Departmentation
Departmentation means division of work
into smaller units and their re-grouping into bigger units (departments) based
on similarity of features.
As the organization grows in size, the
work is divided into units and sub-units. Departments are created and
activities of similar nature are grouped in one unit. Each department is headed
by a person known as departmental manager.
Departmentation, thus, helps in expanding
an organization and promotes efficiency by dividing the work on the basis of specialization
of activities and appointing people in various departments on the basis of
their specialized knowledge.
“Departmentalization is the grouping of jobs, processes and
resources into logical units to perform some organizational tasks.”
Centralization is
a process where the concentration of decision making is in a few hands. All the
important decision and actions at the lower level, are subject to the approval
of top management.
According to Allen, “Centralization” is the systematic and consistent reservation of
authority at central points in the organization.
The implication of centralization can be:
-
1. Reservation of decision-making power
at top level.
2. Reservation of operating authority
with the middle level managers.
3. Reservation of operation at lower
level at the directions of the top level.
Decentralization is
a systematic delegation of authority at all levels of management and
in all the organization. In a decentralization concern, authority in retained
by the top management for taking major decisions. Rest of the authority may be
delegated to the middle level and lower level of management.
According to Allen, “Decentralization
refers to the systematic effort to delegate to the lowest level of authority
except that which can be controlled and exercised at central points.
Authority is the power to make decisions which
guide the action of another. It is a relationship between two individuals—one
of them superior, and the other a subordinate. The superior frames and
transmits decisions, with the expectation that the subordinates will accept and
comply with them. The subordinate expects such decisions, and his behaviour is
determined by them.
Authority means a formal, institutional, or legal power in a
particular job, function or position that empowers the holder of that job,
function or position to successfully perform his task.
Responsibility can be defined as an obligation
(kartavy) of a subordinate to perform the duties assigned to him.
Thus, the responsibility is the obligation to
perform certain functions and achieve results. It is the liability for proper
discharge of duties. According to Koontz and O’Donnell “the obligation of a
subordinate to whom a duty has been assigned to perform the duty”.
Span of Control
refers to the number of subordinates under the manager's
direct control. As an example, a manager with five direct reports
has a span of control of five.
In
a classical type of organizational
structure, which is the most common form, the effectiveness
and efficiency of operations is determined by the number of people under direct
supervision of a manager. For most effective operations, it is necessary to
have the optimum number of subordinates to supervise.
FORMS OF OWNERSHIPS
The different types of business ownership
are: - 1. Single Ownership (Private Undertaking). 2. Partnership. 3. Joint
Stock Company 4. Cooperative Organization (Or Societies) 5. Public Sector 6.
Private Sector.
1. Single
Ownership (Proprietorship):
A business owned by one man is called
single ownership. Single ownership does well for those enterprises which
require little capital and lend themselves readily to control by one person.
Examples of enterprises run by single
owner are printing press, auto repair shop, wood working plant, a small fabrication
shop, retail trades, service industries and small engineering firms etc. In
single ownership, one person contributes the original assets to start the
business, maintains and controls business operations, enjoy full benefit in
terms of profit and is fully liable for all debts associated with the business.
2. Partnership:
A single owner becomes inadequate as the
size of the business enterprise grows. He may not be able to do away with all
the duties and responsibilities of the grown business. At this stage, the
individual owner may wish to associate with him more persons who have either
capital to invest or possess special skill and knowledge to make the existing
business still more profitable.
Such a combination of individual traders
is called Partnership. Partnership may be defined as the relation between
persons who have agreed to share the profits of a business carried on by all or
any of them acting for all.
Partnership is an association of two or
more (up to 20) persons to carry on as co-owners of a business for profit.
Partnerships are based upon a partnership
agreement.
3. Joint Stock
Company:
A joint stock company is an Association
of individuals, called shareholders, who join for profit and agree to supply
capital divided into shares that are transferable for carrying on a specific
business. A joint stock company consists of more than 20 persons for carrying
any business other than the banking business.
These persons give a name to the company,
mention the purpose for which it is formed, and state the nature and the amount
of capital (shares) to be issued, etc., and submit the proposal to the
Registrar of Companies. As the registrar issues a certificate in this
connection, the company starts operating. The managing body of a joint stock
company is Board of Directors elected by the shareholders.
4. Cooperative
Organization (Or Societies):
Cooperative organization is a kind of
voluntary, democratic ownership formed by some motivated individuals for
obtaining necessities of everyday life at rates less than those of the market.
The principle behind the cooperative is that of cooperation and self-help. E.g.
Women Self Help Groups at village, AMUL
It is a form of private ownership which
contains features of large partnership as well as some features of the
corporation. The main aim of the cooperative is to eliminate profit and provide
goods and services to the members of the cooperative at cost.
Members pay fees or buy shares of the cooperative,
and profits are periodically redistributed to them. Since each member has only
one vote (unlike in joint stock companies), this avoids the concentration of
control in a few hands.
In a cooperative, there are shareholders,
a board of directors and the elected officers similar to the corporation. There
are periodic meetings of shareholders, also. Special laws deal with the
formation and taxation of cooperatives.
5. Public
Sector:
Public enterprises are controlled and
operated by the Government to produce and supply goods and services required by
the society. Ultimate control of public enterprises remains with the state and
the state runs it with a service motto. Public enterprises are controlled and
operated by the Government either solely or in association with private
enterprises.
Public sectors are accountable in terms
of their results to Parliament and State Legislature. A public enterprise is
seldom as efficient as a private enterprise; wastage and inefficiency can
seldom be reduced to a minimum.
6. Government
Sector:
The
government Sector consists of the following resident institutional units: all
units of central, state, or local government; all social security funds at each
level of government; all non-market non-profit institutions that are controlled
and financed by government units.
7. Private
Sector:
Private sector serves personal interests
and is a non-government sector. Profit (rather than service) is the main
objective. Private sector constitutes mainly consumer’s goods industries where
profit possibilities are high. Private sector does not undertake risky ventures
or those having low-profit margin. Private enterprises are run by businessmen,
capital is collected from the private partners.
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