Bharat Energy Ltd.
Bharat Energy Ltd. drills for oil at many sites across India. For many years, its work was run from the head office by the heads of separate activities such as drilling, finance and purchase. This old system had two difficulties. First, even a small repair at a drilling site had to be cleared by the head office, and site work often stood still for months. Second, the purchase head kept spare-part stocks low to show savings in his own budget, even when drilling stopped for want of parts.
A consultant advised forming a team around each oil field, with clearly defined duties. Each field manager was put in charge of all the service staff at his field and was even given the power to buy materials. Each team now has its own drilling, service and purchase staff and answers for the results of its field. A few common services are still run from the head office.
In the case, which disadvantage of the company’s old system is shown by its second difficulty?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Departmental interests are pursued at the cost of organisational interests.
Option (1) Departmental interests are pursued at the cost of organisational interests. — Correct. The old system grouped work under heads of separate activities such as drilling, finance and purchase, so it was a functional structure. In a functional structure a head may chase his own department’s goals more than the firm’s. The purchase head kept stocks low to show savings in his budget, though drilling stopped for want of parts.
Option (2) Coordination suffers, as information has to be exchanged across separate departments. — Incorrect. This problem arises when information has to pass between departments. The purchase head kept stocks low on purpose.
Option (3) Costs rise, as similar activities are duplicated in each of the units. — Incorrect. Duplication is a disadvantage of the divisional structure. The old system had one head for each activity.
Option (4) Resistance to change delays or restricts the growth of the enterprise. — Incorrect. This is a disadvantage of informal organisation, when groups oppose changes. No group opposes a change in the case.
NCERT (2026-27 Edition): “Disadvantages: The functional structure has certain disadvantages which an organisation must take into consideration before it adopts it. Some of them are as follows: “Divisional Structure … Disadvantages: The divisional structure has certain disadvantages. Some of them are as follows: |