Topic 5

🟢 Lite — Quick Review (1h–1d)

Rapid summary for last-minute revision before your exam.

• Departmentalisation groups work into logical units: Functional, Divisional, Matrix, Network, Team-based
• Span of Control: Wide span (flat org) = fewer levels, more direct reports | Narrow span = taller org, closer supervision
• Centralisation = Decisions made at top | Decentralisation = Decisions pushed down to lower levels
• Delegation: Assignment of work + conferring authority + creating accountability (must go together)
• Authority = Right to command | Responsibility = Duty to perform | Accountability = Answerability for results
• ⚡ Authority can be delegated; ultimate accountability cannot — a manager remains accountable for subordinates’ actions

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🟡 Standard — Regular Study (2d–2mo)

Standard content for students with a few days to months.

Organising and Structure

Organising is the process of arranging work, allocating resources, and establishing authority relationships to accomplish organisational objectives. It creates the structure within which management functions operate.

Organisational Structure — Key Elements

Line Authority

• Direct chain of command from top to bottom
• Each manager has authority over subordinates
• Commands flow downward; accountability flows upward

Staff Authority

• Advisory or supportive relationship
• Staff managers advise line managers (e.g., Legal, HR, Compliance in banks)
• No direct command over operations

Committee and Matrix Authority

• Committee: Group decision-making; time-consuming but ensures coordination
• Matrix: Dual reporting — functional manager + project manager

Departmentalisation — How Work is Grouped

1. Functional Departmentalisation

Groups activities by organisational function.

• Banking Example: Credit Department, Treasury, Human Resources, IT, Compliance
• Advantages: Specialisation, efficiency, deep expertise
• Disadvantages: Poor coordination across functions, slow response

2. Divisional Departmentalisation

Groups activities by product, market, or geographic area.

• Banking Example: Retail Banking Division, Corporate Banking Division, SME Division
• Advantages: Focus on customer/product, accountability
• Disadvantages: Duplication of functions, may ignore overall org goals

3. Matrix/Flexible Structure

Employees report to two managers: functional + project.

• Advantages: Flexibility, better use of expertise, innovation
• Disadvantages: Power conflicts, complexity, confusion in reporting

4. Network Structure

Core organisation outsources functions to external entities.

• Banking Example: Core bank with third-party fintech partners for payments, lending
• Advantages: Agility, cost efficiency
• Disadvantages: Less control, coordination challenges

5. Team-Based Structure

Permanent cross-functional teams取代 traditional departments.

• Advantages: Collaboration, speed, employee empowerment
• Disadvantages: Turf wars, potential for slow individual decision-making

Span of Control (Management Ratio)

Span of control = Number of subordinates directly reporting to a manager.

Wide Span of Control (Flat Structure)

• Many subordinates per manager
• Fewer levels of management
• Suitable for: Simple, routine tasks; well-trained employees; clear procedures
• Example: Amazon’s two-pizza teams; RBI’s peer officer groups

Narrow Span of Control (Tall Structure)

• Few subordinates per manager
• More levels of management
• Suitable for: Complex tasks; inexperienced subordinates; frequent supervision needed
• Example: Traditional bank branch structure (Branch Manager → Asst Manager → Clerk)

Factors Determining Optimal Span:

• Complexity and variety of work
• Geographic proximity of subordinates
• Competence of manager and subordinates
• Use of written/oral communication
• Amount of standardisation in procedures

Centralisation vs Decentralisation

Centralisation

• Decision-making concentrated at top management
• Advantages: Consistent decisions, better coordination, clearer accountability
• Disadvantages: Slower decisions, less responsive, overloaded top management
• Example: Many Indian PSU banks historically; the RBI itself is relatively centralised

Decentralisation

• Decision-making pushed down to lower levels
• Advantages: Faster decisions, better local responsiveness, employee empowerment
• Disadvantages: Inconsistent decisions, coordination challenges, potential for self-interest
• Types:
  • Political Decentralisation: Geographic divisions autonomy
  • Financial Decentralisation: Business units with P&L responsibility
  • HR Decentralisation: Local hiring and compensation

Factors Favouring Decentralisation:

• Large organisation size
• Geographic dispersion
• Complex, dynamic environment
• Well-trained, capable employees
• Philosophy of employee empowerment

Delegation

Delegation = Assigning work (tasks) + Granting authority (power to act) + Creating accountability (answerability)

The Delegation Process:

1. Assign Task: Clearly define what is to be done
2. Grant Authority: Provide the power to make decisions necessary to complete the task
3. Create Accountability: Establish expectations and reporting requirements

Barriers to Effective Delegation:

• Manager’s belief that “I can do it better myself”
• Fear of losing control or appearing unnecessary
• Subordinate’s fear of failure or reluctance to accept responsibility
• Lack of trust
• Unclear or incomplete delegation

Overcoming Delegation Barriers:

• Select the right person (capability + willingness)
• Communicate clearly what is expected
• Grant adequate authority
• Provide necessary resources
• Establish feedback mechanisms
• Recognise and reward successful delegation

The Exception Principle (Management by Exception):

• Routine decisions are delegated to subordinates
• Manager only intervenes for unusual or significant exceptions
• Reduces manager’s workload; develops subordinates

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🔴 Extended — Deep Study (3mo+)

Comprehensive coverage for students on a longer study timeline.

Organisational Design Principles (Mintzberg)

Mintzberg identified 6 components of any organisation:

1. Strategic Apex: Top management (CEO, Board)
2. Middle Line: Middle managers connecting apex to operating core
3. Operating Core: People who do the basic work (clerks, officers)
4. Technostructure: Analysts who standardise processes (HR, Finance, Compliance)
5. Support Staff: Ancillary units (Legal, Security, Canteen)
6. Ideology: Organisation’s culture and beliefs

Five Organisational Configurations:

1. Simple Structure: One person rule; weak technostructure; centralised; founder-driven (small family businesses, startups)

2. Machine Bureaucracy: Routine tasks, standardised processes; technostructure powerful; centralised; suited for stable environments (traditional manufacturing, PSU banks)

3. Professional Bureaucracy: Professional control; trained specialists; decentralised; highly skilled professionals (hospitals, universities, consulting firms)

4. Divisional Form: Product/market divisions; each division acts like a mini-bureaucracy; common in large banks (retail vs corporate divisions)

5. Adhocracy (Innovative Form): Flexible, organic, project-based; adapts to dynamic environments; found in tech companies, R&D units

Contemporary Organisational Structures in Banking

Traditional Bank Structure:

• Branch-based with hierarchical reporting
• Functional departmentalisation
• Centralised decision-making (especially PSU banks)

Modern Bank Structure (Post-Digital Transformation):

• Customer-centric, process-oriented
• Flatter hierarchies in digital-native banks
• Matrix structures linking product teams and customer segments
• Outsourcing/non-core activities to fintech partners

RBI’s Organisational Structure:

• Board for Financial Supervision (BFS) — supervisory role
• Governor → Deputy Governors (various functions)
• Departmental structure with functional specialisation
• Relatively centralised regulatory decision-making

Chain of Command and Unity of Command

Chain of Command: The unbroken line of authority from the top to the bottom of an organisation.

Unity of Command: Each subordinate reports to and receives instructions from only one superior.

Scalar Principle: There should be a clear, unbroken line of authority linking every position in the organisation.

Exceptions:

• Project managers in matrix structures (dual reporting)
• Staff managers (advisory role, no command)
• Committees (group decision-making)

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