“You cannot do anything If you want to do everything”.

-Management thoughts

After the objectives of an enterprise are determined and plan is prepared, the next step in the management is to execute the plan and attain the objectives of the enterprise.

Every business is required to be provided with all its requirements, such as men, money, machines, methods, etc. Further, a larger business enterprise is, generally, divided into number of departments with special function to perform. When there are a number of departments with special functions to perform, the various departments of the enterprises have to be integrated or unified to ensure that all the activities are done in the desired direction to attain the desired results. This necessitates organising or organisation.


Definition and Meaning

1. Louis A.Allen : “Organisation is the process of identifying and grouping the work to be performed, defining and delegating

responsibility and authority, and establishing relationship for the purpose of enabling people to work most effectively in accomplishing objectives”

2. Koontz and O’Donnell : “Organisation involves the grouping of activities necessary to accomplish goals and plans, the assignment of these activities to appropriate departments and the provision for authority, delegation and co-ordination”


Thus, organising is the determining, grouping and arranging of various activities deemed necessary for the attainment of the objectives, the assigning of people to activities, providing of suitable physical factors of environment and indicating the relative authority delegated to each individual.

Features of Organisation

Organisation has certain essential features. They are:

1. Division of work: The total work of the enterprise is divided into activities and functions. Various activities are assigned to different persons for their efficient accomplishment. This brings in division of labour.


2. Co-ordination: Co-ordination of various activities is as essential as their division. It helps in integrating and harmonising various activities. Co-ordination also avoids duplication of work and delays.

3. Common objective: An organisational structure is a means towards achievement of enterprise goals. The goals of various segments lead to the achievement of major business goals.

4. Co-operative relationship: An organisation creates co-operative relationship among various members of the group. Organising leads to a system which helps in creating meaningful relationship among persons. The structure should be so designed that it motivates people to perform their part or work together.

5. Well-defined authority-responsibility relationship: An organisation consists of various positions arranged in a hierarchy with well defined authority and responsibility.


Steps in organisation

The important steps involved in the process of organisation are as follows:

1. Determination of objectives: The organisation structure is built on the basis of objectives of an enterprise. Therefore determination of objectives is the first step in organisation.

2. Grouping of activities: The identification and grouping of related and similar activities into departments is the second step in the process of organisation.


3 Assignment of duties to persons: It involves the assignment of duties to different subordinates on the basis of their specialisation for ensuring the certainty of work performance.

4. Delegation of authority: A person will be able to perform his duty only when he is given adequate authority to do the work. Hence proper authority must be delegated.

5. Creating authority relationships: After granting authority to persons, the establishment of organisation relationship is done. It involves taking of decisions such as superior-subordinate relationships, who will act under whom, who will be his subordinate, span of control etc.

Objectives of organisation


The organisation aims at the achievement of the following objectives:

1. To help management: The organisation helps management in having a control over various business functions. The work is divided properly and control centres are established. The authority is delegated and responsibilities are fixed. It helps the management in having a co-ordinated administration.

2. To increase production: The duties are assigned according to the principles of division of labour. The efficient system of organisation encourages every employee to make his best contribution in raising output.

3. Co-operation of employees: The organisation structure will succeed only if employees co-operate in the work; the employees learn working in close co-operation of other. The management introduces various incentive schemes and gives monetary and other benefits to the employees, so that they work with a team spirit.

Formal and Informal organisation

In the organisational structure of every enterprise both formal and informal organisations exist.

A) Formal organisation

According to Chester Barnard, ” an organisation is formal when the activities of two or more persons are consciously co-ordinated towards a common objective”. In formal organisation the position, authority, resoponsibility and accountability of each level are clearly defined by means of rules, policies and other regulations of the organisation. It prescribes the relationship amongst the people working in the organisation.


1. It makes everybod responsible for a given task.

2. It ensures law and order in the organisation by prescribing rules, regulations and procedures.

3. It contributes to the attainment of the common objectives of the enterprise.


1. Formal organisation is so impersonal that emotional sentiments of individuals are ignored in determining the inter-actions, communication and accountability.

2. Formal organisation is deliberately designed to achieve the goals of the enterprise. It does not consider the goals of the individuals.

3. The rules and regulations prescribed in formal organisation may be rigid, and so it may become difficult to achieve the goals.

Informal Organisation

An informal organisation is an organisation which is not established by any formal authority, but arises from the personal and social relations of the people.

The people cut across formal channels and communicate with each other. It arises spontaneously and is not based on rules, regulations and procedures. For example, an assistant sales manager may take advice from the production manager instead of the sales manager who is his boss, it is a case of informal organisation. The assistant sales manager may prefer to approach the production manager for advice, probably due to his personal friendship or production manager’s job knowledge or personality, age, seniority, leadership qualities etc.

An informal organisation exists in every enterprise and at all levels of managerial hierarchy. The formal manager should not try to abolish informal relationships of employees, because they are very important and useful for managing the concern efficiently and for achieving the objectives of the oragnisation.


1. It acts as a means by which the workers achieve a sense of security and belonging.

2. It acts as a safety valve for emotional problems and frustrations of the workers of the enterprise.

3. It assists the formal organisation to become humanistic.

4. It helps the group members to attain specific personal objectives.

5. It is one of the important channels of communication. News travels quickly via informal organisation.

6. It lightens the work of formal managers.


1. The communication in informal organisation may sometimes lead to rumours.

2. Informal organisation may put resistance to change and innovations.

3. It may not effectively contribute to the attainment of the objectives of the enterprise.