National Institute of Technology 2009 M.B.A Finance ESSENTIALS OF MANAGEMENT - Question Paper

Q. 3: B) A formal organization is often conceived as a communications system. Is it? How?
ANS:
Formal organization is the intentional structure of roles in a formally organized enterprise. This does not mean there is anything inherently inflexible about it. If a manager is to arrange well, the structure must furnish an environment in which individual performance, both current and future, contributes most effectively to group goals. A formal organization can also be conceived as a communication system where the flow of info is either from top down or bottom up through the accurate channels. For e.g.: the illustration indicates a formal organization where the flow of info is either from the President to the Vice President and to the Division Managers and finally to the Department Managers or vice versa which is from the Department managers to the Division Managers to the Vice President to the President

Q. 4: A) Why do most small companies use functionally organized departments?
ANS:
Grouping activities in accordance with the functions of an enterprise -functional departmentation - embodies what enterprises typically do. Since ail enterprises undertake the creation of something useful and desired by others, the basic enterprise functions are production, selling goods or service at a price and financing. It is logical to group these activities into such departments as engineering, production, sales or marketing and finance. The figure beneath indicates typical functionally organized departments.
Often these particular functional designations do not appear in the organization chart. 1st there is no generally accepted terminology : A manufacturing enterprise employs the terms "production", "sales" and finance; A wholesaler is concerned with activities as "buying", "selling", and "finance" and a railroad is involved with "operations", "traffic" and "finance".
A 2nd cause for the variance of terms is that basic activities often differ in importance: hospitals have no selling departments, churches no production departments but this does not mean that these activities are not undertaken but are unspecialized and of low importance that they are combined with other activities.
A 3rd cause for the absence of sales or production could be that other methods of departmentation could have been opted. Functional departmentation is the most widely employed basis for organizing activities and is current in almost even' enterprise at a few level in the organization structure.
The coordination of activities may be achieved through rules and procedures, different aspects of planning, the hierarchy, personal contacts etc.

Earning:   Approval pending.