Organisation
In a growing technology firm, the CEO decided to reorganize operations to improve efficiency. The company adopted a formal organization structure by clearly defining roles and responsibilities for each employee, creating specialized departments such as R&D, Marketing, and Customer Support. Job descriptions, reporting relationships, and workflows were documented in an organizational chart.
However, alongside this structure, the company recognized the importance of informal organization—social networks and personal relationships among employees. For example, employees from different departments formed a cross-functional team to brainstorm innovative ideas over coffee breaks, fostering collaboration beyond formal channels.
To ensure smooth operations, the CEO implemented delegation of authority by empowering department heads to make decisions within their domains, such as approving budgets and setting project timelines. This delegation freed the CEO to focus on strategic planning. However, the CEO made it clear that accountability remained with the department heads—they were responsible for ensuring tasks were completed and goals met.
This combination of structured formal processes, informal collaboration, and clear delegation of authority improved decision-making, enhanced employee morale, and boosted the firm’s overall productivity.
The purpose of an organizational chart in a formal organization is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Outlining roles and reporting relationships
Option (1) Depicting informal networks — Incorrect. Informal networks grow on their own out of friendship and interaction. They are never drawn on a chart.
Option (2) Documenting personal relationships — Incorrect. Personal relationships are also part of the informal organisation, which has no written form.
Option (3) Outlining roles and reporting relationships — Correct. The organisation chart shows the formal structure of the firm. It shows the positions, the departments and who reports to whom, which is the chain of authority set by management.
Option (4) Increasing employee workload — Incorrect. A chart only shows the structure. It adds no work to anyone.
NCERT (2026-27 Edition): “The organisation structure can be defined as the framework within which managerial and operating tasks are performed. It specifies the relationships between people, work and resources. It allows correlation and coordination among human, physical and financial resources and this enables a business enterprise to accomplish desired goals. The organisation structure of a firm is shown in an organisation chart.” |