Identification of activities - All activities that need to be performed must first be recognized. For example, record keeping, preparing accounts, inventory control, making sales, quality control, etc. All these activities must be grouped and classified into units.2. Departmental organization of activities - In this stage, the manager tries to combine and group similar and related activities into units or departments. This organization of dividing the entire company into independent units and departments is called a department.3. Authority Classification - Once the departments are defined, the manager likes to classify the powers and their scope to the managers. This activity of assigning a rank to management positions is called hierarchy. Top management is engaged in policy formulation, middle-level management in departmental supervision, and lower-level management in supervising team leaders. Clarification of authority helps bring efficiency in running a business. This helps achieve efficiency in running a business. This helps to avoid wastage of time, money, effort, avoiding duplication or overlap of efforts and this helps to make a company's activity smoother