1. Facilitates administration:

Sound organisation facilitates the achievement of the objectives of an enterprise by providing a framework within which the functions of coordination and control can be per formed effectively. It provides a system of authority and a network for effective communications. It is the means by which common men can do uncommon things. Organisation is a network of decision communica­tion centers in which individual efforts can be coordinated towards group goals.

It integrates the various jobs into an operating system to provide for the accomplishment of the firm’s objectives. Thus, a properly designed and balanced organization structure facilitates both manage­ment and operation of the enterprise. Inadequate organisation may not only discourage but actually preclude effective administration.

2. Encourages growth and diversification:

It is sound organization practices that have enabled enterprises to grow and expand to giant sizes. An organization structure is the framework within which an enter­ pries grows. Systematic division of work and consistent delegation of authority facilitate taking up of new activities, and meeting new demands. A sound structure provides the necessary flexibility for growth without losing control over the various activities. Balanced emphasis can be put on different activities.

3. Optimum use of new technology:

Optimum use of technological improvements can be made through a sound structure manned with competent employees. In addition, a sound organisation permits optimum utilization of human resources. It permits humane use of human beings by avoiding duplication of work and overlapping of efforts. Sound organisation ensures that every individual is placed on the job for which he is best suited.

4. Stimulates innovation and creativity:


A well-designed organization stimulates creative thinking and initiative on the part of employees. It provides for effective management of change and responds favorably to changes in the environment. By providing well-defined areas of work and clear-cut responsibility, it provides recognition for the professional and the specialist in terms of their achievements.

5. Encourages good human relations:

In a sound organisation every individual is assigned the job for which he is best suited. The assignment of right jobs to right persons improves job satisfaction and interpersonal relations. Well-defined jobs and clear lines of authority and respon­sibility help to establish cordial relations between management and workers.

6. Ensures continuity of enterprise:

Sound organisation helps in the continuity of management by providing scope for the training and development of future management. An effective organisation provides avenues for development and promotion through extensive delegation and decentralization of authority.

7. Fosters coordination:

Sound organisation facilitates order and cohesiveness in the enterprise. Division of labor, better utilization of technology and human talent, etc. help to improve the efficiency and quality of work. By providing clear channels of communication among the members of the organisation, it facilitates coordination.


Thus, sound organisation is the backbone or foundation of effec­tive management. “Organizing is the process by which a manager brings order out of chaos, removes conflicts between people over work or res­ponsibility, and establishes an environment suitable for teamwork.’

Describing the importance of organisation. Andrew Carnegie, a great industrialist of U.S.A. remarked: “Take away our factories, our trade, our avenues of transportation, our money, leave us nothing but our organization arid, in four years, we shall have re-established ourselves.”