Organising Class 12 Business Studies: Structures, Delegation, Decentralisation and Board Answers

What Organising is about

Weightage: This chapter shares 14 of the 80 theory marks with Planning.Source: CBSE Business Studies (054) syllabus 2026-27, course structure (marks are printed once per group of units)

In real board papers: asked in 2 of the 2 board papers we hold (2026 to 2026), on average 10 marks per paper. See the questions

Key concepts

Steps in the process of organising

NCERT section Steps in the Process of Organising

1. Identification and division of work: the total work is divided into manageable activities (jobs) according to the plan, avoiding duplication and sharing the burden.
2. Departmentalisation: similar or related jobs are grouped into units or departments, e.g. by function (production, finance) or by product or territory.
3. Assignment of duties: jobs are given to people best suited to them, matching skills to the job.
4. Establishing reporting relationships: each person knows whom to take orders from and to whom they are accountable; this creates a hierarchy.

Worked example

Suppose Class 11 students planning a farewell party listed all the tasks (decoration, food, music, invitations) and then formed four committees, one for each group of related tasks. Identify the two steps of organising followed.

Try it first, then show the solutionSolution

1. Listing all the tasks: identification and division of work. (1)
2. Forming committees for groups of related tasks: departmentalisation. (1)

Answer: Identification and division of work; departmentalisation.

Importance of organising

NCERT section Importance of Organising

1. Benefits of specialisation: work is divided and assigned systematically, so people repeat tasks and become specialists.
2. Clarity in working relationships: lines of communication and reporting are clear; accountability can be fixed.
3. Optimum utilisation of resources: no overlapping or duplication of work, so resources are used well.
4. Adaptation to change: the structure can be modified to suit changes in the environment.
5. Effective administration: clear jobs and relationships avoid confusion and duplication.
6. Development of personnel: delegation lets managers handle routine work through subordinates and develop new methods, and lets subordinates grow.
7. Expansion and growth: the firm can add jobs, departments, products and locations.

Worked example

Suppose in a bakery each worker knows exactly to whom he reports and what he is responsible for, so blame can be fixed when something goes wrong. Which point of importance of organising is this? (1 mark)

Try it first, then show the solutionSolution

1. Clear reporting lines and fixed accountability are about working relationships.

Answer: Clarity in working relationships.

Functional structure

NCERT section Types of Organisation Structure

Jobs are grouped by major functions (production, purchase, marketing, finance, HR), each under a functional head reporting to a coordinating head.

Advantages: occupational specialisation and efficient use of manpower; control and coordination within each department; higher managerial and operational efficiency; minimal duplication of effort and economies of scale; easier training (limited range of skills); due attention to every function.

Disadvantages: less emphasis on overall objectives (risk of 'functional empires'); problems in coordination across departments; conflict of interests between departments; inflexibility and narrow outlook; functional heads get no training for top positions.

Suitable when the organisation is large, has diversified activities and operations need a high degree of specialisation (generally with one main product line).

Worked example

Suppose a footwear company that makes only sports shoes groups its staff into production, marketing, finance and HR departments, each with a head. Name the structure and give two advantages. (3 marks)

Try it first, then show the solutionSolution

1. Structure: functional structure. (1)
2. Advantage 1: occupational specialisation, since staff in each department do similar tasks and improve. (1)
3. Advantage 2: minimal duplication of effort, giving economies of scale and lower costs (or easier training). (1)

Answer: Functional structure; specialisation and minimal duplication (economies of scale).

Divisional structure and the comparison

NCERT section Types of Organisation Structure

The organisation is split into separate divisions by product (e.g. cosmetics, garments, footwear). Each division is multifunctional and self-contained, with its own production, marketing and finance, and acts as a profit centre whose head is responsible for its profit or loss.

Advantages: product specialisation develops varied skills in divisional heads (prepares them for top posts); divisional heads are accountable for profits, giving a basis for measuring performance; flexibility and initiative with faster decisions (each division is autonomous); easy expansion by adding new divisions.

Disadvantages: conflict among divisions over allocation of funds; higher cost due to duplication of activities across divisions; divisional heads may gain power and ignore organisational interests.

Suitable for firms making a large variety of products using different resources, and for growing firms.

Basis	Functional	Divisional
Formation	Based on functions	Based on product lines, with functions inside each division
Specialisation	By function	By product
Responsibility	Difficult to fix on a department	Easy to fix for each division's performance
Managerial development	Difficult: each head sees one function	Easier: divisional head handles all functions
Cost	Economical: functions not duplicated	Costly: duplication of resources
Coordination	Difficult across functions for multiple products	Easy, as all functions for a product are in one division

Worked example

Suppose 'Deccan Motors' makes both commercial vehicles (buses, trucks) and passenger cars, each needing different resources and markets. Which structure suits it, and why? (3 marks)

Try it first, then show the solutionSolution

1. Structure: divisional structure. (1)
2. Reason 1: it has distinct product lines that need different resources, so each can be a separate division. (1)
3. Reason 2: each division head can be held accountable for its profit, and new divisions can be added as it grows. (1)

Answer: Divisional structure.

Formal and informal organisation

NCERT section Formal and Informal Organisation

Formal organisation: the structure of authority relationships deliberately designed by top management; specifies who reports to whom; has rules and procedures; emphasises work.

• Advantages: easy to fix responsibility; no ambiguity in roles and no duplication; unity of command through a chain of command; effective accomplishment of goals; stability (behaviour is predictable).
• Limitations: procedural delays (the chain of command must be followed); may not recognise creative talent (no deviation allowed); does not show all human relationships.

Informal organisation: a network of social relationships among employees that arises spontaneously from interaction (e.g. a Sunday cricket group); norms come from the group; communication has no fixed direction (grapevine); no definite structure.

• Advantages: faster spread of information and quick feedback; fulfils social needs and gives a sense of belonging; compensates for inadequacies of the formal organisation (e.g. testing employees' reactions to a plan).
• Disadvantages: spreads rumours; may resist change; pressure to conform to group norms that may go against the organisation.

Basis	Formal	Informal
Meaning	Authority relationships created by management	Social relationships from interaction
Origin	Rules and policies	Social interaction
Authority	From position	From personal qualities
Communication	Through the scalar chain	Any direction, no planned route
Nature	Rigid	Flexible
Leadership	Managers are leaders	Leaders chosen by the group

Worked example

State any three limitations of formal organisation. (3 marks)

Try it first, then show the solutionSolution

1. Procedural delays: the chain of command must be followed, slowing decisions. (1)
2. Lack of recognition of creative talent: no deviation from rigid policies is allowed. (1)
3. It does not give a complete picture of human relationships, as it stresses structure and work. (1)

Answer: Procedural delays; ignores creative talent; does not show all human relationships.

Delegation: elements and importance

NCERT section Delegation

Delegation is the downward transfer of authority from a superior to a subordinate. The manager remains answerable for the result: authority can be delegated, responsibility is shared, accountability cannot be delegated.

Elements:
1. Authority: the right to command and get things done; flows downward; it is restricted by laws and rules.
2. Responsibility: the obligation of a subordinate to properly perform the assigned duty; flows upward; authority should match responsibility.
3. Accountability: being answerable for the final outcome; it cannot be passed on; flows upward.

Importance:
1. Effective management: managers are freed from routine work to focus on important matters.
2. Employee development: subordinates get chances to use their talents and grow, preparing them for higher posts.
3. Motivation of employees: trust shown through delegation builds confidence and self-esteem.
4. Facilitation of growth: trained, experienced staff are ready to lead new units.
5. Basis of management hierarchy: delegation creates superior-subordinate relationships and the chain of authority.
6. Better coordination: clear authority, responsibility and accountability avoid overlapping and duplication.

Worked example

Suppose the sales manager of a cosmetics firm gives a team leader the authority to approve discounts up to 10 per cent, but when sales fall, the CEO still asks the sales manager to explain. Identify the element of delegation that stayed with the sales manager and explain it. (3 marks)

Try it first, then show the solutionSolution

1. Element: accountability. (1)
2. Meaning: answerability for the final outcome of the assigned work. (1)
3. It cannot be delegated: though authority was passed to the team leader, the sales manager remains answerable to the CEO. (1)

Answer: Accountability, which cannot be delegated.

Decentralisation and delegation versus decentralisation

NCERT section Decentralisation

Decentralisation means systematically delegating authority to the lowest levels, except what can only be exercised at the top. Centralisation keeps decision-making at the top. No organisation is fully centralised or decentralised; a balance is needed.

Importance of decentralisation:
1. Develops initiative among subordinates: they learn to take decisions and become self-reliant.
2. Develops managerial talent for the future: lower managers gain experience and become ready for higher posts.
3. Quick decision making: decisions are taken close to the action without referring upwards.
4. Relief to top management: top managers have time for strategy.
5. Facilitates growth: divisions get autonomy and compete, raising output.
6. Better control: performance at each level can be measured and units held accountable.

Basis	Delegation	Decentralisation
Nature	Compulsory: no manager can do all the work	Optional: a policy decision of top management
Freedom of action	Less: more control by superiors	More: less control over decisions at lower levels
Status	A process	The result of delegating systematically to all levels
Scope	Narrow: superior and immediate subordinate	Wide: extends to the lowest level
Purpose	Lessen the manager's burden	Increase the role of subordinates and their autonomy

Worked example

State any three points of significance of decentralisation. (3 marks)

Try it first, then show the solutionSolution

1. Develops initiative among subordinates: they take decisions on their own. (1)
2. Quick decision making: decisions are taken at lower levels without delay. (1)
3. Relief to top management: top managers can focus on policy and strategy. (1)

Answer: Initiative, quick decisions, relief to top management (also managerial talent, growth, control).

Organising in real life

Each concept, met in an everyday situation. Read the situation, answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Topics in this chapter

• Functional and Divisional Structure
• Delegation of Authority
• Decentralisation

Organising: key facts

Organising process (4)

1. 1.Identify and divide work
2. 2.Departmentalise
3. 3.Assign duties
4. 4.Establish reporting relationships

Departments by function, product or territory.

Importance of organising (7)

Specialisation, Clarity in relationships, Optimum use of resources, Adaptation to change, Effective administration, Development of personnel, Expansion and growth

Mnemonic 'SCOAEDE'.

Elements of delegation

Authority (flows down, can be delegated) + Responsibility (flows up) + Accountability (flows up, cannot be delegated)

Authority should match responsibility.

Functional vs divisional

Functional: grouped by function, economical, specialisation; Divisional: grouped by product, costly, easy to fix responsibility

Learn six bases for the 6-mark question.

Formal vs informal

Formal: deliberate, rules, scalar chain, rigid; Informal: spontaneous, group norms, grapevine, flexible

Informal leaders are chosen by the group.

Delegation vs decentralisation

Delegation: compulsory, process, narrow scope; Decentralisation: optional, result, wide scope

Decentralisation is delegation extended to the lowest level.

How the board asks Organising

The question patterns to expect, and the method that works for each.

Tricks to remember Organising

Short memory aids. Say each one aloud once, then use it on a question the same day.

• Process: 'I Do All Errands'

  Identify and divide work, Departmentalise, Assign duties, Establish reporting relationships.

  Use it when: Four steps of organising.

• Delegation: 'ARA'

  Authority goes down; Responsibility and Accountability go up. Authority can be passed on; accountability cannot.

  Use it when: Elements and their direction.

• Decentralisation importance: 'I Train Quick Relief Growing Control'

  Initiative, Talent for future, Quick decisions, Relief to top, Growth, Control.

  Use it when: Six points of importance of decentralisation.

• Delegation importance: 'Eagles Eat More For Big Chicks'

  Effective management, Employee development, Motivation, Facilitation of growth, Basis of hierarchy, Coordination.

  Use it when: Six points of importance of delegation.

Organising: board-level solved questions

Ordered from board level to HOTS. Cover the solution, write your own, then compare step by step.

Case-study practice (Section E style)

Read the situation, then answer every part. In the board paper this is a 4-mark question split into 1 + 1 + 2 marks.

Where the marks are

How a typical answer is split into step marks. Show every step: a right final answer alone rarely earns full marks.

Where students lose marks in Organising

The slips examiners see most often, and what to write instead.

• ✗Mistake: Saying accountability can be delegated

  Students think whatever is assigned moves down.

  Wrong working

  The manager delegated authority and accountability to the supervisor.

  Right working

  The manager delegated authority; accountability for the outcome remains with the manager.

  ✓Do this: Authority is delegated; accountability is never delegated.

  Usually costs: 1 mark in an MCQ; the key mark in a delegation case.

• ✗Mistake: Confusing responsibility and accountability

  Both mean being 'responsible'.

  ✓Do this: Responsibility = obligation to do the assigned duty; accountability = answerability for the outcome.

  Usually costs: 1 mark.

• ✗Mistake: Choosing divisional structure for a single-product firm

  Large size is taken as the only test.

  ✓Do this: Functional suits a large firm with one main product and specialised operations; divisional suits several product lines.

  Usually costs: The identification mark and the reasons that follow.

• ✗Mistake: Writing that decentralisation is compulsory

  Mixing it with delegation.

  ✓Do this: Delegation is compulsory for every manager; decentralisation is an optional policy of top management.

  Usually costs: 1 mark in a distinction.

• ✗Mistake: Giving advantages of formal organisation as 'fast communication'

  Formal is assumed to be efficient in everything.

  ✓Do this: Fast communication is an advantage of informal organisation; formal causes procedural delays.

  Usually costs: 1 mark.

NCERT exercise guide: Organising

What each exercise in the NCERT chapter tests, how to approach it, and a question of the same kind solved step by step. Questions here are written in our own words.

Organising: previous year questions

• Asked in 2 of the 2 board papers we hold (2026 to 2026), on average 10 marks per paper; 7 questions in all, counting OR alternatives. In 4 of 4 sample papers.

Counted from the real papers on our previous year papers page, not estimated. Average marks are over every board paper we hold, with an OR pair counted once. Chapter tags are ours.

Solved board questions from Organising

Real questions from recent papers. Try each one first, then open our step-by-step solution with marks per step.

Every Organising question, by year

Practice questions on Organising

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

1. Q1 · 1 mark · MCQBoard level

   Concentration of decision-making authority at the top of the management hierarchy is called:
   (a) Delegation (b) Decentralisation (c) Centralisation (d) Departmentalisation

   Hint

   Opposite of dispersal.

   Answer

   (c) Centralisation

2. Q2 · 1 mark · Very short answerBoard level

   Which step of organising matches jobs with the people best suited to them?

   Hint

   Right person, right job.

   Answer

   Assignment of duties.

3. Q3 · 3 marks · Case-basedHarder board level

   Suppose in a hospital, a group of nurses who lunch together start a rumour that night shifts will be doubled, and many nurses protest. State two disadvantages of informal organisation seen here and suggest how management should handle it. (3 marks)

   Hint

   False news, opposition.

   Answer

   It spreads rumours, which act against the interest of the formal organisation (1); it may resist change, delaying management's plans (1). Management should not try to suppress the informal group but use it, for example by quickly sharing the correct shift plan through both formal notices and the group itself, so the rumour dies out (1).

4. Q4 · 3 marks · Short answerBoard level

   State any three disadvantages of functional structure. (3 marks)

   Hint

   Empires, coordination, conflict.

   Answer

   Less emphasis on overall objectives as heads pursue departmental goals ('functional empires'); problems in coordination across departments; conflict of interests between departments (also inflexibility and no training of heads for top posts).

5. Q5 · 6 marks · Case-basedHOTS / competency

   Suppose an IT company, worried that AI tools are changing its business fast, gives its project teams power to decide tools, hiring and client pricing without waiting for head office. Identify the concept and explain how it helps the firm in this situation with three points. (6 marks)

   Hint

   Authority to the lowest levels.

   Answer

   Decentralisation (1). Quick decision making: teams can react to fast AI-led changes without referring upward (1.5). Develops initiative and managerial talent: team leaders learn to take decisions and become future leaders (1.5). Relief to top management: head office can focus on the firm's long-term strategy in a disrupted market (1.5). Also better control, as each team's performance can be measured (0.5).

6. Q6 · 4 marks · Short answerHarder board level

   Explain 'facilitation of growth' and 'basis of management hierarchy' as points of importance of delegation. (4 marks)

   Hint

   Ready managers; chain of authority.

   Answer

   Facilitation of growth: delegation gives subordinates experience, so trained people are ready to lead new branches or units when the firm expands (2). Basis of management hierarchy: delegation sets up superior-subordinate relationships, and the flow of authority from top to bottom creates the hierarchy of the organisation (2).

7. Q7 · 3 marks · Case-basedHarder board level

   Suppose a garment exporter makes only cotton shirts, but has 2,000 workers and needs high skill in cutting, stitching and finishing. Which structure suits it? Give two reasons. (3 marks)

   Hint

   One product, specialised operations.

   Answer

   Functional structure (1). It has one product line, so grouping by functions works; operations need a high degree of specialisation, which functional departments provide; it avoids duplication, giving economies of scale (1 + 1).

8. Q8 · 4 marks · Short answerBoard level

   Differentiate between formal and informal organisation on four bases. (4 marks)

   Hint

   Origin, authority, communication, nature.

   Answer

   Origin: company rules and policies vs social interaction. Authority: from position vs from personal qualities. Communication: through the scalar chain vs in any direction. Nature: rigid vs flexible (also leadership: managers vs leaders chosen by the group).

9. Q9 · 4 marks · Short answerHOTS / competency

   'Delegation is compulsory but decentralisation is optional.' Explain the statement and give two more differences. (4 marks)

   Hint

   Can one manager do everything?

   Answer

   Delegation is compulsory because no manager can do all the work alone; work must be shared with subordinates (1). Decentralisation is optional because top management decides, as a policy, how far to spread authority to lower levels (1). Other differences: delegation is a process while decentralisation is its result; delegation has narrow scope (superior-subordinate) while decentralisation extends to the lowest level (1 + 1).

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1. 1.Define organising.Show answer

   Identifying and grouping work, defining and delegating authority and responsibility, and establishing relationships to achieve objectives.

2. 2.Four steps of organising?Show answer

   Identification and division of work, departmentalisation, assignment of duties, establishing reporting relationships.

3. 3.Seven points of importance of organising?Show answer

   Specialisation, clarity in relationships, optimum use of resources, adaptation to change, effective administration, development of personnel, expansion and growth.

4. 4.When is functional structure suitable?Show answer

   Large firm, diversified activities, operations needing high specialisation (mainly one product line).

5. 5.Two disadvantages of divisional structure?Show answer

   Conflict over funds among divisions; higher cost due to duplication (also divisional heads ignoring organisational interests).

6. 6.Three elements of delegation?Show answer

   Authority, responsibility, accountability.

7. 7.Which element cannot be delegated?Show answer

   Accountability.

8. 8.Define informal organisation.Show answer

   A network of social relationships among employees arising spontaneously from interaction.

9. 9.Three limitations of formal organisation?Show answer

   Procedural delays, lack of recognition of creative talent, incomplete picture of human relationships.

10. 10.Six points of importance of decentralisation?Show answer

    Initiative, managerial talent, quick decisions, relief to top management, growth, better control.

11. 11.Is decentralisation compulsory?Show answer

    No, it is an optional policy; delegation is compulsory.

Quick revision checklist

The night before the exam: can you do each of these without looking?

• ☐Can you list the four steps of organising and spot them in a case?
• ☐Can you write the seven points of importance of organising?
• ☐Can you choose between functional and divisional structure from a case and give reasons?
• ☐Can you compare the two structures on six bases?
• ☐Can you state advantages and limitations of formal and informal organisation?
• ☐Can you explain authority, responsibility and accountability, and which cannot be delegated?
• ☐Can you write six points of importance of delegation and of decentralisation?
• ☐Can you distinguish delegation from decentralisation?

Organising: frequently asked questions