Tag: Demerits

The different types of Organization and their Meaning with Merits and Demerits
What does the Organization Mean? For entrepreneurial productive activities, organizes various factors of production such as land, labor, capital, machinery, etc. for channeling. Eventually, the product reaches consumers through different agencies. Business activities are divided into different functions, these tasks are assigned to different individuals. So, what are we going to discuss; The different types of Organization and their Meaning with Merits and Demerits.

If there are different types of Organizations in different departments, their Merits and Demerits will also be there, and together with their meanings.

There should be the achievement of common business goals with various personal endeavors. An organizational organization has a structural framework of the duties and responsibilities required for personnel in carrying out various tasks with the approach of achieving business goals. The management attempts to combine various business activities to meet pre-determined goals. Definition: “The organization is the process of identifying and formulating the process of establishing relationships with the purpose of executing, defining and delegating and fulfilling objectives, to work the most effective way of working people.” In Alan’s words, an organization is a tool to achieve organizational goals. The work of each person is defined and the authority and responsibility are decided to fulfill it.

Different types of Organizations:
- Project organization
- Functional organization
- Matrix organization
- Line organization, and
- Line and staff organization
Project Organization:

Meaning of the project organization: Project organization consists of several horizontal organizational units to complete long-term projects. Each project is extremely important for the organization. Therefore, a team of experts has been formed from different areas for each project. The size of the project team varies from project to project. The activities of the project team are coordinated by the project manager, who has the right to seek advice and assistance of experts within and outside the organization.

The main concept of the project organization is to gather a team of experts to work on and complete a specific project. Project employee is different and independent of functional departments. The project organization is employed in professional areas such as aerospace, construction, aircraft manufacturing and management consulting etc.

Qualifications and Merits of the project organization:
- It focuses on the demand for a complex project.
- It completes the completion of the organization without disturbing the normal routine of any organization.
- It provides a logical point of view for any challenge in completing a major project with a definite start, end, and clearly defined result.
Project organization Demerits or faults:
- Organizational uncertainty is because a project manager has to deal with professionals from different fields.
- There can be inter-departmental conflicts with organizational uncertainties.
- There is a great fear among the personnel that the completion of the project can lead to job loss. This sense of insecurity can cause great anxiety about career progression.
Functional Organization:

Functional organization means: In this type of organization, the number of experts each organization has near a particular task or group of related organizations. Every expert has control over the function under his charge, it does not matter where this ceremony is done in the organization. He controls all those working in that functional area.

For example, a Human Resources Department will recruit, train and develop the necessary people for all other departments of the organization. Each employee receives orders and is responsible for many experts. The functional organization can also be used at a higher level at the lower level of management. At the higher level, it involves the group of all functions to be included in the main functional departments and keeping each department under an expert executive. Each functional issues the order in the whole organization in relation to the tasks in the main question.

Qualifications and merits of functional organization:
- There is a full specialization of work and each worker gets expert guidance from many experts.
- Work is done more effectively because each manager is responsible for one task rather than the abundance of tasks.
- The growth and expansion of the enterprise are not limited to the capabilities of some line managers.
The fault or Demerits of functional organization:
- It violates the principle of unity of the command because a person receives orders from many experts. It leads to conflict and poor discipline.
- Responsibility is divided. It is not possible to decide the responsibilities of specific individuals.
- There is a delay in decision-making. Decision problems cannot be taken quickly to include many experts because all functional managers need consultation.
Matrix Organization:

Meaning of Matrix Organization: The matrix organization or grid organization has a hybrid structure with the combination of the functional department of two complementary structures with the net project structure. Functional structure matrix is the permanent feature of the organization and retains the authorization for the overall operation of the functional units.

The matrix organization has been developed to meet the needs of a large and complex organization, for which it is necessary to make the structure more flexible and technically oriented rather than structural structures. Temporary project teams are consistent with successful completion of special projects. The right of the project manager flows horizontally while the functional manager’s right flows vertically.

Properties or Merits of Matrix Organization:
- It helps individually focus on focus, talent, and resources on a single project which provides better planning and control.
- It provides an environment in which professionals can test their abilities and make the most contribution.
- This project gives motivation to the employees because they can focus directly on the completion of a particular project.
Matrix organization Demerits or faults:
- It violates the principle of unity of order. Each employee has two senior executives- one functional superior and other projects are better.
- The scalar theory is also violated because there is no fixed hierarchy.
- Organizational relations here are more complex. In addition to formal relationships, informants also arise which cause problems of coordination.
Line Organization:

Meaning of Line Organization: This is the basic framework for the entire organization. It represents a direct vertical relationship through which the authority flows. This is the simplest and oldest form of internal organization. This organization is also known as the Scalar organization. Authorization flows from top to lower level. Every person is in charge of all the persons under him and he himself is responsible for his superiority.

All persons responsible for the execution of the authority flows through vertical and top persons. On the other hand, liability flows upwards. Everyone is responsible for their work and is responsible for their senior. Since authority and responsibility flows in a straightforward straight line, it is called line organization. This form of organization is followed in military establishments.

Line organization qualifications and merits:
- It is easy to set up and easy to understand by employees. There is no complexity in this organization because every person is responsible for only one superior.
- Line organization helps in fixing the rights and responsibilities of each person in the organization. The authority is given in the context of the assignment of the work.
- Since only one person is in charge of division or division, the decisions are early. The unity of command theory is followed.
Line organization’s demand and Demerits:
- There is a lack of coordination between different departments.
- The final authority to take all the decisions is with the officers. The flow of information is downwards.
- Business is dependent on some key individuals and the sudden disappearance of such persons from the scene can lead to instability.
Line and Staff Organization:

Meaning of Line and Staff Organization: Because of the underlying lack of line organization and functional organization, they are rarely used in pure forms. Line organization is very focused and the functional organization is very much spread. New Organization Structure Line and Staff Organization have been developed to eliminate the shortage of both types of organizations.

Properties or Merits of Line and Staff Organization:
- Have a schematic specialization. And, there is a well-defined authority and responsibility. The line of command is maintained.
- Ideal and executive functioning is the division.
- Employees with their expert knowledge provide opportunities for line officers to adopt a rational multi-dimensional approach to a problem.
- This type of organization nurtures growth because each person grows in their own characteristics. It also helps coordinate through co-operation and leadership.
Drawbacks or Demerits of Line and Staff Organization:
- On occasions, lines and employees may vary. It can be from the conflict of interest and inhibit harmony relations.
- Incompetent line officers have a misinterpretation of expert advice.
- Employees feel less without conditions of authority.
- Employees become ineffective in the absence of authority.
The different types of Organization and their Meaning with Merits and Demerits. Image credit fro #Pixabay.

Concepts of Organization:

There are two concepts of organization:

Static Concept:

Under the static concept, the term ‘organisation’ is used as a structure, an entity or a network of specified relationship. In this sense, an organization is a group of people bound together in a formal relationship to achieve common objectives. It lays emphasis on position and not on individuals.

Dynamic Concept:

Under the dynamic concept, the term ‘organisation’ is used as a process of an on-going activity. In this sense, an organization is a process of organizing work, people and the systems. It is concerned with the process of determining activities which may be necessary for achieving an objective and arranging them in suitable groups so as to be assigned to individuals. It considers the organization as an open adoptive system and not as a closed system. Dynamic concept lays emphasis on individuals and considers the organization as a continuous process.
November 30, 2018
What is the Inductive Method of Economics?
The Inductive Method: Induction “is the process of reasoning from a part to the whole, from particulars to generals or from the individual to the universal.” This article explains the Inductive Method of Economics; Bacon described it as “an ascending process” in which facts are collected, arranged and then general conclusions are drawn. Also learn the Methods of Economics.

Here are explaining and learn, What is the Inductive Method of Economics? Steps, Merits, and Demerits.

The inductive method was employed in economics by the German Historical School which sought to develop economics wholly from historical research. The historical or inductive method expects the economist to be primarily an economic historian who should first collect material, draw generalizations, and verify the conclusions by applying them to subsequent events. For this, it uses statistical methods. Engel’s Law of Family Expenditure and the Malthusian Theory of Population have been derived from inductive reasoning.
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The inductive method involves the following steps:
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The Problem:

In order to arrive at a generalization concerning an economic phenomenon, the problem should properly select and clearly stated.

Data:

The second step is the collection, enumeration, classification, and analysis of data by using appropriate statistical techniques.

Observation:

Data are using to make the observation about particular facts concerning the problem.

Generalization:

On the basis of observation, generalization is logically deriving which establishes a general truth from particular facts.

Thus induction is the process in which we arrive at a generalization on the basis of particular observing facts. Also learn, Explain is What is Economics? Meaning and Definition of Criticisms!

The best example of inductive reasoning in economics is the formulation of the generalization of diminishing returns. When a Scottish farmer found that in the cultivation of his field an increase in the amount of labor and capital spent on it was bringing in less than proportionate returns year after year, an economist observing such instances in the case of a number of other farms, and then he is arriving at the generalization that is known as the Law of Diminishing Returns.

Merits of the Inductive Method:

The chief merits of this method are as follows:

Realistic:

The inductive method is realistic because it is based on facts and explains to them as they actually are. It is concrete and synthetic because it deals with the subject as a whole and does not divide it into component parts artificially

Future Inquiries:

Induction helps in future inquiries. By discovering and providing general principles, induction helps future investigations. Once a generalization is establishing, it becomes the starting point of future inquiries.

Statistical Method:

The inductive method makes use of the statistical method. This has made significant improvements in the application of induction for analyzing economic problems of the wide range. In particular, the collection of data by governmental and private agencies or macro variables, like national income, general prices, consumption, saving, total employment, etc., has increased the value of this method and helping governments to formulate economic policies pertaining to the removal of poverty, inequalities, underdevelopment, etc.

Dynamic:

The inductive method is dynamic. In this, changing economic phenomena can analyze on the basis of experiences, conclusions can draw, and appropriate remedial measures can take. Thus, induction suggests new problems to pure theory for their solution from time to time.

Historico-Relative:

A generalization drawn under the inductive method is often historical-relative in economics. Since it is drawn from a particular historical situation, it cannot apply to all situations unless they are exactly similar. For instance, India and America differ in their factor endowments. Therefore, it would be wrong to apply the industrial policy which was following in America in the late nineteenth century to present-day India. Thus, the inductive method has the merit of applying generalizations only to related situations or phenomena.

Demerits of Inductive Method:

However, the inductive method is not without its weaknesses which are discussing below.

Misinterpretation of Data:

Induction relies on statistical numbers for analysis that “can misuse and misinterpret when the assumptions which are requiring for their use are forgotten”.

Uncertain Conclusions:

Boulding points out that “statistical information can only give us propositions whose truth is more or less probable it can never give us certainty”.

Lacks Concreteness:

Definitions, sources, and methods using in statistical analysis differ from investigator to investigator even for the same problem, as for instance in the case of national income accounts. Thus, statistical techniques lack concreteness.

Costly Method:

The inductive method is not only time-consuming but also costly. It involves detailed and painstaking processes of collection, classification, analyses, and interpretation of data on the part of trained and expert investigators and analysts

Difficult to Prove Hypothesis:

Again the use of statistics in induction cannot prove a hypothesis. It can only show that the hypothesis is not inconsistent with the known facts. In reality, the collection of data is not illuminating unless it is related to a hypothesis.

Controlled Experimentation not Possible in Economics:

Besides the statistical method, the other method used in induction is controlled experimentation. This method is extremely useful in natural and physical sciences which deal with the matter. But unlike the natural sciences, there is little scope for experimentation in economics because economics deals with human behavior which differs from person to person and from place to place. Also, What is Demand? Meaning and Definition.

Further, economic phenomena are very complex as they relate to the man who does not act rationally. Some of his actions are also bound by the legal and social institutions of the society in which he lives. Thus, the scope of controlled experiments in inductive economics is very little. As pointed Out by Friendman, “The absence of controlled experiments in economics renders the weeding out of unsuccessful hypo-these slow and difficult.”

What is the Inductive Method of Economics? Photo Credit to Pixaby, More free Images, Also, Thanks!
March 24, 2018
What is the Deductive Method of Economics?
The Deductive Method: Deduction Means reasoning or inference from the general to the particular or from the universal to the individual. The deductive method derives new conclusions from fundamental assumptions or truth established by other methods. This article explains the Deductive Method of Economics; It involves the process of reasoning from certain laws or principles, which are assuming to be true, to the analysis of facts. Also learn, What are the Methods of Economics?

Here are explaining and learn, What is the Deductive Method of Economics? Steps, Merits, and Demerits.

Then inferences are drawn which are verifying against observing facts. Bacon described deduction as a “descending process” in which we proceed from a general principle to its consequences. Mill characterized it as a priori method, while others called it abstract and analytical.

Deduction involves four steps:
1. Selecting the problem.
2. The formulation of assumptions based on which the problem is to explore.
3. The formulation of hypothesis through the process of logical reasoning whereby inferences are drawn.
4. Verifying the hypothesis.
These steps are discussing as under, Following are:

Selecting the problem:

The problem which an investigator selects for inquiry must state clearly. It may be very wide like poverty, unemployment, inflation, etc. or narrow relating to the industry. The narrower the problem the better it would be to conduct the inquiry.

Formulating Assumptions:

The next step in deduction is the framing of assumptions which are the basis of the hypothesis. To be fruitful for inquiry, the assumption must be general. In any economic inquiry, more than one set of assumptions should make in terms of which a hypothesis may formulate.

Formulating Hypothesis:

The next step is to formulate a hypothesis based on logical reasoning whereby conclusions are drawn from the propositions. This is done in two ways: First, through logical deduction. If and because relationships (p) and (q) all exist, then this necessarily implies that relationship (r) exists as well. Mathematics is mostly using these methods of logical deduction.

Testing and Verifying the Hypothesis:

The final step in the deductive method is to test and verify the hypothesis. For this purpose, economists now use statistical and econometric methods. Verification consists of confirming whether the hypothesis is in agreement with facts. A hypothesis is true or not can verify by observation and experiment. Since economics is the concern with human behavior, there are problems in making an observation and testing a hypothesis.

For example, the hypothesis that firms always attempt to maximize profits rests upon the observation that some firms do behave in this way. This premise base on a priori knowledge that will continue to accept so long as conclusions deduced from it is consistent with the facts. So the hypothesis stands verified. If the hypothesis not confirms, it can argue that the hypothesis was correct but the results are contradictory due to special circumstances. Explain are Economics is a Science and Art?

Under these conditions, the hypothesis may turn out to the wrong. In economics, most hypotheses remain unverified because of the complexity of factors involving in human behavior which, in turn, depend upon social, political and economic factors. Moreover, controlled experiments in a laboratory are not possible in economics. So the majority of hypotheses remain untested and unverified in economics. Also learn, What are the Fundamentals of Economics?

Merits of the Deductive Method:

The deductive method has many advantages.

Real:

It is the method of “intellectual experiment,” according to Boulding. Since the actual world is very complicated, “what we do is to postulate in our minds economic systems which are simpler than reality but more easy to grasp. We then work out the relationship in these simplified systems and by introducing more and more complete assumptions, finally, work up to the consideration of reality itself.” Thus, this method is nearer to reality.

Simple:

The deductive method is simple because it is analytical. It involves abstraction and simplifies a complex problem by dividing it into parts. Further, the hypothetical conditions are so chosen as to make the problem very simple, and then inferences are deducing from them.

Powerful:

It is a powerful method of analysis for deducing conclusions from certain facts. As pointed out by Cairnes, The method of deduction is incomparable, when conducted under proper checks, the most powerful instrument of discovery ever wielded by human intelligence.

Exact:

The use of statistics, mathematics, and econometrics in deduction brings exactness and clarity in economic analysis. The mathematically trained economist can deduce inferences in a short time and make analogies with other generalizations and theories. Further, the use of the mathematical-deductive method helps in revealing inconsistencies in economic analysis.

Indispensable:

The use of the deductive method is indispensable in sciences like economics where experimentation is not possible. As pointed out by Gide and Rist, “In a science like political economy, where an experiment is practically impossible, abstraction and analysis afford the only means of escape from those other influences which complicate the problem so much.”

Universal:

The deductive method helps in drawing inferences that are of universal validity because they are based on general principles, such as the law of diminishing returns.

Demerits of Deductive Method:

Despite these merits, much criticism has been leveled against this method by the Historical School which flourished in Germany. Explain are What is Economics? Meaning and Definition of Criticisms.

Unrealistic Assumption:

Every hypothesis is based on a set of assumptions. When a hypothesis is testing, assumptions are indirectly testing by comparing their implications with facts. But when facts refute the theory based on the tested hypothesis, the assumptions are also indirectly refuted. So deduction depends upon the nature of assumptions. If they are unrealistic, in this method, economists use the ceteris paribus assumption. But other things seldom remain the same which tend to refute theories.

Not Universally Applicable:

Often the conclusions derived from deductive reasoning are not applied universally because the premises from which they are deducing may not hold good at all times and places. For instance, the classicists assumed in their reasoning that particular conditions prevailing in England of their times were valid universally. This supposition was wrong. Prof. Lerner, therefore, points out that the deductive method is simply “armchair analysis” which cannot regard as universal.

Incorrect Verification:

The verification of theories, generalizations or laws in economics is based on observation. And right observation depends upon data which must be correct and adequate. If a hypothesis is deducing from wrong or inadequate data, the theory will not correspond with facts and will refute. For instance, the generalizations of the classicists were based on inadequate data and their theories were refuted. As pointed out by Ircholson, “the great danger of the deductive method lies in the natural aversion to the labor of verification”.

Abstract Method:

The deductive method is highly abstract and requires great skill in drawing inferences for various premises. Due to the complexity of certain economic problems, it becomes difficult to apply this method even at the hands of an expert researcher. More so, when he uses mathematics or econometrics.

Static Method:

This method of analysis is based on the assumption that economic conditions remain constant. But economic conditions are continuously changing. Thus this is a static method that fails to make the correct analysis.

Intellectually:

The chief defect of the deductive method “lies in the fact that those who follow this method may absorb in the framing of intellectual toys and the real world may forget in the intellectual gymnastics and mathematical treatment”.

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March 24, 2018