48
Middle Level Manager48
Lower Level Manager48
Picture-Based Questions 2 questions
Q56 3 Marks

Study the functional vs divisional structure diagram and answer:

Organising figure
  1. A small bakery making one product line is best organised under:
    AFunctional
    BDivisional
    CBoth equal
    DNeither
  2. Cost of running a divisional structure is generally:
    ALower
    BHigher
    CSame
    DCannot say
  3. Compare functional and divisional structures and discuss when each is suitable.
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1. Option 1 — Functional
2. Option 2 — Higher
3. Functional structure groups jobs by similar function — production, marketing, finance, HR. Specialisation is deep within each function. Best suited to smaller firms with a narrow product range. Pros: efficiency through specialisation, lower cost (no duplication), easy supervision. Cons: weak inter-functional coordination, functional silos, narrow managerial growth. Divisional structure groups jobs by product, region, or market — each division has its own functions. Best suited to large diversified firms. Pros: clear accountability (each division is a profit centre), faster decisions, managerial development (each divisional head runs a mini-business). Cons: duplication of resources across divisions, rivalry between divisions, higher cost. Choice depends on size, diversity, and growth strategy. Many large companies use hybrid (matrix) structures combining functional expertise with divisional accountability.
Q57 27 Marks

Based on the given diagram, answer the following:

Organising figure
  1. Which is the FIRST step in the process of organising?
    ADepartmentalisation
    BAssignment of Duties
    CIdentification and Division of Work
    DEstablishing Reporting Relationships
  2. What is the purpose of 'Departmentalisation' in the organising process?
  3. Which step in the organising process creates a hierarchy and defines authority-responsibility relationships?
    AIdentification and Division of Work
    BDepartmentalisation
    CAssignment of Duties
    DEstablishing Reporting Relationships
  4. Why is 'Division of Work' considered essential in the organising process? Explain with one benefit.
  5. In which type of organisational structure are departments created on the basis of functions performed?
    ADivisional Structure
    BFunctional Structure
    CCommittee Structure
    DMatrix Structure
  6. State any TWO advantages of a Divisional Organisational Structure.
  7. Which organisational structure is most suitable for a large organisation dealing in multiple product lines?
    AFunctional Structure
    BInformal Structure
    CDivisional Structure
    DLine Structure
  8. Mention any ONE limitation of Functional Organisational Structure.
  9. Which element of delegation refers to the obligation of a subordinate to perform the assigned work?
    AAuthority
    BAccountability
    CResponsibility
    DPower
  10. Distinguish between 'Authority' and 'Accountability' as elements of delegation.
  11. Which of the following statements about accountability is CORRECT?
    AAccountability can be delegated to subordinates.
    BAccountability flows downward in the organisation.
    CAccountability cannot be delegated; it always rests with the delegator.
    DAccountability is the same as responsibility.
  12. Why is it said that 'authority can be delegated but responsibility cannot'? Explain briefly.
  13. Which type of organisation emerges spontaneously out of social interactions among employees?
    AFormal Organisation
    BDivisional Organisation
    CFunctional Organisation
    DInformal Organisation
  14. State any TWO features of Formal Organisation as shown in the diagram.
  15. Which of the following is a DISADVANTAGE of Informal Organisation?
    AIt fulfils social needs of employees.
    BIt speeds up communication.
    CIt may spread rumours and resist change.
    DIt supplements formal organisation.
  16. Can informal organisation exist without formal organisation? Justify your answer.
  17. How does decentralisation facilitate the growth of an organisation?
  18. Which of the following BEST describes how decentralisation provides relief to top management?
    ATop management takes all operational decisions.
    BTop management is freed from routine decisions and can focus on strategic policy-making.
    CTop management delegates accountability to subordinates.
    DTop management eliminates the need for middle-level managers.
  19. Distinguish between 'Delegation' and 'Decentralisation' on the basis of scope.
  20. Which importance of decentralisation is reflected when lower-level managers are given authority to make decisions independently?
    ARelief to Top Management
    BFacilitates Growth
    CDevelops Initiative in Subordinates
    DQuick Decision Making
  21. Which is the FIRST step in the process of organising as shown in the diagram?
    ADepartmentalisation
    BAssignment of Duties
    CIdentification and Division of Work
    DEstablishing Reporting Relationships
  22. Which step in the organising process directly leads to the creation of a chain of command?
    AIdentification and Division of Work
    BDepartmentalisation
    CAssignment of Duties
    DEstablishing Reporting Relationships
  23. Why is 'Assignment of Duties' considered an important step in the organising process? Explain briefly.
  24. According to the diagram, which element of delegation 'cannot be delegated'?
    AAuthority
    BResponsibility
    CAccountability
    DBoth Authority and Responsibility
  25. Distinguish between 'Authority' and 'Responsibility' as elements of delegation.
  26. Which of the following statements about delegation is CORRECT?
    AResponsibility can be fully delegated to subordinates.
    BAccountability flows downward from superior to subordinate.
    CA manager can delegate authority but remains accountable for results.
    DDelegation removes the superior's responsibility entirely.
  27. Explain how the principle of 'parity of authority and responsibility' is related to effective delegation.
  28. Which type of organisation 'emerges spontaneously' according to the diagram?
    AFormal Organisation
    BInformal Organisation
    CBoth Formal and Informal
    DNeither of the two
  29. State any two features of Formal Organisation as depicted in the diagram.
  30. Can informal organisation be completely eliminated by management? Give reasons to support your answer.
Show answersHide answers
1. Option 3 — Identification and Division of Work
2. Departmentalisation involves grouping similar or related jobs into departments or divisions so that work can be coordinated effectively and specialisation can be achieved.
3. Option 4 — Establishing Reporting Relationships
4. Division of work ensures that the total work is broken into manageable activities so that no single individual is burdened with the entire work. It promotes specialisation, which increases efficiency and productivity.
5. Option 2 — Functional Structure
6. 1. It facilitates product specialisation as each division focuses on a specific product line. 2. It is easier to fix accountability and evaluate the performance of each division separately.
7. Option 3 — Divisional Structure
8. One limitation of Functional Structure is that it may lead to conflicts among different departments as each functional head may try to dominate over others, creating coordination problems.
9. Option 3 — Responsibility
10. Authority is the right of a superior to give orders and make decisions, and it flows downward in the hierarchy. Accountability, on the other hand, is the answerability for the final outcome of the assigned task and flows upward — the subordinate is accountable to the superior for the results.
11. Option 3 — Accountability cannot be delegated; it always rests with the delegator.
12. A manager can pass on authority (the right to act and decide) to a subordinate, but the ultimate responsibility for the outcome still remains with the manager who delegated. The manager cannot escape the obligation to ensure the task is completed correctly, even though the subordinate performs it.
13. Option 4 — Informal Organisation
14. 1. Formal organisation is deliberately created by management to achieve organisational goals. 2. It has clearly defined roles, authority, and responsibility for each position, and communication follows official channels.
15. Option 3 — It may spread rumours and resist change.
16. No, informal organisation generally cannot exist without formal organisation. Informal organisation arises within the formal structure as employees interact with each other while performing their official duties. It is a by-product of formal organisation and emerges from the social relationships formed in the workplace.
17. Decentralisation facilitates growth by allowing organisations to expand into new markets or product lines without overburdening top management. Since authority is distributed, each division or unit can operate semi-independently, enabling the organisation to grow without losing control.
18. Option 2 — Top management is freed from routine decisions and can focus on strategic policy-making.
19. Delegation has a narrow scope — it is a process between a superior and an immediate subordinate and is limited to specific tasks. Decentralisation has a wider scope — it is an organisation-wide policy of systematically distributing authority across all levels of management.
20. Option 3 — Develops Initiative in Subordinates
21. Option 3 — Identification and Division of Work
22. Option 4 — Establishing Reporting Relationships
23. Assignment of Duties is important because it allocates specific tasks to individual employees based on their skills and qualifications. This ensures accountability, avoids duplication of work, and helps in achieving organisational goals efficiently.
24. Option 3 — Accountability
25. Authority refers to the right of an individual to command subordinates and make decisions, and it flows downward in the hierarchy. Responsibility is the obligation of a subordinate to perform the assigned task, and it flows upward, meaning the subordinate is answerable to the superior for the work done.
26. Option 3 — A manager can delegate authority but remains accountable for results.
27. The principle of parity of authority and responsibility states that authority and responsibility must be co-equal. If a subordinate is given responsibility without adequate authority, they cannot perform the task effectively. Similarly, giving authority without corresponding responsibility may lead to misuse. Effective delegation requires a proper balance between the two.
28. Option 2 — Informal Organisation
29. Two features of Formal Organisation: (i) It is deliberately created by management to achieve organisational goals. (ii) It has clearly defined authority and responsibility for each position, and communication follows official channels.
30. No, informal organisation cannot be completely eliminated by management. It arises naturally from social interactions and personal relationships among employees. Since human beings are social by nature, they will always form informal groups at the workplace. Instead of trying to eliminate it, management should recognise it and use it positively to complement the formal organisation, improve communication, and boost employee morale.
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